Konka Group Co., Ltd. First Quarter Report 2018 KONKA GROUP CO., LTD. FIRST QUARTER REPORT 2018 2018-27 April 2018 1 Konka Group Co., Ltd. First Quarter Report 2018 Part I Important Notes The Board of Directors (or the “Board”), the Supervisory Board as well as the Directors, Supervisors and senior management of Konka Group Co., Ltd. (inclusive of its consolidated subsidiaries, the “Company”; exclusive of its subsidiaries, the “Parent Company”, except where the context otherwise requires) hereby guarantee the factuality, accuracy and completeness of the contents of this Report, and shall be jointly and severally liable for any misrepresentations, misleading statements or material omissions in this Report. All the Company’s Directors have attended the Board meeting for the review of this Report. Liu Fengxi, the Company’s legal representative, Li Chunlei, the Company’s Chief Financial Officer (CFO), and Feng Junxiu, head of the Company’s financial department (equivalent to financial manager) hereby guarantee that the Financial Statements carried in this Report are factual, accurate and complete. This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail. 2 Konka Group Co., Ltd. First Quarter Report 2018 Part II Key Corporate Information I Key Financial Information Indicate by tick mark whether there is any retrospectively restated datum in the table below. □ Yes √ No January-March 2018 January-March 2017 Change Sales revenue (RMB) 7,773,238,729.83 4,686,318,957.34 65.87% Net income attributable to shareholders of 55,758,297.40 26,245,353.83 112.45% the listed company (RMB) Net income attributable to shareholders of the listed company before nonrecurring -68,684,426.14 -18,772,884.12 -265.87% gains and losses (RMB) Net cash flows from operating activities -1,019,365,516.72 -1,629,437,072.94 37.44% (RMB) Basic earnings per share (RMB/share) 0.0232 0.0109 112.84% Diluted earnings per share (RMB/share) 0.0232 0.0109 112.84% Weighted average return on equity (%) 0.70% 0.90% -0.20% March 31, 2018 December 31, 2017 Change Total assets (RMB) 23,501,965,507.75 23,558,735,469.78 -0.24% Equity attributable to shareholders of the 8,059,777,898.53 7,994,145,476.61 0.82% listed company (RMB) Nonrecurring gains and losses: √ Applicable □ Not applicable Unit: RMB Item January-March 2018 Note Gains and losses on disposal of non-current assets (inclusive of offset allowance for asset 63,391,159.53 impairments) Government subsidies charged to current profit and loss (exclusive of government subsidies given in the Company’s ordinary course of business at fixed quotas or amounts as per 57,080,159.10 government’s uniform standards ) Gains and losses on investment or asset management entrustments to other entities 21,676,523.58 Gains and losses on changes in fair value of trading financial assets and liabilities & investment income from disposal of trading financial assets and liabilities and 38,693,734.33 available-for-sale financial assets (exclusive of effective portion of hedges that arise in the Company’s ordinary course of business) 3 Konka Group Co., Ltd. First Quarter Report 2018 Gains and losses on loan entrustment 235,966.96 Non-operating income and expense other than above 17,047,430.35 Less: Income tax effects 20,793,700.28 Non-controlling interests effects (net of tax) 52,888,550.03 Total 124,442,723.54 -- Explanation of why the Company classifies an item as a nonrecurring gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Nonrecurring Gains and Losses, or reclassifies any nonrecurring gain/loss item listed in the said explanatory announcement as a recurring gain/loss: √ Applicable □ Not applicable Item Amount (RMB) Reason Government subsidies related to the Company’s ordinary course of Tax refund of software 24,228,550.05 business and in line with the regulations of national policies at fixed quotas or amounts as per certain standards II Total Number of Shareholders and Top 10 Shareholders’ Holdings at Period-End 1. Numbers of Common Shareholders and Preferred Shareholders with Resumed Voting Rights as well as Holdings of Top 10 Shareholders Unit: share Common shareholders at Preferred shareholders with resumed voting rights at 84,394 0 period-end period-end (if any) Top 10 shareholders Sharehol Pledged or frozen ding shares Nature of percenta Restricted Name of shareholder Shares shareholder ge at shares Shar Status period-e es nd (%) State-owned OVERSEAS CHINESE TOWN juridical 21.75% 523,746,932 0 ENTERPRISES CO. person Foreign CITIC SECURITIES BROKERAGE juridical 7.56% 182,100,202 0 (HONG KONG) CO., LTD. person Foreign HOLY TIME GROUP LIMITED juridical 2.33% 56,000,000 0 person 4 Konka Group Co., Ltd. First Quarter Report 2018 Foreign GUOYUAN SECURITIES BROKER juridical 2.27% 54,755,145 0 (HK) CO., LTD. person Foreign GAOLING FUND,L.P. juridical 2.19% 