2018 Annual Report of Qingdao Haier Co., Ltd. 2018 Annual Report of Qingdao Haier Co., Ltd. Importance Notice I. The Board of Directors, the Board of Supervisors, directors, supervisors and senior management of Qingdao Haier Co., Ltd. (“the Company”) hereby assure that the content set out in the annual report is true, accurate and complete, and free from any false record, misleading representation or material omission, and are individually and collectively responsible for the content set out therein. II. Information of Directors absent from the meeting. Position of director absent Name of director absent Reason for the absence of Name of proxy from the meeting from the meeting director from the meeting Director Liu Haifeng Personal affair Wu Changqi III. Shandong Hexin Certified Public Accountants LLP has issued a standard and unqualified audit report for the Company. IV. Liang Haishan (legal representative of the Company), Gong Wei (chief financial officer of the Company) and Ying Ke (the person in charge of accounting department) hereby certify that the financial report set out in the annual report is true, accurate and complete.. V. Proposal of profit distribution and proposal of capitalizing capital reserves for the reporting period examined and reviewed by the Board Proposal of profit distribution for the reporting period examined and reviewed by the Board: to declare a cash dividend of RMB3.51 per 10 shares (tax inclusive) to all shareholders based on the total number of shares as at the registration date in respect of future proposal for profit distribution. VI. Disclaimer in respect of forward-looking statements √Application □Not applicable Forward-looking statements such as future plans, development strategies as set out in this report do not constitute the Company‘s substantial commitment to investors. Investors are advised to pay attention to investment risks. VII. Is there any fund occupation by controlling shareholders and their related parties for non-operational purposes? No 2018 Annual Report of Qingdao Haier Co., Ltd. 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 □Application √Not application Chairman: Liang Haishan Qingdao Haier Co., Ltd. 29 April 2019 (Note: This Report has been prepared in both Chinese and English. Should there be any discrepancies or misunderstandings between the two versions, the Chinese version shall prevail.) 2018 Annual Report of Qingdao Haier Co., Ltd. Contents SECTION I DEFINITIONS........................................................................................................................ 1 SECTION II GENERAL INFORMATION OF THE COMPANY AND KEY FINANCIAL INDICATORS .... 3 SECTION III SUMMARY OF THE COMPANY‘S BUSINESS ............................................................... 9 SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS ....................................................... 17 SECTION V SIGNIFICANT EVENTS .................................................................................................... 47 SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS . 89 SECTION VII RELEVANT INFORMATION OF PREFERRED SHARES............................................ 98 SECTION VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES ..... 100 SECTION IX CORPORATE GOVERNANCE ...................................................................................... 111 SECTION X RELEVANT INFORMATION ON CORPORATE BONDS ............................................. 121 SECTION XI RESPONSIBILITY STATEMENT .................................................................................. 124 SECTION XII FINANCIAL REPORT ................................................................................................... 125 SECTION XIII DOCUMENTS AVAILABLE FOR INSPECTION ....................................................... 329 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION I DEFINITIONS I. Definitions Unless otherwise stated in context, the following terms should have the following meanings in this report: Definition of frequently used terms CSRC China Securities Regulatory Commission MOFCOM Ministry of Commerce of the PRC SSE Shanghai Stock Exchange The Company, Qingdao Haier Co., Ltd. Qingdao Haier Four Major Securities China Securities Journal, Shanghai Securities News, Securities Times, Securities Newspapers Daily Haier Electronics Group Co., Ltd. (a company listed in Hong Kong, stock code: Haier Electrics, 1169 01169.HK) GEA GE Appliances, Household Appliance Assets and Business of General Electric 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 the famous luxury brand of the world. It has products including ventilator, gas stove, oven, dishwasher, microwave FPA oven, freezer, washing machine, clothes dryer and etc. Its business covers over 50 countries/regions across the world. The Company completed the acquisition of 100% equity interest in Haier New Zealand Investment Holding Company Limited on July 2018, and FPA became a wholly-owned subsidiary of the Company. China Market Monitor Co., Ltd., established in 1994, has been focusing on research CMM on retail sales in China consumption market for a long term and is the nationally recognized market research institute in terms of appliance area. Euromonitor, established in 1972, is the leading strategic market information supplier and owns over 40 years of experience in respect of publishing market Euromonitor report, commercial reference data and on-line database. They create data and analysis on thousands of products and services around the world. All view cloud (AVC) is a big data integrated solution provider perpendicular to the All view cloud smart home field, providing enterprises with big data information services, regular data information services and special data services. 1 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The International Electrotechnical Commission. Founded in 1906, it is the world‘s first organization for the preparation and publication of international electrotechnical standardization and is responsible for international standardization for electrical engineering and electronic engineering. The goals of the commission include: to effectively meet the needs of the global market; to ensure that the IEC standards and conformity assessment programs are applied globally in a prioritized manner and to the greatest extent; to assess and improve the quality of products and services involved in its standards; to create conditions for the common use of complicated systems; to improve the effectiveness of the industrialization process; to improve human health and safety, and to protect the environment. Shenyang Refrigerator Interconnected Factory, Foshan Front-Loading Washing Machine Interconnected Factory, Zhengzhou Air-conditioner Interconnected Factory, Qingdao Mold Interconnected Factory, Qingdao Water Heater Interconnected Factory, Qingdao FPA Electrical Machine Interconnected Factory, 11 Interconnected Jiaozhou Air-Conditioner Interconnected Factory, Huangdao Central Factories Air-Conditioner Interconnected Factory, Huangdao Smart Kitchen Appliance Range Hood Interconnected Factory, Huangdao Smart Kitchen Appliance Stove Interconnected Factory, Qingdao Front-Loading Washing Machine Interconnected Factory ―5‖ refers to five physical spaces where Haier keeps upgrading, including smart living room, smart kitchen, smart bathroom, smart bedroom and smart balcony. ―7‖ “5+7+N” smart represents seven whole-house solutions, namely whole-house air, whole-house full-scene customized water, whole-house cleansing and maintenance, whole-house security, whole-house full set program interaction, whole-house health and whole-house internet, while N refers to variables, i.e. users may customize their own smart living scene freely based on their living habit, realizing unlimited possibilities. ―Ren‖ means staff; ―Dan‖ means the need of users, rather than the ―orders‖, the English word of ―Dan‖, in narrow sense. The ―RenDanHeYi Model‖ encourages the Model of RenDanHeYi integration of staff with users, and ―win-win‖ means to realize every employee‘s value while creating value for users. The Institute of Electrical and Electronics Engineers, an international association of electronic technology and information science engineers, is currently the largest non-profit professional technology society in the world. It is committed to the IEEE development and research of electrical, electronic, computer engineering and science-related fields, and has now developed into an international academic organization with great influence in terms of the fields of space, computer, telecommunications, biomedicine, power and consumer electronics. 2 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION II GENERAL INFORMATION OF THE COMPANY AND KEY 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 Representative of securities Secretary to the Board IR affairs Name Ming Guozhen Liu Tao Sophie (孙瑶) Department of Securities of Department of Securities of Haier Deutschland GmbH, Address Qingdao Haier Co., Ltd. Haier Qingdao Haier Co., Ltd. Haier Hewlett-Packard-Str. 4, Information Industrial Park, No.1 Information Industrial Park, 61352 Bad Homburg, Haier Road, Qingdao City No.1 Haier Road, Qingdao City Germany +49 160 9469 3601 Tel 0532-88931670 0532-88931670 (Germany) Fax 0532-88931689 0532-88931689 / Email finance@haier.com finance@haier.com y.sun@haier.de III. Summary of the General Information Registered address Haier Industrial Park, Laoshan District, Qingdao City Postal code 266101 Haier Information Industrial Park, Laoshan District, Business address Qingdao City Postal code 266101 Website http://www.haier.net/en/ Email 9999@haier.com IV. Place for Information Disclosure and Deposit Designated newspaper for information Shanghai Securities News, Securities Times, China disclosure Securities Journal, Securities Daily 3 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Website for publishing of annual report as www.sse.com.cn designated by the CSRC www.xetra.com; www.degap.de Department of Securities of Qingdao Haier Co., Ltd. Deposit place of annual report Haier Information Industrial Park, No.1 Haier Road, Qingdao City V. Summarized Information of Shares of the Company Summarized Information of Shares of the Company Stock Exchange of Stock Short Name Type of Shares Stock Short Name Stock Code Shares Listed Before Variation Shanghai Stock A shares Qingdao Haier 600690 / Exchange Frankfurt Stock D shares QINGDAO HAIER 690D / Exchange VI. Other Related Information Name Shandong Hexin Certified Public Accountants LLP Accounting firm engaged by the 26th – 27th Floor, Century Building, No.39 Company Business address Donghai Road West, Qingdao City (domestic) Name of signing accountant Wang Hui (王晖), Wang Lin (王琳) Name China International Capital Corporation Limited Sponsor 27th & 28th Floor, China World Tower 2, No. 1 Business address responsible for Jianguomenwai Avenue, Beijing continuing supervision Name of signing sponsors Sun Lei (孙雷), Li Yang (李扬) during the reporting period Period of continuing supervision 18 January 2019 to 31 December 2020 Name China International Capital Corporation Limited Financial 27th & 28th Floor, China World Tower 2, No. 1 advisor Business address responsible for Jianguomenwai Avenue, Beijing continuing Name of signing representative supervision Hu Xiaojun (胡霄俊), Li Yang (李扬) during the of financial advisor reporting period Period of continuing supervision 12 January 2017 to 31 December 2018 Notes: (1)Financial advisor is responsible for continuing supervision during the reporting period: On 12 January 2017, the Company issued the Report on the Execution of Acquisition of Significant Assets by 4 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Qingdao Haier Co., Ltd., according to which, the acquisition of significant assets related to the acquisition of the appliance business of General Electric had been completed. As the financial advisor for this acquisition of significant assets, China International Capital Corporation Limited will carry out continuing supervision on the Company during the continuing supervision period. (2)Sponsor is responsible for continuing supervision: During the reporting period, the Company had an issuance of convertible bonds, and the ―Haier Convertible Bonds‖ were listed on 18 January 2019. China International Capital Corporation Limited, as the sponsor of such issue, is responsible for continuing supervision for the remaining time of the year of listing and the following whole fiscal year. VII. Key accounting data and financial indicators for the last three years (I) Key accounting data Unit and Currency: RMB 2017 yoy Key accounting data 2018 change 2016 After Before (%) adjustment adjustment Operating revenue 183,316,560, 163,428,82 159,254,466, 119,132,261,66 12.17 236.03 5,488.56 909.46 2.60 Net profit attributable to 7,440,228,85 6,907,629,1 6,925,792,32 5,041,782,280. shareholders of the listed 7.71 company 5.90 88.39 1.27 78 Net profit after deduction of 6,601,505,59 5,624,061,7 5,624,061,70 4,332,453,050. non-recurring profit or loss 17.38 attributable to shareholders 9.79 08.46 8.46 07 of the listed company Net cash flow from 18,934,252,8 16,703,785, 16,086,588,0 8,135,878,351. operating activities 13.35 99.16 279.98 28.31 88 yoy As of 31 As of 31 As of 31 December 2017 change December 2016 December (%) 2018 After Before adjustment adjustment Net assets attributable to 39,402,350,7 33,299,583, 32,215,515,2 26,438,188,226 shareholders of the listed 18.33 company 91.68 555.63 01.45 .56 Total assets 166,699,544, 157,164,34 151,463,110, 131,469,157,34 6.07 243.79 5,812.30 707.63 8.79 (II) Key financial indicators 2017 Key financial indicators 2018 After Before yoy change (%) 2016 adjustment adjustment Basic earnings per share 1.210 1.133 1.136 6.80 0.827 (RMB per share) 5 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Diluted earnings per share 1.182 1.085 1.088 8.94 0.824 (RMB per share) Basic earnings per share after deducting non-recurring profit 1.074 0.922 0.922 16.49 0.71 or loss (RMB per share) Decreased by Weighted average return on 21.00 22.89 23.59 20.38 net assets (%) 1.89 percent point Weighted average return on Decreased by net assets after deducting 18.63 19.15 19.15 17.56 non-recurring profit or loss 0.52 percent point (%) Explanation of the key accounting data and financial indicators of the Company as at the end of the reporting period for the previous three years □Applicable √Not applicable VIII. Differences in accounting data under domestic and overseas accounting standards (I) Differences in net profit and net asset attributable to shareholders of listed company in financial report disclosed simultaneously according to international accounting standards and according to China Accounting Standards(CAS) □Applicable √Not applicable (II) Differences in net profit and net asset attributable to shareholders of listed company in financial report disclosed simultaneously according to overseas accounting standards and according to China Accounting Standards(CAS) □Applicable √Not applicable (III) Reasons for the difference between the domestic and overseas accounting standards: □Applicable √Not applicable IX. Key financial data of 2018 by quarters Unit and Currency: RMB Q1 Q2 Q3 Q4 (January-March) (April-June) (July-September) (October-December) Operating revenue 43,609,601,739 46,946,801,849 47,582,370,823 45,177,785,825 Net profit attributable to shareholders of 1,952,610,308 2,832,731,503 1,341,445,310 1,313,441,735 listed company Net profit after deduction of non-recurring profit 1,761,919,418 2,714,072,148 1,046,481,812 1,079,032,222 or loss attributable to shareholders of listed company 6 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Net cash flow from 3,378,067,727. 5,500,897,538.1 operating 2,170,214,541.28 7,885,073,092.10 60 8 activities Reasons for difference between quarterly data and disclosed regular reporting data √Applicable □Not Applicable The difference between the quarterly data and the disclosed regular reporting data was due to the Company's business combination under common control during the reporting period, which resulted in retrospective adjustment to the data. X. Non-recurring Profit or Loss Items and Amount √Applicable □Not Applicable Unit and Currency: RMB Non-recurring profit or loss items Amount in 2018 Profit or loss from disposal of non-current assets 214,439,336.04 Profit from disposal of long-term equity investments 259,839,279.75 Government grants included in current profit or loss, except that closely related to the normal operating business, complied with 640,822,529.56 requirements of the national policies, continued to be granted with the amount and quantity determined under certain standards Gains from the costs of investment in the acquisition of subsidiaries, associated companies and joint ventures being lower 185,413.85 than the share of the fair value of the transferor‘s identifiable net assets Current net profit or loss of subsidiaries from the business combination under common control from the opening of the -59,949,487.99 period to consolidation date Profit and loss of changes in fair value arising from holding of financial assets held for trading and financial liabilities held for trading except for valid straddle business relevant to normal business of the company, as well as investment gain -15,161,125.59 realized from disposal of financial assets held for trading, financial liabilities held for trading, financial assets available for sale Trust fee income from entrusted business 1,493,710.69 Other non-operating income and expenses except the 292,041,683.31 aforementioned items Minority interests -333,421,256.64 Income tax -161,566,826.87 Total 838,723,256.11 XI. Items Measured by Fair Value √Applicable □Not Applicable Unit and Currency: RMB 7 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Item Opening balance Closing balance Change Impact on profit Forward foreign 92,274,790.28 -54,455,694.11 -146,730,484.39 -21,805,376.31 currency contract Short-term wealth 1,567,648,908.00 1,567,648,908.00 111,636,330.40 management products Investment in trading 19,322,411.35 19,322,411.35 -2,259,981.90 equity instruments Interest rate swap 51,339,181.17 57,228,769.39 5,889,588.22 agreement Contingency -5,384,860.29 -5,705,307.28 -320,446.99 consideration Investment in other 1,415,354,307.82 1,400,316,460.34 -15,037,847.48 105,245,136.33 equity instruments Long-term wealth 327,358,825.57 327,358,825.57 302,047.25 management products Bulk effective 37,702,676.06 28,275,122.63 -9,427,553.43 hedging Total 1,591,286,095.04 3,339,989,495.89 1,748,703,400.85 193,118,155.77 XII.Other □Applicable √Not Applicable 8 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION III SUMMARY OF THE COMPANY’S BUSINESS I. Introduction of major business, operating model of the Company and industry background during the reporting period The Company mainly engages in research, development, production and sales of home appliances with product portfolios covering refrigerators/freezers, washing machines, air-conditioners, water heaters, kitchen appliance products, small home appliances, U-home smart home business, etc., offering complete sets of smart home solutions to our consumers through rich portfolio of product and brand to create a better life experience, and the Company's channel integration service business mainly provides customers with full-process services such as distribution, logistic and after-sale of home appliances, household appliances and other products, as well as other value-added services. Since its establishment, the Company has been upholding the concept of ―taking the user as right and ourselves as wrong‖, while adhering to the spirit of entrepreneurship and innovation and the strategy of keeping up with new developments. The Company has always adhered to overseas independent brand creation and through its persistent efforts and industry integration, it has successively acquired the white goods business of Sanyo of Japan, the household appliances business of GE, the Fisher & Paykel business in New Zealand, holds a 48.41% equity in MABE in Mexico, and acquires Italy-based Candy Company to construct the global competitiveness of the trinity of "R&D, manufacturing and marketing". Through continuous optimization of resource integration capabilities and global strategic synergies, the Company achieves the layout and global operation of the seven world-class brands, including Haier, Casarte, Leader, GE Appliances in the USA, Fisher & Paykel in New Zealand, AQUA in Japan and Italy-based Candy. In 2018, revenue from overseas operation represented 42% of the total revenue while near 100% of the revenue was generated from self-owned brands. According to retail sales statistics on the large home appliances published by Euromonitor, the world‘s leading independent provider of strategic market research, in 2018, sales of Haier‘s large home appliances ranked No. 1 in the world for the 10th consecutive year. Meanwhile, global sales of Haier‘s refrigerators, washing machines, wine cellars and freezers continued to rank No. 1 in the world. The sales of Haier Health self-cleaning air-conditioner in 2018 represented a global market share of 40.7% and ranked No. 1 in the world. In face of the opportunities and challenges arising in the Internet of Things (―IoT‖) era, the Company, through strategic market moves, has initiated the transformation to the IoT platform and established three leading platforms, including U+ Smart Life platform, COSMOplat industrial internet cloud platform, and Shunguang social group platform to focus on continuous iterations of the user's best experience. By offering smart homes solutions and introducing full-range smart life experiences to consumers, Haier has satisfied the needs of a better life for its customers. 9 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2018 Industry Summary In 2018, the global economy maintained its moderate growth, but the momentum of growth slowed down gradually due to the intensification of trade protectionism, the continued interest rate increase of the U.S. Federal Reserve, the intensification of capital outflows from emerging economies and the continuing turbulence of financial markets. Given the complex and severe situation at home and abroad, China's economic growth remained within a reasonable range, and its economic structure was constantly optimized; its new momentum for development was growing rapidly; people's livelihood continued to improve. (I) Performance of domestic white goods industry: In 2018, affected by the weakening of economic growth and the reduced growth of real estate sales, the household appliances industry grew slightly, showing a trend of fast growth first and slow growth later in the year, and the pressure of growth increased continuously in the third and fourth quarters. According to the calculation by China Market Monitor Co., Ltd. (CMM), the market size of China's household appliances industry (excluding 3C) in 2018 was RMB948 billion, representing an increase of 1.1% yoy; the growth rate of the industry had fallen significantly compared with that in 2017 at 14.1%. Domestic market in 2018: (1) White goods industry: Domestic retail sales of each white goods sub-industry grew slightly. ① The retail volume and the value of the home-use air-conditioner increased by 3.0% and 5.6% respectively; ② For the refrigerator and washing machine market, replacement demand became the primary driver with weak sales volume growth, while the average prices were boosted by structural upgrading, resulted in retail sales maintaining a slight growth trend: retail volume in the refrigerator industry decreased by 5.9%, but the retail value increased by 7.9%; retail volume and retail value of washing machine increased by 0.1% and 5.4% respectively. (2) Kitchen and bathroom industry: ① The water heater industry recorded a decrease of 3.2% in retail volume and a growth of 0.5% in retail value in 2018; ② In the kitchen appliance market, hoods and stoves recorded negative growth of 7.9% and 7.1% respectively in terms of retail value. The trend of consumption upgrade continued, and the characteristics of experience economy and community economy appeared. ① Brand, quality, design and technology became the major factors influencing the consumption decision. Consumers are willing to pay a premium for "good products", and healthy, smart, artistic products with large capacity are increasingly favored. Innovation in product categories promoted industry upgrading, and the average price continued to rise. High value-added sub-categories such as duplex drum washing machines provided space for price increases. According to CMM‘s offline observed data, the average retail price in the refrigerator industry in 2018 was RMB4,167, representing an increase of 9.9% yoy; the average retail price in the washing machine industry was RMB2,956, representing an increase of 9.93% yoy. ② The trend of consumption differentiation was obvious, and there were more and more young users. ③ The development of the Internet of Things, Big Data, Artificial Intelligence and other technologies accelerated the 10 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. intellectualization trend. The interconnection of intelligent household appliances created a brand new, convenient and smart experience. The requirement for household smart solutions has been constantly raised and pushed the transformation of enterprises from manufacturing and marketing to providing a smart life. With increasing industry concentration, the leadership becomes a core asset. Haier as a leading enterprise focusing on R&D innovation, brand building, and a long-term strategy, increased its market share by relying on comprehensive advantages accumulated in long term market competition. In 2018, new industrial innovation appeared in the household appliances industry, seeking breakthrough opportunities in design, concept and price. Offline channels showed a negative growth trend, while the proportion of online channels continued to increase but the growth slowed down. The integration of online and offline channels has progressed. E-commerce platform accelerated the deployment in rural markets. Traditional offline channels were also trying to promote business using e-commerce resources. In this sense, channel ecology has become diversified increasingly. (II) Performance of overseas white goods industry: Due to the level of economic development and market size in each region, performances differed across markets. ① In the U.S. market, the sales of large appliances was basically the same in 2018 as in 2017 ② In the European market, refrigerators and freezers industries benefited from the increase of the proportion of large-capacity refrigerators including those with open doors and multi-doors; washing products maintained a small single-digit growth due to the increasing proportion of large-capacity washing machines, heat pump dryers and intelligent interconnection products. Sales of cookers and embedded products were basically unchanged compared with 2017. ③ The Japanese market recorded a growth of 3% in 2018. ④ The Australian and New Zealand market experienced a negative growth trend in the household appliances market, impacted by the sustained decline in consumer spending and the weakening of the real estate industry. ⑤ In the South Asia markets, affected by inflation, currency depreciation and other factors, Pakistan‘s economy fluctuated and the growth of household appliances market slowed down; the Indian market was affected by the depreciation of the rupee, rising costs and weakening demand, so growth was flat and lower than expectation. 2019 Industry Outlook: Domestic Market: In 2019, it is expected that the national economy will grow steadily at a low rate; the real estate market will continue to grow slowly; and there will be no obvious favorable factors for the external economic environment of the household appliances industry, but industrial restructuring and consumption upgrading will continue. The market of household appliances is dominated by demand of replacement, and the quality and improvement consumption demand will be further released. According to AVC‘s prediction, the total retail sales of white goods (refrigerators, washing machines and 11 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. air conditioners) will reach RMB372.9 billion in 2019, representing a growth of 0.4% yoy. The kitchen and bathroom market will still be at a turning point. It is estimated that the retail sales of kitchen appliances and water heaters will reach RMB62.6 billion and RMB64.3 billion, respectively, representing 2.4% and 1.9% yoy decrease, respectively. Industry concentration will increase, and the advantages of leading enterprises will be further strengthened. Industrial structure upgrade, experience improvement and intellectualization will continue in the household appliances industry. Enterprises with strong technological innovation ability, quality control ability and comprehensive product lines will continue to benefit from industrial upgrading. Overseas Markets: According to the World Bank‘s report, 2019 Global Economic Prospects, the global economy will face more severe downside risks in 2019 due to potential escalating trade tensions and fragile international finance markets. Global growth will decrease from 3% in 2018 to 2.9% in 2019, and the slowdown of economic growth will be reflected in developed, emerging and developing economies at the same time. The macroeconomic slowdown will affect the demand for home appliances. II. Explanation on significant change on major assets of the Company during the reporting period □Applicable √Not Applicable III. Analysis on core competitiveness during the reporting period √Applicable □Not Applicable Since incorporation in 1984, the Company has always adhered to the principle of driving the sustainable and healthy development with innovation system focusing on the needs of users, and it has successfully turned itself from a collectively owned small factory which was on the verge of bankruptcy into one of the largest home appliances manufacturers in the world. The Company is committed to realizing sustainable development across different cycles through continued innovations in development strategy, management method, brand building, R&D, smart manufacturing, and expansion strategy in foreign and domestic markets to achieve competitiveness regarding dynamic market changes. (I) World-renowned brand competitiveness, comprehensive brand deployment and leading solution capability for smart household appliances According to the data published by Euromonitor, Haier has been ranked No. 1 among global large home appliances brands for 10 consecutive years. In segments of refrigerators, washing machines, wine cellars, and freezers, the Company continues to be No. 1 in the world. To meet the personalized and diversified needs of users, the Company has broken down the global technical barriers in the household appliances industry and promoted the healthy development of the industry through the global strategic synergy among seven brands of household appliances, namely Haier, Casarte, Leader, GE Appliances in the U.S., Fisher & Paykel in New Zealand, AQUA in Japan and Candy in Italy, realizing a coverage in 12 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. global markets and communities. Leading the high-end market. In 2018, Casarte‘s market share of air conditioners above RMB10,000 is 42.7%, representing an annual increase of 7.7 percent point; the market share of Fisher & Paykel, the world's top household appliance brand, is No. 1 in New Zealand and maintains its market leadership. Based on the all-round deployment of brand, research and development, intellectual building, channel, service, ecology and U+ platform, Haier has built up one of the world's leading white goods, kitchen and bathroom industry clusters, covering refrigerators and freezers, washing machines, air conditioners, water heaters and kitchen appliances, and provides consumers with a complete set of "one-stop, full-scene, customized" solutions for smart household appliances. (II) Industry-leading R&D and technological competitiveness 1. Global R&D resources deployment: Relying on 10 R&D centers across the world and multiple (N) innovation centers that focus on users demand changes, Haier has built a ―10+N‖open innovation system to form a global network of resources and users, and attracted world-class resources to participate with its ―cooperation, win-win and sharing‖ mechanism. Haier therefore plays a leading role in the development of products and technologies in the industry, and realizes the goal that "R&D goes wherever users demand and innovations resources are" to provide excellent experience for its users. 2. Leadership in the development of international standards: As of December 2018, Haier as a household appliance enterprise proposed and reviewed the most proposals for international standard in China: Participated in preparation and revision of 60 international standards and submitted 97 international standard revision proposals. At the same time, Haier is also the household appliance enterprise leading the most industry standards in China and has led and participated in 490 national / industrial standards revisions cumulatively. Haier is the only Chinese household appliance enterprise with a seat in the International Electrotechnical Commission's Market Strategy Bureau (IEC/MSB), and the only household appliance enterprise in China that undertakes the membership in International Standards Technical Subcommittee. Haier took the lead in setting up the IEC TC59/SC59M WG4 Refrigerator Preservation International Standard Working Group and led the development of new international standards for refrigerator preservation. In April 2018, in response to the national "the Belt and Road Initiative‖, Haier created the standard output model for such initiative; Haier also led the development and official release of the world's first AI standard white paper. In addition, the Smart Home, Internet of Clothing and other international standard projects under the leadership of Haier were approved by IEEE. 3. Up to now, Haier has applied for more than 43,000 patents globally, and the proportion of invention patents is higher than 60%, representing the high quality of R&D. With more than 10,000 overseas invention patents in 25 different countries, Haier is the household appliance enterprise with the most overseas invention patents in China. Haier ranked No. 1 in ―2018 Hurun Report on IP 13 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Competitiveness‖ in China. In the 20th China Patent Awards in November 2018, Haier won 1 gold award for patent and 1 gold award for designing, and 12 excellence awards for patents. Haier has won 7 gold awards cumulatively during past China Patent Awards and the total number of gold awards was the highest in the industry, and the proportion of invention patents is higher than 60%. Haier has won 15 State Prizes for Progress in Science and Technology, the highest honor in China's science and technology sector, becoming the household appliance enterprise with the most State Prizes for Progress in Science and Technology, accounting for over half of the prizes within the industry. 