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青岛海尔:2017年年度报告(英文版)2018-05-22  

						Stock Code: 600690    Short Name: Qingdao Haier




       Qingdao Haier Co., Ltd.
         2017Annual Report
                                       2017 Annual Report of Qingdao Haier Co., Ltd.




                                                   Important Notice

I.      The Board of Directors, the Board of Supervisors, directors, supervisors and senior management
            of Qingdao Haier Co., Ltd. (“the Company”) hereby assure that the content set out in the
            annual report is true, accurate and complete, and free from any false record, misleading
            representation or material omission, and are individually and collectively responsible for the
            content set out therein.

II.     Information of Directors absent from Meeting
 Position of director Name of director absent Reason for the absence of
                                                                                       Name of proxy
absent from meeting      from meeting          director from meeting
Independent Director      Dai Deming               Personal affair                      Shi Tiantao

III.     Shandong Hexin Certified Public Accountants (LLP) has issued a standard and unqualified
       audited report for the Company.


IV. Liang Haishan (legal representative of the Company), Gong Wei (chief financial officer of the
       Company) and Ying Ke (the person in charge of accounting department) hereby certify that the
       financial report set out in the annual report is true, accurate and complete.


V. Proposal of profit distribution and proposal of capitalizing capital reserves for the reporting
period examined and reviewed by the Board
       Proposal of profit distribution for the reporting period examined and reviewed by the Board: to
declare a cash dividend of RMB3.42 per 10 shares (tax inclusive) based on the total number of shares as
at the registration date in respect of future proposal for profit distribution.
      VI. Disclaimer in respect of forward-looking statements
       Applicable Not applicable

       Forward-looking statements such as future plans, development strategies as set out in this report do
not constitute our substantial commitment to investors. Investors are advised to pay attention to
investment risks.


VII. Is there any fund occupation by controlling shareholders and their related parties for
       non-operational purposes?

       No

VIII. Is there any provision of external guarantee in violation of prescribed decision-making
       procedures?

       No



                                                             1
                                2017 Annual Report of Qingdao Haier Co., Ltd.


IX.     Important Risk Warnings

      For the possible risks which the Company may encounter, please refer to the relevant information
set out in the Section of ―DISCUSSION AND ANALYSIS ON OPERATIONS‖ in this report.

X.     Others

      Applicable Not applicable

                                                                                Chairman: Liang Haishan
                                                                                 Qingdao Haier Co., Ltd.
                                                                                         24 April 2018


Note: This Report and its abstract have been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.




                                                      2
                                          2017 Annual Report of Qingdao Haier Co., Ltd.




                                                                 Contents

Section I         DEFINITIONS .................................................................................................................... 4
Section II        GENERAL INFORMATION OF THE COMPANY AND FINANCIAL INDICATORS .. 6
Section III       SUMMARY OF THE COMPANY‘S BUSINESS ............................................................ 12
Section IV        DISCUSSION AND ANALYSIS ON OPERATIONS ...................................................... 21
Section V         SIGNIFICANT EVENTS ................................................................................................. 51
Section VI        CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS .............. 87
Section VII       RELEVANT INFORMATION OF PREFERRED SHARES .......................................... 101
Section VIII      DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES ....... 102
Section IX        CORPORATE GOVERNANCE ..................................................................................... 115
Section X         RELEVANT INFORMATION ON CORPORATE BONDS .......................................... 124
SECTION XI FINANCIAL REPORT ................................................................................................... 126
SECTION XII DOCUMENTS AVAILABLE FOR INSPECTION ........................................................ 299




                                                                       3
Section I          DEFINITIONS
I.   Definitions
Unless otherwise stated in context, the following terms should have the following meanings in this
report:
Definition of frequently used terms
CSRC                          China Securities Regulatory Commission
MOFCOM                        Ministry of Commerce of the PRC
SSE                           Shanghai Stock Exchange
The Company,
                              Qingdao Haier Co., Ltd.
Qingdao Haier
Four Major Securities         China Securities Journal, Shanghai Securities News, Securities
Newspapers                    Times, Securities Daily
                              KKR Home Investment S.àr. l., a wholly owned subsidiary of KKR
KKR, KKR                      China Growth Fund L.P., is a project company incorporated in
(Luxembourg)                  Luxembourg in accordance with international practices for the sole
                              purpose of strategic investment in the Company
                              Haier Electronics Group Co., Ltd. (a company listed in Hong Kong,
Haier Electrics, 1169
                              stock code: 01169.HK)
                              GE Appliances, Household Appliance Assets and Business of
GEA
                              General Electric
                              Fisher & Paykel Appliances Holdings Limited (Chinese Name:斐雪
                              帕克) was established in 1934 and is known as the national
                              appliance brand of New Zealand, the global top-level kitchen
                              appliance brand and the famous luxury brand of the world. It has
                              products including ventilator, gas stove, oven, dishwasher,
                              microwave oven, freezer, washing machine, clothes dryer and etc.
                              Its business covers over 50 countries/regions across the world. In
FPA                           2012, it became a wholly owned subsidiary of Haier Group. In
                              order to perform the undertaking of Haier Group in respect of
                              eliminating horizontal competition, the Company entered into the
                              Trust Agreement on Fisher & Paykel Appliances Holdings Limited
                              between Haier Group Corporation and Qingdao Haier Co., Ltd. on
                              25 May 2015, whereby Haier Group entrusted its assets held in
                              Fisher & Paykel Appliances Holdings Limited to the Company for
                              operation and management.
                              China Market Monitor Co., Ltd., established in 1994, has been
                              focusing on research on retail sales in China consumption market
CMM
                              for a long term and is the nationally recognized market research
                              institute in terms of appliance area.
                              Euromonitor, established in 1972, is the leading strategic market
Euromonitor                   information supplier and owns over 40-year experience in respect
                              of publishing market report, commercial reference data and on-line
                                                4
                       database. They create data and analysis on thousands of products
                       and services around the world.
                       Based in Kentucky, the U.S., the firm is an institution specializing
                       in market survey, research and analysis. The market research and
                       analysis business of the Company started in 1995. Its ―TraQline‖
The Stevenson
                       product is a world-famous survey and research report on market
Company
                       share. The ―TraQline‖ product offers customers with analysis based
                       on global market share and consumer behaviors and supports the
                       decision-making of various businesses.
                       The International Electrotechnical Commission. Founded in 1906, it
                       is the world‘s first organization for the preparation and publication
                       of international standards of electro technologies, and is responsible
                       for international standardization for electrical engineering and
                       electronic engineering. The goals of the commission include: to
                       ensure that the standards and conformity assessment programs are
IEC
                       applied globally in a prioritized manner and to the greatest extent;
                       to assess and improve the quality of products and services involved
                       in its standards; to create conditions for the common use of
                       complicated systems; to improve the effectiveness of the
                       industrialization process; to improve human health and safety, and
                       to protect the environment.
                       Shenyang      Refrigerator   Interconnected   Factory,  Foshan
                       Front-Loading Washing Machine Interconnected Factory,
                       Zhengzhou Air-conditioner Interconnected Factory, Qingdao Mold
9 Interconnected       Interconnected Factory, Qingdao Water Heater Interconnected
Factories              Factory, Qingdao FPA Electrical Machine Interconnected Factory,
                       Jiaozhou Air-Conditioner Interconnected Factory, Huangdao
                       Central Air-Conditioner Interconnected Factory, Huangdao Smart
                       Kitchen Interconnected Factory
                        ―4‖ refers to the four areas where Haier keeps upgrading: smart
                       lounge, smart kitchen, smart bathroom and smart bedroom. ―7‖
―4+7+N‖ smart full
                       refers to the air, water, cleansing and maintenance, security,
scene & customized
                       voice-control, health and informatization of a house while ―N‖
solution package
                       refers to variables, i.e. users may customize their own smart living
                       scene based on their living habit, realizing unlimited possibilities.
                        ―Individual‖ means staff; ―goal‖ means the need of users, rather
The mode people plus   than the ―orders‖ in narrow sense. The mode ―people plus goal‖
goal                   encourages the integration of staff with users, and ―win-win‖ means
                       to realize every employee‘s value while creating value for users.




                                         5
Section II      GENERAL INFORMATION OF THE COMPANY AND
FINANCIAL INDICATORS
I.     Information of the Company
Chinese name                 青岛海尔股份有限公司
Chinese short name           青岛海尔
English name                 QINGDAO HAIER CO., LTD.
English short name           HAIER
Legal representative         Liang Haishan


II.    Contact Person and Contact Information
                                   Secretary to the Board         Representative of securities affairs
Name                         Ming Guozhen                         Liu Tao
                             Department of Securities of          Department of Securities of
                             Qingdao Haier Co., Ltd.              Qingdao Haier Co., Ltd.
Address
                             Haier Information Industrial Park,   Haier Information Industrial Park,
                                                                  No.1 Haier Road, Qingdao City
                             No.1 Haier Road, Qingdao City
Tel                          0532-88931670                        0532-88931670
Fax                          0532-88931689                        0532-88931689
Email                        finance@haier.com                    finance@haier.com


III.   General Information
Registered address                            Haier Industrial Park, Laoshan District, Qingdao
                                              City
Postal code                                   266101
Business address                              Haier Information Industrial Park, Laoshan District,
                                              Qingdao City
Postal code                                   266101
Website                                       http://www.haier.net/cn/
Email                                         9999@haier.com


IV.    Place for Disclosure and Deposit of Information

Designated newspaper for information          Shanghai Securities News, Securities Times, China
disclosure                                    Securities Journal, Securities Daily
Website for publishing of annual report as
                                              www.sse.com.cn
designated by the CSRC
                                              Department of Securities of Qingdao Haier Co.,
Deposit place of annual report                Ltd. Haier Information Industrial Park, No.1 Haier
                                              Road, Qingdao City




                                                6
V.    Summarized Information of Shares of the Company
                         Summarized information of shares of the Company
  Type of Shares     Stock Exchange of Stock Short Name        Stock Code         Stock Short Name
                        Shares Listed                                              Before Variation
                     Shanghai Stock
      A shares                           Qingdao Haier           600690                    /
                          Exchange


VI.    Other Related Information

Accounting                                            Shandong Hexin Certified Public Accountants
                   Name
firm engaged                                          (LLP)
by the                                                26th – 27th Floor, Century Building, No.39
                   Business address
Company                                               Donghai Road West, Qingdao City
(domestic)         Name of signing accountant         Wang Hui (王辉), Han Xiaojie(韩晓杰)
                                                      China International     Capital    Corporation
                   Name
Financial                                             Limited
advisor                                               27th & 28th Floor, China World Office 2, 1
                   Business address
responsible for                                       Jianguomenwai Avenue, Beijing
continuing         Name of signing
supervision        representative of financial        Chen Jingjing (陈静静), Hu Xiaojun (胡霄俊)
during the         advisor
reporting
period             Period of continuing               12 January 2017 to 31 December 2018
                   supervision
Notes:

      (1) Financial advisor responsible for continuing supervision during the reporting period:

              On 12 January 2017, the Company issued the Report on the Execution of Acquisition

              of Significant Assets by Qingdao Haier Co., Ltd., according to which, the acquisition

              of significant assets related to the acquisition of the appliance assets of General

              Electric had been completed. As the financial advisor for this acquisition of

              significant assets, China International Capital Corporation Limited will carry out

              continuing supervision on the Company during the continuing supervision period

              from 12 January 2017 to 31 December 2018.

      (2) Sponsor responsible for continuing supervision during the reporting period: During

              the reporting period, the Company had a public issuance of convertible bonds. As at

              the disclosure date of this report, the issue has not yet completed. China International

              Capital Corporation Limited, the sponsor of such issue, will carry out continuing

              supervision on the Company starting from the completion of such issuance of
                                                  7
                             convertible bonds.

             VII.     Key accounting data and financial indicators for the last three years
             (I)     Key accounting data
                                                                                                Unit and Currency: RMB


Key accounting                                                       2016                          YoY change
                              2017                                                                                         2015
     data                                                                                             (%)
                                                  After adjustment          Before adjustment
Operating
                       159,254,466,909.46     119,132,261,662.60           119,065,825,201.51             33.68    89,797,165,994.89
revenue
Net        profit
attributable to
                         6,925,792,321.27          5,041,782,280.78           5,036,652,240.84            37.37     4,303,751,562.92
shareholders of
the Company
Net profit after
deduction     of
non-recurring
profit or loss           5,624,061,708.46          4,332,453,050.07           4,332,453,050.07            29.81     3,674,952,510.15
attributable to
shareholders of
the Company
Net cash flows
from operating          16,086,588,028.31          8,135,878,351.88           8,054,704,601.30            97.72     5,604,166,955.11
activities
                                                         As of December 31 2016                                   As of December
                      As of December 31                                                            YoY change
                                                                                                      (%)         31
                             2017                 After adjustment          Before adjustment                          2015
Net        assets
attributable to
                        32,215,515,201.45         26,438,188,226.56         26,364,725,409.83             21.85    22,733,334,660.35
shareholders of
the Company
Total assets           151,463,110,707.63     131,469,157,348.79           131,255,290,325.24             15.21    75,960,718,327.49


             (II) Key financial indicators


                                                                            2016                  YoY
                   Key financial indicators          2017         After            Before        change           2015
                                                               adjustment        adjustment       (%)
             Basic earnings per share
                                                       1.136             0.827       0.826           37.36         0.706
             (RMB per share)
             Diluted earnings per share
                                                       1.088             0.824       0.823           32.04         0.706
             (RMB per share)
             Basic earnings per share after
                                                       0.922              0.71         0.71          29.86         0.603
             deducting      non-recurring
                                                                     8
    profit or loss (RMB per
    share)
    Weighted average return on                                                Increased
                                           23.59         20.38       20.41   by 3.21 pct        16.22
    net assets (%)
                                                                                      pt
    Weighted average return on
    net assets after deducting                                                Increased
                                           19.15         17.56       17.56   by 1.59 pct        13.86
    non-recurring profit or loss                                                      pt
    (%)


    Explanation of the key accounting data and financial indicators of the Company as at the end of
    the reporting period for the previous three years
         Applicable Not applicable



    VIII.     Differences in accounting data under domestic and overseas accounting standards

    (I)   Differences in net profit and net asset attributable to shareholders of listed company in

          financial report disclosed simultaneously according to international accounting standards

          and according to accounting standards in the PRC


            Applicable Not applicable




    (II) Differences in net profit and net asset attributable to shareholders of listed company in

          financial report disclosed simultaneously according to overseas accounting standards and

          according to accounting standards in the PRC


            Applicable Not applicable




    (III) Reasons for the difference between the domestic and overseas accounting standards:

            Applicable Not applicable



    IX.     Key financial data of 2017 by quarters
                                                                             Unit and Currency: RMB
                             Q1                   Q2                    Q3                   Q4
                       (January-March)        (April-June)       (July-September)    (October-December)
Operating revenue     37,741,143,448.27    39,834,606,531.83     41,613,863,654.10    40,064,853,275.26

                                                     9
Net profit
attributable to
                       1,738,763,572.81      2,688,304,831.70       1,255,293,313.13     1,243,430,603.63
shareholders of the
Company
Net profit after
deduction of
non-recurring
profit or loss         1,461,794,756.85        2,315,544,698.1        917,996,951.12       928,725,302.39
attributable to
shareholders of the
Company
Net cash flows
from operating         5,809,318,531.26      2,583,882,374.92       5,766,852,092.76     1,926,535,029.37
activities


     Reasons for difference between quarterly data and regular reporting data
         Applicable Not applicable



     X.   Non-recurring Profit or Loss Items and Amount
          Applicable Not applicable



                                                                                Unit and Currency: RMB
                           Non-recurring profit or loss items                               2017
     Loss and profit from disposal of non-current assets                                 64,634,658.86
     Tax refund, reduction or exemption with approval exceeding authority or
     without official approval or occasionally
     Government grants included in current profit or loss, except that closely
     related to the normal operating business, complied with requirements of the
                                                                                        527,612,997.16
     national policies, continued to be granted with the amount and quantity
     determined under certain standards
     Gains from the costs of investment in the acquisition of subsidiaries,
     associated companies and joint ventures being lower than the share of the fair        9,660,529.47
     value of the transferor‘s identifiable net assets
     Enterprises‘ restructuring costs, such as the replacement cost of employees,
                                                                                        -120,358,066.45
     the cost of integration, etc.
     Current net profit or loss of subsidiaries from the consolidation of enterprises
                                                                                            500,041.82
     under common control from the opening of the period to consolidation date
     In addition to the effective hedging business related to the normal operations
     of the Company, profit or loss of changes in fair value arising from holding
     of trading financial assets and trading financial liabilities, as well as          663,407,128.53
     investment gain realized from disposal of trading financial assets, trading
     financial liabilities and financial assets available for sale
                                                       10
Trust fee income from entrusted business                                         2,830,188.68
Other non-operating net income and expenses expect the aforementioned
                                                                              523,346,200.57
items
Minority interests                                                            -250,957,566.29
Income tax                                                                    -118,945,499.54
                                   Total                                     1,301,730,612.81



XI.    Items Measured by Fair Value
       Applicable Not applicable

                                                                    Unit and Currency: RMB
                         Opening
        Name                               Closing balance     Change        Impact on profit
                         balance
Forward     foreign
                        81,620,979.45      117,512,866.08    35,891,886.63    663,407,128.53
currency contract
Interest rate swap
                        16,502,325.25       51,339,181.17    34,836,855.92
agreement
Contingency
                                             -5,384,860.29   -5,384,860.29
consideration
Available-for-sale
                        30,354,194.80       26,931,420.99    -3,422,773.81         369,851.42
financial assets
        Total          128,477,499.50      190,398,607.95    61,921,108.45    663,776,979.95


XII.    Other
       Applicable Not applicable




                                                11
Section III SUMMARY OF THE COMPANY’S BUSINESS

I.   Introduction of Major Business, Operating Model and Industry Background

     (I) Major Business of the Company

     The Company mainly engages in research, development, production and sales of home

appliances   with   product portfolios       covering   refrigerators/freezers,   washing   machines,

air-conditioners, water heaters, kitchen appliance products, small home appliances, U-home smart

home business, etc., offering integrated smart home solutions to our consumers, and channel

integration service business including logistics, home appliances and other product distribution,

after-sale and other value-added business.

     Since its establishment, the Company has been upholding the concept of ―taking the user as

right and ourselves as wrong‖, while adhering to the spirit of entrepreneurship and innovation and

the strategy of keeping up with new developments. Through its persistent efforts and the

acquisition of the white goods business of Sanyo of Japan and the household appliances business

of GE, the entrusted management of the Fisher & Paykel business in New Zealand, and shares of

MABE in Mexico, the Company has established its competitive edge with integrated capabilities

in R&D, manufacturing and marketing at home and abroad, realizing a layout deployment and

global operation of a world-class brand. In 2017, revenue from overseas operation represented

42% of the total revenue while near 100% of the revenue was generated from self-owned brands.

     According to retail sales statistics on the large home appliances published by Euromonitor,

the world‘s leading independent provider of strategic market research, in 2017, sales of Haier‘s

large home appliances represented a global market share of 10.6%, and ranked No. 1 in the world

for the 9th consecutive year. Meanwhile, global sales of Haier‘s refrigerators, washing machines,

wine cellars and freezers continued to rank No. 1 in the world. The Company‘s smart

air-conditioners accounted for 30.5% of global sales, ranking No. 1 in the segment of

interconnected air-conditioners (including smart air-conditioners) for the 2nd consecutive year.




                                                  12
     In face of the opportunities and challenges arising in the Internet of Things (―IOT‖) era, the

Company, through strategic market moves, has initiated the transformation to the IOT platform

and established three leading platforms, including U+ Smart Life platform, COSMO Plat

industrial internet cloud platform, and Shunguang social group platform. By offering smart homes

solutions and introducing full-range smart life experiences to consumers, Haier has satisfied the

needs of a better life for its customers.

     (II) Industry Background

     2017 witnessed a global economic recovery and a steady growth in the global home

appliance market. According to the statistics of Euromonitor, an annual increase of 4% for the

sales volume of global home appliances and an increase of 6% in sales were recorded in 2017. In

terms of regions, sales in the Asia Pacific region maintained an increment of 7%, performing

better than other regions including a 4% increase for Middle and East Africa, and 2% increase for

North America, Latin America, Australia and Europe individually.

     In 2017, economic performance of the PRC economy was steady with continuous

improvement while increasing domestic income further supported the consumer confidence index.

In terms of cost, with significant increase in bulk materials prices, the profit margin of the industry

was pressured. Fluctuations in foreign exchange rates, especially the strong performance of RMB

in the second half of 2017, have led to challenges in the home appliances export business of the

Company. In terms of demand, the white goods sector in the domestic market grew at different

rates in various sub-sectors: (1) the air-conditioner sector experienced rapid growth due to high

ambient temperatures, development of the real estate industry, higher penetration in rural areas

and other factors. According to the statistics of CMM, in 2017, retail sales and retail volume of

air-conditioners increased by 27.5% and 32.6%, respectively; (2) the refrigerator sector

experienced a turnaround in growth rate, from negative to positive 3.7%. Benefiting from the

increase in price caused by enhanced market structure, retail sales increased by 9.8%; (3) growth

in washing machines maintained stable while its retail sales and retail volume increased by 6.2%

and 11.4%, respectively; (4) the domestic kitchenware and sanitary ware market saw steady

growth: growth rates of retail sales for water heaters and kitchen appliances were 9.69% and

15.26%, respectively.

                                                  13
     Demands for upgrading to a new generation of white goods led the development of the

domestic market. Brand, quality, design and technology have become decision-making factors for

consumers who are willing to pay a higher price for 'quality goods'. Consumption of upgraded

appliances is therefore inevitable. Products with larger volume, intelligent and stylish design

become more welcomed in the market with average prices stepping up steadily. With the

promising growth of the intelligent home appliances market, sales of intelligent air-conditioners

accounted 34.7% of all air-conditioner sales, while the corresponding share of washing machines

and refrigerators was 23.1% and 13.1%, respectively.

     Competent players are getting stronger under the current market condition. By leveraging on

comprehensive advantages gained from long-term competition, leading enterprisers which have

focused on long-term research and development, establishment of quality brands and leading the

market trend will continue to benefit from rewards generated by domestic consumption upgrade

and market centralization.

     The rapid development of IOT, Big Data, Cloud computation, Artificial Intelligence (―AI‖)

and other technologies has enhanced the connections between human and equipment and between

equipment and ecosystem. Also, users' consumption habits have been gradually changed and the

trend of consumption has developed towards advanced economy, social group economy and

sharing economy. Frequent replacement with newer products and sectoral changes have resulted

in shifting competition focus, from product competition to users' value and experience, which

have forced the transformation of enterprises and the change of business model, from selling

products to selling services.

     Industry Outlook

     Influenced by factors such as favorable conditions for the air-conditioner sector and

regulatory policies of the real estate industry, the growth rate of overall demand for national home

appliances is expected to slow down in 2018 and progress with moderate growth driven by life

quality-enhancing product consumption. According to CMM, white goods sales in the PRC are

expected to reach RMB370.5 billion, with a year-on-year increment of 0.3%. While demand for

white goods and black appliances in general are denominated by upgrading and replacement,

kitchen appliances and home appliances will become the new growing points of consumption,
                                                14
with expected year-on-year growth of 11.5% and 13.5%, respectively. Online and offline retail

channels moved closer together. Online business in 2018 is expected to keep its rapid growth trend

and CMM expects that the market share of online home appliances will account for 33% in 2018.

The home appliance industry is expected to demonstrate a development trend with product

upgrading, intelligent products and brand centralization.




II.    Explanation on significant change on major assets of the Company

      □Applicable √Not Applicable



III. Analysis on core competitiveness

      √Applicable □ Not Applicable




      Since the foundation in 1984, the Company always adhered to the principle of driving the

sustainable and healthy development with innovation focusing on the needs of users, and over the

decades has successfully turned itself from a debt-burdened collective small factory which was on

the verge of shutdown into one of the largest home appliances manufacturers in the world. The

Company is committed to realizing sustainable development across different cycles through

continued innovations on corporate strategy and operating mode, brand, research and development,

intelligent manufacturing, establishment of foreign and domestic markets to achieve

competitiveness and remain adapting to ever-changing conditions.

      (I) World-class brand competitiveness, comprehensive layout

      According to the data published by Euromonitor, Haier has ranked No. 1 among global large

home appliances brands for 9 consecutive years. In the segments of refrigerators, washing

machines, wine cellars, freezers, the Company continues to be No. 1 in the world. To meet the

personalized and diversified needs of users, we have broken down the global technical barriers in

the household appliances industry and promoted the healthy development of the industry through

the global strategic synergy among six brands of household appliances, namely Haier, GE

Appliances in the USA, Fisher & Paykel in New Zealand, AQUA in Japan, Casarte and Leader.

                                                 15
Haier has built the largest household appliances industry cluster in the world, which covers the

global market and communities.

    High-end brand, leader in market share. In 2017, Casarte accounted for 35% of the market

of home appliances priced at RMB10,000 or above, up 9 pct pts. MONOGRAM, a high-end home

appliance brand of GEA, accounted for 20% of the high-end market in the USA, up 1 pct pt.

Fisher & Paykel, a world-known home appliance brand, accounted for 36% of the New Zealand

market, up 1 pct pt.

    (II) Leader in R&D and technological competitiveness

     1. Layout of R&D resources around the world: with its 10 large R&D centers around the

world, Haier has established its global network of resources and users by establishing an open and

innovative system ―10+N‖ based on ―N‖ innovative centers, which are accessible for users

seeking solutions. Haier has also attracted world-class resources to participate in R&D with its

―cooperation, win-win and sharing mechanism‖, thus playing a leading role in the development of

products and technologies in the industry and providing excellent experience for its users.

      2. Leadership in industrial standards. With its sustained innovation capacity, Haier has

become a leader in the household appliances industry in the PRC and worldwide. As at December

2017, Haier holds a total of 66 expert seats in IEC and ISO, two international standardization

organizations. Haier also holds 28 expert seats in the UL standardization organization. Haier has

participated in the development of and amendment of international standards and has put forward

90 proposals. Haier ranks No. 1 among household appliances companies in the PRC in terms of

the number of proposals raised. Haier also ranks No. 1 among domestic home appliances

companies in terms of the number of national standards initiated, leading or participating in 445

developments of national/industry standards and their amendments in total, while 391 of which

have been promulgated, and has been granted 11 national innovative contribution awards. In terms

of international participations, Haier is the only home appliance company in the PRC, which

joined the Market Strategic Board of International Electrotechnical Commission (hereinafter

―IEC/MSB‖). Haier, as the only PRC home appliance company joining a technology

sub-committee of an international standards commission, takes up secretary assignment for the

IEC/SC59A International Washing Machines Sub-committee, and has participated in the
                                                16
establishment of IEC TC59/SC59M WG4 Refrigerators and Fresh-keeping International Standards

Working Group, taking a leading role in the formulation of first international standards for

fresh-keeping capabilities of refrigerators, which has realized a breakthrough in the home

appliances sector.

      3. Currently, Haier has accumulated more than 25,000 patents application, and more than

15,000 of which are invention patents, covering 25 countries and regions, making Haier the leader

in household appliances companies in the PRC in terms of overseas invention patents. In 2017,

among more than 7,000 patent applications, the proportion of invention patents was higher than

60%, leading the sector in terms of patents. In the 19th PRC Patent Awards held in December

2017, Haier was honored with a gold award in patent, the only winner in the home appliance

sector, and 2 appearance design gold awards. It was also awarded with 5 patent outstanding

awards. Haier has won 5 gold awards from all the previous PRC Patent Awards, ranking No. 1

among the competitors in terms of total number of gold awards. Haier has become the only

household appliance enterprise being awarded twice with gold awards and the only enterprise

gained 3 gold awards in one time for the past 29 years. Haier has been awarded 14 national

technology advancement awards, representing two-thirds of the sector.

     4. Innovating the R&D mechanism through the HOPE platform. Through HOPE, its online

open innovation platform, Haier has been facilitating the matching of resources from the

beginning of innovation to its materialization, producing cross-border and disruptive innovation

continuously. As the leading open innovation platform, currently the platform can reach 3.8

million world-leading resources, more than 400,000 registered users, and offers over 6,000

creative ideas on average per year, thus supporting the maintenance of our leading position in

products/technologies.

     (III) Competitiveness of smart manufacturing, leading the transformation

     1. The core competitiveness of Haier‘s smart manufacturing lies in its commitment to

realizing long-term value for users through its user-oriented approach and the transition from

large-scale manufacturing to large-scale customization. In practical operation, Haier has

established 9 global-leading sample interconnected factories, as well as the interconnected

capabilities and ecological system covering the whole process. Such businesses cover refrigerators,

                                                17
washing machines, air-conditioners, water heaters, kitchen appliances, electric motors, molds and

other fields, meeting our user's need for perfect experience in high-end personalized products and

services. Such initiatives have produced notable effects: the orders from large-scale customization

in which users are involved in the whole process accounted for 16% of the total, while the orders

from large-scale customization in which customers are involved accounted for 52% and achieved

a breakthrough which eliminated or shortened the period of products in warehouses. In addition,

operational efficiency throughout the process has been enhanced. For example, the development

cycle for new products has been reduced by more than 50%.

     2. COSMO Plat - China‘s first and global-leading industrial internet platform with

independent intellectual property rights was built on the basis of interconnected factories, as well

as best practices in digitalization and product development. This platform, combined with existing

capabilities such as smart equipment, smart control, mold and Smart Research Institute, has been

in collaboration with relevant companies in seven major industries, and will be able to offer

comprehensive solutions and value-added services featured by the combination of software and

hardware as well as the mix of virtual and real factors for the transformation and upgrading of

smart manufacturing.

     (IV) Efficient and in-depth networking channels and logistics layout

     1. Through our diversified channel system, we have achieved full coverage of the first,

second, third and fourth-tier domestic market and provide convenient shopping experience

anywhere, anytime. We have also maintained strong strategic cooperation relationship with

professional chains for household appliances, such as Gome and Suning, as well as e-commerce

platforms, such as Tmall and JD. In respect of our own channels, Haier has established more than

8,000 county-level stores, and more than 30,000 stores within town and country-level network.

With regard to our comprehensive store channel, we have established a number of clubs, such as

the V58 and V140 Clubs, and maintained close cooperation with major enterprises engaging in

regional distribution of household appliances. By leveraging on the comprehensive advantages of

its product lines, Haier has established experience stores with full scene experience of smart life,

realizing full demonstration, design, sales and services to sales terminals and enhancing the

loyalty of sales terminals.

                                                18
     2. The network of the warehouses of Gooday Logistics covers more than 100 cities and

regions in the PRC, with a total storage area of 3.6 million square meters, and 90,000 motor

vehicles for deployment. Gooday Logistics offers around-the-clock service combining delivery

and installation, and is dedicated to providing users with comprehensive, timely and care-free

services.

     (V) Excellent global operation capability

     We have been adhering to the strategy of building our own brand independently. Through

self-development and mergers and acquisitions, the Company has completed its triple network

comprising of R&D, manufacturing and marketing for major overseas markets, which helped us

gain insight into and meet the needs of local consumers in a short time. The successful global

transformation from single-brand to cross-border and cross-sector multi-brand demonstrated its

achievements by going global and developing integrated global resources. As at the end of 2017,

its capacity of overseas markets (America, Europe, South Asia and other regions) reached more

than 20 million units while revenues from overseas markets in 2017 amounted to 42% with almost

100% generated from self-owned brands.

    (VI) Based on credibility culture and win-win model of people plus goal

     Credibility culture based on quality and service is the core driver of Haier‘s growth, and is

also the essential reason for the constant success of Haier. Leveraging the credibility culture of

―user-oriented‖ and ―persistent honesty‖, Haier has turned itself from a small collective factory

which was on the verge of shutdown into one of the largest white goods manufacturers in the

world, while keeping a leading position in world-wide innovation in the internet era. Haier

upholds the concept of ―always take the users as right and ourselves as wrong‖. This concept

stimulates the spirit of innovation, revolution and entrepreneurship of Haier and motivates it to

progress into the future and continuously improve and challenge itself, in order to seize

development opportunities. The win-win model of people plus goal is the assurance of a

sustainable operation of Haier. In exploring the ―individual-goal combination 2.0‖, "Co-create‖

and ―Win-win ecosystem‖, Haier endeavors to build a win-win ecosystem based on user value

interaction in the new stage of e-commerce to make every employee his/her own CEO and realize



                                                 19
their own value while creating value for users, so as to achieve a win-win situation, which is

critical to all parties in the system.




                                             20
Section IV DISCUSSION AND ANALYSIS ON OPERATIONS

     In 2017, the Company focused on technological innovation and leading position in products,

deepened corporate retail transformation, and adhered to global branding and the local triple

network layout. Thus, it achieved quality results growth, with revenue, net profit and net cash flow

from operating activities hitting historical highs.

     Revenue of the year reached RMB159.254 billion, representing an increase of 33.68%. ①

Excluding the effect of consolidating the financial results of GEA, the original businesses of the

Company, i.e. refrigerator, washing machine, air-conditioner and kitchen products recorded

increases of 18%, 20%, 48% and 25%, respectively, each representing their highest growth in

recent years; ② GEA recorded a revenue of RMB 45.894 billion, a new high in ten years. ③

High-end brand Casarte recorded an increase in revenue of 41% in 2017.

     Net profits attributable to the parent company for the year was RMB6.926 billion, up by

37.37%; Net profit after deduction of non-recurring profit or loss attributable to the parent

company was RMB5.624 billion, with an increase of 29.81%. Net cash flow from operating

activities amounted to RMB16.087 billion, representing a year-on-year increase of 97.72%.

     Noticeable increase in market share: ① In the global market, according to the data as

published by Euromonitor, in 2017, the market share of brands of Haier’s large household

appliances reached 10.6%, the top ranking for nine consecutive years. ② In the domestic

market, a full range of products recorded increases in market shares: according to the data

released by CMM, retail market shares of refrigerator, washing machine, air-conditioner, water

heater, ventilator and gas stove of Haier increased by 3.4, 2.3, 0.5, 1.3, 1.12 and 1.06 pct pts.,

respectively; the refrigerator and washing machine businesses maintained and continued to extend

their leading position, with retail sales accounting for 31.83% and 29.89%, which were 2.5 times

and 1.7 times of the brands in second places, respectively, reinforcing the Company‘s leading

position. ③ In the U.S. market, according to a report issued by the Stevenson Company, in

terms of sales, GEA‘s market share in the U.S. household appliances market was 20.4% in 2017.

The breakdown of share by products was as follows: 28.7% for kitchenware, 21.2% for



                                                  21
dishwasher, 19.8% for refrigerator, 15.4% for washing machine. In particular, the market shares of

kitchenware ranked No. 1 in the industry with a clear competitive edge.

The Company’s works in 2017 were mainly as follows:

     1. Capitalizing on the open innovation system of 10+N under the global layout, the

Company led the industry with product differentiation through technological upgrades and

disruptive innovation, and promoted structural adjustment: regarding brands, Casarte‘s

revenue increased by 41%; and regarding product category, mid-to-high end products continued to

grow at a rapid rate. For instance, revenue from side-by-side & multi-door refrigerators and

front-loading washing machines increased by 45% and 43%, respectively, in the domestic market.

    Refrigerators/freezers industry: the Company led the trend of integrated home services and

health preservation in the industry, introduced resolutions for free-embedded, cell-level

preservation and full-space preservation, etc., satisfying users‘ demands for quality life. The

Company kept its leading position driven by iterations, maintained the leading position in each

price range while achieving a breakthrough in the high-end market. According to the data of

CMM, retail sales of refrigerators above RMB10,000 increased by 59.6%, and retail sales of

refrigerators above RMB15,000 increased by 221.1%, respectively.

    The free-embedded F+MSA nutrition controlling and preservation 520 multi-door refrigerator

launched by the Company adopts the advanced MSA nutrition controlling and preservation

technology which is able to reduce the concentration of oxygen in a specific compartment, achieve

a double preservation period, and lower the loss rate to around 1/10 than that of the ordinary

refrigerators. The storage period for strawberry can reach 8 days with a nutrient loss rate of only

1.5%, while the storage period for strawberry of the ordinary refrigerators can reach only 3 days

with a nutrient loss rate of 12%.

    Washing machine industry: with the application of advanced technologies such as washing

in clean water, smart laundry and identification of laundries, the Company kept upgrading its

washing solutions to cater the needs of healthier, more water saving, partition washing, and large

drum diameter demands. According to the data of CMM, the market share of washing machines

above RMB8,000 was 60%.



                                                22
    Casarte ―Fiber Care‖ (纤见) washing machine launched by the Company is the world‘s first

washing machine product equipped with an IOT fiber-level washing program. Adopting the

direct-drive variable frequency motor of Fisher & Paykel, a luxury brand from New Zealand,

through innovating washing technology, upgrading the internal structure and creating a 601 mm

super large drum diameter, the Casarte ―Fiber Care‖ washing machine expands the laundry

capacity, makes picking-up and placing of laundry more convenient, while its larger washing

space can better protect the clothing. At the same time, being connected to the IOT intelligent

detection of fiber and combined with automatically set washing programs, it provides an exclusive

washing solution with one-button control for users, which gives tender care precisely to every 1ml

fiber at a temperature of 2° ensuring perfect protection of silk, Su embroidery, fur and other

materials.

    Household air-conditioner industry: in view of the evolving consumers‘ demand towards

healthy, comfortable, smart and customized products, the Company is dedicated to leveraging on

leading technologies to create a differentiated consumer experience, and to forge differentiated

core competitiveness with a focus on innovation of intelligent, effective and healthy products. In

2017, the Company realized a new type of air-conditioner from blowing clean airflow to allowing

users to breath clean air, and launched the air purification-integrated series, Casarte Yunding (云

鼎) and Tianxi (天玺) series, clean cool series and other differentiated products, which are able to

complete home air purification in just 15 minutes, allowing users to enjoy clean air at home.

Riding on the competitiveness brought by product and technological innovation, product are

continuously improved. According to the statistics of CMM, there is an obvious increase in market

shares of Haier‘s mid-to-high-end air-conditioners, where market shares of wall-mounted air

conditioners in the price range of above RMB4,100 and packaged air conditioners in the price

range of above RMB8,000 increased by 6.8 pct pts. to 15.2% and by 10.5 pct pts. to 22.9%,

respectively, and the market share of packaged air conditioners in the price range of above

RMB16,000 ranked the first place in the industry, amounting to 40%, with a ratio to the second

placed of 1.70.

    Euromonitor issued a certification for Haier air-conditioners – according to retail market sales

statistics of the 2017 interconnected air-conditioners (including smart air-conditioners), Haier

                                                 23
ranked first in the world with a market share of 30.5%, the top ranking for two consecutive years.

According to the 2017 export statistics, Haier air-conditioner ranked first in China‘s own-brand

air-conditioner exports, accounting for 22%.

     The air purification-integrated, clean cool and self-cleaning air-conditioner released by the

Company, is the only professional air-conditioner equipped with purifying function, and it is able

to complete home air purification rapidly to create a clean air environment for users. The products

realized full-mode purification by adopting direct-extraction technology and electric purification

technology of the space capsule purification system, enabling itself to automatically capture dust

and high purifying efficiency assisted by negative ion purification technology. With

humidity-coupled sensing technology and PID flexible variable frequency humidity-control

technology innovated on the basis of flexible variable frequency humidity technology, it is able to

adjust the indoor air environment to the comfort zone of the human body and optimize the air

quality. Supported by Haier‘s inner and outer self-cleaning technology, which was granted six

patents, it makes the air cleaner and healthier. Assisted with unique patented technology of natural

airflow and positioning airflow, combined with smart app management, it provides users with a

comfortable and healthy air experience and smart and convenient use in an all-round way.

     Central air-conditioner industry: to cater users‘ needs of energy-saving in the industry, the

Company continued to make iteration of magnetic levitated products, leading the industry with

magnetic levitated central air-conditioners, and realizing ―multi-speed‖ growth of magnetic

levitated products. In the meantime, the Company launched the first IOT central air-conditioner in

the world, realized integration of IOT and central air-conditioners for the first time and gained a

leading position of IOT central air-conditioners capitalizing on a differentiated experience of

automatic connection to the internet, automatic energy saving and independence. Simultaneously,

the Company introduced temperature and humidity independently-controlled, cloud service and

smart cloud control and other technologies to maintain its leading advantage in respect of energy

saving and intelligence, continued to implement innovation in order to achieve product innovation

driven by differentiation. According to data released by China Industry Online, in 2017, the

domestic market share of Haier‘s central air-conditioner achieved the greatest growth in the

industry with an increase in market share of 1.9 pct pts. year-on-year.

                                                 24
     For instance, ① on top of the leading position of magnetic levitated products and in the face

of customization needs of the industry community, the Company launched evaporative cooling

magnetic levitated air-conditioners applicable to the rail transit industry, corrosion-resistant

magnetic levitated air-conditioners applicable to the aluminum oxidation industry, free cooling

magnetic levitated air-conditioners applicable to the data center industry and other differentiated

customized products to achieve continuous leadership of magnetic levitated air-conditioners; ②

to cater the growing demand for central air-conditioning updates, the Company launched

multi-split central air-conditioners as a new product, the industry‘s first new product of 5 no‘ (no

pipe changing, no line changing, no indoor unit changing, no decoration destroying and no

affecting of business), and achieved ―no renovation destroying while changing new central

air-conditioner‖, occupying a leading position in central air conditioning retrofits. ③ in view of

the needs and growth of unmanned convenience stores and unmanned gas stations and other stores,

the Company took the lead in the industry to launched central air-conditioning for unmanned

shops, and obtained the first share.

     Water heater industry: Relying on the full range of layout of electric, gas, solar and heat

pump water heaters, the Company carried out core technological innovations and product structure

upgrades to provide consumers with comfortable bathing solutions. ① In respect of electric

water heaters, the Company introduced ―instantaneous heating & washing technology‖ which

realizes rapid heating and capacity expanding and solves the pain points‘ of long waiting time for

heating. The Company introduced the ―double-effect discharge inhibition technology and

three-level purification technology‖ to effectively inhibit the generation of discharge and purify

and remove harmful substances such as sediment, residual chlorine and bacteria in water, so as to

better protect mothers and babies. ② In respect of gas water heaters, the Company released six

major core technologies such as the active elimination of carbon monoxide safety systems and

zero-cold-water systems in response to user values such as safety and constant temperature.

According to the data of CMM, our water heaters obtained a market share of 18.77% in terms of

retail sales volume in the domestic market, taking first place.

     To strengthen the Company‘s technological reserves in power plants and thermosiphon, in

May 2017, the company acquired 51% equity interests in GREENoneTEC Solarindustrie GmbH


                                                 25
(―GoT‖), the largest solar thermal power plants manufacturer in the world located in Austria. GoT

has advanced technology and facilities in the fields of solar thermal power plants and large-scale

multi-source water heating systems.

    The Company released the Haier instantaneous heating electricity insulation wall water heater

Plus9. Equipped with a unique instantaneous heating waterfall washing, discharge-inhibiting

cleaning washing, heating electricity insulation wall 3.0, cloud SMART 2.0 smart technology and

outer shaped design and black technologies, the products tackled lots of pain points‘ of users,

such as slow heating, small amount of water, dirty washing, disconnection and big white bucket,

which are typical challenges of the electric water heater industry, and gained the ―APE Appliance

Innovation Award‖ beating more than 500 exhibits.

    Kitchen appliances industry: The Company manufactures a variety of kitchen appliances in

all segmented markets, with particular focus on smart home appliances that can be interconnected

to form a ―smart kitchen‖. Leveraging on the R&D resources of Fisher & Paykel and GEA, the

Company has also developed tailor-made products for Chinese consumers to meet their

requirements for Chinese cuisine, and covered segmented markets of different consumer groups

with 5 major brands, namely luxury brand‘s social kitchen Fisher & Paykel, high-end Italian

embedded kitchen Casarte, professional complete set of American kitchen GEA, the public brand

smart kitchen Haier, and the young market kitchen brand Leader. The Company took the lead in

publishing the industry‘s first ―dry heating prevention home gas cooker standard (防干烧家用燃

气灶具标准)‖ and ―residential open kitchen standard (住宅开放式厨房标准)‖, leading the

industry standards. Our core kitchen products include range hoods, stoves, built-in ovens, steamers,

coffee makers and dishwashers. In 2017, revenue from kitchen appliances in the domestic market

increased by 47% year-on-year; the sales volume of high-end brand Casarte kitchen appliances

increased by more than 125% in 2017 while the share increased by 1 pct pt year-on-year.



    The Company has released a series of star products. ① Range hoods of Yunchu (云厨)

series. it can be operated through the touch screen and mobile application to achieve convenient

functions such as entertainment and recipes in the kitchen. It is equipped with a unique deep

cavity and Fisher & Paykel variable frequency motor to achieve ultra-quiet large suction effect. Its

                                                26
unique net core module tackled the biggest kitchen ―paint point‖ of users, the difficulty to clean

hardened oil. ② Gas stove products with dry heating prevention. Supported by the Company‘s

unique patented technology of dry heating prevention and inter-connection technology, it is able to

detect the temperature inside the pot automatically, therefore, under the circumstance where the

pan is dried up, the gas will be cut to prevent harmful consequences for safety risks, which sets a

global safety & dry heating prevention standard. ③ Casarte steam oven. Its steam surrounds the

cell-grade nutrition. Supported by three core technologies, a steam cruise system and steam

surround system, it meets people‘s needs for a delicious and healthy diet. ④ High-temperature

self-cleaning oven products. With the application of the exclusive hot air with constant

temperature technology developed by GEA, the product is capable of performing carbonization

decomposition of oil pollutants at a temperature of 420 degrees and is easy to clean, thus releasing

users from the trouble of cleaning.



     (II) Domestic market: Focusing on user experience and customer value, deepening

network, optimizing efficiency and improving structure.

    In 2017, the Company continued to promote retail transformation of its China business and

enhanced the market competitiveness of the entire process. It achieved more than 20% revenue

growth for five consecutive quarters since the fourth quarter of 2016, and an increase in market

share. By increasing the proportion of mid-to-high-end products, the average price of the

Company‘s white home appliance in the domestic market increased by more than 10 pct pt in

2017.

     Further penetration of store network and operation improvement of stores. ① The

Company upgraded the business district core store showroom to realize the transformation from

product display to full-scale scene-based experience, and promoted the refinement of the store‘s

―people-to-store-to-model‖ to increase the order conversion rate. ② In the home building

materials channel, the Company promoted the construction of smart complete set of scene

experience stores, provided users with ―one-stop, full-scene, customized‖ solutions with package

display, package design, package sales and package services. By the end of 2017, the Company

has built one city experience center, 100 smart home experience stores, and 800 smart home

                                                27
integration stores. ③ The Company propelled the construction of smart cloud stores, built

asset-light stores based on the principle of ―small but smart‖, and achieved deep coverage of

users‘ touchpoints in communities, decoration companies, townships and village-level networks.

    In terms of e-commerce channels, the Company further improved the layout of JD.com

assistance, JD.com POP, and Tmall authorized stores to achieve channel structure optimization

and expansion of users‘ touchpoints; increased the proportion of mid- to high-end products and

differentiated delivery of products based on channels; strengthened content marketing and realized

strong interaction with users. In 2017, e-commerce revenue increased by more than 70% and the

average price of products increased by more than 20%.

    The Shunguang (顺逛) platform connects on-line stores, off-line stores and micro-enterprises

by integrating the three into one, and coordinating marketing, logistics, information and service

network, and build a multi-entry and 24 x 7 community interaction platform. Based on community

interaction, the Company addresses users‘ pain points‘ and consumer trends, promotes product

and service upgrades and iterations, provided community foundation and user orientation for the

implementation of Haier‘s full scene-based and customized smart solution package, and builds a

differentiated competitive edge for Haier‘s smart family. In 2017, the Shunguang platform

actively took advantage of the entire process chain to open up its entrance, build a comprehensive

community ecosystem with rich resource, and upgraded the value of a single brand to the win-win

platform of the whole ecosystem. In 2017, the Shunguang platform had 800,000 micro-store

owners, 20,000 offline stores, 30,000 user communities in aggregate, and reached total platform

transactions of RMB4.5 billion.

    Constantly increasing the construction of Casarte brand in terms of product portfolio

brand marketing, network layout and point-of-sales experience to address the domestic

consumer trend upgrading. In 2017, revenues from Casarte brand increased by 41%. In the

domestic high-end home electric appliances market above RMB10,000, the market share of

Casarte reached 35%, an increase of 9 pct pt over 2016. In the refrigerators and washing machines

market above RMB10,000, market shares of Casarte refrigerator and washing machine were 30%

and 69%, respectively; in the air-conditioner market of above RMB16,000, market share of

Casarte air-conditioner reached 40%.

                                               28
    Upgrading digital marketing platform to improve operational efficiency: The Company

realized online real-time purchase, sales and inventory management on town and country-level

network through Yilihuo (易理货) platform, facilitating product delivery to customers and users

of town and country-level at the fastest speed and the lowest cost. The Company promoted the

construction of smart cloud store platforms, and through digitizing product information and

training video integrated with the delivery of the latest product information to the terminal in a

timely fashion and accurate manner, it optimized the product launch cycle. By the end of 2017, the

number of screen coverage reached 110,000.

    Innovation on marketing model. ① In the point-of-sales stores, through the coin activities

of washing machines, the Company provided users with clothes ―air wash‖ services to

demonstrate non-copyable leading technology in an intuitive and vivid way, and achieved strong

word-of-mouth promotion; ②Through various types of marketing investment such as the CCTV

national brand plan, local media cooperation, product placement in a variety of show, film and

television dramas, the Company achieved a strong brand recognition.

    The Company stimulated the vitality of the organization by micro-market mechanism and the

model of people plus goal. The Company promoted self-operation under the micro-micro

mechanism, and realized the exercise of employment rights, allocation rights and decision-making

rights. Through the excess profit sharing mechanism, the Company facilitated driver enhancement

of employees, changes in personnel concepts and ability. And through the model of people plus

goal, the Company promoted the collaboration in parallel and operational innovation of the

entire-process logistics hubs focusing on the market.

    (III) Overseas market: Building brands, establishing high-end image, concentrating on

experience in an attempt to boost synergies and comprehensive development

     During the reporting period, the overseas market concentrated on branding and earnings,

facilitated the implementation of the model of people plus goal in respective regions, promoted

integration of culture and mindset, boosted synergies with GEA concerning procurement, products

and R&D, which delivered healthy performance.

     Principle operating conditions in respective regional markets are as follows:
                                                29
     1. The European market. Revenue from the European market increased by 16% in

2017. ① Products: a. Revenue from refrigerators increased by 37% through high-end products

including the launch of third-generation products of Italian refrigerators, 521-series hinged door

refrigerators; boosted synergies with GEA in the European market, launched GE air-conditioners

targeted at the mid to high-end market in Italy. Household air conditioners and commercial air

conditioners increased by 15% and 29% in 2017, respectively. b. Air-cooled refrigerators with

large capacity, front-loading washing machines with large diameter and direct-drive electric motor

rolled out in the Russian market continued to enhance structure and price, with retail price index

of refrigerators and washing machines amounting to 150% and 130%, respectively; market share

of household air-conditioners ranked No.1 with retail price index reaching 115%. ② Regarding

retailing, the Company established shop-in-shop in important channels and engaged direct sellers

to interact directly with users with a view to enhance operating efficiency; strengthened strategic

cooperation with core channel M.V in the Russian market; expanded chain channels in the region

and commenced comprehensive strategic cooperation with national chain channel SULPAK in

Kazakhstan. ③     Increased productivity and efficiency at local manufacturing base.

Production capability of the refrigerator factory in Russia doubled in 2017; actively capitalized on

the opportunities brought by the national development strategy of ―Belt and Road‖ and started

special railway transport to lower material transportation costs and increase gross profit of

products in the second half of the year; facilitated procurement with localization rate increasing to

65%.

     2. South Asian market. The South Asian region continued to grow rapidly in 2017, of which

the Indian market achieved an increase of 40% in revenue, four times higher than the growth in

the industry; revenue from the Pakistan market increased by 42%, four times higher than the

growth in the industry. The market shares of white goods ranked No.1, which was 1.5 times higher

than that of the second largest market participant.

     ① Adhered to the positioning of high-end products, accomplished branding

transformation and consolidated its position as a branding leader. In the Indian market, the

Company launched mid to high-end and differentiated products covering BM refrigerators,

washing machines featured partition washing functions and variable-frequency air-conditioners

that targeted at local market needs and habits. The market shares of BM refrigerators accounted
                                                 30
for 71% in terms of the same segment, lead to an increase of 19% in the average selling price of

refrigerators and an increase of 19% in revenue. In the Pakistan market, refrigerators offered the

best food preservation experience through the ―TURBO COOLING‖ product program; with the

leading ―A-PAM‖ technology and full DC inverter technologies, and through high-end intelligent

product terminal standardization display, air-conditioner products successfully consolidated its

leading market position and won the favor of customers. ② the Company exerted its efforts in

mid to high-end product marketing, promoted point-of-sales retail transformation. Establishing

store display standardized system, the Company focused on competitive product segments and

stores, strengthened the display of products well-received in the market; enhanced group training

for direct sellers, increased output efficiently per capita. ③ By the end of 2017, Haier Industrial

Park in India was put into production. The production capability of refrigerators, washing

machines, air-conditioners, water heaters increased by 3.8 million units, which will efficiently

improve speed and cater to the needs of the local market.

     3. Asia Pacific Region. (1) Japan market: the Company promoted adjustment in channel

structure and product structure to optimize profitability; the AQUA commercial washing machine

was upgraded through an IOT system, the market share of which exceeded 75% in 2017. (2)

Southeast Asia market: ① consolidated product and manufacturing resources in the headquarter,

improved brand image through the launch of glass hinged door refrigerator, T-type four-door

refrigerator, twin drum washing machine, front-loading washing machine, self-cleaning

air-conditioner and other products and optimized product structure and profitability. ②

Expanded local chain channels and established specialty stores channels. ③ Lowered costs

through focused design and promoted lowering of costs through competition mechanism

introduced at suppliers under global procurement platforms; introduced SAP system in Vietnam

and Indonesia‘s manufacturing base to accomplish IT upgrade and standardization in factory

operations.

     4. Other market. ① Established whole process synergy mechanism with MABE team in

Latin American market, interacted with the market to enhance product R&D to ensure main

product projects in countries in Latin America so as to successively roll out new products. The

Company entered the largest retail channel ―falabella‖ in the Chilean market to introduce a

product series to the market. ② Middle East and African Market: despite the stagnant economy
                                                31
and sluggish demand in the region, profitability increased through branding strategy

transformation; launched leading products covering T-door and hinged door refrigerators, DD

direct-drive electric motor front-loading washing machines and other products; initiated agency‘s

strategic transformation from trading to branding; established more than 300 Haier specialty stores

in Nigeria and Saudi Arabia. The implementation of measures mentioned above effectively

enhanced the industry position of the Company in the region. The market shares of T-door

refrigerators increased from 5% in 2016 to 15% in 2017 in Israel, ranking top 3 in the market; the

market shares of refrigerator and washing machine products maintained its leading market

position in Nigeria.

5. GEA’s adoption of the People plus goal Model has helped improve the business’

performance, including: continued strong sales growth in a highly competitive environment, with

GEA outpacing the industry and achieving its highest sales revenues in recent history; share

increases in every product category, with cooking products continuing to hold the leading position

in the industry. GEA share of refrigeration, washing machines, air-conditioners and dishwasher

products has increased by 0.1pts, 0.4pts, 9pts and 0.3pts, respectively.

     ① With the people plus goal model, GEA shifted its view of users and the marketplace and

restructured into eight product microenterprises that focus on delivering for users and achieving

market-leading goals. The business introduced new profit-sharing approaches to drive

microenterprises success, with team members awarded for achieving leadership with users. ②

GEA also is transforming its approach to marketing and branding to know and reach users better

than anyone. The business conducted deep research into consumer behavior and the identification

of target user segments for each of its brands. As a result, GEA is developing a new mass

premium strategy for the Cafébrand, with plans for a new, iconic look and full-featured cooktop,

door-in-door refrigerator and built-in oven. For the Black Friday holiday event in Nov. 2017, GEA

altered its previous strategy. First, it carried out a series of premium brand experience marketing

activities to allow it to adopt a differentiated channel strategy and get closer to the right customer

for each channel. As a result, GEA‘s sales growth for the whole Black Friday week was twice as

that of the whole industry, and sales revenue for Café, GEA‘s brand in the mass premium

channel, increased by 40% compared with the Black Friday in 2016.

                                                 32
     ② Global business synergies released continuously: ① Procurement synergy. In 2017,

261 global synergy projects were conducted, resulting in savings of US$89 million worldwide

during the year. The Company expects total savings from procurement synergies for the period

2016-2019 to exceed expectations. ② R&D synergy. Global R&D collaboration and synergy

projects are focused on four leading principles: product leading, technology leading, efficiency

leading and innovative culture leading. Progress was achieved in each area in 2017 through a

variety of projects and initiatives, including: A. Two Global Product Council Summits resulted in

agreement on 18 global universal product platforms. Of all the product lines, more than 10

products were launched into the market in 2017, and more than 50 products are in R&D progress,

which are estimated to be launched between 2018 and 2019. B. Haier Home Appliances Industry

Group opened an innovation center in the Silicon Valley, developing various disruptive innovation

synergies with Haier‘s global R&D center. C. CVI(Component Value Initiating) system online.

All product component data from GEA, MABE and Fisher & Paykel, along with some data from

Qingdao, is now included in an online CVI system. The system dramatically boosts the global

universality of product components, accelerates R&D process and reduces related procurement

cost. ③ Market synergy. Eight GE Appliances Experience Centers were opened in China in

2017, benefiting from the strength of Haier‘s channel leadership and relationships., Likewise, with

GEA‘s strong commercial relationships in the US Haier has established strategic cooperative

relationships with mainstream large retailer channels like The Home Depot. ④ Manufacturing

synergy. Haier and GEA are working closely together to bring the interconnected factory model

to GEA. With mass-scale customization, GEA could realize zero-distance to users through end-to

end interaction.

     (IV) Continuous and stable growth in the logistics business.

     The business of Gooday Logistics continued to grow solidly and rapidly in 2017, of which

e-commerce logistics and household furniture logistics both achieved rapid growth. The

e-commerce logistics sector provides warehousing, line-haul transportation and last-mile delivery

and installation services to Tmall platform, JD.com platform and Haier‘s online shopping mall.

While providing customers with integrated supply chain solutions, the Company also enhanced

the capability in value-added businesses such as reverse logistics and maintenance. During the


                                                33
11.11 Shopping Carnival, Gooday Logistics‘ on-time delivery rate reached 92.7%, which was

higher than the industry average.

     Leveraging on the advantage in the field of bulky home appliances and the understanding of

the household furniture industry by Boyol New Brothers, a subsidiary of Gooday Logistics,

Gooday Logistics actively expanded the service capability in household product logistics, and the

revenue of online household furniture sector increased by more than 40% in 2017. We developed

our nationwide household furniture delivery and installation network through franchises,

standardized our service process and provided training for the network, and planned to set up

household furniture logistics centers in Guangdong to provide warehousing and collection services

for customers at the household furniture distribution areas. Shanghai Boyol New Brothers

recorded a growth of 18.4% in revenue during the year. Along with the increase in orders from its

existing major customers such as IKEA and Kohler, Boyol New Brothers also actively expanded

its customer base into household furniture, household chemicals and nutritional products. During

the year, we completed an investment in Shanghai Grand Logistics Co., Ltd. and realized a

controlling shareholding. We also further developed the cold chain logistics and fresh food supply

chain businesses. During the year, Gooday Logistics actively arranged its warehousing and

transportation platforms and tested automatic sorting warehouses for bulky items such as home

appliance products. By the end of 2017, the total area of the warehouses amounted to 3.60 million

square meters. Targeting the bulky home appliances market, Gooday Logistics is exploring the

automated warehouse in the country in order to have differentiated competitiveness in the aspects

of smart equipment, smart management and smart services and set up the industry standards for

bulky goods logistics.

     (V) The core capability of U+ SmartLife platform secured its leading position, and the

effective implementation of smart scenes contributed to substantial growth in platform scale.

      ① Continued to carry out technological innovation, standardized output, and enhance

product experience in smart household appliances sector. In 2017, UHomeOS was approved by

the authorities as a CIB project, becoming the only CIB project with IOT security operating

system in the industry; the U+ IoT platform passed EAL3 security certificate, the IOT security of

which was approved; launched the first AI voice solution program and open platform in the

industry, realizing voice interconnectivity and coherent experience; Haier took the leading role in
                                                34
the formulation of IEC/MSB first AI standard white paper, providing strategic guidance for

industry development, accelerating the integration of AI and the industry and forming global AI

standard. ② Pioneered in the global market to launch the complete set of smart household

appliances equipped with interconnected features of whole-scenes, providing users with more than

200 smart home scenes covering four spaces of living room, kitchen, bathroom and bedroom.

Released Store, the first scene of smart home to make it more convenient for users to customize

their own scene solutions on the U+ app. In 2017, the number of devices on the U+ SmartLife

platform underwent a breakthrough in growth, the sales of which achieved a growth of 100%. The

accumulated number of user access devices on the platform exceeded 20 million, becoming the

largest IOT platform in the smart home industry. ③ Promoted the establishment of ecosystem

and sought opportunities for business model transformation, such as the transformation of the

smart kitchen ecosystem from IOT food management to household health; created extreme

washing experience for users in the washing ecosystem with a view to accomplishing the upgrade

from smart control to the internet of clothes ecosystem.

     (VI) Promoted the establishment of COSMO Plat platform and accelerated smart

manufacturing transformation.

     During the reporting period, the Company actively promoted the transformation of the

internal supply chain system from inventory production to user production. In 2017, the Company

developed Huangdao Smart Kitchen Interconnected Factory with the total number of 9 connected

factories, which in turn enhanced the capability and ecosystem of interconnectivity during the

whole process and improved operating efficiency of the supply chain; the rate for products without

being stored reached 69% and the order delivery cycle shortened to 50%, thereby achieving high

efficiency in a precise manner.

     Strengthened the development of the smart manufacturing industry: Acquired Fisher &

Paykel Appliances Holdings Limited (―PML‖), integrated mutual resources and created a smart

equipment business platform; incorporated COSMOline developed by PML into COSMO Plat and

encouraged its establishment and promotion. In February 20118, COSMO Plat was approved by

authorities as the first industrial internet demonstration platform at a national level to accomplish

cross-industry and cross-field expansion and services; based on 9 interconnected factories. The

Company copied the model to 12 industries and 11 regions to accelerate the transformation and
                                                 35
upgrade of manufacturing corporations in China to commence smart manufacturing with a view to

lead the trend of smart manufacturing in the future.

II. Principle operating conditions during the reporting period

     Please refer to relevant information contained in this Section headed ―DISCUSSION AND

ANALYSIS OF OPERATIONS‖.

 (I) Analysis of principal business

Table of movement analysis on the related items in income statement and cash flow

statement

                                                                             Unit and Currency: RMB
Items                                                        Corresponding
                                      Current period                               Change (%)
                                                             period of last year
Operating revenue                     159,254,466,909.46     119,132,261,662.60    33.68
Operating cost                        109,889,621,609.45     82,166,530,321.02     33.74
Sales expense                         28,276,014,979.78      21,254,103,195.32     33.04
Administration expenses               11,133,225,318.88      8,404,150,036.49      32.47
Financial expenses                    1,392,872,274.21       720,408,216.53        93.34
Net cash flows generating from                                                     97.72
                                      16,086,588,028.31      8,135,878,351.88
operating activities
Net cash flows generating from                                                     85.81
                                      -5,621,820,618.20      -39,625,802,967.02
investing activities
Net cash flows generating from                                                     -96.91
                                      922,886,793.22         29,849,765,650.55
financing activities
Loss of impairment on assets          655,916,881.23         490,548,371.52        33.71
Income from change in fair value      614,071,259.47         94,648,076.07         548.79
Income from disposal of assets        10,764,209.65          231,246,918.49        -95.35
Other income                          908,561,990.40                               100
Non-operating income                  692,963,237.76         1,170,564,378.20      -40.8


     Analysis of the relatively significant changes in indicators is as follows:

           1)    Operating revenue increased by 33.68% as compared with the corresponding

     period, which was mainly due to the endogenous growth of the original business of the

     Company and revenue contribution from GEA acquired by the Company;

           2)    Operating cost increased by 33.74% as compared with the corresponding period,

     which was mainly due to the growth in sales that resulted in the corresponding increase in

     costs;


                                                  36
          3)     Loss of impairment on assets increased by 33.71% as compared with the

     corresponding period, which was mainly due to an increase in inventory impairment balance

     at the end of the year;

          4)     Income from change in fair value increased by 548.79% as compared with the

     corresponding period, which was mainly due to the impact from the change in fair value of

     derivative financial instruments such as forward exchange contract;

          5)     Income from disposal of assets decreased by 95.35% as compared with the

     corresponding period, which was mainly due to disposal of assets occurred more last year

     than this year;

          6)     Other income increased by 100% as compared with the corresponding period,

     which was mainly attributable to the implementation of the Accounting Standards for

     Business Enterprises No. 16 - Government grants (2017 Revision) at the time, as requested

     by the MOF during the year. Government grants included in current profit or loss and related

     to daily operation in 2017 were recognized in other income, while such item was not restated

     in the comparative financial statement of 2016;

          7)     Non-operating income decreased by 40.8% as compared with the corresponding

     period, which was mainly attributable to the implementation of the Accounting Standards for

     Business Enterprises No. 16 - Government grants (2017 Revision) at the time, as requested

     by the MOF during the year. Government grants included in current profit or loss and related

     to daily operation in 2017 were recognized in other income, while such item was not restated

     in the comparative financial statement of 2016.


