2017 Interim Report Qingdao Haier Co., Ltd Stock Code: 600690 Short Name: Qingdao Haier Qingdao Haier Co., Ltd 2017 Interim Report Stock Code:600690 INTELLIGENCE CREATES SMART LIFE 1 / 207 2017 Interim Report 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 interim 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. All directors of the Company have attended the Board meeting. III. The interim report is unaudited. 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 interim report is true, accurate and complete. V. Proposal of profit distribution or proposal of capitalizing capital reserves for the reporting period examined and reviewed by the Board Not Applicable 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. 2 / 207 2017 Interim Report Qingdao Haier Co., Ltd VII. Are there any funds held 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 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. 25 August 2017 3 / 207 2017 Interim Report Qingdao Haier Co., Ltd Contents SECTION I DEFINITIONS ............................................................................................................................... 5 SECTION II GENERAL INFORMATION OF THE COMPANY AND FINANCIAL INDICATORS ......... 7 SECTION III SUMMARY OF THE COMPANY’S BUSINESS ....................................................................... 11 SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS ................................................................ 18 SECTION V SIGNIFICANT EVENTS ............................................................................................................ 40 SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS 56 SECTION VII RELEVANT INFORMATION OF PREFERRED SHARES .................................................... 61 SECTION VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT .................................................. 62 SECTION IX RELEVANT INFORMATION ON CORPORATE BONDS .................................................... 63 SECTION X FINANCIAL REPORT ................................................................................................................ 64 SECTION XI DOCUMENTS AVAILABLE FOR INSPECTION.................................................................. 207 4 / 207 2017 Interim Report Qingdao Haier Co., Ltd SECTION I DEFINITIONS Unless otherwise stated in context, the following terms should have the following meanings in this report: refers CSRC China Securities Regulatory Commission to refers SSE Shanghai Stock Exchange to refers China Securities Depository and Clearing Corporation Limited Shanghai CSDCCL to Branch The Company, refers Qingdao Haier Co., Ltd. Qingdao Haier to Four Major refers China Securities Journal, Shanghai Securities News, Securities Times, Securities to Securities Daily Newspapers KKR & Co. L.P. and its subsidiary. KKR & Co. L.P., is a limited partnership KKR refers incorporated and existed in accordance with the laws of the state of Delaware, (GROUP) to USA. KKR & Co. L.P. is listed on the New York Stock Exchange (both stock name and stock ticker: KKR). KKR Home Investment S.à.r.l., a wholly owned subsidiary of KKR China KKR, KKR refers Growth Fund L.P., is a project company incorporated in Luxembourg in (Luxembourg) to accordance with international practices for the sole purpose of a strategic investment in the Company. Haier refers Haier Electronics Group Co., Ltd. (a company listed in Hong Kong, stock Electrionics, to code: 01169.HK) 1169 GE Appliances, a company of Qingdao Haier, helps its users to enjoy every beautiful moment of life by producing high-performance household appliances and providing unparalleled services. GE Appliances owns brands refers GEA including Hotpoint, GE, GE Café GE Profile and Monogram; thus enables its to users to have many options. Its products include refrigerator, freezer, cooking products, dishwasher, washing machine, drier, air-conditioner and water filtration system. Fisher & Paykel Appliances Holdings Limited (Chinese Name:斐雪派克) was established in 1934 and is known as the national appliance brand of New Zealand, the global top-level kitchen appliance brand and a famous luxury brand of the world. It has products including ventilator, gas stove, oven, refers FPA dishwasher, microwave oven, freezer, washing machine, clothes dryer, etc. Its to business covers over 50 countries across the world. In 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 5 / 207 2017 Interim Report Qingdao Haier Co., Ltd Limited between Haier Group Corporation and Qingdao Haier Co., Ltd. on 25th of 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 refers research on retail sales in China‘s consumption market for a long term and is CMM to the nationally recognized market research institute in terms of the appliance industry. Euromonitor International, established in 1972, is the worlds‘ leading strategic market information supplier and owns over 40-year experience in refers Euromonitor respect of publishing market reports, commercial reference data and on-line to database. Euromonitor offer data and analysis on thousands of products and services around the world. 6 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 Qingdao Department of Securities of Qingdao Haier Co., Ltd. Haier Co., Ltd. Address Haier Information Industrial Park, Haier Information Industrial Park, No.1 No.1 Haier Road, Qingdao City Haier Road, Qingdao City Tel 0532-88931670 0532-88931670 Fax 0532-88931689 0532-88931689 Email finance@haier.com finance@haier.com III. Summary of Changes in General Information There was no change in the general information of the Company during the reporting period. Details of the latest conditions are set out in the 2016 annual report of the Company. IV. Information Disclosure and Location Designated newspaper for China Securities Journal, Shanghai Securities News, Securities information disclosure Times, Securities Daily Website for publishing interim www.sse.com.cn report as designated by the CSRC Department of Securities of Qingdao Haier Co., Ltd. Company interim report location Haier Information Industrial Park, No.1 Haier Road, Qingdao City Enquiry index of changes during Nil the reporting period V. Information on Shares of the Company Type of Shares Stock Exchange of Stock Short Name Stock Code Stock Short Name Shares Listed Before Variation A shares Shanghai Stock Qingdao Haier 600690 / Exchange 7 / 207 2017 Interim Report Qingdao Haier Co., Ltd VI. Other Related Information □Applicable √Not Applicable VII. Key Accounting Data and Financial Indicators of the Company (I) Key accounting data Unit and Currency: RMB 1H 2017 1H 2016 Increase/decrease Key accounting data (January - June) (January - June) YoY(%) Operating revenue 77,575,749,980.10 48,786,606,924.87 59.01 Net profit attributable to shareholders 4,427,068,404.51 3,315,173,171.70 33.54 of the Company Net profit after deduction of non-recurring profit or loss 3,777,339,454.95 2,765,423,757.22 36.59 attributable to shareholders of the Company Net cash flows from operating 8,393,200,906.18 4,754,556,382.69 76.53 activities Increase/decrease As of June 30,2017 As of June 30,2016 YoY(%) Net assets attributable to 29,343,093,829.35 26,364,725,409.83 11.30 shareholders of the Company Total assets 139,773,857,467.20 131,255,290,325.24 6.49 (II) Key financial indicators 1H 2017 1H 2016 Increase/decrease Key financial indicators (January - June) (January - June) YoY(%) Basic earnings per share (RMB per 0.726 0.543 33.70 share) Diluted earnings per share (RMB per 0.726 0.543 33.70 share) Basic earnings per share after deducting non-recurring profit or loss (RMB per 0.619 0.453 36.64 share) Weighted average return on net assets Increased by 15.47 13.78 (%) 1.69 pct pt Weighted average return on net assets Increased by after deducting non-recurring profit or 13.20 11.49 1.71 pct pt loss (%) Explanation of the key accounting data and financial indicators of the Company √Applicable □Not Applicable 1. In the first half of 2017, contribution to the revenue of the Company by GEA amounted to RMB22.5 billion, contribution to net profit attributable to the parent company amounted to RMB1.16 billion, and contribution to net profit attributable to the parent company after deduction of non-recurring profit or loss amounted to RMB630 million. 8 / 207 2017 Interim Report Qingdao Haier Co., Ltd 2. In the first half of 2017, the original business of the Company (excluding GEA) recorded an increase in revenue of 22.8% over the same period of last year, among which, revenue from white appliances increased by 27.2% by products as follows: revenue from refrigerator and freezer up by 16.5%, revenue from washing machine up by 20.7%, revenue from air conditioner up by 50.5%, and revenue from kitchen&sanitary products up by 22.7%. 3. Since 1 January 2016, the Company has changed the accounting method for Bank of Qingdao Co., Ltd. from available-for-sale financial assets to long-term equity investment and recognized the profit or loss using equity method, while the net profit attributable to the parent company for the first half of 2016 was adjusted upward accordingly. 4. In the first half of 2017, net profit attributable to the parent company after deduction of non-recurring profit or loss increased by 37% as compared with the same period of last year, of which the net profit attributable to the parent company after deduction of non-recurring profit or loss of the original business of the Company (excluding GEA) increased by 21.5% over the same period of last year. VIII. Differences in Accounting Data under Domestic and Overseas Accounting Standards □Applicable √Not Applicable IX. Non-recurring Profit or Loss Items and Amount √Applicable □Not Applicable Unit and Currency: RMB Non-recurring profit or loss items Amount Profit or loss from disposal of non-current assets -418,828.94 Gain from disposal of long-term equity investment 21,438,092.72 Government grants included in current profit or loss, but closely related to the normal operating business, and in compliance with requirements of national 118,072,782.97 policies, continues to be granted with an amount and quantity determined under certain standards In addition to the effective hedging business related to 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 investment gain 425,914,149.99 realized from disposal of trading financial assets, trading financial liabilities and financial assets available for sale Other non-operating net income and expenses except the aforementioned items 162,843,152.93 Minority interests -70,417,181.68 9 / 207 2017 Interim Report Qingdao Haier Co., Ltd Effect of income tax -7,703,218.43 Total 649,728,949.56 X. Others □Applicable √Not Applicable 10 / 207 2017 Interim Report Qingdao Haier Co., Ltd SECTION III SUMMARY OF THE COMPANY’S BUSINESS I. Introduction of Major Business, Operating Mode 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 appliances 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 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 the new era. Through its persistent efforts and the acquisition of the white goods business of Sanyo of Japan and the household appliances business of GE, and entrusted management of the Fisher & Paykel business in New Zealand, the Company has established its competitive edge with integrated capabilities in R&D, manufacturing and marketing at home and abroad. According to retail sales statistics on large home appliances for the year 2016 published by Euromonitor, the world‘s leading independent provider of strategic market research, in 2016, sales of Haier‘s large home appliances represented a global market share of 10.3%, ranked No. 1 in the world for the 8th 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 U+ SmartLife platform (U+ home OS) + industrial internet platform (COSMOPlat): In face of the opportunities and challenges arising in the Internet of Things (―IOT‖) era, the Company has initiated a transformation to the IOT platform and established its leading role in the development of consumer-oriented smart homes, and the development of smart manufacturing for those industrial enterprises through the construction of the U+ SmartLife platform and the industrial internet platform. 11 / 207 2017 Interim Report Qingdao Haier Co., Ltd U+ SmartLife platform: Through the U+ home OS operating system, the Company provides the support to the transformation of household appliances into smart appliances, as well as the transition of household appliances into internet appliances, and realizes the interconnection between things, the interconnection between humans and things, as well as the interconnection among various services through the interconnection of big data, cloud computing and service resources of third-parties, thus creating a complete ecosystem and providing consumers with a full scene experience of smart life. Industrial Internet Platform (COSMOPlat): As the original ground-breaking project in China, Haier‘s global-leading industrial internet platform with independent intellectual property rights was built on its models developed from interconnected factories, as well as best practices in digitalization and product formation. This platform, combined with existing capabilities such as smart equipment, smart control, mold and Smart Research Institute, will be able to offer comprehensive solutions and value-added services enabled by the combination of software and hardware as well as the mix of virtual and real factors for the transformation and upgrading from mass manufacturing to mass customization for enterprises. (II) Industry Review In the first half of 2017, the domestic macro economy operated stable, and the stable trend of the exchange rate of Renminbi strengthened the market confidence. In respect of the cost, the price of mass raw materials remained high and put pressure on profits. In respect of demand, the domestic market of white appliances witnessed an increasing trend while the performance of each sub-industry faced a different situation: ① affected by factors such as high temperature weather, growth of real estate sector, improvement of rural penetration rate, the demand for air conditioners increased rapidly. According to data released by CMM, retail sales and retail volumes increased by 26.3% and 31.9%, respectively, in the first half of the year; ② demand for refrigerators was inadequate: retail sales and retail volumes increased by 1.7% and 4.8%, respectively; ③ demand for washing machines grew steadily: retail sales and retail volumes increased by 8.2% and 10.3%, respectively. Domestic demand for kitchenware and sanitary ware grew steadily: retail volumes of water heaters and kitchen & electricity products increased by 8.0% and 14.9%, respectively. Benefiting from the recovery of the global economy, export of household appliances from China grew strongly: according to data released by China Industry Online, 12 / 207 2017 Interim Report Qingdao Haier Co., Ltd export sales of refrigerators, air-conditioners and washing machines increased by 17.2%, 13.2%, 14.4%, respectively, in the first half of the year. As the domestic white appliance market entered a development stage led by the demand of replacement and upgrading, brand, quality, design and technique become the main factors that affect the consumption decisions and consumers are likely to pay the premium of ―good products‖. Consumption upgrading is steadfast: high-capacity, healthy, intellectual and artistic products become more popular, and the average price of products increases steadily; the penetrate rate of smart products improves: according to CMM, the penetration rate of smart white appliances will reach over 20% in 2017. The market favores leading enterprises who put a long term focus on innovation and keep leading the trend and build on comprehensive advantages accumulated in long term competition. Such enterprises will continue to benefit from the upgrading of domestic consumption and market concentration. II. Explanation of Significant Changes of Major Assets of the Company during the Reporting Period √Applicable □ Not Applicable During the reporting period, the proportion of overseas assets of the Company remained stable as compared with the 2016 annual report: Overseas assets amounted to RMB62,732.7948 million, representing 44.9% of the total assets. III. Analysis on Core Competitiveness during the Reporting Period √Applicable □ Not Applicable Since the foundation of the Company in 1984, Haier always adhered to the principle of driving sustainable and healthy development with innovation focusing on the needs of users, and the Company has successfully transformed 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 evolution on development strategy and operating mode, brand, research and development, intelligent manufacturing, development of foreign and domestic markets to achieve competitiveness and adapt to ever-changing conditions. 13 / 207 2017 Interim Report Qingdao Haier Co., Ltd (I) Brand competitiveness According to data published by Euromonitor, Haier has been ranked No. 1 among global large home appliances brands for the 8th consecutive years. In the segments of refrigerators, washing machines, wine cellars, freezers, the Company continues to be ranked 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 global strategic synergies among six brands of household appliances, namely Haier, GE Appliances in the U.S., Fisher & Paykel in New Zealand, AQUA in Japan, Casarte and Leader. Haier has built the largest household appliances industry cluster in the world which covers global market and communities. (II) R&D and technological competitiveness 1. Layout of R&D resources around the world: With its 10 large open R&D centers around the world, Haier has established a global network of resources and users, and 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. At present, Haier held a total of 66 expert seats in IEC and ISO, two international standardization organizations. Haier also held 28 expert seats in the UL standardization organization. Of the 90 proposal for the development of and amendments to international standards put forward by Haier, 43 proposals have been published and implemented. Haier ranks No. 1 among household appliances companies in the PRC in terms of the number of proposals raised. Haier took a leading role in the formulation of first international standards for fresh-keeping capabilities of refrigerators issued by IEC. Its proposal for electricity insulation wall technologies have been incorporated into IEC international standards. Haier has led or participated in the development of national/industrial standards and its amendments with a total of 430, marking the highest level of household appliance companies in China. 3. The number of invention patents accounts for more than 70% of total invention patents. And the network of global patents covers 25 countries and regions, making Haier the leader in household appliances companies in the PRC in terms of the amount of overseas invention patents. Haier has 14 / 207 2017 Interim Report Qingdao Haier Co., Ltd obtained more than one hundred international design awards, and was granted the unique gold award in the China industrial design awards for two consecutive years, demonstrating its industry-leading industrial design. Apart from the 14 National Science and Technology Progress awards, it also obtained the first prize in 2016, which was unprecedented in the household appliances industry. 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 source of innovation to the process of materialization of innovation, 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 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 eight global-leading sample interconnected factories, as well as the interconnected capabilities and ecological system covering the whole process. Such businesses cover refrigerators, washing machines, air-conditioners, water heaters, 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: orders from mass customization in which users are involved in the whole process accounted for up to 16% of the total, and orders from mass customization in which customers are involved accounted for up to 52% of the total, achieved the breakthrough which eliminated or shortened the period of products in the warehouses. In addition, operational efficiency throughout the process has been enhanced. COSMOPlat - China‘s first and global-leading industrial internet platform with independent intellectual property rights was developed from interconnected factories, as well as best practices in digitalization and product formation. 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 15 / 207 2017 Interim Report Qingdao Haier Co., Ltd services featured by the union of software and hardware as well as the mix of virtual and real factors for the transformation and upgrading from mass manufacturing to mass customization for enterprises. (IV) Competitiveness in domestic market 1. Through our diversified channel system, we have achieved full coverage of the 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 networks. With regard to our comprehensive store channel, we have established a number of clubs, such as V58 and V140 Clubs, and maintained close cooperation with major enterprises engaging in regional distribution of household appliances. 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 3.57 million square meters, of which self-owed warehouses was 1.05 million square meters, representing 30% of the total areas, besides, it strengthened its terminal service capacity and continues to make investment in the terminal core network contribution. Through the whole-process visualization system and users‘ timely comment system, Gooday Logistics constantly improves the customers‘ experience, leading presence in the last mile. (V) Competitiveness in overseas market We have been adhering to the strategy of building our own brand independently. The Company has completed the localization layout of a triple network comprising R&D, manufacturing and marketing in the overseas market through self-construction and mergers and acquisition, with overseas capacity up to 20 million units, which helped us gain insight into and meet the needs of local consumers in a short time. The Company has completed its acquisition of GEA a year ago and there is strong complementarity between the two parties in R&D of technologies, market channels, product categories as well as procurement and other aspects. The integration of GEA will promote the realization of synergies for each of the parties involved. 16 / 207 2017 Interim Report Qingdao Haier Co., Ltd Europe 1 R&D 2 Factories 8 Marketing China Region America centers 2 R&D 3 R&D 54 Factories 27 Factories 42 Marketing 1 marketing centers East Asia & center South Asia South-east Asia 1 R&D 2 R&D 8 Factories 14 Factories 2 Marketing 9 Marketing centers centers Middle and Eastern Africa 2 Factories 2 Marketing centers Australia 1 R&D 1 Factory 2 Marketing centers (VI) Cultural competitiveness Credibility culture based on quality and service is the core driver of Haier‘s growth, and is also the essential reason of constant success of Haier. Leveraging on 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 follow the times and continuously improve and challenge itself, so as to always seize development opportunities. The win-win model of combining individual and goal is the assurance of sustainable operation of Haier. In exploring the ―Individual-goal combination, Co-create and Win-win ecosystem‖, Haier endeavors to build a win-win ecosystem based on user value interaction in the next stage of the e-commerce era to make every employee his/her own CEO and realize their own value while creating value for users, so as to achieve a win-win situation, which is critical to parties in the system. 17 / 207 2017 Interim Report Qingdao Haier Co., Ltd SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS I. Discussion and Analysis on Operations The Company adheres to the transformation and upgrading of the globalization development direction, focusing on ―electric appliance leading‖, ―internet appliances leading‖, ―ecological leading‖, maintaining the leading position in respect of business scale, globalized operation, high-end structure, market share, ecological layout and other aspects, to achieve the breakthrough from ―No. 1 in China to the leader of white appliances throughout the world‖, the transformation from ―single brand operation to multi-brands synergy operation‖ and the transition from ―traditional household appliance manufactory to the leader of smart life platform in the internet of things era‖. 18 / 207 2017 Interim Report Qingdao Haier Co., Ltd In the first half of 2017, the Company recorded revenue of RMB77.576 billion, representing an increase of 59.01%, of which overseas revenue amounted to RMB35.083 billion, accounting for 45%. Revenue of self-owned brands of global household appliance business accounts for approximately 100%; recorded net profit attributable to the parent company amounted to RMB4.427 billion, representing an increase of 33.54%. Casarte, the high-end brand, recorded an increase in revenue of 46%. Market share of the whole product lineup improved. ① Refrigerators, washing machines, water heaters expanded their leadership, with market share of domestic retail sales from January to June increasing by 3.12, 2.04 and 1.63 percentage points, respectively, ranking No. 1 in each industry in terms of market share; ② household air-conditioners, range hoods, cookers and other key growth businesses grew steadily, with market share of retail sales increasing by 0.42, 0.7 and 0.76 percentage points, respectively. Intelligent air conditioner of the Company accounted for 33.5% of total, ranking No.1 in the industry. (I) Continued Introduction of Original Products, Leading the Industry Trend Each industry of the Company provides consumers with solutions for quality life by building on the global top 10 R&D centers where the Company has first class resources and focuses on the R&D of original technology, leading the industry trend through continuing to promote product innovation. Refrigerator/freezer business: The listing of F+ wholly-new MSA oxygen sensor freshness refrigerator, embedded infrared thermostat refrigerator, whole space freshness refrigerator and other products meet the market demand of super-large volume, premium classification storage, whole space freshness and household integration. F+ wholly-new MSA oxygen sensor freshness refrigerator combines the advantages of super-large volumes of French refrigerators and premium classification storage of T-type refrigerators. The MSA oxygen sensor and freshness technology achieves prolonged freshness for double the time while the nutrition loss is lower than 1/10 of ordinary refrigerators; Haier whole-space freshness refrigerators enlarge the fresh-maintaining space to the freezing compartment, achieving separated storage of dry and wet products, freezing the original taste and flavor. VDE (Verband Deutscher Elektrotechniker) awarded the first worldwide VDE fresh-maintaining certificate to Haier refrigerator, which is currently the first brand that passed the 537 strict inspections and obtained a VDE-QTM quality certificate, which is one of the strictest quality certificates throughout the world. 19 / 207 2017 Interim Report Qingdao Haier Co., Ltd The market share of retail sales of refrigerators in the domestic market for the first half of the year was 30.64%, which is 2.39 times of the No. 2 ranked company; the market share of retail sales in the high-end market of RMB10,000 to RMB15,000 was 35.6% and increased by 11.1 percentage points as compared with the same period last year. Washing machine business: In order to meet the demand for ―healthier, more economical, separate rinsing, large-diameter drum‖ requirements, the Company constantly upgrades the rinsing and care solution through the application of advanced technology to clean water rinsing, smart rinsing, cloth identification and other advanced technologies; and making good products becomes visible through the marketing activities of ―coin challenge‖ and ―egg care washing‖. The ―FabriCare‖ washing machine of Casarte achieved accurate identification of fabric materials, colors of clothes through cloud connection, and achieved smart and healthy washing through the automatic and accurate matching of washing procedures and automatically added suitable detergent. The products are priced at RMB35,999, raising the high-end segment and leading the industry. As the No.1 brand in respect of global rinsing and care solution, the upgrading effect of the washing machine on the business structure of the Company‘s is obvious: leading the industry by differentiation through direct-drive converter drum, revenue of front-loading washing machines increased by 50%; and the share of retail sales in the first half of the year was 29%, increased by 2.04 percentage points as compared with the same period last year, and which is 1.67 times of the No. 2; market share of products priced above RMB10,000 rose from 53% to 65%, increased by 12 percentage points as compared with the same period last year. Household air-conditioner business: benefitting from Haier air-conditioner‘s continuous leading position in terms of technologies such as intelligent self-cleaning, temperature sensing, temperature and humidity self-controlling, as well as the market network, marketing innovation, revenue of the first half of the year increased by over 50%, of which domestic revenue increased by 60%. Sales of household air-conditioners of the Company during January to July this year has exceeded the whole of last year. Global sales in the cold year of 2017 (August 2016 to July 2017) exceeded 10 million sets. In respect of product innovation: ① from cleaning air-conditioner to providing clean air, and from cleaning heat 20 / 207 2017 Interim Report Qingdao Haier Co., Ltd exchanger to automatic inspection and purifying of indoor air. The Company introduced an air-cleaning integrated air-conditioner, which has a purifying capacity of 450 cubic meters/h, reaching professional purifier levels. In the first half of 2017, the share of Haier‘s self-cleaning air-conditioners was 79.9%. ② from refrigeration and heating to human perception: the air-conditioner of Casarte was the first to creat temperature and humidity self-controlling technology to achieve the most comfortable experience through the intelligent adjustment of temperature and humidity. From the healthy and steady air of the Tian Zun air-conditioner to the zoned air of the Casarte series in 2017, the Company realized personalized air supply for different individuals in the same space. Share of sales of products above RMB16,000 during January to July amounted to 39.8%, ranking No. 1 in the industry and achieving a breakthrough in the high-end market. ③ from intelligent control to artificial intelligence: the market share of Haier intelligent air-conditioners was 33.5% in the first half of 2017, ranking No.1 in the industry. Through the establishment of a win-win sharing mechanism with customers, the number of self-owned networks in 2017 realized a rapid increase, which promises a rapid development for future business. In respect of marketing, the Company promoted clean air experience brought by Haier intelligent self-cleaning air-conditioners by digital marketing to strengthen customers‘ attachment to the products. Central air-conditioner business: focusing on “smart energy-saving”, industry segmentation and customization, launching ecological services According to statistics, the energy consumption of central air-conditioners typically account for 40%-60% of the total energy consumption of a building. Aiming at energy-saving of central air-conditioners, the Company provided smart energy-saving solutions for users through cloud services, magnetic suspension, wireless communication and other advanced technology. By realizing magnetic suspension, the Company‘s central air-conditioners continue leading the era and launched the largest refrigerating capacity air-conditioner of the world with 4200 ton of refrigeration and magnetic levitation, which could cover more than 95% of central air-conditioner users, achieving double growth in magnetic suspension through the advantage of saving 50% power‘. 21 / 207 2017 Interim Report Qingdao Haier Co., Ltd Aiming at users‘ energy-saving and upgrading opportunities, the Company launched the exchange of connected machines, to realize the ―exchange of central air-conditioners without impairment‖ by the ―five don‘ts‖ differentiated solution. For heating supply of clean energy, the Company introduced new central air-conditioner products and solutions such as combining air-conditioner with floor heating, two-stage compressive screw machines, heat resource machines, which gained popularity among users; for home users, the Company launched a central air-conditioner with butterfly-wing home-type features, which overturned traditional air supply mode, and the ultrathin design addressed the installation space problem. Product customization was achieved for heat recovery, corrosion resistance and other customized solutions for hotel, railway, industry, etc.. The Company launched central air-conditioner with a ―three-free‖ energy-saving mode with ecological layout and achieved a breakthrough of energy conservation through big data analysis to realize intelligent energy-saving. Market share improves steadily and high-end customization takes the lead: ① market share in the first half of 2017 rose 1.3 percentage points; ② for high-end intelligent energy-saving products, the share of magnetic suspension was 76%; ③ the market share of railway, hotel and other subdivided industries ranked No.1. Kitchenware and sanitary ware business: Water heater business: ① electric water heater: targeting at users‘ demand of ―clean water rinsing‖, ―safe rinsing‖, ―quick heating‖, the Company progressed electric water heater product innovation with the support of core technologies such as ―SMART instantaneous heat cleaning technique‖, ―double-effect scale control and triple-step purification‖, which achieved the effect of saving 90% time and increasing 10 times capacity, effectively addressing the drawback of ―slow heating speed‖; the technique of ―double-effect scale control and triple-step purification‖ controls scale effectively while at the same time purifying the water in three steps, which effectively removes harmful substances such as sediments, rust, residual chlorine, bacteria, etc., sufficiently safeguarding water for users. ② gas water heater: targeting at the requirement of safe and constant temperature, by leveraging aerospace nano-platinum catalytic technology (航天纳米铂金催化技术), the Company‘s gas water heater adopted Nuoco technology (诺客技术) to automatically eliminate carbon monoxide so as to safeguard the safety 22 / 207 2017 Interim Report Qingdao Haier Co., Ltd of bathing; through cross-border cooperation and resource sharing, the Company applied space exploration power line carrier technique (天探测电力载波技术) in the area of gas water heaters to break the industry barrier of space control. Haier‘s water heater products in the first half of the year increased retail price by 23%. The high-end market share improved sharply: electric water heaters from RMB2,800 to RMB4,000, accounted for 27.2%, up by 9 percentage points; gas water heaters above RMB4,000 accounted for 16.6%, up by 9 percentage points compared with the same period last year. Kitchen appliances business: targeting at the portfolio requirement of different kitchen appliances for differentiated home decoration style, the Company integrated the features of global advanced techniques from FPA, GEA, and was enhanced by differentiation, kitting, high-end and intelligence to provide users with a set of smart free-combination solutions to realize the goal of becoming a leader. The Company integrated the GEA technique to launch the five-burner gas stoves, which divided into a heat preservation area, soup-cooking area, stew area, auxiliary heating area, stir frying area and other main kitchen areas, to provide users with more abundant choices for kitchen life. The Company newly established 70 smart kitchen experience centers in the first half of 2017 to propel the transformation towards high-end kitting kitchen appliances. Domestic revenue from kitchen appliances for the first half of 2017 increased by 55%, of which Casarte increased by 79%, which is double the industry‘s average. (II) Domestic market: Focusing on retail, making investments in network, optimizing efficiency and improving structure For more than one year after the commencement of the retail transformation, the Company provided consumers with the best quality and services by focusing on the value of products, upgrading user experience and customer services by focusing on the competitive force in the market, proactively following the development under the consumption upgrading era, through which the Company realized a sharp improvement both in results and quality: revenue from the household appliances business in the 23 / 207 2017 Interim Report Qingdao Haier Co., Ltd PRC during January to June 2017 increased by 28%, the increase of average prices exceeded 10%, and the channel turnaround efficiency improved 15% compared with the same period of last year. During the reporting period, the Company strengthened and expanded the competitive strength of the market system by the following measures. 