4. Innovative R&D mechanism through the HOPE platform: In parallel to independent innovation, Haier opened its global resources, built HOPE (an open innovation platform) to incorporate users, enterprises and resources into the same interactive ecosystem. In addition, Haier continued to make cross-border and disruptive innovation achievements through the effective collaboration and zero-distance interaction of different roles within the community. 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 each year, supporting leadership in products and technologies. (III) Competitiveness of smart manufacturing that leads to change 1. The core competitiveness of Haier‘s smart manufacturing is its commitment to long-term value of users through its user-oriented approach and the transition from large-scale manufacturing to large-scale customization. Haier has established 11 global-leading interconnected factories as examples for the industry, and the interconnected capabilities and ecological system cover the whole process. Such businesses cover refrigerators, washing machines, air-conditioners, water heaters, kitchen appliances, electric motors, molds and other fields, fulfilling user's demand for perfect experiences in high-end personalized products and services. Such initiatives resulted in notable effects: the orders from mass customization with full user involvement accounted for 19%, and the orders from mass customization with full client involvement accounted for 52%. This achieved a breakthrough, which eliminated or shortened the period of products in the warehouses. In addition, operational efficiency throughout the process has been enhanced (e.g. the new product R&D cycle has been shortened by more than 50%). 2. COSMOPlat, China‘s first and global-leading industrial Internet platform, digitized and commercialized Haier's interconnected factory model. The platform established independent intellectual property rights and integrated Haier's existing functionalities, such as intelligent equipment, intelligent control, mold, and research institutes. The platform has already collaborated with relevant companies in 15 industries, and offered comprehensive solutions and value-added services by the combination of software, hardware as well as relevant services for the clients‘ upgrading and smart manufacturing transformation. (IV) The layout of efficient and in-depth distribution channels and logistics network 1. Through an omni-channel distribution system, the Company has achieved full coverage of the first, second, third and fourth-tier domestic markets and provided convenient shopping experience 14 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. anywhere, anytime. The Company also maintained strong strategic cooperation with professional offline distribution platforms for household appliances, such as Gome and Suning, as well as e-commerce platforms, such as Tmall and JD.com. In respect of self-owned channels, Haier has established more than 8,000 county-level stores, and more than 30,000 town-level stores. In the comprehensive store channel, the Company has established a number of clubs, such as V58 and V140 Clubs, to maintain close relationship with major regional distribution enterprises of household appliances. In addition, the Company has accelerated the construction of the front channel contacts. Relying on the advantage of multi-brand and product, the Company will build smart and full-scene experience stores to provide displays, design, sales and services in the end-market, and further improve the channel stickiness. 2. Jushanghui (巨商汇) system covers 100% of dealers' customers, and Yilihuo (易理货) covers all township stores, these two channels allow the Company to realize real-time monitoring of dealers from orders taking, sales processing, inventory management to after-sales services. 3. The storage area of Gooday Logistics occupies an area of 4.70 million square meters with 100,000 registered vehicles. Gooday Logistics offers all-weather 24/7 delivery and installation services, and it is dedicated to providing users with comprehensive, timely and high-quality services. (V) Excellent global operational capability Focusing on ―building own brand independently‖, the Company has completed its deployment of a triple network comprising R&D, manufacturing and marketing in major overseas markets through organic growth and mergers and acquisitions, and targets to identify and meet local consumers‘ demand. The Company is succeeding in transforming from single-brand globalization to multi-brand cross-industry cross-regional globalization. The Company targets a leap from "going out, going in" to "going up" through the integration of global resources. In 2018, the Company focused on branding and product upgrading, and the Company has accelerated the implementation of the transformation of "RenDanHeYi" overseas, deepened its triple strategy of ―manufacturing, marketing and R&D‖, and continued to promote leading smart home solutions overseas in the Internet of Things era. The proportion of overseas revenue in 2018 reached 42% and nearly 100% of it comes from the Company‘s own brands. (VI) Integrity of corporate culture and the win-win under RenDanHeYi management Integrity culture based on quality and service is the core driver of Haier‘s continued success. Leveraging on ―user-oriented‖ and ―persistent honesty‖ values, Haier has turned itself from a collectively owned small factory which was on the verge of bankruptcy 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 an user-oriented value, and this value stimulates the spirit of innovation, revolution and entrepreneurship of Haier and motivates Haier to follow the trend and continuously improve and challenge itself, so as to seize development opportunities. The win-win model of combining 15 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. individual and goal is the assurance of sustainable development of Haier. In exploring the ―RenDanHeYi 2.0, Co-create and Win-win ecosystem‖, Haier endeavors to build a win-win ecosystem based on user value interaction in a new stage of e-commerce era to make every employee his/her own CEO and realize their own value while creating value for users, and benefiting every party in the ecosystem. 16 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS I. Discussion and analysis on operations Led by smart homes and driven by the model of "RenDanHeYi", the Company progressed its product technology innovation, retail transformation and global brand marketing; deepened the triple strategy of ―manufacturing, marketing and R&D‖ for localizing operations in foreign markets; and continuously strengthened competitiveness to achieve growth. Facing the opportunities in the era of the Internet of Things, Haier focused on continuous improvement of user experience, established a win-win and value-added ecological circle with its stakeholders, so as to provide users with a better living solution. In addition, an ecological strategy in the era of the Internet of Things was created to cultivate ecological income. In 2018, the Company's income, net profit attributable to shareholders of the parent company, and net cash flow generated from operating activities all hit a record high, achieving revenue of RMB183.3 billion, representing an increase of 12.2%. Against the adverse industry trend in the third and fourth quarters of 2018, the Company's revenue in the third and fourth quarters achieved a steady growth of 11.5% and 10.4%, respectively. Net profit attributable to shareholders of the parent company for the whole year amounted to RMB7.44 billion and represented an increase of 7.7%; while net profit attributable to shareholders of the parent company after deduction of non-recurring gains and losses amounted to RMB6.6 billion and represented an increase of 17.4%. Net cash flow generated from operating activities amounted to RMB18.93 billion and represented an increase of 13.4% over the same period of last year. Market share continued to rise: ① In the global market, according to Euromonitor International, an authoritative international market research organization, Haier ranked first in retail sales of large-scale household appliances globally in 2018. Haier has been ranking first for ten times. Haier Refrigerator and Haier Washing Machine continued to rank first in the world. ② In the domestic market, market share of the whole business line has maintained the overall improvement trend since 2017. According to the monthly retail monitoring report by China Market Monitor Co., Ltd. (CMM), the retail share of Haier refrigerators, washing machines, air conditioners, water heaters, range hoods and stoves in the offline market increased by 3.52, 3.68, 0.43, 1.16, 0.99, 0.66 percent point respectively in 2018. Haier refrigerators and washing machines continued to maintain the first place in the industry and expanded their leading edge, the shares of which were 3.08, 1.89 times as much as those of the second brand respectively, thus realizing the ring leading. ③ In the U.S. market, under the adverse environment of a downturn in the household appliances industry, GEA has increased its market share by more than 3 percent point through the effective replication of the "RenDanHeYi" model. In July 2018, the Company was listed in Fortune 500. In January 2019, as the only Asian household appliances company on the list, it was listed in Fortune magazine as "The Most Appreciated Enterprise 17 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. in the World in 2019". Main Achievements in 2018 (I) Insisting on original technological innovation and leading the development of the industry. Based on creating the best user experience as the starting point, the Company relied on the global layout of its R&D system through technological upgrades and disruptive innovation, leading the formulation of industry international standards, and continuously launching classic original products, leading the upgrading trend of industry consumption and promoting development of the industry. 1. Refrigerator/freezer business The Company addressed the experience mode and consumption demand of different user groups, and provided a one-stop healthy diet solution for global users through the process of design, R&D and manufacturing, thus creating a better food and scene experience and continuously increasing market share. In 2018, the share of retail sales in the domestic offline market increased by 3.52 percent point to 35.4%; the share in the domestic online market increased by 4.1 percent point to 31.7%. The Company led the development trend of industry products. ① Casarte refrigerators stand out in the high-end market, with a revenue growth of 31%. Casarte refrigerators focus on the high-end target audience and provide solutions for the best experience of home integration and high-end food ingredients preservation according to users‘ high-quality lifestyle. The Company has established a multi-layered and multi-dimensional high-end brand community, which interacts with users, and pushes product design to be more relevant to the user needs. In 2018, the Company generated a new generation of Tiancheng series refrigerators, freely embedded T-609 refrigerators. The platform with freely embedded space and MSA oxygen-control preservation solutions, which can satisfy the needs for fresh capacity of big families with three generations. Focusing on healthy diet lifestyle, the Company launched F+420 Jingqiao series refrigerator, providing the best storage solution with a 2:1:1 golden spacing ratio. It was well-received as soon as it was listed on the market. The "F+" product series also won the international "IFA" award, the national "A+ Star Awards", etc. ② Haier Star Kitchen series refrigerators. The full-space preservation series aims at meeting the storage needs of users for ―refrigerated dry and wet storage, with frozen original flavor‖. It realized the disruptive breakthrough of refrigerated and frozen preservation technology through cross-regional, cross-domain and cross-industry integration of R&D resources. The refrigerator‘s precisely-controlled breeze technology realizes the mode of on-demand air supply and cooling in different partitions, which not only satisfies the needs of consumers to store food in partitions, but also realizes rapid air supply and cooling of the ingredients in the partition, effectively reducing energy consumption and avoiding repeated refrigeration of food in other partitions. For freezing, the Company provided the world's first smart constant temperature system to achieve defrosting hot air without leakage, and achieve that frozen ingredients will not be repeatedly frozen, which leads to juice and texture loss. Compared with ordinary refrigerators, the freezing 18 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. temperature fluctuation is reduced by 75%, the defrosting temperature increase is lowered by 50%, and the juice loss rate is reduced by 18%, thus maintaining the original flavor of frozen ingredients. The full-space preservation technology has been awarded the world's first VDE preservation certification and IEC international preservation standard, and the industry‘s first "China Patent Gold Award" over the past 29 years. 2. Washing machine business Under the general trend of consumption upgrading, with an aim of providing the best user experience, the Company adheres to technological innovation and product iteration to bring more convenient, efficient and healthier washing experience to users and achieve better market performance. The share of retail sales in the domestic offline market increased by 3.7 percent point to 33.57%; the domestic online market share increased by 6.5 percent point to 34.4%. Technological innovation. In response to the problem that some high-end fabrics cannot be washed with water, the Company innovated and improved air-washing technology in 2017, which was continuously upgraded for 18 years, with optional washing parameters and smart cleaning procedures. In addition, Haier‘s washing machine also iterated a number of innovative technologies such as triple IoT clothing identification, smart washing, machine-on-demand, and KDF clean water washing. On 12 December 2018, the Company's "Key Technology and Industrialization of Sectioned Washing of Roller Washing Machines" won the second-class prize of National Science and Technology Progress Award. It was the only National Science and Technology Progress Award granted to the household appliance industry in 2018. It was the first national science and technology advancement award in the history of roller washing machines, and also the only National Science and Technology Progress Award in the washing machine industry over the past decade. Product iteration. The Company kept increasing the drum diameter of the washing machine through directly driven crystal technology, achieving greater capacity and better washing results. Casarte Shuangziyunshang provided double-roller partitioned washing, silent washing, washing and drying, and enhanced the user experience; Casarte Xianjian, as the world's first "Know Me Well" IoT washing machine for clothes, is equipped with RFID clothing identification technology that can automatically scan the clothing‘s identification label, quickly identify the material, color, style and other information, and help the softening and washing technology tailor a special fiber-level washing solution. 3. Home-use air conditioner business The Company is dedicated to the innovation of smart, efficient and healthy products and technologies, providing users with comfortable air solutions, leading the industry to develop a healthy, comfortable and smart trend, and achieve breakthroughs in the high-end market. In the domestic market, the offline share in 2018 increased by 0.43 percent point to 11.45% and maintained an upward trend for 19 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. two consecutive years, of which the market share of RMB 15,000 or above reached 38%, representing an increase of 17.7 percent point; in the global context, according to Euromonitor International, Haier Health Self-cleaning air conditioner accounted for 40.7% market share in 2018, ranking first in the world. In 2018, Casarte TX VIP cabinets, Fresh Air conditioners and other innovative products were introduced into the market, leading the industry development trend. ① Casarte TX VIP cabinets adopted deep ultraviolet UV sterilization and carbon fiber technology to solve problems such as indoor air turbulence and low oxygen content, smartly identify the best apparent temperature for different users in the same room, and distribute air according to temperature partition to resolve health issues caused by direct blowing by air conditioners such as joint pain, catching a cold and triggering of illnesses from air conditioners. In 2018, Casarte home-use air conditioners achieved revenue growth of more than 60%, and the share of high-end market (6,000+ hanging types, 15,000+ cabinets) reached 20%, representing an increase of 125%.② Ordinary air conditioners adopted internal air circulation mode, which causes repeat usage of indoor air, which increases carbon dioxide concentration and decreases oxygen content in the case where the room was not well-ventilated. Haier‘s Fresh Air series products were launched to tackle the problem. The products removed polluted indoor air through double-power constant-temperature technology of fresh air purification and dynamic dual-motor technology of balanced air supply; the five-tier purification function supplies fresh air to adjust indoor air to make us comfortable, and a smart management App was added to provide users with comfortable and a healthy air and smart and convenient control experience. 4. Central air conditioner business Based on the needs of users in different market segments, we launched a series of energy-saving, smart, healthy and convenient products, and seized market opportunities through personalized solutions to further enhance the brand reputation. In 2018, the share of the central air-conditioning increased by 30%, and the share of domestic market reached 9%, representing an increase of one percent point. Multi-functional air conditioners. The newly launched MX attains a wide range of temperatures, and has smart, energy-saving and comfortable performance based on previous generation products, achieving ―resist heat by low temperature and resist freezing by high temperature‖. It realizes heat resistance by providing cold air down to -26 °C and freezing resistance by providing hot air up to +54 °C in summer, with a heating effect that is 30% higher than that of conventional types. It is suitable for most parts of the world including extremely hot and cold regions. Transportation products. Evaporative cold magnetic suspension products were launched for the fast-growing rail transit market. These products had the advantage of small size, high efficiency, low noise, long life expectancy and easy operation. The advantage of power saving and water saving are evident, and COP (equipment energy efficiency) is >5, which met the requirements of energy saving and 20 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. reliability of subways. In view of poor construction conditions of subways, the area occupied by large-scale central air-conditioning equipment, and the difficulty of hoisting the product, the structure is made compact in design, flexible in installation, and requires no additional cooling towers and special machine rooms. Home products. Relying on the Company's global R&D and design and innovation platform, we strengthened the research and development of Casarte‘s central air conditioning for high-end users in terms of product comfort, quality and service, and integration of home appliances. The launch of Casarte‘s DYX central air conditioners improved the appearance of traditional outdoor units. We were the first company in the industry which created 21°aesthetic arc appearance, integrated panel and dynamic grille, and achieved integration with the home decorative environment. The original smart breeze mode offered a technological breakthrough with temperature, humidity, cleanliness and air supply control: After the set temperature was reached, the panel closes, and the air deflector evenly distributes with 1,314 micropores with a diameter of 2.5 mm which breaks up the airflow, and air supply speed is close to 0.6 m/s. Precise temperature control and more comfortable air supply is achieved. We were the first in the industry to offer 10-year warranty, exceeding the 10-year life expectancy in the industry. Internet of Things transformation. Haier‘s central air conditioning, as the pioneer of IoT central air-conditioning, launched the industry's first E+ IoT cloud platform and a full range of IoT central air-conditioning products with IoT magnetic machines. The IoT central air conditioning standard was defined by three tags: self-networking, self-adaptation and self-optimization. We integrated with open resources such as China Mobile and CAICT, and released the first Internet of Things central air-conditioning model in the industry. 5. Water heater business Focusing on user's demands in terms of safety, health, smart, comfort, etc., we carried out technological innovation and product upgrades, and provided a full-house integrated smart water solution through a range of electric water heaters, gas water heaters, solar water heaters and air energy heat pumps. We continued to expand our leading edge in the industry. In 2018, the retail share of the domestic offline market increased by 1.16 percent point, reaching 18.11%; the online market retail share increased by 3.6 percent point, reaching 22.2%. Electric water heater: In view of problems such as long heating time, large space occupation, and vulnerability to bacteria and scaling of traditional electric water heaters, we launched Casarte TM series and Haier Jingxiang series. With the application of 3D instant heating technology, a 15-minute bath only needed to be preheated for 5 minutes, which greatly shortened the waiting time. The heaters had the thickness reduced to 278mm, which greatly reduced the space occupation. In order to protect the user's health during bathing, the double-effect anti-scaling function was offered to effectively suppress the development of scale in the water heaters. Three-stage purification technology removed harmful substances such as sediment, rust, residual chlorine and bacteria in the water. By running the smart 21 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. module, the water heater automatically recorded and analyzed the user's water habits, and heated in advance to achieve energy saving and comfort. In 2018, the electric water heater business achieved a breakthrough in the technology and product portfolio strategy through the Haier & Casarte brands. The volume increase in the price segment of RMB3,000 or above was 30%. Gas water heater: Through the cooperation with China's first-class scientific research institutions, we quickly formed a unique differentiated technology, and launched a series of products featuring patented oxygen-enriched blue flame, NOCO and carbon monoxide security to provide safety for the household gas environment. The precisely-controlled constant temperature realized zero-cold water, and turbocharged technology realized waterfall washing, which constantly improved the user's bathing experience. In 2018, Casarte gas water heater CH3 became the first product in China to pass the European three-star certification for the highest level of hot water comfort in Europe. According to CMM 2018 offline statistics, the Company's share of gas water heater retail sales reached 9.61%, being the top five in the industry, representing an increase of 1.32 percent point over the same period of last year, and the retail share reached 9.6%, representing an increase of 1.6 percent point over the same period of last year. Air energy water heater: The new generation of TM Power air energy water heaters can automatically match the optimal frequency according to the ambient temperature, and makes it possible that the heat pump can be heated up to a high temperature of 80℃ at the energy efficiency ratio COP of up to 6.0. The product won the 2018 Best AWE Environmental Award. Solar water heater: In response of the shortcomings of traditional water heaters, which adopted heat exchange technology such as slow heating, the need of externally-mounted water tanks and complex pipeline with large space occupation, we created the ALL-IN-ONE series to integrate the collector and the heat storage unit into one, without using externally-mounted water tanks in order to save the space. We advanced to localize the technology of GREEN one TEC Solarindustrie GmbH (the world's largest flat solar heat collector manufacturer, an Austria-based subsidiary of the Company), and introduced directly-heated flat-plate technology, which provides heating at twice the rate of traditional solar water heaters. According to CMM offline data, the Company had retail sales and market shares from solar water heaters of 30.37% and 28.29%, respectively. 6. Kitchen appliance business Integrating FPA and GEA's globally-leading technological advantages, expanding into high-end solutions and building a smart kitchen experience center, we achieved rapid growth in an unfavorable market environment with negative growth in the kitchen appliance industry through our brands Casarte, Haier and Leader. The kitchen appliance business of the Company (excluding North America) achieved revenue growth of 20%, and Casarte kitchen appliance increased 200%. The retail sales share in the domestic online/offline market increased significantly year-on-year: retail sales share of the range hoods 22 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. and stoves in the offline market was 4.51% and 5.38%, respectively, an increase of 0.66, 0.99 percent point, respectively; the retail share of the range hoods and stoves in the online market was 6.29% and 4.01% respectively, representing an increase of 1.6, 1.0 percent point, respectively. Gas stoves: For the safety hazard caused by "forgetting to turn off the stove", we launched the anti-dry gas stove series. The product was equipped with NTC active heat source tracking technology. Once the oil temperature in the pot exceeded 230℃ and the bottom temperature reached 298℃, it would start a flameout protection automatically; for fire without the stove working, it would automatically turn off the heat within 3 minutes to ensure the safety of the stove. The industry's first Standard for Anti-drying Household Gas Cookers was also drafted by the Company. Casarte‘s four-headed gas stove won the AWE Award, and Haier‘s four-headed induction stove won the Golden Hook Award for the Third China Integrated Kitchen Industrial Design Awards. Range hoods: ① Casarte kinetic energy range hoods utilized dual-boosting technology to significantly increase the speed and ability of exhaust discharge, redefined kitchen cleaning technology. It won the global IF Design Award. ② Haier air curtain 8°oil range hoods set up an air curtain barrier between users and range hoods through the oil smoke capture system, effectively avoiding the spread of lampblack, and it won the Health Pioneer Award from the China Household Electric Appliances Research Institute. Ovens: Casarte steam energy-embedded refrigerator uses FPA cloud moisture-controlled technology, a dynamic thermal temperature control system and frequency conversion temperature technology to achieve steam energy surrounding, cell-level nutrition, providing ±1℃ precision temperature control and keeping food flavor and moisture in an ideal stage. (II) Domestic market: the Company deepened retail transformation to enhance competitiveness and achieved growth against the trend. In the domestic market in 2018, we continued the transformation ―from product selling to scheme selling, from contact to conversion, from branch to contact, from price to value‖ by promoting smart home solutions, improving the quantity and quality of interactions, deepening marketing transformation, strengthening the superiority of Casarte high-end series, and building the young Leader brand. In 2018, domestic market revenue of refrigerators, washing machines, air conditioners, kitchen appliances and water heaters increased by 14%, 13%, 9%, 16% and 9% respectively. Transformation from product selling to scheme selling: Leading the trend of embedded and integrated home appliances, the Company relied on its multi-brand and product-wide advantages to promote complete smart home appliance solutions and create a ―one-stop, full-scene, customized‖ experience. In 2018, we built 4 smart home city experience centers, 423 full-house smart home integration stores, and 3,037 branch-wide smart home experience stores. Through the transformation of 23 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. products, stores, personnel and platforms, we achieved full sets of products, programs, demonstrations, personnel and services to resolve concerns by providing consumers with one-stop solutions to solve problems from single products to complete sets of products to complete sets of solutions. In 2018, the retail sales of whole house integration channel exceeded RMB5 billion, representing an increase of more than 100%. Transformation from branch to contact: (1) Offline channels: Based on the regional market capacity, we promoted the construction of contact networks in business districts, building material channels and cloud stores, in order to increase the breadth and depth of interactions. By creating service brands such as ―one-stop building home‖ and ―love home‖, we provided a warm service and experience, and promoted the transformation of store and terminal teams. (2) Online channels: ① E-commerce channel: The Company improved the mid-to-high-end product category and full-scale layout, built online boutique content to establish a complete communication matrix, and used data tools to achieve interaction with members. We integrated branch-wide management and improved interaction in e-commerce channels to achieve improved operational efficiency. E-commerce retail sales growth in 2018 was 29%. ② Shunguang: Taking ―home‖ as the core, community interaction as the basis, and user experience iteration as the guide, the transformation from vertical sales channel to platform was realized by introducing consumer brands related to good life. The number of store owners on the platform increased to 1.6 million, representing an increase of 100%. Transformation from contact to conversion: The Company deepened the marketing transformation, enhanced the brand's volume, and strengthened the brand's leading position. ① By participating in the comprehensive exhibition of high-standard large-scale home appliances in the industry such as China Home Appliances and Consumer Electronics Expo (AWE) and International Consumer Electronics Show (CES), and cooperating with CCTV's ―Challenge the Impossible‖ and other famous programs, the Company strengthened its brand recognition. ② The Company achieved recognition by targeting users through experiencing activities at stores including free air wash of high-end clothes and half-cutting foods in refrigerators to show solutions to good life and smart living. These activities were shared and made public in communities to support our reputation. Transformation from price to value: (1) Casarte brand. Based on continuous iterations in leading product lineups, contact networks, user experience, etc., Casarte stood out in the high-end market with revenue growth of 44%. ① High-end market share continued to lead: CMM data showed that in 2018, Casarte refrigerators priced at RMB10,000 or more had a market share of 36%, representing an increase of 5 percent point; the share of washing machines priced at RMB8,000-10,000 was 48.8%, representing an increase of 8.2 percent point; the share of those priced over RMB10,000 was 76.9%, representing an increase of 8 percent point. ② The Company continued to enhance the brand's volume through the programs of Sixianghui, Villa-style life, Hello Life, and the high-end user circle. ③ The Company extended its contact network. According to the distribution of branches and core business districts, more 24 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. than 1,800 Casarte stores were built in 2018, and more than 8,000 Casarte stores and 600 Casarte complete brand halls were accumulatively built. (2) Leader brand. In response to the needs of the youth consumer market, the Leader brand adhered to the concept of ―light fashion appliances‖ and achieved rapid growth through breakthroughs in industrial design, products and marketing. The revenue growth in 2018 was 30%, which was more than 30% for two consecutive years. The Company launched the industry's first set of light fashion home appliance L.ONE, to achieve the youthful of all categories of products and meet the needs of fashion users; the youth community was gathered through the Times Young Creative Awards, music festivals, lifestyle festivals, fashion shows and other diversified marketing tools, so as to create a fashion brand concept and enhance brand influence. (III) Overseas market: We strive for brand leadership, transformation to high-end brands and achieving all-round growth To localize branding in the overseas market, the Company promoted the coordination of the global operation system and deepened