(1). Operating activities by industries, products and regions
                                                           Unit and Currency: RMB0‘000
                               Principle operating activities by products
                                                                                             Gross
                                                                                             profit
                                              Gross      Operating          Operating cost
                                                                                             margin
                  Operating    Operating      profit     revenue            increased/
By product                                                                                   increased
                  revenue      cost           margin     increased/decre    decreased yoy
                                                                                             /
                                              (%)        ased yoy (%)       (%)
                                                                                             decreased
                                                                                             yoy (%)
Air-conditione    2,874,455.   1,960,798.     31.79      53.91              55.05            Decrease


                                                    37
rs                50              49                                                                d by 0.50
                                                                                                    pct pt
                                                                                                    Decrease
                  4,711,359.      3,198,458.
Refrigerators                                   32.11        29.95                31.84             d by 0.97
                  49              88
                                                                                                    pct pt
Kitchenware                                                                                         Decrease
                  2,856,036.      1,720,507.
and                                             39.76        50.21                53.78             d by 1.40
                  26              33
sanitary ware                                                                                       pct pt
                                                                                                    Increased
Washing           3,089,540.      1,990,340.
                                                35.58        31.58                29.70             by       0.94
machines          91              38
                                                                                                    pct pt
                                                                                                    Decrease
Equipment
                  302,483.38      283,388.23    6.31         14.09                14.98             d by 0.72
components
                                                                                                    pct pt
Channel
integrated                                                                                          Decrease
                  2,038,758.      1,830,188.
services                                        10.23        10.21                13.69             d by 2.75
                  31              76
business                                                                                            pct pt
and others
                                  Principle operating activities by regions
                                                                                                    Gross
                                                                                                    profit
                                                             Operating
                                                                                  Operating cost    margin
                                                             revenue
                                                Gross                             increased/        increased
                                                              increased/
                  Operating       Operating     profit                            decreased         /decrease
Region                                                       decreased
                  revenue         cost          margin                            when              d      when
                                                             when compared
                                                (%)                               compared with     compared
                                                             with          last
                                                                                  last year (%)     with
                                                             year (%)
                                                                                                    last year
                                                                                                    (%)
                                                                                                    Decrease
Mainland          9,168,668.      6,235,336.
                                                31.99        28.34                28.89             d by 0.29
China             15              38
                                                                                                    pct pt
Other                                                                                               Increased
                  6,703,965.      4,748,345.
countries/regio                                 29.17        42.23                41.21             by       0.51
                  70              69
ns                                                                                                  pct pt

Information on operating activities by industries, products and regions

      □Applicable √Not Applicable


(2). Analysis of production and sales
     √Applicable □ Not Applicable
Main                           Sales                        Production     Sales volume            Inventory
                Production                 Inventory
Products                       volume                       increased/     increased/decreased     increased/
                                                       38
(10k units                                                       decreased        yoy (%)                  decreased
/set)                                                            yoy (%)                                   yoy (%)
Home            6,566           8,193          1,227             23.07            24.42                    51.29
appliance


(3). Analysis of cost
                                                                                                   Unit: RMB0‘000
                                                  Sub-industry
                                                       % as of                        % as of      Changes
                   Component
Sub-industry                            2017            total            2016             total   in amount    Remark
                    of cost
                                                         cost                             cost       (%)           s

                 Raw
                                  7,625,896.27         85.97       5,450,795.44      85.92        39.90
                 materials
Household
                 Labor            614,318.47           6.93        406,834.63        6.41         51.00
electric
                 Depreciation     163,758.71           1.85        137,048.97        2.16         19.49
appliance
                 Energy           39,436.93            0.44        49,489.27         0.78         -20.31
industry
                 Others           426,694.69           4.81        299,852.54        4.73         42.30



Other information on Analysis of cost

        □Applicable √Not Applicable


(4). Major customers and major suppliers

        √Applicable □ Not Applicable

        Revenue from the top five customers was RMB31,831.3952 million, representing 20.0% of

the total sales for the year; among the revenue from the top five customers, the revenue from

related parties was 0, representing 0% of the total sales for the year.

        The purchase amount from the top five suppliers amounted to RMB36,745.4741 million,

representing 24.6% of the total purchase amount for the year; among the purchase amount from

the top five suppliers, the purchase amount from related parties was RMB26,177.0483 million,

representing 17.5% of the total purchase amount for the year.

1.      Expenses

        √Applicable □ Not Applicable

        1)   Selling expenses increased by 33.04% compared with the corresponding period, which

        was mainly due to the inclusion of selling expenses of GEA (the corresponding period only

        included the selling expenses of GEA during the period from 6 June to 30 June 2016);


                                                          39
     2)   Administration expenses increased by 32.47% compared with the corresponding period,

     which was mainly due to the inclusion of selling expenses of GEA (the corresponding period

     only included the selling expenses of GEA during the period from 6 June to 30 June 2016);

     3)   Financial expenses increased by 93.34% compared with last year, which was mainly due

     to the increase of the average balance of borrowings for the year as compared with the

     corresponding period of last year.


2.   R&D expenditure

Table of R&D expenditure
     √Applicable □ Not Applicable
                                                                                        Unit: RMB
R&D expenditure                                                                4,334,471,020
Capitalized R&D expenditure                                                    254,515,080
Total R&D expenditure                                                          4,588,986,100
Total R&D expenditure as a percentage in operating revenue (%)                 2.88
Number of R&D personnel                                                        11,301
Number of R&D personnel as a percentage in total employees (%)                 14.70
Proportion of capitalization of R&D expenditure (%)                            5.55


Information on R&D expenditure
    □Applicable √Not Applicable


3.   Cash flows

     √Applicable □ Not Applicable

     1)   Net cash flow from operating activities increased by 97.72% from the corresponding

     period, which was mainly due to an increase in revenue and enhancement in supply chain

     management this year;

     2)   Net cash flow from investing activities decreased by 85.81% from the corresponding

     period, which was mainly due to higher payment for acquisition of GEA during the

     corresponding period last year;

     3)   Net cash flow from financing activities decreased by 96.91% from the corresponding

     period, which was mainly due to substantial debt financing for acquisition of GEA during the

     corresponding period last year but decreased this year.



                                                40
        (II) Explanation of non-operating business leading to significant changes in profit

               □Applicable √Not Applicable


        (Ⅲ)Analysis of assets and liabilities
            √Applicable □ Not Applicable
        1. Assets and liabilities
                                                                                            Unit: RMB0‘000
                                               As a                           As a
                                            percentage                     percentage
                                                                                        Change in
                            As the end of          of      As the end of       of
          Items                                                                         percentage   Remarks
                                2017        total assets        2016          total
                                                                                           yoy
                                                    in                      assets in
                                                                                           (%)
                                             2017 (%)                      2016 (%)
Monetary Capital            3,517,727.69    23.22          2,358,223.90    17.94        49.17
Financial assets at
fair value and its
change consolidated         2,068.17        0.01           8,043.24        0.06         -74.29
in profit/loss for the
period
Interest receivable         20,363.75       0.13           13,531.98       0.10         50.49
Dividend receivable         452.45          0.00           10,164.89       0.08         -95.55
Inventories                 2,150,352.48    14.20          1,528,490.43    11.63        40.68
Other current assets        438,976.00      2.90           265,746.22      2.02         65.19
Other         non-current
                            125,406.42      0.83           85,846.14       0.65         46.08
assets
Short-term
                            1,087,858.03    7.18           1,816,553.19    13.82        -40.11
borrowing
Bills payable               1,637,869.97    10.81          1,240,488.98    9.44         32.03
Interests payable           5,765.65        0.04           3,057.03        0.02         88.60
Debentures payable          621,108.84      4.10                                        100.00
Deferred income             49,714.11       0.33           34,282.56       0.26         45.01
Deferred income tax
                            27,911.46       0.18           13,324.31       0.10         109.48
liabilities
Total         non-current
                            117,093.68      0.77           58,278.51       0.44         100.92
liabilities
Other              equity
                            43,142.45       0.28                                        100.00
instruments
Capital reserve             82,688.31       0.55           8,338.32        0.06         891.67
Treasury stock                                             104.20          0.00         -100.00
Other
comprehensive               -3,636.38       -0.02          56,698.74       0.43         -106.41
income

                                                           41
Other explanations

      1) Monetary Capital increased by 49.17% as compared with the beginning of the year,

    which was mainly due to an increase in net cash flows from operating activities during the

    year;

      2) Financial assets measured at fair value and its change included in profit or loss for the

    period decreased by 74.29% as compared with the beginning of the year, which was mainly

    due to the change in fair value of derivative financial instruments such as exchange contracts

    for the year;

      3) Interests receivable increased by 50.49% as compared with the beginning of the year,

    which was mainly due to the increase of interest of wealth management products recognized

    but yet received for the year;

      4) Dividend receivable decreased by 95.55% as compared with the beginning of the year,

    which was mainly attributable to the declared and unpaid dividend by participating

    companies received during the year;

      5) Inventories increased by 40.68% as compared with the beginning of the year, which was

    due to concentrated stock preparation by the Company based on the order and future

    estimates at the end of the year;

      6) Other current assets increased by 65.19% as compared with the beginning of the year,

    which was mainly due to new wealth management products for the year;

      7) Other non-current assets increased by 46.08% as compared with the beginning of the

    year, which was mainly due to the change in fair value of forward exchange contracts held by

    the Company at the end of the year;

      8) Short-term borrowings decreased by 40.11% as compared with the beginning of the year,

    which was mainly due to repayment of certain borrowings by the Company during the year;

      9) Bills payable increased by 32.03% as compared with the beginning of the year, which

    was mainly due to substantial procurement made by the Company at the end of the year

    based on the order and future expectations;

      10)     Interests payable increased by 88.6% as compared with the beginning of the year,

    which was mainly due to the increase of interest which has been provided but not paid;

      11)     Debentures payable increased by 100% as compared with the beginning of the year,
                                                  42
    which was mainly due convertible bonds issued by the Company during the year that were

    attributable to liabilities;

      12)      Deferred income increased by 45.01% as compared with the beginning of the year,

    which was mainly due to the increase of government grants related to assets for the year;

      13)      Deferred income tax liabilities increased by 109.48% from the beginning of the

    year, which was mainly due to the increase of reserved foreign enterprise income tax;

      14)      Other non-current liabilities increased by 100.92% as compared with the beginning

    of the year, which was mainly due to the increase in the repurchase obligations of minority

    interest and the decrease in change in fair value of hedging instruments;

      15)      Other equity instruments increased by 100% as compared with the beginning of the

    year, which was mainly due to exchangeable bonds issued by the Company this year that

    were attributable to equity;

      16)      Capital reserve increased by 891.67% from the beginning of the year, which was

    mainly due to changes in other owners‘ equity for investee accounted for using the equity

    method during the year on prorate basis by the Company;

      17)      Treasury stock decreased by 100% as compared with the beginning of the year,

    which was mainly due to the cancellation of restricted shares by the Company for the year.

      18)      Other comprehensive income decreased by 112.59% as compared with the

    beginning of the year, which was mainly due to the decrease of other comprehensive income

    to be subsequently reclassified into profit or loss and changes in translation reserve.

2. Restrictions on major assets at the end of reporting period

    □Applicable √Not Applicable

3. Other explanations

    □Applicable √Not Applicable

(IV) Analysis on industry operating information

    □Applicable √Not Applicable

(V) Analysis on investment

1. Overall analysis on external equity investment

√Applicable □ Not Applicable


                                                 43
               During the reporting period, investments in external significant equities of the Company

        amounted to RMB856 million.
                                     Percentage
                                          of
                                         the
                                                                                             Amount
  Name of                               equity                                                            Amounted
                     Principle                                                                  of
  company                              interest                                                            Invested
                     operating                                    Remarks                  investment
  invested                                of                                                              (RMB 100
                     activities                                                            (RMB 100
                                         the                                                               million)
                                                                                             million)
                                      company
                                      invested
                                         (%)
                  Manufacturing
                  of automatic
                  and customized                   For details, please refer to the
Fisher &          intelligent                      Announcement on the Transfer of the
Paykel            equipment and                    100% Equity of Fisher & Paykel
Production        offering                         Production Machinery Limited by
                                     100                                                   3.31           0
Machinery         businesses such                  Qingdao Haier Co., Ltd. and
Limited           as solutions for                 Connected Transaction disclosed on
(―PML‖)         the                              21 June 2017 as well as relevant
                  management                       announcement of the Board.
                  system of
                  factories
                                                   For details, please refer to the
                                                   Announcement on the Transfer of
Qingdao           Communication
                                                   Certain Equity of Qingdao Haier
Haier             equipment,
                                                   Multi-media Co., Ltd. (青岛海尔多
Multi-media       home
                                     20.20         媒体有限公司) by Qingdao Haier          5.25           0
Co., Ltd. (青     appliances,
                                                   Co., Ltd. and Capital Increase and
岛海尔多媒        R&D, sales,
                                                   Connected Transaction disclosed on
体有限公司)       etc.
                                                   28 February 2017 as well as relevant
                                                   announcement of the Board.
                                                   For details, please refer to the
                                                   Announcement on the Subscription
                                                   of Capital Increase of Haier Group
Haier Group
                                                   Finance Co., Ltd. by Qingdao Haier
Finance Co.,      Financing          42                                                    2.10           2.10
                                                   Co., Ltd. and Connected Transaction
Ltd.
                                                   disclosed on 31 October 2017 as well
                                                   as relevant announcement of the
                                                   Board.


         (1) Significant equity investment
                                                          44
     √Applicable □ Not Applicable

            Please refer to the content in ―1. Overall analysis on external equity investment‖ as set out

     above.

         (2) Significant non-equity investment

            □Applicable √Not Applicable

         (3) Financial assets measured at fair value

     √Applicable □ Not Applicable


                                                                    Current
                                                                                     Investment       Changes in
                                                                   purchase/
                                                                                       income         fair value
Financial assets measured       Initial cost of   Sources of      sale during
                                                                                     during the       during the
      at fair value              investment         funds             the
                                                                                      reporting       reporting
                                                                   reporting
                                                                                       period           period
                                                                     period
Bank of Communications
                                1,803,769.50      Own funds                        369,851.42        599,390.88
(601328)
BAILIAN (600827)                154,770.00        Own funds                                          -34,267.56
Eastsoft (300183)               18,713,562.84     Own funds                                          -4,299,273.00
Others                          2,267,603.59      Own funds      -91,193.43                          364,636.08
Forward foreign exchange
                                                                                   49,335,869.06     614,071,259.47
contract
             Total              22,939,705.93                    -91,193.43        49,705,720.48     610,701,745.87


     Note: As of 31 December 2017, the aggregate balance of foreign exchange derivative transactions

     amounted to approximately US$3.2 billion.
     (VI) Material Assets and Equity Disposal
            □Applicable √Not Applicable
     (VII) Analysis on Major Controlling Companies
         √Applicable □ Not Applicable
                                                                                            Unit: RMB0000
         Name of company                     Scope of business        Total assets    Net assets         Net Profit
         Haier Electronics Group Co.,         Production and sale
                                                                       4,336,823         2,302,911            358,169
         Ltd.                                of home appliances
         Haier US APPLIANCE                  Shareholding in
                                                                       4,643,124         1,504,903            189,598
         SOLUTIONS, INC.                     GEA
         Qingdao Haier Technology Co.,       Software and IT
                                                                        111,871            99,640             77,104
         Ltd.                                services



                                                         45
     Note: The financial data of Haier Electronics Group Co., Ltd. is determined in accordance

with the accounting standards in the PRC and the accounting policies of the Company.
 (VIII) Information on the Main Structure Controlled by the Company
    □Applicable √Not Applicable

Ⅲ. Discussion and Analysis on the Future Development of the Company
(Ⅰ) General Conditions and Trends of the Industry
      √Applicable □ Not Applicable

      For details, please refer to ―Section III SUMMARY OF THE COMPANY‘S BUSINESS‖ in

this report.



(Ⅱ) Development Strategy of the Company
      √Applicable □ Not Applicable

      After more than 30 years of development, the Company has become into a global enterprise

with a dozen of world-class brands. The Company will promote its global market share and

operational efficiency by promoting the ―global user-oriented and multi-brand synergic

cooperation‖ through the ―global triple layout for the solution of best experience for users‖. In the

face of the opportunities and challenges in the IOT era, the Company will drive the transformation

from electric appliance to Internet appliance and further to website based on the orientation of

―building the ecological platform for smart homes in the IOT era,‖ and meet consumers‘ needs for

customized high-quality life through the implementation of Haier‘s smart homes. On the model of

people plus goal, the Company continued to drive the global transformation in order to establish a

global system with small and micro-organizations as basic units, leading the explosive growth

globally.


(Ⅲ) Operation Plan
√Applicable □ Not Applicable
     The Company will grasp the industry trend and lead the industry consumption upgrade

through product iterations in order to maintain the leading position of the global white home

appliance industry, and continue to strengthen the development of air-conditioner industry and

kitchen appliance industry, while maintaining leading advantages in the refrigerator and washing

machine and water heater industry. Focusing on Haier‘s smart homes, the Company will promote

the implementation of the full scene smart & customized solution package of ―4+7+N‖ in the
                                                  46
market to customize a high-quality life for consumers and promote the transformation of the

Company.

     (I) Domestic market:

     The Company aims to improve its differentiated competitiveness in the domestic market in

terms of brand, network as well as market models, and expand its leading edge. ① The Company

will accelerate the development of the Casarte brand and achieve a leading position of high-end

brands;② The Company aims to improve the differentiated competitiveness of town and

country-level networks, promote the transformation of service providers from ―wholesale to

service‖, make goals, activities, resources, personnel available for stores through information tools

such as Yilihuo, achieve a leading service capacity at town and country-level and establish a

platform mechanism to serve the town and country-level network; ③ The Company will promote

the implementation of smart home resolutions featured by package design, package sales and

service in building materials & home improvement, chain, specialty stores and other channels so

as to transform from selling products to selling solutions.

      (II) Overseas market:

     The Company aims to focus on branding and sustainable profitability and continue to

stimulate micro vitality through the implementation of localization of the model of people plus

goal. ① The Company aims to continue to pursue a high-end differentiated product strategy,

increase the proportion of high-end products and increase profitability. ② The Company aims to

continuously enhance the global supply chain layout, increase the proportion of local

manufacturing of products and improve the localization planning R&D capability, with an aim to

quickly meet the market demand. ③ The Company aims to achieve retail transformation of

service-oriented from overstock of policy-oriented, focus on mid-to-high end, strengthen

point-of-sales construction, enhance channel operation capabilities and optimize the retail network

layout in order to ensure business development.

     (III) U+ SmartLife platform:

     The Company aims to focus on the large-scale implementation of Haier‘s smart homes, and

strengthen its user interactive entrance, IoT+AI empowering scene experience and user service

scene customization. ① The Company aims to upgrade interactive entrance, enrich users‘

                                                  47
interactive entrance and modes to realize distributed multi-model interactive entrance that

supports app operation and control, voice interaction, touch interaction, and multi-screen

interaction. The Company will upgrade the U+ app to enhance the personalized experience of the

whole house smart scene. ② The Company aims to conduct an update of the platform engine to

realize smart IOT through the IoT + AI dual-engine empowerment, as well as smart active

services based on the combination of network big data and small data of users, upgrading user

experience of smart home appliances product. ③ The Company aims to be engaged in

customer-centric service scene customization, including customized interaction, customized scene

and customized services, in order to lead smart homes into the era of full scene service

customization.

     (IV) Interconnected factories and creative convergence customization:

     1. Interconnected factories: The Company aims to reorganize Haier‘s smart manufacturing

assets and business to turn the COSMO Plat platform into a new industry of smart manufacturing

ecological services and provide overall solutions of transformation and upgrading in respect of

smart manufacturing for external enterprises.

     2. The Company aims to promote the automation of the Company‘s own supply chain system,

the integration of information facilities and on-site implementation, and further improve the

efficiency of mass customization in its interconnected factories.

      (V) Logistics business:

     The Company aims to promote the construction of smart warehouse and delivery of

large-format logistics, improve the operational efficiency of warehousing, conduct more in-depth

expansion of product category in the large-format market, and build the end-to-end large-format

logistics network with most extensive coverage and deepest penetration in China.


(Ⅳ) Potential risks
     √Applicable □ Not Applicable
     1. Risk of soft demand due to a slowdown in macro-economic growth. As white home

appliance products fall into the category of durable consumer electronic products, the income level

and expectation on future income growth will have an effect on the purchase of white home

appliance. In the event of a slowdown in the macro economic growth, which will decrease the

                                                 48
purchasing power of consumers, growth of the industry will be adversely affected. In addition,

uncertainties from the real estate market will have some negative effect on market demand, which

will in turn have some indirect effect on demand for home appliance products.

     2. Price war risk caused by intensifying industry competition. In a long run, the market

concentration of white home appliance industry continues to rise, but in short-term, due to the

imbalance between supply and demand caused by high capacity generated from industry

expansion and decreasing of industry demand in recent years, the industry inventory amount rises.

Under the background of product homogeneity, price war will become a short-term approach to

increase its market share.

     3. Risk of rise in cost. Bulk raw materials such as copper, aluminum, steel plate, and

oil-related plastic particles and foam materials account for a large proportion in the cost of white

home appliance production. The Company will endure more cost pressure if price of raw material

continues to rise.

     4. Operating risk in overseas market. The Company has set up several production bases,

research and development centers and marketing centers in a number of countries around the

world, leading to the continuous rise of overseas business. As the overseas market is subject to the

impact of local political and economic situation, legal system and supervisory system, significant

changes of such factors would pose risks to the Company‘s operation locally.

     5. Risk of fluctuation in foreign currency exchange rate. Significant fluctuations in exchange

rates may not only have an adverse impact on the Company's exports, but may also result in an

exchange loss and an increase financial costs.


(V) Others
      □Applicable √Not Applicable

      Future capital expenditure plan: In 2018, the Company‘s investment will focus on the

research and development of leading technologies and modules, the construction of smart

interconnected factories at home and abroad, the construction of complete set of smart home

experience stores, and the investment and construction of U+ SmartLife and COSMO Plat

platform. The Company will actively seize opportunities for external development and promote



                                                 49
the Company‘s leapfrog development in related industries and regions. Investment funds will be

financed through the Company‘s own funds, equity financing and bond financing.


IV. Explanation of circumstances and reasons for non-disclosure by the Company in
consideration of inapplicable regulations, state secrets and commercial secretes
□Applicable √Not Applicable




                                              50
Section V     SIGNIFICANT EVENTS


I. Proposal for Profit Distribution of Ordinary Shares or Capital Reserve Conversion
into the Increase in Share Capital
(Ⅰ) Formulation, implementation or adjustment of the cash dividend policies
    √Applicable □ Not Applicable


    The Company‘s 2016 profit distribution plan was passed on its Annual General Meeting

held on 28 June 2017: based on the Company‘s total existing shares of 6,097,402,727, it is

proposed that the Company will distribute cash dividends of RMB2.48 (tax inclusive) per 10

shares to all shareholders, with a total expected amount before tax of RMB1,512,155,876.30.

The plan has been implemented and completed in August 2017. Details are set out in the

Announcement of Qingdao Haier Co., Ltd. on the Implementation of Interests Distribution for

2016 (No. L 2017-026) published by the Company on the four major securities newspapers

and the website of Shanghai Stock Exchange on 26 July 2017.

    The Company has always applied the sustainable profit distribution policy. During the

reporting period, the Company strictly followed the requirements set out in the Articles of

Association and formulated the ―Shareholder Return Plan for the Next Three Years

(2015-2017)‖. During the formulation of the profit distribution plan, the Company took full

account of return for investors, the long-term interests of the Company, overall interests of all

shareholders and sustainable development of the Company, and provided investors an

opportunity to share the growth of value, so that investors could form the expectation of a

stable return. The procedures and mechanisms for decision-making such as Articles of

Association and planning system of return of shareholders were complete in compliance with

laws and regulations. The process was open and transparent while the standard and ratio of

dividends was clear. Responsibilities of independent directors were clear during the

policy-making process, and independent directors were given the opportunities to play their
                                               51
  roles. Minority shareholders were also given the opportunity to fully express their views and

  demands, and the legitimate interests of minority shareholders were adequately protected.

         The dividend distribution plan of 2017 of the Company: based on the total shares as at

  the date of profit distribution, it is proposed that the Company will distribute cash dividend of

  RMB3.42 per 10 shares (tax inclusive) with expected cash dividend of RMB2,085,311,732.63.

  The remaining reserved profits were carried forward to the next year. The amount of this

  distribution totally accounts for 30.11% of the net profit attributable to parent company of the

  Company in 2017. All dividend of bonus scheme is paid in cash.



  (Ⅱ) Plans or Proposals for Dividends of Ordinary Shares Distribution and for Capital
  Reserve Conversion into Share Capital of the Company in Recent Three Years
  (Including the Reporting Period)
                                                                Unit and Currency: RMB
                                                                                                   Percentage of
                                                                                 Net profit         the net profit
                             Cash
             Number                     Number                                 attributable to     attributable to
                           dividend                                           shareholders of
             of bonus                   of shares                                                    the ordinary
                            per 10                                           ordinary shares of     shareholders
             share for                  converted      Cash dividend
  Year                      shares                                            the Company in             of the
              per 10                     per 10            (tax inclusive)
                            (RMB)                                             the consolidated      Company in
              shares                     shares                              financial statement          the
                              (tax
              (share)                    (share)                             during the year of     consolidated
                           inclusive)
                                                                                                       financial
                                                                                distribution
                                                                                                   statement (%)
2017                   0       3.42               0    2,085,311,732.63       6,925,792,321.27              30.11
2016                   0       2.48               0    1,624,803,749.32       5,036,652,240.84              32.26
2015                   0       2.12               0    1,340,094,420.82       4,300,760,542.82              31.16




  (Ⅲ) Share Repurchased by Cash and Included in Cash Dividend

         □ Applicable √Not Applicable

  (Ⅳ) The Company made profits and the profits for distribution to the shareholders of
  ordinary shares of the Parent Company was positive during the reporting period, but no


                                                      52
cash profit distribution plan for ordinary shares was proposed; the Company should
disclose the reasons in detail and the purpose and use plan of undistributed profits

   □ Applicable √Not Applicable




                                         53
II. Performance on Undertakings
(I) The undertakings made by the actual controllers, shareholders, related parties, acquirer as well as the Company
and other relevant parties during or up to the reporting period
     √Applicable □ Not Applicable

                                                                                                                                                        Performed
                                                                                                                                            A deadline in        a
 Background Type                Covenanter                                     Content                                     Date and term    for         timely
                                                                                                                                            performance and strict
                                                                                                                                                        way
                                           During the period from September 2006 to May 2007, the Company issued shares
                                           to Haier Group Corporation (―Haier Group‖) to purchase the controlling equity in
                                           its four subsidiaries, namely Qingdao Haier Air-Conditioner Electronics Co., Ltd.
                                           (青岛海尔空调电子有限公司), Hefei Haier Air-conditioning Co., Limited (合肥
                                           海尔空调器有限公司), Wuhan Haier Electronics Co., Ltd. (武汉海尔电器股份
               Eliminate the               有限公司), and Guizhou Haier Electronics Co., Ltd. (贵州海尔电器器有限公司).
Undertaking                                                                                                                      27 September
               right defects               With regard to the land and property required in the operation of Qingdao Haier
related     to                 Haier Group                                                                                       2006,
               in       land               Air-Conditioner Electronics Co., Ltd. ( 青岛海尔空调电子有限公司) , Hefei                          YES       YES
significant                    Corporation                                                                                             long
               property and                Haier Air-conditioning Co., Limited (合肥海尔空调器有限公司), and Wuhan term
reorganization
               etc.                        Haier Electronics Co., Ltd. (武汉海尔电器股份有限公司) (the ―Covenantees‖),
                                           Haier Group made an undertaking (the ―2006 Undertaking‖). According to the
                                           content of 2006 Undertaking and current condition of each Covenantee, Haier
                                           Group will constantly assure that Covenantees will lease the land and property
                                           owned by Haier Group for free. Haier Group will make compensation in the event
                                           that the Covenantees suffer loss due to the unavailability of such land and property.




                                                            54
                                          Haier Group Corporation undertakes that it will assure Qingdao Haier and its
                                          subsidiaries of the constant, stable and unobstructed use of the leased property. In
                                          the event that Qingdao Haier or any of its subsidiaries suffers any economic loss
                                          due to the fact that leased property has no relevant ownership certificate, Haier
                                          Group Corporation will make compensation to impaired party in a timely and
                                          sufficient way and take all reasonable and practicable measures to support the
                                          impaired party to recover to normal operation before the occurrence of loss. Upon
                                          the expiration of relevant leasing period, Haier Group Corporation will grant or
                                          take practicable measures to assure Qingdao Haier and its subsidiaries of priority
                                          to continue to lease the property at a price not higher than the rent in comparable
              Eliminate the               market at that time. Haier Group Corporation will assure Qingdao Haier and its
Undertaking right defects                 subsidiaries of the constant, stable, free and unobstructed use of self-built property 24 December
                              Haier Group
related    to in       land               and land of the Group. In the event that Qingdao Haier or any of its subsidiaries 2013             YES   YES
                              Corporation
refinancing   property and                fails to continue to use self-built property according to its own will or in original long term
              etc.                        way due to the fact that self-built property has no relevant ownership certificate,
                                          Haier Group Corporation will take all reasonable and practicable measures to
                                          eliminate obstruction and impact, or will support Qingdao Haier or its affected
                                          subsidiaries to obtain alternative property as soon as possible, if Haier Group
                                          Corporation anticipates it is unable to cope with or eliminate the external
                                          obstruction and impact with its reasonable effort. For details, please refer to the
                                          Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of
                                          the Defective Property, the Influence on Operation of Issuer Caused by
                                          Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L
                                          2014-005) published by the Company on the four major securities newspapers and
                                          the website of Shanghai Stock Exchange on 29 March 2014.
                                         The Company undertakes that it will eliminate the property defects of the
                                         Company and main subsidiaries within five years with reasonable business effort
              Eliminate the              since 24 December 2013, so as to achieve the legality and compliance of the
              right defects   Qingdao    Company and main subsidiaries in terms of land and property. For details, please 24 December
              in       land   Haier Co., refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current 2013            YES        YES
              property and    Ltd.       Situation of the Defective Property, the Influence on Operation of Issuer Caused by five years
              etc.                       Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L
                                         2014-005) published by the Company on the four major securities newspapers and
                                         the website of Shanghai Stock Exchange on 29 March 2014.
                                                           55
Undertaking                 Qingdao    With regard to its share option incentive scheme, the Company has undertaken not 11 April 2014,
related to the              Haier Co., to provide loan or any other kind of financial support to incentive object in long term
share option Other          Ltd.       exercising option under the share option incentive scheme or purchase of restricted             YES   YES
incentive                              shares, including providing guarantee for its loan.
scheme
                                        Inject the assets of Fisher & Paykel to the Company or dispose such assets through
                                        other ways according to the requirements of the domestic supervision before June
Other          Asset        Haier Group 2020. For more details, please refer to the Announcement of Qingdao Haier Co., May 2015-June
                                                                                                                                     YES     YES
undertakings   injection    Corporation Ltd. on the Changes of Funding Commitment (L 2015-015) published on the four 2020
                                        major securities newspapers and the website of Shanghai Stock Exchange on 26
                                        May 2015.
                                        Inject the assets of Haier Photoelectric to the Company or dispose such assets December
                                        through other ways according to the requirements of the domestic supervision 2015-June
Other          Asset        Haier Group before June 2020. For more details, please refer to the Announcement of Qingdao 2020
                                                                                                                                     YES     YES
undertakings   injection    Corporation Haier Co., Ltd. on the Changes of Funding Commitment of Haier Group
                                        Corporation (L 2015-063) published on the four major securities newspapers and
                                        the website of Shanghai Stock Exchange on 23 December 2015.
                                        In December 2015 and January 2016, the meeting of the Board of Directors and
                                        general meeting of the shareholders considered and approved the matters in
                                        relation to the acquisition of minority equity interest of Mitsubishi Heavy
                                        Industries Haier and Carrier Refrigeration Equipment held by Haier Group. The
                                        Company signed the Profit Compensation Agreement with Haier Group to forecast
               Profit                                                                                                     December
Other                       Haier Group the profits achieved by the aforementioned two companies in 2015-2018. If the
               forecast and                                                                                               2015-Decembe YES   YES
undertakings                Corporation profits are not reached during the commitment period, the difference part will be
               compensation                                                                                               r 2018
                                        made up to the Company by Haier Group in cash. For more details, please refer to
                                        the Announcement of Qingdao Haier Co., Ltd. on the Acquisition of Equity in
                                        Sino-foreign Joint Venture Held by Haier Group Corporation and Related-party
                                        Transaction (L 2015-062) published on the four major securities newspapers and
                                        the website of Shanghai Stock Exchange on 23 December 2015.




                                                        56
(II) The Company’s explanation on whether the earnings estimate on assets or projects was met
and its reasons in the situation that earnings in the Company’s assets or projects is estimated,
and the period of which includes the reporting period.
     □Reached √Not reached □Not Applicable
     In December 2015 and January 2016, the meetings of the Board of Directors/Shareholders of the

Company reviewed and approved related resolutions to acquire 45% equity of Mitsubishi Heavy

Industries Haier (Qingdao) Air Conditioner Co., Ltd. (hereinafter referred to as ―Mitsubishi Heavy

Industries Haier‖) and 49% equity of Qingdao Haier Carrier Refrigeration Equipment Co., Ltd.

(hereinafter referred to as ―Haier Carrier‖) held by Haier Group Corporation. According to the Profit

Compensation Agreement signed between the Company and Haier Group, the corresponding

predictive net profit from 2015 to 2018 of Mitsubishi Heavy Industries Haier are RMB90.66 million,

RMB92.86 million, RMB100.66 million and RMB108.69 million, respectively and the corresponding

predictive net profit from 2015 to 2018 of Haier Carrier are RMB76.05 million, RMB76.05 million,

RMB76.72 million, and RMB76.98 million respectively. If the audited net profit in any year of the

target companies during the commitment period is lower than the predictive net profit, the gap will be

compensated by Haier Group in cash (For more details, please refer to the Announcement of Qingdao

Haier Co., Ltd. on the Acquisition of Equity in Sino-foreign Joint Venture Held by Haier Group

Corporation and Related Party Transaction (L 2015-062) published on the four major securities

newspapers and the website of Shanghai Stock Exchange on 23 December 2015).



    According to the Special Verification Report on the Completion of the Predictive Profit [―Hexin

Zhuan Zi (2018) No.000076‖ and ―Hexin Zhuan Zi (2018) No. 000077‖] and Special Statement of

Qingdao Haier Co., Ltd on the Completion of the Predictive Profit in 2017 issued by Shandong Hexin

Accountants LLP, the actual net profit of Mitsubishi Heavy Industries Haier in 2017 was RMB157.62

million,cumulative net profit of RMB369.98 million in 2015 to 2017,the actual net profit exceeded

the Predictive Profit; the actual net profit of Haier Carrier was RMB10.38 million, cumulative net

profit of RMB 162.97 million in 2015 to 2017.The gap between the actual net profit and the

predictive profit has been made up to the Company by Haier Group in cash.


III. Misappropriation and repayment plan of funds during the reporting period
     □ Applicable √Not Applicable




                                                  57
 IV. Explanation of the Company on the “non-standard audit report”
issued by the accounting firm
     □ Applicable √Not Applicable


 V. Explanation of the Company’s analysis on reasons and effects of changes in accounting
 policies and accounting estimates or correction of significant accounting errors
 (I) Explanation of the Company’s analysis on reasons and effects of changes in accounting
 policies and accounting estimates
     □ Applicable √Not Applicable


 (II) Explanation of the Company’s analysis on reasons and effects of correction of significant
 accounting errors
      □ Applicable √Not Applicable

 (III) Communication with former accounting firm
      □ Applicable √Not Applicable


 (IV) Other explanations
     √Applicable □ Not Applicable
     In 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No.

42 – Non-current Assets Held for Sale, Disposal Groups and Discontinued Operations, effected on 28

May 2017. The non-current assets held for sale, disposal groups and discontinued operations existing

on the date of the implementation shall be handled with prospective application method. The Ministry

of Finance also revised the Accounting Standard for Business Enterprises No. 16 – Government

Grant, the revised standard shall be implemented since 12 June 2017. The government grant existing

on 1 January 2017 shall be handled with prospective application method; and the new government

grant from 1 January 2017 to the date of the implementation shall also be adjusted according to the

revised standard.



     The resolution on the Change in Accounting Policies of Qingdao Haier Co., Ltd. was
 considered and approved at the 7th meeting of the 9th session of the Board of the Company on 25
 August 2017, the change of the aforesaid accounting policies were considered on the meeting.


 VI. Appointment and Dismissal of Accounting Firm
                                                                 Unit and Currency: RMB0‘000
                                                               Current appointment
Name of domestic accounting firm                 Shandong Hexin Accountants LLP
Name of domestic accounting firm                                                             715
Name of domestic accounting firm                                                                5

                                                 58
                                                       Name                          Remuneration
Internal control audit accounting Shandong Hexin Accountants LLP                             245
firm
Financial Adviser                 China International     Capital      Corporation        2,236.5
                                  Limited


 Information on Appointment and Dismissal of Accounting Firm

     □ Applicable √Not Applicable



 Explanation of change of accounting firm during the auditing period

     □ Applicable √Not Applicable

 VII. Possibility of listing suspension
 (Ⅰ) Reasons of listing suspension
      □ Applicable √Not Applicable


 (II) Response to be taken by the Company
      □ Applicable √Not Applicable

 VIII. Circumstances and reasons for listing termination
     □ Applicable √Not Applicable


 IX. Matters relating to bankruptcy and restructuring
     □ Applicable √Not Applicable


 X. Material litigation and arbitration matters
     □Material litigation and arbitration matters during the year √ No material litigation and
     arbitration matters in the reporting year


 XI. Penalties to the Listed Company and its Directors, Supervisors, Senior Management,
 Controlling Shareholders, Actual Controllers, Acquires and the Issue of Rectification
     □ Applicable √Not Applicable


 XII. Explanation of the integrity status of the Company and its controlling shareholders and
 actual controller during the reporting period
     □ Applicable √Not Applicable


 XIII. The Company’s share option incentive scheme, employee shareholding plan or other
 employee incentive measures and its influence
 (Ⅰ) Matters disclosed in temporary announcements and without any subsequent progress or
 change
 √Applicable □ Not Applicable
                                                  59
                   Summary                                        Index for details
Cancelation of Exercise/Unlocking of Equity        For details, please refer to the Announcement
under Phase IV Share Option Incentive Scheme:      on       Cancelation       Arrangement      of
on 28 April 2017, the 5th meeting of the 9th       Exercise/Unlocking Part of Retained Equity
session of Board of Directors of the Company       Interests under Phase IV Share Option
considered and approved the Resolution on          Incentive Scheme of Qingdao Haier Co., Ltd.
Cancelation of Exercise/Unlocking of Retained
                                                   (L 2017-014) disclosed on 29 April 2017 and
Equity Interests under Phase IV Share Option
                                                   other relevant announcements on resolutions of
Incentive Scheme of Qingdao Haier Co., Ltd.
As the 2016 annual result of the Company did       Board Meeting, Announcement on Cancelation
not reach the exercise/unlocking condition, the    of Repurchased Restricted Shares under the
Company canceled the exercise/unlocking of the     Share Option Incentive Scheme (L 2017-025)
equity incentives based on the evaluation period   disclosed on 19 July 2017.
of 2016.


 (Ⅱ) Share incentives not disclosed in temporary announcements or with subsequent progress
 Share option incentive
     □ Applicable √Not Applicable

 Other explanations
     □ Applicable √Not Applicable

 Employee shareholding plan
 √Applicable □ Not Applicable

       (1) Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme:

            The Company considered and adopted the Phase II Stock Ownership Scheme of Core

            Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft) and its

            Summary (the ―Stock Ownership Scheme‖) at the 4th meeting of the 9th session of the

            Board of Directors held on 27 February 2017. The total number of the participants of the

            Stock Ownership Scheme is 576, all of them are the directors (excluding independent

            directors), supervisors, senior management of the Company and regular employees who

            serve at the Company and its subsidiaries and sign employment contracts with the

            Company or its subsidiaries and receive remuneration from them, and the amount of

            incentive fund is RMB266.10 million. On 29 March 2017, the Announcement of

            Qingdao Haier Co., Ltd. regarding the Completion of Share Subscription of the Phase II

            Stock Ownership Scheme of Core Employees Stock Ownership Scheme (the

            ―Announcement‖) was disclosed by the Company. 兴证证券资产管理有限公司

            (Industrial Assets Management Co., Ltd.*) was entrusted to manage the Stock

                                                   60
              Ownership Scheme by establish the directional assets management plan for the Phase II

              Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao

              Haier Co., Ltd. (the ―Assets Management Plan‖). As of 28 March 2017, the Assets

              Management Plan has purchased 22,820,787.00 shares of the Company in total,

              representing 0.37% of the total share capital of the Company, from the secondary market

              at an average trading price of approximately RMB11.43 per share with a trading volume

              of approximately RMB260,768,338.35, according to which, the share subscription of the

              Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme has

              been completed. The shares subscribed as above were locked as required. The lock-up

              period was 12 months from the date of the Announcement, i.e. from 29 March 2017 to

              28 March 2017.



(2)   Initial vesting of the Phase I Core Employees Stock Ownership Scheme: on 7 December 2017,

   the Announcement of Qingdao Haier Co., Ltd. regarding the Allocation and Vesting of the Phase I

   Core Employees Stock Ownership Scheme was disclosed by the Company, pursuant to which, on

   30 November 2017, the management commission reviewed and determined that 9,138,000 shares

   (with a market value of RMB91.56 million) shall be vested to 490 participants of the Phase I of

   Stock Ownership Scheme for Core Employees according to the annual result of 2016. According to

   the appraisal of individual performance, the relevant shares of 25 participants among the aforesaid

   participants would not be vested tentatively or would be adjusted due to the failure to complete

   satisfactorily performance or dimission. 1,722,200 shares shall be vested to seven of the directors,

   supervisors and senior management (pursuant to the application by Mr. Gong Wei, the Chief

   financial officer and vice president, 121,325 shares under his name would not be vested tentatively),

   the actual number of vested shares in this vesting was 1,600,900. Any changes of shareholdings of

   the directors, supervisors and senior management of the Company shall be subject to the

   Management Rule for Shareholdings and the Changes of the Directors, Supervisors and Senior

   Management of the Listed Company and other requirements.


   Other incentives
       □ Applicable √Not Applicable


   XIV. Significant Related-party Transactions
                                                     61
 (Ⅰ) Related-party transaction from routine operation
 1. Matter disclosed in temporary announcements and with no subsequent progress or change
      □ Applicable √Not Applicable
 2. Matter disclosed in temporary announcements and with subsequent progress or change
      √Applicable □ Not Applicable
      The Company made a forecast on the daily related-party transaction matters of the Company for
 the year of 2017 at the 5th meeting of the 9th session of Board Meeting held on 28 April 2017, and
 relevant proposals were reviewed and approved at 2016 Annual General Meeting on 28 June 2017.
 For details, please refer to the Announcement of Qingdao Haier Co., Ltd. regarding the Anticipation
 on the Daily Related-party Transactions for 2017 and the announcement on the relevant resolutions
 of the Board disclosed on 29 April 2017, and 2016 Annual General Meeting Announcement disclosed
 by the Company on 29 June 2016.

      For the details of actual implementation of the Related-party transaction of 2017, please refer to

 ―Note12–Related Parties and Related-party Transactions‖ under Section XI ―FINANCIAL REPORT‖

 set out in this report.


 3. Matter not disclosed in temporary announcements
     □ Applicable √Not Applicable
 (Ⅱ) Related-party transactions regarding acquisition or disposal of assets/equity
     1. Matter disclosed in temporary announcements and with no subsequent progress or
     change
     √Applicable □ Not Applicable
                           Summary                                        Index for details
Acquisition the shareholding of PML Company: in order to
consolidate and expand the strengths in smart manufacturing,
and to facilitate the establishment and implementation of the
digital platform of smart manufacturing (COSMO Plat), the For details, please refer to the
Company acquired 100% shareholding of Fisher & Paykel Announcement of Qingdao Haier
Production Machinery Limited (斐雪帕克生产设备有限公 Co., Ltd. regarding the Acquisition
                                                              of 100% Shareholding of Fisher &
司 , ―PML Company‖) holding by Fisher & Paykel
                                                              Paykel   Production   Machinery
Appliances Limited (斐雪帕克电器有限公司, ―Fisher & Limited              and     Related-party
Paykel‖, a overseas subsidiary of Haier Group Corporation) Transaction (L2017-022) disclosed
through an overseas subsidiary by cash, the overseas on 21 June 2017.
subsidiary of the Company paid considerations in cash of
US$48.62 million (equivalent to RMB330.68 million) to
acquire PML Company.
Acquisition the shareholding of Multi-media company: in         For details, please refer to the
order to further facilitate the implementation of U+ Smart      Announcement of Qingdao Haier
Life strategy, along with the establishment of the layout in    Co., Ltd. regarding the Acquisition
respect of the ecological circle of smart family, and further   of Part of Shareholding of Qingdao
grasp the economic entrance of living room by the carrier of    Haier Multi-media Co., Ltd.(青岛
TV, the Company acquired part of the shareholding of            海尔多媒体有限公司)and Capital
Qingdao Haier Multi-media Co., Ltd.(青岛海尔多媒体有限         Increase  and     Related-party

                                                   62
公司), and subscribed part of the new registered capital, the Transaction (L 2017-003) disclosed
total amount was RMB525 million.                               on 28 February 2017.




Subscription for Capital Increase of Finance company: in
order to increase the capital adequacy ratio and support the
business development, Finance company intended to increase
registered capital by transferring the undistributed profit into   For details, please refer to the
the additional capital contribution, pursuant to which, the        Announcement of Qingdao Haier
registered capital would be increase from RMB6,000 million         Co., Ltd. regarding the Subscription
to RMB6,500 million. According to above capital increase,          for Capital Increase of Haier Group
the holding subsidiaries and related parties of the Company        Finance Co., Ltd. and Related-party
have subscribed the additional capital contribution in             Transaction (L2017-039) disclosed
proportion to each of their existing shareholding; of which the    on 31 October 2017.
additional capital contribution subscribed by the holding
subsidiaries and related parties of the Company was RMB210
million and RMB290 million, respectively.

     2. Matter disclosed in temporary announcements and with subsequent progress or change
     □ Applicable √Not Applicable


     3. Matter not disclosed in temporary announcements
     □ Applicable √Not Applicable

     4. If performance agreement is involved, the performance achieved during the reporting
     period shall disclosed
 √Applicable □ Not Applicable
    For more details of performance agreement on acquisition of minority equity interests of

 Mitsubishi and Carrier (please refer to the 2015 Annual Report disclosed by the Company on 29

 April 2016 for details), please refer to the relevant statements in ―The Company‘s explanation on

 whether the earnings estimate on assets or projects was met and its reasons in the situation that

 earnings in the Company‘s assets or projects is estimated, and the period of which includes the

 reporting period.‖ in this section.


 (Ⅲ) Significant related-party transactions of joint external investment
      1. Matter disclosed in temporary announcements and with no subsequent progress or
      change
     √Applicable □ Not Applicable
     For details, please refer to the statements in ―Acquisition the shareholding of Multi-media

 Company‖ and ―Subscription for Capital Increase of Finance Company‖ in ―(Ⅱ) Related-party



                                                    63
transactions regarding acquisition or disposal of assets/equity - 1. Matter disclosed in temporary

announcements and with no subsequent progress or change‖ in this section.

    2. Matter disclosed in temporary announcements and with subsequent progress or change
    □ Applicable √Not Applicable


    3. Matter not disclosed in temporary announcements
    □ Applicable √Not Applicable


(Ⅳ) Amounts due to or from related parties

     1. Matter disclosed in temporary announcements and with no subsequent progress or
     change

    □ Applicable √Not Applicable

     2. Matter disclosed in temporary announcements and with subsequent progress or change

    □ Applicable √Not Applicable



     3. Matter not disclosed in temporary announcements

    □ Applicable √Not Applicable

(Ⅴ) Others

    □ Applicable √Not Applicable

XV. Significant Contracts and Their Execution
(Ⅰ) Trusteeship, contracting and leasing
     1. Trusteeship
    □ Applicable √Not Applicable


    During the reporting period, there was no material trusteeship. To date, the following trusteeships
have been considered and approved on the general meeting of the Company and still within the
validity period:

     (1) According to the 2011 Haier Group's commitment to further support the development of
Qingdao Haier and resolve intra-industry competition to reduce related-party transactions, Haier
Group should strive to resolve the problems of intra-industry competition with the Company within
five years. However, based on the current market and financial factors of FPA, Haier Group was
unable to transfer the assets under custody to the Company before the completion of the
aforementioned commitment. In order to resolve the problems of intra-industry competition between

                                                  64
Haier Group and the Company, Haier Group intends to entrust the Company with the operation and
management of assets under custody and will pay RMB1 million custodian fee to the Company each
year during the period of custody.

     (2) According to the Haier Group's commitment in 2011 to further support the development of
Qingdao Haier and resolve intra-industry competition to reduce related-party transactions, and given
the fact that Qingdao Haier Photoelectric Co., Ltd. and its subsidiaries, who purchase of the color TV
business from Haier Group, are still under transformation and consolidation period and their financial
performance fails to reach the expectation of the Company. Therefore, Haier Group is unable to
complete the transfer before the aforementioned commitment period. Haier Group intends to entrust
the Company with the operation and management of assets under custody and will pay RMB1 million
custodian fee to the Company each year during the period of custody.

    2. Contracting
    □ Applicable √Not Applicable


    3. Leasing
    □ Applicable √Not Applicable


(Ⅱ) Guarantee
√Applicable □Not Applicable
                                                                      Unit and Currency: RMB0‘000




                                                  65
                                  External guarantees provided by the Company (excluding guarantees for subsidiaries)
          Relations                       Date of
                                                                                                                                      Whethe
          hip                             occurren                                   Whethe                  Overdu
                                                                Expirati                         Whethe                               r      is
          between           Amount        ce of the    Starting                      r     the               e         Whether there
                     Secure                                     on date Type of                  r    the                             related
Guarant   the               of            guarante     date of                       guarant                 amount    is           a           Relations
                     d                                          of       guarant                 guarant                              party
or        guarantor         guarant       e (date of   guarant                       ee has                  of the    counter-guaran           hip
                     party                                      guarante ee                      ee     is                            guarant
          and    the        ee            agreeme      ee                            been                    guarant   tee
                                                                e                                overdue                              ee    or
          listed                          nt)                                        fulfilled               ee
                                                                                                                                      not
          company


Total amount of guarantee occurred during the reporting                                                                                                 0
period (excluding guarantees for subsidiaries)

Total balance of guarantee at the end of the reporting period                                                                                           0
(A) (excluding guarantees for subsidiaries)
                                        Guarantees provided by the Company and its subsidiaries for subsidiaries
Total amount of guarantees for subsidiaries occurred during                                                                                  3,833,144.91
the reporting period
Total balance of guarantees for subsidiaries at the end of the                                                                               2,907,898.74
reporting period (B)
                              Total amount of guarantees provided by the Company (including guarantees for subsidiaries)
Total guarantee (A + B)                                                                                                                      2,907,898.74
Ratio of total amount of guarantees to net assets of the                                                                                         90.43%
Company (%)
Among which:


                                                                           66
Amount of guarantees for shareholders, actual controllers and
their related parties (C)                                                                                                                             0

Amount of debt guarantees provided directly or indirectly for
the secured party with asset-liability ratio exceeding 70% (D)                                                                               797,128.51

The amount of total amount of guarantee in excess of 50% of                                                                                1,297,122.98
net assets (E)
Total amount of the above three guarantees (C + D + E)                                                                                     2,094,251.50
Explanation of possibly bearing related discharge duty for None
premature guarantees
                                                                 1. In 2016, the Company acquired the assets of GEA at a total consideration of US$5.61
                                                                 billion, which was sourced from self-owned funds and loan for merger, of which, the loan
                                                                 for merger in the amount of US$3.3 billion was applied for by Haier US Appliance
                                                                 Solutions, Inc., a wholly-owned subsidiary of the Company, to China Development Bank
                                                                 Co., Ltd. The loan was fully secured by the Company and Haier Group Corporation. At the
                                                                 end of the reporting period, the amount of guarantee was equivalent to approximately
                                                                 RMB16.411 billion. The balance of the guarantee amounted to RMB13.862 billion as at the
Explanation of guarantee status                                  end of the reporting period. The provision of guarantee had been considered and approved
                                                                 by the Board and the general meeting of shareholders of the Company;
                                                                 2. In June 2017, the resolution on the Expected Provision of Guarantee for a Subsidiary
                                                                 in 2017 was passed on the 2016 Annual General Meeting of the Company, according to
                                                                 which, the Company had provided guarantee in respect of the application for
                                                                 comprehensive facility made by certain subsidiaries to financial institutions. During the
                                                                 reporting period, the accumulated amount of guarantee offered by the Company to
                                                                 subsidiaries was approximately RMB21.921 billion. As at the end of the reporting period,
                                                                 the balance of the guarantee was RMB15.217 billion.




                                                                            67
 (Ⅲ) Entrusted others to manage cash assets
 1. Entrusted wealth management
 (1). Overall of entrusted wealth management
      √Applicable □ Not Applicable
                                                                         Unit and Currency: RMB
         Type           Sources          Amount               Premature            Past due
                        of funds                               balance            uncollected
                                                                                    amount
Principal-guaranteed
wealth management
                       Own funds        1,974,265,336        1,974,265,336          0.00
    products and
 structured deposit


    Note: As an independently operating Hong Kong listed company, Haier Electric Co., Ltd. has

purchased some short-term principal-protected wealth management and structural deposits from

the four major banks in order to increase the efficiency of the use of idle funds within the

authorities of the management. In the purchase process, all the necessary board reports were

subject to the procedures such as filling and management‘s review according to the regulations
requirements for Hong Kong listed company, so as to ensure sufficient funds for the day-to-day

operations of the main business and improve the shareholders' returns.


 Others
    □ Applicable √Not Applicable




                                                  68
                  (2). Individual entrusted wealth management
                  √Applicable □ Not Applicable
                                                                                                                                                                                   Unit and Currency: RMB
                                                                                                                                                                                                                    Provision
                                                                                                                                                        Expected                                                    for
                                                                                                                                                                                                      Any future
                                                         Commencement        Expiration date                                                                                                Whether
                 Type of entrusted      Amount        of                                                                                                return      Actual                            plan      for impairment
                                                         date of entrusted   of    entrusted Sources                 Determination      of Annualized                                       approved                loss     (if
  Trustee        wealth management      entrusted wealth                                                Investment                                                  gains or Collection               entrusted
                                                         wealth              wealth          of funds                return                yield                                            by    due               any)
                 product                management                                                                                                                  losses                            wealth
                                                         management          management                                                                                                     process
                                                                                                                                                        (if any)                                      management


Qingdao branch                                           29 April 2016       28 April 2017
of   Mitsubishi Principal-guaranteed                                                         Own                     Annualized      yield
Tokyo      UFJ wealth management        260,449,305.68                                                                                       3.37%      8,874,665   8,874,665   Collected   YES
                                                                                             funds                   3.37%
Bank

                                                         10 March 2017       9 June 2017
Qingdao branch
               Principal-guaranteed                                                          Own                     Annualized      yield
of   Bank   of                          176,000,000.00                                                                                       4.25%      1,864,877   1,864,877   Collected   YES
               wealth management                                                             funds                   4.25%
Communications

                                                         12 June 2017        20 July 2017
Qingdao branch
               Principal-guaranteed                                                          Own                     Annualized      yield
of   Bank   of                          177,000,000.00                                                                                       4.40%        810,805    810,805    Collected   YES
               wealth management                                                             funds                   4.4%
Communications


Haier      Road                                          8 June 2017         5 September
sub-branch   of Principal-guaranteed                                         2017        Own                         Annualized      yield
                                        195,000,000.00                                                                                       3.90%      1,854,370   1,854,370   Collected   YES
Construction    wealth management                                                        funds                       3.9%
Bank

                                                         15 June 2017        14 September
Beijing branch                                                               2017
                 Principal-guaranteed                                                     Own                        Annualized      yield
of       Societe                        197,551,588.60                                                                                       4.50%      2,247,149   2,247,149   Collected   YES
                 wealth management                                                        funds                      4.5%
Generale




                                                                                                               69
                                                          21 July 2017       16   October
Qingdao branch                                                               2017
               Principal-guaranteed                                                         Own          Annualized   yield
of   Bank   of                           178,000,000.00                                                                       4.40%   1,866,805   1,866,805   Collected   YES
               wealth management                                                            funds        4.4%
Communications

                                                                             20   October
                                                                             2017
China Minsheng                                            20 July 2017                      Own          Annualized   yield
               Structured deposit        100,000,000.00                                                                       4.20%   1,073,333   1,073,333   Collected   YES
Bank                                                                                        funds        4.2%



                                                                             26   October
Qingdao branch                                                               2017
of   Mitsubishi   Principal-guaranteed                    28 April 2017                     Own          Annualized   yield
                                         269,323,971.08                                                                       4.25%   5,754,930   5,754,930   Collected   YES
Tokyo      UFJ    wealth management                                                         funds        4.25%
Bank


                                                                             31   October
Haier      Road                                                              2017
sub-branch   of   Principal-guaranteed                    2 August 2017                     Own          Annualized   yield
                                         100,000,000.00                                                                       3.90%     961,644    961,644    Collected   YES
Construction      wealth management                                                         funds        3.9%
Bank


                                                          1 August 2017      1 November
Qingdao branch                                                               2017
                  Principal-guaranteed                                                      Own          Annualized   yield
of   Bank   of                           100,000,000.00                                                                       3.80%     957,808    957,808    Collected   YES
                  wealth management                                                         funds        3.8%
China

Qingdao branch                                            2 August 2017      2 November
of   Mitsubishi   Principal-guaranteed                                       2017           Own          Annualized   yield
Tokyo      UFJ                           100,000,000.00                                                                       4.20%   1,073,333   1,073,333   Collected   YES
                  wealth management                                                         funds        4.3%
Bank

                                                          11 November 2016   10 November
                                                                             2017
Qingdao branch
                  Principal-guaranteed                                                      Own          Annualized   yield
of   Bank   of                           200,000,000.00                                                                       2.90%   5,784,110   5,784,110   Collected   YES
                  wealth management                                                         funds        2.9%
China




                                                                                                    70
Haier      Road                                            7 September 2017    6    December
sub-branch   of   Principal-guaranteed                                         2017            Own           Annualized   yield
                                          205,000,000.00                                                                          3.90%   1,971,370   1,971,370   Collected   YES
Construction      wealth management                                                            funds         3.9%
Bank

Haier      Road    Principal-guaranteed   400,000,000.00   15 September 2017   14 December      Own          Annualized   yield   3.70%   3,649,315   3,649,315   Collected   YES
sub-branch   of    wealth management                                           2017             funds        3.7%
Construction
Bank
                                                           19 October 2017     20 December
                                                                               2017
Qingdao branch
                  Principal-guaranteed                                                         Own           Annualized   yield
of   Bank   of                            180,000,000.00                                                                          4.20%   1,284,164   1,284,164   Collected   YES
                  wealth management                                                            funds         4.2%
Communications


                                                                               21 December
Qingdao branch                                                                 2017
of   Mitsubishi   Principal-guaranteed                     21 September 2017                   Own           Annualized   yield
                                          199,878,741.21                                                                          4.26%   2,152,361   2,152,361   Collected   YES
Tokyo      UFJ    wealth management                                                            funds         4.26%
Bank


                                                           20 October 2017

China Minsheng                                                                 19     January Own            Annualized   yield
               Structured deposit         101,070,000.00                       2018                                               4.25%   1,070,927                           YES
Bank                                                                                          funds          4.25%



                                                           21 December 2017

Qingdao branch
                  Principal-guaranteed                                         20 April 2018   Own           Annualized   yield
of   Bank   of                            181,000,000.00                                                                          4.90%   2,915,836                           YES
                  wealth management                                                            funds         4.9%
Communications


                                                           20 July 2017        21 April 2018
Qingdao branch
                  Principal-guaranteed                                                         Own           Annualized   yield
of   Bank   of                            100,000,000.00                                                                          3.90%   2,938,356                           YES
                  wealth management                                                            funds         3.9%
China




                                                                                                        71
                                                           26 October 2017
Qingdao branch
of   Mitsubishi   Principal-guaranteed                                        26 April 2018   Own           Annualized   yield
                                          275,078,900.39                                                                         4.30%   5,897,993   YES
Tokyo      UFJ    wealth management                                                           funds         4.3%
Bank


Haier      Road    Principal-guaranteed   100,000,000.00   2 November 2017    7 May 2018       Own          Annualized   yield   4.00%   2,038,356   YES
sub-branch   of    wealth management                                                           funds        4%
Construction
Bank
                                                           2 November 2017    7 May 2018
Qingdao branch
                  Principal-guaranteed                                                        Own           Annualized   yield
of   Bank   of                            100,000,000.00                                                                         4.00%   2,038,356   YES
                  wealth management                                                           funds         4%
China

Qingdao branch                                             2 November 2017    9 May 2018
of   Mitsubishi   Principal-guaranteed                                                        Own           Annualized   yield
Tokyo      UFJ                            101,085,333.00                                                                         4.30%   2,238,832   YES
                  wealth management                                                           funds         4.3%
Bank

                                                           13 November 2017

Qingdao branch
                  Principal-guaranteed                                        9 May 2018      Own           Annualized   yield
of   Bank   of                            206,000,000.00                                                                         4.00%   3,995,836   YES
                  wealth management                                                           funds         4%
China


                                                           15 December 2017
Haier      Road
sub-branch   of   Principal-guaranteed                                        13 June 2018    Own           Annualized   yield
                                          208,000,000.00                                                                         4.30%   4,410,740   YES
Construction      wealth management                                                           funds         4.3%
Bank


                                                           21 December 2017
Haier      Road
sub-branch   of   Principal-guaranteed                                        20 June 2018    Own           Annualized   yield
                                          400,000,000.00                                                                         4.50%   8,926,027   YES
Construction      wealth management                                                           funds         4.5%
Bank




                                                                                                       72
                                                          21 December 2017
Qingdao branch
of   Mitsubishi   Principal-guaranteed                                       20 June 2018   Own          Annualized   yield
                                         202,031,102.12                                                                       4.65%   4,658,616   YES
Tokyo      UFJ    wealth management                                                         funds        4.65%
Bank




                                                                                                    73
Others
    □ Applicable √Not Applicable


(3). Provisions for impairment of entrusted wealth management
    □ Applicable √Not Applicable



2、 Entrusted loans

(1). Overall entrusted loans

   □ Applicable √ Not

Applicable




   Others
    □ Applicable √Not Applicable



(2). Individual entrusted loans

   □ Applicable √ Not

Applicable




   Others
    □ Applicable √Not Applicable



(3). Provisions for impairment of entrusted loans

    □ Applicable √Not Applicable


3、 Others

√Applicable □ Not Applicable
                                                            Unit and Currency: RMB0‘000




                                           74
  Name of                                                                                         Amount     Amount     Impairment                    Closing
   party                                                                                                                provision (if                balance of
                                                                                                     of         of
 operating                                                                                                                  any)                     investment     Actual
                                    Initial                                            Opening    purchase   disposal
    the                                                                                                                                  Closing     amount as a profit or
                  Type of         investment
derivatives                                         Commencement        Expiration balance of      during    during                     balance of percentage       loss for
                 derivatives      amount in
investment                                                date             date      investment     the        the                      investment    of the net      the
                 investment derivatives
                                                                                                                                         amount         asset      reporting
                                  investment                                           amount     reporting reporting
                                                                                                                                                                    period
                                                                                                   period    period



                Forward
  Bank          exchange           110,525           2017/1/1          2017/12/31 110,525                                                 508,170
                                                                                                                                                                   7,370
                contract

                Interest rate
  Bank          /exchange          907,055           2016/5/1           2021/6/2      907,055                                           1,594,081
                                                                                                                                                                   -2,063
                rate swap

Source     of     funds     for    derivative
                                             Entirely internal funds of the Company
investment

Market prices or fair value change of Change in market price or product fair value:
invested      derivatives       during        the
                                                    1、 Profit or loss of foreign exchange forward contract during the reporting period was RMB73.70 million;
reporting period, including the specific
                                                    2、 Profit or loss of interest rate/exchange rate during the reporting period was RMB-20.63 million.
methods, assumptions and parameters
                                                       Specific methods, assumptions and parameters: quotes for swaps and forwards of foreign exchange and interest
adopted in the analysis of the fair
                                                       rate provided by financial institutes.
values of the derivatives



                           (IV) Other Major Contracts
                               □ Applicable √Not Applicable


                           XVI. Other Major Events
                                √Applicable □ Not Applicable
                                During the Reporting Period, the Company disclosed the following information and all
                           the information will be disclosed on SSE (www.sse.com.cn):

                           Name of Announcement                                      Name of Newspaper and Page                                    Date
                           Report of Qingdao Haier Co., Ltd. on Securities                          Times     page      B034,      Shanghai 12            January
                           the Acquisition of Major Assets                           Securities News page 93, China Securities 2017
                                                                                     Journal page A76, Securities Daily page D84

                           Announcement of Qingdao Haier Co., Securities                            Times     page      B088,      Shanghai 28 February
                           Ltd. regarding the Resolution of the 4th Securities News page 53, China Securities 2017

                                                                                           75
Meeting of the 9th Session of the Board Journal page B077, Securities Daily page D81
of Directors (L 2017-001)
Announcement of Qingdao Haier Co., Securities          Times   page   B088,   Shanghai 28 February
Ltd. regarding the Resolution of the 4th Securities News page 53, China Securities 2017
Meeting of the 9th Session of the Board Journal page B077, Securities Daily page D81
of Supervisors (L 2017-002)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acquisition of Part
of Shareholding of Qingdao Haier Securities            Times   page   B088,   Shanghai
                                                                                         28 February
Multi-media Co., Ltd.(青岛海尔多媒 Securities News page 53, China Securities
                                                                                         2017
体有限公司)and Capital Increase and Journal page B077, Securities Daily page D81
Related-party Transaction (L 2017-003)
disclosed on 28 February 2017.
Announcement of Qingdao Haier Co.,
Ltd. regarding the Resolutions of the
                                          Securities   Times   page   B036,   Shanghai
First Participants Meeting of the Phase                                                  14     March
                                          Securities News page 108, China Securities
II Stock Ownership Scheme of Core                                                        2017
                                          Journal page B046, Securities Daily page A4
Employees Stock Ownership Scheme
(L 2017-004)
Indicative   Announcement     of   the
Holding Subsidiary Haier Electronics      Securities   Times   page   B001,   Shanghai
                                                                                         23     March
Group Co., Ltd. of Qingdao Haier Co.,     Securities News page 108, China Securities
                                                                                         2017
Ltd. regarding the Release of Annual      Journal page B006, Securities Daily page D8
Result of 2016 (L 2017-005)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Completion of Share Securities Times page B145, Shanghai
                                                                               29   March
Subscription of the Phase II Stock Securities News page 164, China Securities
                                                                               2017
Ownership Scheme of Core Employees Journal page A09, Securities Daily page D31
Stock Ownership Scheme (L 2017-006)
Summary of 2016 Annual Report of Securities            Times   page   B125,   Shanghai 29       April
Qingdao Haier Co., Ltd.                   Securities News page 361, China Securities 2017
                                          Journal page B236, Securities Daily page C97