1. Deepening network layout, promoting a full set of real scene sales mode. ① Comprehensively changing the comprehensive store system and innovating and upgrading the specialty store system to realize meticulous planning and management of the network. A. Copying the mode of comprehensive stores like V58, V140, etc. to ordinary comprehensive stores to realize the breakthrough from one to more stores and to propel the operation of Haier Appliance Park in that channel; B. innovating and upgrading the specialty operation system, planning the network layout based on users‘ life scenes; releasing the new brand position of ―Haier specialty store, a warm neighbor‘ near the user‖, to provide the most professional household appliance solutions and services and to penetrate into the life of the community; conducting standardized network development and operating management to specialty stores of single products such as kitchenware, sanitary ware and air-conditioners. C. putting into operation a full set of real scene sales mode in stores, to accomplish ―from sales of products to full set of products, full set of design, full set of purchase and full set of services based on the household appliance solution customization‖, ―from sales of products to experiential marketing‖, so as to gain trust by experience and attract users with services. ② The e-commerce channel improved its market reputation by increasing medium and high-end products layout, strengthening the formation of the brand internet image, increasing traffic entrances by opening an ecological channel and realizing multi-mode operation, so as to maintain rapid development. Revenue for the first half year increased by 70%. During the event held on 18 June, medium and high-end products of the Company online accounted for 55% and the average price rose by 14%. Retail sales of Haier on Tmall on 18th of June amounted to RMB375 million, accounting for 17.27% of the share. ③ The community economic ecological platform of ―Shunguang micro-store, online store, offline store‖ develops rapidly, which accelerated the proceeding of online-offline (O+O) transformation based on trust. As of the end of June, Shunguang had 450,000 micro-store owners, more than 16,000 associations, and realized the initial connection between online stores (Haier mall), offline stores (13,000 24 / 207 2017 Interim Report Qingdao Haier Co., Ltd Haier stores) and micro-store (450,000 Shunguang micro-store owners). Sales of the Shunguang platform during January to June 2017 exceeded RMB2.1 billion, more than the whole year of 2016. 2. Apply smart cloud stores, Yilihuo, Jushanghui and other internet tools to accomplish the digital transformation for staff, products and fields, improving the operating efficiency. ① Smart cloud stores broke the traditional store-opening mode, lowering the establishing cost and operating cost; this allows to display the full advantage of the Company‘s products through in-scene and precise marketing under the new retail method; the combination of information digitalization and training videos makes the latest information of products reach the terminal store in a timely and accurate way. ② Yilihuo eliminated the information breakpoint between enterprises and customers in towns and enables the information of products to reach customers and users in towns at the quickest speed and the lowest cost, thus accurately capturing the requirement of users. ③ Jushanghui platform provides order forecasting from preparing statements to automatic generation by the system, with the accuracy of order forecasting improved by 28%. 3. Casarte pushed forward the construction of brand, marketing and channel, and entered into the rapid development period; revenue for the first half of the year increased by 46%, becoming the leader in the high-end market. ① By launching the brand promotion strategy of ―Casarte Life‖ and strengthening the recognition of target groups to the Casarte brand, the recommendation conversion rate of Casarte brand reached 73%; ② Casarte focused on accurate marketing and conducted ―Chuangyi in China (创艺中国行)‖, ―Chuangyi Life Show (创艺生活展)‖ and ―Yishu Home (艺墅之家)‖ Casarte experience activities; established ―520 Love Wife Day (520 爱妻日)‖ for Casarte; ③ focusing on the full network and exploring new channels: new users of the network in the first half of the year exceeded 800 families; entering into home building materials channel and capturing front-end market for home decoration; sparing no efforts in the construction of network in tier-three and tier-four markets, the growth of market revenue in this market exceeded 70%. Maintaining advantage in the share of high-end market: the share of Casarte refrigerators over RMB10,000 in the first half of the year was 30.0%, up by 9.5 percentage points, representing an increase of 46.3%; Casarte washing machines of RMB8,000-10,000 accounted for 40.4%, up by 16.2 percentage points; the market share of Casarte air-conditioners over RMB20,000 reached 87.3%. 25 / 207 2017 Interim Report Qingdao Haier Co., Ltd (III) Overseas market: collaboration of globalization, comprehensive development of business. Revenue from overseas markets reached RMB35.083 billion in the first half of 2017, an increase by 150.43% on a year-on-year basis, of which self-owned brands accounted for nearly 100%. Original overseas business (excluding GEA) achieved revenue of RMB12.58 billion, significantly up by 19.7%: of which revenue from South Asia region increased by 47%, revenue from Europe increased by 29%. During the reporting period, the Company approved the following measures to facilitate the business development of overseas markets: 1. Propel the creation of a global procurement, supply chain and R&D platform and accelerate collaboration. ① continue the identification of collaboration opportunities for procurement and project landing: new collaboration projects of procurement in 2017 were valued at US$85.20 million, of which over 92% could be realized. The creation of a big data base for global materials entered the execution stage, and global sharing for procurement data will be addressed, which will also facilitate new collaboration opportunities. ② sharing the superior resources in global manufacturing, transferring 15 best practices in manufacturing, among which 7 were provided by GEA; based on the medium and long term development, each business implemented the best strategic layout for the global supply chain, completed the layout mode and evaluated standards. ③ establishing a sharing mechanism for global intellectual property rights and the global COE (Center of Excellence) solution, allowing an equal sharing system for global R&D information, to accomplish uniform import procedures and engineering language of new products, and to implement collaboration across regions and improving R&D efficiency. 2. GEA performs well, the consolidation effect exceeded expectations. In the first half of 2017, GEA achieved revenue of RMB22.5 billion and net profit of RMB1.16 billion. During the year after the transaction closing in June 2016, GEA successfully completed the first stage in the consolidation plan with the improvement of operating efficiency, collaboration with Haier globally in respect of R&D, global products platform, procurement and supply chain; during the reporting period, GEA focused on the goal of being a leader in the market, propelled the innovation of leading products and the implementation of high profit strategy through the adjustment of organization and mechanism, to lay a solid foundation for the development of the next stage. 26 / 207 2017 Interim Report Qingdao Haier Co., Ltd 3. Integrate global advantageous product resources and optimize the structure. ① Europe market: through third-generation products of Italian refrigerators, including a 521 hinged door refrigerator, T-door refrigerator and other high-end differentiated products, revenue from refrigerator recorded an increase of 43%; the share of Haier refrigerators in the mid and high-end market with three doors or above in Russia reached 25%, ranking No.1; wholly-new air-conditioner products of GEA listed in Italy, targeted at the mid to high-end market. Sales of home air-conditioners in Italy for the first half of the year increased by 24% on a year-on-year basis, and commercial air-conditioners increased by 44% on a year-on-year basis. ②Japan market: sales of mid and high-end washing machines for the first half of the year increased by 98% on a year-on-year basis; ③ Southeast Asia market: the import of glass hinged door refrigerators in the headquarter, and T-type four-door refrigerator, twin drum washing machine, composite machine, self-cleaning air-conditioner and other mid and high-end products, quickly improve the image of terminal brands and products structure. 4. Propelling the layout of local supply chain and efficiency improvement. ① The manufacturing cost of Russian refrigerators was lowered by 20% compared with 2016 by the improvement of efficiency and reduction of material consumption, and the gross profit margin improved by increasing the proportion of local procurement, enhancement of skill and lowering of cost; in May this year, 100,000 refrigerators made in Russia went offline. ② the project of Haier industrial park in India proceeds smoothly and is expected to be put into operation by the end of the year. Categories of products after reaching target output will include products from refrigerators to washing machines, air-conditioners, and water heaters, and the overall output is expected to double. While meeting the market demand from India, such products will be at the same time introduced into the markets of Middle East, Africa, Russia, etc.. (IV) Logistic business continues its sound growth Benefitting from the continuous improvement of online home appliances sales and the high quality service capacity of Gooday Logistics, the e-commerce logistic segment maintained high-speed growth, and revenue increased by 56%. Meanwhile, the e-commerce segment also proactively expanded into large-size industries, such as health devices and entertainment equipment, while health devices maintained a more than three-digit figure growth. 27 / 207 2017 Interim Report Qingdao Haier Co., Ltd Regarding logistics, the e-commerce segment proactively explored and promoted a supply chain integration solution, improved value-added services such as delivering accompanied with installation, reverse logistic, in house maintenance, etc., so as to better serve customer needs, improve customers‘ attachment and strengthen operating efficiency. By leveraging its advantage in the large-size home appliances area and supported by brand order from Yihua Group, Gooday Logistics at the same time proactively expanded terminal network coverage, with revenue from online household segment for the first half of the year increasing over 60%. Gooday Logistics also constantly strengthened the transportation network and arranged intelligent and automatic warehouses so as to erect a standard for the large-size product logistics industry. At present, the total area of warehouses of the Group amounted to 3.57 million square meters, of which the area of self-owned warehouses in aggregate was 1.05 million square meters and self-established warehouses amounted to 30%. (V) U+ focuses on intelligent overall scenario, win-win new ecology and provides the best ecological experience Focusing on U+ SmartLife 3.0 strategy around the themes of ―intelligence, scenario and new ecology‖, the Company established a cloud of thing and cloud brain for the U+ SmartLife platform with natural human-computer interaction and distributed scenario internet appliances to provide users with the best experience. Users in the U+ platform reached 50 million and sales of internet appliances amounted to 4.95 million, increased by 112%. 1. Intelligence: releasing a smart family IoT cloud of things solution, U+cloud chip, offering standard and services output, assisting the transformation and upgrading of traditional enterprises; the UHomeOS operating system-liteOS was released and first applied to air-conditioner; focusing on energy saving and water saving of users, the Company established a data mode that can ―self-perceive habits (习惯自感知)‖, ―self-generate energy-saving strategy (节能策略自生成)‖ and ―self-release control strategy (控制策略自下发)‖ by remote technology as well as self-learning intelligent control technique. As of the end of June, energy savings reached 260,000 KWh. 28 / 207 2017 Interim Report Qingdao Haier Co., Ltd 2. Overall scene: increasing model coverage of internet appliances for the complete set of smart household appliances and increasing the number of smart scenes, the Company is improving the management process of the full life-cycle of smart household appliance products; strengthening the control capacity in the U+APP scene, establishing an open U+engine for accessing a massive amount of internet appliances. Making 180+ intelligent scenes to form multi-screen and scene interconnection. 3. New ecology: With a focus on the strategy for ecological platform, the Company is creating an ecology of smart scenes, achieving sustainable and synergic appreciation of the ecological system, promoting added value to the ecology of scenes. For example, kitchen food ecology will focus on trusted food materials and healthy cooking, breaking the platform construction, and preliminarily establishing the mode of ―one scene, one community, one system and one standard‖, with the weekly repurchase rate of scenes exceeding 20% and monthly ecological revenue increasing 9 times. Smart washing ecology focuses on laundry solutions, such as the establishment of internet of clothes ecological union platform as well as community laundry. (VI) Move forward the construction of COSMOPlat platform, accelerate the transformation of intelligent manufacturing, and meeting the rapid growth of personalized customization requirements. During the reporting period, the Company proactively moved forward the transformation of its internal supply chain: with 8 interconnected factories, the Company promoted the mode of interconnected factory to 108 factories throughout the world, and enriched the interconnected capabilities and ecological system covering the whole process. The Company provides customization for home appliances by virtue of a community economy, moving forward into the mother & baby market, and establishing cross-domain community scene ecology. Creative Convergence, together with each industrial line and the Chinese mother & baby community customization platform, built a ―Magic Mommy College (魔法妈咪学院)‖, and opened a full set of customized home appliances products covering all categories including air, food, washing, which drove the MTD (Mind To Deliver) of the Creative Convergence mode to make continuous contributions. As the sub-platform for home appliance customization on Haier‘s COSMOPlat, ―Creative Convergence‖ has developed into the largest home appliances customization platform in the industry. 29 / 207 2017 Interim Report Qingdao Haier Co., Ltd Propelling the development of a new industry of smart manufacturing: the Company acquired Fisher & Paykel Production Machinery Limited (斐雪派克生产设备有限公司) (the ―PML‖), and consolidated the resources of both parties and established a business platform for intelligent equipment; applied COSMOline, developed by PML, into COSMOPlat to drive its development and promotion. Smart manufacturing solutions of the Company have been adopted by 7 top industries, such as machine and electronics, etc.. II. Development Plan for the Second Half of the Year (I) Industry Outlook In the long run, with the diversification of the consumption structure in the industry, the differentiation of consumption requirements as well as the change of concept brought by the boom of young consumer groups and middle class, the upgrading trend of consumption will be further accelerated. In the short run, the de-stocking in the real estate in the tier three and tier four cities generated profit for the industry. Meanwhile, the continuous high temperature facilitated the digestion of stock in the air-conditioner channel. The significant increase of raw material price in the short term increased enterprises‘ costs, while at the same time accelerated the elimination of the weak. (II) Key Works for the Second Half of the Year The Company will closely capture the upgrading trend and lead the consumption upgrading by the innovation of products; continue strengthen the development of air-conditioner products and kitchen and appliances products while at the same time maintain the leading advantages in washing and water heating industry. Domestic market: the Company will continue to promote the upgrading of channel management mode by virtue of the internet, copied and promoted the scene specific and accurate marketing mode under new retail modes; realize the unity of synergy and market throughout the whole process by focusing on products size and the whole process; and realize the upgrading of scene interaction by the continuous propelling of the 3UP scene channel and further improvement of brand image and terminal experience. The Company will accelerate the expansion of the Casarte network in the second half of the year to achieve the coverage over core stores and further facilitating the transformation of Casarte in high-end retail. 30 / 207 2017 Interim Report Qingdao Haier Co., Ltd Overseas market: by leverage the global multi-brand and triple layout, the Company will open and consolidate global resources, and by focusing on differentiated products, improve the terminal competitiveness; move forward the collaboration of global research and development, products and supply chain, and improve performance. Logistic business: Gooday Logistics will also continously strengthen the terminal services capacity, continue making investments into the terminal core network construction. It is expected that 5,000 image stores will be established in stages to conduct delivery, receipt, on-site impairment and other services, so as to improve the terminal image and user attachment. Meanwhile, Gooday Logistics will constantly improve customer experience through visual systems during the whole process and timely evaluation to lead the last mile. U+business: under the guidelines of the U+ smart homes 3.0 strategy, the Company further upgraded U+ cloud brain, optimized natural interaction experience and improved the family scene and knowledge storage of smart home. Constantly attracting third parties‘ hardware resources and ecological resources through open platform and publicizing customized scenes, improving the overall smart home whole scene interaction experience, to further improve U+ecology. COSMOPlat platform: the Company conducted the digitization and product focus of the Haier interconnected factory mode, and also consolidated Haier‘s existing intelligent equipment, intelligent control, sophisticated mode, institution of industrial intelligence and other capacity to offer comprehensive solutions and value-added services through the combination of software and hardware as well as the mix of virtual and real factors for the transformation and upgrading of smart manufacturing. Mass customization business focuses on user requirement, offering home appliances customization by the community and achieving scene customization. The Company is also engaged in mother & baby and other markets to further accomplish the co-development of community and contextualization. (I) Analysis of principal business 1 Table of changes of selected items in financial statement Unit and Currency: RMB Items Corresponding Current period Change (%) period of last year Operating revenue 77,575,749,980.10 48,786,606,924.87 59.01 Operating cost 54,154,905,833.39 34,675,732,074.42 56.18 31 / 207 2017 Interim Report Qingdao Haier Co., Ltd Taxes and surcharge 345,386,333.3 171,696,918.3 101.16 Sales expense 12,937,515,954.38 6,693,076,335.80 93.30 Administration expenses 4,623,708,396.51 3,543,082,531.68 30.50 Financial expenses 611,677,281.93 125,069,008.47 389.07 Net cash flows generating from 8,393,200,906.18 4,754,556,382.69 76.53 operating activities Net cash flows generating from -2,379,700,543.68 -36,998,768,852.90 93.57 investing activities Net cash flows generating from -383,733,536.99 29,440,960,074.11 -101.30 financing activities Reason for the change in operating revenue: operating revenue increased by 59.01% as compared with the same period of last year, which was mainly due to the growth of the original business of the Company and the revenue of GEA contributed to the Company since the acquisition of GEA. Reason for the change in operating expenses: operating expenses increased by 56.18% as compared with the same period of last year, which was mainly due to increase of cost resulting from the growth of sales and helped by the increase of scale after the acquisition of GEA. Taxes and surcharge increased by 101.16% as compared with the same period of last year, which was mainly due to the consolidation of all relevant taxes during the course of operating activities into the accounting item of taxes and surcharge since 1 May 2016 according to the CAIKUAI No. [2016]22 Value Added Tax Accounting Treatment Regulations issued by the MOF. Reason for the change in selling expenses: selling expenses increased by 93.3% as compared with the corresponding period of last year, which was mainly attributable to the increase of revenue of the Company and 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). Reason for the change in management expenses: management expenses increased by 30.5% as compared with the corresponding period of last year, which was mainly due to the inclusion of the management expenses of GEA (the corresponding period only included the management expenses of GEA during the period from 6 June to 30 June 2016). Reason for the change in financial expenses: financial expenses increased by 389.07% as compared with the corresponding period of last year, which was mainly attributable to the increase of the average balance of borrowings for the period as compared with the corresponding period of last year. Reason for the change in net cash flows from operating activities: net cash flows from operating 32 / 207 2017 Interim Report Qingdao Haier Co., Ltd activities increased by 76.53% as compared with the corresponding period of last year, which was mainly due to the increase of revenue for the period and helped by the strengthening of management of accounts receivables. Reason for the change in net cash flows from investing activities: net cash flows from investing activities decreased by 93.57% as compared with the corresponding period of last year, which was mainly attributable to that the payment for the acquisition of GEA, which was settled in the corresponding period of last year (for the current period: nil). Reason for the change in net cash flows from financing activities: net cash flows from financing activities decreased by 101.3% as compared with the corresponding period of last year, which was mainly attributable to the debt financing for the acquisition of GEA in the corresponding period of last year (for the current period: nil). 2 Others (1) Detailed explanation on material changes in the composition of profit or resources of profit of the Company √Applicable □ Not Applicable 1. Loss from change in fair value decreased by 326.09% compared with the corresponding period of last year, which was mainly attributable to the change in fair value of derivative financial instruments such as future exchange. 2. Other income increased by 100% as compared with the corresponding period of last year, which was mainly attributable to the implementation of the Accounting Standards for Business Enterprises No. 16 - Government grants (2017 Revision) at the time, as request by the MOF during the period. 3. Non-operating income decreased by 32.87% as compared with the corresponding period of last year, which was mainly attributable to the changes of accounting methods in equity investment of Bank of Qingdao in the corresponding period of last year, and the inclusion of the difference between the fair value of the equity investment and the attributable fair value of net identifiable assets of the Bank of Qingdao as determined according to the proportion of shareholding (for the current period: nil). 4. Non-operating expenses increased by 49.74% as compared with the corresponding period of last year, which was mainly attributable to the increase of disposal of non-current assets for the period. 3. Principle operating activities by products Unit and Currency: RMB0‘000 33 / 207 2017 Interim Report Qingdao Haier Co., Ltd Gross Operating Operating Gross profit revenue cost Operating Operating profit margin By product increased/ increased/ revenue cost margin increased/ decreased decreased (%) decreased yoy (%) yoy (%) yoy (%) Air-conditioners 1,632,737 1,112,524 31.86 68.94 67.20 0.71 Refrigerators 2,274,300 1,541,866 32.20 48.49 51.06 -1.15 Kitchenware and 1,316,172 826,701 37.19 163.44 182.77 -4.29 sanitary ware Washing machines 1,384,511 906,228 34.55 59.02 55.63 1.43 Equipment components 148,550 125,477 15.53 18.86 18.51 0.25 Channel integrated services business and 967,993 896,303 7.41 14.37 13.22 0.94 others (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: RMB Percentage of change in Percentage Percentage amount of amount at of amount at from the the end of Amount as at the the end of the Amount as at the end of Items the previous end of the period period over end of last period previous period over total assets period to total assets (%) current (%) period (%) Financial assets at fair value and its change 36,973,157.4 0.03 80,432,384.17 0.06 -54.03 consolidated in profit or loss for the period Short-term borrowing 11,985,795,621.88 8.58 18,165,531,879.15 13.84 -34.02 Financial liabilities at 70,573,461.47 0.05 2,340,213.20 0.00 2,915.69 fair value and its 34 / 207 2017 Interim Report Qingdao Haier Co., Ltd change included in profit or loss for the period Interests payable 76,637,799.03 0.05 30,570,328.66 0.02 150.69 Dividend payable 1,893,922,420.51 0.27 148,690,489.01 0.11 1,173.73 Non-current liabilities due within 1,700,963,280.46 1.22 2,966,808,509.55 2.26 -42.67 one year Other non-current 50,769,391.88 0.04 582,785,069.86 0.44 -91.29 liabilities Capital reserve 315,454,458.52 0.23 83,383,194.51 0.06 278.32 Other explanations 1. Financial assets measured at fair value and its change included in profit or loss for the period decreased by 54.03% as compared with the beginning of the year, which was mainly due to the change in fair value of derivative financial instruments such as forward exchange contracts for the period. 2. Short-term borrowings decreased by 34.02% as compared with the beginning of the year, which was mainly due to the adjustment of the borrowing structure and certain short-term borrowings that were turned into long-term borrowing by the Company. 3. Financial liabilities measured at fair value and its change included in profit or loss increased by 2915.69% as compared with the corresponding period of last year, which was mainly due to the change in fair value of derivative financial instruments such as forward exchange contracts for the period. 4. Interests payable increased by 150.69% as compared with the beginning of the period, which was mainly due to the increase of interest which has been provided but not paid. 5. Dividends payable increased by 1173.73% as compared with the beginning of the period, which was mainly attributable to the increase of dividends which have been provided but not allocated to the Company and subsidiaries. 6. Non-current liabilities due within one year decreased by 42.67% as compared with the beginning of the period, which was mainly due to the conversion of convertible bonds issued in prior years by the subsidiary of the Company during the period. 7. Other non-current liabilities decreased by 91.29% as compared with the beginning of the period, which was mainly attributable to the change in fair value of forward exchange contracts held by the Company for the period. 35 / 207 2017 Interim Report Qingdao Haier Co., Ltd 8. Capital reserve increased by 278.32% as compared with the beginning of the period, which was mainly attributable to the capital increases from minority shareholders of the subsidiary of the Company for the period and the conversion of convertible bonds for the period. 2. Restrictions on major assets at the end of reporting period □Applicable √Not Applicable 3. Other explanations □Applicable √Not Applicable (IV) Analysis on investment 1. Overall analysis on external equity investment √Applicable □ Not Applicable During the reporting period, the external equity investment of the Company amounted to RMB856 million. Percentage of the Amount of Investment Major Name of equity investment Amount operating Remark investees interest of (RMB 100 (RMB 100 activities investees million) million) (%) Manufacturing of automatic For details, please refer to the and customized Announcement on the Transfer of Fisher & intelligent the 100% Equity of Fisher & Paykel equipment and Paykel Production Machinery Production offering 100 Limited by Qingdao Haier Co., Ltd. 3.31 0 Machinery businesses such and Connected Transaction Limited as solutions for disclosed on 21 June 2017 as well (―PML‖) the as relevant announcement of the management Board. system of factories Qingdao Communication For details, please refer to the Haier equipment, Announcement on the Transfer of Multi-media home Certain Equity of Qingdao Haier 20.20 5.25 0 Co., Ltd. (青 appliances, Multi-media Co., Ltd. (青岛海尔多 岛海尔多媒 R&D, sales, 媒体有限公司) by Qingdao Haier 体有限公司) etc. Co., Ltd. and Capital Increase and 36 / 207 2017 Interim Report Qingdao Haier Co., Ltd Connected Transaction as well as relevant announcement of the Board. (1) Significant equity investment √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 Unit: RMB Current Investment Changes in purchase / Initial cost income fair value Abbreviation of Sources of sale during of during the during security funds the investment reporting the reporting reporting period period period Bank of Communications 1,803,769.50 Own funds 531,278.28 (601328) BAILIAN (600827) 154,770.00 Own funds 74,443.32 Eastsoft (300183) 18,713,562.84 Own funds -3,314,348.64 Others 2,358,797.02 Own funds -38,042.01 Forward foreign 13,850,304.84 412,063,845.15 exchange contract (Note) Total 23,030,899.36 13,850,304.84 409,317,176.10 Note: As of 30 June 2017, the aggregate balance of foreign exchange derivative transactions amounted to approximately US$2.8 billion. (V) Material Assets and Equity Disposal □Applicable √Not Applicable 37 / 207 2017 Interim Report Qingdao Haier Co., Ltd (VI) Analysis on Major Controlling Companies √Applicable □ Not Applicable Unit: RMB0‘000 Scope of Total Net Name of company Net Profit business assets assets Production and Haier Electronics Group Co., Ltd. sale of home 3,619,712 2,095,786 145,034 appliances Qingdao Haier Air-Conditioner Air conditioner Electronics Co., Ltd. (青岛海尔空 519,606 335,402 27,777 products 调电子有限公司) Haier US APPLIANCE Holding 4,648,790 1,362,467 91,504 SOLUTIONS, INC. company Note: The financial data of Haier Electronics Group Co., Ltd. (a Hong Kong listed company, stock abbreviation: Haier Electronics, stock code: 1169.HK) is determined in accordance with the accounting standards in the PRC and the accounting policies of the Company. (VII) Information on the Main Structure Controlled by the Company □Applicable √Not Applicable II. Other disclosures (I) Warning and explanation for any prediction of accumulated net loss from the beginning of the year to the end of the next reporting period or substantial change in accumulated net profit as compared to the same period last year □Applicable √Not Applicable (II) 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 goods. In the event of a slowdown in the macro economic growth, which will decrease the purchasing power of consumers, growth of the 38 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 intensified 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, industry inventories rise. A price war can become a strategy of competitors to increase market share in the short term. 3. Risk of rise in cost. Bulk raw materials such as copper, aluminum, steel plate, oil-related plastic particles and foam materials account for a large proportion of the cost of white goods production. Given the noticeable upward trend of prices of bulk raw material in 2017 up to now, the Company may be exposed to more cost pressure if the price of raw materials continues to rise in the future. The freight cost constitutes a larger proportion of the selling expenses and freight cost has risen due to restrictions on ―three excess‖ by the government in the logistics industry. 4. Operating risk in overseas market. The Company has set up a dozen production bases, research and development centers and marketing centers in a number of countries around the world, leading to the continuous rise of the overseas business. As the overseas market is subject to the impact of local political and economic situations, including legal and sovereign system, significant changes of such factors would pose risks to the Company‘s local operation overseas. 5. Risk of fluctuation in foreign currency exchange rate. Significant fluctuations in exchange rates may have an adverse impact on the Company's exports and may also result in an exchange loss and an increase in financial costs. 39 / 207 2017 Interim Report Qingdao Haier Co., Ltd SECTION V SIGNIFICANT EVENTS I. 