the triple strategy for global deployment. Growth in major regions exceeded that of the industry, and all white goods businesses have achieved a double-digit growth. Detailed businesses and performances in major regions are as follows: North American Market: the US household appliance market stayed flat and weak in demand and GEA continued to promote the RenDanHeYi model in 2018. It promoted business transformation and revenue in the US increased 13%, the fastest growth observed in the US home appliances market. The Company established a user-centered organization system, to realize end-to-end management, comprehensive responsibility for business results, and accelerate decision-making speed and product launch speed through 12 internal industry platforms. The Company promoted nationwide marketing campaigns targeting specific customers and regions to build brand image. The Company launched leading products to fill shortcomings. In December 2018, GEA was ranked by TWICE the first in the list of 2018 America top 10 Major Appliance Movers & Shakers. The Company promoted a global co-operation mechanism to generate synergies. ① Procurement synergy: By the end of 2018, GEA and its headquarters had completed 412 new synergies programs. Global sourcing resources were shared through the Spend Cube (Global Sourcing Big Data) system and the CVI (Global Selected Module Library) system. At the end of 2018, the GSOP (Global Sourcing Operation Platform) began global collaborative negotiations, supporting global teams to collaborate efficiently online. ② Supply chain synergy: We established a global supply chain committee to create a world-class manufacturing platform featuring leading-edge technologies and processes and improve operational efficiency by sharing successful practices. R&D and product synergy: ① The Global R&D Center and Innovation Center made breakthroughs in many core technologies of home appliances such as ice water technology, heat pump technology, 25 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. direct drive motor technology, etc.; we made great achievements in unified engineering platform system, home appliance size engineering, global patent management, global standards management and others; ② GEA‘s VP of Product led the global product committee meeting where six white good businesses, i,e, refrigerators, washing machines, dishwashers, kitchen appliances, air conditioners and water heaters, were covered. Product leadership and product synergy continued to be the focus. European market: Continued efforts were made to adhere to the localization and transformation to high-end brands strategy of the RenDanHeYi Business model. We relied on leading products to interact with users and provide customers with comprehensive product portfolios so as to enhance the structure and market reputation. In 2018, the Company‘s revenue in the European market increased 25%, within which the Russian market revenue increased by 37.8%. (1) Launch of products. ① The Company improved the product structure by launching products including Cube series refrigerator, drawer-type refrigerator and direct drive frequency variable washing machines. In 2018, the price index exceeded 100 for the first time, and it beat the industry average in Europe. (2) Marketing and channel expansion: ① We replicated a successful channel model in China and continued to implement the transformation to high-end channels to enhance point-of-sale display and shopping experience. ② During exhibitions such as Shanghai Home Expo, Italy MCE Exhibition, German IFA Exhibition and etc., we invited core customers to participate in the Company‘s launches and visit the pavilions. In this way, we could promote their in-depth understanding of the Company's global layout and innovation strength, and strengthen their confidence in cooperating with the Company. (3) Supply Chain build-up: The Russian refrigerator factory operated at full capacity. We continued construction of Haier Russia Industrial Park and Washing Machine Factory and enhanced the efficiency of responding to localization requirements. In 2018, the Company acquired Candy Group to further improve brand deployment and intensify the efforts to expand in the European market. We made efforts to improve product categories and enhance the coverage of different customer segments in order to accelerate the business development in Europe. South Asian market: In 2018, Company business in South Asia grew rapidly, with overall growth of 25%. Pakistan: In 2018, revenue increased 21.7%, with market share ranking first in the local market, which was 1.5 times of the second player. (1) Product Leadership: We took the leading position by developing a full range portfolio covering efficient, healthy, smart and fashionable products through all-dimensional user interaction and product upgrading and iteration: we launched cleaning-free air-conditioner, UPS uninterrupted refrigeration series air-conditioner, and ―ONE TOUCH‖ automatic washing machine to lead the transformation of the automatic washing machine in the market. ② Brand building: A connection was made between online and offline to create a high-end brand image. Online 26 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. products took intelligence as the selling point, and attract attention from interactive advertisements and videos; offline stores continued to intensify the point-of-sale by branding, sample product distribution and demos to lead the home appliance shopping experience and educate the market . ③ Channel construction: Promoted distribution transformation from policy-oriented mechanism, which required overstock to retailing strategy led by user experience. India: 2018 annual growth rate was 41% and that of high-end products was 74%. (1) Product leadership: The refrigerator business has been guided by the differentiation of BM refrigerators to lead the whole business; washing machines have driven the growth of medium and high-end products through leading technologies such as partition washing and variable frequency direct drive; air conditioners have led from frequency conversion technology to intelligent guidance. Air conditioning and air purification were combined into one. The revenue increase in 2018 was 70%. (2) Channel expansion: Efforts were made to promote retail transformation, standardize channel resources, expand the network horizontally and vertically; we focused on e-commerce and regional chain channels to enhance brand image; the Company focused on TOP100 retailers, especially with retailing and display capability. With the training of direct sellers and standardization of customer product demonstrations, the competitiveness of marketing was improved. (3) Brand and marketing: We levered IPL (Indian Premier League) and Asian Cup to implant products and brands, enhance brand awareness and establish a high-end product image. (4) After-sales: We had 500 after-sales service points, and 24-hour quick response services covering 90% of the region; efforts were made to promote the construction of information systems, empowering 3,000 front-line engineers through an APP platform to solve technical issues; we provided innovative services such as safety measurement and mobile service stations to improve brand reputation. (5) Supply chain: The production of Pune Industrial Park has reached 2.2 million sets. It realized the goal of putting into operation, reaching the design capacity and making profits in the same year. The supply chain order guarantee structure and system construction ensures that the order fulfillment and inventory rate of the Industrial Park continued to increase. The supply demands and response rate of terminal sales were ensured. Efforts were made to promote the work related to new projects in the North Industrial Park. Southeast Asian market: Continued efforts were made to implement brand building and RenDanHeYi business model. In 2018, business and platform resources were combined to continue promoting business transformation. Outstanding performance was observed in Thailand and Malaysia, recording growth of 30% and 36%, respectively. ① Product Leadership: Through efforts to promote the simultaneous launch of global high-end product platforms in the Southeast Asian market and adjust product structure, the proportion of high-end product sales rose to 10%. ② Offline and online resources was integrated to enhance Haier brand awareness; high-end products and brand strategy launches were held to boost the market confidence and enhanced customer stickiness. ③ Channel transformation: Transformation was made from sell in to sell out. We made full efforts to promote direct seller management and implement daily retail sales reviews; we optimized promoted standardization of the 27 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. customer end demonstration, to achieve better shelf rate and display efficiency; we increased the sample distribution of high-end products, enhanced the brand image, and sped up the selling process; ④ After-sales service upgrading: In 2018, we enhanced service satisfaction and reputation by building after-sales outlets and mobile service stations, etc.; the training of technical personnel greatly improved service efficiency and quality. Japanese market: We adhered to brand building and the ―Three High‖ strategy to continue optimizing refrigerator, freezer and washing machine businesses; a trend of high performance was seen in the business; community washing has achieved a win-win situation in the eco-sphere, cross-industry cooperation and overseas model replication continued to expand. The revenue growth in 2018 was 10%, better than the increase of 3% in Japanese home appliance market. (1) Branding: efforts were made to actively implement online and offline three-dimensional marketing activities for target users from multiple dimensions, improve brand awareness and support high-end branding strategy. Efforts were also made to actively implement new life marketing. The three-dimensional marketing from all rounds were carried out according to the strategy of online warming-up/promotion + offline mass media advertising + user interaction experience. (2) Product strategy: Continuous efforts were made to transform towards mid-to-high-end products. AQUA refrigerator had a new VBL appearance. And the new SV full range appeared in the market. Ultra-thin T-door refrigerator began its mass production; home-use washing machine continued the efforts to expand vertical washing and drying machine, machines with large capacity and other high-end model lineup. (3) Channel strategy: focuses were put on the development of retail channels. In particular, efforts were made to strengthen cooperation with core customers; (4) AQUA commercial washing machines increased by 15% in 2018, and ecological income continued to increase. The second generation system for commercial washing machine IoT platform was developed and launched. Cross-industry cooperation was promoted, and cooperation with the Family Mart was progressing smoothly; we developed the introduction plan for Thailand and South Korea for the commercial washing platform of Internet of Things. Australian and New Zealand market: Under the unfavorable environment with negative growth in the Australian and New Zealand home appliance industry, FPA has achieved growth in a soft industry by localize the RenDanHeYi business model and promoting the globally consistent high-quality, standard high-end brand experience. The income (NZD) growth in 2018 reached 3%. New Zealand ranked the first for the market share; Australia had a market share of 17.3%, ranking the second place. ① Efforts were made to create the globally leading high-end home appliance range, including Columns full-embedded refrigerator, French refrigerator with black stainless steel appearance, T-door refrigerator, FL10 large-volume roller washing machine and new series of independent oven stoves launched. With innovative technology and seamlessly integrated modular design concept, a stable, high-quality, high-end experience was provided for the user in every detail. ② Innovation was made toward high-quality kitchen demonstration and in-store experience. Retail terminal demonstration systems were provided. Experience centers were set up in New York, Los Angeles, Toronto, Sydney, Shanghai and 28 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. other cities. The best full-process experience was provided or users at all contacts through differentiated experience and all-dimensional delivery, installation and after-sales service.③ Promoting well-organized market growth: great efforts were made to develop the North American market, consolidate and strengthen its market position in the Australian and New Zealand markets. We made breakthroughs and entered the European market. FPA China branch was established in domestic market in 2018. Businesses were expanded through the development of high-end property customer, branding and retail services. In addition, FPA was selected a kitchen appliance brand most trusted by consumers by New Zealand Reader‘s Digest in 2018. Latin American market: In 2018, Haier continued to implement the RenDanHeYi business model in the Latin and American market to improve the competitiveness of products and services. A rapid revenue growth of 58% was achieved through R&D cooperation and market synergy with MABE. Our full-set smart home appliances entered Latin American households step by step. Middle East and African market: Facing negative changes in the local market, political and economic environment, efforts were made to actively respond to the adverse situation by product restructuring and development of new business and channels. High-end products including refrigerator / T-door refrigeration, large capacity washing machines, variable frequency smart air conditioners etc. were launched. In the Israeli market, Haier T-door refrigerator kept its third-place ranking in terms of market share. (IV) Smart home life platform: focusing on IoT+AI strategy and empowering the full scene solution to enhance market competitiveness and promote the implementation of market terminal. Create ecological circles such as the Internet of Clothes and the Internet of Food. With "IoT+AI" dual-engine as the core, we released and consolidated the strategy of "1+2+3N" platform: namely a smart home operating system UHomeOS and "IoT+AI" dual engine to serve the three customizations, which are "customized interaction, scenarios and services". 1. As the only smart home operating system included in the 13th Five-Year Project for Core, High and Fundamental Technologies of the Ministry of Industry and Information Technology, UHomeOS has fulfilled the stage target on schedule, started small-batch market-oriented mass production and applied such in Haier network devices on a large scale. 2. On the basis of IoT's comprehensive interconnection and interoperability and driven by the ―+ AI strategy‖, the Company expanded the application of voice interaction, and formed a variety of user interaction portals such as APP, voice and screen network. The application of large data AI in user scenarios was strengthened and the value-added of network devices was enhanced, so the initial realization from passive control to active service was achieved. 3. Focusing on the whole-house scenario customized by the user, the Company realized 200+ home's main scene which cover 4000+ product model and promoted the continuous scale sales of "5+7+N" full-scene 29 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. solutions. In addition, the Company realized 10000+ scene customization by continuously improving user's experience through user scenario operation and the stability of the scene interconnection achieved 99%. In view of the delivery difficulties of smart home, we have led to establish the capabilities for delivery of a packaged solution, implemented the ―packaged experience, design, sales and services‖ for the user side, and built smart home experience stores. In addition, the B-end market of large real estate and hotel customers was expanded for the full coverage of smart home customer channels. The Company took the lead in proposing the industry's first big data energy-saving standard and became the only leading household appliances company to initiate and publish projects. The Company led the IEEE Intelligent Family Standards Working Group and acted as the chairman. Furthermore, the Company obtained the global interconnection certificate issued by OCF (Open Connectivity Foundation) and achieved seamless interconnection with OCF through the Haier U+ platform. Create ecological brand in Internet of Clothing and Internet of Food. ① Haier‘s Internet of Clothing is the world's first clothing full-life management platform based on the Internet of Things. Through this technology, we combined the upstream and downstream industrial chains of "factories, stores and homes" and provided users with smart solutions for the whole life cycle from washing, caring, storing, matching to purchasing. In May 2018, GS1 China selected Haier‘s Internet of Clothing Alliance to jointly develop national standards for clothing commodity coding rules, and jointly promoted the application of the standard in the apparel industry. The application for the clothing association standards submitted by the Company was also accepted by IEEE. ② The Internet of Food takes smart refrigerators and kitchen appliances as the interaction portals to combine data, such as eating habits generated during the interactive process of smart kitchen scenes with individual health data in order to provide users with value-added services, including physical examination, smart cooking, safe food purchases and healthy diet planning. The Company collected seven modules with resources coming from 400 parties and took the lead in establishing the Internet of Food Alliance. In 2018, the sales volume of smart appliance increased by 79.8%, the number of smart home users increased by 15.6%, the sales of whole house packaged solution accounted for 25% and increased over 100%, and the ecological revenue of Internet of Things amounted to RMB2.8 billion, representing an increase of 1622%. (V) COSMOPlat Industrial Internet Platform: As a large-scale customized industrial Internet Platform centered on the user’s experience and created by the relevant parties, it forms a leading advantage by shaping core capacities; empowers enterprises to transform and upgrade and achieve high-quality development through building the new industrial ecosystem. During the reporting period, COSMOPlat Industrial Internet Platform empowered enterprises to transform by promoting model innovation, platform innovation and ecological construction. As of the 30 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. end of 2018, 11 interconnected factories have been built, forming the world's leading large-scale customization solution. The platform has linked 26 million industrial equipment, building thousands of industrial APP/industrial models, 12 development languages/tools, and tens of thousands of platform developers. The seven modules including Haier user interaction, R&D innovation, synergic procurement, intelligent manufacturing, smart logistics, precision marketing and intelligent service have been digitized and productized to form a complete solution empowers the companies to transform and upgrade. Users, customers and the relevant parties participate in the whole process customization makes the R& D cycle of new products shortened, the efficiency improved, and the non-stock rate reache 71%, realizes users, R&D resources and supplier resources participating in the lifecycle management of product, upgrades products and user bodies and will upgrade the user to lifetime user Haier COSMOPlat has successively become the first demonstration platform of Intelligent Manufacturing Integrated Application based on Industrial Internet of the Development and Reform Commission and the first test platform of Industrial Internet of the Ministry of Industry and Information Technology. In September 2018, the Company became the only Chinese company in the list of the world's first nine "lighthouse factories" published by the World Economic Forum. Develop international standards for mass customization: during the reporting period, IEEE approved Haier to lead the development of international standards for the model of mass customization, and the standard draft was completed. ISO approved Haier to lead the development of ISO standards for the model of mass customization. Make the model of mass customization modularized and intelligentized by software and realize its cross-industry and cross-domain applications through 1+7 (modules) +N (industries) platform architecture. Empowering the Internet of Clothing, the Internet of Food, agriculture, and RVs to provide single or complete solutions for 15 major industries, and to replicate to 20 countries across cultures. For example, COSMOPlat built the first intelligent manufacturing interconnection plant in the auto industry, with a view to solving the problem of fragmentation of parts procurement in the RV industry. It provided more value-added services for users in "booking, transportation, travel and housing" through the IoT users, IoT smart RV, and IoT smart camps as well as the Internet of Things of the RV and camps themselves. In addition, the platform also provides value-added services to other companies by taking advantage of its centralized procurement system. In 2018, COSMOPlat recorded a revenue over RMB7 billion. (VI) Logistics service business: We maintained rapid growth based on the growth of offline business of household appliances and household products and the expansion of new businesses such as cross-border freight forwarding. The Company continuously strengthened the platform network and actively deployed intelligent 31 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. and automated warehouses to set a benchmark for the logistics industry of large-scale packages. As of the end of 2018, the total warehouse area was 4.7 million square meters, of which the proportion of self-built warehouses reached 26%. In Hangzhou and Qingdao, intelligent unmanned warehouses in a total area of 5,000 square meters were deployed to realize intelligent management in the whole process. We continued to deepen the cooperation with major e-commerce platforms to provide high-quality regional distribution and last-mile service for large-sized household appliances of Tmall platform. In order to help e-commerce customers reduce the number of goods deposited, Gooday Logistics reduced the delivery time from 2.3 days to 1.9 days in 2018, while the public praise (DSR) reached 4.91, much higher than the industrial average of 4.84 and that of peers. During the 18 June and 11 October E-commerce Shopping Festivals, the punctuality rates of Gooday Logistics were as high as 99% and 98.5% respectively, higher than the 97.5% and 97% of the industry respectively. We continued to expand the large-scale home market and provide customers with full-channel logistics services. At present, we have achieved the front-end collection of 10 industrial clusters in the home sector, established three Cainiao warehouse management systems, and integrated the resources of 117 trunk lines to 2,200 regions in the country. Furthermore, the Company continued to improve its delivery and assembly capacities and network coverage. We continued to accelerate the development of the new business sectors and actively optimize the asset portfolio. On the one hand, the Company expanded the international freight forwarding business through the merger and acquisition of Peiji Logistics for the expansion to new business sectors; on the other hand, considering the unfavorable competitive environment faced by the LTL business, the founding shareholders of Shengfeng Logistics, a joint venture company in the LTL sector, and Gooday Logistics executed an equity transfer agreement, pursuant to which the transfer of 50.37% of Shengfeng Logistics‘ equity held by Gooday Logistics in cash shall be completed during the year. II. Principle operating conditions during the reporting period Please refer to the related statement in ―I. Discussion and analysis on operations‖ of this section. (I) Analysis of principal business 1. Table of movement analysis on the related items in income statement and cash flow statement Unit and Currency: RMB Corresponding Items Current period Change (%) period of last year Operating revenue 183,316,560,236.03 163,428,825,488. 12.17 56 Operating cost 130,154,144,638.08 112,607,222,004. 15.58 32 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 03 Selling expenses 28,653,223,738.07 28,996,237,421.8 -1.18 2 Administrative expenses 8,324,327,164.18 7,164,848,718.59 16.18 R&D expenses 5,080,604,505.93 4,509,850,773.96 12.66 Gains on changes in fair value -145,191,723.49 614,071,259.47 -123.64 Gains on disposal of assets 267,800,599.46 13,512,402.32 1,881.89 Credit impairment loss 97,513,831.50 100.00 Non-operating income 474,156,808.14 689,516,709.14 -31.23 Other comprehensive income, net of 843,463,106.56 -554,105,703.86 252.22 tax Financial expenses 939,176,200.46 1,603,968,750.90 -41.45 Net cash flow generating from 18,934,252,899.16 16,703,785,279.9 13.35 operating activities 8 Net cash flow generating from -7,665,644,782.77 -5,741,587,992.1 -33.51 investing activities 3 Net cash flow generating from -10,489,353,519.24 510,476,992.91 -2,154.81 financing activities Analysis on reasons for the relatively large fluctuation of the indicators: 1) Income from change in fair value decreased by 123.64% yoy, which was mainly due to the movement of fair value of hedge and lock exchange business caused by the fluctuation of exchange rate. 2) Gain from disposal of assets increased by 1881.89% yoy, which was mainly due to disposal of part of the plants and lands for the current period. 3) Credit impairment loss increased by 100% yoy, which was mainly due to the implementation of New Financial Instrument Standards, whereby the expected credit loss from various financial instruments originally credited to the asset impairment loss are adjusted to be credited to credit impairment loss. And no restatement is needed for the same period of last year. 4) Non-operating income decreased by 31.23% yoy, which was mainly due to the relatively large amount of one-off revenue for the same period of last year. 5) Other comprehensive income, net of tax increased by 252.22% yoy, which was mainly due to the increase of translation difference of the financial statement in foreign currency caused by the fluctuation of exchange rate as compared to the same period of last year. 2. Analysis of income and cost □Applicable √Not Applicable 33 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (1). Principle operating activities by sectors, products and regions Unit and Currency: RMB0‘000 Principle operating activities by products Gross Operating Operating profit Gross revenue cost Operating Operating margin By products profit increased/de increased/de revenue cost increased/dec margin(%) creased yoy creased yoy reased yoy (%) (%) (%) Air-conditioners 3,177,252 2,169,525 31.72 10.59 10.77 Decreased by 0.11 pct pts Refrigerators 5,433,917 3,784,104 30.36 12.07 14.85 Decreased by 1.68 pct pts Kitchen appliance 2,495,053 1,722,286 30.97 7.37 19.18 Decreased by products 6.84 pct pts Water heaters 792,412 431,066 45.60 11.48 6.97 Increased by 2.29 pct pts Washing 3,626,849 2,396,733 33.92 15.06 19.55 Decreased by machines 2.48 pct pts Equipment 147,785 128,760 12.87 -49.42 -53.47 Increased by components 7.58 pct pts Channel Decreased by integrated 2,576,156 2,365,158 8.19 23.76 26.32 1.86 pct pts services business and others Principle operating activities by regions Gross Operating Operating profit Gross revenue cost Operating Operating margin By regions profit increased/de increased/de revenue cost increased/dec margin(%) creased yoy creased yoy reased yoy (%) (%) (%) Mainland China 10,581,757 7,243,848 31.54 15.25 16.64 Decreased by 0.82 pct pts Other countries 7,667,666 5,753,782 24.96 7.98 14.05 Decreased by and regions 3.99 pct pts Explanation of principle operating activities by sectors, products and regions □Applicable √Not Applicable (2). Table of production and sales analysis √Applicable □Not Applicable Unit: (10k units /set) Sales Production Inventory volume Main Sales increased/de increased/decre Production Inventory increased/de products volume creased yoy ased yoy creased yoy (%) (%) (%) Household 7,030 9,153 1,284 7.1 11.7 4.7 appliance 34 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (3). Table of cost analysis Unit: RMB0‘000 By sectors Percentage of Percentage Percentage of change of the of the the amount for amount for the Amount amount Amount for the the current period Cost for the for the corresponding By sectors corresponding compared to component current current period of last period of last the period period in year year in total corresponding total costs costs (%) period of last (%) year (%) Household Primary 10,503,7 appliance business 100.00 8,870,105 100 0 industry cost 13 Raw 8,817,24 materials 83.94 7,625,896 85.97 -2.03 9 Labor 588,073 5.60 614,318 6.93 -1.33 Depreciati 174,804 1.66 163,759 1.85 -0.19 on Energy 60,780 0.58 39,437 0.44 0.14 Others 862,807 8.21 426,695 4.81 3.40 Other explanation of cost analysis □Applicable √Not Applicable (4). Major customers and major suppliers √Applicable □Not Applicable Revenue from the top five customers was RMB 36,797.08 million, representing 20.07% of the total sales for the year; among the revenue from the top five customers, the revenue from related parties was RMB0, representing 0% of the total sales for the year. The purchase amount from the top five suppliers amounted to RMB 44,485.08 million, representing 26.62% of the total purchase amount for the year; among the purchase amount from the top five suppliers, the purchase amount from related parties was RMB 31,568.43 million, representing 18.89% of the total purchase amount for the year. 3. Expenses √Applicable □Not Applicable 1) Financial expenses decreased by 41.45% compared with last year, which was mainly due to the 35 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. increase of exchange gain. 4. R&D expenditure Table of R&D expenditure √Applicable □Not Applicable Unit: RMB Expensed R&D expenditure for the current period 5,080,604,506 Capitalized R&D expenditure for the current period 317,634,389 Total R&D expenditure 5,398,238,895 Total R&D expenditure as a percentage in operating revenue (%) 2.94 Number of R&D personnel 14,941 Number of R&D personnel as a percentage in total employees (%) 17.09 Proportion of capitalization of R&D expenditure (%) 5.88 Explanation of R&D expenditure □Applicable √Not Applicable 5. Cash flow √Applicable □Not Applicable 1) Net cash flow from investing activities decreased by 33.51% yoy, which was mainly due to the increase of cash payment on merge and acquisition of FPA as compared to the same period of last year. 2) Net cash flow from financing activities decreased by 2154.81% yoy, which was mainly due to the increase of net repayment of borrowings for the period. (II) Major changes in profits caused by non-principal businesses □Applicable √Not Applicable (III) Analysis of assets and liabilities √Applicable □Not Applicable 1. Assets and liabilities Unit and Currency: RMB Amount as at Percentag Amount Percenta Percenta the e of as at the ge of ge of Items Explanations end of the amount as end of amount change period at the end previous as at the in 36 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. of the period end of amount period the from over total previous the end assets period of (%) over previous total period to assets current (%) period (%) Mainly due to the reclassification of Financial 1,775,648,387. financial assets in assets held 1.07 100.00 accordance with the 76 for trading New Financial Instrument Standards. Financial assets measured at Mainly due to the fair value reclassification of and 20,681,695 financial assets in changes of 0.01 -100.00 accordance with the .50 which New Financial included in Instrument current Standards. profit and loss Mainly due to the reclassification of Derivative financial assets in financial 96,723,164.37 0.06 100.00 accordance with the assets New Financial Instrument Standards. Mainly because that the amount from disposal of part of the plants and lands 1,626,975,864. 1,192,291,3 Other 0.98 0.76 36.46 by 1169, a receivables 98 02.17 subsidiary of the Company has not been recovered as of the end of the reporting period. Mainly due to the business used for accounting for the settlement amount due but not yet Contract 456,781,406.54 0.27 100.00 received of which assets the Company has already achieved progress target in accordance with the new income standard. 37 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Mainly representing the assets of the 27,453,950. Assets held 144,091,213.39 0.09 0.02 424.85 business that 1169, a for sale 07 subsidiary of the Company intended to dispose. Mainly due to the Available-f reclassification of 1,415,354,3 or-sale 0.90 -100.00 items in accordance financial 07.82 with the New assets Financial Instrument Standards. Mainly due to the Investments reclassification of 1,400,316,460. in other 0.84 100.00 items in accordance equity 34 with the New instruments Financial Instrument Standards. Mainly due to the Other reclassification of non-current 327,358,825.57 0.20 100.00 items in accordance financial with the New assets Financial Instrument Standards. Mainly because that the Company Constructio 3,873,492,230. 1,610,615,0 2.33 1.02 140.50 expands its n in 24 34.68 investment in order progress to cater for the capacity needs. Mainly because that part of the self-developed technology of GEA, 966,051,333 Developme 538,382,288.33 0.32 0.61 -44.27 a subsidiary of the nt cost .81 Company, has been transferred to intangible assets after the completion of development. Mainly due to the Other 2,325,688,982. 1,254,064,1 increase of amount non-current 1.40 0.80 85.45 prepaid for 56 81.76 assets purchasing equipment. 6,298,504,892. 