First Quarterly Report 2017 of Qingdao Securities      Times   page   B125,   Shanghai 29       April
Haier Co., Ltd.                           Securities News page 361, China Securities 2017
                                          Journal page B236, Securities Daily page C98

Announcement of Qingdao Haier Co., Securities          Times   page   B125,   Shanghai 29       April
Ltd. on the Resolution of the 5th Securities News page 361, China Securities 2017
Meeting of the 9th Session of the Board Journal page B236, Securities Daily page C99
                                              76
 of Directors (L 2017-007)


Announcement of Qingdao Haier Co., Securities           Times   page   B127,   Shanghai 29        April
Ltd. on the Resolution of the 5th Securities News page 362, China Securities 2017
Meeting of the 9th Session of the Board Journal page B236, Securities Daily page C100
of Supervisors (L 2017-008)
 Announcement of Qingdao Haier Co., Securities          Times   page   B127,   Shanghai 29        April
 Ltd.     regarding    the   Renewal   of Securities News page 362, China Securities 2017
 Engagement of                             Journal page B237, Securities Daily page C98
 Accounting Firm (L 2017-009)
 Announcement of Qingdao Haier Co.,
                                           Securities   Times   page   B127,   Shanghai
 Ltd. regarding the Expected Daily                                                         29     April
                                           Securities News page 362, China Securities
 Related-party Transaction for 2017 (L                                                     2017
                                           Journal page B237, Securities Daily page C99
 2017-010)
 Announcement of Qingdao Haier Co.,
                                           Securities   Times   page   B126,   Shanghai
 Ltd. regarding the Expected Provision                                                     29     April
                                           Securities News page 362, China Securities
 of Security for a Subsidiary in 2017 (L                                                   2017
                                           Journal page B237, Securities Daily page C100
 2017-011)
 Announcement of Qingdao Haier Co., Securities          Times   page   B126,   Shanghai
                                                                                  29              April
 Ltd. regarding the Foreign Exchange Securities News page 362, China Securities
                                                                                  2017
 Derivatives Business (L 2017-012)   Journal page B237, Securities Daily page C98

 Announcement of Qingdao Haier Co.,
 Ltd. regarding the Adjustment the Price Securities     Times   page   B126,   Shanghai
                                                                                           29     April
 of Retained Equity Interests under Securities News page 362, China Securities
                                                                                           2017
 Phase IV Share Option Incentive Journal page B237, Securities Daily page C98
 Scheme (L 2017-013)
 Announcement of Qingdao Haier Co.,
 Ltd. regarding the Cancelation of Securities Times page B126, Shanghai
                                                                                    29            April
 Exercise/Unlocking of Retained Equity Securities News page 362, China Securities
                                                                                    2017
 Interests under Phase IV Share Option Journal page B237, Securities Daily page C97
 Incentive Scheme (L 2017-014)

 Announcement of Qingdao Haier Co., Securities Times page B126, Shanghai
                                                                                    29            April
 Ltd. regarding the Modification on the Securities News page 363, China Securities
                                                                                    2017
 Articles of the Company (L 2017-015) Journal page B237, Securities Daily page C100
 Notice    on   2016     Annual   General Securities    Times   page   B126,   Shanghai
                                                                                           29     April
 Meeting of Qingdao Haier Co., Ltd. Securities News page 363, China Securities
                                                                                           2017
 (L 2017-016)                              Journal page B237, Securities Daily page C100



                                               77
Announcement of Qingdao Haier Co., Securities         Times   page   B127,   Shanghai
Ltd. on the Notice to the Creditor Securities News page 363, China Securities
regarding Repurchase and Cancelation Journal page B237, Securities Daily page C100 29          April
of the Restricted Shares under the                                                      2017
Share Option Incentive Scheme (L
2017-017)
Announcement of Qingdao Haier Co.,
Ltd.    regarding     thePre-listing Securities Times page B016, Shanghai
                                                                                17             June
Disclosure of the Reduction of Securities News page 56, China Securities
                                                                                2017
Shareholding for Senior Management Journal page B016, Securities Daily page C64
(L 2017-018)
Supplemental Notice on 2016 Annual Securities         Times   page   B016,   Shanghai 17       June
General Meeting of Qingdao Haier Co., Securities News page 56, China Securities 2017
Ltd. (L 2017-019)                        Journal page B016, Securities Daily page C64
Announcement of Qingdao Haier Co.,       Securities   Times   page   B013,   Shanghai 21       June
Ltd. on the Resolution of the 6th        Securities News page 77, China Securities 2017
Meeting of the 9th Session of the Board Journal page B052, Securities Daily page D68
of Directors (L2017-020)
Announcement of Qingdao Haier Co., Securities         Times   page   B013,   Shanghai 21       June
Ltd. on the Resolution of the 6th Securities News page 77, China Securities 2017
Meeting of the 9th Session of the Board Journal page B052, Securities Daily page D68
of Supervisors (L2017-021)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acquisition of 100% Securities Times page B013, Shanghai
                                                                              21               June
Shareholding of Fisher & Paykel Securities News page 77, China Securities
                                                                              2017
Production Machinery Limited and Journal page B052, Securities Daily page D68
Related-party Transaction (L 2017-022)
Announcement of Qingdao Haier Co., Securities         Times   page   B012,   Shanghai 29       June
Ltd. on the Resolutions Passed at 2016 Securities News page 92, China Securities 2017
Annual General Meeting (L 2017-023) Journal page B047, Securities Daily page D50
Announcement of Qingdao Haier Co., Securities         Times   page   B056,   Shanghai 11 July 2017
Ltd. regarding the Listing and Dealing Securities News page 92, China Securities
of Restricted Shares under Non-public Journal page B011, Securities Daily page D53
Issuance (L 2017-024)
Announcement of Qingdao Haier Co.,
                                         Securities   Times   page   B104,   Shanghai
Ltd. regarding the Cancelation of the                                                   19     April
                                         Securities News page 76, China Securities
Repurchased Restricted Shares under                                                     2017
                                         Journal page B006, Securities Daily page D39
the Share Option Incentive Scheme (L

                                             78
2017-025)



Announcement of Qingdao Haier Co., Securities               Times    page    B037,   Shanghai 26       April
Ltd. on the 2016 Interests Distribution Securities News page 76, China Securities 2017
(L 2017-026)                                  Journal page B045, Securities Daily page D46
Indicative   Announcement        of    the
Holding Subsidiary Haier Electronics           Securities   Times    page    B148,   Shanghai
Group Co., Ltd. of Qingdao Haier Co.,          Securities News page 948, China Securities       25 August
Ltd.    regarding     the    Release   of      Journal page B039, Securities Daily page         2017
Half-year    Result     of    2017     (L      D130
2017-027)
                                               Securities    Times    page    B40,   Shanghai
 Summary of 2017 Half-year Report of Securities News page 817, China Securities                 28 August
 Qingdao Haier Co., Ltd.             Journal page B039, Securities Daily page                   2017
                                               D160

 Announcement of Qingdao Haier Co.,            Securities    Times    page    B40,   Shanghai
 Ltd. on the Resolution of the 7th             Securities News page 817, China Securities       28 August
 Meeting of the 9th Session of the Journal page B039, Securities Daily page                     2017
 Board of Directors (L2017-028)    D160

 Announcement of Qingdao Haier Co.,            Securities    Times    page    B40,   Shanghai
 Ltd. on the Resolution of the 7th Securities News page 817, China Securities                   28 August
 Meeting of the 9th Session of the Journal page B039, Securities Daily page                     2017
 Board of Supervisors (L2017-029)              D160

                                               Securities   Times    page    B40,    Shanghai
 Announcement of Qingdao Haier Co.,
                                               Securities News page 817, China Securities       28 August
 Ltd.   regarding     the    Changes     in
                                               Journal page B039, Securities Daily page         2017
 Accounting Policies (L 2017-030)
                                               D160
                                               Securities   Times    page    B7/8,   Shanghai
 Proposal of Qingdao Haier Co., Ltd.                                                            9
                                               Securities News page 34/35, China Securities
 for Public Offering of Convertible                                                             September
                                               Journal page B023, Securities Daily page
 Corporate Bonds                                                                                2017
                                               C21/22

 Announcement of Qingdao Haier Co.,            Securities    Times    page    B7,    Shanghai   9
 Ltd. on the Resolution of the 8th             Securities News page 34, China Securities        September
 Meeting of the 9th Session of the             Journal page B024, Securities Daily page C23     2017
 Board of Directors (L 2017-031)
 Announcement of Qingdao Haier Co.,            Securities    Times    page    B7,    Shanghai   9
 Ltd. on the Resolution of the 8th Securities News page 34, China Securities                    September
                                                 79
 Meeting of the 9th Session of the           Journal page B024, Securities Daily page C22      2017
 Board of Supervisors (L 2017-032)
 Announcement of Qingdao Haier Co., Securities Times page B7, Shanghai
 Ltd. regarding the Risk Warnings and Securities News page 34, China Securities
 Remedial Measures of Qingdao Haier          Journal page B024, Securities Daily page          9
 Co., Ltd. for Dilution of Current           C23                                               September
 Returns     by   Public   Offering     of                                                     2017
 Convertible       Corporate        Bonds
 (L2017-033)
 Announcement of Qingdao Haier               Securities    Times    page    B7,    Shanghai
 Co., Ltd. on Increase the Estimated         Securities News page 34, China Securities         9
 Caps of the Daily Related-party             Journal page B024, Securities Daily page          September
 Transaction regarding Procurement           C23                                               2017
 for 2017 (L 2017-034)
 Announcement of Qingdao Haier Co.,
 Ltd. regarding the Participation in the     Securities   Times     page    B32,    Shanghai   13
 ―Online    Collective Reception Day        Securities News page 77, China Securities         September
 Activity Held for Investors‖ (L            Journal page B012, Securities Daily page D74      2017
 2017-035)

 Announcement of Qingdao Haier Co.,
                                             Securities   Times     page    B44,    Shanghai
 Ltd. regarding the Progress of the                                                            10 October
                                             Securities News page 85, China Securities
 Reduction of Shareholding for Senior                                                          2017
                                             Journal page B032, Securities Daily page D52
 Management (L 2017-036)
 Third Quarterly Report 2017 of              Securities   Times    page    B201,    Shanghai   31 October
 Qingdao Haier Co., Ltd.                     Securities News page 149, China Securities        2017
                                             Journal page B149, Securities Daily page
                                             D113

Announcement of Qingdao Haier Co., Securities             Times    page    B201,    Shanghai
Ltd. on the Resolution of the 9th Securities News page 149, China Securities 31 October
Meeting of the 9th Session of the Board Journal page B076, Securities Daily page D113 2017
of Directors (L2017-037)
Announcement of Qingdao Haier Co., Securities             Times    page    B201,    Shanghai
Ltd. on the Resolution of the 9th Securities News page 149, China Securities 31 October
Meeting of the 9th Session of the Board Journal page B076, Securities Daily page D113 2017
of Supervisors (L2017-038)
Announcement of Qingdao Haier Co., Securities             Times    page    B201,    Shanghai
                                                                                               31     October
Ltd. regarding the Subscription for Securities News page 149, China Securities
                                                                                               2017

                                               80
Capital    Increase   of     Haier   Group Journal page B076, Securities Daily page D113
Finance Co., Ltd. and Related-party
Transaction (L2017-039)
Notice on the First EGM in 2017 of Securities             Times   page   B201,   Shanghai
                                                                                             31     October
Qingdao      Haier    Co.,    Ltd.      (L Securities News page 149, China Securities
                                                                                             2017
2017-040)                                    Journal page B076, Securities Daily page D113

Announcement of Qingdao Haier Co., Securities Times page B037, Shanghai
Ltd. regarding the Issuance of Securities News page 68, China Securities
                                                                                             8 November
Convertible Corporate Bonds by the Journal page B019, Securities Daily page D44
                                                                                             2017
Overseas     Wholly-owned       Subsidiary
(L 2017-041)
Announcement of Qingdao Haier Co., Securities             Times   page   B037,   Shanghai 8 November
Ltd. on the Resolution of the 10th Securities News page 68, China Securities 2017
Meeting of the 9th Session of the Board Journal page B019, Securities Daily page D44
of Supervisors (L2017-042)
Announcement of Qingdao Haier Co.,
                                             Securities   Times   page   B004,   Shanghai 11
Ltd. regarding the Result of the
                                             Securities News page 41, China Securities November
Reduction of Shareholding for Senior
                                             Journal page B022, Securities Daily page C46    2017
Management (L 2017-043)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Completion of Securities Times page B4, Shanghai Securities 22
Issuance     of   Convertible    Corporate News page 76, China Securities Journal page November
Bonds by the Overseas Wholly-owned B046, Securities Daily page C4                            2017
Subsidiary (L 2017-044)
Announcement of Qingdao Haier Co., Securities             Times   page     Shanghai 24
                                                                         B65,
Ltd. on the Resolutions Passed at the Securities News page 93, China Securities November
First EGM in 2017 (L 2017-045)        Journal page B009, Securities Daily page C4   2017

Announcement of Qingdao Haier Co.,
                                             Securities   Times   page   B28,    Shanghai
Ltd. regarding the Allocation and                                                            7 December
                                             Securities News page 85, China Securities
Vesting of the Phase I Core Employees                                                        2017
                                             Journal page B032, Securities Daily page D37
Stock Ownership Scheme (2017-046)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acceptance by the Securities           Times   page   B64,    Shanghai 15
CSRC of the Application for Public Securities News page 52, China Securities December
Offering of       Convertible    Corporate Journal page B045, Securities Daily page D44      2017
Bonds      (L 2017-047)



                                                 81
Announcement of Qingdao Haier Co.,
Ltd. regarding the Capital Increase on Securities Times page B28, Shanghai 19
the Overseas Wholly-owned Subsidiary Securities News page 77, China Securities December
Haier US Appliance Solutions Inc. (L Journal page B015, Securities Daily page D69 2017
2017-048)



XVII. Proactive Performance of Social Responsibilities
(I)Information on initiatives taken to help people out of poverty
√Applicable □ Not Applicable

    1. Targeted measures in poverty alleviation plan

   In accordance with the national plan for targeted measures in poverty alleviation and the

   requirements set out in relevant documents, the Company places great emphasis on

   poverty alleviation, and carries out initiatives of targeted measures in poverty alleviation

   within the scope as authorized by the general meetings on related matters (such as

   donation). Over the years, the Company has been devoted to education undertakings and

   making significant contributions, with a view to targeting the weakest area of education

   and to blocking the transmission of poverty between generations through focused efforts in

   raising the basic cultural quality in poverty and the skill levels of labor force from poor

   families. As at the end of the reporting period, the Company and the Haier Group

   Corporation (its actual controller) and its subsidiaries (referred to as the ―Haier Group‖)

   has built more than 200 hope schools, covering 26 provinces, municipalities directly under

   the central government and autonomous regions in China. These initiatives have

   effectively enhanced the basic educational capabilities in poverty-stricken areas and

   improved the quality of education.



    2. Summary of targeted measures in poverty alleviation during the year

    In 2017, the Company‘s expenditures on targeted measures in poverty alleviation was

    approximately RMB12.96 million, which was mainly utilized in the education

                                              82
     improvement, physical and mental health development of adolescents and children. At

     the same time, as part of its initiatives in response to the government and the performance

     of its social responsibilities, Haier Group has also made investments in many aspects,

     such as poverty alleviation through agricultural development, and poverty alleviation

     through improvement of the health of farmers.



      3.     Results of Poverty Alleviation
                                                                Unit and Currency: RMB0‘000
Indicators                                              Amount and the status
I. General information                                                                           1,296
Funds                                                                                            1,296
II. Breakdown of the use of funds
    1. Overcoming poverty through education
1.1 Amount of investment for the purpose of                                                      1,281
improving      the   resources   of   education    in
poverty-stricken areas
    2. Basic guarantees
        2.1 Amount of investment for the purpose of                                                  15
        helping the disabled living in poverty


 4. Subsequent targeted measures in poverty alleviation plans

       In 2018, the Company will make concerted efforts with Haier Group and continue to
 implement the proposition of the documents issued by the central government in respect of
 poverty alleviation, dedicate to improve the education in poverty-stricken areas and other
 initiatives, and will perform our social responsibilities in a proactive manner.

       The company and Haier Group are also working in the fields such as poverty alleviation
 through agricultural development and improvement of farmers‘ health, for details, please refer
 to ―Social Responsibility‖ and other relevant sections in the ―Social Responsibility Report of
 Qingdao Haier Co., Ltd. for 2017‖ disclosed on the date of the Announcement.



       (II)Performance of social responsibilities
 √Applicable □ Not Applicable

     For details, please refer to the ―Social Responsibility Report of Qingdao Haier Co., Ltd.
     for 2017‖ disclosed on the date of this report.
                                                  83
       (III) Environmental Information

1. Explanation of the environmental protection status of companies and their important
subsidiaries that are key emission units announced by the environmental protection
department

    √Applicable □ Not Applicable

      According to the laws and regulations, the Company established standardized discharge
outlets, and an on-line sewage monitoring system was set up at the front of the sewage outlets
to monitor the amount of the discharged sewage in real time. The wastewater is discharged
after being collected and treated in compliance with regulations. All pollutants are discharged
in accordance with the national and local environmental standards. The applicable standard of
effluent wastewater is Grade B of the ―Water Quality Standard for Sewage Discharge into
Urban Sewers‖ (CJ343-2010). The main pollutants are COD and ammonia nitrogen. The
emission concentration standard of COD and ammonia nitrogen was 500 mg/L and 45 mg/L,
respectively. The actual emissions are strictly performed under the standard. Taking Qingdao
Industrial Park as an example, the actually emission concentration of COD and ammonia
nitrogen was 49.6 mg/L and 6.08 mg/L, respectively, so the discharge amount reached the
standard. The annual emission of COD and ammonia nitrogen was 10.8t and 1.59t,
respectively.



     In 2017, the energy consumption was 8.33 kg of standard coal per ten thousand RMB,
represent a year-on-year decrease of 13.22%. Photovoltaic power generation projects have
achieved a total installed capacity of 62MW and a total generating capacity of 130 million
KWh, which is equivalent to save 15,977 tons of standard coal and reduce carbon dioxide
emissions by 41,859.74 tons.



   Trigeneration (i.e. combined gas, cooling, heat and power) is currently applied in Haier
China-German Industrial Park(海尔中德工业园区). It is equivalent to save 10,000 tons of
standard coal and reduce of 26,200 tons of carbon dioxide emissions. It will be applied in
other new parks of Haier. In 2017, we implemented energy saving and emission reduction
projects such as smart lighting, waste heat recovery, and raw material substitution to achieve
energy savings of 19,498.50 tons of standard coal, which represented a significant energy
saving and emission reduction effect.



     Data transmission, real-time monitoring, real-time warning measures have been applied
among all the environmental protection departments of the Company and the smart energy
center of Haier Group. Various types of pollution control facilities are included in the TPM
management area of the equipment to ensure normal operation of the equipment. In

                                              84
accordance with the requirements of laws and regulations, the Company has formulated the
―Plan of Emergency Preparedness for Emergency Environmental Incidents‖ and organized
drills. Based on the results of the drills, the Company continued to optimize and upgrade the
plan. Haier Smart Energy Center is the leading energy big data analysis system in the industry.
It uses centralized automation, information technology, and centralized management to
implement centralized dynamic monitoring and digital management of water, electricity, gas,
and other major energy consumption of all factories across the country. The system
automatically and accurately collects energy data, and completes the prediction and analysis
of energy consumption data, optimizes energy scheduling, and reduces production energy
consumption of single unit, thereby realizing low-carbon production.



     In March 2017, the Company successfully passed the ISO14001 environmental
management system certification. From 13 to 16 March 2018, the first surveillance audit for
the Company‘s operation of the new version of the 2017 ISO14001 system was conducted by
a professional certification body, the Company passed the first surveillance audit successfully
and the system was proved to be operated well.



   For other relevant information, please refer to ―Social Responsibility‖ and other relevant
sections on the ―Social Responsibility Report of Qingdao Haier Co., Ltd. for 2017‖ disclosed
on the date of the Announcement.




2.   Companies other than key emission units

     √Applicable □ Not Applicable

     During the reporting period, all units of the Company carried out the implementation and
production of construction projects in accordance with laws and regulations, and went
through the procedures of environmental impact assessment by strictly following the
environmental protection requirements, which required the construction, projects
environmental protection must be carry out at the same time. All units passed the
environmental assessment and acceptance, and there was no environmental violation issue
during the reporting period, such as unlicensed construction.



3.   Other explanations
     □ Applicable √Not Applicable


(IV)Other explanations
   □ Applicable √Not Applicable

                                              85
XVIII. Convertible corporation bonds
  (I) Information on the issuance of convertible bonds
    √Applicable □ Not Applicable
    On 9th of September, 2017, after reviewed and approved at the 8th meeting of the 9th

session board of directors, the Company disclosed a proposal for the issuance of convertible

bonds. The proceeds raised from the issuance of convertible bonds will be RMB5.64 billion.

The proceeds will be used in leading consumption upgrades, practicing large kitchen

appliances strategy, and improving the innovation capabilities and other opportunities. As of

the disclosure date of this report, the scheme was accepted by the CSRC with further feedback,

and the Company made responses to the feedback. w



    (II) Information on holders and guarantors of convertible bonds during the
    reporting period

    □ Applicable √Not Applicable

    (III) Information on the change in convertible bonds during the reporting period


    □ Applicable √Not Applicable



     Information on the accumulated number of convertible bonds being converted into
shares during the reporting period



    □ Applicable √Not Applicable

    (IV) Information on the past adjustment of prices for conversion into shares

    □ Applicable √Not Applicable

    (V) Information on the indebtedness, changes in creditability of the Company and
    the cash arrangement for repayment of debts in the coming years

    □ Applicable √Not Applicable

    (VI) Explanation on other information regarding convertible bonds

    □ Applicable √Not Applicable
                                             86
Section VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS
I. CHANGES IN SHARES
(I) Table of Changes in Ordinary Shares
1. Table of Changes in Ordinary Shares
                                                                                                                                                Unit: share
                                            Prior to the change                    Increase and decrease of the change (+,-)                 Balance
                                                                      New                   Shares
                                                                               Bonus
                                            Number           %       shares                converted         Others          Subtotal       Number            %
                                                                               shares
                                                                     issued              from reserve
I. Shares with selling restrictions         606,213,988      9.942                                        -606,213,988     -606,213,988              0            0
1. Shares held by the state
2. Shares held by the state-owned legal
entities
3. Other shares held by other domestic
                                               228,000       0.004                                            -228,000           -228,000            0            0
investors
Including:
      shares held by domestic non-state
-owned legal entities
       shares held by domestic
                                               228,000       0.004                                            -228,000           -228,000            0            0
individuals
4. Shares held by foreign investors         605,985,988      9.938                                        -605,985,988     -605,985,988              0            0
Including:
                                            605,985,988      9.938                                        -605,985,988     -605,985,988              0            0
    shares held by foreign legal entities
        shares held by foreign



                                                                              87
        individuals
II. Tradable shares without selling
                                      5,491,416,739    90.058        605,985,988   605,985,988   6,097,402,727   100.000
restrictions
1. RMB ordinary shares                5,491,416,739    90.058        605,985,988   605,985,988   6,097,402,727   100.000
2. Domestic listed foreign shares
3. Overseas listed foreign shares
4. Others
III. Total shares                     6,097,630,727   100.000           -228,000      -228,000   6,097,402,727   100.000




                                                                88
89
2. Statement on the changes in ordinary shares

    √Applicable □ Not Applicable

     (1) Approved by ―Reply on Approval of Non-public Issuance of Shares of Qingdao Haier

Co., Ltd.‖ by China Securities Regulatory Commission (Zheng Jian Xu Ke [2014] No. 436),

Qingdao Haier Co., Ltd. (hereinafter referred to as the "Company") issued 302,992,994 ordinary

shares of RMB (A share) by way of Non-public Issuance of Shares at an issue price of RMB 10.83

per share to KKR Home Investment S.à r.l. (hereinafter referred to as ―KKR (Luxembourg)‖) on

17 July 2014. On the same date, the Company completed the registration of the above issued

shares and the restricted shares. The lock-up period for the non-public issued shares is 36 months.

In June 2015, the Company‘s share capital changed and the number of restricted shares held by

KKR (Luxembourg) increased from 302,992,994 shares to 605,985,988 shares due to the

implementation of the Company's 2014 profit distribution and plans for capital reserve conversion

into share (10 shares for every 10 shares for RMB4.92). In July 2017, the aforementioned

605,985,988 shares were released by the Company, then listed and circulated on 17 July 2017.

The release of locked-up resulted in a change in the Company's equity structure (the number of

share capital has not changed). For more details, please refer to the Announcement of Qingdao

Haier Co., Ltd. on End of the Lock-up Period for A Shares Issued under the Non-public Issuance

(L 2017-024) disclosed by the Company on 11 July 2017.

    (2)On 28 April 2017, the fifth meeting of 9th session of Board of Directors of the Company

reviewed and approved the Resolution on Cancellation of Exercise/Unlocking of Retained Equity

under Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. The Company

intended to cancel the exercise of the stock option under the second exercise period of the portion

of Retained Equity and to repurchase and cancel the restricted shares under the second exercise

period due to the lack of exercise/unlocking conditions. According to the resolution, the Company

has repurchased a total of 228,000 restricted shares, which were cancelled on 19 July 2017. After

the cancellation, the share capital of the Company has been changed from 6,097,630,727 to

6,097,402,727. For more details, please refer to the Announcement of Qingdao Haier Co., Ltd. on



                                                90
Cancellation of Repurchased Restricted Shares under the Share Option Incentive Scheme (L

2017-025) disclosed by the Company on 19 July 2017.

3. Effect of changes in ordinary shares on the financial indicators such as earnings per share

and net assets per share (if any) over the last year and the last reporting period

□ Applicable √Not Applicable

4. Other disclosure deemed necessary by the Company or required by securities regulatory

authorities

□ Applicable √Not Applicable

(Ⅱ) Changes in shares with selling restrictions
     √Applicable □ Not Applicable
                                                                                                Unit: share
                    Number
                    of shares     Number of                      Number of
                                                  Number of
                      with          shares                         shares                        Date of
                                                     new                          Reasons
                     selling       released                         with                          release
    Name of                                         shares                           for
                   restrictions      from                          selling                         from
  shareholder                                     with selling                     selling
                      at the        selling                      restrictions                     selling
                                                  restrictions                   restrictions
                   beginning      restrictions                   at the end                     restrictions
                                                    in 2017
                       of          in 2017                        of 2017
                      2017
Individual
shareholders
                                                                                 Share
(target for the
                                                                                 Option
retained part of
                                                                                 Incentive
the fourth share      228,000                 0     -228,000                 0
                                                                                 Shares
option
                                                                                 subject to
incentive
                                                                                 restrictions
of the
Company)
     Total            228,000                 0     -228,000                 0         /             /

     Note: During the reporting period, since the annual results of the Company in 2016 did not

fulfill the conditions for unlocking, the Board reviewed and approved relevant resolution on

cancellation of unlocking of part of the restricted shares involved in Phase IV Share Option

Incentive Scheme of the Company. According to the resolution, some restricted shares held by the

scheme participants of Phase IV Share Option Incentive Scheme at the beginning of the period

should be repurchased and cancelled. The repurchase and cancellation of such shares had been

                                                    91
completed on 19 July 2017, and the total number of shares being cancelled was 228,000. For

details, please refer to the Announcement of Qingdao Haier Co., Ltd. on Cancellation of

Repurchased Restricted Shares under the Share Option Incentive Scheme (L 2017-025) disclosed

by the Company on 19 July 2017.


II. ISSURANCE AND LISTING OF SECURITIES
(I) Issuance of securities during the reporting period
     √Applicable □ Not Applicable
                                                                Unit: 0‘000 shares Currency: RMB
                                                                             Number
    Type of                          Price
                                                                             of shares
   shares and                         (or      Number of      Date of                         Date of
                    Date of issue                                             under
 its derivative                     interest   Issuance        listing                       termination
                                                                              listing
   securities                       s rate)
                                                                             approval
Ordinary shares
RMB ordinary                                                    20 June
                                                     244.04                     488.08
shares grant                                                       2015
of restricted
shares under
                     7 July 2014        7.73
the Share                                                       20 June
                                                     366.06                              /
Option                                                             2016
Incentive
Scheme
Non-public
Issuance
                                                                17 July
of RMB              17 July 2014       10.83    30,299.30                    60,598.60
                                                                   2017
ordinary
shares
RMB ordinary                  25
shares exercise       November         10.11         477.92                     477.92
                                                                         2
of share                    2014
                                                              December
option and                  25
                                                                   2014
grant of              November         10.36     1,122.60                     1,122.60
restricted shares         2014
under               8 April 2015                              5 August
                                       10.06          19.00                              /
the Share                                                          2015
Option              28 July 2015
                                                              5 August
Incentive                               8.07     3,090.40                     3,090.40
                                                                   2015
Scheme




                                                92
Details of issuance of securities as of the reporting period (please specify separately for bonds
with different interest rates within the duration):
    √Applicable □ Not Applicable
     (1) In April 2014, the Company introduced Phase IV Share Option Incentive Scheme. The

Scheme involves 54,560,000 options, of which, 49,110,000 options (including 42,879,000 share

options and 6,231,000 restricted shares) were granted under the first grant and 5,450,000 options

(including 4,761,000 share options and 689,000 restricted shares) were reserved shares. After no

objection filing with the CSRC and the approval of the Scheme at a general meeting of the

shareholders of the Company, the Board determined the date of the First Grant was 20 June 2014

and 48,780,000 options (including 42,679,000 share options at the exercise price of RMB16.63

per share; and 6,101,000 restricted shares at the grant price of RMB7.73 per share) were granted

to scheme participants (adjusted after one participant left the Company) under the first grant. The

registration of transfer of the abovementioned restricted shares was completed on 7 July 2014. For

details, please refer to the Announcement of Completion of Registration of Restricted Shares

Granted under the Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. (L

2014-038) published by the Company on the four major securities newspapers and the website of

Shanghai Stock Exchange (www.sse.com.cn) on 8 July 2014.

     (2) In September 2013, the Company induced a proposal on the introduction of the strategic

investor through non-public issuance of no more than 305 million A ordinary shares to KKR

(Luxembourg) with proceeds of not more than RMB3.447 billion. After the approval received

from the general meeting of the shareholders of the Company, Ministry of Commerce and CSRC,

the Board of the Company conducted relevant share transfer procedures in July 2014 and

determined 302,992,994 shares to be issued at the issue price of RMB10.83 per share. The listing

of the relevant share will be effective on 17 July 2017. For details, please refer to Announcement

on Results of Non-public Issuance of Shares and Change in Share Capital of Qingdao Haier Co.,

Ltd. (L 2014-041) published by the Company on the four major securities newspapers and the

website of Shanghai Stock Exchange (www.sse.com.cn) on 22 July 2014.

     (3) In November 2014, the conditions for the third exercise period of Phase Ⅱ Share Option

     Incentive Scheme, the second exercise period of Phase III Share Option Incentive Scheme of

the Company have been fulfilled. On 25 November 2014, the Company directionally issued

additional 4,779,200, and 11,226,000 ordinary shares to determined and qualified participants of
                                                 93
Phase II and Phase III Share Option Incentive Scheme at prices of RMB10.11 and RMB10.36 per

share respectively. The aggregate 16,005,200 shares above mentioned were listed on 2 December

2014. For details, please refer to Announcement on the Exercise Arrangement for the Third

Exercise period of Phase II Share Option Incentive Scheme by the Board of Qingdao Haier Co.,

Ltd. (L 2014-064), Announcement on the Exercise Arrangement for the Second Exercise period of

Phase Ⅲ Share Option Incentive Scheme by the Board of Qingdao Haier Co., Ltd. (L

2014-065)and the Announcement on the Exercise Result for the share Option Incentive Scheme

and the Listing of Additional shares of Qingdao Haier Co., Ltd. (L2014-067) published by the

Company on the four major securities newspapers and the website of Shanghai Stock Exchange

(www.sse.com.cn) on 12 November 2014 and 27 November 2014, respectively.

     (4) In February 2015, according to the Company‘s reserved equity under the Phase IV Share

Option Incentive Scheme, an aggregate of 650,000 share options were granted with the exercise

price of RMB20.44 per share while 190,000 restricted shares were granted with the granting price

of RMB10.06 per share. The Board of Directors determined that the Grant date was 26 February

2015. Registration and transfer issues of the restricted shares have been completed on 8 April

2015. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Completion

of Registration of Reserved Restricted Shares Granted under the Phase IV Share Option Incentive

Scheme (L 2015-011) published by the Company in the four major securities newspapers and the

Shanghai Stock Exchange website (www.sse.com.cn) on 9 April 2015.

     (5) In July 2015, the conditions of the first exercise/unlocking of equity initially granted

under Phase IV Share Option Incentive Scheme were fulfilled. The Company directionally issued

additional 30,904,000 ordinary shares to determined and qualified participants of the first exercise

of equity granted under Phase IV Share Option Scheme at a price of RMB8.07 per share. The

above shares were listed on 5 August 2015. For details, please refer to the Announcement of

Qingdao Haier Co., Ltd. on the Share Option Incentive Exercise Result and New Shares Listing

under the Share Option Incentive Scheme (L 2015-031) published in the four major securities

newspapers and the Shanghai Stock Exchange website (www.sse.com.cn) on 30 July 2015.




                                                94
(II) Changes in total shares and shareholder structure as well as assets and liabilities
structure of the Company
 √Applicable □ Not Applicable


(III) Information on existing shares held by the staff
 √Applicable □ Not Applicable
III. Information on shareholder and actual controllers
(Ⅰ) Total number of shareholders
Total number of ordinary shareholders up to the
                                                                                                172,905
end of the reporting period
Total number of ordinary shareholders as at the
end of the last month prior to the disclosure day of                                            202,628
the annual report


(Ⅱ) Table of top ten shareholders, top ten common shareholders (or the shareholders
without selling restrictions) by the end of the reporting period
                                                                                 Unit: share
                                        Shareholdings of top ten shareholders
                                                                                             Status of
                                        Chan                                     Numbe
                                                                                              shares
                                          ge                                       r of
                                                                                             pledged
                                        durin       Number of                    shares                    Nature
                                                                       Percent               or frozen
                                        g the       shares held                   held                       of
Name of shareholder (full name)                                          age                         N
                                        repor      at the end of                  with                    sharehol
                                                                        (%)                          u
                                         ting        the period                  selling                    der
                                                                                            Status   m
                                        perio                                    restrict
                                                                                                     be
                                           d                                      ions
                                                                                                      r
                                                                                                          Domesti
                                                                                                              c
Haier Electric Appliances                                                                                 on-state-
                                                       1,258,684,824    20.64          0     Nil
International Co., Ltd.                                                                                    owned
                                                                                                            legal
                                                                                                           entity
                                                                                                          Domesti
                                                                                                              c
                                                                                                          on-state-
Haier Group Corporation                                1,072,610,764    17.59          0     Nil
                                                                                                           owned
                                                                                                            legal
                                                                                                           entity
Hong Kong Securities                                                                        Unkno         Unknow
                                                        533,989,517      8.76          0
Clearing Co., Ltd.                                                                           wn             n



                                                       95
                                                                                                      Foreign
KKR HOME INVESTMENT
                                                   484,037,988         7.94        0     Nil           legal
S.A R.L.
                                                                                                       entity
China Securities Finance
                                                                                        Unkno        Unknow
Corporation                                        219,306,498         3.60        0
                                                                                         wn            n
Limited
                                                                                                      Foreign
                                                                                        Unkno
GIC PRIVATE LIMITED                                184,486,626         3.03        0                   legal
                                                                                         wn
                                                                                                       entity
                                                                                                     Domesti
Qingdao Haier Venture &                                                                                  c
Investment Information Co.,                                                                          non-state
                                                   172,252,560         2.83        0     Nil
Ltd.(青岛海尔创业投资咨询有                                                                           -owned
限公司)                                                                                                legal
                                                                                                       entity
National social security fund,                                                          Unkno        Unknow
                                                   104,888,894         1.72        0
Portfolio 104                                                                            wn            n
Central Huijin Asset                                                                    Unkno        Unknow
                                                      69,539,900       1.14        0
Management Ltd.                                                                          wn            n
                                                                                                      Foreign
                                                                                        Unkno
UBS AG                                                43,545,196       0.71        0                   legal
                                                                                         wn
                                                                                                       entity
                        Shareholdings of top ten shareholders without selling restrictions
                                               Number of tradable             Class and number of shares
           Name of shareholder                shares without selling
                                                                              Class             Number
                                                   restrictions
Haier Electric Appliances International
                                                       1,258,684,824      RMB ordinary          1,258,684,824
Co., Ltd.
Haier Group Corporation                                1,072,610,764      RMB ordinary          1,072,610,764
Hong Kong Securities Clearing Co., Ltd.                  533,989,517      RMB ordinary            533,989,517
KKR HOME INVESTMENT S.A R.L.                             484,037,988      RMB ordinary            484,037,988
China Securities Finance Corporation
                                                         219,306,498      RMB ordinary            219,306,498
Limited
GIC PRIVATE LIMITED                                      184,486,626      RMB ordinary            184,486,626
Qingdao Haier Venture & Investment
Information Co., Ltd.(青岛海尔创业投资                   172,252,560      RMB ordinary            172,252,560
咨询有限公司)
National social security fund, Portfolio
                                                         104,888,894      RMB ordinary            104,888,894
104
Central Huijin Asset Management Ltd.                      69,539,900      RMB ordinary             69,539,900
UBS AG                                                    43,545,196      RMB ordinary             43,545,196




                                                 96
                                                  (1) Haier Electric Appliances International Co., Ltd. is a holding
                                                  subsidiary of Haier Group Corporation. Haier Group Corporation
                                                  holds 51.20% of its equity. Qingdao Haier Venture & Investment
Related-parties or parties acting in concert
                                                  Information Co., Ltd.(海尔创业投资咨询有限公司) is a party
among the aforesaid shareholders
                                                  acting in concert with Haier Group Corporation;
                                                  (2) The Company is not aware of the existence of any connections
                                                  of other shareholders.


     Number of shares held by top ten shareholders with selling restrictions and the selling
restrictions
     □ Applicable √Not Applicable
(Ⅲ) Strategic investors or general legal persons who became the top ten shareholders due to
placing of new shares
√Applicable □ Not Applicable
 Name of strategic investor or general legal              Starting date of          Expiration date of
                     person                           agreed shareholding          agreed shareholding
KKR HOME INVESTMENT S.A R.L.                                       17 July 2014              17 July 2017
                                                  According to the Share Purchase Agreement entered
                                                  into between the Company and KKR in 2013, the
                                                  shares of the Company subscribed by it shall not be
Statement of the terms of the agreed
                                                  transferred within 36 months after the date of issuance.
shareholding of the strategic investors or
                                                  The summary of the agreement sets out in the
ordinary legal persons involved in
                                                  announcement regarding the Proposal of Qingdao Haier
placing new shares
                                                  Co., Ltd. on Non-public Issuance of A-share (《青岛海
                                                  尔股份有限公司非公开发行 A 股股票预案》) (L
                                                  2013-023) of the Company dated 8 October 2013.


IV. Controlling shareholder and the ultimate controller
(I) Status of controlling shareholder
1 Legal person
√Applicable □ Not Applicable
Name                                 Haier Electric Appliances International Co., Ltd
The person in charge of the          Zhang Ruimin (张瑞敏)
Company or legal
representative
Establishment date                   1988-06-30
                                     Manufacturing of freezer, electromagnetic stove, house electrical
                                     fan, hairdryer, freezing machine, gas fire, air cleaner, dishwasher,
                                     electric heater, electric cooker, water dispenser, vacuum cleaner,
Principal business
                                     kitchen ventilator, gas stove and oven focal; the export of the
                                     products produced by the Company, the import and export of
                                     technology and equipment for the Company's own use and the

                                                     97
                               import business of raw materials for production.



2 Natural person

    □ Applicable √Not Applicable

3 Explanation on the absence of controlling shareholders of the Company

□ Applicable √Not Applicable

4   Index and dates in respect of the changes in controlling shareholders during the

    reporting period

    □ Applicable √Not Applicable

5 Framework of the ownership and controlling relationship between the Company and its

controlling

shareholder




(II) Status of the ultimate controller
1 Legal person
    √Applicable □ Not Applicable
                                              98
Name                                Haier Group Corporation
The person in charge of the         Zhang Ruimin (张瑞敏)
Company or legal representative
Establishment date                  1980-03-24
                                    Manufacturing of home appliances, digital products,
                                    communication equipment, electronic computers and
                                    accessories, ordinary machineries, kitchen utensils and
                                    industrial use robots; domestic commercial wholesale
Principal business
                                    distribution and retail sale (excluding those operated
                                    exclusively by the State, which are dangerous and limited
                                    by the State); the import and export business (please refer to
                                    Foreign Trade Enterprise Validation Certificate for details).


2 Natural person

    □ Applicable √Not Applicable

3 Explanation on the absence of ultimate controller of the Company

□ Applicable √Not Applicable

4 Index and dates in respect of the changes in ultimate controller during the reporting

period

□ Applicable √Not Applicable

5 Framework of ownership and controlling relationship between the Company and the

ultimate controllers

    √Applicable □ Not Applicable




                                              99
6. The ultimate controller controls the Company by way of Trust or other assets
management
□Applicable √Not Applicable


(III) Introduction of controlling shareholders and ultimate controllers
√Applicable □Not Applicable

    Haier Group Company is registered as a joint-stock enterprise. According to the statement

issued by the State-owned Assets Management Office of Qingdao on 1 June 2002, it is believed

that the enterprise nature of Haier Group Company is a collective owned enterprise.



V. Other legal shareholders with a shareholding percentage over 10%

□Applicable √Not Applicable

VI. Explanation of reduction of share restrictions
□Applicable √Not Applicable




                                               100
Section VII RELEVANT INFORMATION OF PREFERRED SHARES
□Applicable √Not Applicable




                                101
Section VIII   DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES
    I.    Changes of Shareholding and Remuneration
(I) Changes of shareholding and remuneration of current and retired directors, supervisors and senior management during the
reporting period
      √Applicable □Not applicable
                                                                                                                      Unit: share
                                                                                                             Total
                                                                                                          remunera
                                                                                                              tion
                                                                                                           received
                                                                                                             from
                                                                                 Increase/                                  Whether
                                                                       Sharehol                                the
                                                         Shareholdings            decrease                                   receive
                                     Appoint  Expiration                dings                  Reason for Company
             Title                                           at the                   in                                 remuneration
  Name               Gender Age       ment     date of                  at the                  increase/   during
            (note)                                         beginning             shares for                                 from the
                                       date  appointment                end of                  decrease       the
                                                          of the year                the                                  Company‘s
                                                                       the year                           reporting
                                                                                    year                                 related party
                                                                                                            period
                                                                                                          (RMB0‘0
                                                                                                              00)
                                                                                                            (before
                                                                                                              tax)
           Chairm
  Liang                             2016-05-                           10,904,0
             an &     male     52            2019-05-30     10,079,840             824,225                        190          NO
Haishan                             31                                       65
              CEO
                                                                                            Employee           No
                                                                                            shareholding  receipt of
             Vice
   Tan                              2016-05-                           5,272,74             plan vested   remunera
           preside   female 48               2019-05-30      4,613,360             659,380                                    YES
  Lixia                             31                                         0                              tion
           nt
                                                                                                           from the
                                                                                                          Company

                                                               102
  Peng                            2016-05-
           Director   male   57              2019-05-30                                                 20    NO
Jianfeng                          31
   Wu                             2016-05-
           Director   male   63              2019-05-30                                                 20    NO
Changqi                           31
  Zhou                            2016-05-
           Director   male   56              2019-05-30                                                 20    NO
Hongbo                            31
   Liu
                                  2016-05-
Haifeng    Director   male   48              2019-05-30                                                  0    NO
                                  31
 David
           Indepen
 Wu                               2016-05-
             dent     male   78              2019-05-30                                                 20    NO
Cheng                             31
           director
           Indepen
 Dai                              2016-05-
             dent     male   56              2019-05-30                                                 20    NO
Deming                            31
           director
           Indepen
   Shi                            2016-05-
             dent     male   56              2019-05-30                                                 20    NO
Tiantao                           31
           director
           Chairm
                                                                                                 No
             an of
                                                                                                 receipt of
              the
Wang                              2016-05-                                                       remunera
           supervis   male   61              2019-05-30         27,004   27,004                               YES
Peihua                            31                                                             tion
              ory
                                                                                                   from the
           committ                                                                Employee
                                                                                                 Company
           ee                                                                     shareholding
                                                                                  plan vested    No
                                                                                                 receipt of
 Ming   Supervi                   2016-05-                                                       remunera
                      male   58              2019-05-30         17,612   17,612                               YES
Guoqing sor                       31                                                             tion
                                                                                                   from the
                                                                                                 Company


                                                          103
Wang    Supervi                     2016-05-
                    female    43                2019-05-30                        2,231       2,231                            16         NO
Yuqing  sor                         31
          Chief
        financia
                                                                                                    Reduction  in
             l
 Gong                               2016-05-                                   1,050,00             the secondary
         officer,    male     45                2019-05-30        1,400,000                -350,000                            65         NO
  Wei                               31                                                0             market
           vice
        preside
        nt
        Secretar
           y to
           the
        board of                                                                                    Employee
 Ming                               2016-05-
        director    female    54                2019-05-30          874,000     944,446      70,446 shareholding               60         NO
Guozhen                             31
            s,                                                                                      plan vested
        vice
        preside
        nt
             /         /       /        /            /                         18,218,0                      /                             /
  Total                                                          16,967,200             1,250,898                             441
                                                                                     98


Name
                                                                Major work experience

                Male, born in 1966, is a senior engineer. He had served as director of enterprise management office of Qingdao Refrigerator
          General Factory, head of the quality department of Qingdao Haier Refrigerator Co., Ltd., director of personnel department of
Liang
          certification center of Haier Group Corporation, general manager and secretary of the party committee of Qingdao Haier Air
Haishan
          Conditioner Gen Corp., Ltd, head and secretary of the party committee of Haier logistics department, senior vice president of Haier
          Group, executive vice president of Haier Group. He is chairman and CEO of 9th session of the Board of Qingdao Haier Co., Ltd.; he
          was rewarded National May 1st Labor Medal, Outstanding Leadership Award of the National Light Industry Enterprise Information


                                                                    104
           (全国轻工业企业信息化优秀领导奖), Top 10 Leaders in China Strategic Emerging Industries in recent year; Prize of Technology
           Advancement for China Household Appliances, First Prize Award of Science and Technology Progress of China National Light
           Industry Council.

                Female, born in 1970, had served as assistant to director and general manager of Haier Air Conditioning Electronics Import
           and Export Company (海尔空调电子进出口公司), the head of integrated department, deputy director, director of department of
  Tan      overseas market development of Haier Group, and head of department of financial management of Haier Group; currently serves as
           the executive vice president and chief financial officer of Haier Group, the president of Haier Financial Holdings Limited, the vice
 Lixia
           chairman of the 9th session of the Board of Qingdao Haier Co., Ltd.. In recent years, she was successively awarded Model Worker
           of Shandong Province, Outstanding Entrepreneur of the State, "March 8 Red-Banner Holders of the State ", PRC CFO of the Year,
           China Top Ten Women in Economic Area, China Top Ten Brand Female (中国十大品牌女性) and so on.

                Male, born in 1961, professor and tutor of doctorate students of School of Labor and Human Resources of Remin University of
Peng       China, president of China Stone Management Consulting Group, vice chairman of China Human Resource Development
Jianfeng   Association, vice director of Management Consulting Committee of China Enterprise Confederation, director of the 9th session of
           the Board of Qingdao Haier Co., Ltd.. He once was the deputy dean of School of Labor and Human Resources of Remin University
           of China.

                Male, born in 1955, professor and tutor of doctorate students of department of Strategic Management of Guanghua School of
           Management of Peking University. He graduated from Shandong University in 1982 with a bachelor degree in economics. He
           graduated from Katholieke Universiteit Leuven in Belgium in 1990, with a MBA degree and a doctorate degree in applied
 Wu        economics successively. He was an assistant professor and associate professor of Department of Economics of School of Business
Changqi    and Management of Hong Kong University of Science and Technology, professor and director of Department of Strategic
           Management of Guanghua School of Management of Peking University, deputy dean of Guanghua School of Management, Peking
           University, Director of EMBA degree programme center and so on. He is currently the president of the National Hi-Tech Industrial
           Development Zone Strategy Research Institute of Peking University (国家高新技术产业开发区发展战略研究院) and president of
           Guanghua Leadership Institute (in collaboration with CISCO), director of the 9th session of the Board of Qingdao Haier Co., Ltd..

Zhou             Male, born in 1962, chairman of UbiLink, member of the board of directors of Beijing Hanbang Technology Co., Ltd.,
Hongbo     part-time chief scientist of Kyland Technology Co., Ltd (东土科技); he was once the general manager of Beiqi iFoton Co., Ltd. (北
           汽福田车联网公司), chief software specialist of Tsinghua Tongfang, senior engineer / manager of research and development of


                                                                     105
          IBM / BEA and other companies in the United States, postdoctoral researcher of Oak Ridge National Laboratory of America etc. He
          has engaged in the research and development work in supercomputing and cloud computing. He was distinguished expert of Beijing,
          Guiyang and other municipal government; part-time professor of Beijing Jiaotong University, University of Electronic Science and
          Technology of China and other colleges; He was the pioneer engaged in IOT development in Tsinghua Tongfang after his return
          from abroad in 2003, and has published three treatises at home and abroad, and he is one of the nine global IOT experts interviewed
          by the internationally renowned magazine "Economist". He is currently a director of the 9th session of the Board of Qingdao Haier
          Co., Ltd..

               Male, born in 1970, currently is the joint founder and president of Dehong Capital(德弘资本)and was the KKR global partner,
          co-head of KKR Asian Private Equity (KKR 亚洲私募业务) and CEO of KKR Greater China Region, and member of KKR's Asian
          Private Equity Investment Committee, Asia Portfolio Management Committee and China Growth Fund Investment Committee. He
          once served as the managing director of Morgan Stanley and co-head of the Direct Investment Department of Morgan Stanley Asia.
Liu       In years of direct investment career, he achieved an excellent long-term investment performance, he was responsible for and led a
Haifeng   number of successful and pioneering direct investment projects in the Greater China region, such as: Ping An Insurance, China
 David    Mengniu Dairy, Qingdao Haier, Sunner Development, Belle International, Far East Horizon, Nanfu Battery, China Modern Dairy,
          United Envirotech Ltd., China International Capital Corporation Limited (CICC), China Cord Blood Corporation, Yongle
          Household Appliances, Hengan International, COFCO Meat, Guangdong Feed(粤海饲料), Asia Dairy, Uxin Limited, Tarena
          Education and etc. He graduated from Columbia University, and achieved the highest honor of science degree in Department of
          Electronic Engineering; he is a member of Tau Beta Pi (National Engineering Honor Society of America) (全美工程荣誉学会), and
          he has won the Edwin Howard Armstrong Award as the most outstanding electronic engineering student of Columbia University.

               Male, born in 1940, expert in informationization and automation, academician of Chinese Academy of Engineering. He
Wu        graduated from Tsinghua University in 1962 and got a postgraduate degree of Tsinghua University in 1966. He is a professor and
Cheng     doctoral supervisor of department of Automation of Tsinghua University, head of National CIMS Engineering Research Center,
          independent director of the 9th session of the Board of Qingdao Haier Co., Ltd.

                Male, born in 1962. He is a professor and doctoral supervisor of the accounting department of School of Business at Remin
Dai       University of China. He also concurrently holds other positions such as a vice-chairman of Accounting Society of China, and a
Deming    vice-chairman of Beijing Society of Auditing, Independent director of the 9th session of the Board of Directors of Haier. He served
          as an independent director for CSR Corporation Limited and other companies.



                                                                    106
                Male, born in 1962. He currently serves as a professor and doctoral supervisor of the School of Law at Tsinghua University as
           well as director of Finance & Law Research Center under the School of Law at Tsinghua University. He also serves on the 9th
Shi        Session of the Board of Directors of Qingdao Haier as an independent director. Meanwhile, he concurrently holds other positions
 Tiantao   such as a vice president of the Chinese Research Association of Securities Law, an arbitrator of CIETAC, a specially-designated
           supervisor of the Supreme People's Court and a member of the Case Guidance Committee. He was a deputy dean of the School of
           Law at Tsinghua University.

                 Male, born in 1957, senior political analyst, he has served as the deputy secretary of Party Committee of Haier Group
Wang       Air-Conditioner Head Office (海尔集团空调本部), Washing Machine Head Office (洗衣机本部), and Haier Group Freezer &
Peihua     Heater Head Office (海尔集团冷柜电热本部), chairman of the labor union of Haier Group Technology and Equipment Head
           Office, deputy secretary of Discipline Inspection Committee etc.. He is the head of the Organizational Department of Haier Group,
           the president of the 9th session of the Board of Supervisors of Qingdao Haier Co., Ltd..

              Male, born in 1960, senior political analyst, has served as deputy secretary of Discipline Inspection Committee of Qingdao
        Refrigerator General Factory, party branch secretary and assistant manager of Qingdao Haier Transportation Company (青岛海尔运
Ming    输公司), head of the comprehensive department of Qingdao Haier Co., Ltd., deputy secretary of party committee and secretary of
Guoqing discipline inspection committee of Haier Refrigerator Products Head Office (海尔冰箱产品本部), chairman of the labor union. He
        is the chairman of the labor union of Haier Group, and the supervisor of the 9th session of the board of supervisors of Qingdao Haier
        Co., Ltd..

Wang             Female, born in 1975, has served as the worker supervisor of the Board of Supervisors of Qingdao Haier Co., Ltd. and the
Yuqing     office secretary of Qingdao Haier Co., Ltd.. She is a supervisor of the 9th session of the board of supervisors of Qingdao Haier Co.,
           Ltd., and head of the general manager office of Qingdao Haier Co., Ltd..

                 Male, born in 1973, has served as the financial manager of Qingdao Haier Co., Ltd., senior financial manager and senior
           financial analyst of Haier Group, chief financial officer of Haier Washing Machine Head Office (海尔洗衣机本部), chief financial
 Gong
           officer of Haier Air-Conditioner Head Office (海尔空调本部), chief financial officer of White Goods Group, he is the vice president
  Wei      and chief financial officer of Qingdao Haier Co., Ltd.. He was granted the honorary titles such as Outstanding Youth in Post of
           Qingdao City, Outstanding Accounting Workers of Shandong Province, National Outstanding Accounting Workers and so on, and
           won the awards of Top Ten CFO in China as appraised by "New Money" Magazine (《新理财杂志》) in 2011.


                                                                      107
              Female, born in 1964, senior economist, was the lecturer of the investment department of China Institute of Finance, deputy
        head of the Teaching and Research section of Investment Economy Department, a member of treasury department of Everbright
        International Investment Consultancy Company, deputy director and director of general manager office, general manager of business
Ming    management department and general manager of personnel department, assistant to the general manager of the Company, executive
Guozhen vice president of Everbright International Investment Consultancy Company; she was the office director of analysts professional
        committee of the Securities Association of China, vice director of Qualification Management Department of the Association, vice
        director of Practice Standards Committee (执业标准委员会) of the Association. She is currently the vice general manager and
        secretary to the Board of Directors of Qingdao Haier Co., Ltd..

Other information

     □Applicable √Not applicable

 (II) Incentive share option granted to directors and senior management during the reporting period

     □Applicable √Not applicable

II. Positions Held by Current and Retired Directors, Supervisors and Senior Management during the Reporting Period
(I) Positions held in shareholders’ entities

     √Applicable □Not applicable
                                                                                                                           End date of
            Name                           Company                            Position            Appointment date
                                                                                                                          appointment
Liang Haishan                Haier       Electric      Appliances Director                      November 1997
                             International Co., Ltd.
Tan Lixia                    Haier       Electric      Appliances Director
                             International Co., Ltd.
Tan Lixia                    Qingdao       Haier     Venture   & Supervisor                     March 2009


                                                                   108
                          Investment Information Co., Ltd. (青
                          岛海尔创业投资咨询有限公司)
Tan Lixia                 Haier Group Corporation              Executive vice president, February 2016
                                                               chief financial officer
Wang Peihua               Haier Group Corporation              Head of Organizational
                                                               Department
Ming Guoqing              Haier Group Corporation              Chairman of the Labor Union
Positions in shareholders Nil
entities


 (II) Positions held in other entities
     √Applicable □Not Applicable
                                                                                                                    End date of
    Name                                 Company                              Positions      Appointment date
                                                                                                                   appointment
Liang Haishan    Haier Group Finance Co., Ltd.                            Director
Liang Haishan    Haier Financial Holdings Limited                         Director
Liang Haishan    Fisher & Paykel Appliances Holdings Limited              Director
Ming Guozhen     Qingdao Overseas Chinese Industrial Holding Co., Ltd.    Director          July 2008
  Tan Lixia      Haier Group Finance Co., Ltd.                            Supervisor
  Tan Lixia      Haier Financial Holdings Limited                         Legal
                                                                          representative,
                                                                          director
 Tan Lixia       Fisher & Paykel Appliances Holdings Limited              Director
 Wu Cheng        Tsinghua University                                      Professor          February 1967
 Wu Cheng        Kingdee International Software Group Company Limited     Independent                           March 2018
                                                                          Non-executive
                                                                          director
 Wu Changqi      Peking University                                        Professor
 Wu Changqi      Huaxia Bank Co., Ltd. (华夏银行股份有限公司)             Supervisor        12 May 2015          11 May 2018

                                                                    109
Wu Changqi      Beijing Electronic Zone Investment and Development        Independent     28 December 2012   27 December 2018
                Co., Ltd.                                                 director
Zhou Hongbo     Beijing Hanbang Technology Co., Ltd. (北京汉邦高科       Independent     November 2017      November 2020
                数字技术股份有限公司)                                    director
 Shi Tiantao    Tsinghua University                                       Professor       2000
 Shi Tiantao    Jiajiayue Group Holding Co., Ltd. (家家悦集团股份有       Independent
                限公司)                                                   director
 Shi Tiantao    Kunlun Trust Co., Ltd.(昆仑信托有限责任公司)            Independent
                                                                          director
 Shi Tiantao    Rongtong Fund Management Co., Ltd.(融通基金管理有        Independent
                限责任公司)                                              director
Liu Haifeng     Far East Horizon Co., Ltd.(远东宏信有限公司)            Non-executive   October 2009
   David                                                                  director
Liu Haifeng     China International Capital Corporation Limited(中国国   Non-executive   February 2015
   David        际金融股份有限公司)                                      director
Liu Haifeng     Sunpower Group (中圣集团)                                 Non-executive
   David                                                                  director
Dai Deming      Beijing Capital Development Co., Ltd.(北京首都开发股     Independent     September 2015
                份有限公司)                                              director
Dai Deming      China Zheshang Bank Co., Ltd.(浙商银行股份有限公         Independent     March 2015
                司)                                                      Non-executive
                                                                          director
Dai Deming      BOC Aviation Limited(中银航空租赁有限公司)              Independent      May 2016
                                                                          Non-executive
                                                                          director
Dai Deming      China Securities Co., Ltd.(中信建投证券股份有限公        Independent     August 2016
                司)                                                      Non-executive
                                                                          director
Peng Jianfeng   Beijing Chinastone Enterprise Management Consulting       President


                                                                  110
                Co., Ltd.(北京华夏基石企业管理咨询有限公司)
Peng Jianfeng   School of Labor and Human Resources of Remin                Professor
                University of China
Peng Jianfeng   Qingdao Haier Co., Ltd.                            Director
Peng Jianfeng                                                      Independent
                China Merchants Shekou Industrial Zone Holdings Co.,
                Ltd.                                               director
Peng Jianfeng   Chow Tai Seng Jewellery Company Limited            Independent
                                                                   director
Peng Jianfeng   Jinko Power Technology Co., Ltd.(晶科电力科技股份 Independent
                有限公司)                                         director
 Zhou Hongbo    Beijing Hanbang Technology Co., Ltd.               Director                     November 2017          November 2020
Positions    in
shareholders    Nil
entities

III. Remuneration of Directors, Supervisors and Senior Management
     √Applicable □Not Applicable
                                       The procedures for decision- making of remuneration of directors, supervisors and senior
                                       management of the Company are establishing platform, clearing standards, communication and
                                       consultation, and making objective decision. The Remuneration Committee of the Company
Decision-making procedures of the
                                       formulate remuneration standards, adjust principles and assess the principles of realizing, then
remuneration of directors, supervisors
                                       propose them to the board of directors for approval, thus form a system platform, then to determine
and senior management
                                       the actual remuneration of that year according to the principle of ―salary paid by users‖ and the
                                       two-dimensional lattice examination results of the bet against cycle and the two-dimensional lattice
                                       annual examination results.
                                       The management personnel salary system of the Company in 2017 is linked to the vertical and
Determination     basis     of     the horizontal matching statement and the win-win value-added statement, of which the tool is the
remuneration of directors, supervisors
                                       two-dimensional lattice model (二维点阵模型). The two-dimensional lattice (二维点阵) could
and senior
                                       reflect the strategy support, emerging small companies and leading platform vertically, and the
management
                                       global leading market competitiveness horizontally. The highest allowance of outside directors of

                                                                     111
                                       the 9th session of the board of directors of the Company is RMB200,000 (before tax) in total per
                                       year, including the fixed allowances of RMB150,000 per year, the highest performance allowance
                                       is RMB50,000 per year, and the exact amount of performance allowance will be determined based
                                       on the comprehensive consideration of the contribution of directors to the Board decision making,
                                       the effectiveness of the proposals and recommendations to the board of directors, the participation
                                       of the meetings of the Board, attendance rate of all Board meetings and other factors. The travelling
                                       expense for attending the meetings of the board of directors and shareholders and other expenses
                                       necessary for performing their duties pursuant to the Articles of Association shall be fully
                                       reimbursed.
Remuneration payables of directors,
                                       Paid as required.
supervisors and senior management
Total actual remuneration of all the
directors, supervisors and senior
                                       RMB4.41 million
management at the end of the reporting
period

IV. Changes in Directors, Supervisors and Senior Management of the Company

    □Applicable √Not Applicable
V. Punishment by the Securities Supervisory Institute in last three years
□Applicable √Not Applicable




                                                                    112
Ⅵ. Staff of the Company and Principal Subsidiaries
(I) Staff information
Number of staff of the Company                                                           2,866
Number of staff of principle subsidiaries                                               74,030
Total number of staff                                                                   76,896
Number of employees whose retirement
expenses are borne by the Company and the                                                    0
principle subsidiaries
                                    Breakdown by function
                   Function                                        Number
                  Production                                                            48,882
                     Sales                                                              14,175
                      R&D                                                               11,301
                   Financial                                                             1,028
                Administrative                                                           1,510
                     Total                                                              76,896
                                   Breakdown by education
                   Education                                       Number
Bachelor and above                                                                      16,148
College                                                                                 18,702
Technical secondary school and others                                                   42,046
                     Total                                                              76,896


(II) Remuneration policies
  √Applicable □Not Applicable
     The Company conducted the system of ―salary paid by users‖, individual paid separately
and entirety paid in advanced, which originates from the strategic balance sheet of Haier, and
carried out the evaluation of the four aspects, namely the creation of user values, the
enhancement of emerging small companies, the budget implementation of the leading targets
and the continuous optimization based on the vertical and horizontal matching statement and
the win-win value-added statement. The incentive system leads to ―salary paid by users‖,
win-win sharing through everybody creating values to the users who will pay for the values,
achieving the emerging small companies and the leading platform.


(III) Personnel training
       √Applicable □Not Applicable
      Please also refer to relevant content set out in "Social Responsibility Report in 2017 of
      Qingdao Haier Co., Ltd." published on the same date as this report.