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 2016 Annual General Meeting of Qingdao Haier Co., Ltd. General Meeting of 28 June 201 (L2017-023) published by the Company on 29 June 2017 Qingdao Haier Co., 7 the website of Shanghai Stock Exchange Ltd (www.sse.com.cn) and the four major securities newspapers Explanation of Shareholders‘ general meeting √Applicable □Not Applicable 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 Chairman Ms. Tan Lixia, presided over the 2016 AGM. The Company had 9 Directors, of whom 4 Director 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 engagements); 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. Ⅱ. Proposal of Profit Distribution or Capitalisation of Capital Reserve (I) Proposal for Interim Profit Distribution and proposal for Capitalisation of Capital Reserve Whether distributed or converted No 40 / 207 2017 Interim Report Qingdao Haier Co., Ltd III. Performance on Undertakings (I) The undertakings made by the ultimate controller, shareholders, related parties, purchasers and the Company and others during or up to the reporting period √Applicable □Not applicable Whether it is Whether there performed Time and is a Background Type Content in a term deadline 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. (武汉海尔电器股份有限公司), Guizhou Eliminate Haier Electronics Co., Ltd. (贵州海尔电器有限公司). With regard to the land and Undertaking the right 27 property required in the operation of Qingdao Haier Air-Conditioner Electronics Co., related to defects in Haier Group September Ltd. (青岛海尔空调电子有限公司) , Hefei Haier Air-conditioning Co., Limited (合肥 YES YES significant land Corporation 2006, long 海尔空调器有限公司), Wuhan Haier Electronics Co., Ltd. (武汉海尔电器股份有限 reorganization property term 公 司 ) (the ―Covenantees‖), Haier Group made an undertaking (the ―2006 and etc. 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. 41 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 suffer 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 Eliminate in comparable market at that time. Haier Group Corporation will assure the right 24 Undertaking Qingdao Haier and its subsidiaries of the constant, stable, free and defects in Haier Group December related to unobstructed use of self-built property and land of the Group. In the event YES YES land Corporation 2013, long refinancing that Qingdao Haier or any of its subsidiaries fails to continue to use property term self-built property according to its own will or in original way due to the and ect 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 subsidiary 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 42 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 Eliminate business effort since 24 December 2013, so as to achieve the legality and the right compliance of the Company and main subsidiaries in terms of land and 24 Qingdao defects in property. For details, please refer to the Announcement of Qingdao Haier December Haier Co., YES YES land Co., Ltd. on the Formation, Current Situation of the Defective Property, 2013, five Ltd. property the Influence on Operation of Issuer Caused by Uncertainty of Ownership, years and etc. 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. Undertaking With regard to its Share Option Incentive Scheme, the Company has related to the Qingdao undertaken not to provide loan or any other kind of financial support to 11 April Share Option Other Haier Co., incentive object in exercising option under the Share Option Incentive 2014, long YES YES Incentive Ltd. Scheme or purchase of restricted shares, including providing guarantee for term Scheme its loan. 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 2020. For more details, please refer to the May Asset Haier Group Announcement of Qingdao Haier Co., Ltd. on the Changes of Funding 2015-June YES YES injection Corporation Commitment (L 2015-015) published on the four major securities 2020 Other newspapers and the website of Shanghai Stock Exchange on 26 May undertakings 2015. Inject the assets of Haier Photoelectric to the Company or dispose such December Asset Haier Group assets through other ways according to the requirements of the domestic 2015-June YES YES injection Corporation supervision before June 2020. For more details, please refer to the 2020 Announcement of Qingdao Haier Co., Ltd. on the Changes of Funding 43 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 Profit Equipment held by Haier Group. The Company signed the Profit forecast Compensation Agreement with Haier Group to forecast the profits December and Haier Group achieved by the aforementioned two companies in 2015 - 2018. If the 2015- YES YES compensa Corporation profits are not reached during the commitment period, the difference part December tion will be made up to the Company by Haier Group in cash. For more 2018 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 44 / 207 2017 Interim Report Qingdao Haier Co., Ltd IV. Appointment and Dismissal of Accounting Firm Information on Appointment and Dismissal of Accounting Firm √Applicable □Not Applicable During the reporting period, the Company considered and approved the resolution on the re-appointment of accounting firm of the 2016 annual general meeting: in order to ensure the smooth implementation of the financial and internal auditing and the continuity of the auditing work in 2017, the Company re-appointed Shandong Hexin Certified Public Accountants (LLP) as the audit institution of the financial report and internal control of 2017, and the audit fees amounted to RMB9.60 million (of which, financial report of RMB7.15 million, internal report of RMB2.45 million). Explanation of change of accounting firm during the auditing period □ Applicable √Not Applicable Description of the Company on the ―non-standard audit report‖ issued by the accounting firm □ Applicable √Not Applicable Description of the Company on the ―non-standard audit report‖ issued by the accounting firm in respect of the financial report in the annual report last year □ Applicable √Not Applicable V. Matters relating to bankruptcy and restructuring □ Applicable √Not Applicable VI. Material litigation and arbitration matters □Material litigation and arbitration matters during the reporting period √ No material litigation and arbitration matters in the reporting period VII. Penalties to the Listed Company and its Directors, Supervisors, Senior Management, Controlling Shareholders, Ultimate Controller, Acquirer and the Status of Rectification □ Applicable √Not Applicable 45 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd VIII. Explanation of the integrity status of the Company and its controlling shareholders and actual controllers during the reporting period □ Applicable √Not Applicable XI. The Company’s equity incentive plan, employee shareholding plan or other employee incentive measures and its influence (I) Matters disclosed in temporary announcement and without any subsequent progress or change √Applicable □ Not Applicable Summary Index for details Cancelation of Exercise/Unlocking of Equity under Phase IV Share Option Incentive Scheme: On 28 For details, please refer to the Announcement April 2017, the 5th meeting of the 9th session of on Arrangement on Cancelation of Board of Directors of the Company reviewed and Exercise/Unlocking of Equity under Phase IV approved the Resolution on Cancelation of Share Option Incentive Scheme of Qingdao Exercise/Unlocking of Retained Equity under Phase Haier Co., Ltd. (L 2017-014) and relevant IV Share Option Incentive Scheme of Qingdao Haier announcement on the resolutions of the board Co., Ltd.. According to which the exercise/unlocking disclosed on 29 April 2017, Announcement on of the equity incentive based on the assessment for Cancellation of Repurchased Restricted Shares the year 2016 was cancelled as the results for the year under the Share Option Incentive Scheme (L 2016 had not reached the condition for 2017-025) disclosed on 19 July 2017. exercise/unlocking. (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 On 27 February 2017, the Company considered and approved relevant resolutions such as the Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft) and its Summary at the 4th meeting of the 9th session of the Board of Directors. The 576 staff who participated in the Stock Ownership Scheme are the directors (excluding independent directors), supervisors, senior management of the Company and regular employees who serve at the Company and 46 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd its subsidiaries and sign employment contracts with the Company or its subsidiaries and receive remuneration from them, together holding RMB266.10 million in the fund. On 29 March 2017, the Company disclosed the Announcement on the Completion of Share Purchase by the Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (《青島海 爾股份有限公司核心員工持股计划之第二期持股计划完成股票购买的公告》), and the Employees Stock Ownership Scheme has been entrusted to Industrial Assets Management Co., Ltd.( 兴证证券资产 管理有限公司), who will establish a directional asset management plan for the Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (―Assets Management Plan‖) for the management. As of 28 March 2017, the Assets Management Plan has purchased an aggregate of 22,820,787.00 shares of the Company, 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 RMB260,768,338.35. The Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme has completed the purchase of shares of the Company. Those shares purchased aforesaid will be locked in accordance with requirement, and the locking period will be 12 months from the date of the disclosure of this announcement, being 29 March 2017 to 28 March 2018. Other incentives □ Applicable √Not Applicable X. Significant Related-Party Transactions (I) Related-Party Transaction from Routine Operation 1. Matter disclosed in temporary announcement and with no subsequent progress or change □ Applicable √Not Applicable 2. Matter disclosed in temporary announcement and with subsequent progress or change √Applicable □ Not Applicable The Company made a forecast on the 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. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. regarding the Anticipation on the Daily 47 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Related-party Transactions for 2017 and relevant announcement on the resolutions of the Board disclosed on 29 April 2017. For the actual implementation of the Related-party transaction of January to June 2017, please refer to ―Note12 – Related Parties and Related-party Transactions‖ under section X - Financial and Accounting Report set out in this regular report. 3. Matter not disclosed in temporary announcement □ Applicable √Not Applicable (Ⅱ) Related-party Transactions Regarding Acquisition or Disposal of Assets or Equity 1. Matters disclosed in temporary announcement without any subsequent progress or change √Applicable □ Not Applicable Summary Index for details Acquisition of equity of PML: in order to further consolidate and expand the Company‘s strengths in the intelligent manufacturing area, facilitate the construction and implementation of the digital platform of the For details, please refer to the COSMOPlat-intelligent manufacturing, the Company purchased Announcement on the Transfer of the the 100% equity of Fisher & Paykel Production Machinery 100% Equity of Fisher & Paykel Limited (斐雪派克生产设备有限公司, ―PML‖) held by Fisher Production Machinery Limited to & Paykel Appliances Limited ( 斐 雪 派 克 电 器 有 限 公 司 , Qingdao Haier Co., Ltd. and ―Fisher & Paykel‖), an overseas subsidiary of Haier Group Connected Transaction disclosed on Corporation, by way of paying cash through overseas 21 June 2017 (L 2017-022). subsidiary. The overseas subsidiary of the Company shall pay US$48.615481 million (equivalent to RMB330.6825 million) to Fisher & Paykel, and the cash consideration will be transferred to PML. Acquisition of equity of multi-media company: in order to For details, please refer to the further facilitate the implementation of Haier U+SmartLife Announcement on the Transfer of strategy, arrange the construction of Haier smart home ecology Certain Equity of Qingdao Haier and further control the entry of the living room with TV as the Multi-media Co., Ltd. (青岛海尔多 carrier, the Company transferred certain equity of Qingdao 媒 体 有 限公 司 ) to Qingdao Haier Haier Multi-media Co., Ltd. (青岛海尔多媒体有限公司) and Co., Ltd. and Capital Increase and contributed part of its new registered capital, which amounted Connected Transaction (L 2017-003). to RMB525 million in total. 2. Matters disclosed in temporary announcement and with subsequent progress or change □ Applicable √Not Applicable 48 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd 3. Matter not disclosed in temporary announcement □ Applicable √Not Applicable 4. If performance agreement is involved, the performance achieved during the reporting period shall be disclosed □ Applicable √Not Applicable (III) Significant related-party transactions of joint external investment 1. Matters disclosed in temporary announcement and without any subsequent progress or change □ Applicable √Not Applicable 2. Matters disclosed in temporary announcement and with subsequent progress or change □ Applicable √Not Applicable 3. Matter not disclosed in temporary announcement □ Applicable √Not Applicable (IV) Amounts due to or from related parties 1. Matters disclosed in temporary announcement and without any subsequent progress or change □ Applicable √Not Applicable 2. Matters disclosed in temporary announcement and with subsequent progress or change □ Applicable √Not Applicable 3. Matter not disclosed in temporary announcement □ Applicable √Not Applicable 49 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd (V) Other significant related-party transactions □ Applicable √Not Applicable (VI) Others □ Applicable √Not Applicable XI. Significant Contracts and their Execution 1 Trusteeship, contracting and leasing √Applicable □ Not Applicable (1) Trusteeship □ Applicable √Not Applicable There was no material custody of the Company during the reporting period. As at the date hereof, the following matters related to entrusted assets as passed at relevant meetings (such as the general meetings of the Company) are within the term thereof: (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 Haier Group and the Company, Haier Group intends to entrust the Company with the management and operation of assets under custody and will pay RMB1 million trust 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 the Company‘s purchase of the color TV business from Haier Group, Qingdao Haier Photoelectric Co., Ltd. and its subsidiaries are still in the transformation and consolidation period and its financial performance fails to reach the expectation of the Company. Therefore, Haier Group is unable to complete the transfer before the above commitment period. Haier Group intends to entrust the 50 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd 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 2 Guarantee √Applicable □ Not Applicable Unit and Currency: RMB External guarantees provided by the Company (excluding guarantees for subsidiaries) Date Relati of onship occurr Wheth Wheth betwee Wheth Overdu Wheth ence Startin Expirat er the er n the Amou Type er the e er there Rel of the g date ion guarant related Guara guaran Secure nt of of guarant amount is a atio guaran of date of ee has party ntor tor and d party guaran guara ee is of the counter nshi tee guarant guarant been guarant the tee ntee overdu guarant -guaran p (date ee ee fulfille ee or listed e ee tee of d not compa agree ny ment) Total amount of guarantee occurred during the reporting period (excluding guarantees for subsidiaries) Total balance of guarantee at the end of the reporting period (A) (excluding guarantees for subsidiaries) Guarantees provided by the Company for subsidiaries Total amount of guarantees for subsidiaries 3,553,542.41 occurred during the reporting period Total balance of guarantees for subsidiaries at 2,295,459.60 the end of the reporting period (B) Total amount of guarantees provided by the Company (including guarantees for subsidiaries) Total guarantee (A + B) 2,295,459.60 Ratio of total amount of guarantees to net 78.23 51 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd assets of the Company (%) Among which: Amount of guarantees for shareholders, actual 0 controllers and their related parties (C) Amount of debt guarantees provided directly or indirectly for the secured party with 2,063,587.55 asset-liability ratio exceeding 70% (D) The amount of total amount of guarantee in 828,304.90 excess of 50% of net assets (E) Total amount of the above three guarantees 2,891,892.45 (C + D + E) Explanation of possibly bearing related None discharge duty for premature guarantees 1. In the year of 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, and the amount of which was equivalent to approximately RMB22.356 billion (note). The balance guaranteed amounted to approximately RMB15.242 billion as at the end of the reporting period. The provision of security had been Explanation of guarantee status reviewed and approved by the Board and the general meeting of shareholders of the Company; 2. In June 2017, the resolution on the security provided to subsidiaries in the year 2017 was passed on the 2016 Annual General Meeting of the Company, according to which, the Company had provided security 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 RMB18.81 billion. As at the end of the reporting period, the balance guaranteed was RMB7.713 billion. Note: The foreign currency quoted in the above statement is calculated at the exchange rate quoted on 30 June 2017. In US dollars, for example, on 30 June 2017, $ 1 = RMB6.77. 3 Other Major Contracts □ Applicable √Not Applicable 52 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd XII. 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 reporting period In the first half of 2017, the Company‘s expenditures on targeted measures in poverty alleviation was approximately RMB11.18 million, which was mainly utilized in the education 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, poverty alleviation through improvement of the health of farmers. 3. Table of statistics of initiatives of targeted measures in poverty alleviation of the Company during the reporting period Unit and Currency: RMB0‘000 Indicators Amount and the status I. General information Among which:1. Funds 1,118 II. Breakdown of the use of funds 1. Overcoming poverty through education 1,118 53 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd 1.1 Amount of investment for the purpose of 1,118 improving the resources of education in poverty-stricken areas 4. Subsequent targeted measures in poverty alleviation plans In the second half of 2017, 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. XIII. Convertible corporation bonds □ Applicable √Not Applicable XIV. Statement on the matters related to the environment protection list of major pollution emission organizations as announced by environment protection authorities and the subsidiaries of such companies □ Applicable √Not Applicable XX. Other explanations on significant events (I). Information, reason and effect of change in accounting policies, accounting estimates and accounting methods as compared with the last accounting period √Applicable □Not Applicable The Chinese Ministry of Finance issued Accounting Standards for Business Enterprises No. 42 – Non-Current Assets Held for Sale, Disposal Groups and Discontinued Operations in 2017 and it has been performed since 28 May 2017, the non-current assets held for sale, disposal groups and discontinuing operation which existed since implementation date are required to be dealt with prospective application; and revised the Accounting Standards for Business Enterprises No. 16 – Government Grants and it has been performed since 12 June 2017, the government grants which existed since 1 January 2017 are required to be dealt with future method; the government grants which existed during the period from 1 January 2017 to implementation date are required to be dealt with this revised accounting standards. 54 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd On 25 August 2017, the Company considered and approved the Resolution on the Change of Accounting Policies by Qingdao Haier Co., Ltd. on the 7th meeting of the 9th session of the Board of Directors, and considered aforesaid matters such as change of accounting policies. (II) Information of material accounting error correction that need the retroactive restatement during the reporting period, the correct amount, reason and its effect □ Applicable √Not Applicable (III) Others □ Applicable √Not Applicable 55 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS I. CHANGES IN SHARES (I) Table of Changes in Shares 1. Table of Changes in Shares During the Reporting period, there is no change in the aggregate amount of shares and the share capital structure. 2. Statement on the changes in shares □ Applicable √Not Applicable 3. Effects of changes in shares occurred during the period after the Reporting period to the semi-annual report period on financial indicators such as earnings per share and net assets per share (if any) √Applicable □ Not Applicable On 28 April 2017, the 5th meeting of 9th session of Board of Directors of the Company reviewed and approved the Resolution on Cancellation of Exercise/Unlocking of Equity under Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. The Company intended to cancel the exercise of the second period stock option in the portion of retained equity and to repurchase and cancel the restricted shares of the second unlocking 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 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. During the Reporting period, the Company achieved net profit attributable to owners of the Company of RMB 4,427,068,404.51, and equity attributable to owners of the Company of RMB 29,343,093,829.35. Calculated based on the share capital of 6,097,630,727 during the Reporting period, 56 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd earnings per share was RMB0.726 and net assets per share is RMB4.812 in the Company‘s interim report; Calculated based on the latest share capital of 6,097,402,727, earnings per share was RMB0.726 and net assets per share is RMB4.812 in the Company‘s interim report. 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 II. Information on shareholders (I) Total number of shareholders: Total number of ordinary shareholders up to the end of 164,612 the reporting period Total numbers of preferential shareholders with 0 restoration of voting rights as at the end of the reporting period (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 Increa Status of sing/ shares decre pledged asing Number of Number of or frozen Perce Nature durin shares held shares held Num Name of shareholder (full name) ntage of g the at the end of with selling ber (%) shareholder report the period restrictions Statu ing s perio d Domestic Haier Electric Appliances non-state-o 1,258,684,824 20.64 Nil International Co., Ltd. wned legal entity 57 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Domestic non-state-o Haier Group Corporation 1,072,610,764 17.59 Nil wned legal entity Foreign KKR HOME INVESTMENT Unkn 605,985,988 9.94 605,985,988 legal S.A R.L. own entity Hong Kong Securities Unkn 403,226,905 6.61 Unknown Clearing Co., Ltd. own China Securities Finance Unkn 225,816,727 3.70 Unknown Corporation Limited own Qingdao Haier Venture & Domestic Investment Information Co., non-state-o 172,252,560 2.82 Nil Ltd.(青岛海尔创业投资咨询有 wned legal 限公司) entity National social security fund, Unkn 100,588,871 1.65 Unknown Portfolio 104 own Unkn GIC PRIVATE LIMITED 77,301,335 1.27 Unknown own Central Huijin Asset Unkn 69,539,900 1.14 Unknown Management Ltd. own Industrial and Commercial Bank of China Limited-China Southern Consumption Unkn 36,986,401 0.61 Unknown Vitality Flexible Allocation own Hybrid Initiated Securities Investment Fund Shareholdings of top ten shareholders without selling restrictions Number of Class and number of shares tradable shares Name of shareholder held without Class Number selling restrictions Haier Electric Appliances International Co., Ltd. 1,258,684,824 RMB ordinary 1,258,684,824 Haier Group Corporation 1,072,610,764 RMB ordinary 1,072,610,764 Hong Kong Securities Clearing Co., Ltd. 403,226,905 RMB ordinary 403,226,905 China Securities Finance Corporation Limited 225,816,727 RMB ordinary 225,816,727 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 104 100,588,871 RMB ordinary 100,588,871 GIC PRIVATE LIMITED 77,301,335 RMB ordinary 77,301,335 Central Huijin Asset Management Ltd. 69,539,900 RMB ordinary 69,539,900 58 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Industrial and Commercial Bank of China Limited-China Southern Consumption 36,986,401 RMB ordinary 36,986,401 Vitality Flexible Allocation Hybrid Initiated Securities Investment Fund National social security fund, Portfolio 103 36,027,875 RMB ordinary 36,027,875 (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 Related-parties or parties acting in concert among & Investment Information Co., Ltd.(青岛海尔创业投资咨询有 the aforesaid shareholders 限 公 司 ) is a party acting in concert with Haier Group Corporation; (2) The Company is not aware of the existence of any connections of other shareholders. Explanation of preferential shareholders with restoration of voting rights and their N/A shareholdings Number of shares held by top ten shareholders with selling restrictions and the selling restrictions √Applicable □ Not Applicable Unit: share Listing status of shares with selling restrictions Number of Number of shares held Name of shareholder with additional Selling No. with Eligible selling restrictions shares restrictions selling listing eligible to restrictions time be listed KKR HOME INVESTMENT S.A Strategic 1 605,985,988 17 July 2017 0 R.L. investments Restricted Natural person shareholders Shares under (Objects of reserved portion granted the Share 2 228,000 26 February 2017 0 under the Phase IV Share Option Option Incentive Scheme) Incentive Scheme Related-parties or parties acting in concert Nil among the aforesaid shareholders Note: As at the disclosable date of this report, the latest changes on the aforesaid shares being restricted sold are as follows: 59 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd (1) The aforesaid shares with selling restrictions held by KKR HOME INVESTMENT S.A R.L. was deregulated and listed on 17 July 2017. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Non - public Issuance of Shares with Selling Restrictions Listed disclosed by the Company on 11 July 2017 (L 2017-024). (2) The aforesaid shares with selling restrictions held by natural person shareholders was repurchased and cancelled on 19 July 2017. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on Cancellation of Repurchased Restricted Shares under the Share Option Incentive Scheme disclosed by the Company on 19 July 2017 (L 2017-025). (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 Starting date of Expiration date of legal 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 Statement of the terms of the agreed Company subscribed by it shall not be transferred within 36 shareholding of the strategic investors or months after the date of issuance. The summary of the ordinary legal persons involved in agreement sets out in the announcement regarding the placing new shares Proposal of Qingdao Haier 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. III. Changes in controlling shareholder and the ultimate controller □Applicable √Not Applicable 60 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd SECTION VII RELEVANT INFORMATION OF PREFERRED SHARES □Applicable √ Not Applicable 61 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd SECTION VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT I. Changes of Shareholding (I) Changes of shareholding of current and retired directors, supervisors and senior management during the reporting period □Applicable √ Not Applicable Note: The shareholding particulars of directors, supervisors and senior management of the Company set out in the 2016 Annual Report. During the reporting period, there is no change on their shareholdings. (II) Incentive share option granted to directors, supervisors and senior management during the reporting period □Applicable √ Not Applicable II. Changes in Directors, Supervisors and Senior Management of the Company □Applicable √ Not Applicable Explanation on the Changes in directors, supervisors and senior management of the Company □Applicable √ Not Applicable III. Other explanations □Applicable √ Not Applicable 62 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd SECTION IX RELEVANT INFORMATION ON CORPORATE BONDS □Applicable √ Not Applicable 63 / 20744202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd SECTION X FINANCIAL REPORT I. Auditors’ Report □Applicable √ Not Applicable II. Financial Statements Consolidated Balance Sheet 30 June 2017 Prepared by: Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Notes Closing balance Opening balance Current Assets: Monetary Capital VII.1 29,096,992,741.80 23,504,634,124.25 Clearing settlement funds Placements with banks Financial assets measured at fair VII.2 value and changes of which included in 36,973,157.40 80,432,384.17 current profit and loss Derivative financial assets Bills receivables VII.3 12,351,384,023.77 13,796,561,238.05 Accounts receivables VII.4 14,761,940,537.00 12,247,244,097.66 Prepayments VII.5 742,474,582.50 578,543,441.40 Premiums receivables Reinsurance accounts receivables Reinsurance contract reserves receivables Interests receivables VII.6 146,268,609.17 135,319,774.41 Dividends receivables 131,393,317.77 101,648,913.10 Other receivables VII.7 1,088,319,985.89 1,180,418,052.75 Financial assets purchased under resale agreements Inventories VII.8 17,226,363,075.10 15,237,942,420.85 Assets classified as held for sale Non-current assets due within one year Other current assets VII.9 2,676,334,034.47 2,653,444,588.12 Total current assets 78,258,444,064.87 69,516,189,034.76 Non-current assets: Loans and advances granted Available-for-sale financial assets VII.10 1,522,072,563.73 1,555,878,717.05 Held-to-maturity investments Long-term receivables Long-term equity investments VII.11 11,409,603,852.96 11,057,819,628.14 Investment properties VII.12 33,001,507.84 34,600,393.37 Fixed assets VII.13 15,415,207,385.68 15,539,046,885.38 Construction in progress VII.14 1,985,822,855.83 1,769,875,050.35 Construction materials Disposals of fixed assets VII.15 56,056,072.15 55,808,808.81 64 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Biological assets for production Fuel assets Intangible assets VII.16 7,111,319,956.95 7,242,420,479.44 Development expenses VII.17 947,314,222.94 913,283,796.32 Goodwill VII.18 20,527,542,588.58 21,004,123,145.39 Long-term deferred expenditures VII.19 85,829,524.72 115,773,592.78 Deferred income tax assets VII.20 1,639,919,231.91 1,592,009,404.59 Other non-current assets VII.21 781,723,639.04 858,461,388.86 Total non-current assets 61,515,413,402.33 61,739,101,290.48 Total assets 139,773,857,467.20 131,255,290,325.24 Current liabilities: Short-term borrowings VII.22 11,985,795,621.88 18,165,531,879.15 Borrowings from central bank Absorbing deposit and deposit in inter-bank market Placements from banks Financial liabilities measured at fair value and changes of which included in VII.23 70,573,461.47 2,340,213.20 current profit and loss Derivative financial liabilities Bills payable VII.24 15,508,579,823.30 12,404,889,760.05 Accounts payables VII.25 24,835,266,362.14 20,594,203,310.08 Advances from customers VII.26 4,149,761,184.38 5,734,732,855.06 Disposal of repurchased financial assets Handling charges and commissions payable Payables for staff‘s remuneration VII.27 2,140,301,086.17 2,404,380,458.59 Taxes payable VII.28 1,306,449,322.48 1,620,463,062.11 Interests payable VII.29 76,637,799.03 30,570,328.66 Dividends payable VII.30 1,893,922,420.51 148,690,489.01 Other payables VII.31 9,839,677,091.29 9,363,015,551.12 Reinsurance accounts payable Deposits for insurance contracts Consumer deposits for trading in securities Amounts due to issuer for securities underwriting Liabilities classified as held for sale Non-current liabilities due within one VII.32 1,700,963,280.46 2,966,808,509.55 year Other current liabilities 20,946,270.55 17,228,645.29 Total current liabilities 73,528,873,723.66 73,452,855,061.87 Non-current liabilities: Long-term borrowings VII.33 19,690,132,020.64 15,530,801,311.80 Debentures payable Including: preference shares Perpetual bonds Long-term payable VII.34 116,912,770.25 115,783,382.28 Long-term payables for staff‘s VII.35 892,376,822.29 1,206,510,917.33 remuneration Special payable Estimated liabilities VII.36 2,404,885,832.93 2,310,119,430.60 Deferred income VII.37 390,479,357.16 342,825,593.35 65 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Deferred income tax liabilities VII.20 163,130,628.52 133,243,146.68 Other non-current liabilities VII.38 50,769,391.88 582,785,069.86 Total non-current liabilities 23,708,686,823.67 20,222,068,851.90 Total liabilities 97,237,560,547.33 93,674,923,913.77 Owners’ equity Share capital VII.39 6,097,630,727.00 6,097,630,727.00 Other equity instruments Including: preference shares Perpetual bonds Capital reserve VII.40 315,454,458.52 83,383,194.51 Less: Treasury stock VII.41 1,041,960.00 1,041,960.00 Other comprehensive income VII.42 397,623,539.26 566,238,911.96 Special reserve Surplus reserve VII.43 2,074,118,571.01 2,074,118,571.01 General risk provisions Undistributed profits VII.44 20,459,308,493.56 17,544,395,965.35 Total equity attributable to owners of 29,343,093,829.35 26,364,725,409.83 the Company Minority interests 13,193,203,090.52 11,215,641,001.64 Total owners‘ equity 42,536,296,919.87 37,580,366,411.47 Total liabilities and owners‘ 139,773,857,467.20 131,255,290,325.24 equities Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) Balance Sheet of the Company 30 June 2017 Prepared by: Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Notes Closing balance Opening balance Current Assets: Monetary Capital 3,258,256,614.06 3,888,623,400.28 Financial assets measured at fair value and changes of which included in current profit and loss Derivative financial assets Notes receivables Accounts receivables XVIII.1 287,277,541.16 265,438,220.39 Prepayments 10,000,000.00 10,000,000.00 Interests receivables 152,554,270.23 85,452,583.16 Dividends receivables 136,281,061.80 329,713,897.32 Other receivables XVIII.2 1,236,684,324.51 322,953,279.90 Inventories 62,181,463.12 69,799,065.47 Assets classified as held for sale Non-current assets due within one year Other current assets 245,424,828.47 94,935,174.83 Total current assets 5,388,660,103.35 5,066,915,621.35 Non-current assets: 66 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Available-for-sale financial assets 5,884,728.28 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 XVIII.3 22,451,771,746.91 22,342,078,877.07 Investment properties Fixed assets 125,895,991.38 116,840,195.32 Construction in progress 8,959,429.64 22,611,979.50 Construction materials Disposals of fixed assets Biological assets for production Fuel assets Intangible assets 8,161,973.53 8,578,922.84 Development expenses Goodwill Long-term deferred expenditures Deferred income tax assets 69,544,303.72 62,346,256.82 Other non-current assets Total non-current assets 31,270,218,173.46 31,157,934,467.39 Total assets 36,658,878,276.81 36,224,850,088.74 Current liabilities: Short-term borrowings Financial liabilities measured at fair value and changes of which included in current profit and