10,878,580, Mainly due to Short-term 3.78 6.92 -42.10 repayment of the borrowings 57 275.18 borrowings. Mainly due to the Financial reclassification in liabilities 218,748,280.33 0.13 100.00 accordance with the held for New Financial trading Instrument Standards. Financial 2,524,569.4 0.00 -100.00 Mainly due to the liabilities reclassification in 38 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. measured at 5 accordance with the fair value New Financial and Instrument changes of Standards. which included in current profit and loss Mainly due to the reclassification in Derivative 35,603,754.54 0.02 100.00 accordance with the financial New Financial liabilities Instrument Standards. Mainly due to the 5,861,949,1 reclassification to Receipts in 14,681,466.58 0.01 3.73 -99.75 contract liabilities in advance 82.62 accordance with new income standard. Mainly due to the reclassification from 5,482,325,888. Contract 3.29 100.00 receipts in advance liabilities 59 in accordance with new income standard. Mainly due to the liabilities of the Liabilities 32,362,267.88 0.02 100.00 business that 1169, a held for subsidiary of the sale Company intends to dispose. Non-curren Mainly due to the 3,015,060,105. 6,149,302,9 repayment of t liabilities 1.81 3.91 -50.97 due within 58 81.65 borrowings for the one year current period. 。 Mainly due to the recognition of Other 42,961,121. liabilities arising current 423,638,804.62 0.25 0.03 886.10 from possible 03 liabilities returns of sales in accordance with new income standard. Mainly due to the 9,191,896,302. 6,211,088,36 new issuance of Bonds 5.52 3.95 47.99 convertible payable 70 2.68 corporate bonds for the current period. Mainly due to the increase of Other 1,823,866,693. 1,197,485,4 1.09 0.76 52.31 obligation of non-current 93 22.75 repurchase to the liabilities minority equity rights. Other 904,485,788.71 0.54 431,424,524 0.27 109.65 Mainly due to the 39 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. equity .07 recognition of equity instruments value of the new issuance of convertible corporate bonds for the current period. Mainly due to the increase of the translation Other 4,424,024.9 difference in the comprehens 772,632,347.35 0.46 0.00 17,364.47 statements 0 ive income recognized for the movements in fluctuation of exchange rate. Other explanations Nil 2. Restrictions on major assets as of the end of reporting period □Applicable √Not Applicable 3. Other explanations □Applicable √Not Applicable (IV) Analysis of industry operating information □Applicable √Not Applicable (V) Analysis of investment 1. Overall analysis on external equity investment √Applicable □Not Applicable During the reporting period, investments in external significant equities of the Company (including the planned investment amount that has been considered) amounted to RMB 8.742 billion. Amount of Percentage of Name of Principle planned the equity of company operating Remarks investment the company invested activities (RMB 100 invested (%) million) Guangzhou For details, please refer to the Haier Air Production Announcement on Newly Conditioner of air Constructing Project of 5 11.50 Appliances 100 conditioner Million Sets of Self-cleaning Air Co.,Ltd.(广州 products etc. Conditioning by Qingdao Haier 海尔空调器 Co., Ltd. disclosed on 26 April 40 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 有限公司) 2018 as well as relevant announcements of the Board. For details, please refer to the Announcement on Related-party Haier New Transaction of Receiving 100% Zealand Equity of Haier New Zealand Investment Investment 19.06 100 Investment Holding Company Holding Holding etc. Limited by Qingdao Haier Co., Company Ltd. disclosed on 26 April 2018 Limited as well as relevant announcements of the Board. For details, please refer to the Announcement on Purchasing Production 100% Equity of Italy-based Candy S.p.A and sale of Candy Company by Qingdao 37.24 100 (note) home Haier Co., Ltd. disclosed on 29 appliances September 2018 as well as relevant announcements of the Board. For details, please refer to the Haier Announcement on Newly Appliances Production Constructing Industrial Park and sale of Project in North India by 19.62 (India) 100 home Qingdao Haier Co., Ltd. Private disclosed on 30 August 2018 as appliances Limited well as relevant announcements of the Board. Note: (1)As of the date of disclosure of this periodic report, the aforesaid equity transfer has been completed. (2)The above investment amount involving foreign currency shall be converted at the foreign exchange rate as at 31 December 2018. (1) Significant equity investment √Applicable □Not Applicable Please refer to above ―1. Overall analysis on external equity investment‖. (2) Significant non-equity investment □Applicable √Not Applicable (3) Financial assets measured at fair value √Applicable □Not Applicable 41 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Current Investment Changes in purchase/sal income fair value Financial assets Initial cost of Sources of e during the during the during the measured at fair value investment funds reporting reporting reporting period period period Bank of Communications 1,803,769.50 Own funds 389,059.17 -572,145.84 (601328) BAILIAN (600827) 154,770.00 Own funds -198,515.52 Eastsoft (300183) 18,713,562.84 Own funds -5,823,560.70 1,559,253,309 1,559,253,30 Short-term wealth 8,395,598.95 Own funds management products .05 9.05 327,056,778.3 327,056,778. Long-term wealth 302,047.25 Own funds management products 2 32 Interest rate swap -5,329,684.14 Own funds agreement Forward commodity 1,791,718.92 Own funds contracts 129,824,011.4 -151,334,742.9 Forward foreign Own funds exchange contract 8 0 1,426,491,908 52,967,663.8 104,856,077.1 Others Own funds -41,326,895.67 .20 0 6 3,333,474,097 1,939,277,75 235,069,147.8 -194,096,179.6 Total .91 1.17 1 5 Note: As of 31 December 2018, the aggregate balance of foreign exchange derivative transactions amounted to approximately US$4.6 billion. (VI) Sale of material assets and equity √Applicable □Not Applicable During the reporting period, the Company transferred its 22% of equity interests in Qingdao Haier Special Electrical Appliance Co., Ltd. to Qingdao Haier BioMedical Holdings Co., Ltd. (青岛海尔生物医 疗控股有限公司)with a consideration of RMB505 million. For details, please refer to the Announcement on Related-party Transaction of Transferring 22% Equity of Qingdao Haier Special Electrical Appliance Co., Ltd. by Qingdao Haier Co., Ltd. (No. L2018-037) disclosed on 22 June 2018. (VII) Analysis on major controlling companies √Applicable □Not Applicable RMB0‘000 42 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Name of company Scope of business Total asset Net assets Net Profit Haier Electronics Group Production and sale of 4,693,677.19 2,574,828.37 399,010.60 Co., Ltd. home appliances Haier US APPLIANCE 4,643,124.39 2,029,721.81 186,758.91 Holding GEA, etc. SOLUTIONS,INC. Note: The financial data of Haier Electronics Group Co., Ltd. is determined in accordance with the China Accounting Standards (CAS) and the accounting policies of the Company. (VIII) Structured entities controlled by the Company □Applicable √Not Applicable III. Discussion and analysis on the Company’s future development (I) Setup and trend of the industry √Applicable □Not Applicable For details, please refer to the relevant contents of ―SECTION III SUMMARY OF THE COMPANY‘S BUSINESS‖ in this report. (II) Development strategies √Applicable □Not Applicable After more than 30 years of development, the Company has become a world-leading household appliance enterprise. In the future, the company will continue to achieve synergies in its global business and optimize operational efficiency to improve market share and maintain its leadership. In the face of the opportunities and challenges in the IoT era, the Company took the mode of "RenDanHeYi" as the core driving force, built a win-win chain group ecology around the strategic origin of smart homes, and created an ecological brand led by smart homes to continuously innovate and iterate the user experience and satisfy the needs of consumers to achieve a better life. (III) Business plan √Applicable □Not Applicable In 2019, on the basis of its leadership in various industries, the Company will enhance the competitiveness of smart home solutions, further promote its global operations, continuously enhance the industry status of refrigerators, washing machines, water heaters and other dominant products, and continue to strengthen the development of air conditioners and kitchen appliances. Domestic market: Focusing on user experience and customer interests, the Company will adhere to the working principles of "building network of contact points, building industry barriers, building 43 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. parallel platforms and creating lifelong users", deepen the retail transformation, and mainly promote the following works: (1) Promote channel transformation and e-commerce transformation. ① In terms of channel transformation, the Company will upgrade the channel competitiveness under the whole network management to enhance the network coverage in weak areas, blank business circles and blank towns. ② In terms of e-commerce channels, the Company will enhance the competitiveness of air conditioner and kitchen appliances, and plan and implement the complete high-end online solutions. (2) Build scheme and brand barriers. ①The Company will focus on the competitiveness of the first set of solutions in the industry, promote the construction of different networks of contact points, and continuously upgrade the five sets of capabilities. ② Casarte brand promotes the upgrade of operation system from product-led to lifestyle-led by focusing on users' extreme experience. ③ Leader brand builds the younger barrier and becomes the first choice for young people in terms of customization. (3) Promote the transformation of marketing and enhance the competitiveness of digital platforms to achieve the word of mouth of users first. Overseas market: Focusing on the needs of users and taking "high-end, terminal" as the direction of market transformation and upgrading, the Company will accelerate the implementation and leading of "RenDanHeYi" overseas, enhance the global resource coordination ability, and further deepen the triple strategy‘ of ―manufacturing, marketing and R&D‖. ① In terms of products, we will adhere to the strategy of high-end leading and brand creation and lead the market through differentiated high-end products. ② In terms of the market, we will focus on the strategy of "branding and leadership as well as high-end transformation", and actively promote the construction of the whole process and zero-distance interactive platform including creators, customers and users through the model mechanism and resource betting. We will display the upgrading standards by issuing overseas terminals and effectively enhance user experience of high-end Haier brands. Smart home life platform: ① In order to satisfy the needs of all types of personalized home users, "5+7+N" home space and domain life solutions are designed iteratively for the implementation of seven major brands. ② Intensify IoT platform, iteratively build big data home cloud brain, and launch active services of touch control and voice. ③ Optimize all online and offline contact points, and focus on the layout of first-tier cities and backbone cities. ④ Continue to solve the ecological problems of food and clothing, and iterate the integrity platform for the Internet of Food and the ecological model for the Internet of Clothes. Cosmoplat platform: Focus on "value-added sharing and experience iteration" to drive the continuous iteration of Internet ecology with business model realization. ① Capacity building: The industrial Internet platform shall build nine core capacities in accordance with the four-tier architecture and one security system. ②Industry duplication: The Company shall focus on agriculture, machinery, medical treatment, energy and other industries. Regional duplication: The Company shall promote the six major functions of regional centers and promote the existing industry solutions. 44 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (IV) Potential risks of the Company √Applicable □Not Applicable 1. Risk of soft demand due to a slowdown in macro-economic growth. As white home appliance products fall into the category of durable consumer electronic products, the income level and expectation on future income growth will have an effect on the purchase of white home appliance. In the event of a slowdown in the macro economic growth, which will decrease the purchasing power of consumers, growth of the industry will be adversely affected. In addition, uncertainties from the real estate market will have some negative effect on market demand, which will in turn have some indirect effect on demand for home appliance products. 2. Price war risk caused by intensifying industry competition. The industry of white goods products has intense competition with a high homogeneity of products. In recent years, the industry has shown a trend of increasing concentration. In addition, the increase of industry inventory caused by imbalance between supply and demand in individual sub-industries may lead to price wars and other risks. 3. Risk of price fluctuation of raw materials. The Company's products and core components are mainly made of metal raw materials such as steel, aluminum and copper, as well as plastics, foaming materials and other bulk raw materials. The potential increase of prices of raw materials may pose a certain pressure on the Company's production and operation. 4. Operating risk in overseas market. With the stable development of business globalization, the Company has set up several production bases, research and development centers and marketing centers in a number of countries around the world, leading to the continuous rise of overseas business. As the overseas market is subject to the impact of local political and economic situation, legal system and supervisory system, significant changes of such factors would pose risks to the Company‘s operation locally. Under the influence of global trade protectionism, the emergence of a series of problems, such as superpower games, trade frictions, tariff barriers, foreign exchange fluctuations, together with the complexity of global politics and economy, will increase the international trade cost, labor cost and foreign exchange transaction cost, as well as the uncertainty of the Company's overseas operations. 5. Risk of fluctuation in foreign currency exchange rate. With the deepening of the Company's global layout, the import and export of Company's products involve the exchange of foreign currencies such as US dollars, Euro and Japanese yen. If the exchange rate of relevant currencies fluctuates, the Company's financial situation may be influenced to some extent and its financial costs may be increased. 6. Risk of policy changes. The industry of household appliances is closely related to the consumer goods market and real estate market. The changes in macroeconomic policy, consumption investment policy, real estate policy and other relevant laws and regulations will influence customer demands of products, and may influence sales of the Company's products. 45 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (V) Other √Applicable □Not Applicable Future capital expenditure plan: In 2019, the Compan‘s investment will focus on the research and development of leading technologies and modules, the construction of smart interconnected factories, the construction of complete set of smart home experience stores, the smart home living platform and COSMOplat. The Company will actively seize opportunities for external development and promote the Company‘s leapfrog development in related industries and regions. Investment funds will be financed through the Company‘s own funds and equity financing, etc. IV. Explanation of circumstances and reasons for non-disclosure by the Company in consideration of inapplicable regulations, state secrets and commercial secretes □Applicable √Not Applicable 46 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION V SIGNIFICANT EVENTS I. Proposal for profit distribution of ordinary shares or capital reserve conversion into the increase in share capital (I) Formulation, implementation or adjustment of the cash dividend policies √Applicable □Not Applicable The Company‘s 2017 profit distribution plan was passed on its 2017 Annual General Meeting held on 18 May 2018: based on the Companys total existing shares of 6,097,402,727, it is proposed that the Company will distribute cash dividends of RMB3.42 (tax inclusive) per 10 shares to all shareholders, with a total expected amount before tax of RMB2,085,311,732.63. The plan has been implemented and completed in June 2018. Details are set out in the Announcement on Implementation of Rights and Interests Distribution for 2017 of Qingdao Haier Co., Ltd. (No. L2018-033) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange on 1 June 2018. The Company has always applied a stable and sustainable profit distribution policy. During the reporting period, the Company strictly followed the requirements set out in the Articles of Association and in the Shareholder Return Plan for the Next Three Years (2015-2017) of Qingdao Haier Co., Ltd.. During the formulation of the profit distribution plan, the Company took full account of return for investors, the long-term interests of the Company, overall interests of all shareholders and sustainable development of the Company, and provided investors an opportunity to share the growth of value, so that investors could form the expectation of a stable return. In addition, after approval on the 2017 First Extraordinary General Meeting of the Company, the Company formulated the Shareholder Return Plan for the Next Three Years (2018-2020) of Qingdao Haier Co., Ltd. and will continue to implement the stable dividend distribution policy. The procedures and mechanisms for system decision-making such as Articles of Association and planning of return of shareholders implemented by the Company were complete in compliance with laws and regulations. The process was open and transparent while the standard and ratio of dividends was clear. Responsibilities of independent directors were clear during the policy-making process, and independent directors were given the opportunities to play their roles. Minority shareholders were also given the opportunity to fully express their views and demands, and the legitimate interests of minority shareholders were adequately protected. The dividend distribution plan of 2018 of the Company: based on the total shares as at the date of profit distribution, it is proposed that the Company will distribute cash dividend of RMB3.51 per 10 shares (tax inclusive) with expected cash dividend not less than RMB2,235,314,261.70. The remaining reserved profits will be mainly used for project construction, foreign investment, R&D investment and daily operations related to the Company's principal business and therefore to maintain sustainable and stable development and to bring more benefits for investors. The proportion of this distribution is not less than 30% of the net profit attributable to parent company of the Company in 2018. 100% dividend of bonus scheme is paid in cash. 47 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (II) Plans or Proposals for Dividends of Ordinary Shares Distribution and for Capital Reserve Conversion into Share Capital of the Company in Recent Three Years (Including the Reporting Period) Unit and Currency: RMB Net profit Percentage of the attributable to the net profit Cash ordinary attributable to the Number of Number dividend shareholders of ordinary bonus of shares per 10 the listed shareholders of share for converte Cash dividend Year shares companies in the the listed per 10 d per 10 (tax inclusive) (RMB) consolidated companies in the shares shares (tax financial consolidated (share) (share) inclusive) statement during financial the year of statement distribution (%) 2018 0 3.51 0 2,235,314,261.70 7,440,228,855.90 30.04 2017 0 3.42 0 2,085,311,732.63 6,925,792,321.27 30.11 2016 0 2.48 0 1,624,803,749.32 5,036,652,240.84 32.26 (III) Share repurchased by cash and included in cash dividend □Applicable √Not Applicable (IV) The Company made profits and the profits for distribution to the shareholders of ordinary shares of the Parent Company was positive during the reporting period, but no cash profit distribution plan for ordinary shares was proposed; the Company should disclose the reasons in detail and the purpose and use plan of undistributed profits □Applicable √Not Applicable 48 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. II. Performance of undertakings (I) The undertakings made by the ultimate controllers, shareholders, related parties, acquirer as well as the Company and other relevant parties during or up to the reporting period √Applicable □Not Applicable Whethe r Any Date and perform deadline Background of Type of term of ed in a Covenanter Contents of undertakings for undertakings undertakings undertakin timely performa gs and nce strict way Undertakings Eliminate Haier During the period from September 2006 to May 2007, the Company 27 YES YES associated with the right Group issued shares to Haier Group Corporation (―Haier Group‖) to purchase the September major asset defects in Corporation controlling equity in its four subsidiaries, namely Qingdao Haier 2006, reorganization land property Air-Conditioner Electronics Co., Ltd. (青岛海尔空调电子有限公司), long term and etc. 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), and Guizhou Haier Electronics Co., Ltd. (贵州海尔电器有限公司). With regard to the land and property required in the operation of 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), and Wuhan Haier Electronics Co., Ltd. (武汉海尔电器股份有限公司) (the ―Covenantees‖), Haier Group made an undertaking (the ―2006 Undertaking‖). According to the content of 2006 Undertaking and current condition of each Covenantee, Haier Group will constantly assure that Covenantees will lease the land and property owned by Haier Group for free. Haier Group will make compensation in the event that the Covenantees suffer loss due to the unavailability of such land and property. 49 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Eliminate Haier Group Haier Group Corporation undertakes that it will assure Qingdao Haier and 24 YES YES the right Corporation its subsidiaries of the constant, stable and unobstructed use of the leased December defects in property. In the event that Qingdao Haier or any of its subsidiaries suffers 2013, land property any economic loss due to the fact that leased property has no relevant long term and etc. ownership certificate, Haier Group Corporation will make compensation to impaired party in a timely and sufficient way and take all reasonable and practicable measures to support the impaired party to recover to normal operation before the occurrence of loss. Upon the expiration of relevant leasing period, Haier Group Corporation will grant or take practicable measures to assure Qingdao Haier and its subsidiaries of priority to continue to lease the property at a price not higher than the rent in comparable market at that time. Haier Group Corporation will assure Qingdao Haier and its subsidiaries of the constant, stable, free and unobstructed use of self-built property and land of the Group. In the event that Qingdao Haier or any of its subsidiaries fails to continue to use self-built property according to its own will or in original way due to the Undertakings fact that self-built property has no relevant ownership certificate, Haier associated with Group Corporation will take all reasonable and practicable measures to refinancing eliminate obstruction and impact, or will support Qingdao Haier or its affected subsidiaries to obtain alternative property as soon as possible, if Haier Group Corporation anticipates it is unable to cope with or eliminate the external obstruction and impact with its reasonable effort. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of the Defective Property, the Influence on Operation of Issuer Caused by Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L2014-005) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange on 29 March 2014. Eliminate Qingdao The Company undertakes that it will eliminate the property defects of 24 YES YES the right Haier Co., the Company and main subsidiaries within five years with reasonable December defects in Ltd. business effort since 24 December 2013, so as to achieve the legality and 2013, land property compliance of the Company and main subsidiaries in terms of land and eight years and etc. property. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of the Defective Property, 50 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. the Influence on Operation of Issuer Caused by Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L2014-005) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange on 29 March 2014. During the aforesaid period, the Company has formulated relevant performance guarantee measures, including the re-application by the Company and its main subsidiaries to the competent government department for the property ownership certificate and to procure Haier Group Corporation to make guarantee undertakings in respect of the defective property owned by it and its subsidiaries. As of the expiration date, the Company has resolved the property defects of itself and its eight major subsidiaries, while that of the other remaining five major subsidiaries is in process. The Company will make reasonable business efforts to resolve the property defects of these five major subsidiaries. Because of historical issues and other reasons, the approval procedure involved in solving some defective property problems is complicated, including that of multiple government departments, and it takes a long time to handle and coordinate related matters. Due to the above external factors, the Company was unable to complete the above undertakings within the original undertaking period. Therefore, after the approval of the board meeting held by the Company on 5 November 2018 and the general meeting held on 21 December 2018, the term of the above undertakings were extended for three years on the basis of the original deadline. Asset Haier Inject the assets of Fisher & Paykel to the Company or dispose such assets May YES YES injection Group through other ways according to the requirements of the domestic 2015-June Corporation supervision before June 2020. For more details, please refer to the 2020 Announcement of Qingdao Haier Co., Ltd. on the Changes of Funding Other Commitment (L2015-015) published on the four major securities undertakings newspapers and the website of Shanghai Stock Exchange on 26 May 2015. During the reporting period, after considered and approved by the 13th meeting of the 9th session of the Board of Directors and 2017 Annual General Meeting of the Company, the Group has injected the above assets into the Company and this commitment has been completed. 51 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Asset Haier Inject the assets of Haier Photoelectric to the Company or dispose such December YES YES injection Group assets through other ways according to the requirements of the domestic 2015-June Corporation supervision before June 2020. For more details, please refer to the 2020 Other Announcement of Qingdao Haier Co., Ltd. on the Changes of Funding undertakings Commitment of Haier Group Corporation (L2015-063) published on the four major securities newspapers and the website of Shanghai Stock Exchange on 23 December 2015. Profit forecast Haier In December 2015 and January 2016, the meeting of the Board of December YES YES and Group Directors and general meeting of the shareholders considered and 2015-Dec compensation Corporation approved the matters in relation to the acquisition of minority equity ember interest of Mitsubishi Heavy Industries Haier and Carrier Refrigeration 2018 Equipment held by Haier Group. The Company signed the Profit Compensation Agreement with Haier Group to forecast the profits to be Other achieved by the aforementioned two companies in 2015-2018. If the undertakings profits are not reached during the commitment period, the difference part will be made up to the Company by Haier Group in cash. For more details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Acquisition of Equity in Sino-foreign Joint Venture Held by Haier Group Corporation and Related-party Transaction (L2015-062) published on the four major securities newspapers and the website of Shanghai Stock Exchange on 23 December 2015. 52 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The Company’s explanation on whether the earnings estimate on assets or projects was met and its reasons in the situation that earnings in the Company’s assets or projects is estimated, and the period of which includes the reporting period. □Reached √Not Reached □Not Applicable In December 2015 and January 2016, the meetings of the Board of Directors/Shareholders of the Company reviewed and approved related resolutions to acquire 45% equity of Mitsubishi Heavy Industries Haier (Qingdao) Air Conditioner Co., Ltd. (hereinafter referred to as ―Mitsubishi Heavy Industries Haier‖) and 49% equity of Qingdao Haier Carrier Refrigeration Equipment Co., Ltd. (hereinafter referred to as ―Haier Carrier‖) held by Haier Group Corporation. According to the Profit Compensation Agreement signed between the Company and Haier Group, the corresponding predictive net profit from 2015 to 2018 of Mitsubishi Heavy Industries Haier are RMB90.6612 million, RMB92.8607 million, RMB100.6592 million and RMB108.6862 million, respectively and the corresponding predictive net profit from 2015 to 2018 of Haier Carrier are RMB76.0470 million, RMB76.0472 million, RMB76.7156 million, and RMB76.9840 million respectively. If the audited net profit in any year of the target companies during the commitment period is lower than the predictive net profit, the gap will be compensated by Haier Group in cash (For more details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Acquisition of Equity in Sino-foreign Joint Venture Held by Haier Group Corporation and Related Party Transaction (L 2015-062) published on the four major securities newspapers and the website of Shanghai Stock Exchange on 23 December 2015). According to the Special Verification Report on the Completion of the Predictive Profit (―Hexin Zhuan Zi (2019) No.000151‖ and ―Hexin Zhuan Zi (2019) No. 000152‖) and Special Statement of Qingdao Haier Co., Ltd on the Completion of the Predictive Profit in 2018 issued by Shandong Hexin Certified Public Accountants LLP, the actual net profit of Mitsubishi Heavy Industries Haier in 2018 was RMB339.061 million, the actual net profit exceeded the Predictive Profit; the actual net profit of Haier Carrier in 2018 was RMB60.31 million,. The gap between the actual net profit and the predictive profit has been made up to the Company by Haier Group in cash. (II) Completion of performance commitments and their impact on the impairment test of goodwill □Applicable √Not Applicable III. Misappropriation and repayment plan of funds during the reporting period □Applicable √Not Applicable IV. Explanation of the Company on the “non-standard audit report” issued by the accounting firm □Applicable √Not Applicable 53 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. V. Explanation of the Company’s analysis on reasons and effects of changes in accounting policies and accounting estimates or correction of significant accounting errors (I) Explanation of the Company’s analysis on reasons and effects of changes in accounting policies and accounting estimates √Applicable □Not Applicable Ministry of Finance promulgated Accounting Standard for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments, Accounting Standard for Business Enterprises No. 23 — Transfer of Financial Assets and Accounting Standard for Business Enterprises No. 37 — Presentation of Financial Instruments, etc., (collectively the ―New Financial Instrument Standards‖) as well as Accounting Standard for Business Enterprises No. 14 — Income, respectively in 2017, and promulgated the Notice of the Ministry of Finance on Revising and Issuing the Format of Financial Statements of General Enterprises for 2018 (《财政部关于修订印发 2018 年度一般企业财务报表格式的通 知》) (Cai Kuai (2018) No.15) in 2018. the Company and its subsidiaries have started to implement the above amendments to the Accounting Standards for Business Enterprises and the Notice since 1 January 2018, and adjusted the relevant contents of accounting policies and financial statements accordingly. The Company and its subsidiaries implemented the New Financial Instrument Standards and income standard initially for the current period. According to the requirements under the Interpretation of Issues Relating to the Format of the Financial Statements of General Enterprises(《关于一般企业财务 报表格式有关问题的解读》)issued by the Accounting Bureau of the Ministry of Finance, the above changes in accounting policies cause influence on the opening amounts of the consolidated balance sheet. Please refer to the relevant contents in SECTION XI financial report‘ of this report for the above adjustments in accounting policies. (II) Explanation of the Company’s analysis on reasons and effects of correction of significant accounting errors □Applicable √Not Applicable (III) Communication with former accounting firm □Applicable √Not Applicable (IV) Other explanations □Applicable √Not Applicable 54 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. VI. Appointment and dismissal of accounting firm Unit and Currency: RMB0‘000 Current appointment Name of domestic accounting firm Shandong Hexin Certified Public Accountants LLP Remuneration of domestic accounting firm 715 Audit period of domestic accounting firm 6 Name Remuneration Internal control audit Shandong Hexin Certified Public Accountants LLP 245 accounting firm Sponsor China International Capital Corporation Limited 2,390.95 Explanation of appointment and dismissal of accounting firm □Applicable √Not Applicable Explanation of change of accounting firm during the auditing period □Applicable √Not Applicable VII. Possibility of listing suspension (I) Reasons of listing suspension □Applicable √Not Applicable (II) Response to be taken by the Company □Applicable √Not Applicable VIII. Circumstances and reasons for listing termination □Applicable √Not Applicable IX. Matters relating to bankruptcy and restructuring □Applicable √Not Applicable X. Material litigation and arbitration matters □Material litigation and arbitration matters during the year √No material litigation and arbitration matters in the reporting year 55 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. XI. Punishment on the listed company and its directors, supervisors, senior management, controlling shareholders, ultimate controllers and acquirers and the issue of rectification □Applicable √Not Applicable XII. Explanation of the integrity status of the Company and its controlling shareholders and ultimate controller during the reporting period □Applicable √Not Applicable XIII. The Company’s share option incentive scheme, employee shareholding plan or other employee incentive measures and its influence (I) Matters disclosed in temporary announcements and without any subsequent progress or change □Applicable √Not Applicable (II) Share incentives not disclosed in temporary announcements or with subsequent progress Share Option Incentive □Applicable √Not Applicable Other explanations □Applicable √Not Applicable Employees Shareholding Plan √Applicable □Not Applicable (1) The Phase III Employees Stock Ownership Scheme launched and completed the share purchase: On 24 April 2018, the Company considered and approved relevant resolutions such as the Phase III Stock Ownership Scheme of the Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft) and it’s Summary at the 13th meeting of the 9th session of the Board of Directors. The 635 staffs who participated into 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 its subsidiaries and sign employment contracts with the Company or its subsidiaries and receive remuneration from them, together holding RMB271.30 million in the fund. On 23 May 2018, the Company disclosed the Announcement on the Completion of Share Purchase by the Phase III Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd., and the Employees Stock Ownership Scheme has been entrusted to Industrial Securities 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 III Stock Ownership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (―Assets Management Plan‖) for the management. As of 22 May 2018, the Assets Management Plan has purchased an aggregate of 16,063,800 shares of the Company, representing 0.26% of the total share capitals of the Company through the block trade in secondary market at an average trading price of 56 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. RMB16.72 per share with a trading volume of RMB268,586,736.00. The Phase III 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 requirements, and the locking period will be 12 months from the date of the disclosure of this announcement, being 23 May 2018 to 22 May 2019. (2) Partially vesting of the employee stock ownership plan: ①Initial vesting of the Phase II Employees Stock Ownership Scheme etc.: During the reporting period, the lock-up period of the Company's Phase II Stock Ownership Scheme of the Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft) and it’s Summary (referred to as ―Phase II Stock Ownership Scheme‖) has expired. According to the Audit Report of Qingdao Haier Co., Ltd. (Hexin Shen Zi. (2018) No.000267) issued by Shandong Hexin Certified Public Accountants LLP, the annual net profits vested in parent company shareholders with allowance for non-recurring gains and losses in 2017 increased by 29.81% compared to 2016. Upon examination by the Management Committee, the assessment results of 556 holders of Phase II Stock Ownership Scheme were satisfactory. 