(Ⅳ) Labor Outsourcing

    □Applicable √Not Applicable


                                              113
Ⅶ. Other
   □Applicable √Not Applicable




                                   114
Section IX CORPORATE GOVERNANCE
I.   EXPLANATION OF CORPORATE GOVERNANCE
     √Applicable □Not Applicable
     During the reporting period, the Company strictly complied with the requirements under
the Company Law, the Securities Law, Code on Corporate Governance for Listing Company
and the requirements of the relevant laws and regulations, to improve its corporate governance
structure, regulate its operation, improve its information disclosure system, strengthen the
communication with investors and elevate the standard of the Company‘s corporate
governance. In respect of corporate governance structure, the general meeting, the Board and
the management standardized its operation to practically guarantee the legal interests of the
Company and its shareholders; all Directors duly discharged their duties in a diligent way;
each committee of the Board of the Company performed their work according to their
respective detailed working rules to ensure that the Board operate in a more effective and
scientific way; independent Directors fulfilled their duties independently and issued
independent opinion on major matters in order to effectively protect the interests of the
Company as a whole and the lawful rights and interests of medium and small investors. In
respect of information disclosure, the Company strictly executed the registration and
management system for insiders, achieved the management of inside information on
significant events and eliminating the act of using the Company‘s inside information for stocks
trading by insider. Meanwhile, the Company reinforced the accountability of people who are
responsible for annual report disclosure and enhanced the quality and transparency of
information disclosure in annual reports. The Company has placed a lot of emphasis on
information disclosure and disclosed relevant information on a true, accurate, complete and
timely basis strictly in accordance with the requirements of laws and regulations to ensure all
shareholders have equal access to such information. In respect of the management of investor
relation, in accordance with guideline of the Management System for Investor Relation, the
Company integrated business and financial resources by the office of board secretary and
realized positive and all-around access to investors in a multi-layer and diversified format
through introduction reference, result announcement conference and online forum. Meanwhile,
the Company replied investors on a timely basis by ways of interview, e-mail, phone, fax and
the website (http://sns.sseinfo.com) and enhanced interaction with investors, so as to respect
and protect the interests of various investors, with the aim of achieving harmonious and
mutual success with the Company, staff and investors. The corporate governance structure of
the Company is sound and there is no difference between the corporate governance structure
and the requirement of relevant documents from CSRC.
(1)Shareholders and general meeting of shareholders:
       The Company could ensure that all shareholders, especially the minority shareholders
enjoy equal treatment and are able to fully exercise their rights; during the reporting period,
the Company convened and held two shareholders‘ general meetings in compliance with the
requirements of the Articles of Association and Rules Governing Shareholders‘ General
Meeting of the Company. Attendance of Shareholders at the meeting is relatively high, which
ensured that the shareholders fully excised voting rights; the Company also engaged lawyers
who possess the qualification to engage in securities business to attend and witness the
shareholders‘ general meeting; the resolutions were considered and approved in accordance
with legal procedures, which could guarantee the power and rights of minority shareholders.
(2)Relationship between controlling shareholders and the Company:

                                              115
     The controlling shareholders acted normatively and did not interfere with the Company‘s
management decisions and operations, directly or indirectly. The Company and the controlling
shareholders are independent of each other in terms of their staff, assets, finance, organization
and business. Their respective board of directors, the supervisory committee and internal
administrative departments are all independent of each other. The specific requirements for
regulating Related-party transactions and fund flow are set out in the Articles of Association,
Fair Decision-Making System for Related-party Transactions and the Administrative System
for Regulation of Fund Flow between the Company and Related Parties, Risk Control System
for Related-party Transaction with Haier Group Finance Co., Ltd., and Proposal for
Emergency Response System for Risk of Deposits with Haier Group Finance Co., Ltd., which
guaranteed the interests of investors. The daily related-party transactions are subject to the
consideration and approval at the annual general meeting and set specialized execution
procedure. The basis of pricing and reasonability of operation agreement shall be supervised
and reviewed by special departments, so as to regulate the execution of related-party
transactions and protect the interests of minority shareholders and non-related shareholders.
During the reporting period, further enhanced self-procurement capability and scope of the
self-procurement companies Qingdao Haidarui Procurement Service Co., Ltd.(青岛海达瑞采
购服务有限公司) and Qingdao Haidayuan Procurement Service Co., Ltd.(青岛海达源采购
服务有限公司) and strengthened the procurement capability of the Company, which further
reduced related-party transactions. The revenue of the above two companies amounted to
RMB17.59 billion and RMB26.87 billion respectively in 2017, with procurement efforts
continued to increase.




                                               116
(3)Directors and the Board:
      During the reporting period, the Board of the Company operated in accordance with rules
and continued to perform their duties under the Articles of Association and relevant laws and
regulations better and practically implement relevant decisions at the shareholders‘ general
meeting. The number and composition of the members of the Board complied with relevant
laws and regulations; the Directors attended the board meeting and shareholders‘ general
meeting with diligent and responsible attitude and protected the interests of the Company. In
accordance with the requirements in the Code of Corporate Governance for The Company, the
Company has 7 external Directors, of which three are independent Directors, representing
approximately three quarters of the total number of the Directors (9 in total) of the Company.
Each of the independent Directors of the Company respectively acted as member of the
nomination committee, remuneration and appraisal committee and audit committee of the Board
and practically carried out their duties.
     During the reporting period, all Directors and independent Directors performed their duties
earnestly strictly in compliance with the Articles of Association, the Rules of Procedure for the
Board of Directors, the System for Independent Directors and relevant requirements under laws
and regulations and each committees of the Board operated normatively according to its own
work rules. During the reporting period, the Board of the Company considered and approved the
following matters: the Phase II employee incentive scheme and periodical reports, so as to
encourage the Company to further consolidate its resources to better implement the networking
and globalize development strategy.
(4)Supervisors and the Supervisory Committee:
      During the reporting period, the Supervisory Committee operated in accordance with
rules and continued to practically perform their duties under the Articles of Association and
relevant laws and regulations. The number and composition of the members of the Supervisory
Committee complied with requirements under laws and regulations. During the reporting period,
the Supervisors of the Company performed their duties earnestly and adhered to the principle of
being responsible to the Company and all shareholders to supervise legality and compliance on
finance matters of the Company and performance of duty by the Company‘s Directors,
managers of the Company and other senior management strictly in accordance with
requirements under the Articles of Association, the Rules of Procedure for the Supervisory
Committee and relevant laws and regulations.
(5)Performance evaluation and incentive and disciplinary mechanism:
       In accordance with the Articles of Association, the Board shall appoint or remove the
general manager and the secretary of the Board; the Board shall appoint or remove the deputy
general manager and other senior management (including the chief financial officer) of the
Company based on the nomination by the general manager and determine their remunerations
and rewards and penalties. The human resource department of the Company shall make routine
appraisal and evaluation on the performance of Directors, supervisors and senior management
and Remuneration and Appraisal Committee shall make inspection and evaluation on their
performance to determine their remunerations at the end of the year.
     During the reporting period, the Company adopted the Phase II employee incentive scheme
which further perfected the incentive and disciplinary mechanism and mechanism of the
shareholders shares benefits and risks with the management of the Company, so as to enhance
the competitiveness and promote the sustainable and sound development of the Company.
(6)Stakeholders:
     The Company was able to fully respect and protect the lawful rights and interests of banks,
other creditors, employees, consumers and other stakeholders. Meanwhile, the Company
actively took part in public welfare undertaking in such place where it operates, placed a lot of
emphasis on environment protection, performed its social duties earnestly and worked together
                                              117
with these stakeholders actively with good communication to promote the sustainable and sound
development of the Company. For details, please refer to relevant information in 2017 Social
Responsibility Report of Qingdao Haier Co., Ltd. published on the same date of this report.
(7)Information disclosure and transparency:
       During the reporting period, the Company positively disclosed the relevant information in
a true, accurate and complete manner which was strictly in accordance with relevant laws and
regulations including the Articles of Association, Administrative Measure for Information
Disclosure and requirements in the Information Disclosure Management System of the
Company, Work Rules and Procedures Regarding the Annual Report and the Management
System for Investor Relation, proactively communicated with regulatory authorities and
investors and designated newspapers including Shanghai Securities News, China Securities
Journal, Securities Times and Securities Daily for information disclosure to ensure that all
shareholders access to such information equally. The Company authorized the secretary to the
Board to take charge of information disclosure, reception of visits by shareholders and handling
of shareholder's enquiries. Meanwhile, the Company broadened communication channels for
investors to get relevant information of the Company through telephone conference calls after
periodical reporting and occasionally holding on-site and online forums. With respect to the
significant Related-party transactions, the Company performed necessary approval procedures
and disclosed relevant information strictly in compliance with the Articles of Association and
Fair Decision-Making System for Related-party Transactions to protect the interests of investors.
During the reporting period, the Company further perfected the confidentiality procedure for
information disclosure strictly in compliance with the Registration System of Insiders, the
Responsibility System for Major Errors in Information Disclosure in Annual Reports and the
Management System of External Information Users to ensure the fairness and equity of
information disclosure.
(8)Implementation of corporate governance campaign in 2017:
       During the reporting period, the Company continued to carry out works relating to
―solution of business competition and reduction of related-party transactions‖. In 2017, trading
volume of related-party transactions regarding procurement amounted to RMB35.80 billion,
which accounted for 24.0% of the similar transactions, remaining flat as compared to the same
period of the previous year. Trading volume of related-party transactions regarding sales
amounted to RMB5.25 billion, which accounted for 3.3% of the similar transactions,
representing a decrease of 0.4 pct pt compared with last year. The effective optimization of the
related-party transactions in the previous period has been maintained. The Company will
continue to increase investment in independent purchase and promote the continuous
optimization of related-party transactions.
        Leveraging on the further implementation of governance campaign and enhancing the
establishment of fundamental systems, the Company further improved the corporate governance
structure and improved the corporate governance. The Company carried out various activities to
strengthen the consciousness of learning and further strengthened the consciousness on
regulating governance in the Company among Directors, Supervisors and senior management of
the Company with organizational training to improve the ability to regulate governance and
continuously improve and perfect corporate governance of the Company, thus to protect the
minority equity interests and to guarantee and promote the healthy, stable and sustainable
development of the Company.

Whether there is a significant difference between the corporate governance and requirements of
relevant provisions of the CSRC; if so, the reasons should be explained
    □Applicable √ Not Applicable



                                               118
II. Introduction to the General Meeting of shareholders
                                   Index for details of websites designated for    Date of
   Meeting               Date
                                              publishing resolutions              disclosure
                                  For details, please refer to the
                                  Announcement on Resolutions Passed at
                                  the 2016 Annual General Meeting of
2016 Annual
                                  Qingdao Haier Co., Ltd. (L2017-023)
General              28 June 2017                                                 29 June 2017
                                  published by the Company on the website
Meeting
                                  of      Shanghai        Stock       Exchange
                                  (www.sse.com.cn) and the four major
                                  securities newspapers.
                                  For details, please refer to the
                                  Announcement on Resolutions Passed at
2017 First                        the 2017 First Extraordinary General                    24
Extraordinary        23 November Meeting of Qingdao Haier Co., Ltd.
                                                                                    November
General                      2017 (L2017-045) published by the Company on
                                  the website of Shanghai Stock Exchange                2017
Meeting
                                  (www.sse.com.cn) and the four major
                                  securities newspapers.

Explanation of Shareholders‘ general meetings
    √Applicable □Not Applicable
    (1)The 2016 Annual General Meeting of the Company (the ―2016 AGM‖) was held by way
of on-site voting and network voting by poll at Room A108, Haier University, Haier
Information Park, No.1 Haier Road, Qingdao, the PRC in the afternoon on 28 June 2017. The
Company‘s share capital in aggregate amounted to 6,097,630,727 shares. 171 shareholders and
proxies attended the meeting, holding a total of 3,696,722,055 shares, representing 60.63% of
the total number of shares of the Company with voting rights. The Directors, Supervisors and
senior management of the Company as well as the lawyers engaged by the Company also
attended the meeting. The 2016 AGM was convened by the Board of the Company. Vice
president Ms. Tan Lixia presided over the 2016 AGM. The Company had 9 Directors, of whom
4 Directors attended the 2016 AGM (Directors Liang Haishan, Zhou Hongbo, Peng Jianfeng,
Wu Cheng, Liu Haifeng David were unable to attend the 2016 AGM due to personal
engagement); the Company had 3 Supervisors, all of whom attended the 2016 AGM. The
secretary to the Board of the Company attended the 2016 AGM and other members of senior
management of the Company were invited to attend the 2016 AGM.




                                                    119
  (2)The 2017 First Extraordinary General Meeting of the Company (the ―2017 First
EGM‖) was held by way of on-site voting and network voting by poll at Room A108, Haier
University, Haier Information Park, No.1 Haier Road, Qingdao, the PRC in the afternoon
on 23 November 2017. The Company‘s share capital in aggregate amounted to
6,097,402,727 shares. Attendance of shareholders and proxies at the 2017 First EGM is as
follows: there were 96 shareholders of the Company in attendance either in person or by
proxy at the 2017 First EGM, holding a total of 3,613,884,883 shares, representing 59.27%
of the total number of shares of the Company with voting rights. The Directors, Supervisors
and senior management of the Company as well as the lawyers engaged by the Company
also attended the 2017 First EGM. The 2017 First EGM was convened by the Board of the
Company. Mr. Liang Haishan, Chairman of the Board, presided over the 2017 First EGM.
The Company had 9 Directors, of whom 2 Directors attended the 2017 First EGM
(Directors Wu Changqi, Peng Jianfeng, Zhou Hongbo, Liu Haifeng David, Wu Cheng, Shi
Tiantao, Dai Deming were unable to attend the 2017 First EGM due to personal
engagement); the Company had 3 Supervisors, all of whom attended the 2017 First EGM.
The secretary to the Board of the Company attended the 2017 First EGM and other
members of senior management of the Company were invited to attend the 2017 First
EGM.

III. Performance of Duties by Directors
(I) Attendance of board meetings and general meetings by directors
                                                                                                        Attendance
                                                   Attendance of Board meetings
                                                                                                        of general
                                                                                                         meetings
            Whether an                                                                       Absence
 Name
            Independent    Required                   Attendanc                             from two
   of                                                                                                   Attendance
             Director or   attendanc   Attendanc           e                               consecutiv
Director                                                          Attendanc       Absenc                     s
                 not           es          e              By                               e meetings
                                                                  e by proxy        e                   at general
                           of Board    in person     telecommu                              in person
                                                                                                         meetings
                           meetings                    nication                               or not

Liang
                NO            7           7              3            0             0         NO            1
Haishan
   Tan
                NO            7           7              2            0             0         NO            2
  Lixia
  Peng
                NO            7           7              6            0             0         NO            0
Jianfeng
   Wu
                NO            7           7              7            0             0         NO            1
Changqi
  Zhou
                NO            7           7              7            0             0         NO            0
 Hongbo
   Liu
 Haifeng        NO            7           7              6            0             0         NO            1
  David
   Dai
               YES            7           7              6            0             0         NO            1
 Deming
   Wu
               YES            7           7              7            0             0         NO            0
 Cheng
   Shi
               YES            7           7              7            0             0         NO            1
 Tiantao


Statement for failure to attend the Board meetings in person for two consecutive times
      □Applicable √Not Applicable



                                                        120
Number of Board meetings held in the year                                                  7
Of which: Number of on-site meetings                                                       0
Number     of     meetings     held     by
                                                                                           1
telecommunication
Number of meetings held both on site and
                                                                                           6
by telecommunication

(II) Independent Directors’ objection to the relevant matters of the Company
      □Applicable √Not Applicable


(III) Other

    □Applicable √Not Applicable


IV. Major Opinions and Suggestions of the Special Committees of the Board in Performing Their
Duties during the Reporting Period, Details Should Be Disclosed If Any Disagreements

    √Applicable □Not Applicable

     (1)Audit Committee: during the reporting period, the Company convened 5 meetings
of the Audit Committee to consider the annual report audit-related work for three times,
namely, pre-audit, mid-audit and post audit and made relevant arrangement. The Audit
Committee believed that the 2016 financial and accounting statement issued by the
Company was in compliance with the requirements of the Accounting Standards for
Business Enterprises, and gave a true and fair view of the Company‘s assets and liabilities
as of 31 December 2016 and operating results and cash flow for the year 2016. There was
no significant unresolved disagreement between accounting and auditing. There was no
material risk affecting the Company‘s operation. The Company operated prudently and
would be able to continue as a going concern. Other meetings considered the plans for the
annual budget of related-party transactions, internal control self-assessment reports, profit
distribution plan, engagement of accounting firm, change of accounting policies, issuance
of convertible bonds, assigning of multimedia equity/PML equity, subscription of increase
of capital of Finance Company, issuance of exchangeable bonds and the 2016 annual report,
the first quarterly report/the semi-annual report/the third quarterly report of 2017. The
Audit Committee agreed the above resolutions and submitted the same to the Board for
consideration.
(2)Remuneration and Appraisal Committee: during the reporting period, the Company
convened 2 meeting of the Remuneration and Appraisal Committee to consider the Phase II
Stock Ownership Scheme of Core Employees Stock Ownership Scheme and the annual
remuneration package of Directors, supervisors and senior management. The Remuneration
and Appraisal Committee agreed the above resolutions and submitted the same to the Board
for consideration.
(3)Nomination Committee: during the reporting period, the Company convened 1
meeting of the Nomination Committee to summarize the annual performance of duties by
Directors, supervisors and senior management. The Nomination Committee agreed the
above resolutions.



                                                121
(4)Strategy Committee: during the reporting period, the Company convened 7 meetings
of the Strategy Committee to consider and approve the plan for assigning of multimedia
equity/PML equity, performance of duties, issuance of convertible bonds and issuance of
exchangeable bonds. The Strategy Committee agreed the above resolutions and submitted
the same to the Board for consideration.



V. Supervisory Committee’s Explanation on Risks about the Company

    □Applicable √Not Applicable


VI. Statements of the Company on Inability to Maintain the Independence or the
Ability of Independent Operations between the Company and the Controlling
Shareholders with respect to Business, Personnel, Assets, Organization and Finance
□Applicable   √Not Applicable

Corresponding solutions, working progress and subsequent working plans of the Company
in case of horizontal competition
√Applicable □Not Applicable


In recent years, the Company made constant efforts in solving the horizontal competition,
and reduced the number of related-party transactions. As of the end of the reporting period,
the Company effectively solved the horizontal competition, and reduced the number of
related-party transactions by acquiring the Group‘s upstream and downstream assets and
setting up an independent platform for independent procurement and sales. In 2017, the
trading amount of related-party transactions regarding procurement amounted to
RMB35.80 billion, which accounted for 24.0% of similar transactions, remaining flat as
compared to the same period of the previous year; the trading amount of related-party
transactions regarding sales amounted to RMB5.25 billion, which accounted for 3.3% of
similar transactions, representing a year-on-year decrease of 0.4 pct pt.



VII. Establishment and Implementation of Appraisal and Incentive Mechanism for
Senior Management during the Reporting Period

     √Applicable □Not Applicable
     In 2017, the Company adopted a system ―salary paid by users‖ individual paid
separately and entirety paid in advanced, which is linked to the vertical and horizontal
matching statement and the win-win value-added statement for management personnel, of
which the tool is the two-dimensional lattice model (二维点阵模型). The two-dimensional
lattice (二维点阵) could reflect the strategy support, emerging small companies and
leading platform vertically, and the global leading market competitiveness horizontally.
The competitiveness of compensation was determined by such elements as ―support for

                                            122
strategy‖, ―competitiveness of market leading target‖ and ―emerging small companies,
leading platform‖. The senior management receives annual appraisal of the annual
performance, which was the key factor to performance bonus and development. On one
hand, the Company‘s ―salary paid by users‖ overall compensation system of connecting
sales force with their orders and remuneration diversified the way of salary incentive of the
management, and made the compensation mechanism for management more flexible on the
other hand, which drove the innovation of management.
      Meanwhile, the Company‘s salary incentive system was further improved, the
incentive and restriction mechanism was strengthened and a mechanism that shares
interests and risks with the Company and the management was formulated in the principle
of ―salary paid by users‖ by implementing such initiatives as employee shareholding plan.


VIII. Whether to Disclose the Self-Assessment Report on Internal Control

     √Applicable □Not Applicable
    For details, please refer to the 2017 Internal Control Assessment Report of Qingdao
Haier Co., Ltd disclosed on the same date of this report.

Explanations on Material Defects Found in Internal Control during the Reporting Period
     □Applicable √Not Applicable


IX. Relevant Explanations on the Audit Report of Internal Control

√Applicable □Not Applicable
     The Company‘s auditor Shandong Hexin Accountants LLP (山东和信会计师事务所
(特殊普通合伙)) has audited the efficiency of internal control relating to the financial
report of the Company, and has issued its standard unqualified auditor‘s report for the
Company‘s internal control (Hexin Shen Zi (2018) No.000268).
     For further details of the Audit Report of Internal Control of Qingdao Haier Co., Ltd.,
please refer to relevant announcements published on the website of the Shanghai Stock
Exchange (www.sse.com.cn) on 26 April 2018.
     Whether to disclose the audit report on internal control: Yes


X. Other

□Applicable √Not Applicable




                                             123
Section X   RELEVANT INFORMATION ON CORPORATE BONDS

    □Applicable √Not Applicable

     On 9 September 2017, with the consideration and approval at the 8th meeting of the
9th session of the Board of Directors, the Company disclosed the proposal for issuance of
convertible bonds, under which convertible bonds of RMB5.64 billion were intended to be
issued. The fund would be utilized as the Company‘s investments in such aspects as the
leading of the consumption upgrades, the implementation of the large kitchen appliances
strategy and the enhancement of the innovation capabilities. As of the disclosure date of
this report, the proposal was accepted by the CSRC with further feedback. Accordingly, the
Company made responses to the feedback.




                                           124
SECTION XI           FINANCIAL REPORT

     1.   Auditor’s Report

     √Applicable □ Not Applicable


                                 Auditor’s Report
                                                               Hexin ShenZi(2018) No.000267




To the shareholders of Qingdao Haier Co., Ltd:

    I.    OPINION
We have audited the accompanying financial statements of Qingdao Haier Co., Ltd. (hereinafter the

―Company‖), which comprise the consolidated and company balance sheets as at 31 December 2017,

and the consolidated and company income statements, the consolidated and company statements of

changes in shareholders‘ equity and the consolidated and company cash flow statements for the year

then ended, and notes to the financial statements.



In our opinion, the accompanying financial statements present fairly, in all material respects, the

consolidated and company‘s financial position of the Company as at 31 December 2017, and their

financial performance and cash flows for the year then ended in accordance with the requirements of

Accounting Standards for Business Enterprises.


    II. BASIS FOR OPINION
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under

those standards are further described in the Auditor‘s responsibilities for the audit of the consolidated

financial statements section of our report. We are independent of the Company in accordance with the

CICPA‘s Code of Ethics for Professional Accountants (the ―Code‖), and we have fulfilled our other

ethical responsibilities in accordance with the Code. We believe that the audit evidence we have

obtained is sufficient and appropriate to provide a basis for our opinion.


                                                     126
    III. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the consolidated financial statements of the current period. These matters were addressed in the

context of our audit of the consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters. For each matter below, our

description of how our audit addressed the matter is provided in that context.




                 Key audit matter                        How our audit addressed the key audit matter

 (Ⅰ)Impairment testing of goodwill

 Relevant disclosures are included in notes Ⅲ.28

 Other significant accounting policies and               Our audit procedures include:

 accounting estimates and notes Ⅴ.19

 Impairment of long-term assets.                         (1) Compared the actual operating results of the

                                                         related assets group with previous year‘s

 As of December 31, 2017, the book value of              forecasted figures, to assess the reliability of the

 goodwill was RMB 19,843 million, and the book           management forecast on cash flow;

 value of intangible assets with finite useful lives

 was RMB 621 million, without any provision for          (2) Compared the input of cash flow forecast

 impairment.                                             with historical data, approved budget and

                                                         business plan;

 Significant management judgments are involved

 in calculation of asset group‘s recoverable            (3) Tested the accuracy of the discounted

 amount, such as revenue growth rate, gross              cashflow model;

 margin, discount rate, etc.

                                                         (4) Assessed the appropriateness of the

 Provision for impairment of goodwill and                parameters in the discounted cashflow model,

 intangible assets with infinite useful lives is         like discount rate and terminal growth rate,

 considered as the key audit matter due to the           which is based on our understanding of business

 significant amount and management judgment              and industry.

 involved in calculation.

 (Ⅱ)Provision for Inventories

                                                       127
Relevant disclosures are included in notes V. 12

Inventory to the financial statements.

                                                       Our audit procedures include:

Inventories of the company are measured at the

lower of cost and net realizable value. As at          (1) Obtained the calculation report for provision

December 31, 2017, inventory balance was RMB           of inventories, and review their conditions and

22,234 million, provision for inventory                aging to see whether they are consistent with the

impairment was RMB 731 million, and book               information obtained through physical inventory

value was RMB 21,503 million.                          on a sample basis;



The company determines the net realizable value        (2) Compared the major parameters estimated by

of inventory based on the estimated selling price      management with historical data, and assess the

minus the estimated selling expenses and related       appropriateness;

taxes.

                                                       (3) Assessed the selling price estimated by the

Management estimates the selling price based on        management, and checked the inventory against

the status of inventory. The estimation process        the actual selling price after the balance sheet

involves significant judgments such as inventory       date on a sample basis;

status, repair rate, discount rate, etc.

                                                       (4) Assessed selling expenses and related tax

Provision for inventories is considered as the key     estimated by management and compared with

audit matter due to the significant amount and         actual amounts incurred.

management judgment involved in calculation.



(Ⅲ)Product Warranty




                                                     128
 Relevant disclosures are included in notes V. 22

 Provisions to the financial statements.



 Provisions are mainly accrued due to obligations

 arising from product warranty. As of December

 31, 2017, the balance of the provision related to     Our audit procedures include:

 product warranty was RMB 2.60 billion.

                                                       (1) Obtained the provision estimation process;

 Product warranty was measured in accordance

 with the best estimate of the cost to fulfill the     (2) Compared the main parameters estimated by

 relevant obligations.                                 management with historical data;



 Calculation of the product warranty involves          (3) Tested the accuracy;

 management‘s significant judgments based on

 historical experience, such as: replacement rate,     (4) Compared and analyzed the estimation with

 repair rate, and loss due to disassemble product.     company‘s actual operation.



 Provisions are considered as the key audit

 matters due to the significant amount and

 management judgment involved in calculation.




    IV. OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
The management of the Company is responsible for the other information. The other information

comprises the information included in the Annual Report, other than the consolidated financial

statements and our auditor‘s report thereon.



Our opinion on the consolidated financial statements does not cover the other information and we do not

express any form of assurance conclusion thereon.



In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information and, in doing so, consider whether the other information is materially inconsistent


                                                     129
with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears

to be materially misstated. If, based on the work we have performed, we conclude that there is a

material misstatement of this other information, we are required to report that fact. We have nothing to

report in this regard.


    V. RESPONSIBILITIES OF THE MANAGEMENT AND GOVERNANCE
         FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The management of the Company is responsible for the preparation of the consolidated financial

statements that give a true and fair view in accordance with Accounting Standard for Business

Enterprises, and for such internal control as the management determine is necessary to enable the

preparation of consolidated financial statements that are free from material misstatement, whether due to

fraud or error.



In preparing the consolidated financial statements, the management of the Company is responsible for

assessing the Company‘s ability to continue as a going concern, disclosing, as applicable, matters

related to going concern and using the going concern basis of accounting unless the management of the

Company either intends to liquidate the Company or to cease operations or have no realistic alternative

but to do so.



The governance of the Company is in charge of overseeing the Company‘s financial reporting process.


    VI. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
         CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as

a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor‘s

report that includes our opinion.



Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in

accordance with Auditing Standards will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the

aggregate, they could reasonably be expected to influence the economic decisions of users taken on the

basis of these consolidated financial statements.



                                                    130
As part of an audit in accordance with Auditing Standards, we exercise professional judgment and

maintain professional skepticism throughout the audit. We also:



Identify and assess the risks of material misstatement of the consolidated financial statements, whether

due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit

evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a

material misstatement resulting from fraud is higher than for one resulting from error, as fraud may

involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.



Obtain an understanding of internal control relevant to the audit in order to design audit procedures that

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Company‘s internal control.



Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates

and related disclosures made by the management.



Conclude on the appropriateness of the management‘ use of the going concern basis of accounting and,

based on the audit evidence obtained, whether a material uncertainty exists related to events or

conditions that may cast significant doubt on the Company‘s ability to continue as a going concern. If

we conclude that a material uncertainty exists, we are required to draw attention in our auditor‘s report

to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,

to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our

auditor‘s report. However, future events or conditions may cause the Company to cease to continue as a

going concern.



Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the underlying

transactions and events in a manner that achieves fair presentation.



Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company to express an opinion on the consolidated financial statements.



                                                    131
We are responsible for the direction, supervision and performance of the group audit. We remain solely

responsible for our audit opinion.



We communicate with the Governance regarding, among other matters, the planned scope and timing of

the audit and significant audit findings, including any significant deficiencies in internal control that we

identify during our audit.



We also provide the Governance with a statement that we have complied with relevant ethical

requirements regarding independence and to communicate with them all relationships and other matters

that may reasonably be thought to bear on our independence, and where applicable, related safeguards.



From the matters communicated with the Governance, we determine those matters that were of most

significance in the audit of the consolidated financial statements of the current period and are therefore

the key audit matters. We describe these matters in our auditor‘s report unless law or regulation

precludes public disclosure about the matter or when, in extremely rare circumstances, we determine

that a matter should not be communicated in our report because the adverse consequences of doing so

would reasonably be expected to outweigh the public interest benefits of such communication.




Shandong Hexin Certified Public Accountants LLP                CICPA:

                                                             (Engagement Partner)




         China Jinan                                          CICPA:




                                                              24 April 2018




                                                    132
       2. Financial Statements

                                                          CONSOLIDATED BALANCE SHEETS

                                                                       31 December 2017

Prepared by: Qingdao Haier Co., Ltd.                                                                                Currency: RMB Yuan

                                                                Notes                     2017                            2016

Current Assets:

Cash                                                            V.1                          35,177,276,903.91               23,582,239,011.20

Clearing settlement funds

Placements with banks

Financial assets measured at fair value with changes included   V.2                                20,681,695.50                   80,432,384.17

in current profit and loss

Derivative financial assets

Notes receivable                                                V.3                          13,033,083,520.99               13,796,561,238.05

Accounts receivable                                             V.4                          12,448,004,833.06               12,265,195,443.40

Prepayments                                                     V.5                               590,693,658.21                  592,510,116.61

Premiums receivable

Reinsurance accounts receivables

Reinsurance contract reserves receivable

Interest receivable                                             V.6                               203,637,543.83                  135,319,774.41

Dividends receivable                                                                                4,524,472.84                  101,648,913.10

Other receivables                                               V.7                               961,263,981.87                 1,180,418,052.75

Financial assets purchased under resale agreements

Inventories                                                     V.8                          21,503,524,800.18               15,284,904,331.04

Held-for-sale assets

Other non-current assets due in one year

Other current assets                                            V.9                              4,389,760,018.83                2,657,462,188.89

                       Total Current Assets                                                  88,332,451,429.22               69,676,691,453.62

Non-current assets:

Loans and advances granted

Available-for-sale financial assets                             V.10                             1,415,354,307.82                1,555,878,717.05

Held-to-maturity investments

Long term receivables

                                                                              133
Long-term equity investments                                V.11          12,992,767,394.28    11,057,819,628.14

Investment properties                                       V.12              31,214,015.99        34,600,393.37

Fixed assets                                                V.13          16,017,523,376.11    15,544,099,343.40

Construction in progress                                    V.14           1,530,390,130.25     1,786,167,265.52

Construction materials

Disposals of fixed assets                                   V.15              55,808,808.81        55,808,808.81

Productive living assets

Oil and gas properties

Intangible assets                                           V.16           7,005,186,296.28     7,274,440,410.94

Development expenditure                                     V.17            966,051,333.81       913,283,796.32

Goodwill                                                    V.18          19,843,317,357.30    21,004,123,145.39

Long-term prepaid expenses                                  V.19            123,768,671.33       115,773,592.78

Deferred income tax assets                                  V.20           1,895,213,404.67     1,592,009,404.59

Other non-current assets                                    V.21           1,254,064,181.76      858,461,388.86

                    Total Non-current Assets                              63,130,659,278.41    61,792,465,895.17

                       TOTAL ASSETS                                      151,463,110,707.63   131,469,157,348.79

Current Liabilities:

Short-term borrowings                                       V.22          10,878,580,275.18    18,165,531,879.15

Financial liabilities measured at fair value with changes   V.23               2,524,569.45         2,340,213.20

included in current profit and loss

Derivative financial liabilities

Notes payable                                               V.24          16,378,699,659.77    12,404,889,760.05

Accounts payable                                            V.25          25,654,013,649.96    20,601,681,120.03

Accounts received in advance                                V.26           5,833,552,815.05     5,737,348,712.97

Financial assets sold under repurchase agreements

Fees and commissions payable

Employee benefits                                           V.27           2,349,189,122.90     2,408,525,656.48

Taxes payable                                               V.28           1,909,260,527.42     1,620,588,401.27

Interest payable                                            V.29              57,656,458.79        30,570,328.66

Dividends payable                                           V.30            153,756,315.64       148,690,489.01

Other payables                                              V.31          10,805,162,943.62     9,459,636,746.05

Held-for-sale liabilities



                                                                   134
Other non-current liabilities due in one year           V.32           2,850,325,000.00    2,966,808,509.55

Other current liabilities                                                 21,729,198.70      17,228,645.29

                    Total Current Liabilities                         76,894,450,536.48   73,563,840,461.71

Non-current Liabilities:

Long-term borrowings                                    V.33          16,036,492,809.81   15,530,801,311.80

Bonds payable                                           V.34           6,211,088,362.68                   -

Including: Preference shares

             Perpetual Note

Long-term payable                                       V.35            106,020,029.74      115,783,382.28

Long-term employee benefits                             V.36            898,160,742.53     1,209,218,564.79

Payables for specific projects

Provisions                                              V.37           2,619,699,551.41    2,310,119,430.60

Deferred revenue                                        V.38            497,141,088.72      342,825,593.35

Deferred income tax liabilities                         V.20            279,114,620.35      133,243,146.68

Other non-current liabilities                           V.39           1,170,936,828.55     582,785,069.86

                  Total Non-current Liabilities                       27,818,654,033.79   20,224,776,499.36

                        Total Liabilities                            104,713,104,570.27   93,788,616,961.07

Equity:

Share capital                                           V.40           6,097,402,727.00    6,097,630,727.00

Other equity instruments                                V.41            431,424,524.07

Including: Preference shares

             Perpetual note

Capital reserve                                         V.42            826,883,093.84       83,383,194.51

Less: Treasury shares                                   V.43                          -        1,041,960.00

Other comprehensive income                              V.44             -36,363,809.96     566,987,435.57

Special reserve

Surplus reserve                                         V.45           2,103,057,782.41    2,076,460,077.78

General reserve

Retained Earnings                                       V.46          22,793,110,884.09   17,614,768,751.70

   Total equity attributable to owners of the Company                 32,215,515,201.45   26,438,188,226.56

Non-controlling interests                                             14,534,490,935.91   11,242,352,161.16

                            Total Equity                              46,750,006,137.36   37,680,540,387.72



                                                               135
          TOTAL LIABILITIES AND EQUITY                                                     151,463,110,707.63          131,469,157,348.79




                                                       BALANCE SHEET OF THE COMPANY


                                                                 31 December 2017

Prepared by: Qingdao Haier Co., Ltd                                                                             .   Currency: RMB Yuan

                                                        Notes                       2017                            2016

Current Assets:

Cash                                                                                        2,070,527,802.97                3,888,623,400.28

Financial assets measured at fair value with changes

included in current profit and loss

Notes receivable

Accounts receivable                                     XVI. 1                               288,499,726.07                  265,438,220.39

Prepayments                                                                                   20,000,000.00                   10,000,000.00

Interest receivable                                                                          220,157,282.75                   85,452,583.16

Dividends receivable                                                                         970,851,045.94                  329,713,897.32

Other receivables                                       XVI.2                                 15,895,048.43                  322,953,279.90

Inventories                                                                                   89,650,514.91                   69,799,065.47

Held-for-sale assets

Other non-current assets due in one year

Other current assets                                                                          87,165,597.70                   94,935,174.83

                    Total Current Assets                                                    3,762,747,018.77                5,066,915,621.35

Non-current Assets:

Available-for-sale financial assets                                                             5,818,587.80                    5,478,235.84

Held-to-maturity investments

Long term receivables                                                                       8,600,000,000.00                8,600,000,000.00

Long-term equity investments                            XVI.3                              23,581,254,928.08               22,342,078,877.07

Investment properties

Fixed assets                                                                                 118,553,830.32                  116,840,195.32

Construction in progress                                                                      13,594,976.50                   22,611,979.50

Construction materials


                                                                        136
Disposals of fixed assets

Productive living assets

Oil and gas properties

Intangible assets                                                    14,601,582.38         8,578,922.84

Development expenditure

Goodwill

Long-term prepaid expenses

Deferred income tax assets                                          106,347,777.99       62,346,256.82

Other non-current assets

                 Total Non-current Assets                         32,440,171,683.07   31,157,934,467.39

                     TOTAL ASSETS                                 36,202,918,701.84   36,224,850,088.74

Current Liabilities:

Short-term borrowings                                                             -                   -

Financial liabilities measured at fair value with changes                         -                   -

included in current profit and loss

Notes payable                                                                     -                   -

Accounts payable                                                    310,387,267.67     1,142,008,704.07

Accounts Received in Advance                                       2,465,908,721.32    1,844,082,827.50

Employee benefits                                                    51,533,384.22       39,919,748.55

Taxes payable                                                        62,255,803.87       57,218,867.86

Interest payable                                                    156,447,167.63      117,705,327.18

Dividends payable                                                                 -                   -

Other payables                                                    21,112,143,360.73   21,170,550,089.69

Held-for-sale liabilities

Other non-current liabilities due in one year                                     -                   -

Other current liabilities                                            12,498,265.43         4,841,867.91

                 Total Current Liabilities                        24,171,173,970.87   24,376,327,432.76

Non-current Liabilities:

Long-term borrowings                                                              -                   -

Bonds payable                                                                     -                   -

Including: Preference shares

            Perpetual Note



                                                            137
Long-term payable                                                                   20,000,000.00                      20,000,000.00

Long-term employee benefits                                                                       -                                -

Payables for specific projects                                                                    -                                -

Provisions                                                                                        -                                -

Deferred revenue                                                                    37,700,000.00                      17,700,000.00

Deferred income tax liabilities                                                     36,152,815.34                      15,569,301.11

Other non-current liabilities                                                                     -                                -

                Total Non-current Liabilities                                       93,852,815.34                      53,269,301.11

                      Total Liabilities                                          24,265,026,786.21                 24,429,596,733.87

Equity:

Share capital                                                                     6,097,402,727.00                  6,097,630,727.00

Other equity instruments

Including: Preference shares

             Perpetual note

Capital reserve                                                                   2,317,907,947.71                  2,061,597,739.78

Less: Treasury shares                                                                             -                     1,041,960.00

Other comprehensive income                                                          -43,234,737.77                    -10,881,603.15

Special reserve

Surplus reserve                                                                   1,437,313,649.93                  1,389,846,284.51

Retained Earnings                                                                 2,128,502,328.76                  2,258,102,166.73

                        Total Equity                                             11,937,891,915.63                 11,795,253,354.87

                Total Liabilities and Equity                                     36,202,918,701.84                 36,224,850,088.74




                                                CONSOLIDATED INCOME STATEMENTS


                                                       January –December 2017

                                                                                                               Currency: RMB Yuan

                                                                 Notes                     2017                     2016

Total Revenue                                                                             159,254,466,909.46      119,132,261,662.60

          Including: Operating revenue                           V.47                     159,254,466,909.46      119,132,261,662.60


                                                                  138
                       Interest income

                       Earned premiums

                       Fee and commission income

Total Cost                                                                  152,156,542,051.80   113,723,647,827.22

             Including: Cost of sales                                V.47   109,889,621,609.45    82,166,530,321.02

                        Interest expenses

                        Fee and commission expenses

                        Insurance withdrawal payment

                        Net claims incurred

                        Net provisions for insurance contract

                        Insurance policy dividend paid

                        Reinsurance cost

                        Taxes and surcharges                         V.48      808,890,988.25       687,907,686.34

                        Selling and distribution expenses            V.49    28,276,014,979.78    21,254,103,195.32

                        General and administrative expenses          V.50    11,133,225,318.88     8,404,150,036.49

                        Finance income/(expenses)                    V.51     1,392,872,274.21      720,408,216.53

                        Asset impairment (loss)/reversal             V.52      655,916,881.23       490,548,371.52

             Add: Gains/(losses) on changes in fair value            V.53      614,071,259.47         94,648,076.07

                  Gains/(losses) on investment                       V.54     1,481,800,064.82     1,619,717,433.78

                  Gains/(losses) on disposal of non-current assets   V.55        10,764,209.65      231,246,918.49

                  Other income                                       V.56      908,561,990.40

Operating Profit                                                             10,113,122,382.00     7,354,226,263.72

         Add: Non-operating income                                   V.57      692,963,237.76      1,170,564,378.20

         Less: Non-operating expenses                                V.58      261,629,717.99       336,173,701.05

Total Profit                                                                 10,544,455,901.77     8,188,616,940.87

         Less: Income tax expenses                                   V.59     1,492,806,717.73     1,492,636,755.32

Net Profit                                                                    9,051,649,184.04     6,695,980,185.55

Profit for the year attributable to:

         Continuing Operations                                                9,051,649,184.04     6,695,980,185.55

         Discontinued Operations

Profit for the year attributable to:

         Owners of the Company                                                2,125,856,862.77     1,654,197,904.77



                                                                     139
            Non-controlling interests                                                    6,925,792,321.27   5,041,782,280.78

Post-Tax Other Comprehensive Income                                            V.60      -604,055,691.61      -36,691,538.51

Attributable to owners of the company:                                                   -603,351,245.53      -61,126,461.87

(I) Other comprehensive income that will not be reclassified subsequently                   -3,683,444.37     -22,891,322.68

to profit or loss

1. Changes in net liabilities or net assets arising from re-measurement of                  -3,683,444.37     -22,891,322.68

defined benefit plans

2. Share of the other comprehensive income of the investee accounted for

using equity method which cannot be reclassified subsequently to profit and

loss

(II) Other comprehensive income to be reclassified subsequently to profit or             -599,667,801.16      -38,235,139.19

loss

1. Share of the other comprehensive income of the investee accounted for                 -307,016,515.96      -16,103,941.93

using equity method which will be reclassified subsequently to profit and

loss

2. Gain or loss from change in fair value of available-for-sale financial                   -3,059,092.10   -449,464,796.67

assets

3. Gain or loss arising from reclassification from held-to-maturity

investments to available-for-sale financial assets

4. Effective portion of cash flow hedging gains or losses                                  27,853,868.22      11,869,020.64

5. Translation of foreign currency financial statements                                  -317,446,061.32     415,464,578.77

6. Others

Attributable to non-controlling interests:                                                   -704,446.08      24,434,923.36

Total Comprehensive Income for the Year                                                  8,447,593,492.43   6,659,288,647.04

            Attributable to owners of the Company                                        6,322,441,075.74   4,980,655,818.91

            Attributable to non-controlling interests                                    2,125,152,416.69   1,678,632,828.13

Earnings per Share:

            Basic                                                              XVIII.1             1.136              0.827

            Diluted                                                            XVIII.1             1.088              0.824




                                                                               140
                                                         INCOME STATEMENT OF THE COMPANY


                                                                    January – December 2017

                                                                                                                      Currency: RMB Yuan

                                                                               Notes           2017                        2016

Revenue                                                                        XVI.4            3,452,002,347.60          3,251,045,387.75

      Less: Cost of sales                                                      XVI.4            2,383,868,807.01          2,285,513,749.93

              Taxes and surcharges                                                                    25,962,529.33          19,258,535.31

              Selling and distribution expenses                                                   223,849,142.89            248,141,771.37

              General and administrative expenses                                                 715,982,494.02            706,718,455.37

              Finance income/(expenses)                                                           107,748,195.00             34,902,973.23

              Asset impairment (loss)/reversal                                                         9,321,788.24          20,652,209.72

     Add: Gains/(losses) on changes in fair value

             Gains/(losses) on investment                                      XVI.5            1,290,751,070.45            493,291,535.21

             Gains/(losses) on disposal of non-current assets                                                                     91,412.75

             Other income                                                                         104,805,952.53

                                                                                                                                          -

Operating Profit                                                                                1,380,826,414.09            429,240,640.78

     Add: Non-operating income                                                                        74,298,043.16         146,236,590.90

     Less: Non-operating expenses                                                                      1,041,948.86           1,306,239.11

Total Profit                                                                                    1,454,082,508.39            574,170,992.57

     Less: Income tax expenses                                                                        24,059,104.64           2,180,021.90

Net Profit                                                                                      1,430,023,403.75            571,990,970.67

     Profit for the year attributable to continuing Operations                                  1,430,023,403.75            571,990,970.67

     Profit for the year attributable to discontinued Operations

Post-Tax Other Comprehensive Income                                                               -32,353,134.62            -29,723,625.40

(I) Other comprehensive income that will not be reclassified subsequently

to profit or loss

1. Changes in net liabilities or net assets arising from re-measurement of

defined benefit plans




                                                                                141
2. Share of the other comprehensive income of the investee accounted for

using equity method which cannot be reclassified subsequently to profit and

loss

(II) Other comprehensive income to be reclassified subsequently to profit or           -32,353,134.62   -29,723,625.40

loss

1. Share of the other comprehensive income of the investee accounted for               -32,642,433.78   -14,448,296.09

using equity method which will be reclassified subsequently to profit and

loss

2. Gain or loss from change in fair value of available-for-sale financial                 289,299.16    -15,275,329.31

assets

3. Gain or loss arising from reclassification from held-to-maturity

investments to available-for-sale financial assets

4. Effective portion of cash flow hedging gains or losses

5. Translation of foreign currency financial statements

6. Others

Total Comprehensive Income for the Year                                              1,397,670,269.13   542,267,345.27

Earnings per Share:

       Basic

       Diluted




                                                                               142
                                                                              CONSOLIDATED CASH FLOW STATEMENTS


                                                                                                FY2017

                                                                                                                                                                                    Currency: RMB Yuan

                                                      Notes     2017                  2016                                                               Notes   2017                     2016

Ⅰ. Cash Flows from Operating Activities:                                                                Net cash received from disposal of                        23,620,711.45             41,133,607.21


                                                                                                         subsidiaries and other business units
Cash received from sales of goods or rendering of             163,243,966,287.71    136,620,390,069.20


services

Net increase in customer deposits and deposits from                                                      Cash received relating to other investing       V.63     191,730,448.52             10,042,470.81


banks and other financial institutions                                                                   activities

Net increase in borrowing from PBOC                                                                      Sub-Total of Cash Inflows                                964,073,284.73           1,124,838,284.58



Net cash increase in borrowing from other financial                                                      Cash paid to acquire fixed assets, intangible           3,967,160,912.29          2,627,363,433.78


institutes                                                                                               assets and other long-term assets

Cash received from premiums under original

insurance contract

Net cash received from reinsurance business                                                              Cash paid to acquire investments                        2,566,398,552.06          1,448,790,904.93



Net increase in deposits of policy holders and                                                           Net increase in secured loans

investment

Net increase from the disposal of financial assets                                                       Net cash paid to acquire subsidiaries and                 52,334,438.58          36,647,350,833.82


measured at fair value with fair value changes                                                           other business units

included in profit and loss for the year

                                                                                                  143
Cash received from interest, fee and commissions                                                        Cash paid on other investment related                                27,136,079.07


                                                                                                        activities

Net increase in cash borrowed                                                                           Sub-Total of Cash Outflows from               6,585,893,902.93   40,750,641,251.60


                                                                                                        Investing Activities

Net increase in cash received from repurchase                                                           Net Cash Flows from Investing Activities     -5,621,820,618.20   -39,625,802,967.02


operation

Refund of taxes and surcharges                                                                          Ⅲ. Cash Flows from Financing Activities:

                                                                1,138,156,799.93      805,140,490.26


Cash received relating to other operating activities   V.61                                             Cash received from capital contributions      1,379,989,798.26       94,182,889.43


                                                                1,097,869,725.17     1,349,184,967.43


Sub-Total of Cash Inflows from Operating                      165,479,992,812.81   138,774,715,526.89   Including: Cash received from capital

Activities                                                                                              contributions by non-controlling

Cash paid for goods and services                              111,342,509,878.34   101,379,852,303.83   shareholders of subsidiaries


Net increase in loans and advances                                                                      Cash received from borrowings                18,694,640,060.56   43,446,247,876.57



Net increase in deposits in PBOC and interbank                                                          Cash received from issuing bonds              6,796,000,000.00



Cash paid for claims under original insurance                                                           Cash received from other financing related                           24,716,628.63


contract                                                                                                activities

Cash paid for interest, fee and commission                                                              Sub-Total of Cash Inflows From               26,870,629,858.82   43,565,147,394.63


                                                                                                        Financing Activities




                                                                                                 144
Cash paid for insurance policy dividend                                                             Cash repayments of borrowings                         22,922,113,456.97   11,685,054,603.51



Cash paid to and on behalf of employees                    16,328,642,238.15    12,171,909,848.22   Cash payments for interest expenses and                2,898,969,569.61    1,807,044,796.22


                                                                                                    distribution of dividends or profits

Payments of taxes and surcharges                                                                    Including: Cash payments for dividends or

                                                            7,835,178,863.95     6,348,293,330.29   profit to non-controlling shareholders of

Cash paid relating to other operating activities   V.62    13,887,073,804.06    10,738,781,692.67   subsidiaries


Sub-Total of Cash Outflows                                149,393,404,784.50   130,638,837,175.01   Cash payments relating to other financing      V.64     126,660,039.02      223,282,344.35


                                                                                                    activities

Net Cash Flows from Operating Activities           V.65    16,086,588,028.31                        Sub-Total of Cash Outflows From                       25,947,743,065.60   13,715,381,744.08


                                                                                 8,135,878,351.88   Financing Activities

Ⅱ. Cash Flows from Investing Activities:                                                           Net Cash Flows from Financing Activities                922,886,793.22    29,849,765,650.55



Cash received from disposal of investments                                                          Ⅳ. Effect of Fluctuations in Exchange                  -342,880,074.16     209,746,501.09


                                                             275,405,926.37       682,200,570.32    Rates on Cash and Cash Equivalents

Cash received from returns on investments                                                           Ⅴ. Net Increase in Cash and Cash                     11,044,774,129.17   -1,430,412,463.50


                                                             282,045,768.46       130,529,291.68    Equivalents

Net cash received from disposal of fixed assets,                                                    Add: balance of cash and cash equivalents at   V.66   23,295,239,445.05   24,725,651,908.55


intangible assets and other long-term assets                 191,270,429.93       260,932,344.56    the beginning of the period

                                                                                                    Ⅵ. Balance of Cash and Cash Equivalents       V.66   34,340,013,574.22   23,295,239,445.05


                                                                                                    at the End of the Period




                                                                                             145
146
                                                   CASH FLOW STATEMENT OF THE COMPANY


                                                                           FY2017

                                                                                                         Currency: RMB Yuan

                                                                              Notes   2017                    2016

Ⅰ. Cash Flows from Operating Activities:


Cash received from sales of goods or rendering of services                            3,062,693,505.16        4,807,305,663.14


Refund of taxes and surcharges                                                           27,750,963.05          40,093,606.18


Cash received relating to other operating activities                                    104,679,759.70          83,279,056.52


Sub-Total of Cash Inflows from Operating Activities                                   3,195,124,227.91        4,930,678,325.84


Cash paid for goods and services                                                      2,094,136,731.85        1,435,151,669.31


Cash paid to and on behalf of employees                                                 679,495,971.97         584,720,717.20


Payments of taxes and surcharges                                                        181,894,997.28         140,362,961.29


Cash paid relating to other operating activities                                        194,723,652.37         391,453,674.63


Sub-Total of Cash Outflows                                                            3,150,251,353.47        2,551,689,022.43


Net Cash Flows from Operating Activities                                                 44,872,874.44        2,378,989,303.41


Ⅱ. Cash Flows from Investing Activities:


Cash received from disposal of investments


Cash received from returns on investments                                               421,211,612.57         250,135,174.02


Net cash received from disposal of fixed assets, intangible assets and

other long-term assets

Net cash received from disposal of subsidiaries and other business units


Cash received relating to other investing activities                                     20,000,000.00


Sub-Total of Cash Inflows                                                               441,211,612.57         250,135,174.02


Cash paid to acquire fixed assets, intangible assets and other long-term                 32,789,662.23          12,468,050.25

assets

Cash paid to acquire investments                                                      1,006,813,576.50       15,893,337,507.50


Net cash paid to acquire subsidiaries and other business units


Cash paid on other investment related activities                                                               338,162,467.03



                                                                            147
Sub-Total of Cash Outflows from Investing Activities                         1,039,603,238.73    16,243,968,024.78


Net Cash Flows from Investing Activities                                      -598,391,626.16    -15,993,832,850.76


Ⅲ. Cash Flows from Financing Activities:


Cash received from capital contributions


Cash received from borrowings


Cash received from issuing bonds


Cash received from other financing related activities                          462,368,825.80    18,373,218,934.98


Sub-Total of Cash Inflows from Financing Activities                            462,368,825.80    18,373,218,934.98


Cash repayments of borrowings


Cash payments for interest expenses and distribution of dividends or         1,725,900,890.96     1,292,697,714.12

profits

Cash payments relating to other financing activities                             1,041,960.00       139,884,839.50


Sub-Total of Cash Outflows from Financing Activities                         1,726,942,850.96     1,432,582,553.62


Net Cash Flows from Financing Activities                                     -1,264,574,025.16   16,940,636,381.36


Ⅳ. Effect of Fluctuations in Exchange Rates on Cash and Cash                        -2,820.43

Equivalents                                                                                               3,558.31

Ⅴ. Net Increase in Cash and Cash Equivalents                                -1,818,095,597.31    3,325,796,392.32


Add: balance of cash and cash equivalents at the beginning of the            3,888,623,400.28       562,827,007.96

period

Ⅵ. Balance of Cash and Cash Equivalents at the End of the Period            2,070,527,802.97     3,888,623,400.28




                                                                       148
                                                                                           CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


                                                                                                                          FY2017

                                                                                                                                                                                                                            Currency: RMB Yuan

                                                                                                                                         2017

                                                                                              Equity attributable to owners of the Company                                                                   Non-controlling       Total Equity


                                  Share                    Other Equity Instruments             Capital           Less:             Other         Special      Surplus         General      Retained            Interests


                                 Capital         Preference       Perpetual       Others       Reserve          Treasury       Comprehensive      Reserve      Reserve         reserve      Earnings


                                                   Share            Note                                         Stock             Income




Ⅰ. Closing balance in


2016                          6,097,630,727.00                                                83,383,194.51    1,041,960.00      566,238,911.96             2,074,118,571.01             17,544,395,965.35    11,215,641,001.64   37,580,366,411.47


Add: changes in accounting


policies


Errors correction for prior


year


Business combination under


common control                                                                                                                      748,523.61                  2,341,506.77                70,372,786.35         26,711,159.52     100,173,976.25


Others


Ⅱ. Opening balance for


the current year              6,097,630,727.00                                                83,383,194.51    1,041,960.00      566,987,435.57             2,076,460,077.78             17,614,768,751.70    11,242,352,161.16   37,680,540,387.72




                                                                                                                           149
Ⅲ. Increase/decrease for


the current period           -228,000.00   431,424,524.07   743,499,899.33   -1,041,960.00     -603,351,245.53   26,597,704.63    5,178,342,132.39    3,292,138,774.75   9,069,465,749.64


(decrease is represented


by “-”)


(I) Total comprehensive


income                                                                                         -603,351,245.53                    6,925,792,321.27    2,125,152,416.69   8,447,593,492.43


(II) Capital contribution


and withdrawal by            -228,000.00   431,424,524.07   743,499,899.33   -1,041,960.00                       -20,869,660.79    -187,826,947.16    1,452,333,557.09   2,419,375,332.54


shareholders


1. Capital contribution by


shareholders                                                                                                                                          1,452,333,557.09   1,452,333,557.09


2. Capital contribution by


holders of other equity                    431,424,524.07                                                                                                            -     431,424,524.07


instruments


3. Share-based payment


included in shareholders'                                                                                                                                                                -


equity




4. Others                    -228,000.00                    743,499,899.33   -1,041,960.00                       -20,869,660.79    -187,826,947.16                         535,617,251.38


(III) Profit distribution


                                                                                                                 47,467,365.42    -1,559,623,241.72   -285,347,199.03    -1,797,503,075.33



                                                                                         150
1. Appropriation to surplus


reserves                             47,467,365.42     -47,467,365.42


2. Appropriation for general


risks


3. Distribution to owners


(or shareholders)                                    -1,512,155,876.30   -285,347,199.03   -1,797,503,075.33


4. Others


(IV) Internal transfer of


owner’s equity


1. Transfer of capital


reserves into capital (or


share capital)


2. Transfer of surplus


reserves into capital (or


share capital)


3. Surplus reserves used for


making up losses


4. Others


(V) Special reserve


1. Appropriation


2. Utilization



                               151
  (VI) Others


  Ⅳ. Closing balance for


  2017                         6,097,402,727.00                                431,424,524.07    826,883,093.84                          -36,363,809.96             2,103,057,782.41              22,793,110,884.09     14,534,490,935.91    46,750,006,137.36




                                                                                                                                               2016

                                                                                                 Equity attributable to owners of the Company                                                                         Non-controlling         Total Equity


                                  Share                  Other Equity Instruments                Capital             Less:               Other            Special      Surplus         General      Retained             Interests


                                 Capital          Preference    Perpetual      Others            Reserve           Treasury        Comprehensive          Reserve     Reserve          reserve      Earnings


                                                    Share         Note                                               Stock               Income




Ⅰ. Closing balance in


2015                          6,123,154,268.00                                                  83,383,194.51     77,604,544.70     633,183,460.03                  2,026,585,301.23             13,944,632,981.28       9,708,285,895.93   32,441,620,556.28


Add: changes in accounting


policies


Errors correction for prior


year


Business combination


under common control                                                                                                                    -5,069,562.59                   2,341,506.77                65,242,746.41           27,195,349.54      89,710,040.13


Others


Ⅱ. Opening balance for


the current year              6,123,154,268.00                                                  83,383,194.51     77,604,544.70     628,113,897.44                  2,028,926,808.00             14,009,875,727.69       9,735,481,245.47   32,531,330,596.41



                                                                                                                                  152
Ⅲ. Increase/decrease for


the current period           -25,523,541.00   -76,562,584.70     -61,126,461.87   47,533,269.78   3,604,893,024.01    1,506,870,915.69   5,149,209,791.31


(decrease is represented


by “-”)


(I) Total comprehensive


income                                                           -61,126,461.87                   5,041,782,280.78    1,678,632,828.13   6,659,288,647.04


(II) Capital contribution


and withdrawal by            -25,523,541.00   -76,562,584.70                      -9,665,827.29     -86,992,445.58      56,237,351.07       10,618,121.90


shareholders


1. Capital contribution by


shareholders                 -25,523,541.00   -76,562,584.70                                                            56,237,351.07      107,276,394.77


2. Capital contribution by


holders of other equity


instruments


3. Share-based payment


included in shareholders'


equity




4. Others                                                                         -9,665,827.29     -86,992,445.58                         -96,658,272.87




(III) Profit distribution                                                         57,199,097.07   -1,349,896,811.19   -227,999,263.51    -1,520,696,977.63



                                                               153
1. Appropriation to surplus


reserves                             57,199,097.07     -57,199,097.07


2. Appropriation for


general risks


3. Distribution to owners


(or shareholders)                                    -1,292,697,714.12   -227,999,263.51   -1,520,696,977.63


4. Others


(IV) Internal transfer of


owner’s equity


1. Transfer of capital


reserves into capital (or


share capital)


2. Transfer of surplus


reserves into capital (or


share capital)


3. Surplus reserves used for


making up losses


4. Others


(V) Special reserve


1. Appropriation


2. Utilization



                               154
(VI) Others


Ⅳ. Closing balance for


2016                      6,097,630,727.00   83,383,194.51   1,041,960.00     566,987,435.57   2,076,460,077.78   17,614,768,751.70   11,242,352,161.16   37,680,540,387.72




                                                                            155
                                                                                 STATEMENT OF CHANGES IN EQUITY OF THE COMPANY


                                                                                                           FY2017

                                                                                                                                                                                             Currency: RMB Yuan

                                                                                                                            2017


                                       Share              Other Equity Instruments        Capital             Less:                Other       Special     Surplus          Retained Earnings         Total

                                      Capital         Preference   Perpetual   Others     Reserve           Treasury        Comprehensive      Reserve     Reserve                                   Equity


                                                        Share        Note                                     Stock            Income




Ⅰ. Closing balance in 2016        6,097,630,727.00                                     2,061,597,739.78     1,041,960.00     -10,881,603.15             1,389,846,284.51     2,258,102,166.73    11,795,253,354.87


Add: changes in accounting

policies


Errors correction for prior year


Others


Ⅱ. Opening balance for the


current year                       6,097,630,727.00                                     2,061,597,739.78     1,041,960.00     -10,881,603.15             1,389,846,284.51     2,258,102,166.73    11,795,253,354.87


Ⅲ. Increase/decrease for the


current period (decrease is            -228,000.00                                       256,310,207.93     -1,041,960.00     -32,353,134.62               47,467,365.42       -129,599,837.97      142,638,560.76


represented by “-”)




                                                                                                             156
(I) Total comprehensive income                                                      -32,353,134.62                   1,430,023,403.75    1,397,670,269.13


(II) Capital contribution and

withdrawal by shareholders           -228,000.00   256,310,207.93   -1,041,960.00                                                          257,124,167.93


1. Capital contribution by


shareholders                         -228,000.00   -15,248,846.94   -1,041,960.00                                                          -14,434,886.94


2. Capital contribution by


holders of other equity


instruments


3. Share-based payment


included in shareholders' equity




4. Others                                          271,559,054.87                                                                          271,559,054.87


(III) Profit distribution


                                                                                                     47,467,365.42   -1,559,623,241.72   -1,512,155,876.30


1. Appropriation to surplus


reserves                                                                                             47,467,365.42     -47,467,365.42


2. Distribution to owners (or

shareholders)                                                                                                        -1,512,155,876.30   -1,512,155,876.30


3. Others


(IV) Internal transfer of owner’s

equity



                                                                     157
1. Transfer of capital reserves into


capital (or share capital)


2. Transfer of surplus reserves into


capital (or share capital)


3. Surplus reserves used for

making up losses


4.Others


(V) Special reserve


1. Appropriation


2. Utilization


(VI) Others




Ⅳ. Closing balance for 2017              6,097,402,727.00                                        2,317,907,947.71                      -43,234,737.77                    1,437,313,649.93       2,128,502,328.76   11,937,891,915.63




                                                                                                                                     2016


                                           Share                 Other Equity Instruments        Capital               Less:             Other           Special     Surplus                 Retained                Total

                                          Capital            Preference   Perpetual   Others     Reserve             Treasury        Comprehensive       Reserve     Reserve                 Earnings                Equity


                                                               Share        Note                                      Stock             Income




Ⅰ. Closing balance in 2015            6,123,154,268.00                                        2,229,511,649.19      77,604,544.70      18,842,022.25              1,332,647,187.44          3,036,008,007.25       12,662,558,589.43


                                                                                                                         158
Add: Changes in accounting


policies


Errors correction for prior year


Others


Ⅱ. Opening balance for the


current year                       6,123,154,268.00   2,229,511,649.19    77,604,544.70    18,842,022.25    1,332,647,187.44   3,036,008,007.25   12,662,558,589.43


Ⅲ. Increase/decrease for the


current period (decrease is          -25,523,541.00   -167,913,909.41     -76,562,584.70   -29,723,625.40     57,199,097.07    -777,905,840.52      -867,305,234.56

represented by “-”)


(I) Total comprehensive


income                                                                                     -29,723,625.40                       571,990,970.67      542,267,345.27


(II) Capital contribution and


withdrawal by shareholders           -25,523,541.00   -167,913,909.41     -76,562,584.70                                                            -116,874,865.71


1. Capital contribution by

shareholders                         -25,523,541.00   -163,646,699.20    -189,170,240.20


2. Capital contribution by


holders of other equity

instruments


3. Share-based payment


included in shareholders' equity




                                                                              159
4. Others                         -4,267,210.21   112,607,655.50                                        -116,874,865.71




(III) Profit distribution                                          57,199,097.07   -1,349,896,811.19   -1,292,697,714.12


1. Appropriation to surplus


reserves                                                           57,199,097.07     -57,199,097.07


2.Distribution to owners (or


shareholders)                                                                      -1,292,697,714.12   -1,292,697,714.12


3.Others


(IV) Internal transfer of

owner’s equity


1. Transfer of capital reserves


into capital (or share capital)


2. Transfer of surplus reserves


into capital (or share capital)


3. Surplus reserves used for

making up losses


4.Others


(V) Special reserve


1. Appropriation


2. Utilization


(VI) Others


                                                       160
Ⅳ. Closing balance for 2016   6,097,630,727.00         2,061,597,739.78     1,041,960.00   -10,881,603.15   1,389,846,284.51   2,258,102,166.73       11,795,253,354.87


Legal representative:                             Chief Financial Officer:                                                         Person in charge of accounting

Liang Haishan                                     Gong Wei                                                                          department: Ying Ke




                                                                               161
3. General Information of the Company

     1) Overview of the Company

    The predecessor of Qingdao Haier Co., Ltd. (herein after referred to as the Company) was

Qingdao Refrigerator Factory, which was established in 1984. As permitted to offering by

People's Bank of China, Qingdao Branch on 16 December 1989, approved by Qing TiGai [1989]

No.3 on 24 March 1989, based on the reconstruction of the original Qingdao Refrigerator Factory,

a limited company was set up by directional fund raising of RMB150 million. In March and

September 1993, as approved by the document of Qing Gu Ling Zi [1993] No. 2 and No. 9 issued

by the pilot leading team of Qingdao joint stock company, the Company was converted from a

directional offering company to a public subscription company and issued additional 50million

shares to the public and listed with trading on Shanghai Stock Exchange in November 1993.

    The Company‘s registered office is located at the Haier Industrial Park of Laoshan District,

Qingdao, Shandong Province, and the headquarters is located at the Haier Industrial Park of

Laoshan District, Qingdao, Shandong Province.

    In the opinion of the directors, the ultimate holding company of the Company is Haier Group

Corporation (―Haier Corp‖), which is established in the PRC.

    The Company is mainly engaged in manufacturing and trading as well as R&D of refrigerator,

air-conditioner, freezer, washing machine, water heater, dishwashers, gas stove and relevant

products and commercial circulation business.

    These financial statements have been approved for publication by the Board of the Company

on 24 April 2018. Under the Company‘s constitution, these financial statements shall be submitted

for consideration at general meetings.

    2) Scope of consolidated financial statements

    For details of changes in the scope of consolidated financial statements for 2017, please refer

to ―VI. Changes in Consolidation Scope‖ and ―VII. Interest in Other Entities‖ of this note.


4. Basis of Preparation of the Financial Statements




                                                  162
     The financial statements of the Company were prepared on the going concern basis according

to the transactions and matters actually occurred, in accordance with the Accounting Standards for

Enterprises – Basic Standards published by the Ministry of Finance, specific accounting standards,

and guidance on application of accounting standards for enterprises, interpretations to accounting

standards for enterprises and other relevant requirements (hereinafter collectively referred to as the

―Accounting Standards for Enterprises‖) which issued subsequently, and in combination with the

disclosure provisions of the Rules for the Information Disclosure and Compilation of Companies

Publicly Issuing Securities No.15: General Provisions for Financial Report (Revised in 2014) of

CSRC as well as the following significant accounting policies and accounting estimation.

     The Company has ability to continue its operation for at least 12 months since the end of the

reporting period and there are no significant events affecting its ability to continue as a going

concern.