loss Derivative financial liabilities Bills payable Accounts payables 718,058,821.46 1,142,008,704.07 Payments received in advance 1,066,172,209.89 1,844,082,827.50 Payables for staff‘s remuneration 23,938,508.78 39,919,748.55 Taxes payable 5,134,436.46 57,218,867.86 Interests payable 233,737,254.44 117,705,327.18 1,512,155,876.30 Dividends payable - Other payables 22,615,213,152.52 21,170,550,089.69 Liabilities classified as held for sale Non-current liabilities due within one year Other current liabilities 8,635,147.36 4,841,867.91 Total current liabilities 26,183,045,407.21 24,376,327,432.76 Non-current liabilities: Long-term borrowings Debentures payable Including: preference shares Perpetual bonds Long-term payable 20,000,000.00 20,000,000.00 Long-term payables for staff‘s remuneration Special payables Estimated liabilities Deferred income 17,700,000.00 17,700,000.00 Deferred income tax liabilities 15,630,274.98 15,569,301.11 Other non-current liabilities Total non-current liabilities 53,330,274.98 53,269,301.11 Total liabilities 26,236,375,682.19 24,429,596,733.87 67 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Owners’ equity: Share capital 6,097,630,727.00 6,097,630,727.00 Other equity instruments Including: preference shares Perpetual bonds Capital reserve 2,061,626,920.17 2,061,597,739.78 Less: Treasury stock 1,041,960.00 1,041,960.00 Other comprehensive income -24,485,101.06 -10,881,603.15 Special reserve Surplus reserve 1,389,846,284.51 1,389,846,284.51 Undistributed profits 898,925,724.00 2,258,102,166.73 Total owners‘ equity 10,422,502,594.62 11,795,253,354.87 Total liabilities and owners‘ 36,658,878,276.81 36,224,850,088.74 equities Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) Consolidated Income Statement January-June 2017 Unit and Currency: RMB Items Notes 2017 2016 Ⅰ.Total operating revenue 77,575,749,980.10 48,786,606,924.87 Including: operating revenue VII.45 77,575,749,980.10 48,786,606,924.87 Interest income Insurance premiums earned Fee and commission income Ⅱ. Total cost of operations 72,895,770,760.33 45,404,843,534.70 Including: operating cost VII.45 54,154,905,833.39 34,675,732,074.42 Interest expenses Fee and commission expenses Insurance withdrawal payment Net payment from indemnity Net provisions for insurance contract Insurance policy dividend paid Reinsurance cost Taxes and surcharge VII.46 345,386,333.30 171,696,918.27 Selling expenses VII.47 12,937,515,954.38 6,693,076,335.80 Administrative expenses VII.48 4,623,708,396.51 3,543,082,531.68 Financial expenses VII.49 611,677,281.93 125,069,008.47 Loss in assets impairment VII.50 222,576,960.82 196,186,666.06 Add: income from change in fair VII.51 412,063,845.15 -182,258,158.84 value (losses are represented by ―-‖) Investment income (losses are VII.52 653,842,714.35 1,029,193,799.84 represented by ―-‖) Including: investment income of associates and joint ventures Exchange gain (losses are represented by ―-‖) Other income VII.53 72,741,846.04 68 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Ⅲ. Operating profit (losses are 5,818,627,625.31 4,228,699,031.17 represented by ―-‖) Add: non-operating income VII.54 309,004,068.62 460,324,873.14 Including: gain from disposal of non-current assets Less: non-operating expenses VII.55 84,579,023.15 56,483,320.12 Including: Loss from disposal of non-current assets Ⅳ. Total profit (total losses are 6,043,052,670.78 4,632,540,584.19 represented by ―-‖) Less: income tax expense VII.56 758,022,158.23 660,698,381.98 Ⅴ. Net profit (net losses are represented 5,285,030,512.55 3,971,842,202.21 by ―-‖) Net profit attributable to owners of 4,427,068,404.51 3,315,173,171.70 the Company Profit or loss attributable to minority 857,962,108.04 656,669,030.51 shareholders VI. Other comprehensive income, net of VII.57 -201,133,413.24 -376,650,095.76 tax Other comprehensive income attributable to owners of the Company, -168,615,372.70 -386,671,414.67 net of tax (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 2. Share of other comprehensive income of investees that cannot be reclassified to profit or loss under equity method (II) Other comprehensive income to be reclassified subsequently to profit -168,615,372.70 -386,671,414.67 or loss 1. Share of other comprehensive income of investees that will be -122,040,176.25 -45,016,833.22 reclassified subsequently to profit or loss under equity method 2. Gain or loss from change in fair value of available-for-sale financial -2,347,023.98 -448,305,792.02 assets 3. Gain or loss arising from reclassification from held-to-maturity investments to available-for-sale financial assets 4. Effective portion of gain or -5,767,610.62 loss arising from cash flow hedging instruments 5. Exchange differences on -38,460,561.85 106,651,210.57 translation of financial statements denominated in foreign currencies 6. Other Other comprehensive income -32,518,040.54 10,021,318.91 attributable to minority shareholders, net 69 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd of tax Ⅶ. Total comprehensive income 5,083,897,099.31 3,595,192,106.45 Total comprehensive income attributable to the shareholders of parent 4,258,453,031.81 2,928,501,757.03 company Total comprehensive income 825,444,067.50 666,690,349.42 attributable to the minority shareholders Ⅷ . Earnings per share: (I) Basic earnings per share XX .1 0.726 0.543 (RMB/share) (II) Diluted earnings per share XX .1 0.726 0.543 (RMB/share) Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) Income Statement of the Parent Company January-June 2017 Unit and Currency: RMB Items Notes 2017 2016 Ⅰ. Operating revenue XVIII.4 1,543,112,325.65 1,515,871,485.21 Less: Operation cost XVIII.4 1,125,099,741.07 1,063,974,867.43 Taxes and surcharge 9,124,152.47 6,445,399.44 Selling expenses 84,535,020.01 141,678,913.88 Administrative expenses 291,801,719.89 222,014,043.98 Financial expenses 45,432,212.79 -79,578.03 Loss in assets impairment 49,240,545.55 -1,894,656.67 Add: income from change in fair value (losses are represented by ―-‖) Investment income (losses are XVIII.5 151,893,767.73 143,464,637.96 represented by ―-‖) Including: investment income of associates and joint ventures Other income Ⅱ. Operating profit (losses are 89,772,701.60 227,197,133.14 represented by ―-‖) Add: non-operating income 52,825,954.68 75,940,630.64 Including: gain from disposal of non-current assets Less: non-operating expenses 9,413.67 20,330.70 Including: loss from disposal of non-current assets Ⅲ. Total Profit (total losses are 142,589,242.61 303,117,433.08 represented by ―-‖) Less: income tax expense -10,390,190.96 7,794,918.54 Ⅳ. Net Profit (net losses are represented 152,979,433.57 295,322,514.54 by ―-‖) V. Other comprehensive income, net of -13,603,497.91 -20,707,515.14 tax (I) Other comprehensive income will not be reclassified subsequently to profit 70 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd or loss 1. Changes in net liabilities or net assets arising from re-measurement of defined benefit plans 2. Share of other comprehensive income of investees that cannot be reclassified to profit or loss under equity method (II) Other comprehensive income to be reclassified subsequently to profit or -13,603,497.91 -20,707,515.14 loss 1. Share of other comprehensive income of investees that will be -13,949,016.48 -5,254,534.33 reclassified subsequently to profit or loss under equity method 2. Gain or loss from change in fair value of available-for-sale financial 345,518.57 -15,452,980.81 assets 3. Gain or loss arising from reclassification from held-to-maturity investments to available-for-sale financial assets 4. Effective portion of gain or loss arising from cash flow hedging instruments 5. Exchange differences on translation of financial statements denominated in foreign 6. Other VI. Total comprehensive income 139,375,935.66 274,614,999.40 VII. Earnings per share: (I) Basic earnings per share (RMB/ share) (II) Diluted earnings per share (RMB/share) Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) Consolidated Cash Flow Statement January-June 2017 Unit and Currency: RMB Items Notes 2017 2016 Ⅰ. Cash flows from operating activities: Cash received from the sale of goods 74,797,892,675.82 49,016,704,968.11 and rendering of services Net increase in consumer and interbank deposits 71 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Net increase in borrowing from PBOC Net cash increase in borrowing from other financial institutes Cash received from premiums under original insurance contract Net cash received from reinsurance business Net increase in deposits of policy holders and investment Net increase from the disposal of financial assets measured at fair value and changes of which included in current profit and loss Cash paid for interest, bank charges and commissions Net increase in cash borrowed Net increase in cash received from repurchase operation Refunds of taxes 483,646,574.65 324,681,172.08 Cash received from other related VII.58 548,371,812.58 441,762,351.22 operating activities Sub-total of cash inflows from 75,829,911,063.05 49,783,148,491.41 operating activities Cash paid on purchase of goods and 51,715,675,906.49 31,017,533,105.36 services Net increase in loans and advances Net increase in deposits in PBOC and interbank Cash paid for compensation payments under original insurance contract Cash paid for interest, bank charges and commissions Cash paid for insurance policy dividend Cash paid to and on behalf of 7,124,394,856.33 4,555,848,831.85 employees Cash paid for all types of taxes 3,532,854,592.59 3,993,432,606.60 Cash paid to other operation related VII.59 5,063,784,801.46 5,461,777,564.91 activities Sub-total of cash outflows from 67,436,710,156.87 45,028,592,108.72 operating activities Net cash flows from operating VII.63 8,393,200,906.18 4,754,556,382.69 activities Ⅱ. Cash flows from investing activities: Cash received from disposal of 13,500,000.00 537,931,064.15 investments Cash received from return on 111,755,467.37 45,278,736.34 investments Net cash received from the disposal of fixed assets, intangible assets and 38,490,006.64 24,238,142.21 other long term assets Net cash received from disposal of 5,916,992.24 subsidiaries and other operating 72 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd entities Cash received from other VII.60 75,828.87 3,693,847.50 investment related activities Sub-total of cash inflows from 169,738,295.12 611,141,790.20 investing activities Cash paid on purchase of fixed assets, intangible assets and other long 1,682,795,106.07 1,020,054,184.72 term assets Cash paid for investments 811,857,006.21 424,187,569.41 Net increase in secured loans Net cash paid on acquisition of 54,786,726.52 36,161,700,507.07 subsidiaries and other operating entities Cash paid on other investment VII.61 3,968,381.90 related activities Sub-total of cash outflows from 2,549,438,838.80 37,609,910,643.10 investing activities Net cash flows from investing -2,379,700,543.68 -36,998,768,852.90 activities Ⅲ. Cash flows from financing activities: Cash received from investment 403,277,599.87 16,900,063.70 Including: cash received by subsidiaries from minority shareholders‘ investment Cash received from borrowings 12,542,711,276.95 31,315,006,673.29 Cash received from issuing bonds Cash received from other financing related activities Sub-total of cash inflows from 12,945,988,876.82 31,331,906,736.99 financing activities Cash paid on repayment of 13,163,829,731.76 1,636,907,891.06 borrowings Cash paid on distribution of 130,616,690.52 123,970,737.14 dividends, profits, or interest expenses Including: dividend, profit paid to minority shareholders by subsidiaries Cash paid on other financing VII.62 35,275,991.53 130,068,034.68 activities Sub-total of cash outflows from 13,329,722,413.81 1,890,946,662.88 financing activities Net cash flows from financing -383,733,536.99 29,440,960,074.11 activities Ⅳ. Effect of fluctuations in exchange -74,883,290.00 -25,818,334.76 rates on cash and cash equivalents Ⅴ. Net increase in cash and cash 5,554,883,535.51 -2,829,070,730.86 equivalents Add: balance of cash and cash VII.64 equivalents at the beginning of the 23,217,634,558.10 24,724,585,700.76 period Ⅵ. Balance of cash and cash VII.64 28,772,518,093.61 21,895,514,969.90 equivalents at the end of the period Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) 73 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Cash Flow Statement of the Parent Company January-June 2017 Unit and Currency: RMB Items Notes 2017 2016 Ⅰ. Cash flows from operating activities: Cash received from the sale of 139,120,441.24 47,535,983.95 goods and rendering of services Refunds of taxes 11,312,294.31 Cash received from other related 50,673,786.01 5,668,199.83 operating activities Sub-total of cash inflows from 189,794,227.25 64,516,478.09 operating activities Cash paid on purchase of goods 817,622,677.26 175,369,512.35 and services Cash paid to and on behalf of 460,813,118.91 163,991,849.56 employees Cash paid for all types of taxes 95,721,014.98 90,115,531.59 Cash paid to other operation related 201,399,325.56 263,737,039.90 activities Sub-total of cash outflows from 1,575,556,136.71 693,213,933.40 operating activities Net cash flows from operating -1,385,761,909.46 -628,697,455.31 activities Ⅱ. Cash flows from investing activities: Cash received from disposal of investments Cash received from return on 279,713,897.32 investments Net cash received from the disposal of fixed assets, intangible assets and other long term assets Net cash received from disposal of subsidiaries and other operating entities Cash received from other investment related activities Sub-total of cash inflows from 279,713,897.32 investing activities Cash paid on purchase of fixed assets, intangible assets and other long 1,791,373.41 5,209,655.94 term assets Cash paid for investments 220,659,237.50 15,066,468,700.00 Net cash paid on acquisition of subsidiaries and other operating entities Cash paid on other investment related activities Sub-total of cash outflows from 222,450,610.91 15,071,678,355.94 investing activities Net cash flows from investing 57,263,286.41 -15,071,678,355.94 activities Ⅲ. Cash flows from financing activities: 74 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Cash received from investment Cash received from borrowings Cash received from issuing bonds Cash received from other 698,132,975.25 16,570,240,137.80 financing related activities Sub-total of cash inflows 698,132,975.25 16,570,240,137.80 from financing activities Cash paid on repayment of borrowings Cash paid on distribution of dividends, profits, or interest expenses Cash paid on other financing 112,647,024.84 activities Sub-total of cash outflows 112,647,024.84 from financing activities Net cash flows from 698,132,975.25 16,457,593,112.96 financing activities Ⅳ. Effect of fluctuations in exchange rates on cash and cash -1,138.42 equivalents Ⅴ. Net increase in cash and cash -630,366,786.22 757,217,301.71 equivalents 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 3,258,256,614.06 1,320,044,309.67 period Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) 75 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Consolidated Statement of Changes in Equity January-June 2017 Unit and Currency: RMB Current period Equity attributable to owners of the parent company Other equity Items Other General Minority Total owners‘ instruments Less: interests equity Capital comprehensiv Special Surplus risk Undistributed Share capital Preferen Perpet Treasury reserve e reserve reserve provisio profits ce ual Others stock income ns share bonds Ⅰ. Closing 6,097,630,727.00 83,383,194.51 balance for the 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 previous year Add: changes in accounting policies Correction of previous errors The consolidation of enterprises under common control Others Ⅱ. Opening 6,097,630,727.00 83,383,194.51 balance for the 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 current year Ⅲ. 232,071,264.01 Increase/decrease and change of -168,615,372.70 2,914,912,528.21 1,977,562,088.88 4,955,930,508.40 amount for the current period 76 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd (decrease is represented by ―-‖) (I) Total comprehensive -168,615,372.70 4,427,068,404.51 825,444,067.50 5,083,897,099.31 income (II) Capital injection 232,071,264 and reduction by .01 1,401,209,001.28 1,633,280,265.29 owners 1. Ordinary shares 231,991,591.90 invested by 1,401,208,371.06 1,633,199,962.96 shareholders 2. Capital injected by holders of other equity instruments 3. Amount of shares payment credited to owner‘s equity 4.Others 79,672.11 630.22 80,302.33 (III) Profit -1,512,155,876.30 -249,090,979.90 -1,761,246,856.20 distribution 1. Appropriation to surplus reserves 2.Provisions for general risks 3.Distribution to owners (or -1,512,155,876.30 -249,090,979.90 -1,761,246,856.20 shareholders) 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 remedying loss 77 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd 4.Others (V) Special reserve 1. Appropriated for the period 2. Utilized for the period (VI) Others Ⅳ. Closing 6,097,630,727.00 315,454,458.52 397,623,539.26 balance for the 1,041,960.00 2,074,118,571.01 20,459,308,493.56 13,193,203,090.52 42,536,296,919.87 period Previous period Equity attributable to owners of the Company Items Other equity Minority Total owners‘ Less: Other interests equity instruments Special Surplus General risk Undistributed Share capital Prefere Capital reserve Treasury comprehensive Perpetual reserve reserve provisions profits nce Others stock income bonds share Ⅰ. Closing balance for 6,123,154,268.00 83,383,194. 77,604,54 633,183,460.0 2,026,085,301 13,905,774,481. the previous year 9,708,285,895.93 32,402,262,056.88 51 4.70 3 .23 88 Add: changes in accounting policies Correction of previous errors The consolidation 500,000.00 38,858,499.40 of enterprises under 39,358,499.40 common control Others Ⅱ.Opening balance for 6,123,154,268.00 83,383,194. 77,604,54 633,183,460.0 2,026,585,301 13,944,632,981. 9,708,285,895.93 32,441,620,556.28 the current the period 51 4.70 3 .23 28 Ⅲ.Increase/decrease -18,050,341.00 -47,396,7 -386,671,414. -17,475,258.4 3,157,895,845.3 and change of amount 06.70 67 8 6 for the period 502,424,912.00 3,285,520,449.91 (decrease is represented by ―-‖) (I) Total comprehensive -386,671,414. 3,315,173,171.7 income 666,690,349.42 3,595,192,106.45 67 0 (II) Capital injection -18,050,341.00 -47,396,7 -17,475,258.4 -157,277,326.34 and reduction by owners 1,460,835.65 -143,945,383.47 06.70 8 1. Ordinary shares -18,050,341.00 -160,043, -14,203,978.0 -127,835,802.54 1,460,835.65 1,414,445.59 78 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd invested by shareholders 731.54 6 2. Capital injected by holders of other equity instruments 3. Amount of shares payment credited to owner‘s equity 4.Others 112,647,0 -3,271,280.42 -29,441,523.80 -145,359,829.06 24.84 (III) Profit distribution -165,726,273.07 -165,726,273.07 1. Appropriation to surplus reserves 2. Provisions for general risks 3. Distribution to owners (or -165,726,273.07 -165,726,273.07 shareholders) 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 remedying loss 4.Others (V) Special reserve 1. Appropriated for the period 2. Utilized for 2017 (VI) Others Ⅳ. Closing balance for 6,105,103,927.00 83,383,194. 30,207,83 246,512,045.3 2,009,110,042 17,102,528,826. 10,210,710,807.93 35,727,141,006.19 the period 51 8.00 6 .75 64 Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) Statement of Changes in Equity of the Parent Company January-June 2017 79 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd Unit and Currency: RMB Current period Other equity instruments Pre Speci Per Less: Other Items fer al Undistributed Total owners‘ Share capital pet Capital reserve Treasury comprehensive Surplus reserve enc Other reser profits equity ual stock income e s ve bo sha nds re Ⅰ. Closing balance for the 2,258,102,166.7 previous period 6,097,630,727.00 2,061,597,739.78 1,041,960.00 -10,881,603.15 1,389,846,284.51 11,795,253,354.87 3 Add: changes in accounting policies Correction of previous errors Others 2,258,102,166.7 6,097,630,727.00 2,061,597,739.78 1,041,960.00 -10,881,603.15 1,389,846,284.51 11,795,253,354.87 3 Ⅱ.Opening balance for the -1,359,176,442. current period 29,180.39 -13,603,497.91 -1,372,750,760.25 73 Ⅲ.Increase/decrease and change of amount for the period -13,603,497.91 152,979,433.57 139,375,935.66 (decrease is represented by ―-‖) (I) Total comprehensive income 29,180.39 29,180.39 (II) Capital injection and reduction by owners 1. Ordinary shares invested by shareholders 2. Capital injected by holders of other equity instruments 3. Amount of shares payment credited to owner‘s equity 29,180.39 29,180.39 4. Others -1,512,155,876. -1,512,155,876.30 30 (III) Profit distribution 1. Appropriation to surplus -1,512,155,876. -1,512,155,876.30 reserves 30 2. Distribution to owners (or shareholders) 3. Others (IV) Internal transfer of owner‘s equity 1. Transfer of capital reserves into capital (or share capital) 2. Transfer of surplus reserves 80 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd into capital (or share capital) 3. Surplus reserves used for remedying loss 4.Others (V) Special reserve 1. Appropriated for the period 2. Utilized for the period (VI) Others IV. Closing balance for the period 6,097,630,727.00 2,061,626,920.17 1,041,960.00 -24,485,101.06 1,389,846,284.51 898,925,724.00 10,422,502,594.62 Previous period Other equity instruments Less: Other Items Special Undistributed Total owners‘ Share capital Prefer Capital reserve Treasury comprehensive Surplus reserve Perpetual reserve profits equity ence Others stock income bonds share Ⅰ . Closing balance for the previous period 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 Add: changes in accounting policies Correction of previous errors Others - Ⅱ . Opening balance for the current period 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 and change of amount for the -18,050,341.00 -146,260,600.75 -47,396,706.70 -20,707,515.14 295,322,514.54 157,700,764.35 period (decrease is represented by ―-‖) (I) Total comprehensive income -20,707,515.14 295,322,514.54 274,614,999.40 (II) Capital injection and reduction by owners -18,050,341.00 -146,260,600.75 -47,396,706.70 -116,914,235.05 1. Ordinary shares invested by shareholders -18,050,341.00 -141,993,390.54 -47,396,706.70 -112,647,024.84 2. Capital injected by holders of other equity instruments 3. Amount of shares payment credited to owner‘s equity 4.Others -4,267,210.21 -4,267,210.21 81 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd (III) Profit distribution 1. Appropriation to surplus reserves 2.Distribution to owners (or shareholders) 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 remedying loss 4.Others (V) Special reserve 1. Appropriated for the period 2. Utilized for the period (VI) Others Ⅳ . Closing balance for 6,105,103,927.00 2,083,251,048.44 30,207,838.00 -1,865,492.89 1,332,647,187.44 3,331,330,521.79 12,820,259,353.78 the period Legal representative: Liang Haishan Chief accountant: Gong Wei Person in charge of accounting department: Ying Ke (应珂) 82 / 20763202017 Interim Report 2017 Interim Report Qingdao Haier Co., Ltd III. General Information of the Company 1. Overview of the Company √Applicable □Not Applicable 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 Ti Gai [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 50 million shares to the public and listed with trading on SSE 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. 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. The Company‘s ultimate holding company is Haier Group Corporation. These financial statements have been approved for publication by the Board of the Company on 25 August 2017. 2. Scope of consolidated financial statements √Applicable □Not Applicable For details of changes in the scope of consolidated financial statements for the period, please refer to ―VIII. Changes in Consolidation Scope‖ and ―Ⅸ. Interests in Other Entities‖ of this note. IV. Basis of Preparation of the Financial Statements 1. Basis of Preparation 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 83 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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. 2. Continuing Operation √Applicable □Not Applicable 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. V. SIGNIFICANT ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES Tips of specific accounting policies and accounting estimation: √Applicable □Not Applicable 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 V.11); the measurement of inventories (Note V.12); the depreciation and amortization of the investment properties (Note V.14); the depreciation of fixed assets (Note V.15); the amortization of intangible assets (Note V.18); the criterion for determining of long-term assets impairment (Note V.19); and the date of revenue recognition (Note V.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 30 June 2017, operation result and cash flow of the Company in January to June 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 √Applicable □Not Applicable 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. 84 / 207 2017 Interim Report Qingdao Haier Co., Ltd 5. Accounting methods of enterprise combinations involving entities under common control and entities not under common control √Applicable □Not Applicable An enterprise combination is a transaction or event that brings together two or more separate entities into one reporting entity. Enterprise combinations are classified into enterprise combinations under common control and enterprise combinations not under common control. (1) Enterprise combinations under common control An enterprise combination under common control is an enterprise 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 enterprise 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 enterprise combination are the acquiree. 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 enterprise 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 acquiree 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 acquiree is negative as at the date of combination, investment cost of long-term equity investment is calculated as zero. In case the acquiree is controlled by the ultimate controller by the enterprise 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 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 85 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 enterprises 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 enterprise 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 written down to the retained earnings or current profit or loss at the beginning of the comparative reporting period, respectively. (2) Enterprise combinations involving entities not under common control An enterprise combination not under common control is an enterprise combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the 86 / 207 2017 Interim Report Qingdao Haier Co., Ltd combination. For enterprise 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 enterprise combination are the acquirees. The combination date is the date on which the acquirer effectively obtains control of the acquirees. In enterprise 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 acquiree 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 enterprise 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 arises 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 enterprise combination shall be amended accordingly. The cost of combination and identifiable net assets obtained by the acquirer in an enterprise 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 acquiree‘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 acquiree‘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 combination cost is still lower than the fair value of the identifiable net assets of the acquiree obtained during the course of combination, then the difference is recorded in the current profit and loss. In enterprise combination involving entities not under common control that is realized in phases through multiple exchange transactions, in the individual financial statements of parent company, the sum of the book value of the equity investment of the acquiree held before the date of acquisition and 87 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 acquiree 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 acquiree 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 into the current profit or loss. The fair value on the acquisition date of equity interest in the acquiree 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 aquirer's share of the fair value on the acquisition date of the acquiree'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 current consolidated profit or loss. 6. Preparation method of consolidated financial statements √Applicable □Not Applicable (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 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. 88 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 √Applicable □Not Applicable 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: (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 this Note III. 89 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 √Applicable □Not Applicable (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 into the current 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 90 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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. 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 the period of disposal. 10. Financial instruments √Applicable □Not Applicable (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 current 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 91 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 into financial assets at fair value with its change consolidated in profit/loss, held-to-maturity investments, loans and receivables, and available-for-sale financial assets upon initial recognition. 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, on initial recognition, classified into financial liabilities at fair value with its change consolidated in profit/loss and other financial liabilities. Financial assets at fair value with its change consolidated in profit/loss include financial assets held for trading and financial assets designated as at fair value with its change consolidated in profit/loss. All financial assets at fair value with its change consolidated in profit/loss of the Company 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 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 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 current profit or loss and 92 / 207 2017 Interim Report Qingdao Haier Co., Ltd related to embedded derivatives. A financial asset at fair value with its change consolidated in profit/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 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 in 2016. 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 with its change consolidated in profit/loss for the period. Available-for-sale financial assets include non-derivative financial assets designated as 93 / 207 2017 Interim Report Qingdao Haier Co., Ltd available-for-sale at initial recognition, and the financial assets other than financial assets at fair value with its change consolidated in profit/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 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 current 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 with its change 94 / 207 2017 Interim Report Qingdao Haier Co., Ltd consolidated in profit/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 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 the period: 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 the period 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 95 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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 with its change consolidated in profit or loss and other financial liabilities at initial recognition. Financial liabilities at fair value with its change consolidated in profit or loss include financial liabilities held for trading and financial liabilities designated as at fair value with its change included in profit or 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 96 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 instrument of financial liabilities measured at fair value through current profit or loss and related to embedded derivatives. Financial liabilities at fair value with its change consolidated in 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 in the period. 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 in the period. 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 with its change consolidated in profit/loss or loan commitments that are not designated at fair value with its change consolidated in profit/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 97 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 consideration paid (including non-cash assets transferred out or new financial liability assumed) is recognized in current profit or loss. (4) Impairment of financial assets The carrying values of all financial assets except financial assets at fair value with its change included in profit or 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. 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 98 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 of the period. 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 current 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 current profit or loss. 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 99 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 Decrease in closing fair value relative to the in 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 trade 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) Trade 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. 12. Inventories √Applicable □Not Applicable (1) Classification of inventories: 100 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 current 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 101 / 207 2017 Interim Report Qingdao Haier Co., Ltd provision in prior years are not in effect in current year, provision would be reversed within the impaired cost, and recognized in the current 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 √Applicable □Not Applicable 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 102 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 with its change consolidated in profit/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 recognized after adjustment on the ground of the fair 103 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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. 104 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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 current profit or loss. 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; 105 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 106 / 207 2017 Interim Report Qingdao Haier Co., Ltd value and the recoverable amount. Impairment is not reversed in subsequent periods. 15. Fixed assets (1) Recognition criteria √Applicable □Not Applicable 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 have made provisions for all of the fixed assets except for the fixed assets with full provision and used continuously. Type of fixed assets Useful lives Expected net residual 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. 