52,801,250 0 person Domestic WANG LEI natural 1.47% 35,400,939 0 person Domestic ZHANG XIAOYU natural 1.08% 26,096,200 0 person State-owned CHINA MERCHANTS SECURITIES juridical 0.97% 23,357,343 0 (HK) LIMITED person Foreign NAM NGAI natural 0.90% 21,788,540 0 person YUNNAN INTERNATIONAL TRUST CO., LTD-JULI NO. 48 SINGLE Other 0.84% 20,216,860 0 CAPITAL TRUST Top 10 non-restricted shareholders Non-restricted shares held at Type of shares Name of shareholder period-end Type Shares RMB common OVERSEAS CHINESE TOWN ENTERPRISES CO. 523,746,932 523,746,932 stock Domestically CITIC SECURITIES BROKERAGE (HONG KONG) 182,100,202 listed stock for 182,100,202 CO., LTD. foreign investors Domestically HOLY TIME GROUP LIMITED 56,000,000 listed stock for 56,000,000 foreign investors Domestically GUOYUAN SECURITIES BROKER (HK) CO., LTD. 54,755,145 listed stock for 54,755,145 foreign investors Domestically GAOLING FUND,L.P. 52,801,250 listed stock for 52,801,250 foreign investors RMB common WANG LEI 35,400,939 35,400,939 stock 5 Konka Group Co., Ltd. First Quarter Report 2018 RMB common ZHANG XIAOYU 26,096,200 26,096,200 stock Domestically CHINA MERCHANTS SECURITIES (HK) LIMITED 23,357,343 listed stock for 23,357,343 foreign investors Domestically NAM NGAI 21,788,540 listed stock for 21,788,540 foreign investors YUNNAN INTERNATIONAL TRUST CO., LTD-JULI RMB common 20,216,860 20,216,860 NO. 48 SINGLE CAPITAL TRUST stock Jialong Investment Limited, a wholly-funded subsidiary of the Company’s first majority shareholder Related or Overseas Chinese Town Enterprises Co. (“OCT Group” for short), holds 180,001,110 and 18,360,000 acting-in-concert common shares in the Company respectively through CITIC Securities Brokerage (Hong Kong) Co., Ltd. parties among and China Merchants Securities (HK) Limited. Jialong Investment Limited and Overseas Chinese Town shareholders above Enterprises Co. are parties acting in concert. Other than that, it is unknown whether the other shareholders are related parties or act-in-concert parties or not. Shareholders Wang Lei holds 35,400,939 A-shares in the Company through an account of collateral securities for conducting margin trading in GF Securities Co., Ltd. Zhang Xiaoyu holds 26,096,200 A-shares in the Company securities margin through an account of collateral securities for margin trading in Huaxi Securities Co., Ltd. trading (if any) Indicate by tick mark whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company conducted any promissory repo during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 2. Number of Preferred Shareholders and Shareholdings of Top 10 of Them □ Applicable √ Not applicable 6 Konka Group Co., Ltd. First Quarter Report 2018 Part III Significant Events I Changes in Selected Financial Statement Items and Explanation of why √ Applicable □ Not applicable (I) During the Reporting Period, in order to accelerate the shift in its business and profit models, the Company continued to work on the development models of “Hardware + Software”, “Terminals + Users” and “Technology + Holding”, as well as on the expansion guideline of “Technology + Industry + Urbanization”, by implementing strategies of “Promote High-End Orientation in Traditional Business”, “Capitalize Existing Business”, “Turn Traditional Plants into Industrial Parks” and “Integrate Technologies and Create Added Value”. During the Reporting Period, the Company improved efficiency in its multi-media business through promoting corporatization and organizational reform. It also increased its product competitiveness and overall operating income through more investments in technological innovation, product development and content operation. Driven by the fast growing new business, the Company is expected to record sales revenue of approximately RMB7.773billion in the first quarter of 2018, an around 65.87% rise compared to the first quarter of 2017. The estimated influence of non-recurring gains and losses on the net income is about RMB124 million in the Reporting Period. (II) Changes in Key Financial Indicators: Unit: RMB’0,000 (in RMB ten thousand) December 31, Item March 31, 2018 Change Change (%) Explanation of why 2017 Financial assets at Changes in the fair value of forward foreign fair value through 71.73 29.68 42.05 141.68% exchange contracts profit or loss Accounts receivable 425,034.28 344,309.59 80,724.69 23.45% Increase in Sales revenue. January-March January-March Item Change Change (%) Explanation of why 2018 2017 Year-over-year increase in revenue from the Sales revenue 777,323.87 468,631.90 308,691.97 65.87% supply chain management business Year-over-year increase in costs in the supply Cost of sales 714,481.34 402,314.94 312,166.40 77.59% chain management business Gain on changes in Changes in the fair value of forward foreign 3,414.22 -6,933.28 10,347.50 149.24% fair value exchange contracts 7 Konka Group Co., Ltd. First Quarter Report 2018 Non-operating Year-over-year increase in loss on disposal of 203.15 76.78 126.37 164.59% expense property, plant and equipment II Progress, Influence and Solutions Associated with Significant Events √ Applicable □ Not applicable I) Regarding the Kunshan-located Shuiyue Zhouzhuang real estate project, as approved at the 42nd Meeting of the 6th Board, the Company has won the bid for the use right of the land to the south of the Quanwang Road, Zhouzhuang Town, Kunshan City. Currently, Phase IV of this project is under construction, and partial sales are completed. (II) In regard to the Konka Technological Innovation Center project, as approved at the 24th Meeting of the 8th Board, the Company entrusted Chuzhou Konka Technology & Industry Development Co., Ltd. (Chuzhou Konka TID) to build the center in Chuzhou Economic Development Zone. So far, the use right of a 45333 ㎡ land has been obtained by Chuzhou Konka TID for this project, and it is formulating the development plan. (III) Concerning the intended sale of certain properties in Shanghai, as approved at the 34th Meeting of the 8th Board, the Company intended to sell its three houses in Shanghai (Room 908, 1801 and 1807, 5 Lane 25, Huihe Road, Hongkou District) via an equity exchange. So far, the evaluation on these properties has been completed, and the Company is going through the transfer formalities as per the rules governing the transfer of state-owned assets. (IV) About the multi-media subsidiary, as approved at the 37th Meeting of the 8th Board, the Company decided to set up a wholly-owned subsidiary to run the multi-media business covering color TVs, among others. So far, Shenzhen Konka Electronics Technology Co., Ltd. has been officially set up. (V) As for the Yibin-located Konka Intelligent Terminal High-Tech Industrial Park project, as approved at the 37th Meeting of the 8th Board, the Company intended to establish the said industrial park at Yibin Lingang Economic and Technological Development Zone and relocate its intelligent terminal business including mobile phones to this industrial park. So far, the Company has established a subsidiary for this project and is waiting for the local government to put out the project land for bids. Summary of significant event Disclosure date Index to related announcement Dongguan Plant Renovation Project and New Dongguan Plant March 11, 2017 http://www.cninfo.com.cn Project Announcement on Completion of Transfer of Units of Qingsong Venture Capital Fund with Industrial and Commercial March 31, 2018 http://www.cninfo.com.cn Administration Announcement on Establishment of Business Combination Fund April 18, 2018 http://www.cninfo.com.cn Announcement on Increased Investment in Sanjiang Properties April 18, 2018 http://www.cninfo.com.cn and Related-Party Transaction Rising therefrom 8 Konka Group Co., Ltd. First Quarter Report 2018 III Commitments that the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company and Other Commitment Makers, Failed to Fulfill on Time during Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. IV Operating Result Forecast for January-June 2018 Warning of a forecast loss on or a forecast significant year-over-year change in net income for January-June 2018, as well as explanation of why: □ Applicable √ Not applicable V Securities Investments √ Applicable □ Not applicable Nam Opening Closing Variety Symbol Initial Opening Closing Gain/loss Closing e of holding holding in Accountin Sourc book of of investment holding holding Reporting secur percenta percenta value g title e Period security security cost (RMB) (share) (share) (RMB) (RMB) ity ge ge Available-f Initial ZXF or-sale public Stock 002915 1,459.61 227 0.00% 0 0.00% 0.00 6,893.99 C financial offeri asset ngs KCX Ditto 300730 1,513.16 181 0.00% 0 0.00% 0.00 6,769.40 Ditto Ditto X DSX Ditto 002920 12,537.88 614 0.00% 0 0.00% 0.00 13,882.54 Ditto Ditto W MCJ Ditto 002919 1,406.72 112 0.00% 0 0.00% 0.00 3,308.48 Ditto Ditto K Ditto 002922 YGE 3,462.39 279 0.00% 0 0.00% 0.00 6,004.08 Ditto Ditto GHK Ditto 300735 5,064.93 507 0.00% 0 0.00% 0.00 9,702.91 Ditto Ditto J PYH Ditto 300664 5,026.08 0 0.00% 0 0.00% 0.00 8,642.82 Ditto Ditto B RDG Ditto 002923 3,129.84 0 0.00% 0 0.00% 0.00 5,650.64 Ditto Ditto F ZSK Ditto 300684 1,376.00 172 0.00% 0 0.00% 0.00 8,307.60 Ditto Ditto J XLD Ditto 300733 5,160.00 0 0.00% 0 0.00% 0.00 6,840.00 Ditto Ditto L YQK Ditto 002925 13,095.00 0 0.00% 0 0.00% 0.00 34,629.00 Ditto Ditto J 9 Konka Group Co., Ltd. First Quarter Report 2018 Other securities investments 0.00 0 -- 0 -- 0.00 0.00 -- -- held at period-end 110,631.4 Total 53,231.61 2,092 -- 0 -- 0.00 -- -- 6 Disclosure date of announcement on Board’s N/A consent for securities