19 holders had unsatisfactory assessment results or resigned before determination of the equity for the year 2017 under Phase II Stock Ownership Scheme. On 2 May 2018, upon consideration by Employees Stock Ownership Scheme Management Committee, 556 holders of Phase II Core Employees Stock Ownership Scheme were determined according to performances for the year 2017 to be allocated with 8,717,600 shares. The shares of the said 19 holders with unsatisfactory assessment or who resigned were suspended for allocation or adjusted for their shares. There are 7 directors, supervisors and senior executives of the Company. A total of 1,617,300 shares can be allocated for Phase II Stock Ownership Scheme. Upon application by Mr. Gong Wei as chief financial officer and vice president, 121,325 shares he applied for not being allocated in December 2017 when shares of the Phase I Employees Stock Ownership Scheme were allocated (for the relevant announcement, refer to the Notice of Qingdao Haier Co., Ltd. on the Quota Distribution and Equity Allocation of the Phase I Core Employees Stock Ownership Scheme disclosed by the Company on 7 December 2017, No. L 2017-046) are allocated at this time. In summary, the number of shares held by directors, supervisors and senior executives actually allocated this time is 1,738,700 shares. Any change of the shares they hold must be subject to provisions of the Rules Governing the Holding of Shares in the Company by Directors, Supervisors and Senior Management of Listed Companies and Changes Thereof. In summary, according to the aforementioned resolutions, the Company has completed the transfer of relevant stocks at China Securities Depository and Clearing Corporation Shanghai Branch on 10 May 2018, with a total of 8,838,931 shares. ②Second vesting of the Phase I Stock Ownership Scheme: During the reporting period, the lock-up period of the Company's Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft) (referred to as ―Phase I Stock Ownership Scheme‖) has expired. According to the Audit Report of Qingdao Haier Co., Ltd. (Hexin Shen Zi. (2018) No.000267) issued by Shandong Hexin Certified 57 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Public Accountants LLP, the annual net profits vested in parent company shareholders with allowance for non-recurring gains and losses in 2017 increased by 29.81% compared to 2016. Upon examination by the Management Committee, the assessment results of 481 holders of Phase I Stock Ownership Scheme were satisfactory. 34 holders had unsatisfactory assessment results or resigned before determination of the equity for the year 2017 under Phase I Stock Ownership Scheme. On 3 December 2018, upon consideration by Employees Stock Ownership Scheme Management Committee, 481 holders of Phase I Core Employees Stock Ownership Scheme were determined according to performances for the year 2017 to be allocated with 13,156,332 shares. The shares of the said 34 holders with unsatisfactory assessment or who resigned were suspended for allocation or adjusted for their shares. There are 7 directors, supervisors and senior executives of the Company. A total of 2,454,400 shares can be allocated for Phase I Stock Ownership Scheme. Any change of the shares they hold must be subject to provisions of the Rules Governing the Holding of Shares in the Company by Directors, Supervisors and Senior Management of Listed Companies and Changes Thereof. In summary, according to the aforementioned resolutions, the Company has completed the transfer of relevant stocks at China Securities Depository and Clearing Corporation Shanghai Branch on 12 December 2018, with a total of 13,156,332 shares. Other incentives □Applicable √Not Applicable XIV. Significant related party transactions (I) Related party transactions from routine operation 1. Matter disclosed in temporary announcements and with no subsequent progress or change □Applicable √Not Applicable 2. Matter disclosed in temporary announcements and with subsequent progress or change √Applicable □Not Applicable The Company made a forecast on the related-party transaction matters of the Company for the year of 2018 at the 13th meeting of the 9th session of Board Meeting held on 24 April 2018. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. regarding the Renewal of Daily Related-party Transactions Agreement and the Anticipation on the Daily Related-party Transactions for 2018 and the announcement on the relevant resolutions of the Board disclosed on 26 April 2018. For the actual implementation of the Related-party transaction of January to December 2018, please refer to ―Note12 –Related Parties and Related-party Transactions‖ under SECTION X - Financial and Accounting Report set out in this regular report. 58 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 3. Matter not disclosed in temporary announcements □Applicable √Not Applicable (II) Related-party transactions regarding acquisition or disposal of assets/equity 1. Matter disclosed in temporary announcements and with no subsequent progress or change √Applicable □Not Applicable Summary Index for details Acquisition of FPA shares: The Company passed the acceptance Refer to the Announcement of Qingdao of transfer of 100% shares of Haier New Zealand Investment Haier Co., Ltd. on Related-party Holding Company Limited held by the overseas subsidiary Transaction of Accepting the Transfer Haier (Singapore) Management Holding Co. Pte. Limited under of 100% Shares of Haier New Zealand Haier Group Corporation by Haier Singapore Investment Investment Holding Company Limited Holding Pte. Ltd. (―Haier Singapore Investment‖) in cash who (L2018-020) and relevant should accept, in proportion to 100%, the principal and interests announcements disclosed by the of shareholder borrowings payable by the Target Company to Company on 26 April 2018 for more Haier Singapore Management. Haier Singapore Investment, an information. overseas subsidiary of the Company, intends to pay US$303,040,997.28 (equivalent to RMB1,905,552,095.01) to Haier Singapore Management for accepting the transfer of the underlying shares. Transfer shares of Qingdao Haier Special Electrical Appliance Refer to the Announcement of Qingdao Co., Ltd.: As the shareholder of Qingdao Haier Special Haier Co., Ltd. on Related-party Electrical Appliance Co., Ltd. (―QHSPA‖), the Company Transaction of Transferring 22% transferred 22% of QHSPA shares to Qingdao Haier Biomedical Shares of Qingdao Haier Special Holdings Co., Ltd. at the consideration of RMB505,129,570 for Electrical Appliance Co., Ltd. the transaction. Upon completion of the share transfer, the (L2018-037) and relevant Company no longer holds any share of QHSPA. announcements disclosed by the Company on 22 June 2018 for more information. 2. Matter disclosed in temporary announcements and with subsequent progress or change □Applicable √Not Applicable 3. Matter not disclosed in temporary announcements □Applicable√Not Applicable 4. If performance agreement is involved, the performance achieved during the reporting period shall disclosed □Applicable √Not Applicable (III) Significant related-party transactions of joint external investment 1. Matter disclosed in temporary announcements and with no subsequent progress or change □Applicable √Not Applicable 2. Matters disclosed in temporary announcements and with subsequent progress or change □Applicable √Not Applicable 59 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 3. Matter not disclosed in temporary announcements □Applicable √Not Applicable (IV) Amounts due to or from related parties 1. Matter disclosed in temporary announcements and with no subsequent progress or change □Applicable √Not Applicable 2. Matters disclosed in temporary announcement and with subsequent progress or change □Applicable √Not Applicable 3. Matter not disclosed in temporary announcements □Applicable √Not Applicable (V) Others □Applicable √Not Applicable XV. Significant contracts and their execution (I) Trusteeship, contracting and leasing 1. Trusteeship □Applicable √Not Applicable During the reporting period, there was no material trusteeship. To date, the following trusteeships have been considered and approved on the general meeting of the Company and still within the validity period: According to the Haier Group's commitment in 2011 to further support the development of Qingdao Haier and resolve intra-industry competition to reduce related-party transactions, and given the fact that Qingdao Haier Photoelectric Co., Ltd. and its subsidiaries, who purchase of the color TV business from Haier Group, are still under transformation and consolidation period and their financial performance fails to reach the expectation of the Company. Therefore, Haier Group is unable to complete the transfer before the aforementioned commitment period. Haier Group intends to entrust the Company with the operation and management of assets under custody and will pay RMB1 million custodian fee to the Company each year during the period of custody. 2. Contracting □Applicable √Not Applicable 3. Leasing □Applicable √Not Applicable 60 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (II) Guarantee √Applicable □Not Applicable Unit and Currency: RMB0‘000 External guarantees provided by the Company (excluding guarantees for subsidiaries) Relati Date onshi of Whet p Whet occurr Com her Whet Whet betwe Expir Overdu her ence mence the her her en the Amoun ation Type e relate Secur of the ment guara the there Relati Guara guara t of date of amount d ed guara date ntee guara is a onshi ntor ntor guarant of guara of the party party ntee of has ntee is count p and ee guara ntee guarant guara (date guara been overd er-gua the ntee ee ntee of ntee fulfill ue rantee listed or not agree ed compa ment) ny Total amount of guarantee occurred during 0 the reporting period (excluding guarantees for subsidiaries) Total balance of guarantee at the end of the 0 reporting period (A) (excluding guarantees for subsidiaries) Guarantees provided by the Company and its subsidiaries for subsidiaries Total amount of guarantees for subsidiaries 3,968,860 occurred during the reporting period Total balance of guarantees for subsidiaries 2,504,621 at the end of the reporting period (B) Total amount of guarantees provided by the Company (including guarantees for subsidiaries) Total guarantee (A + B) 2,504,621 Ratio of total amount of guarantees to net assets of the Company (%) Among which: Amount of guarantees for shareholders, ultimate controllers and their related parties 0 (C) Amount of debt guarantees provided directly or indirectly for the secured party 1,532,947 with asset-liability ratio exceeding 70% (D) The amount of total amount of guarantee in 534,503 excess of 50% of net assets (E) Total amount of the above three guarantees 2,067,450 (C + D + E) Explanation of possibly bearing related discharge duty for premature guarantees 61 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Explanation of guarantee status 1. In 2016, the Company acquired the assets of GEA at a total consideration of US$5.61 billion, which was sourced from self-owned funds and loan for merger, of which, the loan for merger in the amount of US$5.61 billion was applied for by Haier US Appliance Solutions, Inc., a wholly-owned subsidiary of the Company, to China Development Bank Co., Ltd. The loan was fully secured by the Company and Haier Group Corporation. At the end of the reporting period, the amount of guarantee was equivalent to approximately RMB13.655 billion. The balance of the guarantee amounted to RMB9.046 billion as at the end of the reporting period. The provision of guarantee had been considered and approved by the Board and the general meeting of shareholders of the Company; 2. In May 2018, the resolution on the Expected Provision of Guarantee for a Subsidiary in 2018 was passed on the 2017 Annual General Meeting of the Company, according to which, the Company had provided guarantee in respect of the application for comprehensive facility made by certain subsidiaries to financial institutions. During the reporting period, the accumulated amount of guarantee offered by the Company to subsidiaries was approximately RMB26.034 billion. As at the end of the reporting period, the balance of the guarantee was RMB16 billion. (III) Entrusted others to manage cash assets 1. Entrusted wealth management (1) Overall of entrusted wealth management √Applicable □Not Applicable Unit and Currency: RMB Premature Past due Type Sources of funds Amount balance uncollected amount Principal-guaranteed wealth management 4,018,200,000 4,018,200,000 Own funds products and structured deposit Overseas US dollar 682,232,567 682,232,567 Own funds bills and bonds Note: As an independently operating Hong Kong listed company, Haier Electric Co., Ltd. has purchased some short-term principal-protected wealth management and structural deposits from the four major banks in order to increase the efficiency of the use of idle funds within the authorities of the management. In the purchase process, all the necessary board reports were subject to the procedures such as filling and management‘s review according to the regulations requirements for Hong Kong listed company, so as to ensure sufficient funds for the day-to-day operations of the main business and improve the shareholders' returns. 62 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Others □Applicable √Not Applicable 63 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (2) Individual entrusted wealth management √Applicable □Not Applicable Unit and Currency: RMB Any Expirati Det Act Whethe future Type of on date erm Provision Amount of Commencement Inv ual r plan for entrusted of Sourc inat Expected Coll for entrusted date of entrusted est Annualized gain approv entrust wealth entrusted es of ion return (if ecti impairme Trustee wealth wealth me yield s or ed by ed management wealth funds of any) on nt loss (if management management nt loss due wealth product manage retu any) es process manage ment rn ment Haier Road 17 Own Principal-gu sub-branch 210,000,000. June funds aranteed 14 December 4.20% 4,470,411 of 2019 YES YES wealth 0 2018 Construction management Bank Qingdao 21 June Own branch of 204,000,000. 2019 funds Structured 21 December 4.00% 4,068,822 China YES YES deposit 0 2018 Minsheng Bank Qingdao Principal-gu 18 June Own 423,200,000. branch of aranteed 2019 funds 4.00% 8,997,348 6 December 2018 YES YES Bank of wealth 0 China management Qingdao 10 June Own branch of 183,000,000. 2019 funds Structured 10 December 4.20% 3,832,471 Bank of YES YES deposit 0 2018 Communicat ions Qingdao Structured 102,000,000. 10 December 10 June Own 4.20% 2,136,132 YES YES branch of deposit 2018 2019 funds 64 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Bank of 0 Communicat ions Qingdao 24 April Own branch of 188,000,000. 2019 funds Structured 4.10% 3,801,205 Bank of 26 October 2018 YES YES deposit 0 Communicat ions Sichuan 16 May Own Road 2019 funds 105,700,000. sub-branch Structured 16 November 4.00% 2,096,625 YES YES of China deposit 0 2018 Minsheng Bank Qingdao 20 May Own branch of 102,300,000. 2019 funds Structured 20 November 4.00% 2,029,184 China YES YES deposit 0 2018 Minsheng Bank Qingdao Principal-gu 26 Own 100,000,000. branch of aranteed 25 December June funds 4.00% 2,005,479 YES YES Bank of wealth 00 2018 2019 China management Qingdao 25 Own branch of 100,000,000. June funds Structured 25 December 4.00% 1,994,521 China 2019 YES YES deposit 00 2018 Minsheng Bank Qingdao 26 Own branch of 100,000,000. June funds Structured 26 December 4.22% 2,104,219 Bank of 2019 YES YES deposit 00 2018 Communicat ions Haier Road Principal-gu 400,000,000. 20 December 20 June Own 3.90% 7,778,630 YES YES 65 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. sub-branch aranteed 0 2018 2019 funds of wealth Construction management Bank Qingdao Principal-un 31 Own branch of guaranteed Decemb funds 350,000,000. Postal and floating er 2018 4.30% 7,339,452 6 July 2018 YES YES Savings proceeds 0 Bank of wealth China management Qingdao 7 Own branch of 250,000,000. January funds Structured 4.75% 5,856,164 Bank of 11 July 2018 2019 YES YES deposit 0 Communicat ions Qingdao 11 Own branch of 220,000,000. February funds Structured 4.20% 4,759,233 China 7 August 2018 2019 YES YES deposit 0 Minsheng Bank Qingdao 11 Own branch of February funds Structured 50,000,000.0 4.20% 1,070,137 China 9 August 2018 2019 YES YES deposit Minsheng Bank Qingdao Principal-gu 18 June Own 250,000,000. branch of aranteed 2019 funds 4.00% 5,287,671 7 December 2018 YES YES Bank of wealth 0 China management Qingdao 18 June Own branch of 180,000,000. 2019 funds Structured 18 December 4.00% 3,590,137 China YES YES deposit 0 2018 Minsheng Bank 66 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Haier Road 20 June Own Principal-gu sub-branch 260,000,000. 2019 funds aranteed 20 December 3.90% 5,056,110 of YES YES wealth 0 2018 Construction management Bank Qingdao 19 Own Jinsong Road 240,000,000. February funds 21 November 4.00% 2,367,123 sub-branch 2019 YES YES 0 2018 of China CITIC Bank JPMorgan 23 Own Chase Bank, AT1 bond 5,412,879.6 6 July 2018 October funds 4.65% 239,318 YES YES N.A. 2019 JPMorgan 23 Own Chase Bank, AT1 bond 10,482,765.9 11 July 2018 October funds 4.66% 472,351 YES YES N.A. 2019 JPMorgan 23 Own Chase Bank, AT1 bond 10,556,608.8 24 August 2018 October funds 4.51% 551,076 YES YES N.A. 2019 JPMorgan 23 Own Chase Bank, AT1 bond 18,835,747.3 27 August 2018 October funds 4.49% 992,547 YES YES N.A. 2019 JPMorgan 10 Own Chase Bank, AT1 bond 6,365,000.0 12 July 2018 Decemb funds 4.08% 212,000 YES YES N.A. er 2019 JPMorgan 29 July Own Chase Bank, AT1 bond 6,270,833.3 12 July 2018 2020 funds 5.12% 285,833 YES YES N.A. JPMorgan 16 Own Chase Bank, AT1 bond 1,480,607.1 12 July 2018 Decemb funds 4.88% 38,582 YES YES N.A. er 2020 Citibank 31 May Own Max N.A. HK Bill 10,000,000.0 12 June 2018 2021 funds (3%,Fund YES YES increase*269 67 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. %) Own max(3%,Fund Citibank 10,000,000.0 Bill 13 June 2018 31 May funds increase*270 YES YES N.A. HK 2021 %) JPMorgan 18 June Own max(3%,Fund Chase Bank, Bill 10,000,000.0 29 June 2018 2021 funds increase*185 YES YES N.A. %) JPMorgan 30 July Own max(3%,Fund Chase Bank, Bill 10,000,000.0 14 August 2018 2021 funds increase*185 YES YES N.A. %) 68 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Others □Applicable √Not Applicable (3) Provisions for impairment of entrusted wealth management □Applicable √Not Applicable 2. Entrusted loans (1) Overall entrusted loans □Applicable √Not Applicable Others □Applicable √Not Applicable (2) Individual entrusted loans □Applicable √Not Applicable Others □Applicable √Not Applicable (3) Provisions for impairment of entrusted loans □Applicable √Not Applicable 3. Others √Applicable □Not Applicable Unit and Currency: RMB0‘000 A mo unt Name Initial of Amou Closing of investme pur nt of Type Opening balance of party nt cha dispos Impair Closing of balance investmen Actual profit operati amount Comme se al ment balance derivat Expiration of t amount or loss for the ng the in ncement dur during provisi of ives date investme as a reporting derivat derivativ date ing the on (if investmen invest nt percentag period ives es the reporti any) t amount ment amount e of the invest investme rep ng net asset ment nt orti period ng per iod Forwa rd 2018/1/ 2018/12/3 exchan 792,625 792,625 1,212,854 5,209 Bank ge 1 1 contra ct 69 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Interes t 2016/5/ rate/ex 1,594,081 2021/6/2 1,594,081 1,938,854 10,907 Bank change 1 rate swap Source of funds for Entirely internal funds of the Company derivative investment Market prices or fair value change of invested Change in market price or product fair value: derivatives during the 1. Profit or loss of foreign exchange forward contract during the reporting period was RMB52.09 million; reporting period, including 2. Profit or loss of interest rate/exchange rate during the reporting period was RMB109.07 million. the specific methods, Specific methods, assumptions and parameters: quotes for swaps and forwards of foreign exchange and assumptions and parameters interest rate provided by financial institutes. adopted in the analysis of the fair values of the derivatives (IV) Other Major Contracts □Applicable √Not Applicable XVI. Other major events √Applicable □Not Applicable During the Reporting Period, the Company disclosed the following information and all the information will be disclosed on SSE (www.sse.com.cn): Name of Newspaper and Subject matter Date of publication Page "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B009) Announcement on Receiving "First-time Feedback Shanghai Securities News ( (75) Notice of Examining Administrative Licensing Project 11 January 2018 from China Securities Regulatory Commission" Securities Times (B056) (L2018-001) Security Daily (C3) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B045) Announcement on Applying for Postponement of Shanghai Securities News (32) Reply to "One-time Feedback Notice of Examining 01 February 2018 Administrative Licensing Project by China Securities Securities Times (B036) Regulatory Commission" (L2018-002) Security Daily (D33) China Securities Journal (B015) Shanghai Securities News (116) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Securities Times (B033) 09 February 2018 Change of Shareholder's Equity (L2018-003) Security Daily (D95) China Securities Journal (B015) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (25) Announcement on Remarks on Media Report Securities Times (B052) 10 February 2018 (L2018-004) Security Daily (D95) China Securities Journal (B007) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (232) Publishing Annual Performance of 2017 by Holding Securities Times (B028) 22 March 2018 Subsidiary Haier Electronics Group Co., Ltd. (L2018-005) Security Daily (C4) 70 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (121) Announcement on Express on Performance of 2017 Securities Times (B136) 04 April 2018 (L2018-006) Security Daily (D86) China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (121) Announcement on Reply to Feedback of Application Securities Times (B136) 04 April 2018 Document for Public Issuance of Convertible Corporate Bonds (L2018-007) Security Daily (D86) China Securities Journal (B107) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (133) Announcement on Resolutions of 12th Session of 9th Securities Times (B132) 11 April 2018 Directorate Meeting (L2018-008) Security Daily (D104) China Securities Journal (B107) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (133) Announcement on Resolutions of 11th Session of 9th Securities Times (B132) 11 April 2018 Board of Supervisors Meeting (L2018-009) Security Daily (D104) China Securities Journal (B107) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (133) Announcement on Amending "Articles of Association" Securities Times (B132) 11 April 2018 (L2018-010) Security Daily (D108) China Securities Journal (B107) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (133) Convening 1st Special Shareholders' Meeting of 2018 Securities Times (B132) 11 April 2018 (L2018-011) Security Daily(D108) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) --Summary (265-267) Securities Times (B290) 26 April 2018 of 2017Annual Report Security Daily (D341) China Securities Journal(B287) Shanghai Securities News(265-267) "Qingdao Haier Co., Ltd." (the Company) --First Securities Times(B290) 26 April 2018 Quarterly Report 2018 Security Daily(D342) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Resolutions of 13th Session of 9th Securities Times (B290) 26 April 2018 Directorate Meeting (L2018-012) Security Daily (D341) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Resolutions of 12th Session of 9th Securities Times (B290) 26 April 2018 Board of Supervisors Meeting (L2018-013) Security Daily (D342) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Renewing Engagement of Securities Times (B290) 26 April 2018 Accounting Firm (L2018-014) Security Daily (D341) China Securities Journal (B287) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News Announcement on Re-signing Agreement on Daily 26 April 2018 (265-267) Connected Transaction and Prediction on Daily Securities Times (B290) 71 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Connected Transaction in 2018 (L2018-015) Security Daily (D343) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Prediction on Providing Guarantees Securities Times (B290) 26 April 2018 for Subsidiary in 2018 (L2018-016) Security Daily (D342) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Conducting Foreign Exchange Securities Times (B290) 26 April 2018 Funds Derivatives Business (L2018-017) Security Daily (D344) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- (265-267) Announcement on Amending "Articles of Association" Securities Times (B290) 26 April 2018 (L2018-018) Security Daily (D342) China Securities Journal (B287) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News Announcement on Newly Constructing Project of 5 (265-267) Securities Times (B290) 26 April 2018 Million Sets of Self-cleaning Air Conditioning (L2018-019) Security Daily (D342) China Securities Journal (B287) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News Announcement on Connected Transaction of Receiving (265-267) Securities Times (B290) 26 April 2018 100% Equity of Haier New Zealand Investment Holding Company Limited (L2018-020) Security Daily (D344) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- Notice of (265-267) Convening Annual General Meeting of Securities Times (B290) 26 April 2018 2017(L2018-021) Security Daily (D344) China Securities Journal (B287) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News 2nd Line Distribution and Equity Ownership of Phase I (265-267) Securities Times (B290) 26 April 2018 Core Staff Shareholding Plan and Advance Term Expiration (L2018-022) Security Daily (D341) China Securities Journal (B287) Shanghai Securities News "Qingdao Haier Co., Ltd." (the Company) -- Summary (265-267) of Phase III Shareholding Plan of Core Staff 26 April 2018 Securities Times (B290) Shareholding Plan(Draft) Security Daily (D343) China Securities Journal (B063) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (536) Announcement on Resolutions of 1st Special Securities Times (B401) 28 April 2018 Shareholders' Meeting of 2018 (L2018-023) Security Daily (C289) China Securities Journal (B053) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (76) Announcement on Resolutions of 1st Meeting for Securities Times (B116) 03 May 2018 Holders of Phase III Shareholding Plan of Core Staff Shareholding Plan(L2018-024) Security Daily (B3) China Securities Journal(B056) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News(76) 10 May 2018 Announcement on Changing Representative of Securities Times(B101) 72 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Sponsor and Organizer of Independent Financial Advisor (L2018-025) Security Daily(D39) China Securities Journal (B060) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (128) Announcement on Line Distribution and Rights Securities Times (B121) 12 May 2018 Belongingness of Core Staff Shareholding Plan (L2018-026) Security Daily (C83) China Securities Journal (B004) Shanghai Securities News (64) "Qingdao Haier Co., Ltd." (the Company) -- Securities Times (B048) 17 May 2018 Condensed Report on the Equity Change Security Daily (D77) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (64) Equity Change of Shareholder with over 5% Shares Securities Times(B048) 17 May 2018 (L2018-027) Security Daily(D77) China Securities Journal (B135) ―Qingdao Haier Co., Ltd." (the Company) – Proposal Shanghai Securities News (117) for Public Offering of Convertible Corporate Bonds Securities Times (B004) 19 May 2018 (Amendment) Security Daily (C111) China Securities Journal (B135) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (117) Announcement on Resolutions of Annual General Securities Times (B003) 19 May 2018 Meeting of 2017 (L2018-028) Security Daily (C112) China Securities Journal (B135) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (117) Announcement on Resolutions of 15th Session of 9th Securities Times (B003) 19 May 2018 Directorate Meeting (L2018-029) Security Daily (C112) China Securities Journal (B135) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (117) Announcement on Resolutions of 13th Session of 9th Securities Times (B003) 19 May 2018 Board of Supervisors Meeting (L2018-030) Security Daily (C112) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B135) Announcement on Risk Alert on Diluted Current Shanghai Securities News (117) Return of Public Issuance of Convertible Corporate Securities Times (B003) 19 May 2018 Bonds and Filling Measures (Amendment) Security Daily (C112) (L2018-031) China Securities Journal (B005) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (40) Announcement on Completion of Purchase of 3rd Securities Times (B064) 23 May 2018 Shareholding Plan of Core Staff Shareholding Plan (L2018-032) Security Daily (D25) China Securities Journal (B005) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (57) Announcement on Implementation of Rights and Securities Times (B037) 01 June 2018 Interests Distribution for 2017 (L2018-033) Security Daily (D31) China Securities Journal (B065) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (89) Announcement on Obtaining Approval of Issuance of Securities Times (B101) 13 June 2018 Overseas Listed Foreig-funded Shares from CSRC (L2018-034) Security Daily (D41) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B009) Announcement on Resolutions of 16th Session of 9th Shanghai Securities News (52) 22 June 2018 Directorate Meeting (L2018-035) Securities Times (B076) 73 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Security Daily (D84) China Securities Journal (B009) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (52) Announcement on Resolutions of 14th Session of 9th Securities Times (B076) 22 June 2018 Board of Supervisors Meeting (L2018-036) Security Daily (D84) China Securities Journal (B009) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (52) Announcement on Connected Transaction of Securities Times (B076) 22 June 2018 Transferring 22% Equity of Qingdao Haier Special Electrical Appliance Co., Ltd. (L2018-037) Security Daily (D84) China Securities Journal (B044) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (29) Announcement on Shareholding Increase by Concerted Securities Times (B001) 02 August 2018 Actor of Actual Controller (L2018-038) Security Daily (D35) China Securities Journal (B037) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (25) Announcement on Progress in Shareholding Increase Securities Times (B117) 07 August 2018 by Actual Controller's Concerted Actor (L2018-039) Security Daily (D68) China