107 / 207 2017 Interim Report Qingdao Haier Co., Ltd (4) Basis for Recognition, measurement and depreciation of fixed assets held under finance lease √Applicable □Not Applicable 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 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 √Applicable □Not Applicable (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; 108 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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 √Applicable □Not Applicable (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 period 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 109 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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. (1) 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. (2) 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 110 / 207 2017 Interim Report Qingdao Haier Co., Ltd could not be estimated after considering the industrial practice or relevant expert opinion. 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 exploration; before commercial production or other uses, the application of achievements and other knowledge 111 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 current profit or loss when incurred. 19. Impairment of long-term assets √Applicable □Not Applicable 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. 112 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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 prepayments √Applicable □Not Applicable 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. Remuneration of employees Remuneration of employees are all forms of compensation and other relevant expenditure given by the Company in exchange for services rendered by employees, including short-term remuneration, post-employment benefits, termination benefits and other long-term benefits. Short-term remuneration 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 the current 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 113 / 207 2017 Interim Report Qingdao Haier Co., Ltd is classified as defined contribution plans and defined benefit pension 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 current 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 service offered by employee for the period. 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 current 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 the current 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 of the period when recognition conditions for accrued liabilities are met. 114 / 207 2017 Interim Report Qingdao Haier Co., Ltd 22. Estimated liabilities √Applicable □Not Applicable (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 fall 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 √Applicable □Not Applicable 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 115 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 balance sheet date within the vesting period, the services acquired in the period 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 balance sheet date and the settlement date prior to the settlement of liabilities, the fair value of the liability is re-measured with its change included in profit or 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 current 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. 116 / 207 2017 Interim Report Qingdao Haier Co., Ltd 24. Revenue √Applicable □Not Applicable (1) Sale of goods 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 current profit or loss, and no revenue from the rendering of services may be recognized. 117 / 207 2017 Interim Report Qingdao Haier Co., Ltd (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 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 the period 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 period. 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 period 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 period. 118 / 207 2017 Interim Report Qingdao Haier Co., Ltd (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. 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 current 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 income tax assets / deferred income tax liabilities √Applicable □Not Applicable Deferred income tax assets and deferred income 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 119 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 income 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 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 income 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 income 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). Accounting treatment of operating lease √Applicable □Not Applicable 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. 120 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 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). Accounting treatment of Finance lease √Applicable □Not Applicable 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. CHANGES ON SIGNIFICANT ACCOUNTING POLICES AND ACCOUNTING ESTIMATES (1). Changes on Significant Accounting Policies √Applicable □Not Applicable (1)Changes on accounting policies 121 / 207 2017 Interim Report Qingdao Haier Co., Ltd On 28 April 2017, the CAIKUAI No. [2017]13 the Accounting Standards for Enterprises No. 42—Non-current assets held for sale, disposal group and termination operations was issued by MOF, which was implemented since 28 May 2017. On 10 May 2017, the CAIKUAI No. [2017]15 The Accounting Standards for Enterprises No. 16—Government‘s Subsidies (revised in 2017) was issued by MOF, which was implemented since 12 June 2017. The Company carried out the aforesaid two standards according to the time required by MOF. Before carrying out the Accounting Standards for Enterprises No. 16—Government‘s Subsidies (revised in 2017), the government‘s subsidies gained by the Company were included in the non-operating income. After carrying out the Accounting Standards for Enterprises No. 16—Government‘s Subsidies (revised in 2017), the Company adopted the future applicable method to deal with the government‘s subsidies exiting on 1 January 2017 and adjusted the additional government‘s subsidies during the period from 1 January 2017 to the implementation date of this standard; for the government‘s subsidies occurred after 1 January 2017 and not related to the daily activities, they were included in net operating costs and management expenses, or included in other revenue; the government‘s subsidies not related to the daily activities was included in non-operating income. The changes on the accounting policies and adjustment on the accounting item calculation have only effect on the financial statements and will not have effect on the profit or loss, total assets and net assets of the Company without involving retroactive adjustments on the prior years. (2). Changes on Significant Accounting Estimates √Applicable □Not Applicable There is no change on the accounting estimates of the Company in the period. 29. 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. 122 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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; 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. 123 / 207 2017 Interim Report Qingdao Haier Co., Ltd (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: 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 current 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 current 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 current profit or loss over the remaining term from adjustment to maturity. Amortization based on the effective interest method 124 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 current 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 current profit or loss. The changes in the fair value of the hedging instrument are also recognized in the current 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 current profit or loss. Amounts taken to capital reserve (other capital reserve) are transferred to the current profit or loss when the hedged transaction affects the current 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 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 current 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 current 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 current 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 current profit or loss. When deal with foreign operation, any accumulated profit or loss attributable to shareholders‘ equity will be transferred to the current profit or loss. (4) Explanations on significant accounting estimates 125 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 the period, relevant adjustment due to the effect shall be recognized in the period; 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 Estimated liability 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 Provision 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 impairment 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 whose costs are 126 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 for 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 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 127 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 income tax assets Deferred income tax asset is recognized for all the uncompensated tax losses to the extent that there is 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 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. ⑩ Returned profits from sales The Company and its subsidiaries adopt the policy of returned profits from sales 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 make returned profits from sales on a regular basis with reference to the completion of agreed assessment indexes. Provisions of returned profits from sales 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 returned profits from sales during the period when significant changes occur. 128 / 207 2017 Interim Report Qingdao Haier Co., Ltd VI. Taxation 1. Main tax types and tax rates √Applicable □Not Applicable Tax type Basis of taxation Tax rate Value-added tax Taxable revenue of goods sales and 5%, 6%, 11%, 17% taxable labor services revenue Urban maintenance and 7% Turnover tax amount payable construction tax EIT Statuary tax rate or Income tax amount payable preferential rates as follows (Local) education 1%, 2%, 3% Turnover tax amount payable surcharges 2. Preferential tax √Applicable □Not Applicable Companies enjoying preferential tax and preferential tax rate: Name of company Tax rate Preferential tax entitled to the preferential taxation policies Qingdao Haier Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Refrigerator Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Intelligent Electronics Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Special Refrigerator Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Dishwasher Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Special Freezer Co., Ltd. 15% as a hi-tech enterprise Qingdao Haier Intelligent Home Appliance Technology entitled to the preferential taxation policies 15% Co., Ltd as a hi-tech enterprise entitled to the preferential taxation policies Wuhan Haier Electronics Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Wuhan Haier Freezer Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Hefei Haier Refrigerator Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Hefei Haier Air-conditioning Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Zhengzhou Haier Air-conditioning Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Shenyang Haier Refrigerator Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Chongqing Haier Air-conditioning Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Chongqing Haier Refrigeration Appliance Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Guizhou Haier Electronics Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Qingdao Haier Air-Conditioner Electronics Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Moulds Co., Ltd. 15% as a hi-tech enterprise 129 / 207 2017 Interim Report Qingdao Haier Co., Ltd entitled to the preferential taxation policies Qingdao Meier Plastic Powder Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Chongqing Haier Precision Plastic Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Chongqing Haier Intelligent Electronics Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Qingdao Haigao Design & Manufacture Co., Ltd. 15% as a hi-tech enterprise Qingdao Haier Technology Co., Ltd. 10% significant software enterprise tax preferential entitled to the preferential taxation policies Qingdao Hairi High Technology Molding Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier (Jiaozhou) Air-Comditioner Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Beijing Haier Guangke Digital Technology Co., Ltd. 15% as a hi-tech enterprise Qingdao Haier Intelligent Technology Development entitled to the preferential taxation policies 15% Co., Ltd. as a hi-tech enterprise entitled to the preferential taxation policies Foshan Haier Freezer Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential policies as a Wuhan Haier Energy and Power Co., Ltd. 10% small and micro enterprise entitled to the preferential taxation policies Hefei Haier Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Jiaonan Haier Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Drum Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Foshan Shunde Haier Electric Appliance 15% as a hi-tech enterprise Qingdao Economy and Technology Development Zone entitled to the preferential taxation policies 15% Haier Water Heater Co., Ltd. as a hi-tech enterprise entitled to the preferential taxation policies Wuhan Haier Water Heater Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Foshan Drum Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Goodaymart Logistic Co., Ltd. 15% as a hi-tech enterprise Shengfeng Supply Chain Co., Ltd. (盛丰供应链有限 entitled to the preferential taxation for 15% enterprises in Pingtan Comprehensive 公司) ExperimentaltheArea entitled to preferential taxation policies Chongqing Goodaymart Electronics Sales Co., Ltd. 15% under the Western Development initiative Chongqing Haier Home Appliance Sale Co., Ltd. and the PRCto the preferential taxation policies entitled 15% under the Western Development initiative some branches in western region Chongqing Goodaymart Electronics Sales Co., Ltd. and the PRCto the preferential taxation policies entitled 15% under the Western Development initiative some branches in western region the PRCto the preferential taxation policies entitled Chongqing Haier Washing Machine Co., Ltd. 15% under the Western Development initiative the PRCto the preferential taxation policies entitled Chongqing Haier Water Heater Co., Ltd. 15% under the Western Development initiative Chongqing Haier Drum Washing Machine Co., the PRCto the preferential taxation policies entitled 15% Ltd. under the Western Development initiative the PRC VII. Explanatory Notes for Items in Consolidated Financial Statements Unless otherwise specified, the following closing balance means the amount as at 30 June 2017; opening balance means the amount as at 31 December 2016; current period means the amount incurred 130 / 207 2017 Interim Report Qingdao Haier Co., Ltd from 1 January to 30 June 2017, while the previous period means the amount incurred from 1 January to 30 June 2016. 1. Monetary funds √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Treasury cash 593,053.62 565,073.32 Bank deposit 28,737,845,846.53 23,191,076,580.34 Other monetary 358,553,841.65 312,992,470.59 funds Total 29,096,992,741.80 23,504,634,124.25 Among which: total of overseas amounts 2,549,100,263.21 2,075,691,395.39 Other explanatory An amount of RMB12,786,629,814.46 of the monetary fund was deposited in Haier Group Finance Co., Ltd. on 30 June 2017, the balance of which including a fixed term bank deposit of RMB984,312,683.26. The investment fund in the closing balance of other monetary fund was RMB15,017,278.47, the payment of the third party platform was RMB19,061,914.99 and the amount securing bill payable was RMB324,474,648.19. 2. Financial asset designated to be measured at fair value and the change of which is recorded in current profit and loss √Applicable □Not Applicable Items Closing balance Opening balance Forward foreign exchange sale and 36,973,157.40 80,432,384.17 purchase agreement Total 36,973,157.40 80,432,384.17 3. Bills receivable (1) Categories of bills receivable √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Bank acceptance notes 1,904,187,025.49 3,410,072,113.31 Commercial acceptance bill 10,447,196,998.28 10,386,489,124.74 Total 12,351,384,023.77 13,796,561,238.05 (2) The pledged bills receivable of the Company at the end of the period was RMB 9,520,989,005.71. 4. Accounts receivables (1) Accounts receivables disclosed by categories: Closing balance Opening balance Items 131 / 207 2017 Interim Report Qingdao Haier Co., Ltd Provision for Provision for Book balance Book balance bad debts bad debts Accounts receivables that are individually significant and are subject to provision for bad debts on individual basis Accounts receivables that are subject to provision for bad 15,236,801,608.65 474,861,071.65 12,585,181,476.76 337,937,379.10 debts on portfolio basis Accounts receivables that are individually insignificant but 41,445,442.87 41,445,442.87 71,243,900.12 71,243,900.12 are subject to provision for bad debts on individual basis Total 15,278,247,051.52 516,306,514.52 12,656,425,376.88 409,181,279.22 (2) Accounts receivables of which provision for bad debts is made within the group: Closing balance Opening balance Aging Book balance Provision for bad Book balance Provision for bad debts debts Within 1 14,953,048,631.15 460,673,422.77 12,281,406,481.14 322,748,629.33 year 1-2 177,724,889.08 8,886,244.45 200,752,072.44 10,037,603.63 years 2-3 58,520,469.57 2,926,023.49 79,398,804.14 3,969,940.20 years Over 3 47,507,618.85 2,375,380.94 23,624,119.04 1,181,205.94 years Total 15,236,801,608.65 474,861,071.65 12,585,181,476.76 337,937,379.10 (3) The total amount of the top 5 in the accounts receivables at the end of the period was RMB4,962,485,545.70, accounting for 32.48% of the book balance of the accounts receivables, and the amount of provision for bad debts was RMB82,125,551.23. (4) Provisions for bad debts made, collected or reversed in the period: Provisions for bad debts in the amount of RMB116,172,298.97 were reverted in the period. (5) Accounts receivable written off in the period: The bad debts written off in 2017 was RMB1,953,553.65, and there was no significant accounts receivable written off in the period. 5. Prepayments (1) Aging of prepayments √Applicable □Not Applicable Unit and Currency: RMB Closing balance Opening balance Aging Amount Proportion (%) Amount Proportion (%) Within 1 year 717,127,435.94 96.59 547,842,144.20 94.69 1-2 years 16,207,046.99 2.18 20,243,191.67 3.50 132 / 207 2017 Interim Report Qingdao Haier Co., Ltd 2-3 years 8,672,215.67 1.17 9,492,337.02 1.64 Over 3 years 467,883.90 0.06 965,768.51 0.17 Total 742,474,582.50 100.00 578,543,441.40 100.00 (2) The total amount of the top 5 in the prepayments at the end of the period was RMB289,762,024.09, accounting for 39.03% of the book balance of the prepayments. 6. Interest receivables Closing balance Opening balance Aging Book balance Proportion Book balance Proportion Within 1 year 146,249,181.03 99.99% 133,777,402.17 98.86% 1-2 years 19,428.14 0.01% 1,542,372.24 1.14% Total 146,268,609.17 100.00% 135,319,774.41 100.00% 7. Other receivables (1) Other receivables disclosed by categories: Closing balance Opening balance Items Provision for Provision for Book balance Book balance bad debts bad debts Individual significant other receivables of which provision for bad debts is made on an individual basis Other receivables of which provision for bad debts is 1,149,816,482.93 61,496,497.04 1,217,243,603.74 36,825,550.99 made on a group basis Individual insignificant other receivables of which provision 35,984,245.50 35,984,245.50 61,449,863.58 61,449,863.58 for bad debts is made on an individual basis Total 1,185,800,728.43 97,480,742.54 1,278,693,467.32 98,275,414.57 (2) Other receivables of which provision for bad debts is made on portfolio basis: Closing balance Opening balance Aging Provision for Provision for Book balance Book balance bad debts bad debts Within one year 892,156,530.72 48,613,499.42 872,780,892.61 19,602,415.43 1-2 years 187,197,706.55 9,359,885.33 288,221,508.15 14,411,075.41 2-3 years 50,108,989.39 2,505,449.47 37,909,711.73 1,895,485.59 Over 3 years 20,353,256.27 1,017,662.82 18,331,491.25 916,574.56 Total 1,149,816,482.93 61,496,497.04 1,217,243,603.74 36,825,550.99 133 / 207 2017 Interim Report Qingdao Haier Co., Ltd (3) At the end of the period, total amount of top five other receivables was RMB229,205,981.58, representing19.33% of the book balance of other receivables, and the amount of provision for bad debts was RMB11,460,299.08. (4) Bad-debt provisions made, collected or reversed in the period: Provisions for bad debts in the amount of RMB8,697,165.94 were made in the period. (5) The other receivables actually written off in the period was RMB1,460,605.99. (6) Other receivables mainly include the deposit, the quality retention money, staff borrowing, tax refunds, and advance money for another, etc. 8. Inventories (1) Details of inventories Closing balance Opening balance Items Impairment Impairment Book balance Book balance Provision Provision Raw materials 2,776,960,468.75 60,670,393.92 2,086,007,432.32 56,844,901.08 Work in 295,441,627.87 216,384,326.73 progress Unsettled payments of 179,021,325.97 159,358,411.30 completed projects Finished goods 14,486,084,231.54 450,474,185.11 13,317,467,752.08 484,430,600.50 Total 17,737,507,654.13 511,144,579.03 15,779,217,922.43 541,275,501.58 (2) Impairment provision of inventories Opening Increase for Decrease for the period Closing Items balance the period Reversal Write-off Total balance Raw material 56,844,901.08 8,630,598.81 4,805,105.97 4,805,105.97 60,670,393.92 s Finished 484,430,600.50 105,868,842.00 16,791,944.90 123,033,312.49 139,825,257.39 450,474,185.11 goods Total 541,275,501.58 114,499,440.81 16,791,944.90 127,838,418.46 144,630,363.36 511,144,579.03 (3) Unsettled payments of completed projects from the construction contracts at the end of the period Unsettled payments Accumulatively Accumulated cost of completed projects recognized gross Settled Amounts incurred from the construction profit contracts 885,522,591.36 186,318,837.63 892,820,103.02 179,021,325.97 134 / 207 2017 Interim Report Qingdao Haier Co., Ltd 9. Other current assets √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Bank Treasury deposit 1,052,649,331.20 490,807,882.39 Deductable VAT 1,089,684,914.18 1,794,827,965.32 Others 533,999,789.09 367,808,740.41 Total 2,676,334,034.47 2,653,444,588.12 10. Available-for-sale financial assets (1). Information of available-for-sale financial assets √Applicable □Not Applicable Unit and Currency: RMB Closing balance Opening balance Provision Provision Items Carrying for Carrying for Book value Book value Balance impairmen balance impairmen t t Available-for-sal e debt instrument: At fair value 27,584,986.24 27,584,986.24 30,354,194.80 30,354,194.80 At cost 1,497,712,577.4 3,225,000.0 1,494,487,577.4 1,528,749,522.2 3,225,000.0 1,525,524,522.2 9 0 9 5 0 5 Total 1,525,297,563.7 3,225,000.0 1,522,072,563.7 1,559,103,717.0 3,225,000.0 1,555,878,717.0 3 0 3 5 0 5 (2). Available-for-sale financial assets at fair value at the end of the period √Applicable □Not Applicable Unit and Currency: RMB Categories of available-for-sale financial assets Available-for-sale equity instrument Cost of equity instrument / Amortization cost of debt 23,030,899.36 instruments Fair value 27,584,986.24 Accumulated fair value changes credited into other 3,765,777.42 comprehensive income Allowance for impairment amounts (3) Available-for-sale financial assets at cost at the end of the period Increase for Decrease for Opening balance Closing balance Book value the period the period (1) Book value China Petrochemical Marketing Co., Ltd. 1,379,537,271.77 41,756,944.76 1,337,780,327.01 Others 149,212,250.48 10,720,000.00 159,932,250.48 Total 1,528,749,522.25 10,720,000.00 41,756,944.76 1,497,712,577.49 (2) Provision for impairment China Petrochemical Marketing Co., Ltd. Others 3,225,000.00 3,225,000.00 135 / 207 2017 Interim Report Qingdao Haier Co., Ltd Total 3,225,000.00 3,225,000.00 (3) Book value China Petrochemical Marketing Co., Ltd. 1,379,537,271.77 1,337,780,327.01 Others 145,987,250.48 156,707,250.48 Total 1,525,524,522.25 1,494,487,577.49 (4) Movement in impairment of available-for-sale financial assets during the reporting period: Provision for impairment of Items available-for-sale equity instrument Provision balance at the beginning of the period 3,225,000.00 Provision made in the year Decrease in the year Allowance for impairment amounts at the end of the period 3,225,000.00 11. Long-term equity investments √Applicable □Not Applicable Increase/decrease in the period Investment Investees Opening balance Adjustment in income Other Declaration of Investments other recognized changes cash dividends increased comprehensive under equity in equity or profits income method Associates: Haier Group Finance 4,108,505,917.07 291,954,914.37 -13,419,311.99 Co., Ltd. CONTROLADORA 3,011,983,426.16 99,292,057.77 -67,495,468.99 -34,405,195.14 MABE S.A.deC.V. Bank of Qingdao co., 1,670,058,752.11 120,813,257.79 -38,386,695.61 80,302.33 -76,868,844.93 Ltd. Others 2,267,271,532.80 73,900,402.83 -3,044,759.55 -635,022.00 Total 11,057,819,628.14 585,960,632.76 -122,346,236.14 80,302.33 -111,909,062.07 continued table Increase/decrease in the Closing period balance of Investees The disposal Closing balance provision for Others of the impairment investment Associates: Haier Group Finance Co., Ltd. 4,387,041,519.45 CONTROLADORA MABE S.A.deC.V. 3,009,374,819.80 Bank of Qingdao Co., Ltd. 1,675,696,771.69 Others -1,412.06 2,337,490,742.02 Total -1,412.06 11,409,603,852.96 136 / 207 2017 Interim Report Qingdao Haier Co., Ltd 12. Investment Property Measurement method of investment property (1)Increase and decrease of investment property under cost model for the year are set out as follows: Increase for the Decrease for Items Opening balance Closing balance period the period (1) Total original costs for the investment property 48,177,608.70 48,177,608.70 House, buildings and land 48,177,608.70 48,177,608.70 (2) Total accumulated amortization for the investment property 13,577,215.33 1,598,885.53 15,176,100.86 House, buildings and land 13,577,215.33 1,598,885.53 15,176,100.86 (3) Total accumulated provision for Impairment for the investment property House, buildings and land (4) Total book value for the investment property 34,600,393.37 33,001,507.84 House, buildings and land 34,600,393.37 33,001,507.84 (2) Depreciated and amortized amount for the period was RMB1,598,885.53 . (3) No provision for impairment was made as the recoverable amount of investment property was not less than the book value of the Company at the end of the period. 13. Fixed assets Translation Category of Increase for the Decrease for the difference of Opening balance Closing balance fixed assets period period foreign statement (1) Book value Buildings and 7,652,338,608.01 433,347,676.33 51,878,482.18 -16,785,873.42 8,017,021,928.74 structures Production 14,438,121,707.48 766,847,799.16 529,943,303.01 -137,737,266.55 14,537,288,937.08 equipment Transportation 271,648,884.84 37,348,694.81 22,795,160.60 -238,885.49 285,963,533.56 equipment Office 342,983,520.59 32,516,766.33 15,623,601.59 2,735,077.77 362,611,763.10 equipment Others 650,939,331.36 59,071,020.49 14,114,192.77 149,396.50 696,045,555.58 Total 23,356,032,052.28 1,329,131,957.12 634,354,740.15 -151,877,551.19 23,898,931,718.06 (2) Accumulated depreciation Buildings and 2,108,838,241.54 195,540,739.34 6,235,233.83 3,513,041.09 2,301,656,788.14 structures Production 5,057,054,706.21 855,206,553.36 427,035,029.94 -16,597,867.64 5,468,628,361.99 equipment Transportation 138,946,612.53 25,090,929.34 20,511,544.12 4,867.60 143,530,865.35 equipment Office 167,977,041.68 25,767,740.80 11,266,890.39 3,126,599.76 185,604,491.85 equipment 137 / 207 2017 Interim Report Qingdao Haier Co., Ltd Others 304,113,366.47 52,943,714.51 12,276,594.22 66,740.94 344,847,227.70 Total 7,776,929,968.43 1,154,549,677.35 477,325,292.50 -9,886,618.25 8,444,267,735.03 (3) Net book value Buildings and 5,543,500,366.47 5,715,365,140.60 structures Production 9,381,067,001.27 9,068,660,575.09 equipment Transportation 132,702,272.31 142,432,668.21 equipment Office 175,006,478.91 177,007,271.25 equipment Others 346,825,964.89 351,198,327.88 Total 15,579,102,083.85 15,454,663,983.03 (4) Provision for impairment Buildings and 31,269,149.66 551,222.80 31,820,372.46 structures Production 8,658,226.28 1,212,979.39 59,397.92 7,504,644.81 equipment Transportation 1,959.66 57.61 2,017.27 equipment Office equipment Others 125,862.87 3,699.94 129,562.81 Total 40,055,198.47 1,212,979.39 614,378.27 39,456,597.35 (5) Book value Buildings and 5,512,231,216.81 5,683,544,768.14 structures Production 9,372,408,774.99 9,061,155,930.28 equipment Transportation 132,700,312.65 142,430,650.94 equipment Office 175,006,478.91 177,007,271.25 equipment Others 346,700,102.02 351,068,765.07 Total 15,539,046,885.38 15,415,207,385.68 (1) Total fixed asset transferred from construction-in-progress balance for the period amounted to RMB952,220,110.22. (2) Haier Group Corporation, the parent company of the Company, issued an undertaking letter to the Company, committing that it will ensure the Company and its subsidiaries use the self-established buildings and the Group‘s lands in a continuous, steady, free and undisturbed condition. If Haier Group Corporation suspended or terminated to fulfill its commitment and obligation as leading to any loss of the Company and its subsidiaries, Haier Group Corporation shall take responsibility for the loss. As for the legal defects of the Company‘s and its substantial subsidiaries‘ land and property, the Company committed since the application date of non-public issue, the Company will use all reasonable commercial endeavors to solve the real estate defects of the Company and its substantial subsidiaries within five years to realize the legal compliance of the Company‘s and its substantial subsidiaries in respect of the land and property. 138 / 207 2017 Interim Report Qingdao Haier Co., Ltd (3) The pledged fixed assets were RMB81,743,670.84 at the end of the period. (4) The rental financial fixed assets at the end of the period: Items Category of fixed assets Closing balance Transportation (1) Book amount 22,814,833.51 equipment (2) Accumulated Transportation 15,957,810.14 depreciation equipment Transportation (3) Net book value 6,857,023.37 equipment (4) Provision for Transportation impairment equipment Transportation (5) Book value 6,857,023.37 equipment 14. Construction in progress (1)Balance of Construction in progress Transl ation Percentag Increase for Other differe e Opening Transfer to Closing Source Projects decrea nce of of balance the period fixed assets se foreign balance completio of fund statem n ent Chongqing Self-financin Household Air 6,842,989.46 7,588,173.68 5,922,702.16 8,508,460.98 37% g Conditioner Hefei Self-financin 55,163,303.93 18,362,697.97 23,524,063.01 50,001,938.89 90% g Refrigerator Qingdao Special 170,360,757.1 152,926,522.7 Self-financin 8,289,732.63 25,723,967.04 90% g Freezer 4 3 Jiaozhou 101,053,559.4 109,619,773.7 Self-financin 56,412,093.13 47,845,878.84 80% g Air-Conditioner 7 6 Zhengzhou Self-financin 19,107,519.72 10,020,612.83 9,386,533.84 19,741,598.71 92% g Air-Conditioner Shenyang Self-financin 97,330,292.25 21,301,657.51 76,028,634.74 97% g Refrigerator Qingdao Special Self-financin 28,632,842.95 1,603,930.17 16,080,184.75 14,156,588.37 89% g Refrigerator Qingdao Central 228,836,416.9 Self-financin 238,645,406.28 33,122,218.05 42,931,207.39 50% g Air-Conditioner 4 Electrical Self-financin 20,115,831.80 30,870,745.58 10,739,702.52 40,246,874.86 83% g Air-Conditioner Qingdao Electric Self-financin 29,200,218.71 13,223,612.84 32,623,242.60 9,800,588.95 96% g Water Heater Qingdao Haier Self-financin New Energy g 18,685,374.13 13,786,228.70 4,899,145.43 70% Electric Appliance Qingdao Self-financin DrumWashing 7,459,337.17 47,704,178.54 7,115,180.39 48,048,335.32 90% g Machine Guiyang Self-financin 74,759,310.41 14,645,496.03 89,404,806.44 100% g Logistics Ningbo Self-financin 10,043,180.95 2,745,612.56 12,788,793.51 95% g Logistics Nanchang Self-financin 58,160,947.88 4,945,694.90 63,106,642.78 100% g Logistics 139 / 207 2017 Interim Report Qingdao Haier Co., Ltd Changchun Self-financin 32,420,922.88 6,385,066.90 38,805,989.78 10% g Logistics ChongqingWater Self-financin 29,059,692.94 1,289,540.29 28,763,763.16 1,585,470.07 95% g Heater 222,00 Self-financin Japan Projects 16,543,086.12 4,615,815.03 2,485,492.91 18,895,418.02 99% g 9.78 American -4,998, 211,905,739.8 Self-financin 209,044,715.11 7,859,742.24 43% g Projects 717.52 3 201,959,089.9 2,735,1 305,518,408.1 Self-financin 100,824,148.31 51% g India Projects 9 69.83 3 496,086,859.8 384,276,300.4 -4,292, 762,807,412.6 Self-financin 655,289,847.51 g Others 7 9 994.29 0 1,772,030,794. 1,174,443,404 952,220,110.2 -6,334, 1,987,919,555 Total 27 .08 2 532.20 .93 (2) Provision for impairment of construction in progress Transfer Translation Opening Increase for Other difference of Closing Name of Projects to fixed balance the period decrease foreign balance assets statement Others 2,155,743.92 -59,043.82 2,096,700.10 15. Disposals of fixed assets √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance International Refrigerator 55,808,808.81 55,808,808.81 Project Others 247,263.34 Total 56,056,072.15 55,808,808.81 16. Intangible assets Translation Increase for the Decrease for difference of Categories Opening balance Closing balance period the period foreign statement (1) Original value Technical expertise 773,207,000.00 -18,048,600.00 755,158,400.00 Concession 3,933,279,000.00 54,885,200.00 -91,504,200.00 3,786,889,600.00 Land use rights 1,565,093,116.98 96,812,489.11 -279,293.23 1,661,626,312.86 Management software 494,936,735.56 85,396,589.20 7,657,775.57 -14,448,081.95 558,227,467.24 Trademark rights 659,015,000.00 -15,447,000.00 643,568,000.00 Others 311,513,042.00 54,716,231.30 6,046,551.77 -1,402.31 360,181,319.22 Total 7,737,043,894.54 236,925,309.61 68,589,527.34 -139,728,577.49 7,765,651,099.32 (2) Accumulated amortization Technical expertise 48,117,075.00 38,076,607.50 -1,531,522.50 84,662,160.00 Concession 57,360,318.75 47,138,382.69 -1,937,108.12 102,561,593.32 Land use rights 138,512,078.55 24,703,473.87 -78,212.99 163,137,339.43 Management 171,110,669.67 60,207,198.69 2,359,017.38 -7,257,212.50 221,701,638.48 140 / 207 2017 Interim Report Qingdao Haier Co., Ltd software Trademark rights Others 79,523,273.13 3,645,059.12 814,091.29 -85,829.82 82,268,411.14 Total 494,623,415.10 173,770,721.87 3,173,108.67 -10,889,885.93 654,331,142.37 (3) Net book value Technical expertise 725,089,925.00 670,496,240.00 Concession 3,875,918,681.25 3,684,328,006.68 Land use rights 1,426,581,038.43 1,498,488,973.43 Management software 323,826,065.89 336,525,828.76 Trademark rights 659,015,000.00 643,568,000.00 Others 231,989,768.87 277,912,908.08 Total 7,242,420,479.44 7,111,319,956.95 (4) Provision for impairment Technical expertise Concession Land use rights Management software Trademark rights Others Total (5) Book value Technical expertise 725,089,925.00 670,496,240.00 Concession 3,875,918,681.25 3,684,328,006.68 Land use rights 1,426,581,038.43 1,498,488,973.43 Management software 323,826,065.89 336,525,828.76 Trademark rights 659,015,000.00 643,568,000.00 Others 231,989,768.87 277,912,908.08 Total 7,242,420,479.44 7,111,319,956.95 At the end of the period, the intangible assets arise from internal research and development accounting for 3.10% of the original value at the end of the period. 