investment Disclosure date of announcement on shareholders’ N/A meeting’s consent for securities investment (if any) VI Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB’0,000 (in RMB ten thousand) Capital source for derivative U.S. dollar financings investment Legal matters involved (if N/A applicable) Disclosure date of board announcement approving derivative May 24, 2014 investment (if any) Disclosure date of shareholders’ meeting announcement approving June 10, 2014 derivative investment (if any) We engage in forward forex transactions to reduce the currency risk when securing Analysis of risks and control foreign-currency financing. This is very needed in our routine operation and is in measures associated with derivative compliance with the applicable laws and regulations. We have formulated the investments held in Reporting Management Rules of Konka Group Co., Ltd. for Investment In Derivative Financial Period (including but not limited to Instruments, making clear the relevant consideration and approval procedure, risk control, market risk, liquidity risk, credit etc.. We always sign forward forex contracts with large banks such as the Bank of China, risk, operational risk, legal risk, which operate steadily and have good credit standing, which could help prevent loss on etc.) forward forex contracts due to bank failure. How we usually measure the fair value of derivative financial instruments: Based on the Changes in market prices or fair forward forex sales and purchase contracts that are signed between the Company and value of derivative investments in banks and have not expired in a Reporting Period, we recognize the differences between Reporting Period (fair value the quotations for these contracts on the balance sheet dates provided by the banks and the analysis should include contractual prices as transactional financial assets or liabilities, and the profit/loss on fair measurement method and related value changes is recognized accordingly. Because these contracts have locked in exchange assumptions and parameters) rates, no changes will occur when comparing the fair value on signing dates with that on 10 Konka Group Co., Ltd. First Quarter Report 2018 delivery dates. Material changes in accounting policies and specific accounting principles adopted for derivative No material changes investments in Reporting Period compared to last reporting period It is considered necessary for the Company to lock in foreign-currency financing costs Opinion of independent directors through financial instruments, because it could effectively reduce the currency risk when on derivative investments and risk securing foreign-currency financing. The Company has formulated the internal control control mechanism for investment in derivative financial instruments, and the relevant risk control measures that the Company has taken are considered effective. Unit: RMB’0,000 (in RMB ten thousand) Type of derivative Opening Closing Gain/loss in Closing investment amount as a percentage of financial contractual contractual Reporting Period the Company’s closing net asset value instrument amount amount Forward forex 224,712.77 85,319.52 2,133.33 10.59% contract VII Visits Paid to the Company for Purposes of Research, Communication, Interview, etc. during Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. VIII Irregularities in Provision of Guarantees for External Parties □ Applicable √ Not applicable No such cases in the Reporting Period. IX Occupation of the Company’s Money by Its Controlling Shareholder or Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 11 Konka Group Co., Ltd. First Quarter Report 2018 Part IV Financial Statements I Financial Statements 1. Consolidated Balance Sheet Prepared by Konka Group Co., Ltd. March 31, 2018 Unit: RMB Item March 31, 2018 December 31, 2017 Current assets: Monetary assets 2,117,778,435.95 3,212,044,851.08 Settlement reserve Interbank loans granted Financial assets at fair value through profit or loss 717,258.83 296,799.53 Derivative financial assets Notes receivable 5,055,795,872.09 5,178,668,988.23 Accounts receivable 4,250,342,804.16 3,443,095,947.26 Prepayments 535,176,019.76 467,123,091.74 Premiums receivable Reinsurance receivables Receivable reinsurance contract reserve Interest receivable 1,372,365.15 1,813,256.77 Dividends receivable Other receivables 272,036,785.37 182,405,099.39 Financial assets purchased under resale agreements Inventories 4,579,475,103.24 4,690,363,565.53 Assets classified as held for sale Current portion of non-current assets Other current assets 1,988,929,615.46 1,715,326,868.81 Total current assets 18,801,624,260.01 18,891,138,468.34 Non-current assets: Loans and advances to customers Available-for-sale financial assets 692,112,236.33 712,170,399.09 12 Konka Group Co., Ltd. First