5.   Significant accounting policies and accounting estimates


     According to the characteristics of its production and operation, the Company formulated a

series of specific accounting policies and accounting estimates, including the provisions for

impairment for accounts receivable (Note III.11); the measurement of inventories (Note III.12);

the depreciation and amortization of the investment properties (Note III.14); the depreciation of

fixed assets (Note III.15), the amortization of intangible assets (Note III.18), the criterion for

determining of long-term assets impairment (Note III.19); and the date of revenue recognition

(Note III.24), etc..
     1)    Statement of compliance with enterprise accounting standards

     The financial statements prepared by the Company meet the requirements of the enterprise

accounting standards, which accurately and completely reflected information relating to the

financial condition as of 31 December 2017, operation result and cash flow of the Company in

2017.
     2)    Accounting period

     The accounting year of the Company is from 1 January each year to 31 December of the same

year in solar calendar.

     3)    Operating cycle

                                                  163
    The Company takes 12 months as an operating cycle, which is also the classification basis for

the liquidity of its assets and liabilities.

     4)    Recording currency

    Renminbi is the recording currency of the Company.

     5)    Business combinations under common control and not under common control

    A business combination is a transaction or event that brings together two or more separate

entities into one reporting entity. Business combinations are classified into business combinations

under common control and business combinations not under common control.

    (1) Business combinations under common control

    A business combination under common control is a business combination in which all of the

combining entities are ultimately controlled by the same party or parties both before and after the

combination, and that control is not transitory. For business combination under common control,

the party that obtains the control over the other parties on the combination date is the acquirer, and

other parties involving in the business combination are the transferors. The combination date is the

date on which the acquiring party effectively obtains the control over the party being acquired.

    In case the consideration for long-term equity investments formed in business combination

under common control is paid by ways of cash, transfer of non-cash assets or assumption of debts,

the Company will regard the share of carrying amounts of the net assets of the transferor in the

ultimate controller‘s consolidated financial statements obtained as the initial investment cost of

long-term equity investments as at the date of combination. For carrying value of net assets of the

transferor is negative as at the date of combination, investment cost of long-term equity

investment is calculated as zero. In case the transferor is controlled by the ultimate controller by

the business combination under non-common control before combination, the initial investment

cost of the long-term equity investment of the acquirer includes relevant goodwill. The Company

should adjust the capital reserve (capital premium or share premium) in accordance with the

differences between initial investment cost of the long-term equity investment and the cash paid,

the non-cash assets transferred and the carrying value of liability assumed; in case the balance of

the capital reserve (capital premium or share premium) is insufficient for the elimination, the

surplus reserves and undistributed profits shall be used to dilute such expenses in order. In case

                                                 164
the consideration for the combination is paid by issuance of equity instruments, the aggregate

nominal value of shares issued will be deemed as the share capital. The difference between the

initial investment cost of long-term equity investments and aggregate nominal value of shares

issued shall be adjusted to capital reserve (capital premium or share premium), in case the capital

reserve (capital premium or share premium) is insufficient for the elimination, the surplus reserves

and undistributed profits shall be used to dilute such expenses in order.

    Intermediary fees (such as audit, legal services and valuation consultancy) and other relevant

management fees incurred in the business combination by the acquirer are credited in profit or loss

in the period when they occurred. Trading expenses in direct relation to the issuance of equity

instrument as the consideration for the combination is written down to the capital reserve (share

premium), where the capital reserve (share premium) is insufficient, and to surplus reserves and

undistributed profits in order. Trading expenses in direct relation to the issuance of debt

instrument as the consideration for the combination is included in the initial recognition amount of

the debt instrument.

    For business combination under common control realized through several transactions step

by step, in case of a package transaction, all the transactions are accounted as one transaction that

has acquired the control; in case of not a package transaction, in the financial statement of parent

company the capital reserve ( share premium) is adjusted by the difference between the initial

investment cost and the sum of the carrying value of the original long-term equity investment and

the book value of the new payment consideration for further acquisition of shares with the share of

acquirer's owner's equity on the date of combination in case calculated on the proportion of

shareholding on the date of combination as its initial investment cost; where the capital reserve is

insufficient, the retained earnings will be used to offset such expenses.

    In the consolidated financial statements, the long-term equity investment held by the

combining party before the date of acquiring control of the combined parties, and the profit and

loss, the other comprehensive income and changes in the other owners‘ equity recognized during

the period between the later of the date of acquisition and the date when the combining and the

combined parties are under the common control of the same party and the date of combination, are



                                                 165
written down to the retained earnings or profit or loss at the beginning of the comparative

reporting period, respectively.

    (2) Business combinations involving entities not under common control

    A business combination not under common control is an business combination in which all of

the combining entities are not ultimately controlled by the same party or parties both before and

after the combination. For business combination not under common control, the party that obtains

the control of the other parties at the combination date is the acquirer; other parties involving in

the business combination are the transferors. The combination date is the date on which the

acquirer effectively obtains control of the transferors.

    In business combination involving entities not under common control, the cost of combination

shall be the sum of the assets paid, obligations incurred or assumed and the fair value of the equity

securities issued by the acquirer for obtaining control of the transferor at the date of acquisition.

Intermediary fees (such as audit, legal services and valuation consultancy) and other relevant

management fees incurred by the acquirer for the purpose of business combination are credited in

profit or loss in the period when they occurred. Transaction fees for the equity instruments or debt

instruments issued by the acquirer as combination consideration is included in the initial

recognition amount of such equity instruments or debt instruments. Contingent consideration

involved shall be recorded as the combination cost based on its fair value on the acquisition date.

Should any new or further evidence arise within 12 months after the acquisition date and makes it

necessary to adjust the contingent consideration on the acquisition date, the goodwill arising from

the business combination shall be amended accordingly.

    The cost of combination and identifiable net assets obtained by the acquirer in an business

combination are measured at fair value on the acquisition date. Where the cost of the combination

exceeds the acquirer‘s interest in the fair value of the transferor‘s identifiable net assets, the

difference is recognized as goodwill; where the cost of combination is lower than the acquirer‘s

interest in the fair value of the transferor‘s identifiable net assets, the difference is initially

recognized in profit or loss for the current year after a review of computation for the identifiable

assets, liabilities or fair value of contingent liabilities and combination cost, and where the



                                                     166
combination cost is still lower than the fair value of the identifiable net assets of the transferor

obtained during the course of combination, then the difference is recorded in the profit and loss.

    In business combination involving entities not under common control that is realized in

phases through multiple exchange transactions, in the Company individual financial statements,

the sum of the book value of the equity investment of the transferor held before the date of

acquisition and the cost of new investment on the date of acquisition are recognized as the initial

investment cost of such investment.

    In the consolidated financial statement, the equity of the transferor held before the date of

acquisition is re-measured at the fair value on the date of acquisition, and the difference between

the fair value and book value is included in current investment income; where the equity of the

transferor held before the date of acquisition involves the other comprehensive income, such

equity and relevant other comprehensive income are transferred to current investment income on

the date of acquisition, other than the other comprehensive income that cannot be reclassified in

the profit or loss.

    The fair value on the acquisition date of equity interest in the transferor prior to the

acquisition date and the fair value of the considerations paid for the acquisition of the new equity

on the acquisition date are regarded as the combination costs of the Company, comparing with

acquirer's share of the fair value on the acquisition date of the transferor's net identifiable assets on

the proportion of the shareholding on the acquisition date to confirm the goodwill that required to

be recognized on the acquisition date or the amount that shall be included in the profit or loss.

     6)    Preparation method of consolidated financial statements

      (1) Scope of consolidated financial statements

    The Company incorporated all of its subsidiaries (including the separate entities controlled by

the Company) into the scope of consolidation financial statements, including the enterprises under

the Company‘s control, divisible part in the investees and structured entities.

    (2) To unify the accounting policies, balance sheets date and accounting periods of the

Company and subsidiaries




                                                  167
    When preparing consolidated financial statements, adjustments are made if subsidiaries‘

accounting policies or accounting periods are different from that of the Company, in accordance

with the Company‘s accounting policies and accounting periods.

    (3) Offset matters in the consolidated financial statements

    The consolidated financial statements shall be prepared on the basis of the balance sheets of

the Company and subsidiaries, which offset the internal transactions incurred between the

Company and subsidiaries and among subsidiaries. The owner‘s equity of the subsidiaries not

attributable to the Company shall be presented as ―minority equity‖ under the owners‘ equity item

in the consolidated balance sheet.

    The long-term equity investment of the Company held by the subsidiaries, deemed as treasury

stock of the corporate group as well as the reduction of owners‘ equity, shall be presented as ―Less:

Treasury stock‖ under the owners‘ equity item in the consolidated balance sheet.

    (4) Accounting treatment of subsidiaries acquired from combination

    For subsidiaries acquired from enterprise combination under common control, the assets,

liabilities, operating results and cash flows of the subsidiaries are included in the consolidated

financial statements from the beginning of the period in which the combination took place, as if

the combination has taken since the ultimate controller began its control. When preparing the

consolidated financial statements, for the subsidiaries acquired from enterprise combination under

non-common control, separate financial statement will be adjusted on the basis of their fair values

of the identifiable net assets on the date of acquisition.

     7)   Classification of joint arrangement and accounting methods of joint operations

     A joint arrangement refers to an arrangement jointly controlled by two or more parties. In

accordance with the Company‘s rights and obligations under a joint arrangement, the Company

classifies joint arrangements into: joint operations and joint ventures.

     Joint operations refer to a joint arrangement in which the Company is a party and is entitled

to relevant assets and obligations of this arrangement. The Company recognizes the following

items in relation to its interest in a joint operation, and accounts the same in accordance with

relevant accounting standards for business enterprises:




                                                  168
     (1) recognize the assets held solely by the Company, and recognize assets held jointly by the

Company in appropriation to the share of the Company; (2) recognize the obligations assumed

solely by the Company, and recognize obligations assumed jointly by the Company in

appropriation to the share of the Company; (3) recognize revenue from disposal of joint operations

in appropriation to the share of the Company; (4) recognize revenue from disposal of joint

operations in appropriation to the share of the Company; (5) recognize fees solely occurred by the

Company and recognize fees from joint operations in appropriation to the share of the Company.


     When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets

do not constitute a business, the same below) from joint operations, the Company shall only

recognize the part of profit or lost from this transaction attributable to other parties of joint

operations before these assets are sold to a third party. In case of an impairment loss incurred on

these assets which meets the requirements as set out in ―Accounting Standards for Business

Enterprises No. 8 – Asset Impairment‖, the Company shall full recognize the amount of this loss

in relation to its investment in or sale of assets to joint operations or recognize the loss according

to the Company‘s share of commitment in relation to the its purchase of assets from joint

operations.


          Joint ventures refer to a joint arrangement during which the Company only is entitled to

net assets of this arrangement. Investment in joint venture is accounted for using the equity

method according to the accounting policies referred to under ―13 Long-term equity investment‖

of Note III.


     8)   Recognition standard for cash and cash equivalents

    Cash recognized in the cash flow statements represents the cash on hand and deposits

available for payment of the Company at any time.

    Cash equivalents recognized in the cash flow statements refer to short-term, highly liquid

investments held by the Company that are readily convertible to known amounts of cash and

which are subject to an insignificant risk on change in value.

     9)   Foreign currency businesses and translation of foreign currency statements



                                                   169
     (1) Foreign currency transactions

    If foreign currency transactions occur, they are translated into the amount of functional

currency by applying the spot exchange rate at the transaction date.

    Monetary items denominated in foreign currencies are translated into functional currencies at

the rates of exchange ruling at the balance sheet date. All foreign exchange difference are credited

in the profit or loss, except ① those arising from the funds denominated in foreign currency

specially borrowed for the establishment of the qualifying assets are treated based on the principal

of capitalization of borrowing costs; ② those arising from the other changes in the balance other

than amortized cost of available-for-sale monetary items denominated in foreign currency are

recognized in the other comprehensive income.

    Non-monetary items in foreign currency measured at historical cost are translated using the

spot exchange rate prevailing on the date when transaction occurred and its functional currency

shall remain unchanged. Non-monetary items denominated in foreign currencies that are measured

at fair value are translated using the foreign exchange rate at the date the fair value is determined;

the exchange differences between the translated and original amounts of functional currencies are

recognized in the statement of profit or loss or other comprehensive income as changes in fair

value (including changes in exchange rate).

    (2) Translation of foreign currency financial statements

    If the functional currencies used as the bookkeeping base currency by the subsidiaries, joint

ventures and associates under the control of the Company are different from that of the Company,

their financial statements denominated in foreign currencies shall be translated to perform

accounting and prepare the consolidated financial statements.

    The assets and liabilities of the balance sheet are translated using the spot exchange rate at the

balance sheet date; all items except for ―undistributed profits‖ of the owner‘s equity are translated

at the spot exchange rate on the transaction date. The revenue and expenses in the income

statement are translated using the approximate rate of the spot exchange rate on the transaction

date. Differences arising from the translation of foreign currency financial statements are

presented as the ―other comprehensive income‖ in the owner‘s equity of the balance sheet.



                                                  170
    Foreign currency cash flows are translated using the approximate rate of the spot exchange

rate on the transaction date. The impact of exchange rate changes on cash amount is reflected

separately in the cash flow.

    When disposing overseas operations, the translation difference related to the overseas

operation shall be transferred together or as the percentage of disposing the overseas operation to

profit or loss for 2017 of disposal.

     10) Financial instruments

      (1) Classification, recognition and measurement of financial instruments

    A financial asset or a financial liability is recognized when the Company becomes a

contractual party of a financial instrument. Financial assets and financial liabilities are measured at

fair value upon initial recognition. Related transaction costs are recorded directly in the profit or

loss for financial assets and financial liabilities at fair value with its change consolidated in

profit/loss or included in the amount recognized initially for other types of financial assets and

financial liabilities.

    Determination of the fair value of financial assets and financial liabilities: Fair value refers to

the price receivable from the exchange of an asset or payable for the settlement of a liability in a

fair transaction between knowledgeable and willing counterparties. The fair value of financial

instruments where there is an active market is determined based on the quoted price in such

market, which refers to the price regularly available from exchanges, brokers, trade associations

and pricing service agencies that represents the price adopted in an arm‘s length transaction which

actually occurred in the market. For financial instruments where there is no active market, the fair

value is determined using valuation techniques. Such techniques include reference to prices used

in recent market transactions between knowledgeable and willing counterparties, reference to the

current fair value of another instrument which is substantially the same, discounted cash flow

analysis and option pricing models or other valuation models.

    Financial assets are classified, at initial recognition, as financial assets at fair value through

profit or loss, held-to-maturity investments, loans and receivables and available-for-sale

investments. Classification of financial asset other than receivables is based on the purpose and

capability of financial asset held by the Company and its subsidiaries. The financial liabilities are,

                                                  171
on initial recognition, classified into financial liabilities at fair value through profit or loss and

other financial liabilities.

    Financial assets at fair value through profit or loss include financial assets held for trading and

financial assets designated as at fair value through profit or loss. All financial assets at fair value

through profit or loss are financial assets held for trading. Financial assets may be classified as

financial assets held for trading if one of the following conditions is met: ① the financial asset is

acquired principally for the purpose of sale or repurchase in the near term; ② the financial asset

is part of a portfolio of identified financial instruments that are managed together and for which

there is an objective evidence of recent pattern of short-term profit-taking; or ③ the financial

asset is a derivative, excluding the derivatives designated as effective hedging instruments, the

derivatives classified as financial guarantee contract, and the derivatives linked to an equity

instrument investment, which has no quoted price in an active market nor a reliably measured fair

value, and required to be settled through delivery of that equity instrument. A financial asset may

be designated as at fair value through profit or loss upon initial recognition only when one of the

following conditions is satisfied: ① such designation eliminates or significantly reduces a

measurement or recognition inconsistency that would otherwise result from measuring assets or

recognizing the gains or losses on them on different bases; ② the financial asset forms part of a

group of financial assets or a group of financial assets and financial liabilities, which is managed

and its performance is evaluated on a fair value basis, in accordance with the Company‘s

documented risk management or investment strategy, and information about the grouping is

reported to key management personnel on that basis; or ③ pursuant to Accounting Standards for

Enterprises No. 22 – Recognition and Measurement of Financial Instruments, the financial asset is

designated as combination instrument of financial assets measured at fair value through profit or

loss and related to embedded derivatives. A financial asset at fair value through profit or loss,

except for those falling under cash flow hedging, is subsequently measured at fair value. Any

gains or losses arising from changes in the fair value are recognized in profit or loss of changes in

the fair value. Interests or cash dividends received during the period in which such assets are held,

are recognized as investment income; on disposal, the differences between the consideration



                                                   172
received and initial recognized amount are recognized as investment income and the gain or loss

from changes in fair value shall be adjusted accordingly.

    Held-to-maturity investments are non-derivative financial assets that have fixed or

determinable payments and fixed maturity and for which the Company has the positive intention

and ability to hold to maturity. Held-to-maturity investments are measured subsequently at

amortized cost by using the effective interest rate method. Gains or losses arising from

de-recognition, impairment or amortization are recognized in the profit or loss for the year ended

31 December 2017.

    The effective interest method is a method of calculating the amortized cost of a financial asset

and of allocating interest income or expense over each period based on the effective interest of a

financial asset or a financial liability (including a group of financial assets or financial liabilities).

The effective interest rate is the rate that discounts future cash flows from the financial asset or

financial liability over its expected life or (where appropriate) a shorter period to the carrying

amount of the financial asset or financial liability. In calculating the effective interest rate, the

Company will estimate the future cash flows (excluding future credit losses) by taking into

account all contract terms relating to the financial assets or financial liabilities whilst considering

various fees, transaction costs and discounts or premiums which are part of the effective interest

rate paid or received between the parties to the financial assets or financial liabilities contracts.

    Loans and receivables are non-derivative financial assets with fixed or determinable payments

that are not quoted in an active market. Financial assets, including bills receivable, accounts

receivable, other receivables and long-term receivables are classified as loans and receivables by

the Company. Loans and receivables are subsequently measured at amortized cost using the

effective interest method. Gain or loss on derecognition, impairment or amortization is recognized

to the consolidated profit or loss for the year ended 31 December 2017.

    Available-for-sale financial assets include non-derivative financial assets designated as

available-for-sale at initial recognition, and the financial assets other than financial assets at fair

value through profit or loss, loans and receivables, and held-to-maturity investments.

Available-for-sale financial assets are subsequently measured at fair value, the gains or losses

arising from changes in fair value, except for impairment losses and exchange difference related to

                                                   173
monetary financial assets and amortized cost which are recognized in profit or loss, are recognized

in other comprehensive income and reclassified to profit or loss when the financial assets are

derecognized. Interests calculated in the effective interest method during the holdings of

available-for-sale financial assets and cash dividends declared by investees are recognized in

investment incomes. On disposal, the differences between the consideration received and the

carrying amount of assets after deducting the accumulated fair value adjustments previously

recorded in capital reserves are recorded as investment income. However, an equity instrument

investment which has no quoted price in an active market nor a reliably measured fair value, and a

derivative financial asset (or derivative financial liability) linked to such equity instrument and

required to be settled through delivery of that equity instrument are measured at cost.

    Derivative financial instruments include forward foreign exchange contracts and interest rate

swap contracts, etc. Derivative financial instruments are initially recognized at fair value at the

execution date of relevant contracts, and subsequently measured at fair value. Expect for the

derivative financial instruments designated as hedging instruments with a highly effective hedging,

of which the profit or loss arising from the changes in fair value will be included in the

corresponding profit or loss depending on the nature of hedging relations and the accounting

requirements of hedging tools, the changes in the fair value of all other derivative financial

instruments will be included in the profit or loss.

    For hybrid instruments containing embedded derivatives, an embedded derivative is separated

from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or

financial liability at fair value with its change consolidated in profit/loss, and treated as a

stand-alone derivative if the economic characteristics and risks of the embedded derivative are not

closely related to those of the host contract, and a separate instrument with the same terms as the

embedded derivative would be in compliance with the definition of a derivative. If the Group is

unable to measure the embedded derivative separately either at acquisition or at a subsequent

balance sheet date, it will designate the entire hybrid instrument as a financial asset or financial

liability at fair value through profit or loss.

    Equity instruments refer to the contracts proving the ownership of the remaining equities in

the assets of the Company upon the deduction of all the liabilities. The consideration received

                                                   174
from the issue of the equity instruments increases the shareholders‘ equity upon the deduction of

the transaction costs. The allocations made by the Company to the holders of equity instruments

(excluding stock dividends) decrease shareholders‘ equity. The Company does not recognize the

change in the fair value of equity instruments.

    (2) Recognition and measurement of transfers of financial asset

    Financial asset that satisfied any of the following criteria shall be derecognized: ① the

contract right to recover the cash flows of the financial asset has terminated; ② the financial

asset, along with substantially all the risk and return arising from the ownership of the financial

asset, has been transferred to the transferee; or③ the financial asset has been transferred, and the

Company has given up the control on such financial asset, though it does not assign or maintain

substantially all the risk and return arising from the ownership of the financial asset.

    When the Company does not either assign or maintain substantially all the risk and rewards of

ownership of the financial asset and does not give up the control on such financial asset, to the

extent of its continuous involvement in the financial asset, the Company recognizes it as a related

financial asset and recognizes the relevant liability accordingly. The extent of the continuous

involvement is the extent to which the Company exposes to changes in the value of such financial

assets.

    On derecognition of a financial asset, the difference between the following amounts is

recognized in profit or loss in 2017: the carrying amount and the sum of the consideration received

and any accumulated changes in fair value that had been recognized originally and directly in

capital reserve. If a part of the financial assets qualifies for derecognition, the carrying amount of

the financial asset is allocated between the part that continues to be recognized and the part that

qualifies for derecognition, based on the fair values of the respective parts. The difference between

the following amounts is recognized in profit or loss in 2017 when the carrying amount of the part

that qualifies for derecognition and the sum of the consideration received and any accumulated

changes in fair value that had been recognized originally and directly in capital reserve.

    Financial assets and financial liabilities are offset and the net amount is reported in the

balance sheet if there is currently an enforceable legal right to offset the recognized financial

assets and financial liabilities and there is an intention to settle on a net basis, or to realize the

                                                    175
assets and settle the liabilities simultaneously. Otherwise, financial assets and financial liabilities

are presented separately in the balance sheet without being offset.

    (3) Classification, recognition and measurement of financial liabilities

    The Company classifies financial liabilities and equity instruments according to the substance

of the contractual arrangements of the financial instrument and the definitions of a financial

liability and an equity instrument. Financial liabilities are classified as financial liabilities at fair

value through profit or loss and other financial liabilities at initial recognition.

    Financial liabilities at fair value through profit or loss include financial liabilities held for

trading and financial liabilities designated as at fair value with its change consolidated in

profit/loss.

    Financial liabilities may be classified as financial liabilities held for trading if one of the

following conditions is met: ① The financial liability is acquired principally for the purpose of

sale or repurchase in the near term; ② The financial liability is part of a portfolio of identified

financial instruments that are managed together and for which there is an objective evidence of

recent pattern of short-term profit-taking; or ③ The financial liability is a derivative, excluding

the derivatives designated as effective hedging instruments, the derivatives classified as financial

guarantee contract, and the derivatives linked to an equity instrument investment, which has no

quoted price in an active market nor a reliably measured fair value, and required to be settled

through delivery of that equity instrument.

    A financial liability may be designated as at fair value with its change consolidated in

profit/loss upon initial recognition only when one of the following conditions is satisfied: ① such

designation eliminates or significantly reduces a measurement or recognition inconsistency that

would otherwise result from measuring liabilities or recognizing the gains or losses on them on

different bases; ② the financial liability forms part of a group of financial liabilities or a group of

financial liabilities and financial liabilities, which is managed and its performance is evaluated on

a fair value basis, in accordance with the Company‘s documented risk management or investment

strategy, and information about the grouping is reported to key management personnel on that

basis; or ③ pursuant to Accounting Standards for Enterprises No. 22 – Recognition and

Measurement of Financial Instruments, the financial liability is designated as combination

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instrument of financial liabilities measured at fair value through profit or loss and related to

embedded derivatives.

    Financial liabilities at fair value through profit or loss are subsequently measured at fair value.

The gain or loss arising from changes in fair value and dividend and interest incomes arising from

such financial liabilities are recognized in profit or loss for the year ended 31 December 2017.

    Other financial liabilities: The derivative financial liabilities linked to and to be settled

through delivery of the equity instruments that are not quoted in an active market and the fair

value of which cannot be reliably measured, such equity instruments are subsequently measured at

cost. Other financial liabilities apart from the financial guarantee contracts are subsequently

measured at amortized cost using the effective interest rate method and the gains or losses arising

from de-recognition or amortization are recognized in profit or loss for the year ended 31

December 2017.

    Financial guarantee contracts: Contracts in which the guarantor and the creditor agrees that

the guarantor will settle debts or assume liabilities in accordance with terms therein if the debtor

fails to make payment. Financial guarantee contracts other than those designated as financial

liabilities at fair value through profit or loss or loan commitments that are not designated at fair

value through profit or loss and granted at a rate below market rates are initially recognized at fair

value less directly attributable transaction fees, and shall be subsequently measured at the higher

of the following: the amount determined in accordance with Accounting Standard for Business

Enterprises No. 13 ―Contingencies‖ and the amount initially recognized less cumulative

amortization recognized in accordance with the principles set out in Accounting Standard for

Business Enterprises No. 14 ―Revenue‖.

    Derecognition of financial liabilities: A financial liability shall be derecognized or partly

derecognized when the current obligation is discharged or partly discharged. When the Company

(debtor) and the creditor have signed a contract, which uses a new financial liability to replace the

existing financial liability, and the contract terms of the new financial liability are substantially

different with the existing financial liability, the existing financial liability shall be derecognized,

and the new financial liability shall be recognized at the same time. If a financial liability is fully

or partially derecognized, the difference between the book value of derecognized portion and the

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consideration paid (including non-cash assets transferred out or new financial liability assumed) is

recognized in the profit or loss.

        (4) Impairment of financial assets

        The carrying values of all financial assets except financial assets at fair value with its change

consolidated in profit/loss should be tested for impairment. If impairment is demonstrated by

objective evidences, the provision of impairment should be prepared according to the impairment

test.

        Objective evidences for recognition of impairment of financial asset include the following

observable matters:

        ① The issuer or debtor is experiencing significant financial difficulties;

        ② The debtor breaches the contractual terms, including default or delinquency in interest or

principal payments;

        ③ The Company, based on economic or legal or other factors, waive the debts;

        ④ It is highly probable that the debtor will enter bankruptcy or other financial

reorganization;

        ⑤ The issuer is experiencing significant financial difficulties that the corresponding financial

instruments could not be traded in an active market;

        ⑥ When it is unable to determine whether cash flows of a specific instrument in a group of

financial assets decrease, but the cash flows since initial recognition of that group of financial

assets would decrease and be measurable, or the ability to repay by the debtors in that group of

financial asset deteriorate, or the unemployment rate of the country or region in which the debtors

situate increases, or the price of the underlying collateral decreases significantly in its region, or

the industry of the debtors is diminishing;

        ⑦ There are significant adverse changes in the technology, market, economy or legal

environments in issuance place of the equity instrument so that the investor could not recover its

investment costs;

        ⑧ There is significant or other than temporary decrease in fair value of equity instrument;

        ⑨ Other objective evidences show that the financial asset is impaired.



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    The Company shall carry out independent impairment test for financial assets of significant

single amounts. With regard to the financial assets with insignificant single amounts, an

independent impairment test shall be included in a combination of financial assets with similar

credit risk characteristics so as to carry out an impairment test. In the event, upon independent test,

the financial asset (including those financial assets with significant single amounts and those with

insignificant amounts) has not been impaired, it shall be included in a combination of financial

assets with similar characteristics so as to conduct another impairment test. Financial assets that

have conducted independent test as impairment loss shall not be included in a combination of

financial assets with similar risk characteristics so as to conduct another impairment test.

    When held-to-maturity investments, loans and accounts receivables have been impaired, the

book value of the financial assets shall be written down to the current value of estimated future

cash flow discounted at the original effective interest rate, and the write-down amount is recorded

as impairment loss and written into profit or loss for the year ended 31 December 2017. When a

financial asset based on amortized cost is impaired, if there are objective evidences showing the

value of this financial asset is recovered and it is objectively related to the matters happened after

the impairment loss recognition, the impairment loss recognized shall be reversed. However, the

reversal shall not result in a carrying amount of the financial asset that exceeds the amortized cost

if the impairment had not been recognized at the date when the impairment is reversed.

    If an available-for-sale financial asset is impaired, the cumulative loss arising from decline in

fair value that had been recognized directly in other comprehensive income is reclassified to the

profit or loss. The cumulative loss reclassified is the difference between its acquisition cost (net of

any principal repayment and amortization) and its current fair value, less any impairment loss

previously recognized in profit or loss. If there are objective evidences that the value of that

financial asset is recovered and it can be objectively related to an event occurred after the

impairment loss recognition, the impairment loss recognized shall be reversed, impairment losses

recognized for equity instruments classified as available-for-sale are reversed through other

comprehensive income, while impairment losses recognized for debt instruments classified as

available-for-sale are reversed through profit or loss.



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    If there‘s an objective evidence that an investment in equity instrument which has no quoted

price in an active market nor a reliably measured fair value or a derivative financial asset which is

linked to that equity instrument and required to be settled through delivery of that equity

instrument is impaired, the carrying amount shall be written down to the present value discounted

at the market rate of return on future cash flows of the similar financial assets, and the write-down

amount shall be recognized as impairment loss in profit or loss. Such impairment loss once

recognized shall no longer be reversed.

    For investments in equity instruments, the specific quantitative criterion for the Company to

determine ―serious‖ or ―not temporary‖ decrease in their fair value are set out below:
Specific quantitative criterion on ―serious‖ decrease in   Decrease in closing fair value relative to the
their fair value                                             cost has reached or exceeded 50%.
Specific quantitative criterion on ―not temporary‖
                                                             Fall for 12 consecutive months.
decrease in their fair value

     11) Receivables

    Receivables of the Company include accounts receivables and other receivables. Recognition

and provision of bad debts of receivables:

    (1) Individually significant receivables for which separate bad-debt provision is made

    Individually significant receivables represent the receivables accounting for above 5% of the

closing balance. The Company conducted a separate impairment test for receivables that are

individually significant on the balance sheet date and made provision for its bad debts based on

the difference between the present value of its estimated future cash flows and its carrying

amount.

    (2) Individually insignificant receivables for which separate bad-debt provision is made

    Individual impairment test is made where there is a concrete evidence indicates that there is

an obvious difference in recoverability, and bad debts provision is made based on the difference

between the present value of its estimated future cash flows and its carrying amount.

    (3) Accounts receivables for which collective bad debt provision is made

    Receivables that are individually tested not impairment, is classified by similar credit risks

into several portfolio and then recognize the impairment loss and make bad debts provision on

prorate basis of the balance of the receivables on the balance sheet date.


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     12) Inventories

     (1) Classification of inventories:

    Inventories refer to the finished goods or commodities held for sale in daily activities, goods

in progress in the production process, consumed materials and supplies in the production process

or providing services of the Company, which mainly include raw materials, revolving materials,

entrusted processed materials, wrap page, low-cost consumables, goods in progress, self-made

semi-finished goods, finished goods (merchandise inventory) and engineering construction, etc.

    (2) Measurement of inventories transferred out

    At delivery, inventories are accounted using the weighted average method for the Company

and most of its subsidiaries and using the first in first out method for the remaining subsidiaries.

    (3) Provision for inventory impairment

    At balance sheet date, inventories are stated at the lower of cost or net realizable value.

    The net realizable value of inventories (including finished products, merchandize and

materials for sale) that can be sold directly is determined using the estimated saleable price of such

inventory deducted by the cost of sales and relevant taxation. The net realizable value of materials

in inventory that are held for production is determined using the estimated saleable price of the

finished product deducted by the cost to completion, estimated cost of sales and relevant taxation.

The net realizable value of inventory held for performance of sales contract or labor service

contract is determined based on the contractual price; in case the amount of inventory held by the

enterprise exceeds the contractual amount, the net realizable value of the excess portion of

inventory is calculated using the normal saleable price. Provision for impairment of inventories is

made for individual inventory.

    For items of inventories that is produced and marketed in the same geographical area and with

the same or similar end uses or purposes, which cannot be practicable evaluated separately from

other items, cost and net realizable value of inventories may be determined on an aggregate basis.

For large quantity and low value items of inventories, cost and net realizable value of inventories

may be determined on types of inventories.

    Provision for impairment of inventories is made and recognized as profit or loss when the cost

is higher than the net realizable value on the balance sheet date. If the factors that give rise to the

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provision in prior years are not in effect in current year, provision would be reversed within the

impaired cost, and recognized in the profit or loss.

    (4) Inventory system

    The Company adopts perpetual inventory system.

    (5) Amortization of low-value consumables and packaging

    Low-value consumables and packages of the Company are amortized by one-time write-off.

     13) Long-term equity investments

    Long-term equity investments in this section refer to equity investments held by the Company

that give it control, joint control or significant influence over the investee. Long-term equity

investments where the Company does not exercise control, joint control or significant influence

over the investee are accounted for as available-for-sale financial assets.

    (1) Recognition of initial cost of investment

    ① For long-term equity investment obtained from business consolidation under common

control, the initial cost is measured at the combining party‘s share of the carrying amount of the

equity of the combined party; for a long-term equity investment obtained from business

consolidation under non-common control, the initial cost is the consolidation cost at the date of

acquisition;

    ② For the long-term equity investment acquired in a manner other than enterprise

combination: the initial investment cost of the long-term equity investment acquired by payment

in cash shall be the total purchase price; the initial investment cost of the long-term equity

investment acquired by issuing equity securities shall be the fair value of the equity securities

issued;For long-term equity investment acquired by debt restructuring, the initial investment cost

shall be recognized in accordance with the requirements under Accounting Standards for

Enterprises No. 12 - Debt Restructuring. For long-term equity investment acquired by the

exchange of non-monetary assets, the initial investment cost shall be recognized in accordance

with relevant requirements under the Rules.

    (2) Subsequent measurement and profit or loss recognition

    ① Cost method



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    Where the investor has a control over the investee, long-term equity investments are measured

using cost method. For long-term equity investments using cost method, unless increasing or

reducing the investment, the carrying value is unchanged. The Company‘s share of the profit

distributions or cash dividends declared by the investee are recognized as investment income.

    ② Equity method

    Investor's long-term equity investments in associates and joint ventures are measured using

equity method. Where part of the equity investments of an investor in its associates are held

indirectly through venture investment institutions, common fund, trust companies or other similar

entities including investment linked insurance funds, such part of equity investments indirectly

held by the investor shall be measured at fair value through profit or loss according to relevant

requirements of Accounting Standards for Business Enterprises No.22—Recognization and

measurement of Financial Instruments regardless whether the above entities have significant

influence on such part of equity investments, while the remaining part shall be measured using

equity method.

    Under the equity method, where the initial investment cost of a long-term equity investment

exceeds the Company‘s share of the fair value of the investee‘s identifiable net assets at the time

of acquisition, no adjustment is made to the initial investment cost. Where the initial investment

cost is less than the Company‘s share of the fair value of the investee‘s identifiable net assets at

the time of acquisition, the difference is recognized in profit or loss for the period, and the cost of

the long-term equity investment is adjusted accordingly.

    For long-term equity investments accounted for using the equity method, the Company

recognizes the investment income and other comprehensive incomes according to its share of net

profit or loss and other comprehensive incomes of the investee, and the carrying amount of the

long-term equity investments shall be adjusted accordingly; the carrying amount of the investment

is reduced by the Company‘s share of the profit distribution or cash dividends declared by an

investee; for changes in owner‘s equity of the investee other than those arising from its net profit

or loss, other comprehensive income and profit distribution, the carrying amount of the long-term

equity investment shall be adjusted and recognized to capital reserve. When recognizing

attributable share of the net profit and losses of the investee, the net profit of the investee shall be

                                                   183
recognized after adjustment on the ground of the fair value of all identifiable assets of the investee

when it obtains the investment. If the accounting policies and accounting periods adopted by the

investee are different from those adopted by the Company, an adjustment shall be made to the

financial statements of the investee in accordance with the accounting policies and accounting

periods of the Company and recognize the investment incomes and other comprehensive incomes.

    The Company‘s share of net losses of the investee shall be recognized to the extent that the

carrying amount of the long-term equity investment together with any long-term interests that in

substance form part of the investor‘s net investment in the investee are reduced to zero. If the

Company has to assume additional obligations, the estimated obligation assumed shall be

provided for and charged to the profit or loss as investment loss for the period. Where the investee

is making net profits in subsequent periods, the Company shall resume recognizing its share of

profits after setting off against the share of unrecognized losses.

    (3) Change of the accounting methods for long-term equity investments

    ① Change of measurement at fair value to accounting under equity method: where the equity

investment held have no control, joint control or significant impact on the investee and that are

accounted according to the financial instrument recognition and measurement criteria can carry

out common control or place significant impact due to addition of investment which resulted in

the increase of shareholding, the investee shall plus the fair value of the equity investment

originally held determined in accordance with the Standards for Recognition and Measurement of

Financial Instruments and the fair value of the consideration payable for new investment as the

initial investment cost accounted under equity method when changing the equity method.

    ② Change of measurement at fair value or accounting under equity method to cost method:

the equity investment of the investee held by the investor with no control, joint control or

significant impact and accounted according to the financial instrument recognition and

measurement criteria, or the long-term equity investment in associates or joint venture originally

held that can control the investee due to addition of investment, shall be accounted in accordance

with the long-term equity investment formed by combination of enterprises.

    ③ Change of accounting under equity method to measurement at fair value: the long-term

equity investment originally held with common control or significant impact on the investee that

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cannot conduct common control or significant impact on the investee due to the decrease of

shareholding as a result of factors such as partial disposal, shall be accounted in accordance with

Standards for Recognition and Measurement of Financial Instruments, and the difference between

the fair value on the date when the common control or significant impact is lost and the book

value is included in profit or loss in the relevant year.

    ④ Change of cost method to equity method: where control on the investee change to

significant impact or common control with other investors due to factors such as disposal of

investment, the long-term equity investment cost that ceased to be recognized shall first be carried

forward on the proportion of the investment disposed. Then comparing the cost of the remaining

long-term equity investment with the attributable fair value of the identifiable net assets of the

investee at the original investment calculated on proportion of the remaining shareholding, where

the former larger than the later, it belongs to the goodwill as showed in deciding the investment

price and will not adjust the carrying amount of the long-term equity investment; where the former

less than the later, the retained earnings will be adjusted along with the adjustment of the

long-term equity investment.

    (4) Basis of conclusion for common control and significant influence over the investee

    ① Joint control over an investee refers to activities which have a significant influence on

return of an arrangement could be decided only by mutual consent of the investing parties sharing

the control, which includes the sales and purchase of goods or services, management of financial

assets, acquisition and disposal of assets, research and development activities and financing

activities, etc.

    ② Significant influence on the investee refers to significant influence over the investee exists

when holding more than 20% but less than 50% of the shares with voting rights or even if the

holding is below 20%, there is still significant influence if any of the following conditions

satisfied:

    1) There is representative in the board of directors or similar governing body of the investee;

    2) Participating in investee‘s policy setting process;

    3) Assign management to investee;

    4) The investee relies on the technology or technical information of the investor;

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    5) Major transactions with the investee.

    (5) Impairment test and provision of impairment

    At the balance sheet date, the Company reviews whether there is impairment indicator for the

long-term equity investments. When there is impairment indicator, the recoverable amount is

determined through impairment test and impairment is provided based on the difference between

the recoverable amount and the carrying value. Impairment loss is not reversed once provided.

    The recoverable amount is the higher of net fair value of long-term equity investments on

disposal and the present value of estimated future cash flows.

    (6) Disposal of long-term equity investments

    For disposal of long-term equity investment, the difference between the considerations

received and the carrying amount of the disposed investment is recognized in profit or loss. For

long-term equity investment accounted for using the equity method, the part recognized in other

comprehensive income is accounted on pro rata basis upon disposal in the same way as the

relevant assets or liabilities are disposed of directly by the investee.

     14) Investment properties

    Investment properties of the Company include leased land use rights and leased buildings.

    An investment property is initially measured at cost, and cost method is adopted for

subsequent measurement.

    The buildings leased out of investment properties of the Company are depreciated over their

useful lives using the straight-line method. The specific measurement policy is the same as fixed

assets. For land use rights leased out or held for resale after appreciation in value, they are

amortized over their useful lives using the straight-line method. The specific measurement policy

is the same as that of intangible assets.

    At the balance sheet date, the Company reviews whether there is impairment indicator for

investment properties. When there is impairment indicator, the recoverable amount is recognized

through an impairment test and impairment is provided based on the difference between the

carrying value and the recoverable amount. Impairment is not reversed in subsequent periods.

     15) Fixed assets

     (1). Recognition criteria of fixed assets

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    Fixed assets are tangible assets that are held for production of goods, provision of labor

services, leasing or administrative purposes, and have useful life more than one fiscal year, which

are recognized when the following conditions are met:

    ① economic benefits in relation to the fixed assets are very likely to flow into the enterprise;

    ② the cost of the fixed assets can be measured reliably.

    (2)Classification and Depreciation method of fixed assets

    The fixed assets of the Company can be divided into: buildings and constructions, production

equipment, transportation equipment and office equipment, etc. The straight-line method over

useful lives is used to measure depreciation. The useful lives and the expected net residual value

of fixed assets are determined according to the nature and usage of various fixed assets. At the end

of each year, the useful lives, expected net residual value and depreciation method of fixed assets

are reviewed, and adjusted if there is variance with original policies; The Company has made

provisions for all of the fixed assets except for the fixed assets with full provision and used

continuously.
                                                                       Expected net residual
             Type of fixed assets                 Useful lives
                                                                              value
                Land ownership
             Houses and buildings                 8-40 years                   0%-5%
             Machinery equipment                  4-20 years                   0%-5%
                     Vehicles                     5-10 years                   0%-5%
         Office equipment and others              3-10 years                   0%-5%

    (3)Test method and provision for impairment of fixed assets

    At the balance sheet date, the Company reviews whether there is impairment indicator for the

fixed assets. When there is an impairment indicator, the recoverable amount is estimated and

impairment is provided based on the difference between the carrying value and the recoverable

amount once the impairment of an asset is recognized, it will not be reversed in the subsequent

accounting period.

    (4)Basis for Recognition and measurement of fixed assets held under finance lease

    Basis for recognition of fixed assets held under finance lease: leases that transfer all the risks

and rewards related to the ownership of the relevant assets. The asset is recognized if one or more


                                                 187
of the following criteria is met: ① upon expiry of the lease term, the ownership of the leased

asset is transferred to the lessee; ② the lessee has the option to purchase the leased asset at a

price expected to be sufficiently lower than the fair value of the leased asset when the option is

exercised and at the inception of the lease, it is reasonably certain that the lessee will exercise the

option; ③ the lease term approximates the useful life of the leased asset even if the ownership is

not transferred; ④ at the inception of the lease, the present value of the minimum lease payments

is substantially equivalent to the fair value of the leased asset; ⑤ the leased assets are of such a

specialized nature that only the lessee can use them without major modification.

    Measurement of fixed assets held under finance lease: fixed assets held under finance lease

are initially recognized at the lower of fair value of the leased assets at the inception of lease and

the present value of minimum lease payments.

    Subsequent measurement of fixed assets held under finance lease is accounted for using the

depreciation and impairment policies of owned fixed assets.

     16) Construction in progress

    (1) Types of construction in progress

    Construction in progress for the Company is self-constructed.

    (2) Standard and date of transfer from construction in progress to fixed assets

    The construction in progress of the Company is transferred to fixed assets when the project is

completed and ready for its intended use, which shall satisfy one of the following conditions:

    ① The construction of the fixed assets (including installation) has been completed or

substantially completed;

    ② The fixed asset has been used for trial operation and it is evidenced that the asset can

operate ordinarily or produce steadily qualified products; or the result of trial operation proves that

it can operate normally;

    ③ Further expenditure incurred for construction is very minimal or remote;

    ④ The constructed fixed asset reaches or almost reaches the design or the requirements of

contract, or complies with the design or the requirements of contract.

    (3) Impairment test and provision of impairment of construction in progress



                                                  188
    At the balance sheet date, the Company reviews the construction in progress to check whether

there is any sign of impairment and an impairment test is needed to recognize the recoverable

amount when there are signs that construction in progress may impair. The impairment loss should

be the lower of the carrying value and recoverable amount and impairment loss cannot be reversed

in the following accounting period if it has been provided.

    The recoverable amount of construction in progress should base on the higher value between

fair value of asset less disposal expense and present value of estimated cash flow in the future.

     17) Borrowing costs

    (1)Recognition principles for borrowing cost capitalization

    The Company‘s borrowing costs that are directly attributable to the acquisition or production

of a qualifying asset are capitalized into the cost of relevant assets. Other borrowing costs are

recognized as expenses in profit and loss for the year ended 31 December 2017 when incurred.

Qualifying assets include fixed assets, investment properties and inventories that necessarily take

a substantial period of time for acquisition, construction or production to get ready for their

intended use or sale.

    (2)Computation of capitalized amount of borrowing costs

    Capitalization period refers to the period from the commencement to the cessation of

capitalization of borrowing costs, excluding the periods in which capitalization of borrowing costs

is suspended.

    Capitalization interruption period: Capitalization of borrowing costs is suspended during

periods in which the acquisition or construction of a qualifying asset is interrupted abnormally and

the interruption lasts for more than 3 months.

    Computation of capitalized amount of borrowing costs: ① Specific borrowings will be

recorded based on the actual interest expense incurred in the period of special borrowings less the

interest income from unutilized borrowings placed at banks or investment gain from temporary

investment; ② Normal borrowings utilized are calculated based on the weighted average of

expenses of the aggregate asset exceeding the asset expenses of the portion of special borrowings

multiplied by the capitalization ratio of the normal borrowings utilized. Capitalization ratio is

calculated based on weighted average interest rate of normal borrowings; ③ For borrowings with

                                                 189
discount or premium, the discount or premium was amortized over the accounting periods

borrowings to adjust the interest in every period using the effective interest rates.

     18) Intangible assets

    Intangible assets are the identifiable non-monetary assets which have no physical shape and

are possessed or controlled by the Company.

    Measurement of intangible assets

    Intangible assets are initially recognized at costs. The actual costs of purchased intangible

assets include the consideration and relevant expenses paid. For intangible asset contributed by

investors, the value agreed in the investment contract or agreement is the actual cost of the

intangible asset. But if the value agreed in the investment contract or agreement is not a fair value,

the fair value of the intangible asset is regarded as the actual cost. The cost of a self-developed

intangible asset is the total expenditure incurred in bringing the asset to its intended use.

    Subsequent measurement of intangible assets of the Company: ① Intangible assets with

finite useful lives are amortized on a straight-line basis; at the end of each year, the useful lives

and amortization policy are reviewed, and adjusted if there is any variance with original policies;

② Intangible assets with indefinite useful lives are not amortized and the useful lives are

reviewed at each year end date. If there is objective evidence that the useful life of an intangible

asset is finite, the intangible asset is amortized using the straight-line method according to the

estimated useful life.

    Criterion of determining indefinite useful life

    The useful life of an intangible asset is indefinite if the period in which the future economic

benefits generated by the intangible asset could not be determined, or the useful life could not be

ascertained.

    Criterion of determining intangible assets with indefinite useful lives: ① For intangible

assets derived from contractual rights or other legal rights and there are no explicit years of use

stipulated in the contract or laws and regulations; ② the period in which generating benefits for

the Company still could not be estimated after considering the industrial practice or relevant

expert opinion.



                                                  190
    At the end of each year, the useful lives of the intangible assets with indefinite useful lives are

reviewed. The assessment is performed by the departments that use the intangible assets, using the

down-to-top approach, to determine if there are changes to the determining basis of indefinite

useful lives.

    (3) Methods for impairment test and provision for impairment of intangible assets

    As at the balance sheet date, the Company reviews the intangible assets to check whether

there is an indication of impairment and an impairment test is needed to recognize the recoverable

amount when there are signs that intangible assets may impair. The impairment provision should

be the lower of the recoverable amount and carrying value and provision for impairment loss

cannot be reversed in the following accounting periods once it has been provided.

    The recoverable amount of intangible assets should be based on the higher value between the

net of fair value of asset less disposal expense and present value of estimated cash flow of assets

in the future.

    (4) Basis for research and development stage for internal research and development project

and basis for capitalization of expenditure incurred in development stage

    As for an internal research and development project, expenditure incurred in the research

stage is recognized in profit or loss in the period as incurred. Expenses incurred in the

development stage are recognized as intangible assets if all of the following conditions are met:

① the technical feasibility of completing the intangible asset so that it will be available for use or

for sale; ② the intention to complete the intangible asset for use or for sale; ③ how the

intangible asset will generate economic benefits, including there is evidence that the products

produced by the intangible asset has a market or the intangible asset itself has a market; if the

intangible asset is for internal use, there is evidence that there exists usage for the intangible asset;

④ the availability of adequate technical, financial and other resources to complete the

development and the ability to use or sell the intangible asset; ⑤ the expenditures attributable to

the development of the intangible asset could be reliably measured.

    Basis for distinguishing research stage and development stage of an internal research and

development project: research stage is the activities carried out for the planned investigation and

search for obtaining new technology and knowledge, which has the characteristics of planning and

                                                   191
exploration; before commercial production or other uses, the application of achievements and

other knowledge obtained from the research stage in a plan or design to produce new or

substantially improved materials, equipment and products is regarded as development stage,

which has the characteristics of pinpointing and is very likely to form results.

    All the expenditures on research and development which cannot be distinguished between

research stage and development stage are recognized in the profit or loss when incurred.

     19) Impairment of long-term assets

    Long-term equity investment, investment properties measured based on cost model, fixed

assets, construction in progress, intangible assets and other long-term assets are tested for

impairment if there is any indication that an asset may be impaired at the balance date. If the result

of the impairment test indicates that the recoverable amount of the asset is less than its carrying

amount, a provision for impairment will be made for the difference will be recorded in impairment

loss. The recoverable amount is the higher of the net of the asset‘s fair value less disposal costs

and the present value of the future cash flows expected to be derived from the asset. Provision for

asset impairment is determined and recognized on the individual asset basis. If it is not possible to

estimate the recoverable amount of an individual asset, the recoverable amount of a group of

assets to which the asset belongs is determined. A group of assets is the smallest group of assets

that is able to generate independent cash inflows.

    Goodwill is tested for impairment at least at each year end. In terms of impairment test of

the goodwill, the carrying amount of the goodwill, arising from enterprise combination, shall be

allocated to the related asset groups on reasonable basis since the acquisition date, or to the related

asset group portfolios if it is difficult to be allocated to the related asset groups. When the carrying

amount of the goodwill is allocated to the related asset groups or asset group portfolios, it shall be

allocated in the proportion of the fair value of each asset group or asset group portfolio against the

total fair value of related asset groups or asset group portfolios. If it is difficult to measure the fair

value reliably, it shall be allocated in the proportion of the carrying amount of each asset group or

asset group portfolio against the total carrying amount of related asset groups or asset group

portfolios. When impairment test is made to the related asset groups or asset group portfolios

including goodwill, if there is an indication that the related asset groups or asset group portfolios

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are prone to impair, the Company shall firstly test for impairment for the asset groups or asset

group portfolios excluding goodwill and calculate the recoverable amount and recognize the

impairment loss accordingly by comparing with its carrying amount. The Company shall then test

for impairment for the asset groups or asset group portfolios including goodwill and compare the

carrying amount (including the carrying amount of allocated goodwill) with its recoverable

amount of related asset groups or asset group portfolios. Provision for impairment loss shall be

recognized when the recoverable amount of the related asset groups or asset group portfolios is

lower than its carrying amount.

    Once the above impairment loss of assets is recognized, it shall not be reversed in any

subsequent accounting period.

     20) Long-term prepaid expense

    Long-term prepayments are expenditures which have incurred but the benefit period is more

than one year (excluding one year). They are amortized evenly over the benefit period of each

item of expenses. If the long-term prepayments are no longer beneficial to the subsequent

accounting periods, the unamortized balance is then fully transferred to profit or loss for the

period.

     21) Employee benefits

    Employee benefits are all forms of compensation and other relevant expenditure given by the

Company in exchange for services rendered by employees, including short-term employee

benefits, post-employment benefits, termination benefits and other long-term benefits.

    Short-term employee benefits include short-term salaries, bonus, allowance, subsidies, staff‘s

welfare, housing provident fund, union funds and employee education funds, medical insurance

fees, injury insurance fees, maternity insurance fees, short-term paid absence, short-term profit

sharing plans, etc.. During the accounting period when employees render services, short-term

benefits payable that actually incurred shall be recognized as liabilities and credited into profit and

loss or relevant assets cost on an accrual basis for the benefit objects.

    Post-employment benefits mainly include the basic pension insurance, supplementary pension,

etc., In accordance with the risks and obligations undertaken by the Company, the

post-employment benefits are classified as defined contribution plans and defined benefit pension

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plans. Defined contribution plans: the Company shall recognize the sinking fund paid to individual

entity on balance sheet date as a liability in exchange of services from the employee in accounting

period, and credited into profits or losses or related assets costs in accordance with the benefit

objects. Defined benefit plans: the cost of providing benefits is determined using the projected unit

credit method, with actuarial valuations being carried out by independent actuary at the interim

and the annual balance sheet date. Staffs' benefit costs incurred by the defined benefit plan of the

Group are categorized as follows: (1) service cost, include current period service cost, past-service

cost and settlement gain or loss. Current period service cost means the increase of the present

value of defined benefit obligation resulted from the year 2017 service offered by employee.

Past-service cost means the increase or decrease of the present value of defined benefit obligation

resulted from the revision of the defined benefit plans related to the prior period service offered by

employee; (2) interest costs of defined benefit plans; (3) changes related to the remeasurement of

defined benefit plans liabilities. Unless other accounting standards require or permit to charge the

employee benefits into assets cost, the Company charges (1) and (2) above into profit or loss and

recognized (3) above as other comprehensive income without transferring to profit or loss in

subsequent accounting periods.

    Termination benefits: the indemnity proposal provided by the Company for employees for the

purpose of terminating labor relation with the employees before the expiry of the labor contract or

encouraging employees to accept downsizing voluntarily, when the following conditions are met,

recognize and at the same time credited into profit or loss the accrued liabilities arising from the

indemnity as a result of terminating labor relation with the employees: the Company has made a

formal plan for termination of employment relationship or has made an offer for voluntary

redundancy which will be implemented immediately; and the Company could not unilaterally

withdraw from the termination plan or the redundancy offer. Early retirement benefits will adopt

same principles as the termination benefit. The Company will credit the salaries and social

benefits intend to pay for these early retirees during the periods from the date of early retirement

to the normal retirement date to profit or loss for the year ended 2017 when recognition conditions

for accrued liabilities are met.

     22) Provision

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      (1) Criterion for determining of estimated liability

     If an obligation in relation to contingencies such as external guarantees, discounting of

commercial acceptance bills, pending litigation or arbitration and product quality assurance is

the present obligation of the Company and the performance of such obligation is likely to lead

to the outflow of economic benefits and its amount can be reliably measured, such obligation

shall be recognized as estimated liability.

     (2) Measurement of estimated liability

     The best estimate of the expenditure from the performance of the current obligation is

initially recorded as accrued liability. When the necessary expenditures falls within a range

and the probability of each result in the range are identical, the best estimate is the median of

the range; if there are severable items involved, every possible result and relevant probability

are taken into account for the best estimation.

     At the balance sheet date, the carrying value of estimated liabilities is reviewed. If there

is objective evidence that the carrying value could not reflect the current best estimate, the

carrying value is adjusted to the best estimated value.
     23) Share-based payments

     For equity-settled share-based payment transaction in return for services from employees,

it shall be measured at the fair value of equity instruments granted to the employees. For the

payment of such fair value that may only be exercised if services are fulfilled during the

vesting period or the specified performance is achieved, the fair value shall, based on the best

estimate of the number of exercisable instruments during the vesting period, be recognized in

relevant costs or expenses in straight-line method with the increase in the capital reserve

accordingly.

     The cash-settled share-based payment shall be measured at the fair value of liability

assumed by the Company, which is calculated and determined based on the shares or other

equity instruments. For the cash-settled share-based payment that may be exercised

immediately after the grant, the fair value of the liability assumed by the Company shall, on

the date of the grant, be recognized in relevant costs or expenses and the liabilities shall be

increased accordingly. For cash-settled share-based payment that may be exercised if services

are fulfilled during the vesting period or the specified performance is achieved, on each

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balance sheet date within the vesting period, the services acquired in the year 2017 shall,

based on the best estimate of exercise, be recognized in relevant costs or expenses at the fair

value of the liability assumed by the Company, and the liabilities shall be adjusted

correspondingly.

     At each balanced sheet date and the settlement date prior to the settlement of liabilities,

the fair value of the liability is re-measured with its change consolidated in profit/loss.

     When there is changes to the Company's share-based payment plans, if the modification

increases the fair value of the equity instruments granted, corresponding recognition of

service increase in accordance with the increase in the fair value of the equity instruments; if

the modification increases the number of equity instruments granted, the increase in fair value

of the equity instruments is recognized as a corresponding increase in service achieved.

Increase in the fair value of equity instruments refer to the difference between the fair values

of the equity instrument on the modified date before or after the modification. If the Company

modifies the exercisable conditions in such manner conductive to the employees, including

the shortening of the vesting period, change or cancellation of the performance conditions

(rather than market conditions), the Company shall consider the modified exercisable

conditions upon the disposal of exercisable conditions. If the modification reduces the total

fair value of shares paid or the Company uses other methods not conductive to employees to

modify the terms and conditions of share-based payment plans, it will continue to be

accounted for the services obtained in the accounting treatment, as if the change had not

occurred, unless the Company cancelled some or all of the equity instruments granted.

     During the vesting period, if the Company cancel equity instruments granted will be

treated as accelerating the exercise of rights and the remaining vesting period should be

recognized immediately in the profit or loss, while at the same time recognize the capital

reserve. Employees or other parties can choose to meet non-vesting conditions, but for those

that are not met in the vesting period, the Company will treat it as cancellation of equity

instruments granted.
     24) Revenue

      (1) Sale of goods




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     Revenue from the sale of goods shall be recognized at the amount received or receivable

from buyers based on contractual or agreed prices, when all of the following conditions are

satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the

buyer; ② the Company retains neither continuing managerial involvement to the degree usually

associated with ownership nor effective control over the goods sold; ③ the amount of revenue

can be measured reliably; ④ it is probable that the associated economic benefits will flow to the

enterprise; ⑤ the associated costs incurred or to be incurred can be measured reliably.

     Recognition process of the Company‘s sales revenue: business personnel submit sales

application in the business system according to the consumers‘ orders; financial personnel review

the remaining credit of the consumers or whether the payment for goods is made in advance

according to the sales application, and notify the warehouse to handle the delivery formalities if

the delivery conditions are met. The Financial Department confirms that the major risks of

property in the goods and rewards have been transferred to the buyers upon the receipt of waybill

with the consumers‘ signature, and then issue sales invoices to confirm the sales revenue.

     (2) Provision of labor services

     At the balance sheet date, when the outcome of a transaction involving the rendering of

services can be estimated reliably, revenue from provision of services shall be recognized using

the percentage of completion method. The Company confirms the completion progress in

accordance with the ratio of actual cost accounting for the total estimated cost. At the balance

sheet date, when the outcome of the transaction involving the rendering of services cannot be

estimated reliably, it shall be dealt with in the following ways: ① if the cost of services incurred

is expected to be compensated, the revenue from the rendering of services is recognized to the

extent of actual cost incurred to date, and the relevant cost is transferred to cost of service; ② if

the cost of services incurred is not expected to be compensated, the cost incurred should be

included in the profit or loss, and no revenue from the rendering of services may be recognized.

     (3) Assignment of asset use rights

     Revenue from usage fee arising from assignment of intangible assets (such as trademark

rights, patent rights, franchise rights, software and copyright, etc.) and the use right of other assets

will be recognized in accordance with the time and method for charge as required under relevant

contract or agreement and at the same time satisfy the conditions that the economic benefit in

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connection with transaction could flow into the Company and the amount of revenue could be

reliably measured.

     (4) Construction contracts revenue

     Where the outcome of a construction contract can be estimated reliably at the balance sheet

date, revenues and expenses associated are recognized using the percentage of completion method.

The term ―percentage of completion method‖ means a method by which the contractor recognizes

its revenues and costs in the light of the schedule of the contracted project. The Company

ascertained the completion schedule of a contract project according to the proportion of the

completed total contract cost against the expected total contract cost.

     25) Government grants

    (1) Types of government grants

    Government grants refer to the monetary assets or non-monetary assets obtained by the

Company from the government for free, not including the investment made by the government as

an owner. The government grants are mainly divided into asset-related government grants and

revenue-related government grants.

    (2) Accounting treatment of government grants

    Asset-related government grants shall be recognized as deferred income in profit or loss for

year ended 31 December 2017 on an even basis over the useful life of the asset;government grants

measured at nominal amount shall be recorded directly in profit and loss for the year ended 31

December 2017. Revenue-related government grants shall be treated as follows: ① those used to

compensate relevant expenses or losses to be incurred by the enterprise in subsequent periods are

recognized as deferred income and recorded in profit or loss for the year ended 31 December 2017

when such expenses are recognized; ② those used to compensate relevant expenses or losses that

have been incurred by the enterprise are recorded directly in profit or loss for the year ended 31

December 2017.

    (3) Basis for determination of asset-related government grant and revenue-related government

grant

    If the government grant received by the Company is used for construction or other project that

forms a long-term asset, it is regarded as asset-related government grant.


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    If the government grant received by the Company is not asset-related, it is regarded as

revenue-related government grant.

    Government grant received without clear objective shall be classified as asset-related

government grant or revenue-related government grant by:

    ① Government grant subject to a certain project shall be separated according to the

proportion of expenditure budget and capitalization budget, and the proportion shall be reviewed

and modified if necessary on the balance sheet date;

    ② Government grant shall be categorized as related to income if its usage is just subject to

general statement and no specific project in relevant document.

    (4) Amortization method and determination of amortization period of deferred revenue related

to government grants

    Asset-related government grant received by the Company is recognized as deferred revenue

and is evenly amortized to the profit or loss over the estimated useful life of the relevant asset

starting from the date the asset is available for use.

    (5) Recognition of government grants

    Government grant measured at the amounts receivable is recognized at the end of period when

there is clear evidence that the conditions set out in the financial subsidy policies and regulation

are fulfilled and the receipt of such financial subsidy is assured.

    Other government grants other than those measured at the amounts receivables are recognized

upon actual receipt of such subsidies.

     26) Deferred tax assets / deferred tax liabilities

     Deferred tax assets and deferred tax liabilities of the Company are recognized:

      (1) Based on the difference between the carrying amount and the tax base amount of an

asset or a liability (items not recognized as assets and liabilities but their tax base is ascertained by

the current tax laws and regulation, the tax base is the difference), deferred income tax asset or

deferred income tax-liability is calculated using the applicable tax rate prevailing at the expected

time of recovering the relevant asset or discharging the relevant liability.

      (2) Deferred tax asset is recognized to the extent that there is enough taxable income for the

utilization of the deductible temporary difference. At the balance sheet date, if there is sufficient

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evidence that there would be enough taxable benefit for the utilization of the deductible temporary

difference, the deferred income tax asset not previously recognized is recognized in current period.

If there is no sufficient evidence that there would be enough future taxable income for the

deduction of the deferred income tax asset, the carrying value of the deferred income tax asset is

reduced.

     (3) Deferred tax liability is recognized for taxable temporary difference arising from

investments in subsidiaries and associated companies, unless the Company could control the

reversal of the temporary differences and the temporary differences would not be probably

reversed in the foreseeable future. For deductible temporary differences arising from investments

in subsidiaries and associated companies, deferred income tax asset is recognized if the temporary

difference will be very probably reversed in foreseeable future and there will be sufficient future

taxable profit to deduct the deductible temporary difference.

     (4) No deferred tax liability is recognized for a temporary difference arising from the initial

recognition of goodwill. No deferred income tax asset or deferred income tax liability is

recognized for the temporary differences resulting from 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). At the balance sheet date, deferred income tax assets

and deferred income tax liabilities are measured at the tax rates that are estimated to apply to the

period when the asset is realized or the liability is settled.

     27) Lease

      (1) Operating lease

     ① Rental payments for asset rented are amortized on a straight-line basis over the lease term

(including rent-free periods), and credited into the current expenses. Initial direct costs that are

attributable to leasing transactions paid by the Company are credited to current expense.

     When the lesser of the assets bears the lease related expenses which should be undertaken by

the Company, the Company shall deduct that part of expense from the rent and amortize the net

amount over the lease term and credited to current expense.

     ② Rental income received from assets rented out is amortized on a straight-line basis over

the lease term (including rent-free periods), and recognized as lease income. Initial direct costs

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involving leasing transactions paid by the Company are credited into current expenses, in case the

amount is significant, it will be capitalized, and are credited into current revenue on the same basis

as rental income recognized over the lease term.

     When the Company bears the lease related expenses which should be undertaken by the

lessee, the Company shall deduct that part of expense from the total rent income and allocate the

rental payment over the lease term.

     (2)Finance lease

     ①When the Company is a lessee, the leased asset is recorded at the amounts equal to the

lower of the fair value of the leased asset and the present value of the minimum lease payments on

the lease beginning date and the long-term payables is recorded at the amounts of the minimum

lease payments. The difference between the recorded amount of the leased asset and the minimum

lease payments is accounted for as unrecognized finance charge.

     The unrecognized finance charge is amortized using the effective interest method over the

period of the lease and accounted in finance charge. Initial direct costs incurred by the Company

are credited in value of leased assets.

     ②When the Company is a lessor, the difference between sum of the lease receivables and

unguaranteed residual value and its present value is accounted for as unrealized finance income

and is recognized as rental income over the period of receiving rental. Initial direct costs

attributable to lease transaction incurred by the Company shall be accounted in the initial

measurement of finance lease receivables and reduced the amount of recognized during period of

the lease.

     28) Other significant accounting policies and accounting estimations

      (1) Share repurchases

     When the Company purchases its own shares to decrease its registered capital or reward its

staff, it shall be included in treasury stock against the amount actually paid.

     When the Company awards the purchased shares to its staff under the equity-settled

share-based payment agreement, it shall be included in capital reserve (equity premium) against

the difference between the book balance of awarded treasury stock and the staff-paid cash and

capital reserve recognized upon the granting of equity instruments.