17. Development expenses Decrease for the period Translation Charged to Opening Increase for difference of Closing Items profit or Recognized as an balance the period foreign balance loss for the intangible asset statement period U+ platform 5,088,000.00 2,080,000.00 7,168,000.00 construction 91ABD.ERPP 857,168,622.06 100,469,404.51 50,340,000.23 -20,721,838.67 886,576,187.67 ROGRAM Others 51,027,174.26 17,362,112.49 13,575,595.58 -1,243,655.90 53,570,035.27 Total 913,283,796.32 119,911,517.00 63,915,595.81 -21,965,494.57 947,314,222.94 141 / 207 2017 Interim Report Qingdao Haier Co., Ltd 18. Goodwill Impact of Decrease Increase for fluctuation in Items Opening balance for the Closing balance the period exchange rate period for the period GEA 20,611,638,212.84 -479,879,314.56 20,131,758,898.28 Furniture after-sales service 6,123,000.00 6,123,000.00 business Shanghai Boyol New Brothers Supply Chain 68,407,241.86 68,407,241.86 Management Company Limited Greenone TEC 3,298,757.75 3,298,757.75 Solarindustrie GmbH Shengfeng Logistics Group 317,954,690.69 317,954,690.69 Co., Ltd Total 21,004,123,145.39 3,298,757.75 -479,879,314.56 20,527,542,588.58 (1) The Company additionally acquired RMB3,298,757.75 of goodwill of Greenone TEC Solarindustrie GmbH. The subsidiaries of the Company paid considerations of RMB60,307,603.61 to acquire 51% equity interest of Greenone TEC Solarindustrie GmbH. On 17 May 2017, the fair value of the equity interest was RMB57,008,845.86, the difference between the cost of business combination and the share of fair value of identifiable assets acquired is recognized as goodwill. (2) The Company calculates the recoverable amount of the asset groups by estimating the present value of future cash flows. According to the cash flows in the next five to ten years based on the financial budget approved by the management, the perpetual growth rate of cash flow in the next years is estimated to be 2% to 4%, not more than the long-term average growth rate of the asset group business. The discount rate is within the range of 9.00% to 15.00%. The management prepares the financial budget above based on the past performance and market development forecasts. Pursuant to the result of impairment test, no goodwill has been impaired by the end of the period. 19. Long-term deferred expenditures Translation Increase Amortization difference for amount for the amount for the Other Items Opening balance foreign Closing balance period period deductions currency statement Renovation fee 23,495,429.77 128,243.23 448,313.99 9,438,849.35 13,736,509.66 Expenditure for 45,710,143.55 1,473,799.09 4,940,728.54 42,243,214.10 142 / 207 2017 Interim Report Qingdao Haier Co., Ltd reconstruction of leased plant Others 46,568,019.46 3,886,471.19 4,445,646.49 16,048,924.84 -110,118.36 29,849,800.96 Total 115,773,592.78 5,488,513.51 9,834,689.02 25,487,774.19 -110,118.36 85,829,524.72 20. Deferred income tax assets/liabilities (1) The deferred income tax assets without consideration of the offsetting of balances Items Closing balance Opening balance Provision for assets impairment 157,822,525.86 206,179,413.32 Liabilities 1,329,411,456.74 1,588,572,631.81 Internal unrealized profit due to 335,437,189.29 306,515,615.29 consolidation Others 16,343,978.99 10,774,534.11 Total 1,839,015,150.88 2,112,042,194.53 (2) Deferred income tax liabilities without consideration of the offsetting of balances Items Closing balance Opening balance Changes of the fair value 20,023,745.00 30,458,666.66 Disposal of subsidiaries and 117,683,479.17 111,105,965.55 available-for-sale financial assets Reserved foreign enterprise income 70,702,527.50 38,629,859.78 tax Depreciation and amortization of assets and the difference of the tax 149,007,109.32 461,236,134.20 laws Interest rate swap agreement 3,532,757.81 6,663,731.01 Others 1,276,928.69 5,181,579.42 Total 362,226,547.49 653,275,936.62 (3) The deferred income tax assets and the deferred income tax liabilities offset at the end of the period was RMB199,095,918.97. 21. Other non-current assets √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Prepayments for equipment and 687,050,969.23 776,647,520.39 land Others 94,672,669.81 81,813,868.47 Total 781,723,639.04 858,461,388.86 22. Short-term borrowings (1). Classification of short - term borrowings √Applicable □Not Applicable Unit and Currency: RMB 143 / 207 2017 Interim Report Qingdao Haier Co., Ltd Items Closing balance Opening balance Pledged borrowings 3,048,480,000.00 3,994,850,204.62 Mortgage loan 53,000,000.00 23,000,000.00 Guaranteed borrowings 60,000,000.00 6,950,000,000.00 Unsecured borrowings 8,824,315,621.88 7,197,681,674.53 Total 11,985,795,621.88 18,165,531,879.15 23. Financial liabilities designated to be measured by fair value and change of which is recorded in current profit or loss Items Closing balance Opening balance Forward foreign exchange sale 70,573,461.47 2,340,213.20 and purchase agreement Total 70,573,461.47 2,340,213.20 24. Bills payable √Applicable □Not Applicable Unit and Currency: RMB Categories Closing balance Opening balance Commercially acceptance 2,436,569,579.83 1,725,416,481.48 bill Bank acceptance bill 13,072,010,243.47 10,679,473,278.57 Total 15,508,579,823.30 12,404,889,760.05 25. Accounts payables Items Closing balance Opening balance Accounts payables 24,835,266,362.14 20,594,203,310.08 Total 24,835,266,362.14 20,594,203,310.08 The book balance at the end of the period was mainly the unpaid expenditures on material, equipment and labor. 26. Prepayment Items Closing balance Opening balance Prepayment 4,149,761,184.38 5,734,732,855.06 Total 4,149,761,184.38 5,734,732,855.06 The book balance at the end of the period was mainly the prepayment. 27. Payables for staff’s remuneration (1) Presentation of payables for staff’s remuneration √Applicable □Not Applicable Unit and Currency: RMB Opening Increase for Decrease for Closing Items balance the period the period balance Ⅰ. Short-term 2,197,223,036.69 6,259,845,612.47 6,593,250,259.75 1,863,818,389.41 remuneration Ⅱ. Post-employment 190,360,845.76 518,368,391.98 436,636,832.14 272,092,405.60 144 / 207 2017 Interim Report Qingdao Haier Co., Ltd benefits-defined contribution plan Ⅲ. Termination benefits 16,796,576.14 282,321.44 12,688,606.42 4,390,291.16 Ⅳ . Other welfare due within one year Total 2,404,380,458.59 6,778,496,325.89 7,042,575,698.31 2,140,301,086.17 (2) Presentation of short-term remuneration Opening Increase for the Decrease for the Closing Items balance period period balance Ⅰ. Salaries, bonus, allowance 1,082,738,315.83 4,239,906,530.00 4,525,560,614.86 797,084,230.97 and benefit Ⅱ. Employee welfare 531,758,045.89 61,032,793.73 61,395,062.76 531,395,776.86 Ⅲ. Social benefit 91,041,425.17 594,156,530.56 542,258,303.92 142,939,651.81 Ⅳ. Housing fund 8,587,321.53 113,338,258.85 115,998,515.79 5,927,064.59 Ⅴ . Labor union fee and 2,291,456.49 33,378,658.41 33,565,669.30 2,104,445.60 education fee Ⅵ . Short-term compensated 228,698,109.89 102,222,758.81 150,455,334.78 180,465,533.92 leave Ⅶ. Others 252,108,361.89 1,115,810,082.11 1,164,016,758.34 203,901,685.66 Total 2,197,223,036.69 6,259,845,612.47 6,593,250,259.75 1,863,818,389.41 (3) Presentation of defined contribution plan √Applicable □Not Applicable Unit and Currency: RMB Opening Increase for the Decrease for the Items Closing balance balance period period 1. Basic pension insurance 189,197,049.65 505,858,856.95 424,198,406.04 270,857,500.56 2. Unemployment 700,838.23 10,818,911.06 10,942,308.27 577,441.02 insurance 3. Enterprise annuity 462,957.88 1,690,623.97 1,496,117.83 657,464.02 payment Total 190,360,845.76 518,368,391.98 436,636,832.14 272,092,405.60 (4) Presentation of termination benefits Items Closing balance Opening balance Termination compensation 4,390,291.16 16,796,576.14 Total 4,390,291.16 16,796,576.14 28. Taxes payable √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance VAT 299,239,757.63 501,344,246.89 Business tax 2,313,918.06 11,554,246.76 Enterprise income tax 835,396,732.26 930,301,189.86 145 / 207 2017 Interim Report Qingdao Haier Co., Ltd Individual income tax 20,429,927.44 19,205,381.15 Municipal maintenance tax 16,008,888.61 33,805,437.30 Education surcharge 6,003,582.15 12,144,570.87 The electrical and electronic 72,341,575.67 73,838,985.81 products waste treatment fund Additional taxes 54,714,940.66 38,269,003.47 Total 1,306,449,322.48 1,620,463,062.11 29. Interests payable Items Closing balance Opening balance Interest of long-term borrowings 51,470,134.03 15,891,113.99 Interest of short-term borrowings 25,167,665.00 14,679,214.67 Total 76,637,799.03 30,570,328.66 30. Dividends payable Company Closing balance Opening balance BRAVE LION (HK) LIMITED 122,756,874.10 122,756,874.10 Haier Electric Appliances International 312,153,836.35 Co., Ltd. Haier Group Corporation 266,007,469.47 Qingdao Haier Venture & Investment 42,718,634.88 Information Co., Ltd. HCH (HK) Investment Management Co., 50,015,733.17 Limited Social shareholders (The Company has made provision for the issuance of public 1,074,338,151.44 shares) Other minority shareholders 25,931,721.10 25,933,614.91 Total 1,893,922,420.51 148,690,489.01 31. Other payables (1). Other payables by nature √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Other payables 9,839,677,091.29 9,363,015,551.12 Total 9,839,677,091.29 9,363,015,551.12 The book balance at the end of the period mainly included the incurred but unpaid costs. 32. Non-current liabilities due within 1 year √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Long-term borrowings due 1,693,600,000.00 1,734,250,000.00 within one year Bonds payable due within one 1,223,220,143.70 year Long-term payables due within 7,363,280.46 9,338,365.85 one year 146 / 207 2017 Interim Report Qingdao Haier Co., Ltd Total 1,700,963,280.46 2,966,808,509.55 33. Long-term borrowings (1). Classification of Long-term borrowings √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Pledged borrowings Mortgage loan 31,559,245.46 Guaranteed borrowings 19,251,346,823.40 14,716,253,452.30 Credit borrowings 407,225,951.78 814,547,859.50 Total 19,690,132,020.64 15,530,801,311.80 Long-term borrowings – pledge that the interest rate is the interest rate as provided in the borrowing agreement plus London inter-bank offered rate. Long-term borrowings – guarantee that the interest rate is the interest rate as provided in the borrowing agreement plus London inter-bank offered rate. Long-term borrowings – the interest rate of domestic borrowing in the credit borrowings is the benchmark loan rate published by the People‘s Bank of China. Long-term borrowings – the interest rate of international borrowings in the credit borrowings is the interest rate as provided in the borrowing agreement plus London inter-bank offered rate. 34. Long-term payables (1). Long-term payables by nature of payment: √Applicable □Not Applicable Unit and Currency: RMB Items Opening balance Closing balance CDB development fund investment 93,000,000.00 93,000,000.00 fund Lease 22,783,382.28 23,912,770.25 Total 115,783,382.28 116,912,770.25 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. obtains 1.2% of the earnings every year in dividend or through call premium. From 2020 to 2027, the Company and its subsidiaries will repurchase the investments made by China Development Fund Co. Ltd. to the subsidiary of the Company. 147 / 207 2017 Interim Report Qingdao Haier Co., Ltd 35. Long-term payables for staff’s remuneration √Applicable □Not Applicable (1) Table of long-term payables for staff‘s remuneration Items Closing balance Opening balance I. Post-employment benefits: net liability of 542,499,881.60 837,967,757.25 defined benefit plan II. Termination benefits 49,360,971.88 51,440,750.33 III. Provision for work-related injury 300,515,968.81 317,102,409.75 compensation IV. Other long-term benefits Total 892,376,822.29 1,206,510,917.33 (2) Defined benefit plan Some subsidiaries of the Company have set several defined benefit plans for the qualified staff. In these plans, the employees are entitled to enjoy the retirement benefits agreed in such defined benefit plans. These plans are exposed to interest rate risks, changes in life expectancy of the beneficiary and other risks. The recent actuarial evaluation of the assets and the present value of defined benefit obligations under such plans are determined by using the expected cumulative welfare unit method. ①.The defined benefit plan of Haier Asia Co., Ltd. (海尔亚洲株式会社), a subsidiary of the Company Actuarial assumption used in the defined benefit plan Items Percentage I. Discount rate 1.10% II. Expected rate of return 2.00% Present value of defined benefit obligations Items Amount I. Opening balance 314,909,686.37 II. Defined benefit cost in current profit or loss 1. Current period service cost 2. Past service cost 3. Settlement profit (loss indicated in―-‖) 4. Interest expenses III. Defined benefit cost in other comprehensive incomes 148 / 207 2017 Interim Report Qingdao Haier Co., Ltd 1. Actuarial loss (gain indicated in ―-‖) IV. Other changes -10,446,044.84 1. Consideration paid upon settlement 2. Prepaid benefits -15,402,402.60 3.Exchange difference 4,956,357.76 V. Closing balance 304,463,641.53 Fair value of plan assets Items Amount I. Opening balance 300,272,483.59 II. Defined benefit cost in current profit or loss 1. Interest income III. Defined benefit cost in other comprehensive incomes 1. Return on plan assets (except those included in net interests) 2. Changes in impact of asset cap (except those included in net interests) IV. Other changes -10,667,076.44 1. Payments made by the employer 2. Prepaid benefits -15,402,402.60 3.Exchange difference 4,735,326.16 V. Closing balance 289,605,407.15 Neither the Company's common stocks 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. Defined benefit cost in current profit or loss III. Defined benefit cost in other comprehensive incomes IV. Other changes 221,031.60 V. Closing balance 14,858,234.38 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 set post-employment defined benefit plan of health care benefits for the qualified staff. Actuarial assumption used in the defined benefit plan Items Percentage I. Discount rate 3.98% Present value of defined benefit obligations 149 / 207 2017 Interim Report Qingdao Haier Co., Ltd Items Amount Ⅰ. Opening balance 147,664,284.01 Ⅱ. Consolidation of enterprises under non-common control Ⅲ. Defined benefit cost in current profit or loss 11,899,870.44 1. Current period service cost 6,263,983.76 2. Past service cost -18,571.91 3. Settlement profit (loss indicated in ―-‖) 4. Interest expenses 5,654,458.59 Ⅳ. Defined benefit cost in other comprehensive incomes 1. Actuarial loss (gain indicated in ―-‖) V. Other changes -3,610,868.18 1. Consideration paid upon settlement 2. Paid benefits - 3. Exchange difference -3,610,868.18 Ⅵ. Closing balance 155,953,286.27 Net liability (net asset) of defined benefit plan Items Amount Ⅰ. Opening balance 147,664,284.01 Ⅱ. Consolidation of enterprises under non-common control - Ⅲ. Defined benefit cost in current profit or loss 11,899,870.44 Ⅳ. Defined benefit cost in other comprehensive incomes V. Other changes -3,610,868.18 Ⅵ. Closing balance 155,953,286.27 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 set post-retirement defined benefit plan of health care benefits for the qualified staff. Actuarial assumption used in the defined benefit plan Items Percentage I. Discount rate 3.68% Present value of defined benefit obligations Items Amount Ⅰ. Opening balance 385,674,932.23 Ⅱ. Consolidation of enterprises under non-common control Ⅲ. Defined benefit cost in current profit or loss 17,425,944.74 1. Current period service cost 5,494,041.70 2. Past service cost -1,861,644.08 150 / 207 2017 Interim Report Qingdao Haier Co., Ltd 3. Settlement profit (loss indicated in ―-‖) 4. Interest expenses 13,793,547.12 Ⅳ. Defined benefit cost in other comprehensive incomes 1. Actuarial loss (gain indicated in ―-‖) V. Other changes -9,259,237.12 1. Consideration paid upon settlement 2. Paid benefits 3. Exchange difference -9,259,237.12 Ⅵ. Closing balance 393,841,639.85 Net liability (net asset) of defined benefit plan Items Amount Ⅰ. Opening balance 385,674,932.23 Ⅱ.Consolidation of enterprises under non-common control Ⅲ. Defined benefit cost in current profit or loss 17,425,944.74 Ⅳ. Defined benefit cost in other comprehensive incomes V. Other changes -9,259,237.12 Ⅵ. Closing balance 393,841,639.85 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 set a defined benefit plan of retirement pension for the qualified staff. Actuarial assumption used in the defined benefit plan Items Percentage I. Discount rate 3.21% Present value of defined benefit obligations Items Amount Ⅰ. Opening balance 344,065,731.00 Ⅱ.Consolidation of enterprises under non-common control Ⅲ. Defined benefit cost in current profit or loss -51,562,174.01 1. Current period service cost 15,744,689.04 2. Past service cost -77,706,929.57 3. Settlement profit (loss indicated in ―-‖) 4. Interest expenses 10,400,066.52 Ⅳ. Defined benefit cost in other comprehensive incomes - 1. Actuarial loss (gain indicated in ―-‖) - V. Other changes -7,416,143.07 1. Consideration paid upon settlement - 2. Paid benefits - 3. Exchange difference -7,416,143.07 151 / 207 2017 Interim Report Qingdao Haier Co., Ltd Ⅵ. Closing balance 285,087,413.92 Fair value of plan assets Items Amount Ⅰ. Opening balance 8,170,835.63 II. Defined benefit cost in current profit or loss 1. Interest income III. Defined benefit cost in other comprehensive incomes - 1. Return on plan assets (except those included in net - interests) 2. Changes in impact of asset cap (except those included in net interests) IV. Other changes 262,912,300.00 1. Payments made by the employer 260,020,530.00 2. Paid benefits - 3. Exchange difference 2,891,770.00 V. Closing balance 271,083,135.63 Net liability (net asset) of defined benefit plan Items Amount Ⅰ. Opening balance 335,894,895.37 Ⅱ.Consolidation of enterprises under non-common control Ⅲ. Defined benefit cost in current profit or loss -51,562,174.01 Ⅳ. Defined benefit cost in other comprehensive incomes V. Other changes -270,328,443.07 Ⅵ. Closing balance 14,004,278.29 (3) Provision for work-related injury compensation Our subsidiary 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 will be used to pay the claims to the employees injured during the accidents. The provision accrued was prepared by Beecher Carlson Insurance Services, LLC. adopting the actuarial method. The discount rate used in the actuarial method is 3.72%. Items Amount Ⅰ. Opening balance 317,102,409.75 Ⅱ. Consolidation of enterprises under non-common control Ⅲ. Compensation expenses in current profit or loss 57,146,434.67 Ⅳ. Compensation amount actually paid for the period 66,416,755.42 V. Other changes -7,316,120.19 Ⅵ.Closing balance 300,515,968.81 Classification of the balance of defined benefit plan 152 / 207 2017 Interim Report Qingdao Haier Co., Ltd Items Closing balance Opening balance Short-term remuneration 36,157,557.20 45,903,557.14 Long-term remuneration 542,499,881.60 837,967,757.25 Total 578,657,438.80 883,871,314.39 36. Estimated liabilities Items Closing balance Opening balance Estimated charges of ―three 2,326,468,508.80 2,275,917,930.84 guarantees‖ and installations Acquisition of equity interests of 55,862,218.57 15,700,000.00 minority equity interests Pending litigation 22,555,105.56 18,501,499.76 Total 2,404,885,832.93 2,310,119,430.60 Significant assumptions and estimates related to the estimated charges of ―three guarantees‖ and installations: the Company rationally estimates the rate of ―three guarantees‖ and installations according to the previous actual expenditures and sales data on ―three guarantees‖ and installations, and estimates the potential charges of ―three guarantees‖ and installations based on the policy of ―three guarantees‖ and installations and the realized sales data. 37. Deferred income Explanations of deferred income √Applicable □Not Applicable Unit and Currency: RMB Opening Increase for the Decrease for the Items Closing balance Reason balance period period Government Governmental 337,441,740.36 75,182,143.40 25,912,706.16 386,711,177.60 subsidies related subsidy assets Leaseback The differences on sales price and 5,383,852.99 1,615,673.43 3,768,179.56 the book value of assets Total 342,825,593.35 75,182,143.40 27,528,379.59 390,479,357.16 / 38. Other non-current liabilities √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Changes of fair value in hedging 50,769,391.88 582,785,069.86 instruments Total 50,769,391.88 582,785,069.86 39. Share capital Class of shares Opening balance Increase for Decrease for Closing balance 153 / 207 2017 Interim Report Qingdao Haier Co., Ltd the period the 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 natural persons 4. Shares held by foreign non-state-owned legal 605,985,988 605,985,988 entities Ⅱ. Non-restricted shares 5,491,416,739 5,491,416,739 1.Ordinary shares in 5,491,416,739 5,491,416,739 RMB 2. Domestic listed foreign shares 3. Overseas listed foreign shares 4. Others Ⅲ. Total shares 6,097,630,727 6,097,630,727 40. Capital reserve √Applicable □Not Applicable Unit and Currency: RMB Increase for the Decrease for the Items Opening balance Closing balance period period Capital premium (share capital 231,991,591.90 231,991,591.90 premium) Other capital 83,383,194.51 79,672.11 83,462,866.62 reserve Total 83,383,194.51 232,071,264.01 315,454,458.52 Other explanations, including the explanations on increases or decreases for the period and the reasons thereof: Movements in capital reserve due to: ①an increase of RMB231,991,591.90 in capital premium due to the capital contribution to subsidiaries not on the original proportion of equity interest for the period led to the changes in the shareholdings of the Company; ②an increase of RMB79,672.11 in other capital reserves due to the changes of capital reserves calculated in equity method for the period. 41. Treasury stock √Applicable □Not Applicable Unit and Currency: RMB Increase for the Decrease for the Items Opening balance Closing balance period period Restricted share 1,041,960.00 1,041,960.00 certificates Share repurchase Total 1,041,960.00 1,041,960.00 154 / 207 2017 Interim Report Qingdao Haier Co., Ltd 42. Other comprehensive income Amounts incurred for the period Opening The pre-tax Attributable Attributable Closing Items Less: balance to the parent to minority balance amount for income tax Others company, net shareholders, the period expense of tax net of tax a 34,176,554.03 -122,346,236.14 -122,040,176.25 -306,059.89 -87,863,622.22 b 6,134,086.21 -2,746,669.05 -406,294.04 -2,347,023.98 6,648.97 3,787,062.23 c 9,966,493.62 -9,300,368.43 -3,532,757.81 -5,767,610.62 4,198,883.00 d 522,147,275.38 -70,679,191.47 -38,460,561.85 -32,218,629.62 483,686,713.53 e -6,185,497.28 -6,185,497.28 Total 566,238,911.96 -205,072,465.09 -3,939,051.85 -168,615,372.70 -32,518,040.54 397,623,539.26 Notes: (1) Item a, b, c, and d are other comprehensive income that will be reclassified to profit or loss in the future, 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 profit and loss in change in fair value of financial assets available-for-sale. Item c represents effective portion of gain or loss 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. 43. Surplus reserve √Applicable □Not Applicable Unit and Currency: RMB Items Opening balance Increase for the Decrease for the Closing balance period period Statutory surplus 2,026,461,769.42 2,026,461,769.42 reserve Discretionary 26,042,290.48 26,042,290.48 surplus reserve Reserve fund 11,322,880.64 11,322,880.64 Enterprise 10,291,630.47 10,291,630.47 expansion fund Total 2,074,118,571.01 2,074,118,571.01 44. Undistributed profits √Applicable □Not Applicable Items Amount Undistributed profits at the end of last year 17,544,395,965.35 Add: correction of accounting errors Adjustment on implementation of ASBE 155 / 207 2017 Interim Report Qingdao Haier Co., Ltd Adjustment on business combination under common control Undistributed profits at the beginning of the year 17,544,395,965.35 Add: net profit attributable to owners of the Company 4,427,068,404.51 Profit available for appropriation for the year 21,971,464,369.86 Less: appropriation of statutory surplus reserve Appropriation of staff incentive and welfare fund Dividend payable for ordinary shares 1,512,155,876.30 Retained earnings after deduction of combined offsetting under common control Undistributed profits at the end of the period 20,459,308,493.56 45. Operating income and Operating cost (1) Operating income Categories Amount for the current period Amount for the previous period Principal Business 77,242,627,605.56 48,396,652,699.11 Other Business 333,122,374.54 389,954,225.76 Total 77,575,749,980.10 48,786,606,924.87 (2) Income and cost of principle operations presented by product categories Amount for the current period Amount for the previous period Categories Income of principal Cost of principal Income of principal Cost of principal business business business business Air 16,327,368,124.73 11,125,241,053.36 9,664,635,513.49 6,653,835,753.76 conditioner Refrigerator 22,743,000,584.94 15,418,659,922.43 15,316,053,347.53 10,206,844,876.29 Kitchen 13,161,723,397.20 8,267,012,813.14 4,996,083,899.67 2,923,535,853.93 appliance Washing 13,845,106,171.68 9,062,281,717.42 8,706,411,819.07 5,823,035,874.06 machine Equipment 1,485,496,698.74 1,254,773,044.03 1,249,804,964.69 1,058,835,187.55 product Integrated channel 9,679,932,628.27 8,963,031,315.36 8,463,663,154.66 7,916,431,058.06 services and others Total 77,242,627,605.56 54,090,999,865.74 48,396,652,699.11 34,582,518,603.65 46. Taxes and surcharge Amount for the current Amount for the previous Items period period Business tax 6,278,229.86 5,858,432.78 City maintenance and construction tax 120,193,292.32 112,850,473.17 Education surcharge 52,303,868.63 48,800,232.38 156 / 207 2017 Interim Report Qingdao Haier Co., Ltd Property tax 61,265,810.45 Land use tax 18,718,053.00 Stamp tax 43,625,123.62 Others 43,001,955.42 4,187,779.94 Total 345,386,333.30 171,696,918.27 47. Expenses of sales √Applicable □Not Applicable Unit and Currency: RMB Amount for the current Amount for the previous Items period period Expenses of sales 12,937,515,954.38 6,693,076,335.80 Total 12,937,515,954.38 6,693,076,335.80 Selling expenses of the Company mainly include compensation, transportation and warehousing costs, advertising and sales promotion expenses, after-sale expenses and so on. 48. Management expenses √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current Amount for the previous period period Management expenses 4,623,708,396.51 3,543,082,531.68 Total 4,623,708,396.51 3,543,082,531.68 Administrative expenses of the Company mainly include compensation, research and development costs, administrative expenses, taxes, rental payments and so on. 49. Financial expenses Amount for the current Amount for the previous Items period period Interest expenses 612,416,699.07 197,158,970.54 Less: interest income 132,911,499.93 112,282,670.60 Exchange gain or loss 172,272,254.88 15,543,225.29 Others -40,100,172.09 24,649,483.24 Total 611,677,281.93 125,069,008.47 50. Loss in assets impairment Amount for the current Amount for the previous Items period period Bad debt loss 124,869,464.91 57,962,188.88 Loss from price drop in inventory 97,707,495.91 138,224,477.18 Impairment loss on fixed assets Impairment loss on construction in progress Impairment loss on financial assets available for sale Total 222,576,960.82 196,186,666.06 157 / 207 2017 Interim Report Qingdao Haier Co., Ltd 51. Profit or loss of changes in fair value Amount for the current Amount for the previous Items period period Financial instruments measured in fair value through current profit or loss - 412,063,845.15 -182,258,158.84 derivative financial instruments Total 412,063,845.15 -182,258,158.84 52. Investment Income √Applicable □Not Applicable Amount for the Amount for the Items current period previous period Long-term equity investments income calculated by the 585,960,632.76 413,267,458.21 equity method Investment income from disposal of long-term equity 21,438,092.72 37,414,012.10 investments Investment income from financial assets available for 21,465,578.23 9,343,791.85 sale during the holding period Investment income from disposal of financial assets 531,765,734.66 available for sale Investment income from disposal of financial assets at fair value and its changes recognized in the current profit 13,850,304.84 32,350,801.48 and loss Wealth management products return 11,128,105.80 5,052,001.54 Total 653,842,714.35 1,029,193,799.84 53. Other income Amount for the current Amount for the previous Items period period Refundable value-added tax for software 72,741,846.04 products Total 72,741,846.04 According to the requirements of CAIKUAI No.[2017] 15 the Accounting Standards for Enterprises No.16—Government‘s Subsidies issued by the MOF in May 2017, since 1 January 2017, the Company‘s government subsidies related to corporate daily activities are included in other gains or reduced costs related costs in accordance with the essence of economic business. Once the refundable value-added tax is received which is closely related to the normal operating business of the Company will be included in other revenue items. 54. Non-operating income Amount for the current Amount for the previous Items period period 158 / 207 2017 Interim Report Qingdao Haier Co., Ltd Gain on disposal of non-current assets 49,427,601.31 5,558,955.90 Government grants 62,000,721.48 125,842,469.31 Change in accounting methods of 166,840,685.70 financial assets available for sale Others 197,575,745.83 162,082,762.23 Total 309,004,068.62 460,324,873.14 Details of government grants are presented as follows: Amount for the current Amount for the Items period previous period Current amortization of government 5,738,834.79 16,734,996.28 grants related to assets Government grants related to profit 56,261,886.69 109,107,473.03 Total 62,000,721.48 125,842,469.31 55. Non-operating expenses Amount for the current Amount for the Items period previous period Loss on disposal of non-current asset 49,846,430.25 20,179,924.08 Charitable donation expenses 11,183,710.06 6,288,255.95 Others 23,548,882.84 30,015,140.09 Total 84,579,023.15 56,483,320.12 56. Income tax expense (1) Table of income tax expense √Applicable □Not Applicable Unit and Currency: RMB Amount for the previous Items Amount for the current period period Current income expense 778,856,781.57 615,259,241.98 Deferred tax income -20,834,623.34 45,439,140.00 Total 758,022,158.23 660,698,381.98 (2) Adjustment process of accounting profit and income tax expenses: √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current period Total profit 6,043,052,670.78 Income tax expenses calculated at statutory /applicable tax rate 1,510,763,167.70 Impact from different tax rates applicable to subsidiaries -631,694,049.31 Impact from adjustment to income tax in prior periods -75,991,738.05 Effect from non-taxable income -141,463,594.83 Impact from non-deductible costs, fees and losses 19,157,316.84 Impact from deductible losses of unrecognized deferred tax before 77,670,591.77 use Effect of write-off of deferred income taxes -419,535.89 Others Total income tax expenses 758,022,158.23 159 / 207 2017 Interim Report Qingdao Haier Co., Ltd 57. Other comprehensive income √Applicable □Not Applicable For details, please refer to item 42 of note VII. 58. Cash received from other operation related activities Items Amount Deposits and securities 68,796,766.32 Government grants 253,966,557.91 Non-operating income excluding government 101,459,811.04 grants Interest income 121,962,665.17 Others 2,186,012.14 Total 548,371,812.58 59. Cash paid to other operation related activities Items Amount Cash paid on operating expenses 3,151,649,224.94 Cash paid on management expenses 1,791,755,150.46 Cash paid on financial expenses 55,214,874.23 Non-operating expenses 33,663,772.25 Others 31,501,779.58 Total 5,063,784,801.46 60. Cash received from other investment related activities Items Amount Government grants related to assets 75,828.87 Total 75,828.87 61. Cash paid to other financing related activities Items Amount Cash paid on repurchasing shares 12,038,506.40 Cash paid due to the withdrawal of minority 603,380.00 Cash paid on financial lease 6,220,000.00 Loan margin 16,414,105.13 Others Total 35,275,991.53 62. Information of net profit adjusted to cash flows of operating activities: Net profit adjusted to cash flows of operating Amount for the current Amount for the activities period previous period 1. Net profit 5,285,030,512.55 3,971,842,202.21 160 / 207 2017 Interim Report Qingdao Haier Co., Ltd Plus: provisions for assets impairment 222,576,960.82 196,186,666.06 Depreciation of fixed assets 1,156,148,562.88 671,372,916.51 Amortization of intangible assets 173,770,721.87 51,395,463.20 Amortization of long term expenses payable 9,834,689.02 16,414,091.19 Loss on disposal of fixed assets, intangible assets 418,828.94 -167,680,746.72 and other long term assets (―-‖ represents ―gains‖) Gain and loss on change of fair value -412,063,845.15 182,258,158.84 (―-‖ represents ―gains‖) Financial expenses (―-‖ represents ―gains‖) 612,416,699.07 197,158,970.54 Loss on investments (―-‖ represents ―gains‖) -653,842,714.35 -1,029,193,799.84 Decrease of deferred income tax assets 274,672,665.40 -29,728,891.88 (―-‖ represents ―increase‖) Increase of deferred income tax liabilities -295,507,288.73 75,168,031.88 (―-‖ represents ―decrease‖) Decrease of inventories (―-‖ represents ―increase‖) -2,086,128,150.16 586,856,577.31 Decrease of operational account receivables -660,451,774.62 24,497,917.00 (―-‖ represents ―increase‖) Increase of operational account payables 4,614,484,067.71 -14,090,986.86 (―-‖ represents ―decrease‖) Others 151,840,970.93 22,099,813.25 Net cash flows generated from operational 8,393,200,906.18 4,754,556,382.69 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 Financial leased fixed assets 3. Changes of cash and cash equivalents: Cash balance at the end of the period 28,772,518,093.61 21,895,514,969.90 Less: cash balance at the beginning of the period 23,217,634,558.10 24,724,585,700.76 Add: cash equivalents balance at the end of the period Less: cash equivalents balance at the beginning of the period Net increase of cash and cash equivalents 5,554,883,535.51 -2,829,070,730.86 63. Cash and cash equivalents Items Closing balance Opening balance I. Cash 28,772,518,093.61 23,217,634,558.10 Including: treasury cash 593,053.62 565,073.32 Bank deposit available for payment at 28,737,845,846.53 23,191,076,580.34 any time Other monetary capital available for 34,079,193.46 25,992,904.44 payment at any time II. Cash equivalents Including: bond investment due within three months Ⅲ. Closing balance of cash and cash 28,772,518,093.61 23,217,634,558.10 equivalents Including: restricted cash and cash equivalents used by the parent company or subsidiaries of the Group 64. Foreign Currency Items 161 / 207 2017 Interim Report Qingdao Haier Co., Ltd Closing balance Opening balance Items Foreign currency Exchange Foreign currency Exchange RMB balance RMB balance balance rate balance rate Monetary capital Dollar 616,510,502.50 6.7744 4,176,488,748.14 387,284,566.46 6.9370 2,686,593,037.50 Euro 13,434,640.84 7.7496 104,113,092.63 21,250,231.16 7.3068 155,271,189.01 Yen 5,152,812,685.67 0.060485 311,667,875.29 5,184,441,120.47 0.059591 308,946,030.81 Others 1,252,116,637.05 961,507,199.02 Sub-total 5,844,386,353.11 4,112,317,456.34 Receivables Dollar 1,118,305,787.67 6.7744 7,575,850,727.98 976,653,474.79 6.9370 6,775,045,154.60 Euro 77,850,240.42 7.7496 603,308,223.16 49,108,138.60 7.3068 358,823,347.09 Yen 3,598,512,480.30 0.060485 217,656,027.37 4,314,375,738.62 0.059591 257,097,964.64 Others 2,105,944,296.47 1,882,170,143.32 Others Sub-total 10,502,759,274.98 9,273,136,609.65 Short-term borrowings Dollar 544,039,812.49 6.7744 3,685,543,305.73 1,329,063,973.44 6.937 9,219,716,783.74 Euro 20,181,516.95 7.7496 156,398,683.76 10,815,675.73 7.3068 79,027,979.42 Yen 44,978,035,950.41 0.0605 2,721,171,175.00 5,251,439,976.00 0.059591 312,938,559.62 HK 725,000,000.00 0.8679 629,227,500.00 725,000,000.00 0.8945 648,512,500.00 Dollars Others 5,744,061.22 21,015,000.00 Sub-total 7,198,084,725.71 10,281,210,822.78 Payables Dollar 803,006,496.42 6.7744 5,439,887,209.35 894,240,568.95 6.937 6,203,346,826.78 Euro 19,470,141.02 7.7496 150,885,804.85 28,647,679.79 7.3068 209,322,866.70 Yen 1,596,990,579.56 0.0605 96,617,930.06 3,804,098,671.44 0.059591 226,690,043.93 Others 851,831,193.63 1,012,439,147.10 Sub-total 6,539,222,137.89 7,651,798,884.51 Non-current liabilities due within one year Dollar 250,000,000.00 6.7744 1,693,600,000.00 250,000,000.00 6.937 1,734,250,000.00 Sub-total 1,693,600,000.00 1,734,250,000.00 Long-term borrowings Dollar 2,841,778,876.86 6.7744 19,251,346,823.40 2,121,414,653.64 6.937 14,716,253,452.30 Euro 5,005,824.91 7.7496 38,793,140.72 Yen 5,278,445,730.06 0.059591 314,547,859.50 Others Sub-total 19,290,139,964.12 15,030,801,311.80 65. Government Subsidies √Applicable □Not Applicable Unit and Currency: RMB Amounts included in Types Amount Presented items the profit or loss for the period Research and development 31,638,029.63 Management expenses -31,638,029.63 projects Research and development 6,242,739.87 Deferred revenue projects 162 / 207 2017 Interim Report Qingdao Haier Co., Ltd Technology upgrading and 24,434,031.86 Operating costs -24,434,031.86 innovation Technology upgrading and 52,798,214.00 Deferred revenue innovation Technology upgrading and 34,750,026.00 Non-operating income 34,750,026.00 innovation Tax refunds 72,741,846.04 Other revenue 72,741,846.04 Other tax refunds 12,114,492.86 Non-operating income 12,114,492.86 Others 15,136,202.62 Non-operating income 15,136,202.62 Total 249,855,582.88 VIII. Changes in consolidation scope 1. The consolidation of enterprises under non-common control √Applicable □Not Applicable (1). The consolidation of enterprises under non-common control occurred for the period √Applicable □Not Applicable Unit and Currency: RMB Net profit Income of of Proporti Recogniti acquiree acquiree Name Date of Method Cost of on of Date of on basis from the from the of equity of equity equity equity purchas as at the date of date of acquir acquisiti acquisiti acquisition acquire e date of acquisition acquisitio ee on on d (%) purchase to the end n to the of the period end of the period Green 2017.5.1 Acquisiti 2017.5. Equity 60,307,603 47,282,807 2,925,986 one 7 51% on 17 Transf .61 .16 .87 er (2). Combination costs and goodwill □ Applicable √ Not Applicable Unit and Currency: RMB Combination costs Green one ------ Cash 52,366,495.84 ------ Fair value of contingent considerations 7,941,107.77 Total combination costs 60,307,603.61 Less: share of fair value of identifiable assets 57,008,845.86 Amount of goodwill 3,298,757.75 (3). Identifiable assets and liabilities of the acquire as at the acquisition date √Applicable □Not Applicable Unit and Currency: RMB Green one Items Fair value as at the date of Book value as at the date acquisition of acquisition Monetary Capital 22,542.76 22,542.76 Receivables 48,279,085.49 48,279,085.49 Inventories 29,245,478.71 29,245,478.71 Fixed assets /Construction in 175,517,957.81 142,590,494.36 progress / Intangible assets Deferred income tax assets 1,645,621.75 1,645,621.75 163 / 207 2017 Interim Report Qingdao Haier Co., Ltd Other long-term 270,513.16 270,513.16 assets Accounts payables -10,655,212.95 -10,655,212.95 Short-term borrowings -86,767,097.30 -86,767,097.30 Other payables -27,381,943.58 -27,381,943.58 Estimated liabilities -4,200,468.29 -4,200,468.29 Payables for staff‘s remuneration -1,562,964.95 -1,562,964.95 Deferred income tax liabilities -7,995,166.84 Deferred revenue -3,712,041.75 -3,712,041.75 Receipts in advance -924,253.32 -924,253.31 Net assets 111,782,050.70 86,849,754.10 Less: minority equity interest Net assets acquired 111,782,050.70 86,849,754.10 2. The consolidation of enterprises under common control √Applicable □Not Applicable Enterprise combination under common control did not occur for the period. 