Securities Journal (A16) Qingdao Haier Co., Ltd." (the Company) – Proposal Shanghai Securities News (94) for Public Offering of Convertible Corporate Bonds Securities Times (B007) 25 August 2018 (Amendment) Security Daily (C205/206) China Securities Journal (A16) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (95) Announcement on Resolutions of 17th Session of 9th Securities Times (B008) 25 August 2018 Directorate Meeting (L2018-040) Security Daily (C207) China Securities Journal (A16) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (95) Announcement on Resolutions of 15th Session of 9th Securities Times (B008) 25 August 2018 Board of Supervisors Meeting (L2018-041) Security Daily (C207) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (A16) Announcement on Risk Alert of Diluted Current Shanghai Securities News (95) Return on Public Issuance of Convertible Corporate Securities Times (B007) 25 August 2018 Bonds and Filling Measures (Amendment) Security Daily (C207) (L2018-042) China Securities Journal (B036) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (193) Publishing Semi-annual Performance of 2018 by Securities Times (B213) 30 August 2018 Holding Subsidiary Haier Electronics Group Co., Ltd. (L2018-043) Security Daily (D197) China Securities Journal (A39) Shanghai Securities News (160) "Qingdao Haier Co., Ltd." (the Company) -- Summary Securities Times (B176) 31 August 2018 of 2018 Half-year Report Security Daily (D149) China Securities Journal (A39) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (160) Announcement on Resolutions of 18th Session of 9th Securities Times (B176) 31 August 2018 Directorate Meeting (L2018-044) Security Daily (D150) China Securities Journal (A39) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (160) Announcement on Resolutions of 16th Session of 9th Securities Times (B176) 31 August 2018 Board of Supervisors Meeting (L2018-045) Security Daily (D149) 74 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. China Securities Journal (A39) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (160) Announcement on Newly Constructing Industrial Park Securities Times (B176) 31 August 2018 Project in North India (L2018-046) Security Daily (D150) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (A39) Announcement on Connected Transaction of Planning Shanghai Securities News (160) to Conduct Equity Replacement by Holding Subsidiary Securities Times (B176) 31 August 2018 and Haier Electronics International Co., Ltd. Security Daily (D149) (L2018-047) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (A39) Announcement on Receiving Decision on Adopting Shanghai Securities News (160) Measure of Regulatory Interview Issued for Relevant Securities Times (B176) 31 August 2018 Personal by Qingdao Securities Regulatory Bureau Security Daily (D150) (L2018-048) China Securities Journal (B020) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (72) Announcement on Participating in Activity of Online Securities Times (B36) 21 September 2018 Collective Reception Day for Investors (L2018-049) Security Daily (D2) China Securities Journal (B008) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (120) Announcement on Increasing Capital in Oversea Securities Times (B036) 22 September 2018 Wholly-owned Subsidiary (L2018-050) Security Daily (C48) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B013) Announcement on Obtaining Approval of Application Shanghai Securities News (32) for Public Issuance of Convertible Corporate Bonds by Securities Times (B036) 27 September 2018 Issuance Examination Committee of CSRC upon Security Daily (D20) Verification (L2018-051) China Securities Journal (B128) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (156) Announcement on Resolutions of 21st Session of 9th Securities Times (B173) 29 September 2018 Directorate Meeting (L2018-052) Security Daily (C92) China Securities Journal (B128) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (156) Announcement on Resolutions of 17th Session of 9th Securities Times (B173) 29 September 2018 Board of Supervisors Meeting (L2018-053) Security Daily (C92) China Securities Journal (B128) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (156) Announcement on Purchasing 100% Equity of Securities Times (B173) 29 September 2018 Italy-based Candy Company (L2018-054) Security Daily (C92) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (41) Announcement on Resolutions of 22nd Session of 9th Securities Times (B028) 09 October 2018 Directorate Meeting (L2018-055) Security Daily (D45) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (41) Announcement on Resolution of 18th Session of 9th Securities Times (B028) 09 October 2018 Board of Supervisors Meeting (L2018-056) Security Daily (D45) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (41) Announcement on Connected Transaction of Planning Securities Times (B028) 09 October 2018 to Sign "Agreement on Financial Services" (L2018-057) Security Daily (D45) 75 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B004) Announcement on Reply to "Letter on Verification Shanghai Securities News (41) Opinion on Application Documents on Public Issuance Securities Times (B028) 09 October 2018 of Convertible Corporate Bonds from 17th Issuance Security Daily (D45) Examination Committee" (L2018-058) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (41) Announcement on Issuing Promise by Its Actual Securities Times (B028) 09 October 2018 Controller (L2018-059) Security Daily (D45) China Securities Journal (B012) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (28) Announcement on Price Range of Issuance of D Shares Securities Times (B028) 13 October 2018 (L2018-060) Security Daily (C35) China Securities Journal (B025) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (36) Announcement on Obtaining Approval from Federal Securities Times (B028) 15 October 2018 Financial Supervisory Authority for Overseas Listing of Foreign Shares (D Shares) (L2018-061) Security Daily (B4) China Securities Journal (B045) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (24) Announcement on Public Issuance Price of Oversea Securities Times (B132) 20 October 2018 Listed Foreign Shares (D Shares) (L2018-062) Security Daily (D25) China Securities Journal (B002) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (544) Announcement on Listing of Overseas Listing of Securities Times (B020) 25 October 2018 Foreign Shares (D Shares) and Change of Shares (L2018-063) Security Daily (C144) China Securities Journal (B002) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (205) Announcement on Continuous Shareholding Increase Securities Times (B216) 27 October 2018 by Concerted Actor of Actual Controller (L2018-064) Security Daily (C144) China Securities Journal (B174) Shanghai Securities News (205) "Qingdao Haier Co., Ltd." (the Company) -- Third Securities Times (B280) 31 October 2018 Quarterly Report of 2018 Security Daily (D214) China Securities Journal (B174) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (205) Announcement on Resolutions of 23rd Session of 9th Securities Times (B280) 31 October 2018 Directorate Meeting (L2018-065) Security Daily (D214) China Securities Journal (B174) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (205) Announcement on Resolutions of 19th Session of 9th Securities Times (B280) 31 October 2018 Board of Supervisors Meeting (L2018-066) Security Daily (D214) China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (36) Announcement on Resolutions of 24th Session of 9th Securities Times (B076) 06 November 2018 Directorate Meeting (L2018-067) Security Daily (D42) China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (36) Announcement on Resolutions of 20th Session of 9th Securities Times (B076) 06 November 2018 Board of Supervisors Meeting (L2018-068) Security Daily (D42) China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- 06 November 2018 Shanghai Securities News (36) 76 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Announcement on Changing Promise about Flawed Securities Times (B076) House Properties (L2018-069) Security Daily (D42) China Securities Journal (B048) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (36) Convening 2nd Special Shareholders' Meeting of 2018 Securities Times (B076) 06 November 2018 (L2018-070) Security Daily (D42) China Securities Journal (B005) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (49) Announcement on Exercising Part of Over-allotment Securities Times (B102) 26 November 2018 Option, Activities for Stabilizing Price and End of Term of Stable Price of D Shares (L2018-071) Security Daily (A4) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (52) Announcement on Listing and Trading of Option Securities Times (B056) 04 December 2018 Shares of Over-allotted Options of D Shares and Equity Change (L2018-072) Security Daily (D14) China Securities Journal (B004) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (52) Announcement on Changing "Articles of Association" Securities Times (B056) 04 December 2018 (L2018-073) Security Daily (D14) China Securities Journal (B016) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (45) Announcement on Continuous Shareholding Increase Securities Times (B085) 05 December 2018 by Actual Controller's Concerted Actor (L2018-074) Security Daily (C4) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B016) Announcement on Obtaining Written Reply to Shanghai Securities News (45) Application for Public Issuance of Convertible Securities Times (B085) 05 December 2018 Corporate Bonds from CSRC upon Approval and Security Daily (C4) Verification (L2018-075) China Securities Journal (B028) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (72) Reaching 1% by Shares Increased by Shareholder Securities Times (B016) 11 December 2018 (L2018-076) Security Daily (D82) China Securities Journal (B016) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (80) Announcement on Resolutions of 25th Session of 9th Securities Times (B008) 14 December 2018 Directorate Meeting (L2018-077) Security Daily (D10) China Securities Journal (B016) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (25) Announcement on Resolutions of 21st Session of 9th Securities Times (B008) 14 December 2018 Board of Supervisors Meeting (L2018-078) Security Daily (D10) China Securities Journal (B016) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (25) Announcement on Public Issuance of Convertible Securities Times (B008) 14 December 2018 Corporate Bonds (L2018-079) Security Daily (D9) China Securities Journal (B016) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (25) Announcement on Online Road Show for Public Securities Times (B008) 14 December 2018 Issuance of Convertible Corporate Bonds (L2018-080) Security Daily (D9) "Qingdao Haier Co., Ltd." (the Company) -- China Securities Journal (B012) Announcement on 2nd Line Distribution and Rights Shanghai Securities News (25) 15 December 2018 Belongingness of Phase I Core Staff Shareholding Plan Securities Times (B040) 77 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (L2018-081) Security Daily (C51) China Securities Journal (B012) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (25) 2nd Line Distribution and Equity Ownership of Phase Securities Times (B040) 15 December 2018 II Shareholding Plan in Core Staff Shareholding Plan and Advance Term Expiration (L2018-082) Security Daily (C51) China Securities Journal (A17) "Qingdao Haier Co., Ltd." (the Company) -- Notice of Shanghai Securities News (41) Issuance of Publicly Issuing Convertible Corporate Securities Times (B029) 18 December 2018 Bonds (L2018-083) Security Daily (D28) China Securities Journal (A33) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (17-20) Announcement on Online Lot-winning Rate and Securities Times (B89-92) 19 December 2018 Offline Allotment Result of Public Issuance of Convertible Corporate Bonds (L2018-084) Security Daily (D69-72) China Securities Journal (A07) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (61) Announcement on Online Lot-winning Result for Securities Times (B073) 20 December 2018 Public Issuance of Convertible Bonds (L2018-085) Security Daily (D58) China Securities Journal (B060) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (17) Announcement on Resolutions of 2nd Special Securities Times (B093) 22 December 2018 Shareholders' Meeting of 2018 (L2018-086) Security Daily (C79) China Securities Journal (A10) "Qingdao Haier Co., Ltd." (the Company) -- Shanghai Securities News (45) Announcement on Issuance Result of Public Issuance Securities Times (B017) 24 December 2018 of Convertible Corporate Bonds (L2018-087) Security Daily (D15) XVII. Proactive performance of social responsibilities (I) Information on poverty alleviation of the listed companies √Applicable □Not Applicable 1. Targeted measures in poverty alleviation plan √Applicable □Not Applicable 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 ultimate controller) and its subsidiaries (referred to as the ―Haier Group‖) has built nearly 300 hope schools, covering 26 provinces, municipalities directly under the central government and autonomous regions in China, and continuously provide the above-mentioned schools support in materials and other 78 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. respects in each year including the reporting period. These initiatives have effectively enhanced the basic educational capabilities in poverty-stricken areas and improved the quality of education. At the same time, the Company actively responded to the national rural revitalization strategy to implement targeted measures in poverty alleviation and together with the county-level governments and ecological resources to actively plan for farmer entrepreneurship to create a better life in the countryside. 2. Summary of targeted measures in poverty alleviation during the year √Applicable □Not Applicable In 2018, the Companys expenditures on targeted measures in poverty alleviation was approximately RMB17.44 million, which was mainly utilized in the education improvement, physical and mental health development of adolescents and children. At the same time, the Company also explored feasible methods in agricultural poverty alleviation. For instance, for rural entrepreneurs, Haier customized skill enhancement solutions for them among which the Xiaoshun Business School(小顺商 学院), jointly established by RRS Health(日日顺健康)and Haier University, is a good example. The school was built with a multi-level training system based on rural talent revitalization strategy to enhance farmers' entrepreneurial skills. By providing local platforms and employment opportunities, we strive to build a sound brain circulation ecological system that can ―cultivate and retain competent talents‖. In addition, given the economic condition in different rural areas, the Company has customized the entrepreneurial poverty alleviation model with programs, platforms, networks, achievements and practicability to follow, implemented the national targeted poverty alleviation initiative and spared no effort to rural poverty alleviation. 3. Results of targeted measures in poverty alleviation √Applicable □Not Applicable Unit and Currency: RMB0‘000 Indicators Amount and the status I. General information Including: 1. Funds 1,744 II. Breakdown of the use of funds 1. Poverty alleviation through education 1.1 Increase the amount of educational resources invested in 1,264 poverty-stricken areas 2. Poverty alleviation through health enhancement Including: 2.1 Amount invested in medical and health resources in 51 poverty areas 3.Basic guarantees 3.1 Amount invested in helping poor people with disabilities 76 79 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 4. Poverty alleviation in the society 4.1 Contributed amount in targeted poverty alleviation works 5 4.2 Charity funds for poverty alleviation 348 4. Subsequent targeted measures in poverty alleviation plans √Applicable □Not Applicable 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, promote the revitalization of rural talents and other initiatives, and will perform our social responsibilities in a proactive manner. (II) Performance of social responsibilities √Applicable □Not Applicable For details, please refer to the 2018 Social Responsibility Report of Qingdao Haier Co., Ltd. disclosed on the date of this periodic report. (III) Environmental information 1. Explanation of the environmental protection status of companies and their important subsidiaries that are key emission units announced by the environmental protection department √Applicable □Not Applicable Innovation drive and green development are the development goals of modern manufacturing. The Company continues to promote green development, actively promote green consumption, enhance the application of energy-saving technologies, and integrate low carbon, cycling, energy saving and emission reduction into all aspects of enterprise development. Besides, the Company also continues to promote technological innovation, research and develop the products integrating smart IoT and green development to strive to increase the green of products at full life span, extend the green supply chain, lead innovation, green, interaction and win-win of the industry, and contribute to the national green development. (1) Pollution discharge information √Applicable □Not Applicable The Company and its holding subsidiaries including Qingdao Haier Refrigerator Co., Ltd. (―Haier Refrigerator‖) and Guizhou Haier Electronics Co., Ltd. (―Guizhou Haier‖) are key emission units announced by the environmental protection department. The polluted industrial wastewater of the Company is mainly domestic water (water for toilets and bathrooms) to be discharged to municipal pipelines through sewer pipes. The exhaust gas is mainly assembly welding fume, and is exhausted out of the workshop with the high-power exhaust fans. After 80 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. collection and filtering through the collection hood, the workshop welding fume is exhausted to the outside of the workshop through the exhaust pipe. The foamed injection exhaust gas is discharged to the outside of the workshop with high-power exhaust fans and through the special fan stack pipes and the exhaust funnel in an organized way. The major pollutants and emission standards are as shown in the table below: Reaching Monitoring Monitoring Plant Pollutant Standard Value Measured Value Standard or Point Index not Emission 120mg/m 2.68mg/m Particulate density 1# Welding matter 3.5 (15m in height) Emission rate 0.042kg/h of Assembly kg/h Yes A Emission Carbonic / <0.3mg/m density oxide Emission rate / / Emission 120mg/m 3.92mg/m Particulate density 2# Welding matter 3.5 (15m in height) Emission rate 0.044kg/h of Assembly kg/h Yes B Emission Carbonic / <0.3mg/m density oxide Emission rate / / Emission 120mg/m / Particulate density matter 3.5 (15m in height) Emission rate / kg/h Emission 12mg/m <5.0×10-4mg/m density Benzene 0.9 (20m in height) Emission rate / kg/h Emission Exhaus 40mg/m 0.197mg/m density t gas Toluene 3# Fan Stack 5.2 (20m in height) Emission rate 8.2×10-4kg/h of Foam kg/h Yes Station A Emission 70mg/m 4.75mg/m density Xylene 1.7 (20m in height) Emission rate 0.020kg/h kg/h Non-methan Emission 120mg/m 1.12mg/m e density Hydrocarbo 17 (20m in height) Emission rate 0.005kg/h n kg/h Emission Carbonic / / density oxide Emission rate / / Emission 120mg/m / Particulate density matter 3.5 (15m in height) Emission rate / kg/h 4# Fan Stack Emission of Foam 12mg/m <5.0×10-4mg/m Yes density Station B Benzene 0.9 (20m in height) Emission rate / kg/h Emission Toluene 40mg/m 0.059mg/m density 81 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 5.2 (20m in height) Emission rate 2.5×10-4kg/h kg/h Emission 70mg/m 4.13mg/m density Xylene 1.7 (20m in height) Emission rate 0.017kg/h kg/h Non-methan Emission 120mg/m 1.21mg/m e density Hydrocarbo 17 (20m in height) Emission rate 0.005kg/h n kg/h Emission Carbonic / / density oxide Emission rate / / Emission 2.0mg/m 1.81mg/m 5# density Emission rate / / Hood Yes Emission 2.0mg/m 0.33mg/m 6# density Emission rate / / The polluted industrial wastewater of Haier Refrigerator is also mainly domestic water (water for toilet, bathroom) to be discharged to the municipal pipelines through sewer pipes. The production exhaust gas mainly includes welding fume, foaming exhaust gas and canteen oil fume, all of which are collected by the gas collecting hood and discharged to high altitude through the exhaust funnel in an organized way. The major pollutants and emission standards are as shown in the table below: Reaching Monitoring Monitoring Plant Pollutant Standard Value Measured Value Standard or Point Index not Exhaust Emission 120 mg/m 2.0 mg/m Stack at 1# Particulate density Yes Welding of matter Emission rate 5.9 kg/h 0.047 kg/h Assembly A Exhaust Emission 120 mg/m 1.8 mg/m Stack at 2# Particulate density Yes Welding of matter Emission rate 5.9 kg/h 0.031 kg/h Assembly B Non-methan Emission 120 mg/m 3.93 mg/m e density Hydrocarbon Emission rate 17 kg/h 0.044 kg/h Exhaus Emission t gas 12 mg/m <0.004 mg/m Benzene density Emission rate 0.90 kg/h / Pre-mixer 3# Yes Emission 40 mg/m <0.004 mg/m Toluene density Emission rate 5.2 kg/h / Emission 70 mg/m <0.004 mg/m Xylene density Emission rate 1.7 kg/h / Vacuum Non-methan Emission 120 mg/m 3.14 mg/m Yes Infusion e density 82 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Assembly 5# Hydrocarbon Emission rate 17 kg/h 0.038 kg/h Emission 12 mg/m <0.004 mg/m Benzene density Emission rate 0.90 kg/h / Emission 40 mg/m <0.004 mg/m Toluene density Emission rate 5.2 kg/h / Emission 70 mg/m <0.004 mg/m Xylene density Emission rate 1.7 kg/h / Non-methan Emission 120 mg/m 22.4 mg/m e density Hydrocarbon Emission rate 17 kg/h 0.253 kg/h Emission 12 mg/m <0.004 mg/m Benzene density Emission rate 0.90 kg/h / Adsorption Emission Yes Process 5# 40 mg/m <0.004 mg/m Toluene density Emission rate 5.2 kg/h / Emission 70 mg/m <0.004 mg/m density Xylene Emission rate 1.7 kg/h / Emission Hood Hood 2.0 mg/m 0.86 mg/m Yes density Pollutants of Guizhou Haier mainly involve noise and foaming exhaust gas. For noise, plant barriers, greening for sound absorption and attenuation over distance, etc. The foaming exhaust gas is discharged to high altitude through the exhaust funnel in an organized way. The major pollutants and emission standards are as shown in the figure below: Reaching Monitoring Monitoring Standard Measured Item Pollutant Standard Point Index Value Value or not Diurnal noise 60 dB 48.7 dB Yes value 1# Plant Gate Night noise 50 dB 41.5 dB Yes value Diurnal noise 2# Air 60 dB 48.9 dB Yes value Noise Compression Noise Night noise Station 50 dB 42.5 dB Yes value Diurnal noise 60 dB 55.6 dB Yes value 3#EMR Night noise 50 dB 47.6 dB Yes value Volatil Upwind Non-metha e direction of ne Emission organic unauthorized 4.0 mg/m 0.13mg/m Yes Hydrocarb density compo exhaust gas at on und boundary 83 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Downwind direction of Emission unauthorized 4.0 mg/m 0.28mg/m Yes density exhaust gas at boundary Upwind direction of Emission unauthorized 0.40mg/m 1.8*10-3 mg/m Yes density exhaust gas at boundary Benzene Downwind direction of Emission unauthorized 0.40mg/m 2.0*10-3mg/m Yes density exhaust gas at boundary Upwind direction of Emission ND(below unauthorized 2.4 mg/m Yes density detection limit) exhaust gas at boundary Toluene Downwind direction of Emission unauthorized 2.4 mg/m 2.8*10-3mg/m Yes density exhaust gas at boundary Upwind Inspect direction of ion of Emission unauthorized 1.2 mg/m 5.6*10-3 mg/m Yes organic density exhaust gas at matter boundary Xylene Downwind direction of Emission unauthorized 1.2 mg/m 1.12mg/m Yes density exhaust gas at boundary Upwind direction of Emission unauthorized 0.080 mg/m 0.005 mg/m Yes density exhaust gas at boundary Phenols Downwind direction of Emission unauthorized 0.080mg/m 0.008mg/m Yes density exhaust gas at boundary Upwind direction of Emission unauthorized 0.40 mg/m 0.09 mg/m Yes density exhaust gas at boundary Anilines Downwind direction of Emission unauthorized 0.40mg/m 0.10mg/m Yes density exhaust gas at boundary 84 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (2) Construction and operation of pollution control facility √Applicable □Not Applicable The Company and Haier Refrigerator have provided activated carbon filtration equipment for the treatment of the exhaust gas from assembly welding absorbed by the foaming door. The restaurants are provided with electric ion fume decomposition devices. The exhaust gas treatment equipment is controlled by designated personnel,the pollution prevention and control facilities are included in the TPM management scope of the equipment, and the daily inspection, weekly maintenance, and monthly maintenance are carried out to ensure the normal operation of the equipment. The management of the operations of pollution control facilities for exhaust gas generation is strengthened. We have ensured efficient operation of pollution control facilities. Exhaust gas is tested by delegation on an annual basis. The fan stacks are cleaned and inspected on a weekly, monthly and quarterly basis. Spot inspection records are kept. Fan stack cleaning records are archived. All these are to ensure normal operation of the exhaust facilities and smooth exhaust gas emission. The exhaust pipes are inspected periodically for presence of foreign matters and looseness or falling. Preparations for emergency response are also made. Guizhou Haier Electric Appliance Co., Ltd. regulates the waste oil generated by the equipment (the annual production of waste oil is within 0.8 tons), establishes the controlling account, and is in charge of the designated personnel. Emergency storage materials (sawdust, cotton yarn, absorbent cotton, etc.) are kept in the storage location, emergency plans for waste oil leakage are prepared and drills are conducted; anti-leakage measures are made in storage places, walls are tiled and roofs are covered with colored steel tile to prevent leakage; environmental management supervision signs, hazardous waste warning signs, risk management signs are well-founded. (3) Evaluation of the effect of construction projects on the environment and other environmental administration license √Applicable □Not Applicable The Company and its subsidiaries perform the implementation and production of construction projects according to the laws and regulations. We perform environmental impact evaluation procedures in strict accordance with the Three Simultaneous system for environmental protection of construction projects which have been approved in the environmental impact assessment. There are no environmental violations such as having constructions without approval. (4) Emergency plan for environmental emergencies √Applicable □Not Applicable The Emergency Plan for Environmental Emergencies is developed according to the laws and regulations by the Company and its subsidiaries. Drills have been organized. The Plan is continuously optimized and upgraded according to the drill results. 85 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (5) Environmental self-monitoring plan √Applicable □Not Applicable All pollutant discharges of the Company comply with national and local environmental standards. The sewage is discharged after being collected and treated, and is monitored in real time through the automatic online sewage monitoring system. The data is connected to the Haier Smart Energy System. In March 2017, the Company received and passed the certification of version change of ISO14001 environmental management system. In March 2018, the professional certification body conducted the first supervision and audit of the operation of 2017 ISO14001 system after version change. The operation was approved and functioned smoothly. (6) Other environmental information to be disclosed √Applicable □Not Applicable Remarkable results in energy-saving and emission reduction have been made by the Company through promoting energy-saving and emission reduction projects such as transforming the use of liquefied gas to natural gas, aerial lighting renovation and provision of filtration devices with compressed gas and also by the Haier Refrigerator through promoting energy-saving and emission reduction projects such as cooling oil to water for adsorption machines, lighting renovation and etc.. 2. Statement on environmental protection of companies other than key pollution discharge units √Applicable □Not Applicable All units of the Company perform the implementation and production of construction projects according to the requirements of laws and regulations. We complete environmental impact evaluation procedures in strict accordance with the Three Simultaneous system for environmental protection of construction projects which have been approved in the environmental impact assessment. There are no environmental violations such as having construction without approval. The Company has established Haier Smart Energy Center, a leading energy big data analysis system in the industry. It uses automation, information technology and centralized management mode to implement centralized dynamic monitoring and digital management of main energy for consumption such as water, electricity and gas in all factories across the country; automatically and accurately collects energy data, and completes the prediction and analysis of energy consumption data, optimizes energy deployment and reduce the energy consumption by producing a single product, thus truly achieving low-carbon production. 3. Statement on reasons for non-disclosure of environmental information by companies other than key pollution discharge units □Applicable √Not Applicable 86 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 4. Statement on subsequent development or changes of environmental information contents disclosed in the reporting period √Applicable □Not Applicable The Company will continue to maintain and keep optimizing existing results and allows up-to-standard discharge in strict accordance with existing environmental discharge and emission standards. (IV) Other explanations □Applicable √Not Applicable XVIII. Convertible corporation bonds (I) Information on the issuance of convertible bonds √Applicable □Not Applicable On 23 November 2017, the Proposal of the Plan of Public Offering of Convertible Corporate Bonds of Qingdao Haier Co., Ltd. was passed at the 2017 First Extraordinary General Meeting of the Company. In accordance with the resolutions passed at this general meeting and the documents approved by China Securities Regulatory Commission, the Company has completed the issuance of convertible corporate bonds in December 2018, which issued convertible corporate bonds of RMB 3.00749 billion in total. Such bonds has been listed on 18 January 2019, with the listed name ―Haier Convertible Bonds‖ and the Bonds Code is 110049. For the details, please refer to relevant documents, such as the Company‘s Prospectus on the Public Issuance of the A Share Convertible Corporate Bonds of Qingdao Haier Co., Ltd. disclosed on 14 December 2018 and Announcement on the Listing of the Convertible Corporate Bonds of Qingdao Haier Co., Ltd. disclosed on 16 January 2019. (II) Information on holders and guarantors of convertible bonds during the reporting period √Applicable □Not Applicable Number of convertible bond holders at the end of the period 49,125 Guarantor of the convertible bonds of the Company Nil Top ten convertible bond holders are as below: Bonds held at the Ownership held Name of convertible corporate bond holders end of the period (%) (RMB) Haier Electric Appliances International Co., Ltd. 620,532,000 20.63 Haier Group Corporation 528,797,000 17.58 GIC PRIVATE LIMITED 129,860,000 4.32 Qingdao Haier Venture & Investment Information Co., Ltd. 84,921,000 2.82 (青岛海尔创业投资咨询有限公司) National social security fund, Portfolio 104 51,365,000 1.71 87 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Qingdao Haichuangzhi Management Consulting Enterprise 32,480,000 1.08 (Limited Partnership) Industrial and Commercial Bank of China - SSE 50 Trading 20,510,000 0.68 Open Index Securities Investment Funds Agricultural Bank of China Limited - E Fund Consumer 17,561,000 0.58 Industry Equity Securities Investment Funds Bank of China Limited- E Fund's small and medium-sized 17,255,000 0.57 hybrid securities investment funds Tibet Lianhai Capital Management Limited(西藏联海资产 管理有限公司)- Neutron Star Road, 9 B Yue Jin No. 1 15,125,000 0.50 Private Equity Funds (III) Information on the change in convertible bonds during the reporting period □Applicable √Not Applicable Information on the accumulated number of convertible bonds being converted into shares during the reporting period □Applicable √Not Applicable (IV) Information on the past adjustment of prices for conversion into shares □Applicable √Not Applicable (V) Information on the indebtedness, changes in creditability of the Company and the cash arrangement for repayment of debts in the coming years √Applicable □Not Applicable At the end of the reporting period, the Company‘s liabilities amounted to RMB 111,569.27 million in total, including current liabilities RMB80,081.66 million and non-current liabilities RMB31,487.60 million. Through the evaluation of the credit status of the Company and the public issuance of convertible corporate bonds, United Credit Ratings Co., Ltd. determined the long-term credit rating of the Company is AAA, the rating outlook is ―stable‖ and the bond credit rating is AAA. The Company's operations in all aspects are stable, the asset structure is reasonable, and the credit status is good, thus being able to provide stable and sufficient working capital for the payment of convertible corporate bond interest and repayment of principle in the future. (VI) Explanation on other information regarding convertible bonds □Applicable √Not Applicable 88 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS I. Changes in ordinary share capital (I) Table of Changes in ordinary shares 1. Table of Changes in ordinary shares Unit: share Prior to the change Increase and decrease of the change (+,-) Balance New shares Bonus Shares converted Number % Others Subtotal Number % issued shares from reserve I. Shares with selling restrictions 1. Shares held by the state 2. Shares held by the state-owned legal entities 3. Shares held by other domestic investors Including: shares held by domestic non-state -owned legal entities Shares held by domestic individuals 4. Shares held by foreign investors Including: shares held by foreign legal entities shares held by foreign individuals II.Tradable shares without selling 6,097,402,727 100.000 271,013,973 271,013,973 6,368,416,700 100.00 restrictions 1. RMB ordinary shares 6,097,402,727 100.000 6,097,402,727 95.74 89 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2. Domestic listed foreign shares 3. Overseas listed foreign shares 271,013,973 271,013,973 271,013,973 4.26 4. Others III. Total ordinary shares 6,097,402,727 100.000 271,013,973 271,013,973 6,368,416,700 100.00 90 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2. Statement on the changes in ordinary shares √Applicable □Not Applicable On 27 April 2018, Proposal of Intended Application for the Initial Public Offering and Listing of Shares at the D Shares Market of China Europe International Exchange AG of Qingdao Haier Co., Ltd. was passed on the 2018 First Extraordinary General Meeting. The Company intended to apply for the initial public offering and listing of shares at the D shares market of China Europe International Exchange AG, such issuance and listing would be achieved through the entrance of Frankfurt Stock Exchange and listing for dealing. Such issuance has been completed in November 2018, and 271,013,973 D shares in total were issued. 