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     When cancelling the treasury stock, the share capital shall be cancelled against the total face

value of the cancelled treasury stock; the treasury stock shall be eliminated against the book

balance of the cancelled treasury stock; the capital reserve (equity premium) shall be eliminated

against the difference; if the equity premium is insufficient for elimination, the retained earnings

shall be adjusted accordingly.

      (2) Asset securitization business

     Some of the Company‘s receivables are securitized. The Company‘s underlying assets are

trusted to a special purpose entity which issues senior asset-backed securities to investors. The

Company holds subordinated asset-backed securities which are not transferrable before both the

principals and interests of the senior asset-backed securities are repaid. The Company serves as

the asset service supplier, providing services including asset maintenance and its daily

management, formulation of the annual asset disposal plan, formulation and implementation of the

asset disposal plan, signing relevant asset disposal agreements and periodic preparation of asset

service report. Meanwhile, the Company, as the liquidity support organization, provides liquidity

support before the principals of the senior asset-backed securities are fully repaid to make up the

differences of the interests or principals. Trust assets are prioritized to repay the principals and

interests of the senior asset-backed securities after the trust taxes and relevant fees are paid, and

the remaining trust assets upon the full repayment of the principals and interests will be owned by

the Company as returns of the subordinated asset-backed securities. The trust assets are not

derecognized because the Company retains substantially all the risks and rewards. At the same

time, the Company has de facto controls over the special purpose entity which are consolidated

into our financial statements.

     The Company evaluates the extent to which it transfers the risks and rewards of ownership of

the assets to the other entities and determines whether it retains control while applying the

accounting policy in respect of asset securitization.

     ①The financial asset is derecognized when the Company transfers substantially all the risks

and rewards of ownership of the financial asset;

     ② The financial asset is continued to recognize when the Company retains substantially all

the risks and rewards of ownership of the financial asset;

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     ③ When the Company neither transfers nor retains substantially all the risks and rewards of

ownership of the financial asset, the Company evaluates whether it retains control over the

financial asset. If the Company does not retain control, it derecognizes the financial asset and

recognizes separately as assets or liabilities any rights and obligations created or retained in the

transfer. If the Company retains control, it continues to recognize the financial asset to the extent

of its continuing involvement in the financial asset.

      (3) Hedge accounting

     ① Hedges are classified as:

     1) A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset

or liability or an unrecognized firm commitment (except foreign exchange risk).

     2) Cash flow hedges is a hedge of the exposure to variability in cash flows that is either

attributable to a particular risk associated with a recognized asset or liability or a highly probable

forecast transaction, or a foreign currency risk in an unrecognized firm commitment.

     3) Hedge of a net investment in a foreign operation is a hedge of the exposure to foreign

exchange risk associated with a net investment in a foreign operation. Net investment in a foreign

operation is the share of interest in the net asset of the foreign operation.

     ② Designation of the hedge relationship and recognition of the effectiveness of hedging:

     At the inception of a hedge relationship, the Company formally designates the hedge

relationship and prepares documents relating to the hedge relationship, the risk management

objective and its strategy for undertaking the hedge. The documentation includes identification of

the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and

how the Company will assess the hedging instrument‘s effectiveness.

     Hedging instrument‘s effectiveness means the degree of the change of fair value and cash

flow of the hedging instrument in offsetting the exposure to changes in the hedged item‘s fair

value or cash flows attributable to the hedged risk. The hedge is assessed by the Company for

effectiveness on an ongoing basis and judged whether it has been highly effective throughout the

accounting periods for which the hedging relationship was designated. A hedge is regarded as

highly effective if both of the following conditions are satisfied:



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     1) at the inception and in subsequent periods, the hedge is expected to be highly effective in

offsetting changes in fair value or cash flows attributable to the hedged risk during the period for

which the hedge is designated;

     2) the actual results of offsetting are within a range of 80% to 125%.

     ③ Method of Hedge accounting:

     1) Fair value hedges

     The change in the fair value of a hedging derivative is recognized in the profit or loss. The

change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of

the carrying amount of the hedged item and is also recognized in the profit or loss.

     For fair value hedges relating to financial instruments carried at amortized cost, the

adjustment to carrying value of the hedged items is amortized through the profit or loss over the

remaining term from adjustment to maturity. Amortization based on the effective interest method

may begin as soon as an adjustment is made to the carrying amount and shall not be later than

when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk

being hedged.

     If the hedged item is derecognized, the unamortized fair value is recognized immediately in

the profit or loss.

     When an unrecognized firm commitment is designated as a hedged item, the subsequent

cumulative change in the fair value of the firm commitment attributable to the hedged risk is

recognized as an asset or liability with a corresponding gain or loss recognized in the profit or loss.

The changes in the fair value of the hedging instrument are also recognized in the profit or loss.

     2) Cash flow hedges

     The effective portion of the gain or loss on the hedging instrument is recognized directly as

capital reserve (other capital reserve), while the ineffective portion is recognized immediately in

the profit or loss.

     Amounts taken to capital reserve (other capital reserve) are transferred to the profit or loss

when the hedged transaction affects the profit or loss, such as when hedged financial income or

financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost

of a non-financial asset or non-financial liability, the amounts taken to capital reserve (other

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capital reserve) are transferred to the initial carrying amount of the non-financial asset or

non-financial liability (or the amounts originally recognized in capital reserve (other capital

reserve) will be transferred to the profit or loss for in the same period when the profit or loss are

affected by the non-financial asset or non-financial liability).

     If the forecast transaction or firm commitment is no longer expected to occur, the

accumulated profit or loss hedging instruments previously recognized in shareholders‘ equity are

transferred to the profit or loss. If the hedging instrument expires or is sold, terminated or

exercised without replacement or rollover, or if its designation as a hedge is revoked, the amounts

previously recognized in other comprehensive income remain in there until the forecast

transaction or firm commitment affects the profit or loss.

     3) Hedge of net investment in foreign operation

     A hedge of a net investment in a foreign operation includes the hedge of the currency item as

a portion of net investment, its treatment is similar to cash flow hedge. The portion of the gain or

loss on a hedging instrument that is determined to be an effective hedge is included in other

comprehensive income. The ineffective portion is recognized in the profit or loss. When deal with

foreign operation, any accumulated profit or loss attributable to shareholders‘ equity will be

transferred to the profit or loss.

      (4) Explanations on significant accounting estimates

     Judgments, estimates and assumptions shall be made to book value of the financial

statements items, which could not be measured accurately, due to the inherent uncertainties of

operating activities, while applying accounting policy. Such judgments, estimates and assumptions

were based on the management‘s historical experience and made after considered other various

factors. These judgments, estimates and assumptions will influence the amount of revenues,

expenses, assets and liabilities presented in financial reports and the disclosure of contingent

liabilities on the balance sheet date. However, the actual results caused by the uncertainties of

these estimations may be different from the current estimates of the management, and thus cause a

material adjustment to the carrying amounts of assets and liabilities affected in the future. The

judgments, estimates and assumptions mentioned above shall be reviewed on a going concern

basis. If the revisions to accounting estimates only affected for the year ended 31 December 2017,


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relevant adjustment due to the effect shall be recognized for the year ended 31 December 2017; if

the revision affects both the current and future period, the effect shall be recognized in the current

and future period.

     On the balance sheet date, the significant fields involving judgments, estimates and

assumptions about financial report items are listed as follows:

       ①      Provision

       Provision for product quality guarantee, estimated onerous contracts, and other estimates

  shall be recognized in accordance with the terms of contract, current knowledge and historical

  experience. If the contingent event has formed a practical obligation which probably results in

  outflow of economic benefits from the Company, an estimated liability shall be recognized on

  the basis of the best estimate of the expenditures to settle relevant practical obligation.

  Recognition and measurement of the estimated liability significantly rely on the management‘s

  judgments. In the process of judgment, the Company takes into consideration the assessment of

  relevant risks, uncertainties, time value of money and other factors related to the contingent

  events. Among them, the Company will undertake estimated liabilities with respect to the

  after-sales services provided for the return, maintenance and installation of goods. When

  estimating liabilities, the Company has considered the maintenance information in recent years,

  but the previous maintenance experiences may fail to reflect the future circumstances. Any

  increase or decrease in this provision is likely to affect the profits and losses of the next year.

       ② Allowance for bad debts

       The allowance method is adopted for bad debts according to accounting policies of

  accounts receivables. Impairment losses for receivables are assessed on the basis of

  recoverability, as a result of judgments and estimates of the management. The difference

  between actual outcome and the previously estimated outcome will influence the carrying value

  of receivables and accrual or reversal of provision for bad debts during the period accounting

  estimates are changed.

       ③ Provision of inventories

       Inventories are measured by lower of historical cost or net realizable value method

  according to the accounting policies of inventories; for obsolete and unsalable inventories or


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whose costs are higher than the net realizable, provision for impairment of inventories shall be

incurred. The carrying value of inventory shall be written down to the net realizable value on

the basis of the salability of inventories and the net realizable value. Inventory impairment

requires the management‘s obtaining of solid evidence, and their judgment and estimations

made after considering the purpose of holding inventories and the effect of events after the

balanced sheet date and etc. The difference between the actual outcome and the previously

estimated outcome will influence the carrying value of inventories and the provision or reversal

of impairment of inventories during the period accounting estimates are changed.

     ④ Fair value of financial instruments

     For financial instruments where there is no active market, the Company will determine the

fair value through a variety of valuation methods. Such valuation methods include discounted

cash flow analysis. In the valuation, the Company shall estimate the future cash flow, credit risk,

market volatility and correlation, and select the appropriate discount rate. Such related

assumptions are uncertain, and their changes may affect the fair value of financial instruments.

     ⑤ Impairment of available-for-sale financial assets

     The determination of whether impairment loss shall be recognized in income statement for

available-for-sale financial asset is significantly depends on the judgments and assumptions of

the management. While making judgments and assumptions, it shall be take into consideration

that how much the fair value of the investment is lower than the cost and its continuity, the

financial position and short-term business projection of the investee, including industry

conditions, technological innovation, the credit ratings, probability of violation and

counterparts‘ risks.

     ⑥ Provision of long-term assets impairment

     On the balance sheet date, the Company shall judge whether there is any possible

indication of impairment against non-current assets other than financial assets. The intangible

assets with indefinite useful life must be tested for impairment on an annual basis as well as

when there is any indication of impairment. Other non-current assets other than financial assets

shall be tested for impairment when there is an indication showing that the carrying value is not

recoverable. Impairment occurs while the carrying value of an asset or asset group is higher

than the recoverable value, which is the higher of the net of fair value deducted disposal

                                              207
expenses and the present value of expected future cash flow. The net of fair value deducted by

disposal expenditure is determined with reference to the price in the sale agreement regarding

analogous asset, and observable market price less the increase of cost that directly attributable

to the disposal of assets. Significant judgments regarding the production amount, sales price,

relevant operating costs of the assets (or assets group) and the discount rate used to calculate the

present value shall be made when determining the present value of future cash flows.

Recoverable amount shall be estimated by using all accessible relevant information, including

production amount, sales price, and relevant operating costs predictions made based on

reasonable and supportive assumptions. The Company shall test for goodwill impairment at

least every year. This requires the Company to estimate the present value of future cash flows

for such assets groups or asset group portfolios allocated with goodwill. When estimating the

present value of future cash flows, the Company shall not only estimate the future cash flows

generated by such asset groups or asset group portfolios, and select the appropriate discount rate

to determine the present value of such future cash flows.

     ⑦ Depreciation and amortization

     Investment properties, fixed assets and intangible assets are depreciated and amortized by

a straight-line approach over their estimated useful life by taking into consideration the residual

value. Useful life shall be periodically reviewed to determine the depreciation and amortization

expenses for each reporting period and be determined on the basis of historical experience

regarding analogous assets and the expected technological innovation. Significant changes to

previous accounting estimates will result in adjustments against depreciation and amortization

expenses in the future periods.

     ⑧ Deferred tax assets

     Deferred tax asset is recognized for all the uncompensated tax losses to the extent that

there are sufficient taxable income for the deduction of loss. In order to determine the amount

of deferred tax assets, the management of the Company needs to predict the timing and the

amount of taxable profits in the future by taking into account a large amount of judgment, as

well as the strategy of tax planning.

     ⑨ Income tax




                                               208
      There are certain transactions the tax treatment and calculations undertaken during the

ordinary course of business for which the ultimate tax determination is uncertain. Whether some

items could be presented before taxation shall be approved by relevant tax authorities. Where

the final tax outcome of these matters is different from the initial estimated amount, such

differences will impact the current and deferred tax in the period of confirmation.

      ⑩Rebate accrual

      The Company and its subsidiaries adopt the policy of rebate for all consumers. According

to the relevant conventions in the sales agreement, the review of specific transactions, the

market situation, the pipeline inventory levels and the historical experiences, the Company and

its subsidiaries estimate and accrue rebate on a regular basis with reference to the completion of

agreed assessment indexes. Rebate accrual involve the judgment and estimates of the

management. In case of any significant changes in the previous estimates, the difference above

will have an impact on the rebate during the period when significant changes occur.

   29、Significant changes on accounting policies

      In 2017, the Ministry of Finance promulgated the accounting standards for Enterprises No.

42 held-for-sale, disposal groups and discontinued operation, the revised accounting standards

for Enterprises No. 16 - government grants and the notice on the revision of the format of the

general financial statements for enterprise (Accounting [2017] 30). The Company has prepared

the financial statement per above guidelines in 2017 and the impact is as follows:


                   Details                       Accounts affected in       Restatement for 2016
                                                 Financial statements
The government grants which is credited in
profit and loss and related to the daily             Other income
                                                                                    N/A
operation is recognized in other income. The    Non-operating income
comparatives in 2016 were not restated.
                                               Gains/(losses) on disposal   Increase by RMB
The gain/loss from disposal of long term         of non-current assets       231,246,918.49
assets is recognized in Gains/(losses) on
disposal of non-current assets. The             Non-operating income        Decrease by RMB
comparatives in 2016 were adjusted                                           252,475,880.16
accordingly.
                                               Non-operating expenses       Decrease by RMB
                                                                             21,228,961.67



                                                  209
  6. Taxation

  1). Main tax categories and rates
           Category                            Tax base                                    Tax rate


                             Taxable revenue from sales of goods or
Value-added tax                                                                       5%, 6%, 11%, 17%
                             rendering services


City maintenance and
                             Circulation tax payable                                           7%
construction tax

(Local) Educational
                             Circulation tax payable                                       1%, 2%, 3%
surcharge

                                                                            Statuary tax rate or preferential rates as
Corporate income tax         Taxable income
                                                                                             follows


  2). Preferential tax

       Companies subjected to preferential tax:
                       Company                             Tax rate                   Preferential tax

                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Co., Ltd.                                     15%
                                                                      hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Refrigerator Co., Ltd.                        15%
                                                                      hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Intelligent Electronics Co., Ltd.             15%
                                                                      hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Special Refrigerator Co., Ltd.                15%
                                                                      hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Dishwasher Co., Ltd.                          15%
                                                                      hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Qingdao Haier Special Freezer Co., Ltd.                     15%
                                                                      hi-tech enterprise


Qingdao Haier Intelligent Home Appliance Technology                   entitled to the preferential taxation policies as a
                                                            15%
Co., Ltd                                                              hi-tech enterprise


                                                                      entitled to the preferential taxation policies as a
Wuhan Haier Electronics Co., Ltd.                           15%
                                                                      hi-tech enterprise



                                                          210
                                                              entitled to the preferential taxation policies as a
Wuhan Haier Freezer Co., Ltd.                           15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Hefei Haier Refrigerator Co., Ltd.                      15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Hefei Haier Air-conditioning Co., Ltd.                  15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Zhengzhou Haier Air-conditioning Co., Ltd.              15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Shenyang Haier Refrigerator Co., Ltd.                   15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies
Chongqing Haier Air-conditioning Co., Ltd.              15%   under the Western Development initiative of
                                                              the PRC


                                                              entitled to the preferential taxation policies
Chongqing Haier Refrigeration Appliance Co., Ltd.       15%   under the Western Development initiative of
                                                              the PRC


                                                              entitled to the preferential taxation policies
Guizhou Haier Electronics Co., Ltd.                     15%   under the Western Development initiative of
                                                              the PRC


                                                              entitled to the preferential taxation policies as a
Qingdao Haier Air-Conditioner Electronics Co., Ltd.     15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Qingdao Haier Moulds Co., Ltd.                          15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies as a
Qingdao Meier Plastic Powder Co., Ltd.                  15%
                                                              hi-tech enterprise


                                                              entitled to the preferential taxation policies
Chongqing Haier Precision Plastic Co., Ltd.             15%   under the Western Development initiative of
                                                              the PRC


                                                              entitled to the preferential taxation policies
Chongqing Haier Intelligent Electronics Co., Ltd.       15%   under the Western Development initiative of
                                                              the PRC




                                                      211
                                                             entitled to the preferential taxation policies as a
Qingdao Haigao Design & Manufacture Co., Ltd.          15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Haier Technology Co., Ltd.                     10%
                                                             key software enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Hairi High Technology Molding Co., Ltd.        15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Haier (Jiaozhou) Air-Conditioner Co., Ltd.     15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Beijing Haier Guangke Digital Technology Co., Ltd.     15%
                                                             hi-tech enterprise


Qingdao Haier Intelligent Technology Development             entitled to the preferential taxation policies as a
                                                       15%
Co., Ltd.                                                    hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Foshan Haier Freezer Co., Ltd.                         15%
                                                             hi-tech enterprise


                                                             entitled to the preferential policies as a
Wuhan Haier Energy and Power Co., Ltd.                 10%
                                                             small/micro enterprise


Shanghai Haier Zhongzhifang Innovation Management            entitled to the preferential policies as a
                                                       10%
Co                                                           small/micro enterprise


                                                             entitled to the preferential taxation policies as a
Hefei Haier Washing Machine Co., Ltd.                  15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Haier Washing Machine Co., Ltd.                15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Jiaonan Haier Washing Machine Co., Ltd.        15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Qingdao Haier Drum Washing Machine Co., Ltd.           15%
                                                             hi-tech enterprise


                                                             entitled to the preferential taxation policies as a
Foshan Shunde Haier Electric Appliance                 15%
                                                             hi-tech enterprise


Qingdao Economy and Technology Development Zone              entitled to the preferential taxation policies as a
                                                       15%
Haier Water Heater Co., Ltd.                                 hi-tech enterprise




                                                     212
                                                               entitled to the preferential taxation policies as a
Wuhan Haier Water Heater Co., Ltd.                       15%
                                                               hi-tech enterprise


                                                               entitled to the preferential taxation policies as a
Foshan Drum Washing Machine Co., Ltd.                    15%
                                                               hi-tech enterprise


                                                               entitled to the preferential taxation policies as a
Qingdao Haier Goodaymart Logistic Co., Ltd.              15%
                                                               hi-tech enterprise


                                                               entitled to the preferential taxation policies as a
Qingdao Haier New Energy Appliance Co., Ltd.             15%
                                                               hi-tech enterprise


                                                               entitled to the preferential taxation for
Shengfeng Supply Chain Co., Ltd.                         15%   enterprises in Pingtan Comprehensive
                                                               Experimental Area


                                                               entitled to the preferential taxation policies
Chongqing Goodaymart Electronics Sales Co., Ltd.         15%   under the Western Development initiative of
                                                               the PRC


                                                               entitled to the preferential taxation policies
Chongqing Haier Home Appliance Sale Co., Ltd. and
                                                         15%   under the Western Development initiative of
some branches in western region
                                                               the PRC


                                                               entitled to the preferential taxation policies
Chongqing Goodaymart Electronics Sales Co., Ltd. and
                                                         15%   under the Western Development initiative of
some of branch companies
                                                               the PRC


                                                               entitled to the preferential taxation policies
Chongqing Haier washing machine Co., Ltd.                15%   under the Western Development initiative of
                                                               the PRC


                                                               entitled to the preferential taxation policies
Chongqing Haier Water Heater Co., Ltd.                   15%   under the Western Development initiative of
                                                               the PRC


                                                               entitled to the preferential taxation policies
Chongqing Haier Drum Washing Machine Co.,
                                                         15%   under the Western Development initiative of
Ltd.
                                                               the PRC



  7. Notes to the consolidated financial statements

   1) Cash


                                                       213
                       Items                                   2017                                       2016

  Cash on hand                                                             513,781.37                               565,073.32

  Cash in bank                                                  32,994,884,486.17                          23,268,681,467.29

  Other cash balances                                            2,181,878,636.37                                312,992,470.59

                       Total                                    35,177,276,903.91                          23,582,239,011.20
        Include: total amount deposit
                                                                 7,732,752,678.06                           2,076,472,495.27
  overseas

The cash deposited in Haier Group Finance Co., Ltd. was RMB13,023,745,865.25 on 31

December 2017, the balance of which included a fixed deposit of RMB1,523,531,572.38. The

investment fund in the closing balance of other cash balances was RMB1,212,429,818.26, deposit

in third party payment platform was RMB132,185,488.42 and the amount securing notes payable

was RMB837,263,329.69.

   2) Financial assets measured at fair value with fair value changes included in profit and
       loss for the year

                        Items                                       2017                                     2016
Foreign exchange contacts                                                  20,681,695.50                            80,432,384.17

                        Total                                              20,681,695.50                            80,432,384.17

   3) Notes receivable

        (1)Categories:
                        Items                                       2017                                     2016
Bank acceptance notes                                                 1,946,518,710.06                           3,410,072,113.31
Commercial acceptance notes                                         11,086,564,810.93                        10,386,489,124.74

                        Total                                       13,033,083,520.99                        13,796,561,238.05

        (2)The pledged notes at the end of the period was RMB 10,122,596,789.43.

   4) Accounts receivable

        (1)Accounts receivables disclosed by categories:
                                                       2017                                               2016


               Items                                          Allowance for bad                                   Allowance for bad
                                        Book balance                                       Book balance
                                                                     debts                                              debts

Individually significant accounts

receivables of which provision for

bad debts is made on an individual

basis

Accounts receivables of which        12,803,484,274.71         355,479,441.65           12,603,132,822.50          337,937,379.10


                                                              214
provision for bad debts is made on

a group basis

Individually insignificant accounts

receivables of which provision for
                                              88,400,865.52          88,400,865.52         71,243,900.12      71,243,900.12
bad debts is made on an individual

basis

                 Total                   12,891,885,140.23        443,880,307.17       12,674,376,722.62     409,181,279.22

        (2)Accounts receivables of which provision for bad debts is made on a group basis:
                                               2017                                              2016

        Aging                                          Allowance for bad                                Allowance for bad
                            Book balance                                         Book balance
                                                             debts                                            debts

  Within 1 year            12,477,896,240.89               339,251,644.04        12,298,498,084.65         322,748,629.33

  1 to 2 years                178,439,139.23                  8,870,352.87           201,611,814.67         10,037,603.63

  2 to 3 years                121,898,217.63                  6,094,910.89            79,398,804.14          3,969,940.20

  Over 3 years                  25,250,676.96                 1,262,533.85            23,624,119.04          1,181,205.94

         Total             12,803,484,274.71               355,479,441.65        12,603,132,822.50         337,937,379.10

    (3) The total amount of the top 5 in the accounts receivables at the end of the period was
RMB4,378,349,246.22, accounting for 33.96% of the book balance of the accounts receivables,
and the amount of provision for bad debts was RMB56,136,215.78.
    (4) Provisions for bad debts in the amount of RMB68,240,543.13 were provided in 2017.
    (5) Accounts receivable written off in 2017
The bad debts written off in 2017 were RMB21,367,480.50, and there was no significant accounts
receivable written off in 2017.
     (6) Accounts receivable secured for loans was RMB 57,202,845.67.

   5) Prepayments

        (1)Aging:
                                                2017                                              2016
        Aging
                                     Amount               Proportion (%)               Amount               Proportion (%)

Within 1 year                         500,715,555.59                 84.77%             561,808,819.41                94.82%

1-2 years                              71,155,092.86                 12.05%              20,243,191.67                 3.42%

2-3 years                              11,070,761.72                   1.87%              9,492,337.02                 1.60%

Over 3 years                            7,752,248.04                   1.31%                965,768.51                 0.16%
        Total                         590,693,658.21                 100.00%            592,510,116.61                100.00%

        (2)The total amount of the top 5 in the prepayments at the end of the period was

RMB99,756,168.90, accounting for 16.89% of the book balance of the prepayments.

   6) Interest receivable

                                                                 215
                                                  2017                                                2016
        Aging
                             Book balance                   Proportion              Book balance                 Proportion

Within 1 year                      202,405,171.56                   99.39%             133,777,402.17                   98.86%

1-2 years                            1,232,372.27                      0.61%             1,542,372.24                       1.14%

        Total                      203,637,543.83                   100.00%            135,319,774.41                  100.00%


  7) Other receivables

        (1)Other receivables disclosed by categories:
                                                             2017                                         2016

                 Items                                              Allowance for                                Allowance for
                                            Book balance                                   Book balance
                                                                       bad debts                                    bad debts
Individually significant other

receivables of which provision for

bad debts is made on an individual

basis

Other receivables of which

provision for bad debts is made on a         989,277,529.42            28,013,547.55      1,217,243,603.74        36,825,550.99
group basis

Individually insignificant other

receivables of which provision for
                                              48,882,935.05            48,882,935.05         61,449,863.58        61,449,863.58
bad debts is made on an individual

basis

                 Total                     1,038,160,464.47            76,896,482.60      1,278,693,467.32        98,275,414.57

        (2)Other receivables of which provision for bad debts is made on a group basis
                                                    2017                                              2016

         Aging                                             Allowance for bad                                 Allowance for bad
                                   Book balance                                        Book balance
                                                                 debts                                              debts

Within 1 year                         873,640,986.50           22,317,036.56            872,780,892.61            19,602,415.43

1-2 years                              60,265,756.01            2,927,971.65            288,221,508.15            14,411,075.41

2-3 years                              21,037,477.39            1,051,873.86             37,909,711.73             1,895,485.59

Over 3 years                           34,333,309.52            1,716,665.48             18,331,491.25               916,574.56

         Total                        989,277,529.42           28,013,547.55           1,217,243,603.74           36,825,550.99

    (3) At the end of the period, total amount of top 5 other receivables was
RMB322,809,706.07, representing 31.09% of the book balance of other receivables, and the
amount of provision for bad debts was RMB4,418,141.79.
   (4) Allowance for bad-debt provided, collected or reversed in 2017:
      Allowance for bad debts of RMB7,191,177.79 were provided in 2017.
   (5) The other receivables actually written off in 2017 was RMB13,732,925.91.



                                                                 216
       (6) Other receivables mainly include deposit, warranty, staff borrowing, tax refunds, and
   advance money for another, etc.

     8) Inventories

           (1)Details
                                                       2017                                               2016

              Items                                             Impairment                                         Impairment
                                       Book balance                                      Book balance
                                                                   Provision                                        Provision

Raw materials                           3,459,878,187.81           33,888,186.04         2,086,658,637.93          56,844,901.08

Work in progress                         212,212,549.56                                    216,384,326.73

Unsettled payments of
                                         187,935,341.58                                    205,608,536.83
completed projects

Finished goods                        18,374,187,900.35         696,800,993.08          13,317,528,331.13         484,430,600.50

              Total                   22,234,213,979.30         730,689,179.12          15,826,179,832.62         541,275,501.58

           (2)Impairment provision of inventories

                                         Increase for the period                Decrease for the period
   Items              2016                                 Other                         Write-off / other            2017
                                       Provision                          Reversal
                                                         movement                           movement
   Raw
                  56,844,901.08       17,659,387.37                                         40,616,102.41          33,888,186.04
 materials
 Finished
                 484,430,600.50      515,154,291.56      4,734,665.72                      307,518,564.70         696,800,993.08
   goods
   Total         541,275,501.58      532,813,678.93      4,734,665.72                      348,134,667.11         730,689,179.12

           (3)Unsettled payments of completed projects from the construction contracts at the end of

   the period

                                                                                                     Unsettled payments of
                                                   Accumulatively
                      Accumulated cost                                                                    completed projects
      Items                                     recognized gross               Settled payments
                          occurred                                                                    from the construction
                                                      margin
                                                                                                              contracts
                          946,671,023.57              190,969,369.89               949,705,051.88              187,935,341.58


     9) Other current assets

                        Items                                  2017                                   2016

     Bank deposit for financial products                        2,007,051,839.54                             490,807,882.39

     Deductible taxes                                           1,941,860,551.67                          1,795,947,798.29



                                                               217
  Others                                                         440,847,627.62                            370,706,508.21

                     Total                                     4,389,760,018.83                        2,657,462,188.89


  10) Available-for-sale financial assets

   (1)Information of available-for-sale financial assets

                                             2017                                                   2016

        Items                            Impairment                                            Impairment
                     Book balance                        Book Value          Book balance                     Book Value
                                         provision                                             provision

Available-for-sal
e equity
instrument:

Measured at fair
                         26,931,420.99                       26,931,420.99     30,354,194.80                      30,354,194.80
value


Measured at cost      1,418,647,886.83 30,225,000.00 1,388,422,886.83 1,528,749,522.25 3,225,000.00 1,525,524,522.25

        Total         1,445,579,307.82 30,225,000.00 1,415,354,307.82 1,559,103,717.05 3,225,000.00 1,555,878,717.05



   (2)Available-for-sale financial assets measured at fair value at the end of the period:

         Categories of available-for-sale financial assets                    Available-for-sale equity instrument

Cost of equity instrument                                                                                     22,939,705.93

Fair value                                                                                                    26,931,420.99
Accumulated fair value changes credited into other
                                                                                                                3,270,254.43
comprehensive income
Provision for impairment


   (3)Available-for-sale financial assets measured at cost at the end of the period:

                                                                              Increase in         Decrease in
                    Book value                               2016                                                           2017
                                                                             current period      current period

(1) Book balance

China Petrochemical Marketing Co., Ltd.               1,379,537,271.77                           97,055,356.14       1,282,481,915.63

Others                                                 149,212,250.48         8,723,000.00       21,769,279.28         136,165,971.20

                      Total                           1,528,749,522.25        8,723,000.00      118,824,635.42       1,418,647,886.83

(2) Provision for impairment

China Petrochemical Marketing Co., Ltd.

Others                                                   3,225,000.00        27,000,000.00                              30,225,000.00

                      Total                              3,225,000.00        27,000,000.00                              30,225,000.00


                                                             218
              (3) Book value

              China Petrochemical Marketing Co., Ltd.             1,379,537,271.77                                           1,282,481,915.63

              Others                                               145,987,250.48                                             105,940,971.20

                                   Total                          1,525,524,522.25                                           1,388,422,886.83


              (4)Movement in impairment of available-for-sale financial assets during the reporting period:

                                                                                      Provision for impairment of available-for-sale
                                            Items
                                                                                                    equity instrument
              Provision balance at the beginning of the period                                                           3,225,000.00

              Increase in current period                                                                                27,000,000.00

              Decrease in current period

              Provision balance at the end of the period                                                                30,225,000.00


               11) Long-term equity investments


                                                                              Increase/decrease in current period

                                                                       Investment
                                                                                           Adjustment in
       Investees                  2016                                   income                                                   Declaration of
                                                    Investments                                other          Other changes
                                                                        recognized                                                cash dividends
                                                     increased                            comprehensive          in equity
                                                                       under equity                                                 or profits
                                                                                              income
                                                                         method

Associates:
Haier Group Finance
                           4,108,505,917.07                           599,531,382.04       -25,150,071.38
Co., Ltd.
Bank of Qingdao co.,
                           1,670,058,752.11      35,575,618.47        179,946,554.84       -89,828,108.22    743,740,179.58       -76,868,897.00
Ltd.
Haier Medical and
Laboratory Products            303,384,893.47                          28,846,036.10               -557.68
Co., Ltd.
Wolong Electric
Zhangqiu Haier                 122,669,926.30                           -3,772,588.90
Motor Co., Ltd.
Qingdao Haier
Software Investment             17,045,106.31                             854,224.76
Co., Ltd.
Qingdao Haier SAIF
Smart Home Industry
                               227,531,053.19                          43,005,828.79
Investment Center
(limited partnership)
Qingdao Haier
                               102,915,605.69                            3,153,197.39
Special Steel Plate


                                                                       219
Research and
Development Co.,
Ltd.
Hefei Haier Special
Steel Plate Research
                         126,896,206.56                    13,598,315.11
and Development
Co., Ltd.
Mitsubishi Heavy
Industries Haier
(Qingdao)                503,375,198.93                    67,851,552.02                                  -41,292,000.00
Air-conditioners Co.,
Ltd.
Qingdao Haier
Carrier Refrigeration    302,112,378.55                     3,072,758.54
Equipment Co., Ltd.
Beijing Mr. Hi
Network Technology         5,838,036.16                    -2,080,276.41
Company Limited
Qingdao Haier Media
                                          525,252,525.00   17,218,526.54                   1,297,604.70
Co., Ltd.
Beijing Xiaobei
                           6,422,222.58                    -8,034,056.78                   4,299,176.02
Technology Co., Ltd.
Guangzhou Heying
Investment
                         153,796,910.58                    -1,749,375.14
Partnership (limited
partnership)
Qingdao HSW Water
                          30,722,549.43                    11,163,969.26
Appliance Co., Ltd.
Qingdao Roca Water
                          13,124,212.46                    -5,774,212.46
Appliance Co., Ltd.
China Shengfeng
Microfinance limited
                          79,553,513.46                     1,033,082.28                                    -360,000.00
in Jin‘an District of
Fuzhou City
Fujian
ATL-Shengfeng             12,675,789.21                      441,959.22
Logistics Co., Ltd.
Qingdao Java Cloud
Network Technology         2,729,378.59                      -974,021.75
Co., Ltd.
Qingdao JSH
Network Technology         6,706,394.01                    -1,194,645.01
Co. Ltd.
Hunan Electronic          50,269,006.41                    16,293,186.76   -1,430,266.42                    -275,400.00


                                                           220
Co., Ltd.

HNR Company
                              89,650,522.58                         7,252,163.18         -5,324,458.14
(Private) Limited
HPZ LIMITED                   78,885,757.89                         5,247,912.02         -3,545,099.90
CONTROLADORA
                           3,011,983,426.16                       187,824,212.45       -180,862,238.39                        -33,883,079.64
MABE S.A.deC.V.
Middle East Air
conditioning                  30,966,870.44                        -7,326,638.14         -1,589,688.88
Company Limited
           Total          11,057,819,628.14   560,828,143.47    1,155,429,046.71       -307,730,489.01     749,336,960.30    -152,679,376.64

                    (continued)
                                                               Increase/decrease in current
                                                                                                                              Closing
                                                                          period
                                                                                                                             balance of
                            Investees                                          The disposal               2017
                                                                 Other                                                      provision for
                                                                                     of the
                                                               movement                                                     impairment
                                                                                   investment

    Associates:
    Haier Group Finance Co., Ltd.                                                                 4,682,887,227.73

    Bank of Qingdao co., Ltd.                                                                     2,462,624,099.78

    Haier Medical and Laboratory Products Co., Ltd.                                                 332,230,371.89

    Wolong Electric Zhangqiu Haier Motor Co., Ltd.                                                  118,897,337.40

    Qingdao Haier Software Investment Co., Ltd.                                                      17,899,331.07
    Qingdao Haier SAIF Smart Home Industry
                                                                                                    270,536,881.98
    Investment Center (limited partnership)
    Qingdao Haier Special Steel Plate Research and
                                                                                                    106,068,803.08
    Development Co., Ltd.
    Hefei Haier Special Steel Plate Research and
                                                                                                    140,494,521.67
    Development Co., Ltd.
    Mitsubishi Heavy Industries Haier (Qingdao)
                                                                                                    529,934,750.95
    Air-conditioners Co., Ltd.
    Qingdao Haier Carrier Refrigeration Equipment Co.,
                                                                                                    305,185,137.09           -21,000,000.00
    Ltd.
    Beijing Mr. Hi Network Technology Company
                                                                                                         3,757,759.75
    Limited
    Qingdao Haier Media Co., Ltd.                                                                   543,768,656.24

    Beijing Xiaobei Technology Co., Ltd.                                                                 2,687,341.82
    Guangzhou Heying Investment Partnership (limited
                                                                                                    152,047,535.44
    partnership)
    Qingdao HSW Water Appliance Co., Ltd.                                     -41,886,518.69

    Qingdao Roca Water Appliance Co., Ltd.                                     -7,350,000.00




                                                                   221
China Shengfeng Microfinance limited in Jin‘an
                                                                                                    80,226,595.74
District of Fuzhou City
Fujian ATL-Shengfeng Logistics Co., Ltd.                                                            13,117,748.43

Qingdao Java Cloud Network Technology Co., Ltd.                                                       1,755,356.84

Qingdao JSH Network Technology Co. Ltd.                                                               5,511,749.00

Hunan Electronic Co., Ltd.                                                                          64,856,526.75

HNR COMPANY (PRIVATE) LIMITED                                                                       91,578,227.62

HPZ LIMITED                                                                                         80,588,570.01

CONTROLADORA MABE S.A.deC.V.                                                                      2,985,062,320.58

Middle East Air Conditioning Company Limited                                                        22,050,543.42

                           Total                                            -49,236,518.69      13,013,767,394.28          -21,000,000.00


           12) Investment properties

              (1)Increase/decrease of investment properties recognized under cost method for the year are

         set out as follows:
                                                                                         Decrease
                                                                                                         Exchange
                                                                         Increase in         in
                       Items                            2016                                            differences          2017
                                                                        current period   current
                                                                                          period
(1) Total original costs                             48,177,608.70                                     -1,640,579.17      46,537,029.53

Land and buildings                                   48,177,608.70                                     -1,640,579.17      46,537,029.53

(2) Total accumulated amortization                   13,577,215.33       1,792,405.00                     -46,606.79      15,323,013.54

Land and buildings                                   13,577,215.33       1,792,405.00                     -46,606.79      15,323,013.54

(3) Total accumulated provision for Impairment

Land and buildings

(4) Total book value                                 34,600,393.37                                                        31,214,015.99

Land and buildings                                   34,600,393.37                                                        31,214,015.99


              (2) Depreciation and amortization in 2017 was RMB1,792,405.00.

              (3) No provision for impairment was made as the recoverable amount of investment property

         was not less than the book value at the end of the period.


           13) Fixed assets

                                                  Increase in current     Decrease in current      Exchange differences
         Category                  2016                                                                                           2017
                                                        period                  period
    (1)Cost

    Buildings                  7,652,338,608.01     1,251,347,764.42          106,142,901.14             -94,083,548.19      8,703,459,923.10


                                                                 222
Machinery and
                     14,484,407,964.25     2,337,500,807.90    900,644,448.35    -440,160,171.41   15,481,104,152.39
equipment
Motor vehicles          271,954,859.35       62,765,916.93      46,063,267.43       -594,648.34      288,062,860.51

Office furniture        343,213,649.04       80,332,039.30      61,159,874.23      -3,017,038.70     359,368,775.41

Others                  651,054,841.59       53,906,696.55      17,629,427.81        660,034.44      687,992,144.77

      Total          23,402,969,922.24     3,785,853,225.10   1,131,639,918.96   -537,195,372.20   25,519,987,856.18

(2)Accumulated depreciation

Buildings             2,108,838,241.55      428,111,233.23      27,007,535.84      -5,756,141.11    2,504,185,797.83
Machinery and
                      5,098,620,275.87     1,849,637,197.44    560,034,776.04     -95,961,402.80    6,292,261,294.47
equipment
Motor vehicles          139,157,416.64       47,686,567.17      41,990,990.90       -525,022.94      144,327,969.97

Office furniture        168,071,346.48       44,070,081.55      19,659,967.49      -1,001,044.15     191,480,416.39

Others                  304,128,099.83       33,375,766.37      10,905,518.69       1,285,736.60     327,884,084.11

      Total           7,818,815,380.37     2,402,880,845.76    659,598,788.96    -101,957,874.40    9,460,139,562.77

(3)Net balance

Buildings             5,543,500,366.46                                                              6,199,274,125.27
Machinery and
                      9,385,787,688.38                                                              9,188,842,857.92
equipment
Motor vehicles          132,797,442.71                                                               143,734,890.54

Office furniture        175,142,302.56                                                               167,888,359.02

Others                  346,926,741.76                                                               360,108,060.66

      Total          15,584,154,541.87                                                             16,059,848,293.41

(4)Provision for impairment

Buildings                31,269,149.66                                              -565,980.78       30,703,168.88
Machinery and
                          8,658,226.28        4,033,767.05       1,191,213.04         -10,743.79      11,490,036.50
equipment
Motor vehicles                  1,959.66                                                  59.63             2,019.29

Office furniture

Others                      125,862.87                                                  3,829.76         129,692.63

      Total              40,055,198.47        4,033,767.05       1,191,213.04       -572,835.18       42,324,917.30

(5)Book value

Buildings             5,512,231,216.80                                                              6,168,570,956.39
Machinery and
                      9,377,129,462.10                                                              9,177,352,821.42
equipment
Motor vehicles          132,795,483.05                                                               143,732,871.25

Office furniture        175,142,302.56                                                               167,888,359.02

Others                  346,800,878.89                                                               359,978,368.03

      Total          15,544,099,343.40                                                             16,017,523,376.11


                                                      223
                (1) Total fixed asset transferred from construction-in-progress in 2016 amounted to
             RMB2,664,003,620.50 in current period.
               (2) The pledged fixed assets were RMB123,187,034.47 at the end of the period.

               14) Construction in progress

                  (1)Balance of Construction in progress

                                                                                     Exchange
                                        Increase in      Transfer to       Other                                        Source
    Projects             2016                                                        differences      2017
                                       current period    fixed assets     decrease                                      of fund


                                                                                                                       Self-fundi
Smart kitchen                            35,666,458.97                                                 35,666,458.97
                                                                                                                          ng

Hefei                                                                                                                  Self-fundi
                       55,163,303.93     56,464,359.42    56,149,243.02                                55,478,420.33
refrigerator                                                                                                              ng

Dalian air                                                                                                             Self-fundi
                       11,779,137.62     12,959,299.86    11,019,620.18                                13,718,817.30
conditioning                                                                                                              ng

Qingdao Haier                                                                                                          Self-fundi
                        8,971,965.00     10,263,634.79     5,987,237.25                                13,248,362.54
refrigerator                                                                                                              ng

Hefei air                                                                                                              Self-fundi
                       18,323,657.33     24,049,043.13    17,191,420.29                                25,181,280.17
conditioning                                                                                                              ng

                                                                                                                       Self-fundi
Dishwasher             19,276,332.48     60,579,748.77    14,627,429.29                                65,228,651.96
                                                                                                                          ng

Qingdao
                                                                                                                       Self-fundi
special                28,632,842.95      6,577,695.19    26,337,099.29                                 8,873,438.85
                                                                                                                          ng
refrigerator
Qingdao
                                                                                                                       Self-fundi
central air           238,645,406.28     28,231,402.67   253,807,681.65                                13,069,127.30
                                                                                                                          ng
conditioning
Wuhan air                                                                                                              Self-fundi
                        9,133,948.47     12,652,711.93    11,019,074.13                                10,767,586.27
conditioning                                                                                                              ng

Washing                                                                                                                Self-fundi
                        1,526,886.75    204,437,620.91                                                205,964,507.66
appliance                                                                                                                 ng

                                                                                                                       Self-fundi
Tianjin ririxin        18,661,632.65     89,358,693.84                                                108,020,326.49
                                                                                                                          ng

Jiaozhou                                                                                                               Self-fundi
                                         68,399,634.69         3,883.50                                68,395,751.19
logistics                                                                                                                 ng

Nanjing                                                                                                                Self-fundi
                         321,699.00      54,524,009.25                                                 54,845,708.25
logistics                                                                                                                 ng

Huangdao                                                                                                               Self-fundi
                                         44,828,353.19                                                 44,828,353.19
sales                                                                                                                     ng

Jinzhou                                                                                                                Self-fundi
                         138,200.00      23,146,612.07                                                 23,284,812.07
gooday mart                                                                                                               ng




                                                               224
Hefei drum
                                                                                                                                                    Self-fundi
washing                                          22,895,993.54         3,846,153.84                                                19,049,839.70
                                                                                                                                                        ng
machine
                                                                                                                                                    Self-fundi
Thailand                  5,744,901.13           23,222,821.62        17,515,680.04                         191,996.36             11,644,039.07
                                                                                                                                                        ng

                                                                                                                                                    Self-fundi
India                   100,824,148.31          335,497,564.88     437,712,506.69                        1,390,793.50
                                                                                                                                                        ng

                                                                                                                                                    Self-fundi
GEA                     189,281,952.27          689,177,512.92     589,264,859.24                       -14,288,930.43            274,905,675.52
                                                                                                                                                        ng

                                                                                                                                                    Self-fundi
Mexico                                          150,561,752.65        87,618,213.01                      -4,599,720.20             58,343,819.44
                                                                                                                                                        ng

                                                                                                                                                    Self-fundi
Others                1,081,896,995.27          463,242,946.95   1,131,903,519.08     1,245,000.00       7,883,730.84             419,875,153.98
                                                                                                                                                        ng

    Total             1,788,323,009.44     2,416,737,871.24      2,664,003,620.50     1,245,000.00       -9,422,129.93           1,530,390,130.25


                (2)Provision for impairment of construction in progress


                                                           Increase in
                                          Opening                            Transfer to        Other            Exchange          Closing
                    Projects                                 current
                                          balance                            fixed assets     decrease          differences        balance
                                                             period
           Other                       2,155,743.92                         2,155,743.92


             15) Disposals of fixed assets

                               Items                                       2017                      2016                     Reason

           International Refrigerator Assets                               55,808,808.81             55,808,808.81         Demolition

                               Total                                       55,808,808.81             55,808,808.81


             16) Intangible assets

                                                            Increase in current        Decrease in            Exchange
             Categories                  2016                                                                                            2017
                                                                  period              current period         differences
           (1)Cost
           Proprietary
                                   773,207,000.00                 13,837,839.10                              -44,436,979.82            742,607,859.28
           technology
           Licenses and
                                 3,933,279,000.00                 47,300,834.00        54,058,096.00        -228,164,538.00        3,698,357,200.00
           franchises
           Land use
                                 1,598,673,596.98                182,519,669.53        13,654,775.23          -1,694,884.48        1,765,843,606.80
           rights
           Brand                   659,015,000.00                                                            -38,266,000.00            620,749,000.00
           Software and
                                   807,290,760.91                228,329,658.01        14,448,494.46         -23,640,702.94            997,531,221.52
           others
               Total             7,771,465,357.89                471,988,000.64        82,161,365.69        -336,203,105.24        7,825,088,887.60



                                                                           225
(2)Accumulated amortization
Proprietary
                     48,117,075.00     80,350,113.96                   -4,810,298.02    123,656,890.94
technology
Licenses and
                     57,360,318.75     98,175,645.70                   -6,571,499.77    148,964,464.68
franchises
Land use
                    140,470,939.99     43,424,905.16    416,758.41      -660,863.95     182,818,222.79
rights
Brand
Software and
                    251,076,613.21    112,604,565.67   4,194,768.42    -5,913,988.39    353,572,422.07
others
    Total           497,024,946.95    334,555,230.49   4,611,526.83   -17,956,650.13    809,012,000.48

(3)Net balance
Proprietary
                    725,089,925.00                                                      618,950,968.34
technology
Licenses and
                   3,875,918,681.25                                                    3,549,392,735.32
franchises
Land use
                   1,458,202,656.99                                                    1,583,025,384.01
rights
Brand               659,015,000.00                                                      620,749,000.00
Software and
                    556,214,147.70                                                      643,958,799.45
others
    Total          7,274,440,410.94                                                    7,016,076,887.12

(4)Provision for impairment
Proprietary
technology
Licenses and
franchises
Land use
rights
Brand
Software and
                                       10,020,069.91                     870,520.93      10,890,590.84
others
    Total                              10,020,069.91                     870,520.93      10,890,590.84

(5)Book value
Proprietary
                    725,089,925.00                                                      618,950,968.34
technology
Licenses and
                   3,875,918,681.25                                                    3,549,392,735.32
franchises
Land use
                   1,458,202,656.99                                                    1,583,025,384.01
rights
Brand               659,015,000.00                                                      620,749,000.00



                                              226
                 Software and
                                          556,214,147.70                                                                                    633,068,208.61
                 others
                      Total              7,274,440,410.94                                                                                 7,005,186,296.28


                       At the end of the period, the intangible assets arising from internal research and development

                 accounted for 4.87% of the cost at the end of the period.

                  17) Development expenditure

                                                                                                                                    Exchange
                                                                                       Decrease in current period                                        2017
                                                    Increase in                                                                    differences
         Items                    2016
                                                   current period               Credit to profit or          Transferred to
                                                                           loss in current period            intangible asset
U+ platform
                                 5,088,000.00           6,580,000.00                          6,580,000.00          5,088,000.00
construction
91ABD.ERPprogra
                              857,168,622.06          209,551,049.10                                             59,506,242.01      -54,724,963.60     952,488,465.55
m
Others                          51,027,174.26          44,964,030.49                                             80,643,215.87       -1,785,120.62      13,562,868.26

         Total                913,283,796.32          261,095,079.59                          6,580,000.00     145,237,457.88       -56,510,084.22     966,051,333.81



                  18) Goodwill

                                                                                       Decrease
                                                                  Increase in
                 Items                      2016                                       in current     Exchange differences              2017
                                                               current period
                                                                                        period
          GEA                         20,611,638,212.84                                                  -1,193,184,015.50         19,418,454,197.34
          Furniture
                                            6,123,000.00                                                                                6,123,000.00
          after-sales service
          Shanghai
          Guangde
                                                                  29,079,469.66                                                        29,079,469.66
          Logistics Co.,
          Ltd.
          GREEN one TEC
          Solarindustrie                                            3,298,757.75                                                        3,298,757.75
          GmbH
          Shanghai Boyol
          New Brothers
          Supply Chain
                                           68,407,241.86                                                                               68,407,241.86
          Management
          Company
          Limited
          Shengfeng
                                          317,954,690.69                                                                             317,954,690.69
          Logistics Group



                                                                                 227
Co., Ltd

      Total             21,004,123,145.39         32,378,227.41                        -1,193,184,015.50         19,843,317,357.30


              The Company calculates the recoverable amount of the asset groups by discounted cashflow

     method. Cash flows in the next five to ten years is based on the financial budget approved by the

     management, the terminal growth rate is estimated to be 2% to 3%, which is not larger than the

     long-term average growth rate of the asset group‘s business. The discount rate is within the range

     of 9.00% to 18.50%. The management estimates those based on the past performance and market

     development forecasts. It is believed that no provision for impairment of goodwill was required

     per result of impairment test.

       19) Long-term prepaid expenses

                                            Increase in                                        Exchange
                                                                                  Other
           Items           2016               current       Amortization                       differences           2017
                                                                                 decrease
                                              period
    Renovation           23,495,429.77       5,405,235.93    7,230,906.47      14,011,401.17                       7,658,358.06

    Improvement
    on leased            45,710,143.55      58,965,978.28   20,956,047.70                                         83,720,074.13
    property
    Others               46,568,019.46       7,776,587.00    8,519,796.83      13,545,631.83     111,061.34       32,390,239.14

           Total        115,773,592.78      72,147,801.21   36,706,751.00      27,557,033.00     111,061.34      123,768,671.33



       20) Deferred income tax assets / Deferred income tax liabilities

              (1)Deferred income tax assets balance after elimination

                        Items                                        2017                               2016

     Provision for assets impairment                                   185,051,809.02                         206,179,413.32

     Liabilities                                                      1,514,275,639.33                       1,588,572,631.81

     Unrealized earnings due to consolidation                          418,158,297.39                         306,515,615.29

     Others                                                            327,972,788.34                          10,774,534.11

                        Total                                         2,445,458,534.08                       2,112,042,194.53


              (2)Deferred income tax liabilities balance after elimination

                         Items                                       2017                               2016

      Changes of the fair value                                             5,298,198.09                       30,458,666.66
      Disposal of subsidiaries and
                                                                       102,860,801.45                         111,105,965.55
      available-for-sale financial assets



                                                               228
  Withholding tax                                           161,690,532.32                  38,629,859.78
  Difference between accounting and tax
  laws on assets depreciation and                           471,732,062.64               461,236,134.20
  amortization
  Interest rate swap agreement                               13,902,650.26                   6,663,731.01

  Others                                                     73,875,505.00                   5,181,579.42

                     Total                                  829,359,749.76               653,275,936.62


            (3) The deferred income tax assets and the deferred income tax liabilities eliminated at

 the end of this year was RMB550,245,129.41.

   21) Other non-current assets

                    Items                            2017                            2016

 Prepayments for equipment and land                      757,518,103.03                     776,647,520.39

 Foreign exchange contracts                              343,283,948.90

 Others                                                  153,262,129.83                      81,813,868.47

                    Total                             1,254,064,181.76                      858,461,388.86


   22) Short-term borrowings

                 Category                            2017                              2016

Borrowings - secured by guarantor                        2,501,400,000.00                   6,950,000,000.00

Borrowings - secured by mortgage                          130,394,916.35                      23,000,000.00

Borrowings - secured by pledge                           3,914,042,669.00                   3,994,850,204.62

Borrowings - unsecured                                   4,332,742,689.83                   7,197,681,674.53

                  Total                               10,878,580,275.18                 18,165,531,879.15


   23) Financial liabilities measured at fair value with fair value changes included in profit

          and loss for the year

                 Items                            2017                               2016

 Foreign exchange contracts                               2,524,569.45                        2,340,213.20

                 Total                                    2,524,569.45                        2,340,213.20


   24) Notes payable

                 Items                            2017                               2016

 Bank acceptance notes                              14,212,716,989.23                  10,679,473,278.57

 Commercially acceptance notes                       2,165,982,670.54                   1,725,416,481.48



                                                   229
                         Total                             16,378,699,659.77                      12,404,889,760.05


            25) Accounts payable

                         Items                            2017                                   2016

          Accounts payable                                 25,654,013,649.96                      20,601,681,120.03

                         Total                             25,654,013,649.96                      20,601,681,120.03

               The ending balance was mainly the unpaid expenditures on material, equipment and labor.

            26) Advances from customers

                         Items                            2017                                   2016

          Advances from customers                           5,833,552,815.05                       5,737,348,712.97

                         Total                              5,833,552,815.05                       5,737,348,712.97


            27) Employee benefits payable

               (1)Employee benefits payable:

                                                           Increase in current    Decrease in current
                Items                      2016                                                                 2017
                                                                  period                period
Short-term employee benefits           2,201,368,234.58     14,009,125,746.30      14,080,469,336.87        2,130,024,644.01
Post-employment benefits-defined
                                        190,360,845.76       1,270,177,716.22        1,416,120,913.16          44,417,648.82
contribution plan
Termination benefits                     16,796,576.14           122,649,985.70       124,486,594.65           14,959,967.19

Other benefits due in one year                                   159,786,862.88                               159,786,862.88

                Total                  2,408,525,656.48     15,561,740,311.10      15,621,076,844.68        2,349,189,122.90


               (2)Short-term employee benefits:

                                                           Increase in current    Decrease in current
                Items                      2016                                                                 2017
                                                                  period                period
(1)Salaries, bonus, allowances       1,086,883,513.72      9,352,812,040.33        9,182,630,366.42       1,257,065,187.63

(2)Welfare                            531,758,045.89           180,884,089.00        415,371,419.54         297,270,715.35

(3)Social security                     91,041,425.17       1,655,558,914.10        1,599,233,591.32         147,366,747.95

(4)Housing fund                         8,587,321.53           247,944,420.53        248,804,583.14           7,727,158.92

(5)Union fund and education fund        2,291,456.49            73,062,279.43         72,478,376.61           2,875,359.31

(6)Short-term paid leave              228,698,109.89           251,881,649.87        304,336,887.10         176,242,872.66

(7)Others                             252,108,361.89       2,246,982,353.04        2,257,614,112.74         241,476,602.19

                Total                  2,201,368,234.58     14,009,125,746.30       14,080,469,336.87       2,130,024,644.01




                                                          230
      (3)Defined contribution plan:

                                                           Increase in current     Decrease in
                 Items                     2016                                                                2017
                                                                   period         current period
Pension                                 189,197,049.65      1,247,515,619.27     1,393,609,223.32        43,103,445.60

Unemployment insurance                     700,838.23            21,649,871.97     21,585,432.91               765,277.29

Supplementary pension                      462,957.88             1,012,224.98         926,256.93              548,925.93

                 Total                  190,360,845.76      1,270,177,716.22     1,416,120,913.16        44,417,648.82


      (4)Termination benefits:

                  Items                              2017                                2016

Termination compensation                                    14,959,967.19                      16,796,576.14

                  Total                                     14,959,967.19                      16,796,576.14


 28) Taxes payable

                 Items                            2017                                  2016

VAT                                                      482,237,560.42                     501,344,246.89

Corporate income tax                                 1,246,597,129.08                       930,301,189.86

City Construction tax                                     10,698,089.06                        33,805,437.30

Business tax                                               6,482,581.69                        11,554,246.76

Individual income tax                                     22,133,761.57                        19,205,381.15

Education surcharge                                        4,651,788.94                        12,144,570.87
Treatment fund for appliance and
                                                          77,767,756.79                        73,838,985.81
electronic products waste
Others                                                    58,691,859.87                        38,394,342.63

                 Total                               1,909,260,527.42                     1,620,588,401.27


 29) Interest payable

                  Items                              2017                                2016

Interest on long-term borrowings                            46,938,624.99                      15,891,113.99

Interest on short-term borrowings                           10,717,833.80                      14,679,214.67

                  Total                                     57,656,458.79                      30,570,328.66


 30) Dividends payable

                Shareholder                              2017                             2016

BRAVE LION (HK) LIMITED                                     122,756,874.10                  122,756,874.10

Others                                                          30,999,441.54                  25,933,614.91


                                               231
                  Total                                   153,756,315.64              148,690,489.01


 31) Other payables

                  Items                               2017                           2016

Other payables                                         10,805,162,943.62             9,459,636,746.05

                  Total                                10,805,162,943.62             9,459,636,746.05

    The ending balance mainly included the incurred but unpaid costs.

 32) Other non-current liabilities due in one year

                 Items                                2017                           2016

Long-term payables due in one year                                                      9,338,365.85

Bonds payable due in one year                                                       1,223,220,143.70

Long-term borrowings due in one year                    2,850,325,000.00            1,734,250,000.00

                 Total                                  2,850,325,000.00            2,966,808,509.55


 33) Long-term borrowings

                 Items                                2017                           2016
Borrowings - secured by guarantor and
                                                       10,489,849,095.99           14,716,253,452.30
mortgage
Borrowings - secured by guarantor                       5,227,360,000.00

Borrowings - unsecured                                       288,741,397.35           814,547,859.50

Borrowings - secured by mortgage                              30,542,316.47

                 Total                                 16,036,492,809.81           15,530,801,311.80

     Interest rate on long-term borrowings – secured by guarantor is the one as provided in the

agreement plus LIBOR.

     Interest rate on domestic long-term borrowings – unsecured is the benchmark rate published

by the People‘s Bank of China.

     Interest rate on offshore long-term borrowings – unsecured is the one as provided in the

agreement plus LIBOR.

     Interest rate on long-term borrowings – secured by mortgage is the one as provided in the

agreement plus LIBOR.

 34) Bonds payable




                                                232
      On 21 November 2017, Harvest International Company, the Company‘s wholly-owned

subsidiary, issued HK$8 billion exchangeable corporate bonds, of which term is 5 years, coupon

rate is zero and rate of return is 1%.
     The bonds were divided into liabilities and equities on initial recognition:

                                  Items                                              Convertible bonds issued in 2017

Initial recognition:                                                                                           6,731,131,007.13

Including:

      Equities of exchangeable bonds                                                                            431,424,524.07

      Liabilities of exchangeable bonds                                                                        6,299,706,483.06

      Change in liabilities for the period:
                                                                     Less:
                                                                     bond                        Reclassified
                                                   Accrued
                                 Increase in                      interest       Difference      to maturity
   Items          2016                               bond                                                              2017
                               current period                        paid       on exchange      within one
                                                    interest
                                                                  for the           rate            year
                                                                  period
Exchangeable
bonds issued                   6,299,706,483.06   12,236,509.61                -100,854,629.99                    6,211,088,362.68

in 2017
    Total                      6,299,706,483.06   12,236,509.61                -100,854,629.99                    6,211,088,362.68



  35) Long-term payable

                       Items                                           2017                                    2016

 Investment from CDB development fund                                          93,000,000.00                     93,000,000.00

 Lease                                                                         13,020,029.74                     22,783,382.28

                       Total                                                  106,020,029.74                    115,783,382.28

      Under the Investment Contract of China Development Fund executed by the Company and
its subsidiaries including Qingdao Haier Refrigerator Co., Ltd., Qingdao Haier Air Conditioner
Gen Corp., Ltd., Qingdao Haier (Jiaozhou) Air-conditioning Co., Limited together with China
Development Fund Co. Ltd. in 2015 and 2016, China Development Fund Co. Ltd. invested
RMB20 million in Qingdao Haier Refrigerator Co., Ltd., and RMB73 million in Qingdao Haier
(Jiaozhou) Air-conditioning Co., Limited. China Development Fund Co. Ltd. earns 1.2% of the
annual profits by means of dividends or repurchase premiums. The Company and its subsidiaries
will repurchase the investments above during 2020 to 2027.


  36) Long-term employee benefits payable



                                                               233
      (1)Long-term employee benefits payable

                       Items                                2017                               2016
I. Post-employment benefits: net liability
                                                                   549,421,555.18               837,967,757.25
of defined benefit plan
II. Termination benefits                                            81,557,019.60                54,148,397.79
III. Provision for work-related injury
                                                                   267,182,167.75               317,102,409.75
compensation
Ⅳ. Other long-term benefits

                       Total                                       898,160,742.53              1,209,218,564.79


      (2)Defined benefit plan

    Some subsidiaries of the Company have participated in several defined benefit plans, in
which eligible employees are entitled to the retirement benefits agreed.

     These plans are exposed to interest rate risks, changes in life expectancy of the beneficiary
and other risks.

    The actuarial valuation of the assets and the present value of defined benefit obligations
under such plans are determined by using the Projected Unit Credit (PUC) method.

      ①. The defined benefit plan of Haier Asia Co., Ltd., a subsidiary of the Company

       Actuarial assumption:

                               Items                                                Rate

I. Discount rate                                                                    0.50%

II. Expected rate of return                                                         2.00%


       Change in Defined Benefit Obligation


                                   Items                                              Amount

I. Defined benefit obligation at beginning of year                                               314,909,686.37

II. Cost recognized in current profit or loss                                                     11,101,765.66

1. Current service cost                                                                            9,511,366.06

2. Past service cost

3. Settlement gains (loss indicated in ―-‖)

4. Interest cost                                                                                   1,590,399.60

III. Cost recognized in other comprehensive incomes                                                   317,903.32

1. Actuarial loss (gain indicated in ―-‖)                                                          317,903.32

IV. Other changes                                                                                -23,013,289.43



                                                      234
1. Settlements

2. Benefit paid                                                                         -14,134,696.44

3. Exchange differences                                                                  -8,878,592.99

V. Defined benefit obligation at end of year                                           303,316,065.92


       Change in Fair Value of Plan Assets

                                Items                                         Amount

I. Fair value of plan assets at beginning of year                                      300,272,483.59

II. Amount recognized in current profit or loss                                           1,516,476.83

1. Interest income                                                                        1,516,476.83

III. Amount recognized in other comprehensive incomes                                   13,283,096.23

1. Return on plan assets (except those included in net interests)                       13,283,096.23
2. Changes in impact of asset cap (except those included in net
interests)
IV. Other changes                                                                        -7,748,158.75

1.Employer contributions                                                                15,571,690.85

2. Benefits paid out                                                                    -14,134,696.44

3. Exchange differences                                                                  -9,185,153.16

V. Fair value of plan assets at end of year                                            307,323,897.90


       Neither the Company's ordinary shares or bonds, nor the properties occupied by the

Company are included in the plan assets.

       Net liability (net asset) of defined benefit plan:

                                Items                                         Amount

I. Opening balance                                                                      14,637,202.78

II. Cost recognized in current profit or loss                                             9,585,288.83

III. Cost recognized in other comprehensive incomes                                     -12,965,192.91

IV. Other changes                                                                       -15,265,130.68

V. Closing balance                                                                       -4,007,831.98


       The average term for the defined benefit obligation is 14.70 years at the balance sheet date.

       ②.The defined benefit plan of Roper Corporation, a subsidiary of the Company

    Roper Corporation, a subsidiary of the Company, has provided post-employment defined
benefit plan of health care benefits to eligible employees.

       Actuarial assumption:

                                                         235
                            Items                                          Rate

I. Discount rate                                                          3.98%


       Change in Defined Benefit Obligation


                                 Items                                        Amount

I. Defined benefit obligation at beginning of year                                     147,664,284.01

II. Business combination not under common control

III. Cost recognized in current profit or loss                                             11,036,022.36

1. Current service cost                                                                     6,169,577.08

2. Past service cost                                                                         -702,792.99

3. Settlement gains (loss indicated in ―-‖)

4. Interest cost                                                                            5,569,238.27

IV. Cost recognized in other comprehensive incomes                                          5,158,509.31

1. Actuarial loss (gain indicated in ―-‖)                                                5,158,509.31

V. Other changes                                                                        -18,181,734.40

1. Settlements

2. Benefit paid                                                                            -9,382,639.44

3. Exchange differences                                                                    -8,799,094.96

Ⅵ.Defined benefit obligation at end of year                                           145,677,081.28


       Net liability (net asset) of defined benefit plan:

                                 Items                                        Amount

I. Opening balance                                                                     147,664,284.01

II. Business combination not under common control

III. Cost recognized in current profit or loss                                             11,036,022.36

IV. Cost recognized in other comprehensive incomes                                          5,158,509.31

V. Other changes                                                                        -18,181,734.40

Ⅵ.Closing balance                                                                     145,677,081.28


       The average term for the defined benefit obligation is 12.14 years at the balance sheet date.

       ③.The defined benefit plan of Haier US Appliance Solutions, Inc., a subsidiary of the

       Company.

      Haier US Appliance Solutions, Inc., a subsidiary of the Company, has provided

post-retirement defined benefit plan of health care benefits for the eligible employees.