3.Disposal of subsidiaries Single disposal of investments in subsidiaries representing loss of control: Sunlit Suzhou Jinan Goodaymart Enterprise Goodaymart Name of subsidiaries Trading Co., Ltd. International Electronics Co., Ltd. Ltd. Consideration for disposal of 1,010,000.00 2,258,830.19 8,820,000.00 equity interest Proportion of equity disposal 49.00% 81.00% 81% Method of equity disposal Disposal Disposal Disposal Date of loss-of-control 2017/1/1 2017/6/30 2017/1/1 Basis of determination of date of Disposal Disposal Disposal loss-of-control Difference between disposal consideration and its share of net assets of the subsidiary in the -595,421.85 1,000,040.98 -2,551,432.07 consolidated financial statements as respect to the disposal of investment continued Shanghai Leya Qingdao Information Goodaymart Home Heroic Plan Technology Co., Name of subsidiaries Ltd.(上海樂雅 Furnishing Service Global Limited Co., Ltd. 資訊科技有限公 司) Consideration for disposal of 23,584,905.66 23,044,485.99 equity interest Proportion of equity disposal Not Applicable 100% 100% 164 / 207 2017 Interim Report Qingdao Haier Co., Ltd Method of equity disposal Disposal Disposal Liquidation Date of loss-of-control 2017/6/30 2017/1/3 2017/1/1 Basis of determination of date of Disposal Disposal Liquidation loss-of-control Difference between disposal consideration and its share of net assets of the subsidiary in the 23,584,905.66 consolidated financial statements as respect to the disposal of investment 4. Changes of consolidation scope for other reasons Notes for the change of consolidation scope for other reasons (such as establishment of new subsidiaries, liquidation of subsidiaries, etc.) and the relevant information: √Applicable □Not Applicable (1) The Company made contribution to establish a wholly owned subsidiary Shanghai Haier Zhongzhifang Maker Space Management Co., Ltd.(上海海尔众智坊创客空间管理有限公司) for the period. (2) The Company made contribution to establish a wholly owned subsidiary Haier Industrial Holding Limited(海尔工业控股有限公司) for the period. 165 / 207 2017 Interim Report Qingdao Haier Co., Ltd IX. Interests in other entities 1. Interests in subsidiaries (1). Composition of the Group Principal Shareholding Acquisiti Name of Registrati Business place of Percentage Voting share on subsidiaries on place nature business Direct Indirect method This company is a group company, mainly engaging in investment common Mainland of Haier Electronics holding, the control China and Bermuda 14.06% 29.78% 55.89% Group Co., Ltd. production and combinat Hong Kong sale of washing ion machines and water heaters, distribution service and logistics service Household The US and Wonder Global British appliances other Establish (BVI) Investment Virgin production 100.00% 100.00% overseas ment Limited Islands distribution areas business Household Singapore common Haier Singapore appliances and other control Investment Singapore production 100.00% 100.00% overseas combinat Holding Co., Ltd. distribution areas ion business Manufacture common Qingdao Haier Qingdao Qingdao and operation control Air Conditioner High-tech High-tech 99.95% 99.95% of household combinat Gen Corp., Ltd. Zone Zone air-conditioners ion Huichuan Huichuan District, District, common Guizhou Haier Manufacture Zunyi Zunyi control Electronics Co., and sale of 59.00% 59.00% City, City, combinat Ltd. refrigerator Guizhou Guizhou ion Province Province 166 / 207 2017 Interim Report Qingdao Haier Co., Ltd Hefei common Hefei Haier Hefei Haier Manufacture Haier control Air-conditioning Industrial and sale of 100.00% 100.00% Industrial combinat Co., Limited Park air-conditioners Park ion Wuhan Wuhan common Wuhan Haier Manufacture Haier Haier control Electronics Co., and sale of 60.00% 60.00% Industrial Industrial combinat Ltd. air-conditioners Park Park ion Qingdao Haier common Qingdao Qingdao Manufacture Air-Conditioner control Developme Developm and sale of 100.00% 100.00% Electronics Co., combinat nt Zone ent Zone air-conditioners Ltd. ion Qingdao Haier common Information Qingdao Qingdao Manufacture control Plastic High-tech High-tech of plastic 100.00% 100.00% combinat Development Co., Zone Zone products ion Ltd. Dalian Dalian Manufacture common Dalian Haier Export Export and sale of control Precision 90.00% 90.00% Expressing Expressin precise combinat Products Co., Ltd. Zone g Zone plastics ion Hefei Hefei Economic Economic & common & Manufacture Hefei Haier Technologic control Technolog and sale of 94.12% 5.88% 100.00% Plastic Co., Ltd. al combinat ical plastic parts Developme ion Developm nt Area ent Area Research and common Qingdao Qingdao manufacture Qingdao Haier control High-tech High-tech of precise 75.00% 25.00% 100.00% Moulds Co., Ltd. combinat Zone Zone mould and ion product Manufacture of plastic common Qingdao Meier Qingdao Qingdao powder, control Plastic Powder Developme Developm plastic sheet 40.00% 60.00% 100.00% combinat Co., Ltd. nt Zone ent Zone and high ion performance coatings Chongqing Haier Jiangbei Jiangbei Plastic common Precision Plastic District, District, products, 90.00% 10.00% 100.00% control Co., Ltd. Chongqing Chongqin sheet metal combinat 167 / 207 2017 Interim Report Qingdao Haier Co., Ltd City g City work, ion electronics and hardware Jiangbei Jiangbei Manufacture District, District, and sale of Chongqing Haier Chongqing Chongqin electronics common Intelligent City g City and control 90.00% 10.00% 100.00% Electronics Co., automatic combinat Ltd. control ion system equipment Qingdao Qingdao Research, common High-tech High-tech development, Qingdao Haier control Zone Zone manufacture 50.00% 50.00% Robot Co., Ltd. combinat and sale of ion robot Qingdao Qingdao Manufacture Qingdao Haier High-tech High-tech and Establish Refrigerator Co., Zone Zone production of 100.00% 100.00% ment Ltd. fluorine-free refrigerators Qingdao Haier Pingdu Pingdu Manufacture Refrigerator Developme Developm and production Establish 75.00% 75.00% (International) nt Zone, ent Zone, of ment Co., Ltd. Qingdao Qingdao refrigerators Research and Qingdao development Household Qingdao Qingdao of home Appliance Establish High-tech High-tech appliances 100.00% 100.00% Technology and ment Zone Zone mould and Equipment technological Research Institute equipment Research, development Qingdao Haier Qingdao Qingdao and sales of Whole Set Home Establish High-tech High-tech health series 98.33% 98.33% Appliance ment Zone Zone of small Service Co., Ltd. home appliance Qingdao Haier Design and Qingdao Qingdao Intelligent development Establish High-tech High-tech 97.36% 97.36% Electronics Co., of electronics ment Zone Zone Ltd. and 168 / 207 2017 Interim Report Qingdao Haier Co., Ltd automatic control system Qingdao Haier Manufacture Qingdao Qingdao Special and sales of Establish Developme Developm 100.00% 100.00% Refrigerator Co., fluorine-free ment nt Zone ent Zone Ltd. refrigerators Manufacture and production Qingdao Haier Qingdao Qingdao of Establish Dishwasher Co., Developme Developm 100.00% 100.00% dish washing ment Ltd. nt Zone ent Zone machine and gas stove Research, manufacture Qingdao Haier Qingdao Qingdao and sales of Establish Special Freezer Developme Developm freezer and 96.06% 96.06% ment Co., Ltd. nt Zone ent Zone other refrigeration products Dalian Dalian Manufacture Dalian Haier Export Export and Establish Air-conditioning 90.00% 90.00% Expressing Expressin production of ment Co., Ltd. Zone g Zone air-conditioners Dalian Dalian Manufacture Dalian Haier Export Export and Establish Refrigerator Co., 90.00% 90.00% Expressing Expressin production of ment Ltd. Zone g Zone refrigerators Development , assembling Qingdao Haier Qingdao Qingdao and sales of Establish Electronic Plastic Developme Developm 80.00% 80.00% plastics, ment Co., Ltd. nt Zone ent Zone electronics and product Wuhan Wuhan Economic & Economic Research, Technologic & manufacture al Technolog and sales of Wuhan Haier Establish Developme ical freezer and 95.00% 5.00% 100.00% Freezer Co., Ltd. ment nt Zone Developm other High-tech ent Zone refrigeration Industrial High-tech products Park Industrial 169 / 207 2017 Interim Report Qingdao Haier Co., Ltd Park Development , purchase Qingdao Haidarui Qingdao Qingdao and sales of Establish Procurement High-tech High-tech 98.00% 2.00% 100.00% electrical ment Service Co., Ltd. Zone Zone product and components Development and application Qingdao Haier of household Intelligent Home Qingdao Qingdao appliances, Establish Appliance High-tech High-tech 98.91% 1.09% 100.00% communication, ment Technology Co., Zone Zone electronics Ltd. and network engineering technology Jiangbei Jiangbei Chongqing Haier District, Manufacture District, Establish Air-conditioning Chongqing and sales of 76.92% 23.08% 100.00% Chongqin ment Co., Ltd. City air conditioners g City Development and manufacture Qianwangan Qianwang of precise Qingdao Haier g ang plastic, metal Establish Precision Road, Road, plate, mould 70.00% 70.00% ment Products Co., Ltd. Jiaonan Jiaonan and City City electronic products for household appliances Manufacture Qingdao Haier Jiaonan Jiaonan of household Air Conditioning Establish City, City, appliances 70.00% 70.00% Equipment Co., ment Qingdao Qingdao and Ltd. electronics Dalian Free Trade Dalian Dalian Zone Haier Export Export Domestic Establish 100.00% 100.00% Air-conditioning Expressing Expressin trade ment Trading Co., Ltd. Zone g Zone Dalian Free Trade Dalian Dalian Domestic 100.00% 100.00% Establish 170 / 207 2017 Interim Report Qingdao Haier Co., Ltd Zone Haier Export Export trade ment Refrigerator Expressing Expressin Trading Co., Ltd. Zone g Zone Qingdao Ding Manufacture QingdaoDe QingdaoD Xin Electronics and sale of Establish velopment evelopme 100.00% 100.00% Technology Co., electronic ment Zone nt Zone Ltd. Parts. Jiangbei Jiangbei Chongqing Haier Household District, District, Establish Electronics Sales appliance 95.00% 5.00% 100.00% Chongqing Chongqin ment Co., Ltd. sales City g City Chongqing Haier Jiangbei Jiangbei Manufacture Refrigeration District, District, and Establish 84.95% 15.05% 100.00% Appliance Co., Chongqing Chongqin production of ment Ltd. City g City refrigerator Hefei Manufacture Hefei Haier Hefei Haier Haier and Establish Refrigerator Co., Industrial 100.00% 100.00% Industrial production of ment Ltd. Park Park refrigerator Wuhan Wuhan Wuhan Haier Haier Haier Energy Establish Energy and 75.00% 75.00% Industrial Industrial service ment Power Co., Ltd. Park Park Qingdao Haier Qingdao Qingdao HVAC Air-conditionin Establish Developme Developm 100.00% 100.00% Engineering Co., g ment nt Zone ent Zone Ltd Chongqing Sales of Jiangbei Jiangbei Gooddaymart household District, District, Establish Electric appliances 51.00% 51.00% Chongqing Chongqin ment Appliance Sale and City g City Co., Ltd electronics Qingdao Haier Jiaozhou Jiaozhou Manufacture (Jiaozhou) Establish City, City, and sale of 100.00% 100.00% Air-conditioning ment Qingdao Qingdao air-conditioners Co., Limited Manufacture and sales of Qingdao Haier Jiaozhou Jiaozhou plastic and Establish Component Co., City, City, 100.00% 100.00% precise sheet ment Ltd. Qingdao Qingdao metal products Establish Haier Hong Kong Hong 100.00% 100.00% ment 171 / 207 2017 Interim Report Qingdao Haier Co., Ltd Shareholdings Kong Investm (Hong Kong) ent Limited Shenbei Shenbei Shenyang Haier New New Manufacture Establish Refrigerator Co., Area, Area, and sales of 100.00% 100.00% ment Ltd. Shenyang Shenyang refrigerator City City Shanshui Shanshui Manufacture Foshan Haier District, District, Establish and sales of 100.00% 100.00% Freezer Co., Ltd. Foshan Foshan ment freezer City City Zhengzho Zhengzhou u Economic Economic and Manufacture Zhengzhou Haier and Technologic and sales of Establish Air-conditioning Technolog 100.00% 100.00% al air ment Co., Ltd. ical Developme conditioner Developm nt ent Zone Zone Development Qingdao , purchase Qingdao Qingdao Haidayuan and sales of Establish Developme Developm 100.00% 100.00% Procurement electrical ment nt Zone ent Zone Service Co., Ltd. product and components Qingdao Haier Development Intelligent Qingdao Qingdao and research Establish Technology High-tech High-tech 100.00% 100.00% of household ment Development Co., Zone Zone appliances Ltd. Design, manufacture common Qingdao Hai Ri Qingdao Qingdao and sales of control High-Tech Model High-tech High-tech 100.00% 100.00% product combinat Co., Ltd. Zone Zone model and ion mould Qingdao Hai Gao Industrial common Qingdao Qingdao Design and design and control High-tech High-tech 75.00% 75.00% Manufacture Co., prototype combinat Zone Zone Ltd. production ion Beijing Haier Beijing Beijing Development 55.00% 55.00% common 172 / 207 2017 Interim Report Qingdao Haier Co., Ltd Guangke Digital , promotion control Technology Co., and transfer combinat Ltd. of ion technology Shanghai Haier Wholesale Medical and retail of Establish Shanghai Shanghai 100.00% 100.00% Technology Co., medical ment Ltd. facility Development common Qingdao Haier and sales of control Technology Co., Qingdao Qingdao software and 100.00% 100.00% combinat Ltd. information ion product Qingdao Haier Entrepreneurshi Technology Establish Qingdao Qingdao p investment 100.00% 100.00% Investment Co., ment and consulting Ltd. Qingdao Casarte Development, Smart Living production and Establish Qingdao Qingdao 100.00% 100.00% Appliances Co., sales of ment Ltd. appliances Qingdao Sales of Haichuangyuan household Establish Qingdao Qingdao 100.00% 100.00% Appliances Sales appliances and ment Co., Ltd. digital products Technical Beijing ASU services, import Establish Beijing Beijing 100.00% 100.00% Tech Co., Ltd. and export ment business Technical Haiyike (Beijing) services, Establish Beijing Beijing 100.00% 100.00% Tech Co., Ltd. software ment development Sales of Haier Overseas household Electric appliances, Establish Qingdao Qingdao 100.00% 100.00% Appliance Co., international ment Ltd. freight forwarding Haier Group Sales of common (Dalian) household control Dalian Dalian 100.00% 100.00% Electrical appliances, combinat Appliances international ion 173 / 207 2017 Interim Report Qingdao Haier Co., Ltd Industry Co., Ltd. freight forwarding Production and Qingdao Haier sales of air Central Establish Qingdao Qingdao conditioners and 100.00% 100.00% Air-conditioner ment refrigeration Co., Ltd. equipment Beijing Haier Technology Yunchu development, Establish Technology Co., Beijing Beijing 91.21% 91.21% promoting and ment Ltd.(北京海尔云 transfer 厨科技有限公司) Chongqing Haier Household Home Appliance Establish Hefei Hefei appliance 100.00% 100.00% Sale Hefei Co., ment sales Ltd. Beijing Chuangshi Magic Establish Mirror Beijing Beijing Smart home 100.00% 100.00% ment Technology Co., Ltd. Beijing Haier Radio and Zhongyou Establish Beijing Beijing television 51.00% 51.00% Netmedia Co., ment program Ltd. Qingdao Weixi Smart Intelligent Establish Qingdao Qingdao 87.08% 87.08% Technology Co., bathroom ment Ltd. Haier U+smart Technology Software Establish Beijing Beijing 100.00% 100.00% (Beijing) Co., development ment Ltd. Qingdao Haier Industry Industrial Establish Intelligence Qingdao Qingdao intelligent 100.00% 100.00% ment Research Institute technology Co., Ltd. Sales, research Haier (Shanghai) and Establish Appliance Co., Shanghai Shanghai development of 100.00% 100.00% ment Ltd. household appliances 174 / 207 2017 Interim Report Qingdao Haier Co., Ltd Shanghai Haier Zhongzhifang Maker's Maker Space hatchery Establish Management Co., Shanghai Shanghai 100.00% 100.00% management ment Ltd.(上海海尔众 consulting 智坊创客空间管 理有限公司) Haier Industrial Industrial Holding Establish Qingdao Qingdao investment, 100.00% 100.00% Limited(海尔工 ment consulting, etc. 业控股有限公司) Small companies such as Qingdao Hai Heng Feng All over Sales of All over the Establish Electrical the household country ment Appliances Sale country appliances & 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 operating decision of small companies, such as Haier Electronics Group Co., Ltd., Qingdao Hai Heng Feng Electrical Appliances Sale & Service Co., Ltd, thus, they 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 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). Significant non-wholly owned subsidiaries √Applicable □Not Applicable Unit and Currency: RMB Percentage of Profit or loss Dividend declared Balance of Name of shareholding of attributed to to minority minority equity subsidiaries minority minority shareholders for the interest at the end 175 / 207 2017 Interim Report Qingdao Haier Co., Ltd shareholders shareholders for the period of the period period Haier Electronics 56.16% 855,626,318.73 249,053,586.90 12,598,255,475.57 Group Co., Ltd. Guizhou Haier Electronics Co., 41.00% 4,949,040.48 110,277,487.36 Ltd. Wuhan Haier Electronics Co., 40.00% 9,828,776.29 215,227,239.21 Ltd. Qingdao Haier Refrigerator 25.00% 235,854.36 79,354,680.59 (International) Co., Ltd. (3) Main financial information of significant non-wholly owned subsidiaries Closing balance Name of Current assets Non-current Total assets Current Non-current Total liabilities subsidiaries assets liabilities liabilities Haier Electronics 27,996,860,321.18 8,070,482,165.18 36,067,342,486.36 13,962,005,236.82 1,232,057,660.65 15,194,062,897.47 Group Co., Ltd. Guizhou Haier 396,371,895.14 34,660,101.37 431,031,996.51 161,936,044.82 126,470.38 162,062,515.20 Electronics Co., Ltd. Wuhan Haier 925,610,095.54 130,852,702.57 1,056,462,798.11 518,053,415.04 341,285.04 518,394,700.08 Electronics Co., Ltd. Qingdao Haier Refrigerator 279,206,813.97 55,808,808.81 335,015,622.78 17,596,900.43 17,596,900.43 (Internation al) Co., Ltd. Continued Opening balance Name of Current assets Non-current Total assets Current Non-current Total liabilities subsidiaries assets liabilities liabilities Haier 28,356,845,782.86 7,662,215,538.27 36,019,061,321.13 16,690,729,604.24 1,039,492,037.45 17,730,221,641.69 Electronics 176 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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. Amount for the current period Total Name of subsidiaries Cash flows from Operating income Net profit comprehensive operating activities income Haier Electronics Group Co., Ltd. 35,859,899,261.80 1,447,319,410.67 1,391,001,266.18 1,837,812,414.48 Guizhou Haier Electronics Co., Ltd. 530,268,800.91 12,070,830.44 12,070,830.44 -10,146,559.16 Wuhan Haier Electronics Co., Ltd. 1,317,041,564.88 24,571,940.73 24,571,940.73 2,692,599.62 Qingdao Haier Refrigerator 943,417.45 943,417.45 -38,323.32 (International) Co., Ltd. Continued Amount for the previous period Total Name of subsidiaries Cash flows from Operating income Net profit comprehensive operating activities income Haier Electronics Group Co., Ltd. 28,794,279,022.44 1,069,181,489.62 1,088,300,280.31 1,116,067,058.61 Guizhou Haier Electronics Co., Ltd. 463,807,588.48 14,023,651.53 14,023,651.53 -20,013,648.34 Wuhan Haier Electronics Co., Ltd. 843,507,252.40 35,074,533.19 35,016,715.42 -34,799,441.65 Qingdao Haier Refrigerator 9,090.37 -566,030.17 -566,030.17 -730,518.41 (International) Co., Ltd. 2. Transactions leading to the change of owners’ equity in subsidiaries but not losing the control √Applicable Not Applicable (1). Explanation to the change of owners’ equity in subsidiaries: √Applicable □Not Applicable 177 / 207 2017 Interim Report Qingdao Haier Co., Ltd Explanation to the change of owners‘ equity in subsidiaries: shareholding proportion held by the Company changed as a result of the capital contribution contributed by minority shareholders of the Company‘s subsidiary Haier Electronics Group Co., Ltd. and transfer of share option by convertible bond creditors; Changes in shareholding proportions in Beijing Haier Cloud Kitchen Technology Co., Ltd.(北京海尔云厨科技有限公司), and Haier Appliances (India) Co., Ltd. (海尔电器(印度)有限公司), which are subsidiaries of the Company, have taken place and the capital contribution to them are not on the original proportion of equity interest; Shareholding proportion held by the Company changed as a result of the acquisition of minority shareholders‘ equity interest of the Company‘s subsidiary Qingdao Hai Ri High-Tech Model Co., Ltd. (青岛海日高科模型有限公司). (2) Impact of the transactions on the minority equity interest and the equity attributable to owners of the Company: Haier Electronics Items Others Group Co., Ltd. Total of cost of acquisition/disposal 403,703,264.00 consideration Less: share of net assets of subsidiaries calculated with reference to the proportion 222,905,948.81 412,788,907.09 of the share acquired/disposed The difference -222,905,948.81 -9,085,643.09 Including: adjustment and increase to 222,905,948.81 9,085,643.09 capital reserve 3. Interests in joint ventures and associates √Applicable □Not Applicable (1). Significant joint ventures and associates √Applicable □Not Applicable Unit and Currency: RMB Shareholding The percentage (%) accounting The name of joint Principal Registration Business treatment ventures or place of place nature for the associates business Direct Indirect investment in joint 178 / 207 2017 Interim Report Qingdao Haier Co., Ltd ventures and associates Wolong Electric Equity Motor Zhangqiu Haier Zhangqiu Zhangqiu 30.00 method Manufacturing Motor Co., Ltd. Haier Medical and Equity Medical Laboratory Products Qingdao Qingdao 27.37 method freezer Co., Ltd. Qingdao Haier Equity Special Steel Plate method Manufacture Research and Qingdao Qingdao 30.00 of steel plate Development Co., Ltd. Hefei Haier Special Equity Steel Plate Research Manufacture method Hefei Hefei 30.00 and Development of steel plate Co., Ltd. Qingdao Haier Equity SAIF Smart Home Venture method Industry Investment Qingdao Qingdao capital 63.00 Center (limited investment partnership) Mitsubishi Heavy Equity Industries Haier Manufacture method (Qingdao) Qingdao Qingdao of household 45.00 Air-conditioners appliances Co., Ltd. Qingdao Haier Equity Manufacture Carrier method Qingdao Qingdao of household 49.00 Refrigeration appliances Equipment Co., Ltd. Haier Group Equity Qingdao Qingdao Financing 42.00 Finance Co., Ltd. method Qingdao Haier Equity Software Software Qingdao Qingdao 25.00 method development Investment Co., Ltd. Beijing Mr. Hi Equity Network Technology method Beijing Beijing 40.00 Technology development Company Limited Bank of Qingdao Commercial Equity Qingdao Qingdao 9.47 Co., Ltd. bank method 179 / 207 2017 Interim Report Qingdao Haier Co., Ltd Beijing Xiaobei Sales of Equity Technology Co., Beijing Beijing household 45.00 method Ltd. appliances Haier Tongchuang Equity Investment method Guangzhou Guangzhou Investment 50.00 Partnership (limited partnership) Qingdao HSW Equity Water Appliance Qingdao Qingdao Sales 15.00 method Co., Ltd. Qingdao Roca 49.00 Equity Water Appliance Qingdao Qingdao Sales method Co., Ltd. China Shengfeng 20.00 Equity Microfinance method limited in Jin‘an Fuzhou Fuzhou Microfinance District of Fuzhou City Fujian Equity ATL-Shengfeng Fuzhou Fuzhou Logistics 40.00 method Logistics Co., Ltd. Qingdao Java Cloud Equity Online Network method Qingdao Qingdao household 24.93 Technology Co., service Ltd. Qingdao JSH Equity Network E-commerce method Qingdao Qingdao 24.02 Technology Co. platform Ltd. Konan Electronic Motor Equity Hunan Hunan 50.00 Co., Ltd. Manufacturing method HPZ LIMITED Manufacture Equity Nigeria Nigeria of household 25.01 method appliances HNR COMPANY Manufacture Equity (PRIVATE) Pakistan Pakistan of household 31.72 method LIMITED appliances CONTROLADORA Manufacture Equity MABE S.A.de C.V. Mexico Mexico of household 48.42 method appliances Middle East Air Sales of Equity Saudi Saudi Conditioning household 49.00 method Arabia Arabia Company, Limited appliances 180 / 207 2017 Interim Report Qingdao Haier Co., Ltd (2). Main financial information of important associates √Applicable □Not Applicable Unit and Currency: RMB ① Basic information of important associates: 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: Yulong International Center Building 1, No.178-2 Haier Road, Laoshan District, Qingdao City. The Company‘s subsidiaries hold an aggregate of 42.00% equity interest in Finance Company. b. General Electric Company has participated in the capital contribution to the establishment of CONTROLADORA MABE S.A.de C.V. (hereinafter referred to as ―MABE‖). In June 2016, a subsidiary of the Company acquired 48.42% 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 48.42% of equity interests in MABE in total. c. Bank of Qingdao Co., Ltd. (hereinafter referred to as ―Qingdao Bank‖), one of the first city commercial banks in China, was established in November 1996. The registered place and principal place of business of Qingdao Bank is No.68 Hong Kong Middle Road, Shinan District, Qingdao, Shandong Province. The Company and its subsidiaries hold approximately 9.47% of equity interests in Qingdao Bank in total. ②Financial information of significant associates Opening balance/ Closing balance/ Amount for Amount for the previous Items the current period period Finance company Finance company Current assets 59,755,549,370.28 64,554,524,837.39 Non-current assets 7,842,756,084.34 7,512,078,269.27 Total assets 67,598,305,454.62 72,066,603,106.66 Current liabilities 54,406,147,919.45 57,728,520,903.78 Non-current liabilities 2,746,820,584.14 4,555,925,257.50 Total liabilities 57,152,968,503.59 62,284,446,161.28 Minority equity interests 181 / 207 2017 Interim Report Qingdao Haier Co., Ltd Equity interest attributable to 10,445,336,951.03 9,782,156,945.38 shareholders of the parent company Including: share of net assets calculated based on shareholding 4,387,041,519.45 4,108,505,917.06 percentage Operating income 1,248,590,983.58 1,162,696,352.56 Net profit 695,130,748.49 642,161,602.48 Other comprehensive income -31,950,742.84 -44,730,124.25 Total comprehensive income 663,180,005.65 597,431,478.23 Dividend received from associates for the year Opening balance/ Closing balance/ Amount for Amount for the previous Items the current period period MABE MABE Current assets 6,110,372,160.34 5,411,456,582.00 Non-current assets 10,172,700,735.07 9,986,415,019.00 Total assets 16,283,072,895.41 15,397,871,601.00 Current liabilities 7,125,562,337.24 5,947,561,816.00 Non-current liabilities 5,863,737,121.51 6,151,148,892.00 Total liabilities 12,989,299,458.75 12,098,710,708.00 Minority equity interests Equity interest attributable to 3,293,773,436.66 3,299,160,893.00 shareholders of the Company Including: share of net assets calculated based on shareholding 1,594,845,098.03 1,597,453,704.39 percentage Operating income 9,329,282,700.19 Net profit 205,064,142.44 Other comprehensive income -139,395,846.73 Total comprehensive income 65,668,295.71 Dividend received from associates 34,405,195.14 for the year Opening balance/ Closing balance/ Amount for Items Amount for the previous the current period period 182 / 207 2017 Interim Report Qingdao Haier Co., Ltd Qingdao Bank Qingdao Bank Current assets 151,946,616,000.00 118,881,404,000.00 Non-current assets 130,029,615,000.00 159,106,702,000.00 Total assets 281,976,231,000.00 277,988,106,000.00 Current liabilities 203,171,280,000.00 214,236,012,000.00 Non-current liabilities 60,616,479,000.00 46,116,121,000.00 Total liabilities 263,787,759,000.00 260,352,133,000.00 Minority equity interests 492,961,000.00 Equity interest attributable to 17,695,511,000.00 17,635,973,000.00 shareholders of the Company Including: share of net assets calculated based on shareholding 1,675,696,771.69 1,670,058,752.11 percentage Operating income 2,835,194,000.00 2,970,628,000.00 Net profit 1,278,760,000.00 1,261,528,000.00 Other comprehensive income -404,519,000.00 -152,700,000.00 Total comprehensive income 874,241,000.00 1,108,828,000.00 Dividend received from associates 76,868,844.93 for the year (3) Summarized financial information of insignificant joint ventures and associates Items Closing balance/ Opening balance/ Amount for the current Amount for the period previous period Total book value of investment to 2,337,490,742.02 2,267,271,532.80 associates Total amount of the following items of associates‘ financial amounts calculated based on shareholding percentage --Net profit 73,900,402.83 24,097,736.19 --Other comprehensive income -3,044,759.55 -11,890,274.01 --Total comprehensive income 70,855,643.28 12,207,462.18 X. Segment Information √Applicable □Not Applicable The Company principally engaged in manufacture and sales of household appliances and relevant services business, manufacture of upstream household appliances parts business and distribution of products of third-party, logistics and after-sale business. The Company has 6 business segments, 183 / 207 2017 Interim Report Qingdao Haier Co., Ltd including refrigerator segment, air-conditioner segment, washing machine segment, kitchenware and sanitary ware segment, equipment components segment, integrated channel services segment 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 products. 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 products. Kitchenware and sanitary ware segment mainly engaged in manufacture and sales of water heater and kitchen appliances products. Equipment components segment mainly engaged in procurement, manufacture and sales of upstream matching accessories for household appliances, manufacture and sales of mould. 