3. Effect of changes in ordinary shares on the financial indicators such as earnings per share and net assets per share (if any) over the last year and the last reporting period √Applicable □Not Applicable In 2018, the Company achieved net profit attributable to shareholders of the parent company of RMB7,440,228,855.90,equity attributable to owners of the parent company of RMB39,402,350,791.68, in terms of total share capital of 6,097,402,727 shares of the Company before issuance of D shares, revenue was RMB1.22 per share and net asset was RMB6.46 per share accordingly; in terms of total share capital of 6,368,416,700 shares of the Company after issuance of D shares, revenue was RMB1.17 per share and net asset was RMB6.19 per share accordingly. 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. Issuance and listing of securities (I) Issuance of securities as of the reporting period √Applicable □Not Applicable Unit: 0‘000 shares Currency: RMB Number of Type of shares Number shares Price (or Date of Date of and its derivative Date of issue of under interests rate) listing termination securities issuance listing approval Ordinary shares RMB ordinary 7 July 2014 7.73 244.04 20 June 2 488.08 shares - grant of 015 restricted shares 366.06 20 June 2 / under the Share 016 Option Incentive Scheme Non-public 17 July 201 10.83 30,299.3 17 July 60,598.60 91 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Issuance of 4 0 2017 RMB ordinary shares RMB ordinary 8 April 201 10.06 19.00 / shares - exercise 5 5 August of share option 28 July 201 8.07 3,090.40 2015 3,090.40 and grant of 5 restricted shares under the Share Option Incentive Scheme D shares 24 October EUR1.05 26,500 24 Octobe 26,500 2018 r 2018 30 Novembe 601.397 30 Novem 601.3973 r 2018 3 ber 2018 Convertible corporation bonds, convertible bonds with warrants and corporate bonds Convertible 18 December Interest rates RMB3,0 18 January RMB3,007 corporation 2018 for the first 07,490,0 2019 ,490,000 bonds of year to sixth 00 Qingdao Haier year are 0.2%, Co., Ltd. 0.5%, 1.0%, 1.5%, 1.8%, 2.0%, respectively Details of issuance of securities in the latest 3 years as of the reporting period (please specify separately for bonds with different interest rates within the duration): √Applicable □Not Applicable (1) In April 2014, the Company introduced Phase IV Share Option Incentive Scheme. The Scheme involves 54,560,000 options in total, of which, 49,110,000 options (including 42,879,000 share options and 6,231,000 restricted shares) were granted under the first grant and 5,450,000 options (including 4,761,000 share options and 689,000 restricted shares) were reserved shares. After no objection filing with the CSRC and the approval of the Scheme at a general meeting of the shareholders of the Company, the Board determined the date of the First Grant was 20 June 2014 and 48,780,000 options (including 42,679,000 share options at the exercise price of RMB16.63 per share; and 6,101,000 restricted shares at the grant price of RMB7.73 per share) were granted to scheme participants (adjusted after one participant left the Company) under the first grant. The registration of transfer of the abovementioned restricted shares was completed on 7 July 2014. For details, please refer to the Announcement of Completion of Registration of Restricted Shares Granted under the Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. (L2014-038) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange (www.sse.com.cn) on 8 July 2014. (2) In September 2013, the Company induced a proposal on the introduction of the strategic investor through non-public issuance of no more than 305 million A ordinary shares to KKR (Luxembourg) with proceeds of not more than RMB3.447 billion. After the approval received from the general meeting of the shareholders of the Company, Ministry of Commerce and CSRC, the Board of the 92 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Company conducted relevant share transfer procedures in July 2014 and determined 302,992,994 shares to be issued at the issue price of RMB10.83 per share. The listing of the relevant share will be effective on 17 July 2017. For details, please refer to Announcement on Results of Non-public Issuance of Shares and Change in Share Capital of Qingdao Haier Co., Ltd. (L2014-041) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange (www.sse.com.cn) on 22 July 2014. (3) In February 2015, according to the Company‘s reserved equity under the Phase IV Share Option Incentive Scheme, an aggregate of 650,000 share options were granted with the exercise price of RMB20.44 per share while 190,000 restricted shares were granted with the granting price of RMB10.06 per share. The Board of Directors determined that the Grant date was 26 February 2015. Registration and transfer issues of the restricted shares have been completed on 8 April 2015. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Completion of Registration of Reserved Restricted Shares Granted under the Phase IV Share Option Incentive Scheme (L2015-011) published by the Company on the four major securities newspapers and the Shanghai Stock Exchange website (www.sse.com.cn) on 9 April 2015. (4) In July 2015, the conditions of the first exercise/unlocking of equity initially granted under Phase IV Share Option Incentive Scheme were fulfilled. The Company directionally issued additional 30,904,000 ordinary shares to determined and qualified participants of the first exercise of equity granted under Phase IV Share Option Scheme at a price of RMB8.07 per share on 28 July 2015. The above shares were listed on 5 August 2015. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Share Option Incentive Exercise Result and New Shares Listing under the Share Option Incentive Scheme (L2015-031) published by the Company on the four major securities newspapers and the Shanghai Stock Exchange website (www.sse.com.cn) on 30 July 2015. (5) In April 2018, after considering and approving at the 11th meeting of the 9th session of the Board and the 2018 First Extraordinary General Meeting of the Company, the Company intended to apply for the initial public offering and listing of shares at the D shares market of China Europe International Exchange AG. After obtaining relevant approval and examination, the Company issued 265,000,000 and 6,013,973 D shares (which were issued pursuant to the exercise of Over-allotment Share Option), respectively in October and November 2018, resulting in an aggregate of 271,013,973 D shares being issued and listed for trading. For details, please refer to Announcement on Listing of Overseas Listing of Foreign Shares (D Shares) and Change of Shares of Qingdao Haier Co., Ltd. (L2018-063) and Announcement on Listing and Trading of Option Shares of Over-allotted Options of D Shares and Equity Change of Qingdao Haier Co., Ltd. (L2018-072) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange (www.sse.com.cn) on 25 October 2018 and 4 December 2018, respectively. (6) In September 2017, after considering and approving at the 8th meeting of the 9th session of the Board of the Company, the Company intended to issue convertible corporate bonds up to RMB5,640,000,000 (subject to the adjustment of the Board with up to RMB3,007,490,000). After 93 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. obtaining relevant approval and examination, the Company issued convertible corporate bonds of RMB3,007,490,000 on 18 December 2018,which listed for trading on 18 January 2019. For details, please refer to relevant announcements, such as Announcement on Public Issuance of Convertible Corporate Bonds of Qingdao Haier Co., Ltd. (L2018-079) and Announcement on the Listing of the Convertible Corporate Bonds of Qingdao Haier Co., Ltd. (L2019-004) disclosed by the Company on 13 December 2018 and 16 January 2019, respectively. (II) Changes in total shares and shareholder structure as well as assets and liabilities structure of the Company □Applicable √Not Applicable (III) Information on existing shares held by the staff □Applicable √Not Applicable III. Information on shareholder and ultimate controllers (I) Total number of shareholders Total number of ordinary shareholders up to the end of the reporting period 173,027 Total number of ordinary shareholders as at the end of the last month prior to the disclosure 172,948 day of the annual report Note: The above number of shareholders is the total number of the Company‘s shareholders of A shares and D shares. (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 Numbe Status of shares r of pledged or frozen Change Number of shares Name of Percent during the shares held at held Nature of shareholder (full age reporting the end of the with Numbe shareholder name) (%) Status period period selling r restrict ions Haier Electric Domestic Appliances 1,258,684,824 19.76 non-state-o Nil International wned legal Co., Ltd. entity Haier Group Domestic Corporation 1,072,610,764 16.84 non-state-o Nil wned legal entity 94 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Hong Kong Unknown Securities 496,233,305 7.79 Unkno Clearing Co., wn Ltd. GIC PRIVATE 263,406,745 4.14 Unkno Foreign LIMITED wn legal entity Deutsche Bank Foreign 209,115,801 3.28 Unkno Aktiengesellscha legal entity wn ft (note) China Securities Unknown Finance 182,592,697 2.87 Unkno Corporation wn Limited Qingdao Haier Domestic Venture & non-state-o Investment wned legal Information Co., 172,252,560 2.70 Nil entity Ltd.(青岛海尔创 业投资咨询有限 公司) KKR HOME Foreign 161,116,436 2.53 Unkno INVESTMENT legal entity wn S.A R.L. National social Unknown 102,211,900 1.60 Unkno security fund, wn Portfolio 104 Central Huijin Unknown Asset 69,539,900 1.09 Unkno Management wn Ltd. Shareholdings of top ten shareholders not subject to selling restrictions Number of tradable shares without Class and number of shares Name of shareholder selling restrictions Class Number Haier Electric Appliances 1,258,684,824 RMB 1,258,684,824 International Co., Ltd. ordinary Haier Group Corporation 1,072,610,764 RMB 1,072,610,764 ordinary Hong Kong Securities 496,233,305 RMB 496,233,305 Clearing Co., Ltd. ordinary GIC PRIVATE LIMITED 263,406,745 RMB 263,406,745 ordinary Deutsche Bank Overseas Aktiengesellschaft (note) 209,115,801 listed 209,115,801 foreign shares China Securities Finance 182,592,697 RMB 182,592,697 Corporation Limited ordinary Qingdao Haier Venture & Investment Information Co., 172,252,560 RMB 172,252,560 Ltd.(青岛海尔创业投资咨询 ordinary 有限公司) KKR HOME INVESTMENT 161,116,436 RMB 161,116,436 S.A R.L. ordinary National social security fund, 102,211,900 RMB 102,211,900 Portfolio 104 ordinary 95 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Central Huijin Asset 69,539,900 RMB 69,539,900 Management Ltd. ordinary Related-parties or parties (1) Haier Electric Appliances International Co., Ltd. is a holding acting in concert among the subsidiary of Haier Group Corporation. Haier Group Corporation holds aforesaid shareholders 51.20% of its equity. Qingdao Haier Venture & Investment Information Co., Ltd.(青岛海尔创业投资咨询有限公司) 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 Not applicable shareholders with restoration of voting rights and their shareholdings Note: This account is the Deutsche Bank collection account for the Company's D shares, which is the original data provided by the German securities registration agency to the Company after the merger according to local market practices and technical settings, not representing the ultimate shareholder. Number of shares held by top ten shareholders with selling restrictions and the selling restrictions □Applicable √Not Applicable (III) Strategic investors or general legal persons who became the top ten shareholders due to placing of new shares □Applicable √Not Applicable IV. Controlling shareholder and the ultimate controller (I) Status of controlling shareholder 1 Legal person √Applicable □Not Applicable Name Haier Electric Appliances International Co., Ltd. The person in charge of the Zhang Ruimin (张瑞敏) Company or legal representative Establishment date 1988-06-30 Principal business Manufacturing of freezer, electromagnetic stove, house electrical fan, hairdryer, freezing machine, gas fire, air cleaner, dishwasher, electric heater, electric cooker, water dispenser, vacuum cleaner, kitchen ventilator, gas stove and oven focal; the export of the products produced by the Company, the import and export of technology and equipment for the Company's own use and the import business of raw materials for production. 2 Natural person □Applicable √Not Applicable 96 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 3 Explanation on the absence of controlling shareholders of the Company □Applicable √Not Applicable 4 Index and dates in respect of the changes in controlling shareholders during the reporting period □Applicable √Not Applicable 5 Framework of the ownership and controlling relationship between the Company and its controlling shareholder √Applicable □Not Applicable (II) Status of the ultimate controller 1 Legal person √Applicable □Not Applicable Name Haier Group Corporation The person in charge of the Company Zhang Ruimin(张瑞敏) or legal representative Establishment date 1980-03-24 Principal business Manufacturing of home appliances, digital products, communication equipment, electronic computers and accessories, ordinary machineries, kitchen utensils and industrial use robots; domestic commercial wholesale distribution and retail sale (excluding those operated exclusively by the State, which are dangerous and limited by the State); the import and export business (please refer to Foreign Trade Enterprise Validation Certificate for details). 2 Natural person □Applicable √Not Applicable 3 Explanation on the absence of ultimate controller of the Company □Applicable √Not Applicable 4 Index and dates in respect of the changes in ultimate controller during the reporting period □Applicable √Not Applicable 97 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 5 Framework of ownership and controlling relationship between the Company and the ultimate controllers √Applicable □Not Applicable 6 The ultimate controller controls the Company by way of Trust or other assets management □Applicable √Not Applicable (III) Introduction of controlling shareholders and ultimate controllers √Applicable □Not Applicable Haier Group Company is registered as a joint-stock enterprise. According to the statement issued by the State-owned Assets Management Office of Qingdao on 1 June 2002, it is believed that the enterprise nature of Haier Group Company is a collective owned enterprise. V. Other legal shareholders with a shareholding percentage over 10% □Applicable √Not Applicable VI. Explanation of reduction of share restrictions □Applicable √Not Applicable SECTION VII RELEVANT INFORMATION OF PREFERRED SHARES □Applicable √Not Applicable 98 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 99 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES I. Changes of Shareholding and Remuneration (I) Changes of shareholding and remuneration of current and retired directors, supervisors and senior management during the reporting period √Applicable □Not Applicable Unit: share Total Whether remuneration receive received from remuneration Expiration Shareholding Increase/ Reason Shareholding the Company from the Title Appointmen date of s at the decrease in for Name Gender Age s at the end during the Companys (note) t date appointmen beginning of shares for increase/ of the year reporting related party t the year the year decrease period (RMB0000) (before tax) Liang Chairman male 53 2016-05-31 2019-05-30 10,904,065 12,859,062 1,954,997 Employee 190 NO Haishan & CEO shareholdi Tan Vice female 49 2016-05-31 2019-05-30 ng plan No receipt of YES Lixia president vested remuneration 5,272,740 6,836,737 1,563,997 from the Company Peng Director male 58 2016-05-31 2019-05-30 20 NO Jianfeng Wu Director male 64 2016-05-31 2019-05-30 20 NO Changqi Zhou Director male 57 2016-05-31 2019-05-30 20 NO Hongbo Liu Director male 49 2016-05-31 2019-05-30 No receipt of NO Haifeng 100 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. remuneration from the Company Wu Independ male 79 2016-05-31 2019-05-30 NO Cheng ent 20 director Dai Independ male 57 2016-05-31 2019-05-30 NO Deming ent 20 director Shi Independ male 57 2016-05-31 2019-05-30 NO Tiantao ent 20 director Wang Chairman male 62 2016-05-31 2019-05-30 No receipt of YES Peihua of the remuneration Board of 27,004 91,213 64,209 Superviso from the rs Company Ming Superviso male 59 2016-05-31 2019-05-30 No receipt of YES Guoqing r remuneration 17,612 59,518 41,906 from the Company Wang Employe female 44 2016-05-31 2019-01-08 NO Yuqing e 2,231 7,532 5,301 16 superviso r Yu Miao Employe male 37 2019-01-08 2019-05-30 NO e 21 superviso r 101 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Gong Chief male 46 2016-05-31 2019-05-30 Employee NO Wei financial shareholdi officer, 1,050,000 1,450,556 400,556 ng plan 65 vice vested president Ming Secretary female 55 2016-05-31 2019-05-30 NO Guozhen to the board of 944,446 1,106,579 162,133 60 directors, vice president Total / / / / / 18,218,098 22,411,197 4,193,099 / 472 / Name Major work experience Liang Male, born in 1966, is a senior engineer. He had served as head of the quality department of Qingdao Haier Refrigerator Co., Ltd., general manager Haishan of Qingdao Haier Air Conditioner Gen Corp., Ltd, senior vice president of Haier Group, rotation president of Haier Group. He is vice president of the board of directors of Haier Group, chairman of 9th session of the Board and general manager of Qingdao Haier Co., Ltd.; he was rewarded National May 1st Labor Medal, Outstanding Leadership Award of the National Light Industry Enterprise Information (全国轻工业企业信息化优 秀领导奖), Top 10 Leaders in China Strategic Emerging Industries in recent year; Prize of Technology Advancement for China Household Appliances, First Prize Award of Science and Technology Progress of China National Light Industry Council, 2017 Forbes China Best CEO of Listed Company, 2017 Taishan Industry Leading Talent of Shandong Province. Tan Lixia Female, born in 1970, had served as assistant to director and general manager of Haier Air Conditioning Electronics Import and Export Company (海尔空调电子进出口公司), the head of integrated department, deputy director, director of department of overseas market development of Haier Group, and head of department of financial management of Haier Group, CFO of Haier Group currently serves as the executive vice president of Haier Group, the president of Haier Financial Holdings Limited, the vice chairman of the 9th session of the Board of Qingdao Haier Co., Ltd.. In recent years, she was successively awarded Model Worker of Shandong Province, Outstanding Entrepreneur of the State, "March 8 Red-Banner Holders of the State ", PRC CFO of the Year, China Top Ten Women in Economic Area, China Top Ten Brand Female (中国十大品牌女性), member of the 12th Standing Committee of the All-China Women's Federation and the vice president of the China Women Entrepreneurs Association and so on. Peng Male, born in 1961, professor and tutor of doctorate students of School of Labor and Human Resources of Remin University of China, president of Jianfeng China Stone Management Consulting Group, vice chairman of China Human Resource Development Association, vice director of Management Consulting Committee of China Enterprise Confederation, director of the 9th session of the Board of Qingdao Haier Co., Ltd.. He once was the 102 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. deputy dean of School of Labor and Human Resources of Remin University of China. Wu Changqi Male, born in 1955, professor and tutor of doctorate students of department of Strategic Management of Guanghua School of Management of Peking University. He graduated from Shandong University in 1982 with a bachelor degree in economics. He graduated from Katholieke Universiteit Leuven in Belgium in 1990, with a MBA degree and a doctorate degree in applied economics successively. He was an assistant professor and associate professor of Department of Economics of School of Business and Management of Hong Kong University of Science and Technology, professor and director of Department of Strategic Management of Guanghua School of Management of Peking University, deputy dean of Guanghua School of Management, Peking University, Director of EMBA degree programme center and so on. He is currently the president of the National Hi-Tech Industrial Development Zone Strategy Research Institute of Peking University (国家高新技术产业开发区发展战略研究院) and president of Guanghua Leadership Institute, director of the 9th session of the Board of Qingdao Haier Co., Ltd.. Zhou Male, born in 1962, chairman of UbiLink, member of the board of directors of Beijing Hanbang Technology Co., Ltd., part-time chief scientist of Hongbo Kyland Technology Co., Ltd (东土科技); he was once the general manager of Beiqi iFoton Co., Ltd. (北汽福田车联网公司), chief software specialist of Tsinghua Tongfang, senior engineer / manager of research and development of IBM/Oracle and other companies in the United States, postdoctoral researcher of Oak Ridge National Laboratory of America etc. He has engaged in the research and development work in supercomputing and cloud computing. He was distinguished expert of Beijing, Guiyang and other municipal government; part-time professor of Beijing Jiaotong University, University of Electronic Science and Technology of China and other colleges; He was the pioneer engaged in IoT development in Tsinghua Tongfang after his return from abroad in 2003, and has published three treatises at home and abroad, and he is one of the nine global IoT experts interviewed by the internationally renowned magazine "Economist". He is currently a director of the 9th session of the Board of Qingdao Haier Co., Ltd.. Liu Haifeng Male, born in 1970, currently is the president of Dehong Capital(德弘资本)and was the KKR global partner, co-head of KKR Asian Private Equity (KKR 亚洲私募业务) and CEO of KKR Greater China Region. He once served as the managing director of Morgan Stanley and co-head of the Direct Investment Department of Morgan Stanley Asia. In years of direct investment career, he achieved an excellent long-term investment performance, he was responsible for and led a number of successful and pioneering direct investment projects in the Greater China region, such as: Ping An Insurance, Mengniu Dairy, Qingdao Haier, Sunner Development, Belle International, Far East Horizon, Nanfu Battery, China Modern Dairy, United Envirotech Ltd., China International Capital Corporation Limited (CICC), China Cord Blood Corporation, Yongle Household Appliances, Hengan International, COFCO Meat, Guangdong Feed(粤海饲料), Asia Dairy, Uxin Limited, Tarena Education and etc. He graduated from Columbia University, and achieved the highest honor of science degree in Department of Electronic Engineering; he is a member of Tau Beta Pi (National Engineering Honor Society of America) (全美工程荣誉学会), and he has won the Edwin Howard Armstrong Award as the most outstanding electronic engineering student of Columbia University. Wu Cheng Male, born in 1940, expert in information and automation, academician of Chinese Academy of Engineering. He graduated from Tsinghua University in 1962 and got a postgraduate degree of Tsinghua University in 1966. He is a professor and doctoral supervisor of department of Automation of Tsinghua University, head of National CIMS Engineering Research Center, independent director of the 9th session of the Board of Qingdao Haier Co., Ltd. Dai Deming Male, born in 1962. He is a professor and doctoral supervisor of the accounting department of School of Business at Remin University of China. He also concurrently holds other positions such as a vice-chairman of Accounting Society of China, Independent director of the 9th session of the 103 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Board of Directors of Qingdao Haier. He served as an independent director for Beijing Capital Development Co., Ltd.(北京首都开发股份有限公 司) and other companies. Shi Tiantao Male, born in 1962. He currently serves as a professor and doctoral supervisor of the School of Law at Tsinghua University as well as director of Finance & Law Research Center under the School of Law at Tsinghua University. He also serves on the 9th session of the Board of Directors of Qingdao Haier as an independent director. Meanwhile, he concurrently holds other positions such as a vice president of the Chinese Research Association of Securities Law, an arbitrator of CIETAC, and a member of the Case Guidance Committee of the Supreme People's Court. Wang Peihua Male, born in 1957, senior political analyst, he has served as the deputy secretary of Party Committee of Haier Group Air-Conditioner Head Office (海尔集团空调本部), Washing Machine Head Office (洗衣机本部), and Haier Group Freezer & Heater Head Office (海尔集团冷柜电热本部), chairman of the labor union of Haier Group Technology and Equipment Head Office, deputy secretary of Discipline Inspection Committee etc.. He is the head of the Organizational Department of Haier Group and the president of the 9th session of the Board of Supervisors of Qingdao Haier Co., Ltd.. Ming Male, born in 1960, senior political analyst, has served as deputy secretary of Discipline Inspection Committee of Qingdao Refrigerator General Guoqing Factory, party branch secretary and assistant manager of Qingdao Haier Transportation Company (青岛海尔运输公司), head of the comprehensive department of Qingdao Haier Co., Ltd., deputy secretary of party committee and secretary of discipline inspection committee of Haier Refrigerator Products Head Office (海尔冰箱产品本部), chairman of the labor union. He is the chairman of the labor union of Haier Group, and the supervisor of the 9th session of the board of supervisors of Qingdao Haier Co., Ltd.. Wang Yuqing Female, born in 1975, has served as the employee supervisor of the Board of Supervisors of Qingdao Haier Co., Ltd., the office secretary of Qingdao Haier Co., Ltd., employee supervisor of the board of supervisors of Qingdao Haier Co., Ltd., and head of the general manager office of Qingdao Haier Co., Ltd.. Yu Miao Male, born in 1982, Chinese nationality with a master degree. He serves as legal manager of Qingdao Haier Co., Ltd. since April 2012. Gong Wei Male, born in 1973, has served as the financial manager of Qingdao Haier Co., Ltd., senior financial manager and senior financial analyst of Haier Group, chief financial officer of Haier Washing Machine Head Office (海尔洗衣机本部), chief financial officer of Haier Air-Conditioner Head Office (海尔空调本部), chief financial officer of White Goods Group, he is currently the vice president and chief financial officer of Qingdao Haier Co., Ltd.. He was granted the honorary titles such as Outstanding Youth in Post of Qingdao City, Outstanding Accounting Workers of Shandong Province, National Outstanding Accounting Workers and so on, and won the awards of Top Ten CFO in China as appraised by "New Money" Magazine (《新理财杂志》) in 2011. Ming Female, born in 1964, senior economist, was the lecturer of the investment department of China Institute of Finance, deputy head of the Teaching Guozhen and Research section of Investment Economy Department, a member of treasury department of Everbright International Investment Consultancy Company, deputy director and director of general manager office, general manager of business management department and general manager of personnel department, assistant to the general manager of the Company, executive vice president of Everbright International Investment Consultancy Company; she was the office director of analysts professional committee of the Securities Association of China, vice director of Qualification Management Department of the Association, vice director of Practice Standards Committee (执业标准委员会) of the Association. She is currently the vice general manager and secretary to the Board of Directors of Qingdao Haier Co., Ltd.. 104 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Other information □Applicable √Not Applicable (II) Incentive share option granted to directors and senior management during the reporting period □Applicable √Not Applicable II. Positions held by current and retired directors, supervisors and senior management during the reporting period (I) Positions held in shareholders’ entities √Applicable □Not Applicable Name Company Position Appointment date End date of appointment Liang Haishan Haier Electric Appliances International Director November 1997 Co., Ltd. Tan Lixia Haier Electric Appliances International Director Co., Ltd. Tan Lixia Qingdao Haier Venture & Investment Supervisor March 2009 Information Co., Ltd. (青岛海尔创业投 资咨询有限公司) Tan Lixia Haier Group Corporation Executive vice president February 2016 Wang Peihua Haier Group Corporation Head of Organizational Department Ming Guoqing Haier Group Corporation Chairman of the Labor Union Positions in shareholders Nil entities 105 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (II) Positions held in other entities √Applicable □Not Applicable Name Company Position Appointment date End date of appointment Liang Haishan Haier Group Finance Co., Ltd. Director Liang Haishan Haier Financial Holdings Limited Director Ming Guozhen Qingdao Overseas Chinese Industrial Director July 2008 Holding Co., Ltd. Tan Lixia Haier Group Finance Co., Ltd. Supervisor Tan Lixia Haier Financial Holdings Limited Legal representative, director Wu Cheng Tsinghua University Professor February 1967 Wu Cheng Kingdee International Software Group Independent Non-executive March 2018 Company Limited director Wu Changqi Peking University Professor Wu Changqi Huaxia Bank Co., Ltd.(华夏银行股份 Supervisor 12 May 2015 12 May 2021 有限公司) Wu Changqi Beijing Electronic Zone Investment and Independent director 28 December 2012 22 April 2019 Development Co., Ltd. Wu Changqi Yijiahe Technology Co., Ltd. Independent director 24 August 2018 24 August 2021 Shi Tiantao Tsinghua University Professor 2000 Shi Tiantao Jiajiayue Group Holding Co., Ltd.(家家 Independent director 悦集团股份有限公司) Shi Tiantao Beijing Zeho Waterfront Co., Ltd.(北京 Independent director 正和恒基滨水生态环境治理股份有限 公司) Shi Tiantao Rongtong Fund Management Co., Ltd. Independent director (融通基金管理有限责任公司) Liu Haifeng Far East Horizon Co., Ltd(远东宏信有 Non-executive director October 2009 限公司) Liu Haifeng China International Capital Corporation Non-executive director February 2015 Limited(中国国际金融股份有限公司) 106 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Liu Haifeng Sunpower Group(中圣集团) Non-executive director November 2017 Dai Deming China Zheshang Bank Co., Ltd.(浙商银 Independent Non-executive March 2015 行股份有限公司) director Dai Deming BOC Aviation Limited(中银航空租赁 Independent Non-executive May 2016 有限公司) director Dai Deming China Securities Co., Ltd.(中信建投证 Independent Non-executive August 2016 券股份有限公司) director Dai Deming Power Construction Corporation of China(中 Independent Non-executive March 2018 国电力建设股份有限公司) director Dai Deming Poly Developments and Holdings Independent Non-executive September 2018 Corporation Limited(中国保利发展股 director 份有限公司) Peng Jianfeng Beijing Chinastone Enterprise President 2003 Management Consulting Co., Ltd.(北京 华夏基石企业管理咨询有限公司) Peng Jianfeng School of Labor and Human Resources Professor 1996 of Remin University of China Peng Jianfeng China Merchants Shekou Industrial Independent director 2015 Zone Holdings Co., Ltd. Peng Jianfeng Jinko Power Technology Co., Ltd.