                                                     236
       Actuarial assumption:

                            Items                                         Rate

I. Discount rate                                                         3.68%


       Change in Defined Benefit Obligation


                                 Items                                      Amount

I. Defined benefit obligation at beginning of year                                    385,674,932.23

II. Business combination not under common control

III. Cost recognized in current profit or loss                                         19,303,876.24

1. Current service cost                                                                 5,484,636.88

2. Past service cost

3. Settlement gains (loss indicated in ―-‖)

4. Interest cost                                                                       13,819,239.36

IV. Cost recognized in other comprehensive incomes                                     17,768,624.43

1. Actuarial loss (gain indicated in ―-‖)                                           17,768,624.43

V. Other changes                                                                      -37,959,222.07

1. Settlements

2. Benefit paid                                                                       -14,830,489.57

3. Exchange differences                                                               -23,128,732.50

Ⅵ.Defined benefit obligation at end of year                                          384,788,210.83


       Net liability (net asset) of defined benefit plan:

                                 Items                                      Amount

I. Opening balance                                                                    385,674,932.23

II. Business combination not under common control

III. Cost recognized in current profit or loss                                         19,303,876.24

IV. Cost recognized in other comprehensive incomes                                     17,768,624.43

V. Other changes                                                                      -37,959,222.07

Ⅵ.Closing balance                                                                    384,788,210.83


       ④.The defined benefit plan of Haier US Appliance Solutions, Inc., a subsidiary of the

       Company.

      Haier US Appliance Solutions, Inc., a subsidiary of the Company, has provided defined

benefit plan of pension for the eligible employees.



                                                     237
       Actuarial assumption:

                            Items                                   Rate

I. Discount rate                                                    3.21%


       Change in Defined Benefit Obligation


                                 Items                                Amount

I. Defined benefit obligation at beginning of year                             344,065,731.00

II. Business combination not under common control

III. Cost recognized in current profit or loss                                  21,279,102.59

1. Current service cost                                                         13,521,404.60

2. Past service cost

3. Settlement gains (loss indicated in ―-‖)                                  -3,040,785.00

4. Interest cost                                                                10,798,482.99

IV. Cost recognized in other comprehensive incomes                              18,144,337.07

1. Actuarial loss (gain indicated in ―-‖)                                    18,144,337.07

V. Other changes                                                               -50,134,189.83

1. Settlements

2. Benefit paid                                                                -29,839,432.68

3. Exchange differences                                                        -20,294,757.15

Ⅵ.Defined benefit obligation at end of year                                   333,354,980.83


       Change in Fair Value of Plan Assets

                                 Items                                Amount

I. Fair value of plan assets at beginning of year                                8,170,835.63

II. Amount recognized in current profit or loss

1.Interest income

III. Amount recognized in other comprehensive incomes                               99,717.48

1. Return on plan assets (except those included in net interests)                   99,717.48
2. Changes in impact of asset cap (except those included in net
interests)
IV. Other changes                                                              218,467,225.83

1.employer contributions                                                       256,259,925.97

2. benefits paid out                                                           -29,839,432.68

3. Exchange differences                                                         -7,953,267.46

V. Fair value of plan assets at end of year                                    226,737,778.94



                                                         238
       Net liability (net asset) of defined benefit plan:

                                Items                                                  Amount

I. Opening balance                                                                                335,894,895.37

II. Business combination not under common control

III. Cost recognized in current profit or loss                                                     21,279,102.59

IV. Cost recognized in other comprehensive incomes                                                 18,044,619.59

V. Other changes                                                                                 -268,601,415.66

Ⅵ.Closing balance                                                                                106,617,201.89


      (3)Provision for work-related injury compensation

      Haier US APPLIANCE SOLUTIONS, INC. made a provision for the occupational injury

claims filed by the injured due to production accidents starting from 1 January 1991. The

provision was calculated by Beecher Carlson Insurance Services, LLC., based on actuarial method.

The discount rate used in the actuary is 3.72%.

                                Items                                                  Amount

Ⅰ. Opening balance                                                                               317,102,409.75

II. Business combination not under common control

Ⅲ. Compensation recognized in current profit and loss                                             54,164,730.17

Ⅳ. Actual compensation paid                                                                      -86,748,055.06

V. Other changes                                                                                  -17,336,917.11

Ⅵ.Closing balance                                                                                267,182,167.75


       Classification of the balance of defined benefit plan

                     Items                                     2017                             2016

Current                                                                87,660,938.82              45,903,557.14

Non-current                                                           549,421,555.18             837,967,757.25

                     Total                                            637,082,494.00             883,871,314.39


  37) Provisions

                     Items                                     2017                             2016

Warranty and installation                                        2,600,696,051.30               2,275,917,930.84

Active litigation                                                      19,003,500.11              18,501,499.76

Others                                                                                            15,700,000.00

                     Total                                       2,619,699,551.41               2,310,119,430.60



                                                         239
    Significant assumptions and estimates related to warranty and installation: estimates are
based on historical expenditures and sales, warranty policies, and realized sales in current period.

  38) Deferred revenue

                                                 Increase in current          Decrease in current
      Items                    2016                                                                         2017
                                                          period                      period
Government
                               337,441,740.36         242,595,462.63                  85,844,575.37        494,192,627.62
grants
Sale and
                                 5,383,852.99                                          2,435,391.89          2,948,461.10
leaseback
      Total                    342,825,593.35         242,595,462.63                  88,279,967.26        497,141,088.72


  39) Other non-current liabilities

                       Items                                          2017                                2016
Changes of fair value in hedging
                                                                                                          582,785,069.86
instruments
Foreign exchange contract                                                    242,417,657.63
Obligation of repurchase non-controlling
                                                                             916,938,153.36
interest
Contingent consideration                                                         5,384,860.29

Changes of fair value in put option                                              6,196,157.27

                       Total                                             1,170,936,828.55                 582,785,069.86


  40) Share capital

                                                                   Increase in          Decrease in
            Category                      2016                                                               2017
                                                              current period           current period

I. Restricted shares                      606,213,988                                    606,213,988

1. State-owned shares
2. Shares held by domestic
non-state-owned
legal entities
3. Shares held by domestic
                                                228,000                                         228,000
individuals
4. Shares held by offshore
non-state-owned legal                     605,985,988                                    605,985,988
entities
Ⅱ. Non-restricted shares               5,491,416,739                605,985,988                            6,097,402,727

1. Ordinary shares in RMB               5,491,416,739                605,985,988                            6,097,402,727

2. Domestic listed foreign



                                                             240
 shares

 3. Offshore listed foreign
 shares
 4.Others

 Ⅲ. Total shares                    6,097,630,727            605,985,988         606,213,988      6,097,402,727


   41) Other equity instruments

                                                       Increase in current       Decrease in
                  Items              2016                                                            2017
                                                              period            current period
 Equity portion of
                                                           431,424,524.07                          431,424,524.07
 exchangeable bonds
             Total                                         431,424,524.07                          431,424,524.07


   42) Capital reserve

                                               Increase in current           Decrease in current
          Items               2016                                                                     2017
                                                       period                      period

Capital surplus                                       331,168,733.63              331,168,733.63

Other capital reserve         83,383,194.51           743,499,899.33                                826,883,093.84

          Total               83,383,194.51          1,074,668,632.96             331,168,733.63    826,883,093.84

       Movements in capital surplus mainly include:

       ① Capital contribution to subsidiaries not on the original proportion of equity interest led to

 the changes in the shareholdings of the Company, which results to an increase of

 RMB122,472,125.68 in 2017.

       ② Cancellation of treasury shares in 2017, which results to an decrease of RMB813,960.00.

       ③ Business combination not under common control in 2017, which results to an decrease of

 RMB317,663,275.95.

       ④ Purchase of non controlling interest in 2017, which results to an decrease of

 RMB12,691,497.68.

       ⑤ Retained earnings was transferred to capital surplus due to insufficiency for offsetting,

 which results to an increase of RMB208,696,607.95.

       Movements in other capital reserve mainly include:

       Changes on other equity of the investee applied equity method, which results proportionate

 movement of other capital reserves by the Company.


                                                        241
  43) Treasury shares

                                                            Increase in current           Decrease in
                 Items                     2016                                                                        2017
                                                                      period            current period
Restricted shares                           1,041,960.00                                       1,041,960.00

Share repurchase

             Total                          1,041,960.00                                       1,041,960.00

        The Company cancelled restricted shares with a value of RMB1,041,960.00 in 2017.

  44) Other comprehensive income

                                                                               2017                                                   2017

                                                                                                     Post-tax
                                                         Less:          Post-tax amount              amount
Items             2016
                                 Pre-tax amount        income             Attributable to         Attributable to      Others
                                                     tax expense               parent            non-controlling
                                                                                                   shareholders
  a           34,176,554.03        -307,730,489.01                          -307,016,515.96             -713,973.05                -272,839,961.93

  b              6,134,086.21        -3,401,925.21     -410,431.40             -3,059,092.10             67,598.29                    3,074,994.11

  c           11,943,250.39         35,816,200.12      7,962,331.90            27,853,868.22                                        39,797,118.61

  d          520,919,042.22        -317,418,943.44                          -317,446,061.32              27,117.88                 203,472,980.90

  e              -6,185,497.28       -3,355,628.26      413,005.31             -3,683,444.37             -85,189.20                  -9,868,941.65

Total        566,987,435.57        -596,090,785.80     7,964,905.81         -603,351,245.53             -704,446.08                 -36,363,809.96


        Notes: (1) Item a, b, c, and d are other comprehensive income that will be reclassified to profit or loss,

including:

        Item a represents other comprehensive income of investees accounted for using the equity method, which

will be reclassified subsequently to profit or loss.

        Item b represents changes in fair value of available-for-sale financial assets.

        Item c represents effective portion of gains/losses arising from cash flow hedging instruments

        Item d represents exchange differences from translation of foreign currency financial statements.

      (2) Item e represents changes arising from remeasurement of net liabilities or assets of defined benefit plans,

which may not be subsequently reclassified to profit or loss.


  45) Surplus reserve

                                                        Increase in current           Decrease in current
         Items                      2016                                                                                  2017
                                                                 period                        period
Statutory surplus
                                  2,028,803,276.19               47,467,365.42                 20,869,660.79          2,055,400,980.82
reserve
Discretionary                        26,042,290.48                                                                      26,042,290.48


                                                              242
 surplus reserve

 Reserve fund                      11,322,880.64                                                   11,322,880.64
 Enterprise
                                   10,291,630.47                                                   10,291,630.47
 expansion fund
        Total                   2,076,460,077.78        47,467,365.42      20,869,660.79         2,103,057,782.41

       Pursuant to Company Law of the People‘s Republic of China and articles of association, the
 Company is required to appropriate the statutory surplus reserve at 10% of its net profit.
       Retained earnings was transferred to capital surplus due to insufficiency for offsetting, which
 results to a decrease in 2017

   46) Retained Earnings

                                 Items                                              Amount
Retained Earnings at the end of last year                                                     17,544,395,965.35
Add: correction of accounting errors

Adjustment due to implementation of new accounting standard

Adjustment due to business combination under common control                                      70,372,786.35
Retained Earnings at the beginning of the year                                                17,614,768,751.70
Add: net profit attributable to owners of the Company                                          6,925,792,321.27
Profit available for appropriation for the year                                               24,540,561,072.97
Less: appropriation of statutory surplus reserve                                                 47,467,365.42
Appropriation of staff incentive and welfare fund

Dividend payable for ordinary shares                                                           1,512,155,876.30
Business combination under common control                                                       187,826,947.16

Retained Earnings at the end of the period                                                    22,793,110,884.09




                                                        243
     47) Operating revenue and COGS

        (1)Operating revenue
              Categories                            2017                                     2016
   Primary Business                                   158,726,338,506.38                          118,575,634,618.01
   Other Business                                          528,128,403.08                             556,627,044.59

                 Total                                159,254,466,909.46                          119,132,261,662.60

        (2)Primary Business revenue and COGS presented by product categories:
                                             2017                                             2016
    Categories
                                   Revenue              COGS                     Revenue                    COGS

 Air conditioner             28,744,555,048.98       19,607,984,859.83        18,676,423,237.28        12,645,964,675.28

   Refrigerator              47,113,594,913.60       31,984,588,757.22        36,254,741,110.25        24,260,152,441.10

Kitchen appliance            28,560,362,564.19       17,205,073,338.09        19,013,918,291.78        11,187,891,955.96

Washing machine              30,895,409,074.18       19,903,403,843.63        23,479,946,836.50        15,346,199,597.38

Equipment product             3,024,833,837.20        2,833,882,299.86         2,651,194,282.78         2,464,745,052.71
Integrated channel
                             20,387,583,068.23       18,301,887,553.75        18,499,410,859.42        16,097,749,339.90
services and others
      Total                 158,726,338,506.38      109,836,820,652.38       118,575,634,618.01        82,002,703,062.33


     48) Taxes and surcharges

                           Items                                   2017                              2016
   Business tax                                                           3,937,319.54                 10,230,737.89
   City maintenance and construction tax                              289,360,072.51                  289,324,905.41
   Education surcharge                                                207,436,359.71                  197,382,776.46
   Property tax                                                          58,333,977.34                 45,615,653.30
   Land use tax                                                          39,803,659.28                 28,738,931.20
   Stamp tax                                                          164,204,646.62                   87,975,062.38
   Others                                                                45,814,953.25                 28,639,619.70

                           Total                                      808,890,988.25                  687,907,686.34




                                                            244
 49) Selling and distribution expenses

                     Items                            2017                         2016

Selling and distribution expenses                     28,276,014,979.78           21,254,103,195.32

                     Total                            28,276,014,979.78           21,254,103,195.32


     Selling expenses of the Company mainly include employee benefit expenses, transportation

and warehousing costs, advertising and sales promotion expenses, after-sale expenses, etc.

 50) General and administrative expenses

                     Items                            2017                         2016

General and administrative expenses                   11,133,225,318.88            8,404,150,036.49

                     Total                            11,133,225,318.88            8,404,150,036.49

    G&A expenses of the Company mainly include employee benefit expenses, research and
development costs, administrative expenses, rental expense, etc.

 51) Finance income/(expenses)

                     Items                           2017                         2016

 Interest expenses                                   1,214,335,487.98              789,048,547.63

  Less: Interest income                                313,552,297.85              225,930,059.97

  Less: Cash discount                                  178,496,609.91               98,631,937.73

 Exchange gain or loss                                 583,170,145.68              179,026,421.60

 Others                                                 87,415,548.31               76,895,245.00

                     Total                           1,392,872,274.21              720,408,216.53


 52) Asset impairment loss/reversal

                     Items                           2017                         2016

 Impairment loss/(reversal) of bad debts                    61,049,365.34           21,816,555.49

 Impairment loss on inventories                         532,813,678.93             466,518,247.15

 Impairment loss on fixed assets                             4,033,767.05

 Impairment loss on intangible assets                       10,020,069.91

 Impairment loss on construction in progress                                         2,213,568.88
 Impairment loss on long term equity
                                                            21,000,000.00
 investment
 Impairment loss on available for sale
                                                            27,000,000.00
 financial assets



                                               245
                        Total                                       655,916,881.23           490,548,371.52


  53) Gains/(losses) on changes in fair value

                     Items                                       2017                       2016
Financial instruments measured at fair value
with changes included in current profit and                        614,071,259.47               83,266,828.84
loss - derivative financial instruments
Changes in fair values of hedging
instrument and hedged items in an effective                                                     11,381,247.23
hedge relationship
                     Total                                         614,071,259.47               94,648,076.07


  54) Gains/(losses) on investment

                        Items                                    2017                       2016
Gains/(losses) on long-term equity
                                                                  1,189,499,159.93             974,078,918.55
investments under equity method
Gains/(losses) on disposal of long-term equity
                                                                   154,563,929.68               86,010,966.27
investments
Gains/(losses) on available for sale financial
                                                                    41,422,977.72               26,720,731.79
assets during the holding period
Gains/(losses) on disposal of available for
                                                                        1,006,946.64           531,827,281.30
sale financial assets
Gains/(losses) on disposal of financial assets
measured at fair value with changes included                        49,335,869.06               -9,217,370.89
in current profit and loss
Gains/(losses) on financial products                                45,971,181.79               10,296,906.76

                        Total                                     1,481,800,064.82           1,619,717,433.78


  55) Gains/(losses) on disposal of non-current assets

                         Items                                    2017                     2016

 Gains on disposal of non-current assets                                15,690,888.77        252,475,880.16

 Losses on disposal of non-current assets                                4,926,679.12          21,228,961.67

                         Total                                          10,764,209.65        231,246,918.49


  56) Other income

                Items                             2017                    2016           Related to

Government grants                             867,832,122.10                            Profit or loss

Government grants                                40,729,868.30                             Assets

                Total                            908,561,990.4


                                                          246
 57) Non-operating income

                      Items                            2017                       2016

Gains on disposal of non-current assets                      60,431,217.90            4,908,681.33

Government grants                                                                  696,833,330.02
Changes in accounting treatment of available
                                                                                   166,840,685.70
for sale financial assets
Others                                                      632,532,019.86         301,981,681.15

                      Total                                 692,963,237.76        1,170,564,378.20

    Government grants:
                     Items                             2017                       2016

Related to assets                                                                    63,310,400.17

Related to profit or loss                                                           633,522,929.85

                     Total                                                          696,833,330.02


 58) Non-operating expenses


                      Items                            2017                   2016

  Losses on disposal of non-current assets                  162,131,645.01        239,227,865.90

  Donation                                                   12,959,800.05         15,145,964.51

  Others                                                     86,538,272.93         81,799,870.64

                      Total                                 261,629,717.99        336,173,701.05


 59) Income tax expenses

    (1)Income tax expenses
                    Items                            2017                    2016

  Current tax                                         1,663,220,970.73        1,319,650,567.57

  Deferred tax                                         -170,414,253.00            172,986,187.75

                    Total                             1,492,806,717.73        1,492,636,755.32

    (2)Numerical reconciliation of income tax expense prima facie tax payable
                                     Items                                   2017

  Profit before income tax expense                                           10,544,455,901.77

  Tax at China tax rate of 25%                                                2,636,113,975.44

  Difference in overseas tax rates                                             -485,447,920.31

  Adjustments for prior periods                                                -106,909,555.19

  Non-assessable income                                                        -251,839,213.46



                                               247
Non-deductible amount                                                    65,890,435.62

Unrecognition on deductible temporary differences or losses             277,059,386.40

Others                                                                 -642,060,390.77

Income tax expense                                                    1,492,806,717.73


60) Other comprehensive income

    Relevant disclosure in V.44

61) Cash received relating to other operating activities

                          Items                               2017

Deposits and securities                                                 139,228,669.93

Government grants                                                       318,432,554.22

Non-operating income excluding government grants                        318,000,399.91

Interest income                                                         244,201,255.41

Others                                                                   78,006,845.70

                          Total                                       1,097,869,725.17


62) Cash paid relating to other operating activities

                          Items                                2017
Selling and distribution expenses                                      9,683,277,105.13
General and administrative expenses                                    3,865,733,432.42
Financial expenses                                                       84,547,951.86
Non-operating expenses                                                   49,401,553.54

Others                                                                  204,113,761.11

                           Total                                      13,887,073,804.06




                                                   248
63) Cash received relating to other investing activities

                           Items                                                2017

 Government grants related to assets                                                    188,727,997.88

 Cash received from acquiring subsidiaries                                                3,002,450.64

                            Total                                                       191,730,448.52


64) Cash payments relating to other financing activities

                           Items                                                2017

 Cash paid on repurchasing shares                                                        13,080,466.40
 Cash paid due to the withdrawal of non-controlling
                                                                                          1,508,000.00
 shareholders
 Cash paid on financial lease                                                            17,263,522.47

 Acquisition of non-controlling interest                                                 76,641,300.81

 Others                                                                                  18,166,749.34

                            Total                                                       126,660,039.02


65) Supplementary information of cash flow statement

                        Items                               2017                        2016

1. Net profit                                               9,051,649,184.04           6,695,980,185.55

Plus: provisions for assets impairment                        655,916,881.23             490,548,371.52

Depreciation of fixed assets                                2,404,673,250.76           2,150,460,933.50

Amortization of intangible assets                             334,555,230.49             241,325,547.38

Amortization of long-term prepaid expenses                     36,706,751.00              32,843,689.24
Loss on disposal of fixed assets, intangible
assets and other long term assets (―-‖                      90,936,217.46               3,064,257.71
represents ―gains‖)
Loss on change of fair value (―-‖ represents
                                                             -614,071,259.47             -94,648,076.07
―gains‖)
Financial expenses (―-‖ represents ―gains‖)            1,214,335,487.98             789,048,547.63

Loss on investments (―-‖ represents ―gains‖)           -1,481,800,064.82          -1,619,717,433.78
Decrease of deferred income tax assets (―-‖
                                                             -329,983,599.43            -398,120,606.40
represents ―increase‖)
Increase of deferred income tax liabilities (―-‖
                                                              159,569,346.43             571,106,794.15
represents ―decrease‖)
Decrease of inventories (―-‖ represents
                                                            -6,726,791,971.64          -1,659,356,640.18
―increase‖)



                                                      249
 Decrease of operational account receivables
                                                              694,351,560.41      -3,017,750,721.23
 (―-‖ represents ―increase‖)
 Increase of operational account payables (―-‖
                                                           10,188,558,879.93          4,314,265,550.01
 represents ―decrease‖)
 Others                                                       407,982,133.94          -363,172,047.15
 Net cash flows generated from operational
                                                           16,086,588,028.31          8,135,878,351.88
 activities
 2. Significant investment and financing
 activities not involving cash inflows and
 outflows
 Capital transferred from debts                             1,223,220,143.70

 Convertible corporate bonds due within 1 year                                        1,223,220,143.70

 Financial leased fixed assets

 3. Changes of cash and cash equivalents:

 Cash balance at the end of 2017                           34,340,013,574.22      23,295,239,445.05

 Less: cash balance at the beginning of 2017               23,295,239,445.05      24,725,651,908.55
 Add: cash equivalents balance at the end of
 2017
 Less: cash equivalents balance at the beginning
 of 2017
 Net increase of cash and cash equivalents                 11,044,774,129.17      -1,430,412,463.50


 66) Cash and cash equivalents

                       Items                              2017                        2016
  I. Cash                                                 34,340,013,574.22       23,295,239,445.05
  Including: cash on hand                                        513,781.37                  565,073.32
  Cash in bank which is available for
                                                          32,994,884,486.17       23,268,681,467.29
  payment at any time
  Other cash available for payment at any
                                                           1,344,615,306.68             25,992,904.44
  time
  II. Cash equivalents

  Including: bond investment due within
  three months
  Ⅲ. Closing balance of cash and cash
                                                          34,340,013,574.22       23,295,239,445.05
  equivalents
  Including: restricted cash and equivalents
  held by the Company or subsidiaries


 67) Foreign Currency

Items                               2017                                       2016


                                                    250
               Balance in           Exchange                           Balance in         Exchange
                                                   Balance in RMB                                        Balance in RMB
               foreign currency     rate                               foreign currency   rate
Cash

USD            1,249,816,041.00           6.5342    8,166,547,975.10    387,284,566.46       6.9370       2,686,593,037.53

EUR               20,058,292.65           7.8023     156,500,816.74       21,250,231.16      7.3068        155,271,189.04

JPY            5,007,949,886.95     0.057883         289,875,163.31    5,184,441,120.54   0.059591         308,946,030.81

HKD            1,029,213,931.69           0.8359     860,319,925.50     324,689,386.07       0.8945        290,434,655.84

Others                                               772,356,596.65                                        671,853,643.07

Sub-total                                          10,245,600,477.30                                      4,113,098,556.29

Accounts receivables

USD            1,036,244,584.01           6.5342    6,771,029,360.84    976,653,474.79       6.9370       6,775,045,154.62

EUR               46,516,973.55           7.8023     362,939,382.73       49,108,138.60      7.3068        358,823,347.12

JPY            3,875,029,615.17     0.057883         224,298,339.21    4,314,375,738.62   0.059591         257,097,964.64

Others                                              1,744,262,398.17                                      1,900,121,489.06

Sub-total                                           9,102,529,480.95                                      9,291,087,955.44

Short-term borrowings

USD            1,048,141,122.69           6.5342    6,848,763,723.88   1,329,063,973.44          6.937    9,219,716,783.75

EUR               11,319,902.42           7.8023      88,321,274.65       10,815,675.73      7.3068         79,027,979.42

JPY              740,217,334.97     0.057883          42,846,000.00    5,251,439,976.00   0.059591         312,938,559.61

HKD                                                                     725,000,000.00       0.8945        648,512,500.00

Others                                               296,567,076.35                                         21,015,000.00

Sub-total                                           7,276,498,074.88                                     10,281,210,822.78

Accounts payables

USD              897,463,561.23           6.5342    5,864,206,401.79    894,240,568.95           6.937    6,203,346,826.81

EUR               15,125,382.24           7.8023     118,012,769.85       28,647,679.79      7.3068        209,322,866.69

JPY            1,215,454,339.45     0.057883          70,354,143.53    3,804,098,671.44   0.059591         226,690,043.93

Others                                              1,010,745,873.14                                      1,012,439,147.10

Sub-total                                           7,063,319,188.31                                      7,651,798,884.53

Non-current liabilities due in one year

USD             375,000,000.00        6.5342       2,450,325,000.00     250,000,000.00           6.937    1,734,250,000.00

Sub-total                                          2,450,325,000.00                                       1,734,250,000.00

Long-term borrowings

USD            2,449,565,439.28           6.5342   16,005,950,493.34   2,121,414,653.64          6.937   14,716,253,452.30

JPY                                                                    5,278,445,730.06   0.059591         314,547,859.50

Others

Sub-total                                          16,005,950,493.34                                     15,030,801,311.80




                                                            251
             8. Changes of consolidation scope

             1) Business combination not under common control

             (1)Business combination not under common control in 2017
                                                            (% )                                  Recogniti
                                                                      Acqui                                          Acquiree‘s         Acquiree‘s net
                                                           Interes                                    on basis
                     Time                                             sition      Acquisition                       revenue from           profit from
 Acquiree                          Acquisition cost           t                                          of
                of acquisition                                        metho            date                        acquisition date      acquisition date
                                                           acquir                                 acquisitio
                                                                        d                                          to the year end       to the year end
                                                             ed                                       n dates
Shanghai                                                                                          shareholdi
Grand                                                                 Acqui                       ng
                  2017.8.31           28,049,392.06          57                     2017.8.31                        67,329,520.17         -8,497,474.28
Logistics                                                             sition                      transferre
Co., Ltd                                                                                          d
GREENone                                                                                          shareholdi
TECSolarin                                                            Acqui                       ng
                  2017.5.17           60,307,603.61          51                     2017.5.17                       143,717,836.33         -1,097,544.85
dustrieGmb                                                            sition                      transferre
H                                                                                                 d

             (2)Acquisition cost and goodwill
                                                                  Shanghai Grand Logistics Co.,               GREENoneTEC Solarindustrie
                            Acquisition cost
                                                                                Ltd                                     GmbH
             ------ Cash                                                                                                           52,366,495.84
             ------ Fair value of contingent
                                                                                                                                    7,941,107.77
             considerations
             Other non-current assets                                                 19,683,702.94

             Available-for-sale financial assets                                       8,365,689.12

             Total cost                                                               28,049,392.06                                60,307,603.61
             Less: fair value of identifiable net assets
                                                                                      -1,030,077.60                                57,008,845.86
             acquired
             Goodwill                                                                 29,079,469.66                                 3,298,757.75

             (3)Acquiree‘s identifiable assets and liabilities at acquisition date:
                                                                                   Shanghai Grand Logistics Co., Ltd
                                  Items
                                                                               Fair value                            Book value

              Cash                                                                       3,002,449.81                        3,002,449.81
              Accounts Receivables                                                      57,568,812.25                       57,568,812.25
              Inventories                                                                   131,363.44                         131,363.44
              Fixed assets /Construction in progress /
                                                                                         8,982,560.18                        8,982,560.18
              Intangible assets
              Other long-term assets                                                    14,868,469.35                       14,868,469.35




                                                                            252
Accounts Payables                                               -49,047,536.81                         -49,047,536.81
Taxes payables                                                       -121,522.65                          -121,522.65

Long-term payable                                               -30,600,000.00                         -30,600,000.00

Borrowings                                                        -3,700,000.00                         -3,700,000.00



Net assets                                                         1,084,595.57                          1,084,595.57

Less: Non-controlling interests                                    2,891,749.27                          2,891,749.27

Net assets obtained                                               -1,807,153.70                         -1,807,153.70


 (Continued)

                                                             GREENoneTEC Solarindustrie GmbH
                    Items
                                                        Fair value                              Book value

Cash                                                                  22,542.76                              22,542.76
Accounts Receivables                                             48,279,085.49                          48,279,085.49
Inventories                                                      29,245,478.71                          29,245,478.71
Fixed assets /Construction in progress /
                                                                175,517,957.81                         142,590,494.37
Intangible assets
Other long-term assets                                             1,916,134.91                          1,916,134.91



Accounts Payables                                               -44,724,843.09                         -44,724,843.09

Other long-term liabilities                                     -11,707,208.59                          -3,712,041.75

Borrowings                                                      -86,767,097.30                         -86,767,097.30



Net assets                                                      111,782,050.70                          86,849,754.10

Less: Non-controlling interests

Net assets obtained                                             111,782,050.70                          86,849,754.10


 2) Business combination under common control


(1)Business combination under common control in 2017


                                                               Basis for recognition as
                                                                                          Acquisitio       Recognition basis of
               Acquiree                % interest acquired      business combination
                                                                                            n date           acquisition dates
                                                               under common control



                                                              Ultimately                                Rights and obligations
FISHER&PAYKELPRODUCTIO
                                             100%             controlled by Haier         2017.9.30     related to target
N MACHINERY LIMITED
                                                              Group before and                          shareholding have been



                                                      253
                                                                after the                              transferred to the
                                                                transaction                            Company
                                                                Ultimately                             Rights and obligations
                                                                controlled by Haier                    related to target
Tianjin Ririxin Assets Management
                                               100%             Group before and         2017.9.30     shareholding have been
Co., Ltd.
                                                                after the                              transferred to the
                                                                transaction                            Company

     (Continued)

                                                                                                Acquiree‘s        Acquiree‘s net
                                         Acquiree‘s revenue        Acquiree‘s net profit
                                                                                                 revenue in            profit in
                 Acquiree               from beginning to the      from beginning to the
                                                                                                comparative           comparative
                                          year end in 2017            year end in 2017
                                                                                                     period                period
FISHER & PAYKEL
PRODUCTION MACHINERY                           102,889,623.68                 3,858,338.44      96,749,199.17         4,131,170.90
LIMITED
Tianjin Ririxin Assets
                                                                              -3,358,296.62                            -580,505.70
Management Co., Ltd.


(2)Acquisition cost

                                             FISHER & PAYKEL
                                                                                   Tianjin Ririxin Assets
                 Acquisition cost       PRODUCTION MACHINERY
                                                                                   Management Co., Ltd.
                                                  LIMITED
                    ------Cash                           322,686,078.00                         56,092,700.00


(3)Acquiree‘s assets and liabilities

                                                FISHER & PAYKEL PRODUCTION MACHINERY LIMITED
                       Items
                                                       Acquisition date                         2016

   Cash                                                           2,806,899.17                          781,099.88
   Accounts receivable                                          50,668,040.17                        21,881,319.31
   Inventories                                                  27,063,064.46                        46,961,910.19
   Fixed assets                                                   4,635,875.06                         5,052,458.02
   Intangible assets                                                308,887.42                          398,312.94

   Less: Accounts payable                                       -24,089,609.09                       -19,768,010.49

          Long-term employee benefits                            -3,658,808.37                        -2,707,647.46

          Net assets                                            57,734,348.82                        52,599,442.39

   Less: Non-controlling interests

   Net assets obtained                                          57,734,348.82                        52,599,442.39


    (Continued)

                                                        254
                                                        Tianjin Ririxin Assets Management Co., Ltd.
                       Items
                                                     Acquisition date                            2016

   Cash                                                           1,395,709.13                      76,823,787.07
   Accounts receivable                                        105,922,959.46                            488,792.29

   Construction in progress                                    65,937,254.45                        16,292,215.17

   Intangible assets                                           31,117,911.36                        31,621,618.56

   Other long term assets                                      41,977,122.83                        13,565,510.12

   Less: Accounts payable                                      -34,134,719.99                      -91,217,389.35

          Short-term borrowings                               -168,000,000.00

          Net assets                                           44,216,237.24                        47,574,533.86

   Less: Non-controlling interests

   Net assets obtained                                         44,216,237.24                        47,574,533.86


 3) Disposal of subsidiaries

      Lose control over subsidiaries at disposal once:

                                                                        Sunshine Enterprise
                                             Ji'nan Goodaymart                                   Suzhou Goodaymart
               Subsidiaries                                              International Co.,
                                              trading Co., Ltd.                                  Appliance Co., Ltd.
                                                                                 Ltd.


Consideration                                                                                            8,820,000.00

Proportion of disposal                                       49.00%                     81.00%                81.00%

Method                                                    Disposal                   Disposal                Disposal

Date of loss-of-control                                 2017/6/30                  2017/6/30                2017/1/1
Basis of determination of date of
                                                          Disposal                   Disposal                Disposal
loss-of-control
Difference between consideration and
its share of net assets of the subsidiary
                                                      -595,421.85                1,000,040.98           -2,551,432.07
as respect to the disposal in the
consolidated level


    (Continued)

                                            Liaoning Goodaymart         Huadong Logistics          Shanghai Leya
               Subsidiaries
                                                 Co., Ltd.                   Co., Ltd.              InfoTech Ltd
Consideration                                        2,080,000.00                2,100,000.00           23,044,485.99

Proportion of disposal                                       51.00%                     60.00%              100.00%

Method                                                         Sale                                       Liquidation

Date of loss-of-control                                2017/12/31                 2017/10/31                2017/1/1

Basis of determination of date of                              Sale                       Sale            Liquidation


                                                       255
loss-of-control

Difference between consideration and
its share of net assets of the subsidiary
                                                    -1,480,620.62          511,838.05
as respect to the disposal in the
consolidated level


    (Continued)

                                            Shengfeng Yiwu Co.,                          Hai Yi Ke (Beijing)
              Subsidiaries                                          HH Retail Limited
                                                   Ltd.                                  technology Co., Ltd.
Consideration                                      22,773,599.19            13,281.59

Proportion of disposal                                    100.00%             51.00%                   100%

Method                                                       Sale          Liquidation           Liquidation

Date of loss-of-control                               2017/10/31           2017/11/30            2017/10/25
Basis of determination of date of
                                                             Sale          Liquidation           Liquidation
loss-of-control
Difference between consideration and
its share of net assets of the subsidiary
                                                    1,635,535.21            14,382.08            -182,884.25
as respect to the disposal in the
consolidated level


 4) Changes of consolidation scope due to other reasons

     (1)The Company established a wholly-owned subsidiary Haier Shanghai Zhongzhi Fang
Chuang Ke Management Co., Ltd. in 2017.
     (2)The Company established a wholly-owned subsidiary Haier Industrial Holding Co., Ltd.
in 2017.
     (3)Haier Industrial Holding Co., Ltd., a subsidiary of the Company, established a
wholly-owned subsidiary Maniiq (Qingdao) Intelligent Equipment Co., Ltd. in 2017.
     (4)Haier Industrial Holding Co., Ltd., a subsidiary of the Company, established a
wholly-owned subsidiary Haier Digital Technology (Shanghai) Co., Ltd. in 2017.
     (5)Qingdao Haier Dishwasher Co., Ltd., a subsidiary of the Company, established a
wholly-owned subsidiary Qingdao Haier Smart Kitchen Appliance Co., Ltd. in 2017.
     (6)Qingdao Haier Dishwasher Co., Ltd., a subsidiary of the Company, established a
wholly-owned subsidiary JIYI Appliance (Shanghai) Co., Ltd. in 2017.
     (7)Wuhan Haier Energy Co., Ltd., a subsidiary of the Company, established a
wholly-owned subsidiary Qingdao Hao Pin Hai Rui Information Technology Co., Ltd. in 2017.
     (8)Maniiq (Qingdao) Intelligent Equipment Co., Ltd., a subsidiary of the Company,
established a wholly-owned subsidiary Maniiq (HK) Intelligent Equipment Co. Ltd in 2017.
     (9)Maniiq (Qingdao) Intelligent Equipment Co., Ltd., a subsidiary of the Company,
established a wholly-owned subsidiary Maniiq (Singapore) Intelligent Equipment Co. Ltd in 2017.
     (10)The Company established a wholly-owned subsidiary Qingdao Haier Special
Refrigeration Appliance Co., Ltd. in 2017.



                                                      256
               (11)Qingdao Haier Technology Investment Co., Ltd., a subsidiary of the Company,
          established Beijing Micro Technology Co., Ltd. in 2017, shareholding of which is 55% at the year
          end.
               (12)Qingdao Haier Dishwasher Co., Ltd., a subsidiary of the Company, established a
          wholly-owned subsidiary Laiyang Haier Smart Kitchen Appliance Co., Ltd. in 2017.
               (13)Qingdao Haier Technology Investment Co., Ltd., a subsidiary of the Company,
          established AituTuo (Shanghai) Information Technology Co., Ltd. in 2017, shareholding of which
          is 72% at the year end.
               (14)Haier Industrial Holding Co., Ltd., a subsidiary of the Company, established Qingdao
          Blue Whale Technology Co., Ltd. in 2017, shareholding of which is 87% at the year end.
               (15)The Company established a wholly-owned subsidiary Qingdao Hailian Rongchuang
          Technology Co., Ltd. in 2017.
               (16)Qingdao Haier Air Conditioning Electronics Co., Ltd., a subsidiary of the Company,
          established a wholly-owned subsidiary Hefei Haier Air Conditioning Electronics Co., Ltd. in
          2017.
               (17)Beijing Haier Yun Kitchen Technology Co., Ltd., a subsidiary of the Company,
          established a wholly-owned subsidiary Qingdao Wine Intelligent Technology Co., Ltd. in 2017.
               (18) Shanghai Haier Medical Technology Co., Ltd., a subsidiary of the Company,
          established a wholly-owned subsidiary Taizhou Haier Medical Technology Co., Ltd. in 2017.
               (19)Haier (Hong Kong) Limited, a subsidiary of the Company, established a wholly-owned
          subsidiary Harvest International Company in 2017.

          9. Interests in other entities

          1) Interests in subsidiaries

          (1) Structure of the Company
                      Operation     Registered                                                         Right to
  Subsidiaries                                              Business              Shareholding %                   Method
                       location          office                                                        vote%

                                                                                  Direct   Indirect
                                                  Group company, which
                                                  mainly engage in                                                Business
                     Mainland of                  investment holding, the                                         combinat
Haier Electronics
                     China and     Bermuda        production and sale of          14.01%   29.68%       55.70%    ion under
Group Co., Ltd.
                     Hong Kong                    washing machines and                                            common
                                                  water heaters, distribution                                     control
                                                  service and logistics service
                     The US and
Wonder Global                      British
                       other                      Household appliances                      100.00                Establish
(BVI) Investment                   Virgin                                                              100.00%
                       overseas                   production & distribution                        %              ment
Limited                            Islands
                       areas
Haier Singapore      Singapore                                                                                    Business
                                                  Household appliances                      100.00
Investment           and other     Singapore                                                           100.00%    combinat
                                                  production & distribution                        %
Holding Co., Ltd.    overseas                                                                                     ion under


                                                            257
                     areas                                                                             common
                                                                                                       control
                                                                                                       Business
Qingdao Haier        Qingdao       Qingdao       Manufacture and sale of                               combinat
Air Conditioner      High-tech     High-tech     household                 99.95%            99.95%    ion under
Gen Corp., Ltd.      Zone          Zone          air-conditioners                                      common
                                                                                                       control
                     Huichuan      Huichuan                                                            Business
Guizhou Haier        District,     District,                                                           combinat
                                                 Manufacture and sale of
Electronics Co.,     Zunyi City,   Zunyi City,                             59.00%            59.00%    ion under
                                                 refrigerator
Ltd.                 Guizhou       Guizhou                                                             common
                     Province      Province                                                            control
                                                                                                       Business
Hefei Haier          Hefei Haier   Hefei Haier                                                         combinat
                                                 Manufacture and sale of   100.00
Air-conditioning     Industrial    Industrial                                                100.00%   ion under
                                                 air-conditioners              %
Co., Limited         Park          Park                                                                common
                                                                                                       control
                                                                                                       Business
                     Wuhan
Wuhan Haier                        Wuhan Haier                                                         combinat
                     Haier                       Manufacture and sale of
Electronics Co.,                   Industrial                              60.00%            60.00%    ion under
                     Industrial                  air-conditioners
Ltd.                               Park                                                                common
                     Park
                                                                                                       control
                                                                                                       Business
Qingdao Haier
                     Qingdao       Qingdao                                                             combinat
Air-Conditioner                                  Manufacture and sale of   100.00
                     Developme     Development                                               100.00%   ion under
Electronics Co.,                                 air-conditioners              %
                     nt Zone       Zone                                                                common
Ltd.
                                                                                                       control
Qingdao Haier                                                                                          Business
Information          Qingdao       Qingdao                                                             combinat
                                                 Manufacture of plastic    100.00
Plastic              High-tech     High-tech                                                 100.00%   ion under
                                                 products                      %
Development Co.,     Zone          Zone                                                                common
Ltd.                                                                                                   control
                                                                                                       Business
                     Dalian        Dalian
Dalian Haier                                                                                           combinat
                     Export        Export        Manufacture and sale of
Precision                                                                  90.00%            90.00%    ion under
                     Expressing    Expressing    precise plastics
Products Co., Ltd.                                                                                     common
                     Zone          Zone
                                                                                                       control
                     Hefei         Hefei
                                                                                                       Business
                     Economic &    Economic &
                                                                                                       combinat
Hefei Haier          Technologic   Technologic   Manufacture and sale of
                                                                           94.12%   5.88%    100.00%   ion under
Plastic Co., Ltd.    al            al            plastic parts
                                                                                                       common
                     Developme     Development
                                                                                                       control
                     nt Area       Area
Qingdao Haier        Qingdao       Qingdao       R&D and manufacture of    75.00%   25.00%   100.00%   Business


                                                            258
Moulds Co., Ltd.     High-tech   High-tech     precise mold and product                                     combinat
                     Zone        Zone                                                                       ion under
                                                                                                            common
                                                                                                            control
                                                                                                            Business
Qingdao Meier        Qingdao     Qingdao       Manufacture of plastic                                       combinat
Plastic Powder       Developme   Development   powder, plastic sheet and        40.00%   60.00%   100.00%   ion under
Co., Ltd.            nt Zone     Zone          high-performance coatings                                    common
                                                                                                            control
                                                                                                            Business
                     Jiangbei    Jiangbei
Chongqing Haier                                Plastic products, sheet metal                                combinat
                     District,   District,
Precision Plastic                              work, electronics and            90.00%   10.00%   100.00%   ion under
                     Chongqing   Chongqing
Co., Ltd.                                      hardware                                                     common
                     City        City
                                                                                                            control
                                                                                                            Business
Chongqing Haier      Jiangbei    Jiangbei
                                               Manufacture and sale of                                      combinat
Intelligent          District,   District,
                                               electronics and automatic        90.00%   10.00%   100.00%   ion under
Electronics Co.,     Chongqing   Chongqing
                                               control system equipment                                     common
Ltd.                 City        City
                                                                                                            control
                                                                                                            Business
                     Qingdao     Qingdao                                                                    combinat
Qingdao Haier                                  R&D, manufacture and sale
                     High-tech   High-tech                                      50.00%            50.00%    ion under
Robot Co., Ltd.                                of robot
                     Zone        Zone                                                                       common
                                                                                                            control
Qingdao Haier        Qingdao     Qingdao
                                               Manufacture and production       100.00                      Establish
Refrigerator Co.,    High-tech   High-tech                                                        100.00%
                                               of fluorine-free refrigerators       %                       ment
Ltd.                 Zone        Zone
Qingdao Haier        Pingdu      Pingdu
Refrigerator         Developme   Development                                                                Establish
                                               Manufacture of refrigerators     75.00%            75.00%
(International)      nt Zone,    Zone,                                                                      ment
Co., Ltd.            Qingdao     Qingdao
Qingdao
Household                                      Research and development
                     Qingdao     Qingdao
Appliance                                      of home appliances mold          100.00                      Establish
                     High-tech   High-tech                                                        100.00%
Technology and                                 and technological                    %                       ment
                     Zone        Zone
Equipment                                      equipment
Research Institute
Qingdao Haier
                     Qingdao     Qingdao       Research, development and
Whole Set Home                                                                                              Establish
                     High-tech   High-tech     sales of health-related small    98.33%            98.33%
Appliance Service                                                                                           ment
                     Zone        Zone          home appliance
Co., Ltd.
Qingdao Haier        Qingdao     Qingdao       Design, R&D of electronics
                                                                                100.00                      Establish
Intelligent          High-tech   High-tech     and automatic control                              100.00%
                                                                                    %                       ment
Electronics Co.,     Zone        Zone          system


                                                          259
Ltd.
Qingdao Haier
                     Qingdao       Qingdao
Special                                          Manufacture and sales of       100.00                      Establish
                     Developme     Development                                                    100.00%
Refrigerator Co.,                                fluorine-free refrigerators        %                       ment
                     nt Zone       Zone
Ltd.
Qingdao Haier        Qingdao       Qingdao       Manufacture of dish
                                                                                100.00                      Establish
Dishwasher Co.,      Developme     Development   washing machine and gas                          100.00%
                                                                                    %                       ment
Ltd.                 nt Zone       Zone          stove
Qingdao Haier        Qingdao       Qingdao       Research, manufacture and
                                                                                                            Establish
Special Freezer      Developme     Development   sales of freezer and other     96.06%            96.06%
                                                                                                            ment
Co., Ltd.            nt Zone       Zone          refrigeration products
                     Dalian        Dalian
Dalian Haier
                     Export        Export        Manufacture of                                             Establish
Air-conditioning                                                                90.00%            90.00%
                     Expressing    Expressing    air-conditioners                                           ment
Co., Ltd.
                     Zone          Zone
                     Dalian        Dalian
Dalian Haier
                     Export        Export                                                                   Establish
Refrigerator Co.,                                Manufacture of refrigerators   90.00%            90.00%
                     Expressing    Expressing                                                               ment
Ltd.
                     Zone          Zone
Qingdao Haier        Qingdao       Qingdao       Development, assembling
                                                                                                            Establish
Electronic Plastic   Developme     Development   and sales of plastics,         80.00%            80.00%
                                                                                                            ment
Co., Ltd.            nt Zone       Zone          electronics and product
                     Wuhan         Wuhan
                     Economic &    Economic &
                     Technologic   Technologic
                     al            al            Research, manufacture and
Wuhan Haier                                                                                                 Establish
                     Developme     Development   sales of freezer and other     95.00%   5.00%    100.00%
Freezer Co., Ltd.                                                                                           ment
                     nt Zone       Zone          refrigeration products
                     High-tech     High-tech
                     Industrial    Industrial
                     Park          Park
Qingdao Haidarui     Qingdao       Qingdao       Development, purchase and
                                                                                                            Establish
Procurement          High-tech     High-tech     sales of electrical product    98.00%   2.00%    100.00%
                                                                                                            ment
Service Co., Ltd.    Zone          Zone          and components
Qingdao Haier                                    Development and
Intelligent Home     Qingdao       Qingdao       application of household
                                                                                                            Establish
Appliance            High-tech     High-tech     appliances, communication,     98.91%   1.09%    100.00%
                                                                                                            ment
Technology Co.,      Zone          Zone          electronics and network
Ltd.                                             engineering technology
                     Jiangbei      Jiangbei
Chongqing Haier
                     District,     District,     Manufacture and sales of air                               Establish
Air-conditioning                                                                76.92%   23.08%   100.00%
                     Chongqing     Chongqing     conditioners                                               ment
Co., Ltd.
                     City          City
Qingdao Haier        Qianwangan    Qianwangan    Development and                         70.00%   70.00%    Establish


                                                           260
Precision            g Road,        g Road,         manufacture of precise                                    ment
Products Co., Ltd.   Jiaonan City   Jiaonan City    plastic, metal plate, mold
                                                    and electronic products for
                                                    household appliances
Qingdao Haier
                     Jiaonan
Air Conditioning                    Jiaonan City,   Manufacture of household                                  Establish
                     City,                                                                 70.00%   70.00%
Equipment Co.,                      Qingdao         appliances and electronics                                ment
                     Qingdao
Ltd.
Dalian Free Trade    Dalian         Dalian
Zone Haier           Export         Export                                                 100.00             Establish
                                                    Domestic trade                                  100.00%
Air-conditioning     Expressing     Expressing                                                 %              ment
Trading Co., Ltd.    Zone           Zone
Dalian Free Trade    Dalian         Dalian
Zone Haier           Export         Export                                                 100.00             Establish
                                                    Domestic trade                                  100.00%
Refrigerator         Expressing     Expressing                                                 %              ment
Trading Co., Ltd.    Zone           Zone
Qingdao Ding
                     Qingdao        Qingdao
Xin Electronics                                     Manufacture and sale of                100.00             Establish
                     Developme      Development                                                     100.00%
Technology Co.,                                     electronic Parts.                          %              ment
                     nt Zone        Zone
Ltd.
                     Jiangbei       Jiangbei
Chongqing Haier
                     District,      District,                                                                 Establish
Electronics Sales                                   Household appliance sales     95.00%   5.00%    100.00%
                     Chongqing      Chongqing                                                                 ment
Co., Ltd.
                     City           City
Chongqing Haier      Jiangbei       Jiangbei
Refrigeration        District,      District,                                                                 Establish
                                                    Manufacture of refrigerator   84.95%   15.05%   100.00%
Appliance Co.,       Chongqing      Chongqing                                                                 ment
Ltd.                 City           City
Hefei Haier          Hefei Haier    Hefei Haier
                                                                                  100.00                      Establish
Refrigerator Co.,    Industrial     Industrial      Manufacture of refrigerator                     100.00%
                                                                                      %                       ment
Ltd.                 Park           Park
                     Wuhan
Wuhan Haier                         Wuhan Haier
                     Haier                                                                                    Establish
Energy and                          Industrial      Energy service                         75.00%   75.00%
                     Industrial                                                                               ment
Power Co., Ltd.                     Park
                     Park
Qingdao Haier
                     Qingdao        Qingdao
HVAC                                                                                       100.00             Establish
                     Developme      Development     Air-conditioning                                100.00%
Engineering Co.,                                                                               %              ment
                     nt Zone        Zone
Ltd
Chongqing
                     Jiangbei       Jiangbei
Goodaymart
                     District,      District,       Sales of household                                        Establish
Electric                                                                                   51.00%   51.00%
                     Chongqing      Chongqing       appliances and electronics                                ment
Appliance Sale
                     City           City
Co., Ltd


                                                              261
Qingdao Haier
                    Jiaozhou       Jiaozhou
(Jiaozhou)                                        Manufacture and sale of                 100.00             Establish
                    City,          City,                                                           100.00%
Air-conditioning                                  air-conditioners                            %              ment
                    Qingdao        Qingdao
Co., Limited
Qingdao Haier       Jiaozhou       Jiaozhou       Manufacture and sales of
                                                                                          100.00             Establish
Component Co.,      City,          City,          plastic and precise sheet                        100.00%
                                                                                              %              ment
Ltd.                Qingdao        Qingdao        metal products
Haier
Shareholdings                                                                    100.00                      Establish
                    Hong Kong      Hong Kong      Investment                                       100.00%
(Hong Kong)                                                                          %                       ment
Limited
Harvest
                         Cayman         Cayman                                            100.00             Establish
International                                     Investment                                       100.00%
                         Islands        Islands                                               %              ment
Company
Shenyang Haier      Shenbei        Shenbei New
Refrigerator Co.,   New Area,      Area,          Manufacture and sales of       100.00                      Establish
                                                                                                   100.00%
Ltd.                Shenyang       Shenyang       refrigerator                       %                       ment
                    City           City
Foshan Haier        Shanshui       Shanshui
                                                  Manufacture and sales of       100.00                      Establish
Freezer Co., Ltd.   District,      District,                                                       100.00%
                                                  freezer                            %                       ment
                    Foshan City    Foshan City
Zhengzhou Haier     Zhengzhou      Zhengzhou
Air-conditioning    Economic       Economic
Co., Ltd.           and            and
                                                  Manufacture and sales of air   100.00                      Establish
                    Technologic    Technologic                                                     100.00%
                                                  conditioner                        %                       ment
                    al             al
                    Developme      Development
                    nt Zone        Zone
Qingdao
                    Qingdao        Qingdao        Development, purchase and
Haidayuan                                                                        100.00                      Establish
                    Developme      Development    sales of electrical product                      100.00%
Procurement                                                                          %                       ment
                    nt Zone        Zone           and components
Service Co., Ltd.
Qingdao Haier
Intelligent         Qingdao        Qingdao
                                                  Development and research       100.00                      Establish
Technology          High-tech      High-tech                                                       100.00%
                                                  of household appliances            %                       ment
Development Co.,    Zone           Zone
Ltd.
Qingdao Hai Ri                                                                                               Business
High-Tech Model     Qingdao        Qingdao        Design, manufacture and                                    combinat
                                                                                          100.00
Co., Ltd.           High-tech      High-tech      sales of product model and                       100.00%   ion under
                                                                                              %
                    Zone           Zone           mould                                                      common
                                                                                                             control
Qingdao Hai Gao     Qingdao        Qingdao        Industrial design and                                      Business
                                                                                          75.00%   75.00%
Design and          High-tech      High-tech      prototype production                                       combinat


                                                            262
Manufacture Co.,     Zone       Zone                                                                 ion under
Ltd.                                                                                                 common
                                                                                                     control
Beijing Haier                                                                                        Business
Guangke Digital                                                                                      combinat
                                           Development, promotion
Technology Co.,      Beijing    Beijing                                           55.00%   55.00%    ion under
                                           and transfer of technology
Ltd.                                                                                                 common
                                                                                                     control
Shanghai Haier
Medical                                    Wholesale and retail of                100.00             Establish
                     Shanghai   Shanghai                                                   100.00%
Technology Co.,                            medical facility                           %              ment
Ltd.
Qingdao Haier                                                                                        Business
Technology Co.,                            Development and sales of                                  combinat
                                                                         100.00
Ltd.                 Qingdao    Qingdao    software and information                        100.00%   ion under
                                                                             %
                                           product                                                   common
                                                                                                     control
Qingdao Haier
Technology                                 Entrepreneurship              100.00                      Establish
                     Qingdao    Qingdao                                                    100.00%
Investment Co.,                            investment and consulting         %                       ment
Ltd.
Qingdao Casarte
Smart Living                               Development, production                100.00             Establish
                     Qingdao    Qingdao                                                    100.00%
Appliances Co.,                            and sales of appliances                    %              ment
Ltd.
Qingdao
                                           Sales of household
Haichuangyuan                                                                     100.00             Establish
                     Qingdao    Qingdao    appliances and digital                          100.00%
Appliances Sales                                                                      %              ment
                                           products
Co., Ltd.
Beijing ASU                                Technical services, import             100.00             Establish
                     Beijing    Beijing                                                    100.00%
Tech Co., Ltd.                             and export business                        %              ment
Haier Overseas
                                           Sales of household
Electric                                                                 100.00                      Establish
                     Qingdao    Qingdao    appliances, international                       100.00%
Appliance Co.,                                                               %                       ment
                                           freight forwarding
Ltd.
Haier Group                                                                                          Business
(Dalian)                                   Sales of household                                        combinat
                                                                         100.00
Electrical           Dalian     Dalian     appliances, international                       100.00%   ion under
                                                                             %
Appliances                                 freight forwarding                                        common
Industry Co., Ltd.                                                                                   control
Qingdao Haier
                                           Production and sales of air
Central                                                                           100.00             Establish
                     Qingdao    Qingdao    conditioners and                                100.00%
Air-conditioner                                                                       %              ment
                                           refrigeration equipment
Co., Ltd.


                                                      263
Beijing Haier
Yun Kitchen                                   Technology development                100.00              Establish
                       Beijing     Beijing                                                    100.00%
Technology Co.,                               and transfer                                %             ment
Ltd.
Chongqing Haier
Home Appliance                                                                      100.00              Establish
                     Hefei       Hefei        Household appliance sales                       100.00%
Sale Hefei Co.,                                                                           %             ment
Ltd.
Beijing
Chuangshi Magic
                                                                                    100.00              Establish
Mirror               Beijing     Beijing      Smart home                                      100.00%
                                                                                          %             ment
Technology Co.,
Ltd.
Beijing Haier
Zhongyou                                      Radio and television                                      Establish
                     Beijing     Beijing                                            51.00%     51.00%
Netmedia Co.,                                 program                                                   ment
Ltd.
Qingdao Weixi
Smart                                                                                                   Establish
                     Qingdao     Qingdao      Intelligent bathroom                  71.43%     71.43%
Technology Co.,                                                                                         ment
Ltd.
Haier U+smart
Technology                                                                100.00                        Establish
                     Beijing     Beijing      Software development                            100.00%
(Beijing) Co.,                                                                  %                       ment
Ltd.
Qingdao Haier
Industry
                                              Industrial intelligent      100.00                        Establish
Intelligence         Qingdao     Qingdao                                                      100.00%
                                              technology                        %                       ment
Research Institute
Co., Ltd.
Haier (Shanghai)                              Sales, research and
                                                                          100.00                        Establish
Appliance Co.,       Shanghai    Shanghai     development of household                        100.00%
                                                                                %                       ment
Ltd.                                          appliances
Shanghai Haier
Zhongzhifang                                  Business management
                                                                          100.00                        Establish
Chuangke              Shanghai     Shanghai   consulting, chuangke                            100.00%
                                                                            %                           ment
Management Co.,                               management
Ltd.
                                              Industrial investment,
Haier Industrial                                                          100.00                        Establish
                      Qingdao      Qingdao    robotics and automation                         100.00%
Holding Co., Ltd.                                                           %                           ment
                                              R&D, etc.
Maniiq (Qingdao)
                                              Robotics and automation               100.00              Establish
Intelligent           Qingdao      Qingdao                                                    100.00%
                                              R&D, design, etc.                       %                 ment
Equipment Co.,


                                                        264
Ltd.
Haier digital
                                             Technology development,
technology                                                                100.00             Establish
                   Shanghai      Shanghai    promotion and transfer,               100.00%
(Shanghai) Co.,                                                             %                ment
                                             material sales, etc.
Ltd.
Qingdao Haier
Smart Kitchen                                Smart kitchen appliances     100.00             Establish
                   Qingdao       Qingdao                                           100.00%
Appliance Co.,                               production and sales           %                ment
Ltd.
JIYI Appliance
                                                                          100.00             Establish
(Shanghai) Co.,    Shanghai      Shanghai    Household appliances sales            100.00%
                                                                            %                ment
Ltd.
Qingdao Hao Pin
Hai Rui                                      Development, procurement
                                                                          100.00             Establish
Information        Qingdao       Qingdao     and sales of electrical               100.00%
                                                                            %                ment
Technology Co.,                              products and components
Ltd.
FISHER &                                                                                     Business
PAYKEL                                       Automated and customized                        combinat
                     New                                                  100.00
PRODUCTION                     New Zealand   special equipment                     100.00%   ion under
                    Zealand                                                 %
MACHINERY                                    manufacturing                                   common
LIMITED                                                                                      control
Maniiq
(Singapore)
                                                                          100.00             Establish
Intelligent        Singapore    Singapore    Investment & Management               100.00%
                                                                            %                ment
Equipment Co.
Ltd.
Maniiq (HK)
Intelligent                                                               100.00             Establish
                   Hongkong     Hongkong     Investment & Management               100.00%
Equipment Co.                                                               %                ment
Ltd.
Qingdao Haier
Special
                                             Household appliances         100.00             Establish
Refrigeration      Qingdao       Qingdao                                           100.00%
                                             production and sales           %                ment
Appliance Co.,
Ltd.
Beijing Micro
                                             Technology development                          Establish
Technology Co.,   Beijing      Beijing                                    55.00%   55.00%
                                             and promotion                                   ment
Ltd.
Laiyang Haier
Smart Kitchen                                Household appliances         100.00             Establish
                    Laiyang      Laiyang                                           100.00%
Appliance Co.,                               production and sales           %                ment
Ltd.
AituTuo            Shanghai      Shanghai    Technology development       72.22%   72.22%    Establish


                                                        265
(Shanghai)                                         and promotion                                             ment
Information
Technology Co.,
Ltd.
Qingdao Blue
Whale                                              Industrial Intelligence                                   Establish
                       Qingdao        Qingdao                                           87.00%     87.00%
Technology Co.,                                    Technology                                                ment
Ltd.
Qingdao Hailian
Rongchuang                                         Industrial Intelligence    100.00                         Establish
                       Qingdao        Qingdao                                                     100.00%
Technology Co.,                                    Technology                   %                            ment
Ltd.
Hefei Haier Air
Conditioning                                       Household appliances                 100.00               Establish
                        Hefei           Hefei                                                     100.00%
Electronics Co.,                                   production and sales                    %                 ment
Ltd.
Qingdao Wine
Intelligent                                                                             100.00               Establish
                       Qingdao        Qingdao      Wine sets R&D, sales                           100.00%
Technology Co.,                                                                            %                 ment
Ltd.
Taizhou Haier
Medical                                            Medical R&D and                      100.00               Establish
                       Taizhou        Taizhou                                                     100.00%
Technology Co.,                                    promotion                               %                 ment
Ltd.
Small companies
such as Qingdao
Hai Heng Feng
                     All over the   All over the   Sales of household                                        Establish
Electrical
                     country        country        appliances                                                ment
Appliances Sale
& Service Co.,
Ltd.

               Reasons for including subsidiaries which the Company has 50% or less of the equity into the

        scope of consolidated financial statements:

               At the end of the reporting period, the Company had substantial control over the finance and

        operation of Haier Electronics Group Co., Ltd., and small companies like Qingdao Hai Heng Feng

        Electrical Appliances Sale & Service Co., Ltd, which were included into the scope of consolidated

        financial statements.

               Reason for the ratio of voting rights higher than the ratio of shareholding of Haier Electronics

        Group Co., Ltd.: on 10 July 2015, HCH (HK) Investment Management Co., Limited (hereinafter



                                                             266
              referred to as ―HCH‖) signed a Shareholder Voting Right Entrustment Agreement with the

              Company. HCH entrusted the Company to exercise the underlying shareholder voting rights of

              336,600,000 shares of Haier Electronics Group Co., Ltd. Both parties agreed that HCH will not

              revoke the entrustment and authorization to the Company unless the Company issues a written

              notice of revoking trustee to HCH.

              (2)Material non-wholly owned subsidiaries
                                                                              Profit for the year
                                                         Non-controlli                                   Dividend declared
                                                                                attributable to                                        Non-controlling
                      Subsidiaries                       ng interest%                                    to non-controlling
                                                                               non-controlling                                         interest in 2017
                                                                                                            shareholders
                                                                                   interests
        Haier Electronics Group Co., Ltd.                      56.31%             2,089,558,119.70          268,235,152.93            13,933,248,551.72
        Guizhou Haier Electronics Co., Ltd.                    41.00%               11,271,736.53                 8,200,000.00           108,400,183.40
        Wuhan Haier Electronics Co., Ltd.                      40.00%               25,682,261.02                 8,000,000.00           223,080,723.94
        Qingdao Haier Refrigerator
                                                               25.00%                    601,920.58                                       79,720,746.80
        (International) Co., Ltd.

              (3)Summarized financial information in respect of material non-wholly owned subsidiaries
                                                                                    2017
Subsidiaries        Current assets          Non-current            Total assets           Current liabilities         Non-current            Total liabilities
                                                assets                                                                  liabilities
Haier
Electronics
                     34,425,125,631.08      8,943,099,505.92       43,368,225,137.00        18,004,664,972.39         2,334,453,969.47        20,339,118,941.86
Group Co.,
Ltd.
Guizhou
Haier
                        382,643,646.95        36,428,561.26             419,072,208.21         154,508,222.80              173,294.24            154,681,517.04
Electronics
Co., Ltd.
Wuhan
Haier
                        978,695,296.94       131,215,185.69         1,109,910,482.63           551,805,602.69              403,070.08            552,208,672.77
Electronics
Co., Ltd.
Qingdao
Haier
Refrigerator            280,498,996.95        55,808,808.81             336,307,805.76            17,424,818.56                                   17,424,818.56

(Internation
al) Co., Ltd.




                                                                            267
            (continued)
                                                                             2016
Subsidiaries      Current assets         Non-current        Total assets          Current liabilities        Non-current            Total liabilities
                                             assets                                                            liabilities
Haier
Electronics
                   28,447,723,872.34     7,710,129,372.00   36,157,853,244.34         16,781,946,993.59      1,039,492,037.45        17,821,439,031.04
Group Co.,
Ltd.
Guizhou
Haier
                      431,426,225.53       37,508,427.60         468,934,653.13         211,909,531.88            126,470.38            212,036,002.26
Electronics
Co., Ltd.
Wuhan
Haier
                      689,813,474.19      132,342,221.17         822,155,695.36         308,318,253.02            341,285.04            308,659,538.06
Electronics
Co., Ltd.
Qingdao
Haier
Refrigerator          277,702,166.97       55,808,808.81         333,510,975.78           17,035,670.88                                  17,035,670.88

(Internation
al) Co., Ltd.


                                                                                           2017

                                                                                                     Total
                Subsidiaries                                                                                                  Cash flows from
                                             Operating revenue           Net profit             comprehensive
                                                                                                                             operating activities
                                                                                                    income
   Haier Electronics Group Co., Ltd.          78,800,676,129.43       3,581,699,624.80          3,591,581,429.04                4,124,147,398.81
   Guizhou Haier Electronics Co., Ltd.         1,150,823,650.51          27,492,040.30              27,492,040.30                 247,441,041.27
   Wuhan Haier Electronics Co., Ltd.           2,497,891,874.47          64,205,652.56              64,205,652.56                 152,962,111.33
   Qingdao Haier Refrigerator
                                                                           2,407,682.30              2,407,682.30                     -287,141.80
   (International) Co., Ltd.




                                                                     268
         (continued)
                                                                                           2016
              Subsidiaries                                                                    Total comprehensive           Cash flows from
                                          Operating revenue               Net profit
                                                                                                      income            operating activities
Haier Electronics Group Co., Ltd.            63,861,599,904.07        2,803,182,356.85             2,848,171,495.64          3,660,201,428.95
Guizhou Haier Electronics Co., Ltd.            939,787,451.99             18,847,783.66               18,847,783.66            59,180,619.09
Wuhan Haier Electronics Co., Ltd.             1,636,159,440.14            31,640,081.80               31,640,081.80           329,771,205.77
Qingdao Haier Refrigerator
                                                     11,943.43                 674,048.72                674,048.72            57,378,584.24
(International) Co., Ltd.