Quarter Report 2018 Held-to-maturity investments Long-term receivables Long-term equity investments 1,335,317,343.74 1,319,987,343.74 Investment property 215,047,811.42 216,455,629.99 Property, plant and equipment 1,589,036,269.37 1,587,170,348.35 Construction in progress 140,555,936.41 135,863,821.01 Engineering materials Proceeds from disposal of property, plant and equipment Productive living assets Oil and gas assets Intangible assets 203,993,082.56 205,057,773.69 R&D expense Goodwill 3,597,657.15 3,597,657.15 Long-term prepaid expense 154,564,404.30 150,060,937.30 Deferred income tax assets 337,948,558.46 307,942,263.12 Other non-current assets 28,167,948.00 29,290,828.00 Total non-current assets 4,700,341,247.74 4,667,597,001.44 Total assets 23,501,965,507.75 23,558,735,469.78 Current liabilities: Short-term borrowings 7,094,776,142.17 6,927,472,037.35 Borrowings from central bank Customer deposits and deposits from banks and other financial institutions Interbank loans obtained Financial liabilities at fair value through profit or loss 13,760,747.13 47,482,470.50 Derivative financial liabilities Notes payable 568,225,276.62 541,175,312.09 Accounts payable 3,323,036,647.61 3,612,216,266.59 Advances from customers 710,996,014.05 640,510,784.17 Financial assets sold under repurchase agreements Handling charges and commissions payable Payroll payable 193,833,901.36 291,370,297.67 Taxes payable 1,278,332,348.68 1,326,569,094.53 Interest payable 34,606,973.14 35,723,963.94 Dividends payable 13 Konka Group Co., Ltd. First Quarter Report 2018 Other payables 1,626,459,597.43 1,608,359,305.87 Reinsurance payables Insurance contract reserve Payables for acting trading of securities Payables for underwriting of securities Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities 394,871.76 374,358.99 Other current liabilities Total current liabilities 14,844,422,519.95 15,031,253,891.70 Non-current liabilities: Long-term borrowings 166,000,000.00 167,000,000.00 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables 41,025.69 61,538.46 Long-term payroll payable 12,312,017.04 13,361,821.86 Specific payables Provisions 1,552,310.49 6,181,865.10 Deferred income 134,208,522.11 130,049,911.87 Deferred income tax liabilities 26,044,725.18 12,636,633.40 Other non-current liabilities Total non-current liabilities 340,158,600.51 329,291,770.69 Total liabilities 15,184,581,120.46 15,360,545,662.39 Owners’ equity: Share capital 2,407,945,408.00 2,407,945,408.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 104,732,242.30 104,732,242.30 Less: Treasury shares Other comprehensive income 13,571,583.47 3,697,458.95 Specific reserve Surplus reserves 1,217,644,874.79 1,217,644,874.79 General reserve 14 Konka Group Co., Ltd. First Quarter Report 2018 Retained earnings 4,315,883,789.97 4,260,125,492.57 Total equity attributable to owners of Parent Company 8,059,777,898.53 7,994,145,476.61 Non-controlling interests 257,606,488.76 204,044,330.78 Total owners’ equity 8,317,384,387.29 8,198,189,807.39 Total liabilities and owners’ equity 23,501,965,507.75 23,558,735,469.78 Legal representative: Liu Fengxi CFO: Li Chunlei Head of the financial department: Feng Junxiu 2. Parent Company Balance Sheet Unit: RMB Item March 31, 2018 December 31, 2017 Current assets: Monetary assets 734,187,293.95 1,760,838,390.83 Financial assets at fair value through profit or loss 717,258.83 296,799.53 Derivative financial assets Notes receivable 2,816,719,863.12 2,864,064,309.99 Accounts receivable 5,559,277,595.37 4,732,153,992.25 Prepayments 1,394,806,157.68 1,066,260,182.37 Interest receivable 57,364,215.13 23,894,771.88 Dividends receivable 203,670,000.00 2,690,276.72 Other receivables 4,640,090,018.36 4,314,882,334.26 Inventories 1,657,710,511.67 2,090,697,937.23 Assets classified as held for sale Current portion of non-current assets 100,000,000.00 100,000,000.00 Other current assets 1,662,409,701.81 1,547,454,872.74 Total current assets 18,826,952,615.92 18,503,233,867.80 Non-current assets: Available-for-sale financial assets 562,612,236.33 562,612,236.33 Held-to-maturity investments Long-term receivables Long-term equity investments 2,868,044,424.45 2,649,074,424.45 Investment property 215,047,811.42 216,455,629.99 Property, plant and equipment 475,419,199.00 482,020,892.58 Construction in progress 112,209,457.15 79,927,345.88 Engineering materials 15 Konka Group Co., Ltd. First Quarter Report 2018 Proceeds from disposal of property, plant and equipment Productive living assets Oil and gas assets Intangible assets 91,902,482.16 91,718,400.70 R&D expense Goodwill Long-term prepaid expense 73,730,479.55 78,305,555.97 Deferred income tax assets 299,354,801.03 279,324,511.96 Other non-current assets 20,000,000.00 20,000,000.00 Total non-current assets 4,718,320,891.09 4,459,438,997.86 