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 3rd and 4th tier markets channel business 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 monetary capital, 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 profit/loss in fair value, income from investment, and financial expenses. (1) Information of reportable segments Segment information for the period Kitchenware and Segment Air-conditioner Refrigerator Washing machine sanitary ware information segment segment segment segment 184 / 207 2017 Interim Report Qingdao Haier Co., Ltd Segment revenue 16,065,232,785.84 20,664,137,087.68 12,517,651,383.97 12,223,265,112.69 Including: revenue from 5,935,165,349.29 11,674,637,424.70 9,671,117,921.21 6,419,268,474.84 external consumers Inter-segment 10,130,067,436.55 8,989,499,662.98 2,846,533,462.76 5,803,996,637.85 revenue Total segment 15,051,615,417.92 19,005,739,766.51 11,604,782,789.73 11,082,170,369.17 operating cost Segment 1,013,617,367.92 1,658,397,321.17 912,868,594.24 1,141,094,743.52 operating profit Total segment 18,167,934,777.30 11,630,054,029.22 12,322,334,536.90 9,873,354,624.69 assets Total segment 9,048,675,971.14 21,769,995,041.59 5,680,590,433.28 4,483,299,083.18 liabilities Continued Segment of Segment Equipment Inter-segment integrated channel Total information components segment elimination services and others Segment revenue 20,065,175,857.03 48,268,853,383.36 -52,155,823,784.43 77,648,491,826.14 Including: revenue from 1,526,368,776.97 42,421,933,879.13 - 77,648,491,826.14 external consumers Inter-segment 18,538,807,080.06 5,846,919,504.23 -52,155,823,784.43 - revenue Total segment 19,893,023,579.68 47,623,649,726.63 -51,976,888,171.24 72,284,093,478.40 operating cost Segment 172,152,277.35 645,203,656.73 -178,935,613.19 5,364,398,347.74 operating profit Total segment 24,536,192,591.95 30,901,519,705.33 -34,698,364,286.81 72,733,025,978.58 assets Total segment 26,131,258,124.21 27,366,427,179.12 -34,104,421,433.03 60,375,824,399.49 liabilities Segment information for the corresponding period of last year Segment Air-conditioner Refrigerator Kitchenware and Washing machine 185 / 207 2017 Interim Report Qingdao Haier Co., Ltd information segment segment sanitary ware segment segment Segment revenue 9,085,882,265.93 13,897,809,010.88 4,439,810,301.41 7,297,456,518.37 Including: revenue from external 3,005,648,352.37 6,600,284,838.00 2,119,082,446.37 2,897,001,933.03 consumers Inter-segment 6,080,233,913.56 7,297,524,172.88 2,320,727,855.04 4,400,454,585.34 revenue Total segment 8,525,051,027.95 12,610,442,700.89 3,994,249,021.83 6,597,175,312.13 operating cost Segment operating 560,831,237.98 1,287,366,309.99 445,561,279.58 700,281,206.24 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 Equipment Segment of Segment Inter-segment components integrated channel Total information elimination segment services and others Segment revenue 14,799,342,326.20 38,986,829,070.96 -39,672,010,042.59 48,835,119,451.16 Including: revenue from external 1,340,536,577.34 32,872,565,304.05 - 48,835,119,451.16 consumers Inter-segment 13,458,805,748.86 6,114,263,766.91 -39,672,010,042.59 - revenue Total segment 14,631,500,705.45 38,457,666,157.64 -39,536,310,399.66 45,279,774,526.23 operating cost Segment operating 167,841,620.75 529,162,913.32 -135,699,642.93 3,555,344,924.93 profit Total segment 23,027,647,676.49 26,750,757,320.79 -29,599,977,056.15 69,705,299,420.43 assets Total segment 21,723,163,381.14 24,126,790,721.51 -28,490,996,947.49 54,524,260,232.41 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 Amount for the current period Amount for the previous period 186 / 207 2017 Interim Report Qingdao Haier Co., Ltd income Mainland China 42,565,075,285.61 34,826,153,702.66 Other countries/regions 35,083,416,540.53 14,008,965,748.50 Total 77,648,491,826.14 48,835,119,451.16 Continued Total non-current Closing balance Opening balance assets Mainland China 11,519,966,367.04 11,281,553,188.93 Other countries/regions 14,896,308,798.11 15,247,717,206.38 Total 26,416,275,165.15 26,529,270,395.31 The total non-current assets exclude: available-for-sale financial assets, long-term equity investment, goodwill, deferred income tax assets. XI. Disclosure of fair value 1. Fair value of assets and liabilities at fair value at the end of the period Fair value at the end of the period Items Level 1 Level 2 Total Recurring fair value measurement I. Financial asset designated to be measured by fair value 36,973,157.40 36,973,157.40 and change of which is recorded in current profit and loss II. Financial liability designated to be measured by fair value and change of which is recorded in current profit and 121,342,853.35 121,342,853.35 loss III. Available-for-sale financial assets 25,840,885.83 1,744,100.41 27,584,986.24 2. Basis for determination of level 1 fair value at recurring and non-recurring fair value measurement √Applicable □Not Applicable Unadjusted quoted prices of similar assets or liabilities in active markets as at the measurement date. 3. Valuation techniques used and the qualitative and quantitative information of key parameters for recurring and non-recurring fair value measurement categorised within Level 2 √Applicable □Not Applicable Inputs other than quoted prices included within level 1 that are observable for the assets or liabilities, either directly or indirectly. XII. Related parties and Related-party transactions (Ⅰ) Explanation for basis of identifying related party 187 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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. According to Management Practices for Information Disclosure of The Company (China Securities Regulatory Commission Order No. 40), in certain occasions, related legal person and natural person will be identified as related parties. (II) Relations between related parties 1. Information about the Company and other companies holding shares of the Company Equity Style of legal Relationshi Voting Name of Registered Registered Interest of enterpris represe p with the share of the enterprises address capital the es ntative Company Company Company Qingdao Collective Haier Group High-tech Zhang the owned 311,180,000 17.59% 17.59% Corporation Zone Haier Ruimin Company enterprise Park The Haier Electric Qingdao Joint-stoc subsidiary Appliances High-tech Zhang k 631,930,635 of the 20.64% 20.64% International Zone Haier Ruimin company parent Co., Ltd. Park company Qingdao Haier The party Venture & Qingdao acting in Zhang Investment Co., Ltd. Free Trade 30,000,000 concert with 2.82% 2.82% Ruimin Information Co., Zone the parent Ltd. company 2. Information about subsidiaries of the Company Detailed information of subsidiaries is disclosed in item 1 of note IX. interests in subsidiaries. 3. Information about associates and joint ventures Information about the associates or joint ventures of the Company are set out in item 11 of note Ⅶ and item 3 of note IX. 4. Related companies without controlling relationship Relationship with the Name of enterprises Company FISHER&PAYKEL APPLIANCES LIMITED Subsidiary of Haier Group 188 / 207 2017 Interim Report Qingdao Haier Co., Ltd HAIER INFORMATION APPLIANCES S.R.L. Subsidiary of Haier Group HAIER INTERNATIONAL (HK) LTD. Subsidiary of Haier Group HAIER INTERNATIONAL CO., LTD Subsidiary of Haier Group Feima Electronic (Qingdao) Co., Ltd. Subsidiary of Haier Group Haier International Trading Co., Ltd. Subsidiary of Haier Group Haier Group Finance Co., Ltd. Subsidiary of Haier Group Haier Group Electric Appliance Industry Co., Ltd. Subsidiary of Haier Group Haier Group Corporation Subsidiary of Haier Group Haier Energy Power Co., Ltd. Subsidiary of Haier Group Haier Brothers Animation Industry Co., Ltd. Subsidiary of Haier Group Hefei Haier Logistics Co., Limited Subsidiary of Haier Group Laiyang Haier Electrical Co. Ltd. Subsidiary of Haier Group Lizhu Haier Built Facilities(Qingdao) Co., Ltd. Subsidiary of Haier Group Qingdao Haier Tooling Development and Manufacturing Co., Ltd. Subsidiary of Haier Group Qingdao Haier International Travel Agency Co., Ltd. Subsidiary of Haier Group Qingdao Haier International Trading Co., Ltd. Subsidiary of Haier Group Qingdao Haier Household Integration Co., Ltd. Subsidiary of Haier Group Qingdao Haier Parts Procurement Co., Ltd. Subsidiary of Haier Group Qingdao Haier Software Investment Co., Ltd. Subsidiary of Haier Group Qingdao Haier Strauss Water Equipment Co., Ltd. Subsidiary of Haier Group Qingdao Haier Special Plastic Development Co., Ltd. Subsidiary of Haier Group Qingdao Haier Communications Co., Ltd. Subsidiary of Haier Group Qingdao Haier Logistics Consulting Co., Ltd. Subsidiary of Haier Group Qingdao Haiyongda Property Management Co., Ltd. Subsidiary of Haier Group HCH (HK) Investment Management Co., Limited Subsidiary of Haier Group Xingyang International Co., Ltd. Subsidiary of Haier Group BRAVE LION (HK) LIMITED Subsidiary of Haier Group Chongqing Haier Electrical Appliances Sales Co., Ltd. Subsidiary of Haier Group Chongqing Haier Logistics Co., Ltd Subsidiary of Haier Group The joint venture of the parent Qingdao Haier New Material Research and Development Co., Ltd. company CONTROLADORA MABE S.A.de C.V. Joint venture HNR Company (Pvt) Limited Joint venture MiddleEast Airconditioning Company,Limited Joint venture Hefei Haier Special Steel Plate Research and Development Co., Ltd. Joint venture Konan Electronic Co., Ltd. Joint venture 189 / 207 2017 Interim Report Qingdao Haier Co., Ltd Qingdao Haier Carrier Refrigeration Equipment Co., Ltd. Joint venture Qingdao Haier Special Steel Plate Research and Development Co., Ltd. Joint venture Mitsubishi Heavy Industries Haier (Qingdao) Air-conditioners Co., Ltd. Joint venture Wolong Electric Zhangqiu Haier Motor Co., Ltd. Joint venture (III) Information on Related-party transaction 1. The detailed information of the Company procuring goods and services from related-party are as follows: Amount for the current Amount for the previous Name of related parties period period Qingdao Haier Parts Procurement Co., 4,101,092,652.62 2,834,073,214.99 Ltd. CONTROLADORAMABES.A.deC.V. 3,524,320,229.06 Chongqing Haier Electrical Appliances 2,215,820,324.20 2,465,270,177.05 Sales Co., Ltd. Hefei Haier Logistics Co., Limited 999,455,393.51 590,802,325.75 Chongqing Haier Logistics Co., Ltd. 983,636,882.26 585,481,049.95 HNR Company (Pvt) Limited 919,404,923.83 573,735,257.92 Qingdao Haier International Trading Co., 526,417,908.74 247,965,334.09 Ltd. Wolong Electric Zhangqiu Haier Motor 355,699,474.19 313,371,323.79 Co., Ltd. Qingdao Haier Special Plastic 332,029,641.38 280,906,377.02 Development Co., Ltd. Hefei Haier Special Steel Plate Research 324,233,684.39 311,939,821.56 and Development Co., Ltd. Qingdao Haier Special Steel Plate 291,804,265.09 223,736,153.61 Research and Development Co., Ltd. Qingdao Haier Communications Co., 286,602,718.51 Ltd. Qingdao Haier Strauss Water Equipment 225,881,787.55 48,294,127.73 Co., Ltd. Haier Energy Power Co., Ltd. 223,432,383.88 177,900,502.03 Qingdao Haier Tooling Development 184,193,856.07 142,344,338.00 and Manufacturing Co., Ltd. Lizhu Haier Built Facilities (Qingdao) 104,798,646.07 96,627,259.69 Co., Ltd. Qingdao Haiyongda Property 91,155,393.46 60,616,791.01 Management Co., Ltd. HAIER INTERNATIONAL(HK)LTD. 57,729,284.04 32,048,676.99 190 / 207 2017 Interim Report Qingdao Haier Co., Ltd HAIER INTERNATIONAL CO., LTD 48,993,253.14 32,810,835.38 Mitsubishi Heavy Industries Haier 26,906,682.16 19,901,171.32 (Qingdao) Air-conditioners Co., Ltd. Qingdao Haier Household Integration 7,055,871.66 115,840,029.68 Co., Ltd. Other related parties 693,482,690.40 539,456,883.01 Total 16,524,147,946.21 9,693,121,650.57 2. The detailed information of the Company procuring goods and services from related-party are as follows: Amount for the current Amount for the Name of related parties period previous period FISHER&PAYKELAUSTRALIAPTY 443,606,539.65 357,585,646.59 Qingdao Haier International Trading 382,386,502.01 295,668,534.02 Co., Ltd. Hefei Haier Special Steel Plate Research 377,550,381.70 353,802,132.04 and Development Co., Ltd. Wolong Electric Zhangqiu Haier Motor 303,051,955.98 226,781,249.16 Co., Ltd. Qingdao Haier New Material Research 216,055,389.34 172,047,424.81 and Development Co., Ltd. Qingdao Haier Special Steel Plate 167,992,052.29 190,369,953.69 Research and Development Co., Ltd. Chongqing Haier Electrical Appliances 96,889,976.15 116,299,875.16 Sales Co., Ltd. Qingdao Haier Special Plastic 94,854,275.54 70,862,710.70 Development Co., Ltd. Qingdao Haier Tooling Development 80,082,974.19 37,237,163.70 and Manufacturing Co., Ltd. Haier Group Electric Appliance Industry 41,489,915.93 56,831,677.83 Co., Ltd. Qingdao Haier International Travel 18,529,608.83 15,387,386.88 Agency Co., Ltd. Other related parties 228,963,648.33 289,715,111.60 Total 2,451,453,219.94 2,182,588,866.18 191 / 207 2017 Interim Report Qingdao Haier Co., Ltd 3. Unsettled amounts of related parties Items and names of consumers Ending balance Beginning balance Dividends receivables: Wolong Electric Zhangqiu Haier 50,000,000.00 50,000,000.00 Motor Co., Ltd. Qingdao Haier Carrier Refrigeration Equipment Co., 39,306,692.40 Ltd. Qingdao Haier Software 4,524,472.84 4,524,472.84 Investment Co., Ltd. MiddleEast Airconditioning 7,817,747.86 Company, Limited Bank of Qingdao Co., Ltd. 76,868,844.93 Trade receivables: Provision for Provision for Items and names of consumers Book balance Book balance bad debts bad debts FISHER& PAYKELAPPLIANCESLIMIT 317,751,221.21 15,887,561.06 224,292,054.50 11,214,602.73 ED Haier Group Electric Appliance 133,914,747.12 6,695,737.36 210,327,249.43 10,516,362.47 Industry Co., Ltd. HNR Company (Pvt) Limited 122,775,678.35 6,138,783.92 Hefei Haier Special Steel Plate Research and Development Co., 5,167,586.86 258,379.34 94,611,810.86 4,730,590.54 Ltd. HAIER INTERNATIONAL 43,154,437.15 2,157,721.86 31,129,868.67 1,556,493.43 CO., LTD Qingdao Haier Special Steel Plate Research and Development 809,908.84 40,495.44 24,923,915.12 1,246,195.76 Co., Ltd. Haier Finance Leasing (China) 39,871,231.96 1,993,561.60 Co., Ltd. Other related parties 336,010,090.34 16,800,504.52 368,319,082.85 18,415,954.13 Prepayments: Qingdao Haier Parts 57,601,548.78 54,261,329.05 Procurement Co., Ltd. Qingdao Haier International 121,954,432.10 26,145,174.92 Trading Co., Ltd. Hefei Haier Logistics Co., 8,124,949.88 8,934,803.31 Limited Other related parties 7,933,983.17 27,420,535.40 192 / 207 2017 Interim Report Qingdao Haier Co., Ltd Interests receivables: Haier Group Finance Co., Ltd. 4,107,145.57 10,353,293.15 Other receivables: Provision for Provision for Items and names of consumers Book balance Book balance bad debts bad debts Haier Group Electric Appliance 58,591,749.22 2,929,587.46 59,806,077.31 2,990,303.87 Industry Co., Ltd. Chongqing Haier Electrical 32,185,535.78 1,609,276.79 33,441,658.84 1,672,082.94 Appliances Sales Co., Ltd. Qingdao Haier Logistics 1,510,000.00 75,500.00 13,593,017.74 679,650.89 Consulting Co., Ltd. Other related parties 72,884,742.92 3,644,237.15 84,938,909.08 4,246,945.45 Bills payable: Wolong Electric Zhangqiu Haier 19,824,848.32 76,131,434.12 Motor Co., Ltd. Laiyang Haier Electrical Co. Ltd. 51,074,468.80 58,008,353.21 Other related parties 7,383,200.6 20,169,217.84 Accounts payables: CONTROLADORA MABE 82,308,464.05 1,231,921,638.54 S.A.de C.V. Chongqing Haier Electrical 304,977,700.76 275,130,591.00 Appliances Sales Co., Ltd. Qingdao Haier Communications 99,944,203.23 219,092,243.03 Co., Ltd. Qingdao Haier International 177,789,841.90 209,554,906.25 Trading Co., Ltd. Qingdao Haier Parts 1,641,047,065.82 176,467,143.15 Procurement Co., Ltd. Feima Electronic (Qingdao) Co., - 144,450,361.18 Ltd. Qingdao Haier Special Plastic 75,497,230.32 86,510,974.88 Development Co., Ltd. HNR Company (Pvt) Limited 211,158,405.03 75,871,533.43 HAIER INTERNATIONAL 19,859,001.66 61,199,874.08 CO., LTD Chongqing Haier Logistics Co., 338,930,197.01 54,116,937.28 Ltd. Hefei Haier Logistics Co., 588,676,232.40 50,255,970.60 Limited Qingdao Haier Strauss Water 81,799,163.80 46,642,817.01 Equipment Co., Ltd. 193 / 207 2017 Interim Report Qingdao Haier Co., Ltd HAIER INTERNATIONAL 41,669,785.41 (HK) LTD. Lizhu Haier Built Facilities - 39,042,729.52 (Qingdao) Co., Ltd. HAIER INFORMATION 25,411,237.92 33,861,555.29 APPLIANCES S.R.L. Haier Group Electric Appliance - 11,485,262.70 Industry Co., Ltd. Other related parties 301,392,763.65 252,519,124.31 Receipts in advance: Haier Group Electric Appliance 11,549,594.10 10,576,951.80 Industry Co., Ltd. HAIER INTERNATIONAL 1,096,369.42 1,159,469.63 CO., LTD Other related parties 19,129,051.80 24,877,981.64 Other payable: Haier Brothers Animation 386,304,363.95 384,741,409.54 Industry Co., Ltd. Haier Group Corporation 163,049,555.34 Chongqing Haier Logistics Co., 51,830,739.06 51,830,739.06 Ltd. Haier Energy Power Co., Ltd. 14,344,838.61 37,071,886.32 Xingyang International Co., Ltd. 13,885,076.40 Other related parties 134,178,038.57 165,677,261.12 Interests payables: Haier Group Finance Co., Ltd. 27,878,441.97 14,845,738.29 Dividends payables: BRAVE LION (HK) LIMITED 122,756,874.10 122,756,874.10 Haier Electric Appliances 312,153,836.35 International Co., Ltd. Haier Group Corporation 266,007,469.47 Qingdao Haier Venture & 42,718,634.88 Investment Information Co., Ltd. HCH (HK) Investment 50,015,733.17 Management Co., Limited Other related parties 10,015,329.74 16,781,015.20 4. Other Related-party transactions (1) One of the Company‘s subsidiaries entered into a loan contract with Haier Group Finance Co., Ltd.. The borrowed amount as of 30 June 2017 was RMB5,703 million and the interest and fees payable to Haier Group Finance Co., Ltd. for the period was RMB155 million in total. 194 / 207 2017 Interim Report Qingdao Haier Co., Ltd (2) Information about the guarantor of the Company‘s ending guaranteed borrowing who is a related party: Borrower Borrowed amount Guarantor HAIER US APPLIANCE 20,625,984,869.08 Haier Group Corporation SOLUTIONS, INC Total 20,625,984,869.08 (3) The interest income from bank deposits with Haier Group Finance Co., Ltd. deposited by the Company and its subsidiaries for the period was RMB20.59 million in total. (4) Qingdao Haier Goodaymart Logistic Co., Ltd., a subsidiary of the Company and other companies provided logistics services to other related companies under Haier Group, the logistics income for the period was RMB108 million. (5) Leasing Lease expense Application of leased Lessees Lessors recognized for the assets period Qingdao Haier Subsidiary of the Investment and Production and 7,225,022.00 Company Development Co., Ltd. operation and its subsidiaries Subsidiary of the Other companies of Production and 23,609,593.30 Company Haier Group operation Total 30,834,615.30 (Ⅳ) Pricing policies 1. Connected 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. Connected 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. Connected Procurements 195 / 207 2017 Interim Report Qingdao Haier Co., Ltd In addition to independent procurement platform, the Company entrusted Haier Group Corporation and its subsidiaries for procurements of part of raw materials and distribution of goods and materials. The business is conducted according to the Purchase and Distribution Contract entered among the Company, Haier Group Corporation and other parties. The Company, Haier Group Corporation and its subsidiaries purchase materials from agents. They purchase and distribute goods for production and non-production use according to the specific material procurement target proposed by the Company. The price of materials purchased and delivered consist 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 purchased from the market. Connected 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 of 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 among the Company, Haier Group Corporation and other parties, the price of financial services is determined by the principle that is not less favorable of market value fair. The Company is entitled to decide whether to keep cooperation relationship with them with the knowledge of the price prevailing on the market and in combination with its own interests. While performing the agreement, the Company could also require other financial service institutions to provide related financial services basing on actual situation. In order to meet the Company‘s demands such as the avoidance of foreign exchange fluctuation risk, the Company may choose Haier Group Finance Co., Ltd. (―Finance Company‖) to provide some foreign exchange derivative service after comparing with comparable companies. The Company will uphold the safe and sound and appropriately reasonable principle, under which all foreign exchange capital business shall have a normal and reasonable business background to eliminate speculative operation. At the same time, the Company has specified the examination and permission rights, management positions and responsibilities at all levels for its foreign exchange capital business to eradicate the risks of operation by persons and improved its response speed to risks on the premise that the risks are effectively controlled. 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 logistics services provided by the related companies of Haier Group Corporation, the Company signed the Logistics and Service Agreement with Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation, the Company entrusted the subsidiaries of Haier Group to provide energy and power, basic research and detection, equipment 196 / 207 2017 Interim Report Qingdao Haier Co., Ltd 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 provide Haier Electronics with hydropower energy and related support; meeting, accommodation, ticket agent; integrated services such as product certification, software, food and beverage agent, property decoration, house lease, finance and marketing, product research and development services. 4. Others 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 contract 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 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 Haier Special Steel Plate Research and Development Co., Ltd. and Hefei Haier Special Steel Plate Research and Development 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. XIII. Share-based Payment Nil 197 / 207 2017 Interim Report Qingdao Haier Co., Ltd XIV. Commitment and contingencies As of 30 June 2017, there is no critical contingency of the Company required to be disclosed. XV. Events Subsequent to the Balance Sheet date 1. On 1 August 2017, the Company, based on the share capital of 6,097,402,272 shares registered in China Securities Depository & Clearing Corporation Ltd., Shanghai Branch, distributed RMB2.48 (tax inclusive) for every 10 shares to all shareholders, with a total amount of dividend before tax of RMB1,512,155,876.30. 2. As approved by the China Securities Regulatory Commission on the approval of the Non-public Issuance of shares in Qingdao Haier Co., Ltd. (Zheng Jian Xu Ke[2014] No.436), Qingdao Haier Co., Ltd. (hereinafter referred to as the "Company") offered a non-public offering of 302,992,994 shares (A shares)at the issue price of RMB10.83 per share to KKR Home Investment S.àr.l. (hereinafter referred to as "KKR (Luxembourg)") on 17 July 2014. The Company completed the above mentioned non-public offering shares registration and restricted registration on 17 July 2014, with 36 months of restricted period .In June 2015, the Company held the 2014 annual general meeting on which considered and approved the Company's 2014 profit distribution plan, including that on the basis of 3,046,125,134 shares, the capital reserve conversion increased 10 shares for every 10 shares to all shareholders, and after the implementation of the programme, the number of restricted shares held by KKR (Luxembourg) has been changed from 302,992,994 shares to 605,985,988 shares. This portion of the stock will be listed for circulation on 17 July 2017. 3. The Company has no material events subsequent to the balance sheet date which need to be disclosed. XVI. Financial Instruments Related Risks The Company‘s financial assets include notes receivables, receivables and etc., and the Company‘s financial liabilities include bills payable, payables, long- and short- term borrowings and etc. Please refer to relevant items in Note VII for detailed descriptions of various financial instruments. Risks relating to these financial instruments and the risk management policies the Company adopts to mitigate these risks are summarized below. The Company‘s management manages and monitors these risk exposures in order to ensure these risks are well within their respective risk limits. 1. Credit risk The credit risk the Company exposed to mainly comes from bank deposits, notes receivables, accounts receivables, interest receivables, other receivables and wealth management products in other current assets. 198 / 207 2017 Interim Report Qingdao Haier Co., Ltd (1) The Company‘s bank deposits and wealth management products are mainly deposited with Haier Group Finance Co., Ltd., national banks and other large and medium size listed banks. The interest receivables mainly refer to the accrued interest from time deposits placed with the aforesaid banks. The Group doesn‘t believe there is any significant credit risk due to defaults of its counterparties which would cause any significant loss. (2) Accounts receivables and notes receivables: The Company only trades with recognized and creditworthy third parties. It is the Company‘s policy that all consumers who wish to trade on credit terms are subject to credit verification procedures. The payment terms shall be determined on a reasonable basis. The Company monitors the balances of accounts receivables on an ongoing basis and maintains credit insurances for significant accounts receivables due from its credit clients, so as to ensure the Company will not expose to significant risk of bad debts. (3) The Company‘s other receivables mainly include export tax rebate receivable, recurrent loans and advances to its employees. The Company strengthened the management of these receivables and corresponding business activities based on their historical reasons of occurrence, and continued to monitor such receivables, so as to ensure that the Company‘s significant risk of bad debts are controllable and to further reduce such risks. 2. Liquidity risk Liquidity risk is the risk that an enterprise may encounter deficiency of funds in meeting obligations associated with financial liabilities. In order to control liquidity risk, the Company integrates the utilization of various financing methods such as settlement with bills and bank loans, to strive for a sustainable and flexible financing. The Company has secured line of credit with a great number of 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, the US, Japan, Southeast Asia, South Asia, central and east Africa, Europe, and Australia, etc. and are settled in RMB, US dollar, and other currencies. The Company‘s overseas assets and liabilities denominated in foreign currencies as well as transactions settled in foreign currencies in the future 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, so as to reduce its exposure to fluctuations in exchange rates to the largest extent. The Company avoid its exposure to fluctuations in exchange rates by entering into forward foreign exchange contracts. 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. 199 / 207 2017 Interim Report Qingdao Haier Co., Ltd XVII. Other Important Events The Company has no other important events that need to be disclosed. XVIII. Notes to Main Items of Financial Statements of the Parent Company 1. Trade receivables (1) Disclosure of trade receivables by consumer categories is set out as follows: Closing balance Opening balance Items Provision for Provision for Book balance Book balance bad debts bad debts Individual significant trade receivables of which provision for bad debts is made on an individual basis Trade receivables of which provision for bad 302,397,411.75 15,119,870.59 279,408,653.04 13,970,432.65 debts is made on a group basis Individual insignificant trade receivables of which provision for bad debts is made on an individual basis Total 302,397,411.75 15,119,870.59 279,408,653.04 13,970,432.65 (2) Trade receivables of which provision for bad debts is made on a group basis: Closing balance Opening balance Aging Provision for bad Provision for Book balance Book balance debts bad debts Within one 278,232,371.75 13,911,618.59 260,896,436.79 13,044,821.84 year One to two 19,294,625.12 964,731.26 18,512,216.25 925,610.81 years More than 4,870,414.88 243,520.74 two years 200 / 207 2017 Interim Report Qingdao Haier Co., Ltd Total 302,397,411.75 15,119,870.59 279,408,653.04 13,970,432.65 (3) The total debt amount of the top 5 debtors in the ending trade receivables amounted to RMB301,179,615.49, representing 99.60% of the book balance of the trade receivables. 2. Other receivables (1) Disclosure of other receivables by consumer categories is set out as follows: Closing balance Opening balance Items Provision for Provision for Book balance Book balance bad debts bad debts Individual significant other receivables of which provision for bad debts is made on an individual basis Other receivables of which provision for bad debts is 1,301,772,973.17 65,088,648.66 339,950,820.95 16,997,541.05 made on a group basis Individual insignificant other receivables of which provision for bad debts is made on an individual basis Total 1,301,772,973.17 65,088,648.66 339,950,820.95 16,997,541.05 (2) Other receivables of which provision for bad debts is made on a group basis: Closing balance Opening balance Aging Provision for Provision for Book balance Book balance bad debts bad debts Within 1,301,772,973.17 65,088,648.66 339,950,820.95 16,997,541.05 one year Total 1,301,772,973.17 65,088,648.66 339,950,820.95 16,997,541.05 (3) The total debt amount of the top 5 debtors in the ending trade receivables amounted to RMB1,136,514,152.63, representing 87.31% of the book balance of the trade receivables. 3. Long-term equity investments √Applicable □Not Applicable (1) Details of long-term equity investments: Items Closing balance Opening balance 201 / 207 2017 Interim Report Qingdao Haier Co., Ltd Provision for Provision for Book balance Book balance impairment impairment Long-term equity investments Including: long-term equity 20,269,704,813.36 7,100,000.00 20,211,704,813.36 7,100,000.00 investments to subsidiaries Long-term equity investments to 2,189,166,933.55 2,137,474,063.71 associates Total 22,458,871,746.91 7,100,000.00 22,349,178,877.07 7,100,000.00 (2) Long-term equity investments to subsidiaries Impairment Increase or Opening Closing provision Name of Investee Companies decrease for the balance balance closing period balance I. 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 Co., 271,380,000.00 271,380,000.00 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. Chongqing Haier Intelligent Electronics 11,870,511.98 11,870,511.98 Co., Ltd. Qingdao Haier Electronic Plastic Co., Ltd. 48,000,000.00 48,000,000.00 Dalian Haier Refrigerator Co., Ltd. 99,000,000.00 99,000,000.00 Dalian Haier Air-conditioning Co., Ltd. 99,000,000.00 99,000,000.00 202 / 207 2017 Interim Report Qingdao Haier Co., Ltd Guizhou Haier Electronics Co., Ltd. 96,904,371.71 96,904,371.71 Hefei Haier Air-conditioning Co., Limited 67,110,323.85 67,110,323.85 Qingdao Haier Refrigerator (International) 158,387,576.48 158,387,576.48 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 Corp., 218,245,822.50 218,245,822.50 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 Appliance 91,750,000.00 91,750,000.00 Co., Ltd. Qingdao Haier Industry Intelligence 8,000,000.00 8,000,000.00 Research Institute Co., Ltd. Haier Shareholdings (Hong Kong) Limited 13,561,203,702.07 13,561,203,702.07 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 156,600,000.00 156,600,000.00 Co., Ltd. Qingdao Casarte Smart Living Appliances 10,000,000.00 10,000,000.00 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 8,500,000.00 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 7,100,000.00 203 / 207 2017 Interim Report Qingdao Haier Co., Ltd Qingdao Haidarui Procurement Service 107,800,000.00 107,800,000.00 Co., Ltd. Shanghai Haier Zhong Zhi Fang Chuang 2,000,000.00 2,000,000.00 Ke Space Management Co., Ltd. Haier Industries Holdings Limited 50,000,000.00 50,000,000.00 Qingdao Haier Intelligent Household 326,400,000.00 326,400,000.00 Appliances Co., Ltd. Total 20,211,704,813.36 58,000,000.00 20,269,704,813.36 7,100,000.00 (3) Long-term equity investments to associates Increase or decrease for the Period Name of Impairm Opening Closing investee Increase or Investment income ent balance balance companies decrease for recognized under the Others provision the Period equity method Bank of Qingdao Co., 606,868,517.54 43,901,307.40 -41,852,555.17 608,917,269.77 Ltd. Others 1,530,605,546.17 49,644,117.61 1,580,249,663.78 Total 2,137,474,063.71 93,545,425.01 -41,852,555.17 2,189,166,933.55 4. Operation Income and Operation Expense: √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous period Items Revenue Cost Revenue Cost Principal Business 1,541,395,774.74 1,124,839,769.04 1,508,462,660.45 1,061,570,975.96 Other Business 1,716,550.91 259,972.03 7,408,824.76 2,403,891.47 Total 1,543,112,325.65 1,125,099,741.07 1,515,871,485.21 1,063,974,867.43 5. Investment Income Amount for the Amount for the previous Items current period period Long-term equity investments income calculated 93,545,425.01 85,815,381.99 by the equity method Investment income from disposal of long-term 17,262,280.41 equity investments Investment income from disposal of financial assets available for sale Long-term equity investments income calculated 58,348,342.72 40,386,975.56 by cost method 204 / 207 2017 Interim Report Qingdao Haier Co., Ltd Investment income from financial assets available for sale during the holding period Total 151,893,767.73 143,464,637.96 XIX. The approval of Financial Statements The financial statements were approved to be issued by the board of the Company on 25 August 2017. XX. Supplementary Information 1. Basic and diluted earnings per share Amount for the current period Amount for the previous period Earnings per share Earnings per share Weighted Weighted (RMB) (RMB) Items average average Basic Diluted Basic Diluted return on net return on net earnings earnings earnings earnings assets assets per share per share per share per share Net profit attributable to ordinary shareholders of 15.47% 0.726 0.726 13.78% 0.543 0.543 the parent company Net profit attributable to ordinary shareholders of the parent company after 13.20% 0.619 0.619 11.49% 0.453 0.453 deduction of non-recurring gain or loss 2. Non-recurring gain or loss Amount for the Amount for the Items current period previous period Net profit attributable to ordinary shareholders of the parent 4,427,068,404.51 3,315,173,171.70 company Less: non-recurring gain or loss 649,728,949.56 549,749,414.48 Net profit attributable to ordinary shareholders of the 3,777,339,454.95 2,765,423,757.22 Company after deduction of non-recurring gain or loss Breakdown of non-recurring profit or loss for the period Non-recurring profit or loss items Amount for the period Gains or losses from disposal of non-current assets -418,828.94 Income from disposal of long-term equity investments 21,438,092.72 Government grants included in current profit or loss, except that closely related 118,072,782.97 205 / 207 2017 Interim Report Qingdao Haier Co., Ltd to the normal operating business, complied with requirements of the national policies, continued to be granted with the amount and quantity determined under certain standards Profit and loss of changes in fair value arising from holding of trading financial assets and trading financial liabilities except for valid straddle business relevant to normal business of the company, as well as investment gain realized from 425,914,149.99 disposal of trading financial assets, trading financial liabilities and financial assets available for sale Other non-operating income and expenses 162,843,152.93 Effect of minority equity interests -70,417,181.68 Effect of income tax -7,703,218.43 Total 649,728,949.56 1. Difference on figures by domestic and foreign Accounting Standards □Applicable √Not Applicable 2. Others □Applicable √Not Applicable 206 / 207 2017 Interim Report Qingdao Haier Co., Ltd SECTION XI DOCUMENTS AVAILABLE FOR INSPECTION (I) Interim Report of 2017 of Qingdao Haier Co., Ltd with signatures of the legal representative. (II)Financial report with signatures and seals of the legal representative, Documents chief accountant and person in charge of accounting department. Available for (III) All documents which have been publicly disclosed on the newspaper designated by Inspection China Securities Journal, Shanghai Securities News, Securities Times, Securities and the website of Shanghai Stock Exchange (www.sse.com.cn)during the reporting period. Chairman: Liang Haishan Publish approved by the Board on 25 August 2017 Revised information □Applicable √Not Applicable 207 / 207