         2) Transactions leading to the change of shareholding in subsidiaries but not losing the

         control

                 (1)Change of shareholding ratio in subsidiaries:

                 Non-controlling shareholders of Haier Electronics Group Co., Ltd. exercise or reduce capital,

         which led to the changes in the shareholdings of the Company;

                 Capital contribution not on the original proportion of equity interest or acquisition of

         non-controlling interest, which results in changes of shareholdings ratio in the following

         subsidiaries: Beijing Haier Cloud Kitchen Technology Co., Ltd., Haier electric (India) Co., Ltd.,

         Qingdao Wei Xi Intelligent Technology Co., Ltd., Beijing Yi Shu Technology Co., Ltd.

             (2)Impact of the transactions on non-controlling interest and the equity attributable to
         owners of the Company:
                                                              Haier Electronics Group Co.,
                              Items                                                                                Others
                                                                          Ltd.

    Consideration for acquisition/disposal                                                                              418,463,664.00

    Less: share of net assets of subsidiaries in respect
                                                                              104,202,485.94                            436,733,303.74
    to the shareholding proportion acquired/disposed

    Difference                                                                -104,202,485.94                           -18,269,639.74

    Including: capital reserve adjustment                                     104,202,485.94                                18,269,639.74

         3)      Interests in joint ventures and associates

         (1)Associates
                                                                                 Business                                   Investment
                                                   Business      Registered
                    Associates                                                   descriptio       Shareholding %            accounting
                                                   location       location
                                                                                       n                                     method
   Wolong Electric Zhangqiu Haier Motor           Zhangqiu       Zhangqiu         Motor              30.00%             Equity method



                                                                    269
Co., Ltd.                                                      Manufact
                                                                 uring
Haier Medical and Laboratory Products                           Medical
                                         Qingdao    Qingdao                  27.37%   Equity method
Co., Ltd.                                                       freezer
                                                               Manufact
Qingdao Hegang Composite New
                                         Qingdao    Qingdao      ure of      30.00%   Equity method
Material Technology Co., Ltd.
                                                               steel plate
                                                               Manufact
Hefei Hegang New Material Technology
                                          Hefei      Hefei       ure of      30.00%   Equity method
Co., Ltd.
                                                               steel plate
                                                                Venture
Qingdao Haier SAIF Smart Home
                                                                capital
Industry Investment Center (limited      Qingdao    Qingdao                  63.00%   Equity method
                                                               investmen
partnership)
                                                                    t
                                                               Manufact
Mitsubishi Heavy Industries Haier                                ure of
                                         Qingdao    Qingdao                  45.00%   Equity method
(Qingdao) Air-conditioners Co., Ltd.                           household
                                                               appliances
                                                               Manufact
Qingdao Haier Carrier Refrigeration                              ure of
                                         Qingdao    Qingdao                  49.00%   Equity method
Equipment Co., Ltd.                                            household
                                                               appliances
Haier Group Finance Co., Ltd.            Qingdao    Qingdao    Financing     42.00%   Equity method
                                                               Software
Qingdao Haier Software Investment Co.,
                                         Qingdao    Qingdao    developm      25.00%   Equity method
Ltd.
                                                                  ent
                                                               Technolog
Beijing Mr. Hi Network Technology                                  y
                                          Beijing    Beijing                 40.00%   Equity method
Company Limited                                                developm
                                                                  ent
                                                               Commerci
Bank of Qingdao Co., Ltd.                Qingdao    Qingdao                  9.47%    Equity method
                                                                al bank
                                                                Sales of
Beijing Xiaobei Technology Co., Ltd.      Beijing    Beijing   household     45.00%   Equity method
                                                               appliances
                                                               R&D and
Qingdao Haier Multimedia Co., Ltd.       Qingdao    Qingdao     sales of     20.20%   Equity method
                                                               television
Guangzhou Heying Investment              Guangzho   Guangzho   Investmen
                                                                             50.00%   Equity method
Partnership (Limited Partnership)           u          u            t
Fuzhou Jinan District Shengfeng                                Micro-fin
                                          Fuzhou     Fuzhou                  20.00%   Equity method
Guorong Microfinance Co., Ltd.                                    ance
Fujian Bafang Shengfeng Logistics Co.,
                                          Fuzhou     Fuzhou    Logistics     40.00%   Equity method
Ltd.

                                                      270
                                                                  Online
Qingdao Java Cloud Network
                                         Qingdao     Qingdao      Home           24.93%           Equity method
Technology Co., Ltd.
                                                                  Service
                                                                E-commer
Qingdao Jushanghui Network
                                         Qingdao     Qingdao        ce           24.02%           Equity method
Technology Co., Ltd.
                                                                 platform
                                                                  Motor
Konan Electronic Co., Ltd.                Hunan       Hunan      Manufact        50.00%           Equity method
                                                                   uring
                                                                 Manufact
                                                                  ure of
HPZ LIMITED                              Nigeria     Nigeria                     25.01%           Equity method
                                                                household
                                                                appliances
                                                                 Manufact
HNR COMPANY (PRIVATE)                                             ure of
                                         Pakistan    Pakistan                    31.72%           Equity method
LIMITED                                                         household
                                                                appliances
                                                                 Manufact
                                                                  ure of
CONTROLADORA MABE S.A.de C.V.            Mexico      Mexico                      48.41%           Equity method
                                                                household
                                                                appliances
                                                                 Sales of
Middle East Air Conditioning Company,     Saudi       Saudi
                                                                household        49.00%           Equity method
Limited                                   Arabia      Arabia
                                                                appliances

     (2) Basic and financial information of significant associates

           ①Basic information:

           a. Haier Group Finance Co., Ltd. (hereinafter referred to as ―Finance Company‖) is

     established by Haier Group Corporation and its three affiliates. Registration place and principal

     place of business: Qingdao High-tech Zone Haier Park. The Company‘s subsidiaries hold an

     aggregate of 42.00% equity interest in Finance Company.
           b. General Electric Company established CONTROLADORA MABE S.A.de C.V.

     (hereinafter referred to as ―MABE‖) with other parties. In June 2016, a subsidiary of the Company

     acquired 48.41% of equity interests in MABE held by General Electric Company. The registered

     address and principal place of business of MABE is Mexico. The subsidiaries of the Company

     hold approximately 48.41% of equity interests in MABE in total.

           c. Bank of Qingdao Co., Ltd. (hereinafter referred to as ―BOQ‖), one of the first urban

     commercial banks in China, was established in November 1996. The registered address and


                                                       271
principal place of business is No.68 Hong Kong Middle Road, Shinan District, Qingdao,

Shandong Province. The Company and its subsidiaries hold approximately 9.61% of equity

interests in BOQ in total.

        ②Financial information:
                                                    2017                          2016
                       Items
                                              Finance Company               Finance Company

 Current assets                                      68,438,104,678.89            64,554,524,837.39
 Non-current assets                                   7,913,830,198.85             7,512,078,269.27
 Total assets                                        76,351,934,877.74            72,066,603,106.66
 Current liabilities                                 62,029,645,645.42            57,728,520,903.78
 Non-current liabilities                              3,172,557,737.73             4,555,925,257.50
 Total liabilities                                   65,202,203,383.15            62,284,446,161.28
 Non-controlling interests

 Equity attributable to shareholders of the
                                                     11,149,731,494.59             9,782,156,945.38
 Company
 Including: share of net assets calculated
                                                      4,682,887,227.73             4,108,505,917.06
 per shareholding percentage
 Operating revenue                                    2,653,326,366.04             2,332,603,892.42
 Net profit                                           1,427,455,671.54             1,274,117,159.81
 Other comprehensive income                                -59,881,122.33               -74,752,484.83
 Total comprehensive income                           1,367,574,549.21             1,199,364,674.98
 Dividend received from associates for the
                                                           210,000,000.00           294,000,000.00
 year



                                                    2017                          2016
                       Items
                                                    MABE                         MABE

 Current assets                                       5,825,075,945.00             5,411,456,582.00
 Non-current assets                                  10,303,936,800.80             9,986,415,019.00
 Total assets                                        16,129,012,745.80            15,397,871,601.00
 Current liabilities                                  7,048,408,869.00             5,947,561,816.00
 Non-current liabilities                              5,836,693,752.60             6,151,148,892.00
 Total liabilities                                   12,885,102,621.60            12,098,710,708.00
 Non-controlling interests

 Equity attributable to shareholders of the
                                                      3,243,910,124.20             3,299,160,893.00
 Company
 Including: share of net assets calculated            1,570,532,598.81             1,597,453,704.39


                                              272
  per shareholding percentage

  Operating revenue                                        19,990,494,697.46             9,967,422,072.09
  Net profit                                                     387,947,925.94           451,756,280.78
  Other comprehensive income                                 -373,213,732.21              155,137,412.22
  Total comprehensive income                                      14,734,193.73           606,893,693.00
  Dividend received from associates for the
                                                                  33,883,079.64
  year



                                                          2017                          2016
                        Items
                                                          BOQ                           BOQ

  Current assets                                          130,366,445,000.00           118,881,404,000.00
  Non-current assets                                      175,909,647,000.00           159,106,702,000.00
  Total assets                                            306,276,092,000.00           277,988,106,000.00
  Current liabilities                                     203,654,201,000.00           214,236,012,000.00
  Non-current liabilities                                  76,498,682,000.00            46,116,121,000.00
  Total liabilities                                       280,152,883,000.00           260,352,133,000.00
  Non-controlling interests                                      493,355,000.00
  Equity attributable to shareholders of the
                                                           25,629,854,000.00            17,635,973,000.00
  Company
  Including: share of net assets calculated
                                                            2,462,624,099.78             1,670,058,752.11
  per shareholding percentage
  Operating revenue                                         5,567,593,000.00             5,996,145,000.00
  Net profit                                                1,903,607,000.00             2,088,605,000.00
  Other comprehensive income                                 -948,623,000.00              -419,980,000.00
  Total comprehensive income                                     954,984,000.00          1,668,625,000.00
  Dividend received from associates for the
                                                                  76,868,897.00             76,868,897.00
  year

 (3) Summarized financial information of insignificant associates
                   Investment in associates                          2017                 2016

Wolong Electric Zhangqiu Haier Motor Co., Ltd.                        118,897,337.40     122,669,926.30

Qingdao Haier Special Appliance Co., Ltd.                             332,230,371.89     303,384,893.47
Qingdao Hegang Composite New Material Technology
                                                                      106,068,803.08     102,915,605.69
Co., Ltd.
Hefei Hegang New Material Technology Co., Ltd.                        140,494,521.67     126,896,206.56
Qingdao Haier SAIF Smart Home Industry Investment
                                                                      270,536,881.98     227,531,053.19
Center (limited partnership)
Mitsubishi Heavy Industries Haier (Qingdao)
                                                                      529,934,750.95     503,375,198.93
Air-conditioners Co., Ltd.


                                                    273
Qingdao Haier Carrier Refrigeration Equipment Co., Ltd.         284,185,137.09          302,112,378.55

Qingdao Haier Software Investment Co., Ltd.                      17,899,331.07           17,045,106.31

Beijing Mr. Hi Network Technology Company Limited                  3,757,759.75           5,838,036.16

Beijing Xiaobei Technology Co., Ltd.                               2,687,341.82           6,422,222.58
Guangzhou Heying Investment Partnership (Limited
                                                                152,047,535.44          153,796,910.58
Partnership)
Qingdao Hai Shi water equipment Co., Ltd.                                                30,722,549.43

Qingdao Le Jia water equipment Co., Ltd.                                                 13,124,212.46
Fuzhou Jinan District Shengfeng Guorong Microfinance
                                                                 80,226,595.74           79,553,513.46
Co., Ltd.
Fujian Bafang Shengfeng Logistics Co., Ltd.                      13,117,748.43           12,675,789.21

Qingdao Java Cloud Network Technology Co., Ltd.                    1,755,356.84           2,729,378.59

Qingdao Jushanghui Network Technology Co., Ltd.                    5,511,749.00           6,706,394.01

Konan Electronic Co., Ltd.                                       64,856,526.75           50,269,006.41

HPZ LIMITED                                                      91,578,227.62           89,650,522.58

HNR COMPANY (PRIVATE) LIMITED                                    80,588,570.01           78,885,757.89

Middle East Air-conditioning Company, Limited                    22,050,543.42           30,966,870.44

               Total book value of investment                  2,318,425,089.95       2,267,271,532.80
Financial info of associates calculated based on
shareholding percentage
--Net profit                                                    188,126,897.38          107,572,183.30
--Other comprehensive income                                     -11,890,071.02         -20,378,283.27
--Total comprehensive income                                    176,236,826.36           87,193,900.03


 10.Segment Information

       The Company principally engaged in manufacture and sales of household appliances and

 relevant services business, manufacture of household appliances parts, distribution of products of

 third-party, logistics and after-sale business. The Company has six business segments, including

 refrigerator segment, air-conditioner segment, washing machine segment, kitchenware and

 sanitary ware segment, equipment components segment, integrated channel services and other

 segment. The management of the Company assesses operating performance of each segment and

 allocates resources according to the division. Sales between segments were mainly based on

 market price.

       Refrigerator segment mainly engaged in manufacture and sales of refrigerator and freezers.



                                                       274
     Air-conditioner segment mainly engaged in manufacture and sales of household air

conditioners and commercial air conditioners.

Washing machine segment mainly engaged in manufacture and sales of washing machine.

Kitchenware and sanitary ware segment mainly engaged in manufacture and sales of water heater

and kitchen appliances.

Equipment components segment mainly engaged in procurement, manufacture and sales of

upstream matching accessories for household appliances, manufacture and sales of mold.

     Segment of integrated channel services and others mainly engaged in distribution business,

logistics business, after-sale business, small home appliance business and others.

     The Company‘s channel business at 3rd and 4th tier markets is treated as integrated channel

services and assessed separately with other segments. Accordingly, operating profit from 3rd and

4th tier markets of refrigerator, air-conditioner, kitchenware and sanitary ware, washing machine

business segment was not reflected in operating profit of each segment.


     As the centralized management under the headquarters or not being included in the

assessment scope of segment management, the total assets of segment exclude cash, financial

assets held for trading, dividends receivable, other current assets, available-for-sale financial

assets, long-term equity investment, goodwill, deferred income tax assets; the total liabilities of

segment exclude long-term and short-term borrowings, financial liabilities held for trading,

dividends payables, tax payable, bonds payable, deferred income tax liabilities; operating profit of

segment exclude gains/(losses) on changes in fair value, gains/(losses) on investment, financial

expenses, gains/(losses) on disposal of non-current assets, other income(exclude refundable VAT

at filing), non-operating income and expense and income tax expenses.


 (1)Information of reportable segments


        Segment information in 2017
                                                                 Kitchenware and
    Segment         Air-conditioner         Refrigerator                               Washing machine
                                                                   sanitary ware
   information          segment               segment                                      segment
                                                                     segment
Segment revenue      28,840,347,171.08      44,131,030,463.73      27,601,150,579.00    29,020,717,182.83

Including:            9,684,628,827.73      25,594,590,993.02      20,551,150,314.45    14,389,559,050.19


                                                  275
external revenue

Inter-segment
                       19,155,718,343.35      18,536,439,470.71       7,050,000,264.55      14,631,158,132.64
revenue
Total segment
                       27,580,651,735.98      41,176,879,923.32      25,367,332,940.16      26,839,940,665.47
operating cost
Segment
                        1,259,695,435.10       2,954,150,540.41       2,233,817,638.84       2,180,776,517.36
operating profit
Total segment
                       14,045,226,564.02      15,092,982,587.34      12,461,571,650.25      10,774,302,199.29
assets
Total segment
                        8,164,863,742.03      23,320,161,709.92       6,468,160,503.11       5,649,976,080.52
liabilities
(continued)
                                                                  Kitchenware and
   Segment         Air-conditioner         Refrigerator                                   Washing machine
                                                                   sanitary ware
 information          segment                segment                                           segment
                                                                     segment
Segment
                    43,694,604,946.39      98,299,134,797.24      -111,951,569,237.57       159,635,415,902.70
revenue
Including:
external             3,126,185,862.59      86,289,300,854.72                                159,635,415,902.70
revenue
Inter-segment
                    40,568,419,083.80      12,009,833,942.52      -111,951,569,237.57
revenue
Total
segment             43,333,219,091.51      97,692,790,975.83      -111,227,145,554.68       150,763,669,777.59
operating cost
Segment
operating             361,385,854.88         606,343,821.41           -724,423,682.89         8,871,746,125.11
profit
Total
segment             26,193,061,725.41      31,818,076,218.88       -34,661,005,792.71        75,724,215,152.48
assets
Total
segment             28,088,630,394.16      26,753,925,068.41       -33,224,692,236.96        65,221,025,261.19
liabilities

         Segment information in 2016

                                                                  Kitchenware and
     Segment         Air-conditioner         Refrigerator                               Washing machine
                                                                   sanitary ware
   information           segment               segment                                      segment
                                                                     segment
Segment revenue       17,208,677,349.84     33,306,169,720.12      18,246,482,539.54     21,566,715,143.98
Including:
                       5,870,195,820.93     17,453,376,711.71      12,713,092,711.04      9,706,872,749.51
external revenue


                                                    276
Inter-segment
                          11,338,481,528.91    15,852,793,008.41        5,533,389,828.50       11,859,842,394.47
revenue
Total segment
                          16,640,596,218.18    30,744,680,296.73       16,610,785,512.02       19,825,524,531.56
operating cost
Segment
                            568,081,131.66      2,561,489,423.39        1,635,697,027.52        1,741,190,612.42
operating profit
Total segment
                          13,258,952,328.16    12,795,156,573.98       13,406,793,447.42       10,065,969,129.74
assets
Total segment
                           6,076,480,008.35    21,272,341,142.80        5,761,567,268.81        4,054,914,657.29
liabilities
(continued)
                                                                     Kitchenware and
   Segment              Air-conditioner       Refrigerator                                     Washing machine
                                                                       sanitary ware
 information               segment              segment                                               segment
                                                                            segment
Segment
                        32,870,306,719.36     78,259,359,141.97        -82,144,573,517.97       119,313,137,096.84
revenue
Including:
external                 2,717,181,829.03     70,852,417,274.62                                 119,313,137,096.84
revenue
Inter-segment
                        30,153,124,890.33      7,406,941,867.35        -82,144,573,517.97
revenue
Total segment
                        32,572,157,593.68     78,627,932,124.67        -82,018,436,666.15       113,003,239,610.69
operating cost
Segment
operating                  298,149,125.68       -368,572,982.70             -126,136,851.82          6,309,897,486.15
profit
Total segment
                        23,098,412,868.47     26,812,236,664.64        -29,599,977,056.15         69,837,543,956.26
assets
Total segment
                        21,745,513,699.93     24,218,008,110.86        -28,490,996,947.49         54,637,827,940.55
liabilities




(2)Geographical information


         ―Other countries/regions‖ in this report refers to all other countries/regions (including Hong

Kong and Macau Special Administration Region and Taiwan) other than the mainland China for

the purpose of information disclosure.

    External transaction
                                                 2017                                         2016
              revenue

Mainland China                                          92,230,801,573.98                       71,729,266,323.31

Other countries/regions                                 67,404,614,328.72                       47,583,870,773.53


                                                         277
           Total                                       159,635,415,902.70                            119,313,137,096.84

(continued)
 Total non-current assets                           2017                                           2016

Mainland China                                             12,248,609,942.72                          11,329,467,022.66

Other countries/regions                                    14,735,396,871.62                          15,253,167,977.34

           Total                                           26,984,006,814.34                          26,582,635,000.00


     The total non-current assets exclude: available-for-sale financial assets, long-term equity

investment, goodwill, deferred income tax assets.


11. Disclosure of fair value

Fair value at the end of the period - financial assets/liabilities measured at fair value

                                                                                   Fair value at the end of the period
                             Items
                                                                         Level 1                 Level 2                 Total

 Financial assets measured at fair value with changes
                                                                                             363,965,644.40        363,965,644.40
 included in current profit and loss
 Financial liabilities measured at fair value with fair value
                                                                                             256,523,244.65        256,523,244.65
 changes included in profit and loss for the year
 Financial assets measured at fair value with changes
                                                                                               56,024,787.21        56,024,787.21
 included in other comprehensive income
 Available-for-sale financial assets                                    24,571,561.22           2,359,859.77        26,931,420.99


Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities


Level 2 – based on valuation techniques for which the lowest level input that is significant to the

fair value measurement is observable, either directly or indirectly


12. Related parties and Related-party transactions

     (Ⅰ)Explanation for basis of identifying related party

    According to Accounting Standards for Business Enterprises No. 36 — Related Party

Disclosures, parties are considered to be related if one party has the ability to control or jointly

control the other party or exercise significant influence over the other party. Parties (two or more

than two) are also considered to be related if they are subject to common control, joint control or

significant influence from other party.



                                                            278
           According to Management Practices for Information Disclosure of Listed Company (China

   Securities Regulatory Commission Order No. 40), related legal entity or individual will be

   identified as related parties in certain occasions.

            (Ⅱ)Relationships between related parties

           1. Information about the parent and other companies holding shares of the Company
                                                                                                                Voting
                                                                                                 Interest in
                                                                                                               rights to
                   Type of     Registered     Registered          Legal                             the
   Name                                                                       Relationships                       the
                  enterprise    address           capital    representative                      Company
                                                                                                               Company
                                                                                                    (%)
                                                                                                                  (%)
Haier Group                     Qingdao
                  Collective
Corporation                    High-tech                                         parent
                 ownership                    311,180,000    Zhang Ruimin                         17.59%       17.59%
                               Zone Haier                                       company
                  company
                                 Park
Haier
                                Qingdao
Electric          Joint-stoc                                                  Subsidiary of
                               High-tech
Appliances            k                       631,930,635    Zhang Ruimin        parent           20.64%       20.64%
                               Zone Haier
International     company                                                       company
                                 Park
Co., Ltd.
Qingdao
Haier             Company
                                Qingdao
Venture &           with                                                      Parties acting
                               Free Trade     100,000,000     Zhou Yunjie                         2.83%         2.83%
Investment         limited                                                     in concert
                                 Zone
Information        liability
Co., Ltd.

           2. Subsidiaries of the Company

           Relevant disclosure is in Ⅶ. 1 Interests in subsidiaries

           3. Associates and joint ventures

           Relevant disclosure is in Ⅴ.11 and Ⅶ.3.

           4. Other related parties
                                           Name                                                Relationship

     FISHER&PAYKEL APPLIANCES LIMITED                                                 Affiliate of Haier Group

     HAIER INFORMATION APPLIANCES S.R.L.                                               Affiliate of Haier Group

     HAIER INTERNATIONAL (HK) LTD.                                                     Affiliate of Haier Group

     HAIER INTERNATIONAL CO., LTD                                                      Affiliate of Haier Group

     Feima Electronic (Qingdao) Co., Ltd.                                              Affiliate of Haier Group

     Haier Group Finance Co., Ltd.                                                     Affiliate of Haier Group


                                                            279
Haier Group Electric Appliance Industry Co., Ltd.                         Affiliate of Haier Group

Haier Energy & Power Co., Ltd.                                            Affiliate of Haier Group

Haier Brothers Animation Industry Co., Ltd.                               Affiliate of Haier Group

Hefei Haier Logistics Co., Limited                                        Affiliate of Haier Group

Laiyang Haier Electrical Co. Ltd.                                         Affiliate of Haier Group

Qingdao Haier furniture Co., Ltd.                                         Affiliate of Haier Group

Qingdao Haier Tooling Development and Manufacturing Co., Ltd.             Affiliate of Haier Group

Qingdao Haier International Travel Agency Co., Ltd.                       Affiliate of Haier Group

Qingdao Haier International Trading Co., Ltd.                             Affiliate of Haier Group

Qingdao Haier Household Integration Co., Ltd.                             Affiliate of Haier Group

Qingdao Haier Parts Procurement Co., Ltd.                                 Affiliate of Haier Group

Qingdao Haier Strauss Water Equipment Co., Ltd.                           Affiliate of Haier Group

Qingdao Haier Special Plastic Development Co., Ltd.                       Affiliate of Haier Group

Qingdao Haier Communications Co., Ltd.                                    Affiliate of Haier Group

Qingdao Haier Logistics Consulting Co., Ltd.                              Affiliate of Haier Group

Qingdao Haiyongda Property Management Co., Ltd.                           Affiliate of Haier Group

Brave Lion (HK) limited                                                   Affiliate of Haier Group

Chongqing Haier Electrical Appliances Sales Co., Ltd.                     Affiliate of Haier Group

Chongqing Haier Logistics Co., Ltd.                                       Affiliate of Haier Group
Qingdao Goodaymart Lejia Technology Co., Ltd.                             Affiliate of Haier Group

Suzhou Hai Xin InfoTech Ltd                                               Affiliate of Haier Group

Haier finance leasing (China) Co., Ltd.                                   Affiliate of Haier Group

                                                                         Associate of Haier Group‘s
Qingdao Haier new materials R & D Co., Ltd.
                                                                                  affiliate
CONTROLADORA MABE S.A.de C.V.                                                    Associate

HNR Company (Pvt) Limited                                                        Associate

Middle East Air-conditioning Company, Limited                                    Associate

Qingdao Haier Software Investment Co., Ltd.                                      Associate

Hefei Hegang New Material Technology Co., Ltd.                                   Associate

Qingdao Haier Carrier Refrigeration Equipment Co., Ltd.                          Associate

Haier Medical and Laboratory Products Co., Ltd.                                  Associate

Qingdao Hegang Composite New Material Technology Co., Ltd.                       Associate

Mitsubishi Heavy Industries Haier (Qingdao) Air-conditioners Co., Ltd.           Associate

Wolong Electric Zhangqiu Haier Motor Co., Ltd.                                   Associate

   (Ⅲ)Related-party transactions

   1. Purchases of goods or services:

                                                      280
                 Related parties                      2017                     2016

  Qingdao Haier Parts Procurement Co., Ltd.            8,788,819,505.91        6,559,317,331.99

  CONTROLADORA MABE S.A.de C.V.                        7,402,437,722.16        4,036,320,000.00
  Chongqing Haier Electrical Appliances Sales
                                                       5,802,696,369.58        5,308,308,617.34
  Co., Ltd.

  Hefei Haier Logistics Co., Limited                   2,635,311,120.52        1,892,629,617.04

  Chongqing Haier Logistics Co., Ltd.                  2,243,036,226.80        1,589,002,597.45

  HNR Company (Pvt) Limited                            1,382,295,370.15        1,132,376,506.93
  Qingdao Haier International Trading Co.,
                                                       1,131,818,054.68        1,032,040,565.52
  Ltd.
  Wolong Electric Zhangqiu Haier Motor Co.,
                                                        759,511,960.70          657,210,146.25
  Ltd.
  Hefei Hegang New Material Technology
                                                        741,061,609.82          628,809,482.35
  Co., Ltd.
  Qingdao Haier Special Plastic Development
                                                        722,409,540.37          636,837,147.86
  Co., Ltd.
  Qingdao Hegang Composite New Material
                                                        621,080,904.82          460,990,968.73
  Technology Co., Ltd.
  Qingdao Haier Strauss Water Equipment
                                                        491,725,981.72          158,083,431.03
  Co., Ltd.

  Haier Energy Power Co., Ltd.                          448,843,514.32          417,094,079.20
  Qingdao Haier Tooling Development and
                                                        381,538,275.52          321,030,643.12
  Manufacturing Co., Ltd.
  HAIER INTERNATIONAL(HK)LTD.                           282,924,819.61           41,838,241.70

  Qingdao Haier furniture Co., Ltd.                     237,032,081.27          237,013,845.15

  HAIER INTERNATIONAL CO., LTD                          227,930,736.42          147,195,063.71
  Qingdao Haiyongda Property Management
                                                        196,524,982.09          142,315,716.56
  Co., Ltd.
  Mitsubishi Heavy Industries Haier (Qingdao)
                                                         78,433,710.84           39,119,316.10
  Air-conditioners Co., Ltd.
                                                         28,744,430.47           49,575,049.05
  FISHER&PAYKEL APPLIANCES

  LIMITED
  Qingdao Haier Household Integration Co.,
                                                         16,811,242.24          154,078,740.02
  Ltd.
  Others                                               1,178,738,855.29        1,201,539,966.04

                      Total                           35,799,727,015.30       26,842,727,073.14

     2. Sales of goods:
                 Related parties                         2017                     2016

FISHER&PAYKEL APPLIANCES LIMITED                            918,893,637.76        892,026,486.85



                                                281
Hefei Hegang New Material Technology Co., Ltd.               720,039,062.34           782,482,433.58

Qingdao Haier International Trading Co., Ltd.                638,554,200.89           545,455,276.03


Wolong Electric Zhangqiu Haier Motor Co., Ltd.               567,996,750.61           486,108,923.29


Qingdao Haier New Materials R & D Co., Ltd.                  519,845,230.06           356,450,592.68

CONTROLADORA MABE S.A.de C.V.                                427,074,898.76           212,574,037.33

Qingdao Hegang Composite New Material
                                                             336,114,667.51           414,573,862.79
Technology Co., Ltd.

Qingdao Haier Special Plastic Development Co.,
                                                             267,962,166.18           159,443,929.38
Ltd.


Chongqing Haier Electrical Appliances Sales Co.,
                                                             220,923,910.45           219,247,147.91
Ltd.

Qingdao Haier Tooling Development and
                                                             138,168,574.82            96,822,916.82
Manufacturing Co., Ltd.


Haier Group Electrical Appliance Industry Co.,
                                                              72,815,827.07           128,226,503.41
Ltd.

Suzhou Hai Xin InfoTech Ltd                                   59,713,542.97            18,004,582.06

Qingdao Haier International Travel Agency Co.,
                                                              38,678,257.43            34,512,005.34
Ltd.

Haier finance leasing (China) Co., Ltd.                       32,786,700.84            46,871,535.91

Qingdao Haier furniture Co., Ltd.                             25,588,713.65            21,647,687.86


Qingdao Goodaymart Lejia Technology Co., Ltd.                 12,623,292.07            18,418,533.09


Others                                                       251,335,096.89           210,751,128.42

                         Total                              5,249,114,530.30      4,643,617,582.75


       3. Related-party balances
                 Items                             2017                        2016

 Notes receivable:
 Haier Group Electric Appliance
 Industry Co., Ltd.

 Others                                                   827,490.67

 Dividends receivable:
 Wolong Electric Zhangqiu Haier
                                                                                      50,000,000.00
 Motor Co., Ltd.



                                                   282
Qingdao Haier Carrier Refrigeration
                                                                                                 39,306,692.40
Equipment Co., Ltd.
Qingdao Haier Software Investment
                                                                4,524,472.84                      4,524,472.84
Co., Ltd.
MiddleEast Air conditioning
                                                                                                  7,817,747.86
Company, Limited
Accounts receivable:
                                                              Allowance for                     Allowance for
               Items                   Book balance                            Book balance
                                                                bad Debt                          bad Debt
FISHER&PAYKEL APPLIANCES
                                       240,525,663.08          12,026,283.15   225,657,276.99    11,282,863.85
LIMITED
Haier Group Electric Appliance
                                       172,889,483.50           8,644,474.17   210,327,249.43    10,516,362.47
Industry Co., Ltd.
Qingdao Haier new materials R & D
                                        60,381,881.38           3,019,094.07    44,543,720.65     2,227,186.03
Co., Ltd.
Hefei Hegang New Material
                                        37,553,831.20           1,877,691.56    94,611,810.86     4,730,590.54
Technology Co., Ltd.
Haier finance leasing (China) Co.,
                                        33,979,469.96           1,698,973.50    19,457,726.96       972,886.35
Ltd.
Qingdao Haier International Travel
                                        33,535,331.94           1,676,766.60    34,699,458.66     1,734,972.93
Agency Co., Ltd.
Qingdao Haier Special Plastic
                                        30,061,911.52           1,503,095.58    21,214,104.15     1,060,705.21
Development Co., Ltd.

Suzhou Hai Xin InfoTech Ltd             18,580,938.10             929,046.91     8,259,547.06       412,977.35

Haier International Co.,Ltd.            15,579,415.32             778,970.77    31,129,868.67     1,556,493.43
Haier Medical and Laboratory
                                         5,293,566.32             264,678.32     6,963,446.22       348,172.31
Products Co., Ltd.
Qingdao Hegang Composite New
                                         5,271,174.28             263,558.71    24,923,915.12     1,246,195.76
Material Technology Co., Ltd.
Wolong Electric Zhangqiu Haier
                                         4,280,804.75             214,040.24     5,706,153.26       285,307.66
Motor Co., Ltd.
Mitsubishi Heavy Industries Haier
                                         2,609,651.81             130,482.59    18,441,193.77       922,059.69
(Qingdao) Air-conditioners Co., Ltd.
HNR COMPANY (PRIVATE)
                                         1,562,877.40              78,143.87   122,775,678.35     6,138,783.92
LIMITED

Others                                 243,199,406.35           7,866,563.45   224,716,650.56     11235832.53

Prepayments:
Qingdao Haier International Trading
                                                               25,694,085.49                     26,145,174.92
Co., Ltd.
Qingdao Haier Parts Procurement
                                                               26,855,446.50                     54,261,329.05
Co., Ltd.

Others                                                         76,575,980.84                     36,355,338.71



                                                        283
Interest receivable:

Haier Group Finance Co., Ltd.                                16,597,598.16                     10,353,293.15

Other receivables:
                                                            Allowance for                     Allowance for
                 Items                Book balance                           Book balance
                                                              bad Debt                          bad Debt
Haier Group Electric Appliance
                                       5,054,271.27             252,713.56   59,806,077.31       2,990,303.87
Industry Co., Ltd.
Chongqing Haier Electrical
                                                                             33,441,658.84       1,672,082.94
Appliances Sales Co., Ltd.
Qingdao Haier Logistics Consulting
                                           7,742.59                 387.13   13,593,017.74        679,650.89
Co., Ltd.

Others                                43,498,213.21           2,174,910.66   84,938,909.08       4,246,945.45

Notes payable:
Wolong Electric Zhangqiu Haier
                                                             61,412,756.84                     76,131,434.12
Motor Co., Ltd.

Laiyang Haier Electrical Co. Ltd.                            56,557,892.89                     58,008,353.21

Others                                                        6,544,689.10                     20,169,217.84

Accounts payable:
Qingdao Haier Parts Procurement                             975,508,354.98                    176,467,143.15
Co., Ltd.
CONTROLADORA MABE                                           359,468,427.60                   1,231,921,638.54
S.A.deC.V.

Chongqing Haier Logistics Co., Ltd.                         304,825,911.96                     54,116,937.28

Qingdao Haier International Trading                         268,481,130.24                    209,554,906.25
Co., Ltd.

Hefei Haier Logistics Co., Limited                          257,354,153.49                     50,255,970.60

HAIER INTERNATIONAL (HK)                                    162,909,377.32                     41,669,785.41
LIMITED
Chongqing Haier Electrical                                   90,092,109.31                    275,130,591.00
Appliances Sales Co., Ltd.
Qingdao Haier Strauss Water                                  61,152,328.59                     46,642,817.01
Equipment Co., Ltd.
HAIER INTERNATIONAL CO.,                                     56,102,305.76                     61,199,874.08
LTD
Qingdao Haier Special Plastic                                52,784,094.74                     86,510,974.88
Development Co., Ltd.

HNR Company (Pvt) Limited                                    49,389,796.48                     75,871,533.43

Qingdao Haier furniture Co., Ltd.                            33,084,367.38                     39,042,729.52

Qingdao Haier new materials R & D                             7,656,997.98                       1,775,542.51
Co., Ltd.

HAIER INFORMATION                                             6,105,741.28                     33,861,555.29



                                                      284
APPLIANCES S.R.L.

Qingdao Haier Communications                               4,801,675.32               219,092,243.03
Co., Ltd.
Feima Electronic (Qingdao) Co.,                            1,609,886.22               144,450,361.18
Ltd.
Haier Group Electric Appliance                              163,868.98                 11,485,262.70
Industry Co., Ltd.

Others                                                   405,762,541.99               256,597,230.36

Advances from customers:

Hefei Hai Zhi Real Estate Co., Ltd.                      155,000,000.00               155,000,000.00
Haier Group Electric Appliance
                                                           5,984,613.13                10,576,951.80
Industry Co., Ltd.
HAIER INTERNATIONAL CO.,
                                                            356,979.71                  1,159,469.63
LTD

Others                                                    12,012,397.83                24,877,981.64

Other payables:
Haier Brothers Animation Industry
                                                         384,741,409.54               384,741,409.54
Co., Ltd.

Chongqing Haier Logistics Co., Ltd.                       51,830,739.06                51,830,739.06

Haier Energy Power Co., Ltd.                              42,485,111.74                37,071,886.32

Hefei Haier Logistics Co., Limited                         8,663,500.00                 8,663,500.00
Haier Group Electric Appliance
                                                           2,413,136.73                 6,716,767.49
Industry Co., Ltd.

Haier Group Corporation                                                               163,049,555.34
Qingdao Haier Industry
                                                                                       91,217,389.35
Development Co., Ltd.

Others                                                   159,066,947.95               150,926,828.65

Interest payable:

Haier Group Finance Co., Ltd.                              5,953,652.09                14,845,738.29

Dividends payable:

BRAVE LION (HK) LIMITED                                  122,756,874.10               122,756,874.10

Others                                                    30,999,441.54                16,781,015.20

       4. Other Related-party transactions

       (1)Certain of the Company‘s subsidiaries entered into loan contracts with Haier Group

Finance Co., Ltd.. The loan balance as of 31 December 2017 was RMB4,252 million and the

interest incurred in 2017 was RMB277 million.

       (2)Loans guaranteed by related parties:



                                                   285
              Borrower                      Loan amount                             Guarantor

Qingdao Haier Special Refrigerator
                                                300,000,000.00              Haier Group Corporation
Co., Ltd.

Qingdao Haier Special Freezer Co.,
                                                500,000,000.00              Haier Group Corporation
Ltd.


Zhengzhou Haier Air-conditioning
                                                170,000,000.00              Haier Group Corporation
Co., Ltd.

Qingdao Haier (Jiaozhou)
                                               400,000,000.00               Haier Group Corporation
Air-conditioning Co., Limited

Qingdao Haier Air-Conditioner
                                               300,000,000.00               Haier Group Corporation
Electronics Co., Ltd.


Chongqing Haier Appliance Sales
                                               500,000,000.00               Haier Group Corporation
Co., Ltd.

Qingdao Haidayuan Procurement
                                               300,000,000.00               Haier Group Corporation
Service Co., Ltd.

HAIER US APPLIANCE
                                            18,167,534,095.99               Haier Group Corporation
SOLUTIONS, INC

                Total                       20,637,534,095.99


       (3)The interest income from deposits in Haier Group Finance Co., Ltd. in 2017 was
RMB60 million.

       (4)Haier Pakistan (Private) Limited, a Company‘s subsidiary, lend an amount of
274million to HNR COMPANY (PRIVATE) LIMITED, the Company‘s associate.

       (5)Qingdao Haier Goodaymart Logistic Co., Ltd., a subsidiary of the Company and other
companies provided logistics services to other related parties within Haier Group, the logistics
income for 2017 was RMB208 million.

       (6)Leasing

                                                                                      Lease expense recognized
         Lessees                     Lessors                     Used for
                                                                                           for the period
                           Qingdao Haier Investment
Subsidiaries of the
                           and Development Co.,          Production and operation                29,177,127.64
Company
                           Ltd. and its subsidiaries
Subsidiaries of the        Other companies of Haier
                                                         Production and operation                61,063,342.71
Company                    Group



                                                       286
         Total                                                                           90,240,470.35


     (Ⅳ)Transfer Pricing

     1. Related-party sales

     Following the acquisition of the overseas white household appliances assets, the Company‘s
original overseas sales model, being exports through the Group‘s exporting platform, was changed.
The trading company under the company holding overseas white household appliances assets was
fully responsible for sales of export-oriented products. Meanwhile, the trading company was also
responsible for the overseas sales of some of the Group‘s products (such as brown goods). As such,
the Company entered into a Sales Framework Agreement with Haier Group Corporation. Under
which, it was agreed that the Company and Haier Group Corporation will sell products and
provide sales-related services (including but not limited to agency sales services, after-sales
services and technical support) on a reciprocal basis for a term of three years.

     Sales among Haier Electronics Group Co., Ltd. (―Haier Electronics‖), a holding subsidiary of
the Company, Qingdao Haier Investment and Development Co., Ltd, Haier Group Corporation are
carried out according to relevant provisions of Goods Export Agreement, After-sales Service
Agreement, Logistics Service Agreement entered into among parties.

     2. Related-party Procurements

     In addition to independent procurement platform, the Company entrusted Haier Group
Corporation and its subsidiaries for procurements and delivery of part of raw materials, which is
conducted according to the Purchase and Distribution Contract entered among the Company,
Haier Group Corporation and other parties. The price consists of the actual purchase price and the
agency fee, of which the agency fee was calculated by 1.25% of the actual purchase price, while in
principle the price of materials should not be higher than the price that the Company
independently purchases from the market.

     Related-party procurements among Haier Electronics, Qingdao Haier Investment and
Development Co., Ltd, Haier Group Corporation are carried out according to relevant provisions
of Materials Procurement Agreement and Production and Experimental Equipment Procurement
Agreement entered among parties.

     3. Related-party Transactions on Financial and Logistics Services

     Some of the financial services such as deposit and loan service, discounting service and
foreign exchange derivatives needed by the Company are provided by Haier Group Corporation,
its subsidiaries and other companies. According to the Financial Service Agreement entered


                                                 287
among the Company, Haier Group Corporation and other parties, the price is not less favorable
than market price. The Company is entitled to decide whether to cooperate with them with the
knowledge of the price prevailing on the market. While executing the agreement, the Company
could also require other financial service institutions to provide related financial services. In order
to mitigate foreign exchange fluctuation risk, the Company may choose Haier Group Finance Co.,
Ltd. (―Finance Company‖) to provide service after comparison. All foreign exchange business
shall have a normal and reasonable business background without speculation. At the same time,
the Company has specified the authority and responsibilities at all levels to avoid unauthorized
access.

     Related-party transactions of financial services among Haier Electronics, Finance Company,
Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation are carried
out according to relevant provisions of Financial Service Agreement entered into among parties.

     In order to further standardize the administrative services provided by the related companies
of Haier Group Corporation, the Company signed the Administrative Service Agreement with
Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation, and entrusted
the subsidiaries of Haier Group to provide energy and power, detection, equipment leasing, house
rental and maintenance, landscaping and sanitation, gift purchasing, design, consultation, all kinds
of booking and other services.

     In accordance with the Comprehensive Service Agreement, Promotion Agreement, Product
Research and Development Agreement entered into among Haier Electronics, Qingdao Haier
Investment and Development Co., Ltd and Haier Group Corporation, Haier Electronics entrusted
subsidiaries of Haier Group to support on: energy, meeting, accommodation, ticket, product
certification, software, catering, property decoration, house lease, finance and marketing, product
research and development.

     4. Other

     In order to expand the sales businesses in the third and fourth-tier markets, Haier Electronics
renewed the Products Procurement Agreement and Internal Sales Agreement with Qingdao Haier
Investment and Development Co., Ltd and Haier Group Corporation, according to which, while
Haier Electronics purchases products from contracted parties, the purchasing price shall be
determined basing on the prices of which Haier Electronics purchases the same type of product in
similar transactions from independent third parties in the market, and are not less favorable than
the terms and conditions provided by the independent third parties to Haier Electronics; while
Haier Electronics sales products to contract parties for their own use or distributes products
through sales network, the selling price shall be determined basing on the prices of which Haier

                                                  288
Electronics sells the same type of product in similar transactions to independent third parties in the
market, and are not less favorable than the terms and conditions provided by Haier Electronics to
independent third parties.

     The Company and its subsidiaries entered into a series of contracts, including the Framework
Agreement Regarding the Procurement of Modular Products with Wolong Electric Zhangqiu
Haier Motor Co., Ltd. and other companies. Pursuant to which, they agreed to supply modular
products to the Company at the most favorable price which is no higher than the price it offered to
other clients.

     The Company and its subsidiaries entered into a series of contracts, including the Contract
Arrangement Regarding the Procurement of Special Steel Plate Products with Qingdao Hegang
Composite New Material Technology Co., Ltd. and Hefei Hegang New Material Technology Co.,
Ltd.. Under which, it is agreed that they shall supply goods to the Company on terms which are
not less favorable than terms offered by other suppliers.

13. Share-based Payments

General information on share-based payment

□Applicable √Not Applicable


14. Contingencies

1) Critical commitment
□Applicable √Not Applicable
2) Contingencies
Critical contingencies on the balance sheet date
□Applicable √Not Applicable
3) Others
□Applicable √Not Applicable



15. Subsequent Events

     1. According to the resolution of the 13th meeting of the 9th session of the Board of Directors
of the Company held on 24 April 2018, the profit for the year is proposed to be distributed on the
basis of the total number of shares on the registration date when the plan is implemented in the
future, the Company will declare cash dividend of RMB3.42 (including taxes) for every 10 shares
to all shareholders.

     2. According to the resolution of the 12th meeting of the 9th session of the Board of Directors
of the Company held on 10 April 2018, the Company passed the resolution of ―Proposal of

                                                 289
Qingdao Haier Co., Ltd on the Initial Public Offering in the D-shares Market of the China
European International Exchange‖. The Company intends to make Initial Public Offer of the
D-shares on China European International Exchange (the ―D-Shares Market‖). The listing will be
implemented through the access and listing transaction of the Frankfurt Stock Exchange. China
Europe International Exchange Co., Ltd. is a jointly company established by the Shanghai Stock
Exchange, the Deutsche Brse Group, and the China Financial Futures Exchange. The Deutsche
Brse Group is the main body of the Frankfurt Stock Exchange. The Frankfurt Stock Exchange's
listing rules apply to the D Shares Market. Subject to regulatory requirements such as the
minimum issuance ratio of the Company‘s stocks listed on the market, combined with the
company‘s capital requirements for future business development, the number of D-shares to be
issued this time will not exceed 400 million shares (before the execution of the over-allotment
option) and may be awarded. The bookkeeping administrator does not exceed the
above-mentioned over-allotment rights of 15% of the number of issued D shares. The final
number of issues is submitted to the general meeting of shareholders for authorization of the board
of directors and authorized persons of the board of directors to be determined in accordance with
legal requirements, regulatory approvals, and market conditions.

     3. The Company intends to acquire the 100% equity interest of Haier New Zealand
Investment Holding Company Limited (―Haier New Zealand‖) which is held by Haier (Singapore)
Management Holding Co. Pte. Limited (―Haier Singapore‖), through overseas subsidiary Haier
Singapore Investment Holding Pte. Ltd. at cash consideration. (the "Transaction"). On 24 April
2018, Haier Singapore Investment Holding Pte. Ltd. and Haier Singapore entered into an equity
transfer agreement Sale and Purchase Agreement (the ―Equity Transfer Agreement‖). Pursuant to
the Equity Transfer Agreement, Haier Singapore Investment Holding Pte. Ltd. intends to acquire
100% of the equity of Haier New Zealand held by Haier Singapore at a cash consideration of
US$303,040,997.28. After the completion of this transaction, Haier New Zealand will become a
wholly owned overseas subsidiary of the Company. The Transaction is subject to the approval of
the overseas investment of domestic enterprises and the overseas anti-monopoly. The contractual
party will examine the relevant filing, registration or examination and approval procedures in the
competent authority according to relevant laws and regulations.

     4. On 23 November 2017, the Company held the first extraordinary general meeting of
shareholders in 2017 and passed the resolution of ―Proposal on the Issue of Convertible Bonds by
Qingdao Haier Co., Ltd.‖. According to the resolution, the Company will issue convertible bonds
of no more than RMB5,640 million at RMB 100 per face value, and the term of convertible bonds
shall not exceed six years from the date of issue. The issue size, maturity, coupon interest rate and



                                                 290
payment period of the convertible bonds are authorized by the Company‘s Board of Directors to
be implemented by the Company's shareholders. The issue of convertible bonds is subject to the
approval of the China Securities Regulatory Commission, and there is still uncertainty about
whether or not the approval can be obtained.

     5. The Company has no other significant subsequent events that need to be disclosed.

16. Financial Instruments Related Risks

     The Company‘s financial assets include notes receivable, accounts receivable and etc., and
financial liabilities include notes payable, accounts payable, long- and short- term borrowings and
etc. Relevant info is disclosed in Note V. Risks relating to these financial instruments and the risk
management policies s to mitigate these risks are summarized below. The Company manages and
monitors these risk exposures to ensure above risks are well under control.

     1) Credit risk

     The credit risk the Company exposed to mainly arise from cash in bank, notes receivable,
accounts receivable, interest receivable, other receivable and financial products in other current
assets.

(1) The Company‘s bank deposits and financial products are mainly deposited with Haier Group
Finance Co., Ltd., national banks and other large and medium sized listed banks. The interest
receivables mainly refer to the accrued interest from fixed deposits with them. The Group doesn‘t
believe there is any significant credit risk due to defaults of its counterparties which would cause
significant loss.

(2) Accounts receivable and notes receivable: The Company only trades with approved and
reputable third parties. All consumers who are traded by credit are subject to credit assessment,
and the payment terms shall be determined on a reasonable basis. The Company monitors the
balances of accounts receivable on an ongoing basis and mitigates the risk with credit insurances.

(3) Other receivables mainly include export tax refund, loans and advances to its employees. The
Company strengthened the management of these receivables and corresponding business activities
based on historical data, and continued to monitor such receivables, so as to ensure that the
Company‘s significant risk of bad debts are controllable and to be reduced.

     2) Liquidity risk

     Liquidity risk is the risk that an enterprise may encounter deficiency of funds in fulfilling
obligations associated with financial liabilities. The Company utilizes various financing methods




                                                 291
such as notes and bank loans, to strive for a sustainable and flexible financing. It also has facilities
with several commercial banks to satisfy its needs for working capital and capital expenditures.

        3) Exchange rate risk

        The Company‘s businesses are based in mainland China, USA, Japan, Southeast Asia, South
Asia, central and east Africa, Europe, and Australia, etc. and are settled in RMB, USD, and other
currencies.

The Company‘s overseas assets and liabilities denominated in foreign currencies as well as
transactions settled in foreign currencies expose the Company to fluctuations in exchange rates.
The Company‘s finance department is responsible for monitoring the size of transactions in
foreign currencies and assets and liabilities denominated in foreign currencies and enter into
forward foreign exchange contracts to minimize the exposure.

        4) Interest rate risk

        The Company mainly faces interest rate risk from its long- and short- term bank loans and
bonds payables which are interest-bearing. Financial liabilities with floating interest rates expose
the Company to cash flow interest rate risk, while financial liabilities with fixed interest rates
expose the Company to fair value interest rate risk. The Group determines the percentage of
fixed-interest rate and floating interest rate contracts in light of the prevailing market conditions.

17. Other Significant Events

        The Company has no other significant events that need to be disclosed.

18. Notes to Major Accounts of Financial Statements of the Company

        1) Accounts receivable

        (1)Accounts receivables disclosed by categories:

                                                       2017                                  2016

                Items                                     Allowance for bad                         Allowance for bad
                                       Book balance                           Book balance
                                                                debts                                     debts

Individually significant accounts

receivables of which provision for

bad debts is made on an individual

basis

Accounts receivables of which

provision for bad debts is made on    303,683,922.18          15,184,196.11   279,408,653.04           13,970,432.65
a group basis

Individually insignificant accounts

receivables of which provision for


                                                              292
bad debts is made on an individual

basis

                Total                   303,683,922.18             15,184,196.11          279,408,653.04             13,970,432.65

         (2)Accounts receivables of which provision for bad debts is made on a group basis

                                             2017                                                     2016
    Aging                                                                                                       Allowance for bad
                           Book balance             Allowance for bad debts            Book balance
                                                                                                                      debts

Within 1 year                274,306,287.64                  13,715,314.38               260,896,436.79              13,044,821.84

1 to 2 years                  29,377,634.54                   1,468,881.73                18,512,216.25                925,610.81

        Total                303,683,922.18                  15,184,196.11               279,408,653.04              13,970,432.65

         (3)The total amount of the top 5 in the accounts receivables at the end of the period was
RMB295,248,673.54, accounting for 97.22% of the book balance of the accounts receivables.

         2) Other receivables

         (1)Other receivables disclosed by categories:

                                                           2017                                          2016
                Items                                           Allowance for bad                               Allowance for bad
                                          Book balance                                    Book balance
                                                                      debts                                            debts

Individually significant other

receivables of which provision for

bad debts is made on an individual

basis

Other receivables of which

provision for bad debts is made on a      16,731,629.93                 836,581.50        339,950,820.95             16,997,541.05
group basis

Individually insignificant other

receivables of which provision for

bad debts is made on an individual

basis

                Total                     16,731,629.93                 836,581.50        339,950,820.95             16,997,541.05


         (2)Other receivables of which provision for bad debts is made on a group basis

                                                      2017                                               2016
           Aging                                                                                             Allowance for bad
                                     Book balance            Allowance for bad debts      Book balance
                                                                                                             debts

Within 1 year                          16,731,629.93                    836,581.50       339,950,820.95              16,997,541.05

           Total                       16,731,629.93                    836,581.50       339,950,820.95              16,997,541.05




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            (3)The total amount of the top 5 in the other receivables at the end of the period was
   RMB16,438,436.13, accounting for 98.25% of the book balance of the other receivables.

            3) Long-term equity investments

            (1)Details of long-term equity investments:
                                                          2017                                    2016
                   Items                                         Provision for                           Provision for
                                              Book balance                           Book balance
                                                                 impairment                              impairment

Long-term equity investments
Including: long-term equity
                                            20,490,178,326.42     7,100,000.00     20,211,704,813.36     7,100,000.00
investments to subsidiaries
Long-term equity investments to
                                             3,119,176,601.66    21,000,000.00      2,137,474,063.71
associates
                   Total                    23,609,354,928.08    28,100,000.00     22,349,178,877.07     7,100,000.00


            (2)Long-term equity investments to subsidiaries

                                                                  Movement in                              Impairment
                  Investee                        2016                                     2017
                                                                      2017                                  provision

Subsidiaries:
Chongqing Haier Electronics Sales Co.,
                                                 9,500,000.00                             9,500,000.00
Ltd.
Haier Group (Dalian) Electrical
                                               34,735,489.79                             34,735,489.79
Appliances Industry Co., Ltd.

Qingdao Haier Refrigerator Co., Ltd.          402,667,504.64                            402,667,504.64
Qingdao Haier Special Refrigerator Co.,
                                              329,832,047.28                            329,832,047.28
Ltd.
Qingdao Haier Information Plastic
                                              102,888,407.30                            102,888,407.30
Development Co., Ltd.

Dalian Haier Precision Products Co., Ltd.      41,836,159.33                             41,836,159.33

Hefei Haier Plastic Co., Ltd.                  42,660,583.21                             42,660,583.21

Qingdao Haier Technology Co., Ltd.             16,817,162.03                             16,817,162.03

Qingdao Haier Moulds Co., Ltd.                273,980,796.30                            273,980,796.30
Qingdao Haier Intelligent Electronics
                                              271,380,000.00       23,073,513.06        294,453,513.06
Co., Ltd.
Qingdao Household Appliance
Technology and Equipment Research              66,778,810.80                             66,778,810.80
Institute

Qingdao Meier Plastic Powder Co., Ltd.         24,327,257.77                             24,327,257.77
Chongqing Haier Precision Plastic Co.,
                                               47,811,283.24                             47,811,283.24
Ltd.


                                                         294
Chongqing Haier Intelligent Electronics
                                             11,870,511.98                       11,870,511.98
Co., Ltd.
Qingdao Haier Electronic Plastic Co.,
                                             48,000,000.00                       48,000,000.00
Ltd.

Dalian Haier Refrigerator Co., Ltd.          99,000,000.00                       99,000,000.00

Dalian Haier Air-conditioning Co., Ltd.      99,000,000.00                       99,000,000.00

Guizhou Haier Electronics Co., Ltd.          96,904,371.71                       96,904,371.71
Hefei Haier Air-conditioning Co.,
                                             67,110,323.85                       67,110,323.85
Limited
Qingdao Haier Refrigerator
                                            158,387,576.48                      158,387,576.48
(International) Co., Ltd.

Qingdao Haier Robot Co., Ltd.                  3,149,188.69                        3,149,188.69
Qingdao Haier Air-Conditioner
                                           1,113,433,044.51                    1,113,433,044.51
Electronics Co., Ltd.
Qingdao Haier Air Conditioner Gen
                                            218,245,822.50                      218,245,822.50
Corp., Ltd.

Qingdao Haier Special Freezer Co., Ltd.     442,684,262.76                      442,684,262.76

Qingdao Haier Dishwasher Co., Ltd.          206,594,292.82                      206,594,292.82

Wuhan Haier Freezer Co., Ltd.                47,310,000.00                       47,310,000.00

Wuhan Haier Electronics Co., Ltd.           100,715,445.04                      100,715,445.04
Chongqing Haier Air-conditioning Co.,
                                            100,000,000.00                      100,000,000.00
Ltd.

Hefei Haier Refrigerator Co., Ltd.           49,000,000.00                       49,000,000.00
Qingdao Haier Whole Set Home
                                            118,000,000.00                      118,000,000.00
Appliance Service Co., Ltd.
Chongqing Haier Refrigeration
                                             91,750,000.00                       91,750,000.00
Appliance Co., Ltd.
Qingdao Haier Industry Intelligence
                                               8,000,000.00                        8,000,000.00
Research Institute Co., Ltd.
Haier Shareholdings (Hong Kong)
                                          13,561,203,702.07                   13,561,203,702.07
Limited

Shenyang Haier Refrigerator Co., Ltd.       100,000,000.00                      100,000,000.00

Foshan Haier Freezer Co., Ltd.              100,000,000.00                      100,000,000.00
Zhengzhou Haier Air-conditioning Co.,
                                            100,000,000.00                      100,000,000.00
Ltd.
Qingdao Haidayuan Procurement Service
                                             20,000,000.00                       20,000,000.00
Co., Ltd.
Qingdao Haier Intelligent Technology
                                            130,000,000.00                      130,000,000.00
Development Co., Ltd.
Qingdao Haier Technology Investment
                                            156,600,000.00    43,400,000.00     200,000,000.00
Co., Ltd.



                                                       295
 Qingdao Casarte Smart Living
                                                  10,000,000.00                                   10,000,000.00
 Appliances Co., Ltd.
 Haier Overseas Electric Appliance Co.,
                                                  40,000,000.00                                   40,000,000.00
 Ltd.

 Haier (Shanghai) Electronics Co., Ltd.            8,500,000.00          4,000,000.00             12,500,000.00
 Haier U+smart Intelligent Technology
                                                 137,000,000.00          6,000,000.00         143,000,000.00
 (Beijing) Co., Ltd.

 Haier Electronics Group Co., Ltd.               669,830,769.26                               669,830,769.26          7,100,000.00
 Qingdao Haidarui Procurement Service
                                                 107,800,000.00                               107,800,000.00
 Co., Ltd.
 Haier Shanghai Zhongzhi Fang Chuang
                                                                         2,000,000.00              2,000,000.00
 Ke Management Co., Ltd.

 Haier Industrial Holding Co., Ltd.                                    100,000,000.00         100,000,000.00
 Qingdao Haier special refrigerating
                                                                       100,000,000.00         100,000,000.00
 Appliance Co., Ltd.
 Qingdao Haier Intelligent Household
                                                 326,400,000.00                               326,400,000.00
 Appliances Co.,Ltd.
                     Total                    20,211,704,813.36        278,473,513.06      20,490,178,326.42          7,100,000.00

                (3)Long-term equity investments to associates:

                                                          Movement in 2017

                                                            Investment
                                                              income                                                    Impairment
        Associates              2016                                                                    2017
                                              Increase/     recognized                                                   provision
                                                                                Others
                                              Decrease       under the
                                                              equity
                                                              method
Haier Medical and
Laboratory Products          192,525,039.75                 37,390,308.79               -557.68      229,914,790.86

Co., Ltd.
Wolong Electric
Zhangqiu Haier               106,948,493.17                       9,293.39                           106,957,786.56

Motor Co., Ltd.
Qingdao Hegang
Composite New
                             102,915,605.69                  3,153,197.39                            106,068,803.08
Material Technology
Co., Ltd.
Hefei Hegang New
Material Technology           95,197,776.89                 14,091,790.11                            109,289,567.00

Co., Ltd.
Qingdao Haier SAIF
Smart Home Industry          227,531,053.19                 43,005,828.79                            270,536,881.98

Investment Center


                                                            296
(Limited Partnership)

Bank of Qingdao Co.,
                             606,868,517.54      35,575,618.47     65,389,255.82      209,686,836.07    917,520,227.90
Ltd.
Mitsubishi Heavy
Industries Haier
(Qingdao)                    503,375,198.93                        67,851,552.02      -41,292,000.00    529,934,750.95

Air-conditioners Co.,
Ltd.
Qingdao Haier
Carrier Refrigeration        302,112,378.55                         3,072,758.54                        305,185,137.09     21,000,000.00

Equipment Co., Ltd.
Qingdao Haier
                                                525,252,525.00     17,218,526.54        1,297,604.70    543,768,656.24
multimedia Co., Ltd.
         Total             2,137,474,063.71     560,828,143.47    251,182,511.39      169,691,883.09   3,119,176,601.66    21,000,000.00



            4) Operating revenue and Cost of sales:

                                                           2017                                            2016

                 Items
                                        Operating revenue               COGS            Operating revenue              COGS


  Primary Business                       3,396,281,592.16         2,383,460,866.48        3,238,545,943.78        2,282,262,928.08

  Other Business                              55,720,755.44              407,940.53          12,499,443.97           3,250,821.85

                 Total                   3,452,002,347.60         2,383,868,807.01        3,251,045,387.75        2,285,513,749.93


            5) Gains/(losses) on investment

                           Items                                           2017                                 2016
  Income from long-term equity investments under
                                                                               251,182,511.39                       193,500,696.28
  equity method
  Investment income from disposal of long-term
                                                                                                                     17,262,280.41
  equity investments
  Income from long-term equity investments under
                                                                            1,039,337,401.79                        282,298,678.36
  cost method
  Investment income from available for sale
                                                                                   231,157.27                             229,880.16
  financial assets during the holding period
                           Total                                            1,290,751,070.45                        493,291,535.21


       19. Supplementary Information

            1) Basic earnings per share and diluted earnings per share

                                                          2017                                             2016
                   Items
                                         Weighted             Earnings per share          Weighted           Earnings per share



                                                                  297
                                        average                (RMB)                    average                (RMB)
                                   return on net       Basic         Diluted          return on net    Basic         Diluted
                                        assets       earnings       earnings             assets       earnings      earnings
                                                     per share      per share                         per share     per share
 Net profit attributable to
 ordinary shareholders of               23.59%         1.136           1.088            20.38%         0.827           0.824
 the Company
 Net profit attributable to
 ordinary shareholders of
 the Company after
                                        19.15%         0.922           0.874            17.56%         0.710           0.708
 deduction of
 extraordinary
 profit or loss


      2) Extraordinary profit or loss

                                Items                                            2017                        2016
Net profit attributable to ordinary shareholders of the
                                                                               6,925,792,321.27         5,041,782,280.78
Company
Less: Extraordinary profit or loss                                             1,301,730,612.81           709,329,230.71
Net profit attributable to ordinary shareholders of the
                                                                               5,624,061,708.46         4,332,453,050.07
Company after deduction of extraordinary profit or loss

      Details of extraordinary profit and loss in 2017:
                                         Items                                                        2017
Gain or loss from disposal of non-current assets                                                           -90,936,217.46

Gain or loss from disposal of long-term equity investments                                                 154,563,929.68

Gain or loss from disposal of available for sale financial assets                                              1,006,946.64
Government grants included in current profit or loss, except that closely
related to the normal operating business, complied with requirements of the
                                                                                                           527,612,997.16
national policies, continued to be granted with the amount and quantity
determined under certain standards
Gains from the costs of investment in the acquisition of subsidiaries,
associated companies and joint ventures being lower than the share of the fair                                 9,660,529.47
value of the investee‘s identifiable net assets
Enterprises‘ restructuring costs, such as the replacement cost of employees,
                                                                                                          -120,358,066.45
the cost of integration, etc.
Gain or loss from fair value changes of financial assets/liabilities held for
trading, as well as investment gain/loss arising from disposal of financial
                                                                                                           663,407,128.53
assets/liabilities held for trading and available for sale financial assets, except
the effective hedging related to the normal operations of the Company,
Trust fee income from entrusted business                                                                       2,830,188.68

Other non-operating income and expenses expect the aforementioned items                                    523,346,200.57



                                                            298
Impact on non-controlling interests                                                         -250,957,566.29

Income tax                                                                                  -118,945,499.54

The acquiree's net profit before business combination under common control                      500,041.82

                                      Total                                                1,301,730,612.81




Please state the reasons for classifying extraordinary profit and loss items according to definitions
provided in the ―Explanatory Announcement on Information Disclosure by Companies on Public
Issuance of Securities No. 1 – Extraordinary profit and loss‖ (公开发行证券的公司信息披露解
释性公告第 1 号–非经常性损益) and for classifying extraordinary profit and loss items listed in
the ―Explanatory Announcement on Information Disclosure by Companies on Public Issuance of
Securities No. 1 – Extraordinary profit and loss‖ (公开发行证券的公司信息披露解释性公告第
1 号–非经常性损益) as recurring profit and loss items by the Company.
□ Applicable √ Not applicable



2.    Differences between accounting data under domestic and foreign accounting standards
      □ Applicable √ Not applicable

3.    Others
      □ Applicable √ Not applicable


SECTION XII DOCUMENTS AVAILABLE FOR INSPECTION


Documents available for        (I) Financial statements with signatures and seals of the legal
inspection                     representative, chief accountant and person-in-charge of accounting
                               department.
Documents available for        (II) Original audit report with seals of accounting firm, signatures and
inspection                     seals of the registered accountants.
Documents available for        (III) Original copies of all documents and announcements of the
inspection                     Company which have been publicly disclosed on newspapers designated
                               by the China Securities Regulatory Commission during the reporting
                               period.


                                                                    Chairman of the Board: Liang Haishan
                                              Date of approval for publication by the Board: 24 April 2018

Revised information
□ Applicable √ Not applicable




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