Total assets 23,545,273,507.01 22,962,672,865.66 Current liabilities: Short-term borrowings 3,436,156,337.31 3,269,730,888.60 Financial liabilities at fair value through profit or loss 13,760,747.13 47,482,470.50 Derivative financial liabilities Notes payable 2,068,677,122.84 2,394,426,158.76 Accounts payable 6,756,231,381.01 6,167,204,323.22 Advances from customers 596,815,815.61 601,036,147.76 Payroll payable 117,014,504.66 163,066,135.71 Taxes payable 1,061,133,669.37 1,070,771,570.12 Interest payable 48,578,589.94 50,336,913.53 Dividends payable Other payables 1,980,154,534.60 1,868,073,013.59 Liabilities directly associated with assets classified as held for sale Current portion of non-current liabilities Other current liabilities Total current liabilities 16,078,522,702.47 15,632,127,621.79 Non-current liabilities: Long-term borrowings 166,000,000.00 167,000,000.00 Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term payroll payable 16 Konka Group Co., Ltd. First Quarter Report 2018 Specific payables Provisions 1,552,310.49 6,181,865.10 Deferred income 91,099,996.06 94,590,560.82 Deferred income tax liabilities Other non-current liabilities Total non-current liabilities 258,652,306.55 267,772,425.92 Total liabilities 16,337,175,009.02 15,899,900,047.71 Owners’ equity: Share capital 2,407,945,408.00 2,407,945,408.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserves 111,525,163.22 111,525,163.22 Less: Treasury shares Other comprehensive income -1,970,304.62 -1,970,304.62 Specific reserve Surplus reserves 1,217,644,874.79 1,217,644,874.79 Retained earnings 3,472,953,356.60 3,327,627,676.56 Total owners’ equity 7,208,098,497.99 7,062,772,817.95 Total liabilities and owners’ equity 23,545,273,507.01 22,962,672,865.66 3. Consolidated Income Statement Unit: RMB Item January-March 2018 January-March 2017 1. Operating revenue 7,773,238,729.83 4,686,318,957.34 Including: Sales revenue 7,773,238,729.83 4,686,318,957.34 Interest revenue Premium revenue Handling charge and commission revenue 2. Cost of operating revenue 7,882,064,997.46 4,733,743,173.50 Including: Cost of sales 7,144,813,360.27 4,023,149,407.98 Interest expense Handling charge and commission expense Surrenders Net claims paid 17 Konka Group Co., Ltd. First Quarter Report 2018 Net amount provided as insurance contract reserve Expenditure on policy dividends Reinsurance premium expense Taxes and surtaxes 13,589,602.99 18,889,210.59 Selling expense 515,116,761.90 518,071,670.57 Administrative expense 162,232,118.05 135,856,678.53 Finance costs 61,086,438.88 42,775,464.29 Asset impairment losses -14,773,284.63 -4,999,258.46 Add: Gain on changes in fair value (“-” for loss) 34,142,182.67 -69,332,778.97 Investment income (“-” for loss) 36,786,042.34 34,979,227.70 Including: Share of profit or loss of joint ventures and 6,970,000.00 associates Foreign exchange gain (“-” for loss) Asset disposal income (“-” for loss) Other income 79,427,673.98 - 3. Operating income (“-” for loss) 41,529,631.36 -81,777,767.43 Add: Non-operating revenue 84,351,129.33 113,572,905.33 Less: Non-operating expense 2,031,498.28 767,810.90 4. Pretax income (“-” for loss) 123,849,262.41 31,027,327.00 Less: Income tax expense 19,428,807.03 5,067,406.90 5. Net income (“-” for net loss) 104,420,455.38 25,959,920.10 5.1 Net income from continuing operations (“-” for net loss) 5.2 Net income from discontinued operations (“-” for net loss) Attributable to owners of Parent Company 55,758,297.40 26,245,353.83 Attributable to non-controlling interests 48,662,157.98 -285,433.73 6. Other comprehensive income, net of tax 9,213,157.17 2,713,427.50 Attributable to owners of Parent Company 9,874,124.52 2,650,263.36 6.1 Items that will not be reclassified to profit or loss 6.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 6.1.2 Share of other comprehensive income of investees that will not be reclassified to profit or loss under equity method 6.2 Items that may subsequently be reclassified to profit or loss 9,874,124.52 2,650,263.36 6.2.1 Share of other comprehensive income of investees that will be reclassified to profit or loss under equity method 6.2.2 Gains/Losses on changes in fair value of -31,342.08 18 Konka Group Co., Ltd. First Quarter Report 2018 available-for-sale financial assets 6.2.3 Gains/Losses arising from reclassification of held-to-maturity investments to available-for-sale financial assets 6.2.4 Effective gains/losses on cash flow hedges 6.2.5 Differences arising from translation of foreign 9,905,466.60 2,650,263.36 currency-denominated financial statements 6.2.6 Other Attributable to non-controlling interests -660,967.35 63,164.14 7. Total comprehensive income 113,633,612.55 28,673,347.60 Attributable to owners of Parent Company 65,632,421.92 28,895,617.19 Attributable to non-controlling interests 48,001,190.63 -222,269.59 8. Earnings per share 8.1 Basic earnings per share 0.0232 0.0109 8.2 Diluted earnings per share 0.0232 0.0109 Legal representative: Liu Fengxi CFO: Li Chunlei Head of the financial department: Feng Junxiu 4. Parent Company Income Statement Unit: RMB Item January-March 2018 January-March 2017 1. Sales revenue 3,669,669,375.96 3,528,146,131.01 Less: Cost of sales 3,269,110,540.85 3,096,777,598.35 Taxes and surtaxes 7,177,383.09 5,965,647.75 Selling expense 378,868,998.55 384,384,952.78 Administrative expense 96,348,524.41 97,836,429.53 Finance costs 92,033,331.44 100,233,983.39 Asset impairment losses Add: Gain on changes in fair value (“-” for loss) 34,142,182.67 -34,248,996.77 Investment income (“-” for loss) 222,948,489.00 46,382,940.03 Including: Share of profit or loss of joint ventures and 6,970,000.00 associates Asset disposal income (“-” for loss) Other income 29,928,292.31 - 2. Operating income (“-” for loss) 113,149,561.60 -144,918,537.53 Add: Non-operating revenue 13,919,212.26 58,888,782.88 Less: Non-operating expense 1,773,382.89 465,857.89 3. Pretax income (“-” for loss) 125,295,390.97 -86,495,612.54 19 Konka Group Co., Ltd. First Quarter Report 2018 Less: Income tax expense -20,030,289.07 -21,258,680.23 4. Net income (“-” for net loss) 145,325,680.04 -65,236,932.31 4.1 Net income from continuing operations (“-” for net loss) 4.2 Net income from discontinued operations (“-” for net loss) 5. Other comprehensive income, net of tax 5,222,526.42 5.1 Items that will not be reclassified to profit or loss 5.1.1 Changes in net liabilities or assets caused by remeasurements on defined benefit pension schemes 5.1.2 Share of other comprehensive income of investees that will not be reclassified into profit or loss under equity method 5.2 Items that may subsequently be reclassified to profit or loss 5,222,526.42 5.2.1 Share of other comprehensive income of investees that will be reclassified into profit or loss under equity method 5.2.2 Gains/Losses on changes in fair value of available-for-sale 4,296,185.76 financial assets 5.2.3 Gains/Losses arising from reclassification of held-to-maturity investments to available-for-sale financial assets 5.2.4 Effective gains/losses on cash flow hedges 5.2.5 Differences arising from translation of foreign 926,340.66 currency-denominated financial statements 5.2.6 Other 6. Total comprehensive income 150,548,206.46 -65,236,932.31 7. Earnings per share 7.1 Basic earnings per share 7.2 Diluted earnings per share 5. Consolidated Cash Flow Statement Unit: RMB Item January-March 2018 January-March 2017 1. Cash generated by or used in operating activities: Proceeds from sale of commodities and rendering of services 5,754,785,966.74 3,504,876,874.27 Net increase in customer deposits and deposits from banks and other financial institutions Net increase in loans from central bank Net increase in loans from other financial institutions Premiums received on original insurance contracts Net proceeds from reinsurance Net increase in deposits and investments of policy holders 20 Konka Group Co., Ltd. First Quarter Report 2018 Net increase in proceeds from disposal of financial assets at fair value through profit or loss Interest, handling charges and commissions received Net increase in interbank loans obtained Net increase in proceeds from repurchase transactions Tax rebates 168,573,547.32 102,339,410.87 Cash generated by other operating activities 172,592,473.35 118,039,119.57 Subtotal of cash generated by operating activities 6,095,951,987.41 3,725,255,404.71 Payments for commodities and services 6,072,157,862.54 4,440,141,644.59 Net increase in loans and advances to customers Net increase in deposits in central bank and in interbank loans granted Payments for claims on original insurance contracts Interest, handling charges and commissions paid Policy dividends paid Cash paid to and for employees 481,603,150.56 458,532,563.30 Taxes paid 201,309,910.91 135,715,221.18 Cash used in other operating activities 360,246,580.12 320,303,048.58 Subtotal of cash used in operating activities 7,115,317,504.13 5,354,692,477.65 Net cash flows from operating activities -1,019,365,516.72 -1,629,437,072.94 2. Cash generated by or used in investing activities: Proceeds from disinvestments 37,303,231.61 112,806.75 Investment income 27,461,877.60 30,385,376.69 Net proceeds from disposal of property, plant and equipment, 26,132.00 78,346,069.28 intangible assets and other long-lived assets Net proceeds from disposal of subsidiaries or other business units Cash generated by other investing activities 420,950,000.00 557,451,449.68 Subtotal of cash generated by investing activities 485,741,241.21 666,295,702.40 Payments for acquisition of property, plant and equipment, 87,522,934.00 73,620,997.55 intangible assets and other long-lived assets Payments for investments 8,378,256.00 4,157,113.94 Net increase in pledged loans granted Net payments for acquisition of subsidiaries and other business units Cash used in other investing activities 623,480,000.00 285,575,000.00 Subtotal of cash used in investing activities 719,381,190.00 363,353,111.49 21 Konka Group Co., Ltd. First Quarter Report 2018 Net cash flows from investing activities -233,639,948.79 302,942,590.91 3. Cash generated by or used in financing activities: Capital contributions received 26,400,000.00 265,000.00 Including: Capital contributions by non-controlling interests to 26,400,000.00 265,000.00 subsidiaries Increase in borrowings obtained 2,430,850,602.39 2,238,876,860.00 Net proceeds from issuance of bonds Cash generated by other financing activities 444,080,082.06 Subtotal of cash generated by financing activities 2,457,250,602.39 2,683,221,942.06 Repayment of borrowings 2,184,187,298.05 1,143,869,292.69 Payments for interest and dividends 86,485,560.15 105,020,297.25 Including: Dividends paid by subsidiaries to non-controlling 672,569.18 461,972.51 interests Cash used in other financing activities 318,701.97 Subtotal of cash used in financing activities 2,270,672,858.20 1,249,208,291.91 Net cash flows from financing activities 186,577,744.19 1,434,013,650.15 4. Effect of foreign exchange rate changes on cash and cash -42,957,026.83 5,263,241.18 equivalents 5. Net increase in cash and cash equivalents -1,109,384,748.15 112,782,409.30 Add: Cash and cash equivalents, beginning of the period 3,097,899,703.76 2,020,902,945.14 6. Cash and cash equivalents, end of the period 1,988,514,955.61 2,133,685,354.44 6. Parent Company Cash Flow Statement Unit: RMB Item January-March 2018 January-March 2017 1. Cash generated by or used in operating activities: Proceeds from sale of commodities and rendering of services 4,460,261,836.82 4,295,329,683.99 Tax rebates 49,651,754.59 26,891,931.97 Cash generated by other operating activities 400,528,693.60 707,878,209.00 Subtotal of cash generated by operating activities 4,910,442,285.01 5,030,099,824.96 Payments for commodities and services 4,046,918,162.79 3,920,920,891.18 Cash paid to and for employees 308,420,198.90 276,264,044.77 Taxes paid 63,378,125.20 46,694,339.02 Cash used in other operating activities 1,120,437,119.07 1,124,083,766.45 Subtotal of cash used in operating activities 5,539,153,605.96 5,367,963,041.42 Net cash flows from operating activities -628,711,320.95 -337,863,216.46 2. Cash generated by or used in investing activities: 22 Konka Group Co., Ltd. First Quarter Report 2018 Proceeds from disinvestments Investment income 33,036,245.41 32,123,053.44 Net proceeds from disposal of property, plant and equipment, 26,132.00 98,058.25 intangible assets and other long-lived assets Net proceeds from disposal of subsidiaries or other business units Cash generated by other investing activities 517,743,720.30 557,000,000.00 Subtotal of cash generated by investing activities 550,806,097.71 589,221,111.69 Payments for acquisition of property, plant and equipment, 39,045,066.97 15,173,135.90 intangible assets and other long-lived assets Payments for investments 212,000,000.00 40,000,000.00 Net payments for acquisition of subsidiaries and other business units Cash used in other investing activities 692,763,165.04 333,255,000.00 Subtotal of cash used in investing activities 943,808,232.01 388,428,135.90 Net cash flows from investing activities -393,002,134.30 200,792,975.79 3. Cash generated by or used in financing activities: Capital contributions received Increase in borrowings obtained 763,416,364.16 471,029,374.72 Net proceeds from issuance of bonds Cash generated by other financing activities 141,159,013.75 Subtotal of cash generated by financing activities 763,416,364.16 612,188,388.47 Repayment of borrowings 667,515,069.15 165,708,656.06 Payments for interest and dividends 81,697,528.08 101,133,666.93 Cash used in other financing activities 318,701.97 Sub-total of cash used in financing activities 749,212,597.23 267,161,024.96 Net cash flows from financing activities 14,203,766.93 345,027,363.51 4. Effect of foreign exchange rate changes on cash and cash -19,141,408.56 7,947,240.71 equivalents 5. Net increase in cash and cash equivalents -1,026,651,096.88 215,904,363.55 Add: Cash and cash equivalents, beginning of the period 1,743,269,944.67 973,613,753.40 6. Cash and cash equivalents, end of the period 716,618,847.79 1,189,518,116.95 II Independent Auditor’s Report Indicate by tick mark whether the Q1 financial statements have been audited by an independent auditor. □Yes √ No 23 Konka Group Co., Ltd. First Quarter Report 2018 The Q1 financial statements have not been audited by such an auditor. The Board of Directors Konka Group Co., Ltd. April 27, 2018 24