(晶科 Independent director 2017 电力科技股份有限公司) Zhou Hongbo Beijing Hanbang Technology Co., Ltd. Director November 2017 November 2020 Positions in other entities Nil III. Remuneration of directors, supervisors and senior management √Applicable □Not Applicable Decision-making procedures of the remuneration The procedures for decision- making of remuneration of directors, supervisors and senior management of the of directors, supervisors and senior management Company are establishing platform, clearing standards, communication and consultation, and making objective decision. The Remuneration Committee of the Company formulate remuneration standards, adjust principles and assess the principles of realizing, then propose them to the board of directors for approval, thus form a system 107 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. platform, then to determine the actual remuneration of that year according to the principle of ―salary paid by users‖ and the two-dimensional lattice examination results of the bet against cycle and the two-dimensional lattice annual examination results and win-win value-added statement examination results. Determination basis of the remuneration of The management personnel salary system of the Company in 2018 is linked to the vertical and horizontal directors, supervisors and senior management matching statement and the win-win value-added statement, of which the tool is the two-dimensional lattice model (二维点阵模型). The two-dimensional lattice (二维点阵) could reflect the strategy support, emerging small companies and leading platform vertically, and the global leading market competitiveness horizontally. The highest allowance of outside directors of the 9th session of the board of directors of the Company is RMB200,000 (before tax) in total per year, including the fixed allowances of RMB150,000 per year, the highest performance allowance is RMB50,000 per year, and the exact amount of performance allowance will be determined based on the comprehensive consideration of the contribution of directors to the Board decision making, the effectiveness of the proposals and recommendations to the board of directors, the participation of the meetings of the Board, attendance rate of all Board meetings and other factors. The travelling expense for attending the meetings of the board of directors and shareholders and other expenses necessary for performing their duties pursuant to the Articles of Association shall be fully reimbursed. Remuneration payables of directors, supervisors Paid as required. and senior management Total actual remuneration of all the directors, RMB4.72 million supervisors and senior management at the end of the reporting period IV. Changes in directors, supervisors and senior management of the Company √Applicable □Not Applicable Name Position Changes Reasons Wang Yuqing employee supervisor Resigned Personal reasons Yu Miao employee supervisor Appointed Appointed at the Employee Representatives Meeting V. Punishment by the Securities Supervisory Institute in last three years □Applicable √Not Applicable 108 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. VI. Staff of the parent company and principal subsidiaries (I) Staff information Number of staff of the parent company 3,338 Number of staff of principle subsidiaries 84,109 Total number of staff 87,447 Number of employees whose retirement expenses are borne by the parent company and the principal 0 subsidiaries Breakdown by function Function Number Production 50,897 Sales 17,565 R&D 14,941 Financial 1,327 Administrative 2,717 Total 87,447 Breakdown by education Education Number (person) Bachelor and above 21,275 College 22,641 Technical secondary school and others 43,531 Total 87,447 (II) Remuneration policies √Applicable □Not Applicable The Company conducted the system of ―salary paid by users‖, individual paid separately and entirety paid in advanced, which originates from the strategic balance sheet of Haier, and carried out the evaluation of the four aspects, namely the creation of user values, the enhancement of emerging small companies, the budget implementation of the leading targets and the continuous optimization based on the vertical and horizontal matching statement and the win-win value-added statement. The incentive system leads to ―salary paid by users‖, win-win sharing through everybody creating values to the users who will pay for the values, leading to create ecological value, achieving the emerging small companies and the leading platform. (III) Personnel training √Applicable □Not Applicable Please also refer to relevant content set out in 2018 Social Responsibility Report of Qingdao Haier Co., Ltd. published on the same date as this report. (IV) Labor Outsourcing □Applicable √Not Applicable 109 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. VII. Other □Applicable √Not Applicable 110 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION IX CORPORATE GOVERNANCE I. Explanation of Corporate Governance √Applicable □Not Applicable During the reporting period, the Company strictly complied with the requirements under the Company Law, the Securities Law, Code on Corporate Governance for Listing Company and the requirements of the relevant laws and regulations, to improve its corporate governance structure, regulate its operation, improve its information disclosure system, strengthen the communication with investors and elevate the standard of the Company‘s corporate governance. In respect of corporate governance structure, the general meeting, the Board and the management standardized its operation to practically guarantee the legal interests of the Company and its shareholders; all Directors duly discharged their duties in a diligent way; each committee of the Board of the Company performed their work according to their respective detailed working rules to ensure that the Board operate in a more effective and scientific way; independent Directors fulfilled their duties independently and issued independent opinion on major matters in order to effectively protect the interests of the Company as a whole and the lawful rights and interests of medium and small investors. In respect of information disclosure, the Company strictly executed the registration and management system for insiders, achieved the management of inside information on significant events and eliminating the act of using the Company‘s inside information for stocks trading by insider. Meanwhile, the Company reinforced the accountability of people who are responsible for annual report disclosure and enhanced the quality and transparency of information disclosure in annual reports. The Company has placed a lot of emphasis on information disclosure and disclosed relevant information on a true, accurate, complete and timely basis strictly in accordance with the requirements of laws and regulations to ensure all shareholders have equal access to such information. In respect of the management of investor relation, in accordance with guideline of the Management System for Investor Relation, the Company integrated business and financial resources by the office of board secretary and realized positive and all-around access to investors in a multi-layer and diversified format through introduction reference, result announcement conference and online forum. Meanwhile, the Company replied investors on a timely basis by ways of interview, e-mail, phone, fax and the website (http://sns.sseinfo.com) and enhanced interaction with investors, so as to respect and protect the interests of various investors, with the aim of achieving harmonious and mutual success with the Company, staff and investors. The corporate governance structure of the Company is sound and there is no difference between the corporate governance structure and the requirement of relevant documents from CSRC. (1) Shareholders and general meeting of shareholders: The Company could ensure that all shareholders, especially the minority shareholders enjoy equal treatment and are able to fully exercise their rights; during the reporting period, the Company convened 111 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. and held three shareholders‘ general meetings in compliance with the requirements of the Articles of Association and Rules Governing Shareholders‘ General Meeting of the Company. Attendance of shareholders at the meeting is relatively high, which ensured that the shareholders fully excised voting rights; the Company also engaged lawyers who possess the qualification to engage in securities business to attend and witness the shareholders‘ general meeting; the resolutions were considered and approved in accordance with legal procedures, which could guarantee the power and rights of minority shareholders. (2) Relationship between controlling shareholders and the listed company: The controlling shareholders acted normatively and did not interfere with the Company‘s management decisions and operations, directly or indirectly. The Company and the controlling shareholders are independent of each other in terms of their staff, assets, finance, organization and business. Their respective board of directors, the Board of Supervisors and internal administrative departments are all independent of each other. The specific requirements for regulating Related-party transactions and fund flow are set out in the Articles of Association, Fair Decision-Making System for Related-party Transactions and the Administrative System for Regulation of Fund Flow between the Company and Related Parties, Risk Control System for Related-party Transaction with Haier Group Finance Co., Ltd., and Proposal for Emergency Response System for Risk of Deposits with Haier Group Finance Co., Ltd., which guaranteed the interests of investors. The daily related-party transactions are subject to the consideration and approval at the annual general meeting and set specialized execution procedure. The basis of pricing and reasonability of operation agreement shall be supervised and reviewed by special departments, so as to regulate the execution of related-party transactions. Internal control and internal control audit of the Company would also focus on the compliance of the related-party transactions, in order to protect the interests of minority shareholders and non-related shareholders. During the reporting period, further increased self-procurement capability and scope of the self-procurement platform Qingdao Haidarui Procurement Service Co., Ltd.(青岛海达瑞采购服务有限 公司) and Qingdao Haidayuan Procurement Service Co., Ltd.(青岛海达源采购服务有限公司) and strengthened the procurement capability of the Company, which further reduced related-party transactions. (3) Directors and the Board: During the reporting period, the Board of the Company operated in accordance with rules and continued to perform their duties under the Articles of Association and relevant laws and regulations better and practically implement relevant decisions at the shareholders‘ general meeting. The number and composition of the members of the Board complied with relevant laws and regulations; the directors attended the board meeting and shareholders‘ general meeting with diligent and responsible attitude and protected the interests of the Company. In accordance with the requirements in the Code on Corporate Governance for Listing Company, the Company has 7 external directors, of which three are independent 112 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. directors, representing over three quarters of the total number of the directors (9 in total) of the Company. Each of the independent directors of the Company respectively acted as member of the nomination committee, remuneration and appraisal committee and audit committee of the Board and practically carried out their duties. During the reporting period, all directors and independent directors performed their duties earnestly strictly in compliance with the Articles of Association, the Rules of Procedure for the Board of Directors, the System for Independent Directors and relevant requirements under laws and regulations and each committees of the Board operated normatively according to its own work rules. During the reporting period, the Board of the Company considered and approved the following matters: the Phase III Employees Stock Ownership Scheme and periodical reports, so as to encourage the Company to further consolidate its resources to better implement the networking and globalize development strategy. (4) Supervisors and the Board of Supervisors: During the reporting period, the Board of Supervisors operated in accordance with rules and continued to practically perform their duties under the Articles of Association and relevant laws and regulations. The number and composition of the members of the Board of Supervisors complied with requirements under laws and regulations. During the reporting period, the Supervisors of the Company performed their duties earnestly and adhered to the principle of being responsible to the Company and all shareholders to supervise legality and compliance on finance matters of the Company and performance of duty by the Company‘s directors, managers of the Company and other senior management strictly in accordance with requirements under the Articles of Association, the Rules of Procedure for the Board of Supervisors and relevant laws and regulations. (5) Performance evaluation and incentive and disciplinary mechanism: In accordance with the Articles of Association, the Board shall appoint or remove the general manager and the secretary of the Board; the Board shall appoint or remove the deputy general manager and other senior management (including the chief financial officer) of the Company based on the nomination by the general manager and determine their remunerations and rewards and penalties. The human resource department of the Company shall make routine appraisal and evaluation on the performance of directors, supervisors and senior management and Remuneration and Appraisal Committee shall make inspection and evaluation on their performance to determine their remunerations at the end of the year. During the reporting period, the Company adopted the Phase III Employees Stock Ownership Scheme which further perfected the incentive and disciplinary mechanism and mechanism of the shareholders shares benefits and risks with the management of the Company, so as to enhance the competitiveness and promote the sustainable and sound development of the Company. 113 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (6) Stakeholders: The Company was able to fully respect and protect the lawful rights and interests of the suppliers, channels, banks, other creditors, employees, consumers and other stakeholders. Meanwhile, the Company actively took part in public welfare undertaking in such place where it operates, placed a lot of emphasis on environment protection, performed its social duties earnestly and worked together with these stakeholders actively with good communication to promote the sustainable and sound development of the Company. For details, please refer to relevant information in 2018 Social Responsibility Report of Qingdao Haier Co., Ltd. published on the same date of this report. (7) Information disclosure and transparency: During the reporting period, the Company positively disclosed the relevant information in a true, accurate and complete manner which was strictly in accordance with relevant laws and regulations including the Articles of Association, Administrative Measure for Information Disclosure and requirements in the Information Disclosure Management System of the Company, Work Rules and Procedures Regarding the Annual Report and the Management System for Investor Relation, proactively communicated with regulatory authorities and investors and designated newspapers including Shanghai Securities News, China Securities Journal, Securities Times and Securities Daily for information disclosure to ensure that all shareholders access to such information equally. The Company authorized the secretary of the Board to take charge of information disclosure, reception of visits by shareholders and handling of shareholder's enquiries. Meanwhile, the Company broadened communication channels for investors to get relevant information of the Company through telephone conference calls after periodical reporting and occasionally holding on-site and online forums. With respect to the significant Related-party transactions, the Company performed necessary approval procedures and disclosed relevant information strictly in compliance with the Articles of Association and Fair Decision-Making System for Related-party Transactions to protect the interests of investors. During the reporting period, the Company further perfected the confidentiality procedure for information disclosure strictly in compliance with the Registration System of Insiders, the Responsibility System for Major Errors in Information Disclosure in Annual Reports and the Management System of External Information Users to ensure the fairness and equity of information disclosure. (8) Implementation of corporate governance campaign in 2018: During the reporting period, the Company continued to carry out works relating to ―solution of business competition and reduction of related-party transactions‖. In 2018, trading volume of related-party transactions regarding procurement amounted to RMB33.59 billion, which accounted for 20.1% of the similar transactions, representing a decrease of 3.9 pct pt compared to the same period of the previous year. Trading volume of related-party transactions regarding sales amounted to RMB4.49 114 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. billion, which accounted for 2.4% of the similar transactions, representing a decrease of 0.9 pct pt compared to the same period of the previous year. The effective optimization of the related-party transactions in the previous period has been maintained. The Company will continue to increase investment in independent purchase and promote the continuous optimization of related-party transactions. Leveraging on the further implementation of governance campaign and enhancing the establishment of fundamental systems, the Company further improved the corporate governance structure and improved the corporate governance. The Company carried out various activities to strengthen the consciousness of learning and further strengthened the consciousness on regulating governance in the listed company among directors, supervisors and senior management of the listed company with organizational training to improve the ability to regulate governance and continuously improve and perfect corporate governance of the Company, thus to protect the minority equity interests and to guarantee and promote the healthy, stable and sustainable development of the Company. Whether there is a significant difference between the corporate governance and requirements of relevant provisions of the CSRC; if so, the reasons should be explained □Applicable √Not Applicable II. Brief Introduction to the General Meeting of Shareholders Index for details of websites designated Meeting Date Date of disclosure for publishing resolutions 2018 First 27 April 2018 For details, please refer to the 28 April 2018 Extraordinary Announcement on Resolutions Passed General Meeting at the 2018 First Extraordinary General Meeting of Qingdao Haier Co., Ltd. (L2018-023) published by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) and the four major securities newspapers. 2017 Annual 18 May 2018 For details, please refer to the 19 May 2018 General Meeting Announcement on Resolutions Passed at the 2017 Annual General Meeting of Qingdao Haier Co., Ltd. (L2018-028) published by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) and the four major securities newspapers. 2018 Second 21 December For details, please refer to the 22 December 2018 Extraordinary 2018 Announcement on Resolutions Passed General Meeting at the 2018 Second Extraordinary General Meeting of Qingdao Haier Co., Ltd. (L2018-086) published by the Company on the website of Shanghai Stock Exchange (www.sse.com.cn) and the four major securities newspapers. 115 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Explanation of shareholders‘ general meetings √Applicable □Not Applicable (1) The 2018 First Extraordinary General Meeting of the Company (the ―2018 First EGM‖) was held by way of on-site voting and online voting by poll at Room A108, Haier University, Haier Information Park, No.1 Haier Road, Qingdao, the PRC in the afternoon on 27 April 2018 for deliberation of the proposals concerning the issuance of D shares of the Company. The Company had a total of 6,097,630,727 shares. Attendance of shareholders and proxies at the 2018 First EGM are as follows: there were 96 shareholders of the Company in attendance either in person or by proxy at the 2018 First EGM, holding a total of 3,502,250,459 shares, representing 57.44% 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 2018 First EGM. The 2018 First EGM was convened by the Board of the Company. Ms. Tan Lixia, Vice Chairman of the Board, presided over the 2018 First EGM. The Company had 9 Directors, of whom 2 Directors attended the 2018 First EGM (Directors Liang Haishan, Wu Changqi, Peng Jianfeng, Zhou Hongbo, Liu Haifeng David, Wu Cheng, Dai Deming were unable to attend the 2018 First EGM due to personal engagement); the Company had 3 Supervisors, of which 2 Supervisors attended the 2018 First EGM (employee supervisor Wang Yuqing was unable to attend the 2018 First EGM due to personal engagement). The secretary to the Board of the Company attended the 2018 First EGM and other members of senior management of the Company were invited to attend the 2018 First EGM. (2) The 2017 Annual General Meeting of the Company (the ―2017 AGM‖) was held by way of on-site voting and online voting by poll at Room A108, Haier University, Haier Information Park, No.1 Haier Road, Qingdao, the PRC in the afternoon on 18 May 2018 for deliberation of the proposals concerning the annual report of the Company and other issues. The Company had a total of 6,097,630,727 shares. Attendance of shareholders and proxies at the 2017 AGM is as follows: there were 73 shareholders of the Company in attendance either in person or by proxy at the 2017 AGM, holding a total of 3,485,550,588 shares, representing 57.16% of the total number of shares of the Company with voting rights. The directors, supervisors and senior management of the Company as well as the lawyers engaged by the Company also attended the 2017 AGM. The 2017 AGM was convened by the Board of the Company. Mr. Liang Haishan, Chairman of the Board, presided over the 2017 AGM. The Company had 9 Directors, of whom 2 Directors attended the 2017 AGM (Directors Tan Lixia, Wu Changqi, Peng Jianfeng, Zhou Hongbo, Liu Haifeng David, Wu Cheng, Shi Tiantao were unable to attend the 2017 AGM due to personal engagement); the Company had 3 Supervisors, all of whom attended the 2017 AGM. The secretary to the Board of the Company attended the 2017 AGM and other members of senior management of the Company were invited to attend the 2017 AGM. (3) The 2018 Second Extraordinary General Meeting of the Company (the ―2018 Second EGM‖) was held by way of on-site voting and online voting by poll at Room A108, Haier University, Haier Information Park, No.1 Haier Road, Qingdao, the PRC in the afternoon on 21 December 2018 for 116 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. deliberation of the proposals concerning change in defective property commitment and improvement of the framework agreement on financial related-party transactions. The Company had a total of 6,368,416,700 shares. Attendance of shareholders and proxies at the 2018 Second EGM is as follows: there were 128 shareholders of the Company in attendance either in person or by proxy at the 2018 Second EGM, holding a total of 3,572,492,799 shares, representing 56.10% 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 2018 Second EGM. The 2018 Second EGM was convened by the Board of the Company. Mr. Liang Haishan, Chairman of the Board, presided over the 2018 Second EGM. The Company had 9 Directors, of whom 1 Director attended the 2018 Second EGM (Directors Tan Lixia, Wu Changqi, Peng Jianfeng, Zhou Hongbo, Liu Haifeng David, Dai Deming, Shi Tiantao, Wu Cheng were unable to attend the 2018 Second EGM due to personal engagement); the Company had 3 supervisors, all of whom attended the 2018 Second EGM. The secretary to the Board of the Company attended the 2018 Second EGM and other members of senior management of the Company were invited to attend the 2018 Second EGM. III. Performance of duties by directors (I) Attendance of board meetings and general meetings by directors Attendance Attendance of Board meetings of general meetings Whether an Requir Absence Name of independent ed Atte Attenda from two director director or attenda ndan nce by Attenda Attendances Absenc consecutive not nces of ce in telecom nce by at general e meetings in Board pers municati proxy meetings person or meetin on on not gs Liang No 15 15 7 0 0 No 2 Haishan Tan No 15 14 7 1 0 No 1 Lixia Peng No 15 15 15 0 0 No 0 Jianfeng Wu No 15 15 14 0 0 No 0 Changqi Zhou No 15 15 14 0 0 No 0 Hongbo Liu No 15 15 15 0 0 No 0 Haifeng David Dai Yes 15 14 12 1 0 No 1 Deming Wu Yes 15 15 15 0 0 No 0 Cheng Shi Yes 15 15 13 0 0 No 1 Tiantao 117 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Statement for failure to attend the Board meetings in person for two consecutive times □Applicable √Not Applicable Number of Board meetings held in the year 15 Of which: Number of on-site meetings 0 Number of meetings held by telecommunication 6 Number of meetings held both on site and by 9 telecommunication (II)Independent directors’ objection to the relevant matters of the Company □Applicable √Not Applicable (III) Other □Applicable √Not Applicable IV. Major opinions and suggestions of the Special Committees of the Board in performing their duties during the reporting period, details should be disclosed if any disagreements √Applicable □Not Applicable (1)Audit Committee: during the reporting period, the Company convened 7 meetings of the Audit Committee to consider the annual report audit-related work for three times, namely, pre-audit, mid-audit and post audit and made relevant arrangement. The Audit Committee believed that the 2017 financial and accounting statement issued by the Company was in compliance with the requirements of the Accounting Standards for Business Enterprises, and gave a true and fair view of the Company‘s assets and liabilities as of 31 December 2017 and operating results and cash flow for the year 2017. There was no significant unresolved disagreement between accounting and auditing. There was no material risk affecting the Company‘s operation. The Company operated prudently and would be able to continue as a going concern. Other meetings considered the plans for the annual budget of related-party transactions, internal control self-assessment reports, profit distribution plan, engagement of accounting firm, issue D shares, transfer shareholdings of subsidiaries and related-party transactions, and the 2017 annual report, the first quarterly report/the semi-annual report/the third quarterly report of 2018. The Audit Committee agreed the above resolutions and submitted the same to the Board for consideration. (2)Remuneration and Appraisal Committee: during the reporting period, the Company convened 1 meeting of the Remuneration and Appraisal Committee to consider the Phase III Stock Ownership Scheme of Core Employees Stock Ownership Scheme and the annual remuneration package of directors, supervisors and senior management. The Remuneration and Appraisal Committee agreed the above resolutions and submitted the same to the Board for consideration. (3)Nomination Committee: during the reporting period, the Company convened 1 meeting of the 118 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Nomination Committee to summarize the annual performance of duties by directors, supervisors and senior management. The Nomination Committee agreed the above resolutions. (4)Strategy Committee: during the reporting period, the Company convened 7 meetings of the Strategy Committee to consider and approve the plan for transferring shareholdings of subsidiaries and related-party transactions, performance of duties, and issuance of D shares. The Strategy Committee agreed the above resolutions and submitted the same to the Board for consideration. V. Board of Supervisors’ explanation on risks about the Company □Applicable √Not Applicable VI. Statements of the Company on inability to maintain the independence or the ability of independent operations between the Company and the controlling shareholders with respect to business, personnel, assets, organization and finance □Applicable √Not Applicable Corresponding solutions, working progress and subsequent working plans of the Company in case of horizontal competition √Applicable □Not Applicable In recent years, the Company made constant efforts in solving the horizontal competition, and reduced the number of related-party transactions. During the reporting period, the Company further solved the horizontal competition, and reduced the number of related-party transactions by acquiring FPA, etc. In 2018, the trading amount of related-party transactions regarding procurement amounted to RMB33.59 billion, which accounted for 20.1% of similar transactions, representing a year-on-year decrease of 3.9 pct pt (including trading amount with the joint ventures, the same below); the trading amount of related-party transactions regarding sales amounted to RMB4.49 billion, which accounted for 2.4% of similar transactions, representing a year-on-year decrease of 0.9 pct pt. VII. Establishment and implementation of appraisal and incentive mechanism for senior management during the reporting period √Applicable □Not Applicable In 2018, the Company adopted a system ―salary paid by users‖ individual paid separately and entirety paid in advanced, which is linked to the vertical and horizontal matching statement and the win-win value-added statement for management personnel, of which the tool is the two-dimensional lattice model (二维点阵模型). The two-dimensional lattice (二维点阵) could reflect the strategy support, emerging small companies and leading platform vertically, and the global leading market competitiveness horizontally. The competitiveness of compensation was determined by such elements as 119 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. ―support for strategy‖, ―competitiveness of market leading target‖ and ―emerging small companies, leading platform‖. The senior management receives annual appraisal of the annual performance, which was the key factor to performance bonus and development. On the one hand, the Company‘s ―salary paid by users‖ overall compensation system of connecting sales force with their orders and remuneration diversified the way of salary incentive of the management, leading to create user value and create ecological value, and made the compensation mechanism for management more flexible on the other hand, which drove the innovation of management. Meanwhile, the Company‘s salary incentive system was further improved, the incentive and restriction mechanism was strengthened and a mechanism that shares interests and risks with the Company and the management was formulated in the principle of ―salary paid by users‖ by implementing such initiatives as Core Employees Stock Ownership Scheme. VIII. Whether to disclose the self-assessment report on internal control √Applicable □Not Applicable For details, please refer to the 2018 Internet Control Assessment Report of Qingdao Haier Co., Ltd. disclosed on the same day of this report. Explanations on material defects found in internal control during the reporting period □Applicable √Not Applicable IX. Relevant explanations on the audit report of internal control √Applicable □Not Applicable The Company‘s auditor Shandong Hexin Certified Public Accountants LLP (山东和信会计师事 务所(特殊普通合伙)) has audited the efficiency of internal control relating to the financial report of the Company, and has issued its standard unqualified audit report for the Company‘s internal control (Hexin Shen Zi.(2019) No.000267). For the details of Audit Report of Internal Control of Qingdao Haier Co., Ltd., please refer to relevant announcements published on the website of Shanghai Stock Exchange (www.sse.com.cn) on 30 April 2019. Whether to disclose the audit report on internal control: Yes X. Other □Applicable √Not Applicable 120 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION X RELEVANT INFORMATION ON CORPORATE BONDS √Applicable □Not Applicable I. Overview of corporate bonds Unit and Currency: RMB0‘000 Method of Balanc Places of Name of Abbrevi Issuing Date of Interest capital Code e of transacti bonds ation date expiry rate(%) repayme bonds on nt with interest Converti Haier 110049 18 17 300,74 Interest rates On an Shangha ble Converti Decem Decem 9 for the first annual i Stock Corporat ble ber ber year to sixth basis Exchang e Bonds Bonds 2018 2024 year are 0.2, e of 0.5, 1.0, 1.5, Qingdao 1.8, 2.0, Haier respectively Co., Ltd. Interest payment and repayment of corporate bonds □Applicable √Not Applicable The interest of convertible corporate bonds in this Issuance is paid on an annual basis, while the principal and the interest for the last year of convertible corporate bonds which do not convert to shares shall be returned when expired. The interest payment day for each year is the date of first anniversary of the issuance of convertible corporate bonds. Based on the issuance date, the first interest payment day is 18 December 2019. As such, interest payment and repayment within the reporting period is not applicable. Other information on corporate bonds √Applicable □Not Applicable For other information, please refer to the ―II. Issuance and listing of securities‖ under the SECTION VI ―CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS‖ in this report. II. Contact person and method of corporate bonds trustee manager and contact method of credit rating agency Name United Credit Ratings Co., Ltd. Credit rating agency 12th Floor, PICC Office Tower, No.2 Jianguomen Address Outer Street, Chaoyang District, Beijing, China Other explanation: 121 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. □Applicable √Not Applicable III. Use of funds raised from corporate bonds √Applicable □Not Applicable The Company received a net proceeds of RMB2,983,580,454.50 from the public issuance of convertible corporate bonds (the amount of proceeds of RMB3,007,490,000 net of sponsorship and underwriting fees paid of RMB23,909,545.50) on 24 December 2018, which has not been used in 2018. IV. Introduction of corporate bonds rating √Applicable □Not Applicable The convertible corporate bonds have been rated by the United Credit Ratings Co., Ltd., which issued the Credit Rating Report Regarding Public Issuance of A Shares Convertible Corporate Bonds of Qingdao Haier Co., Ltd.. According to this rating report, the main credit rating of Qingdao Haier is AAA and the credit rating of convertible corporate bonds is AAA. During the period of convertible corporate bonds, the United Credit Ratings Co., Ltd. will perform regular follow-up rating on an annual basis. V. Corporate bonds credit enhancement mechanism, solvency plan and others during the reporting period √Applicable □Not Applicable The interest of convertible corporate bonds in this issuance is paid on an annual basis, while the principal and the interest for the last year of convertible corporate bonds which do not convert to shares shall be returned when expired. The coupon rate of convertible corporate bonds in the issuance is: 0.20% for the first year, 0.50% for the second year, 1.00% for the third year, 1.50% for the fourth year, 1.80% for the fifth year and 2.00% for the sixth year. VI. Meeting of corporate bondholders □Applicable √Not Applicable VII. Duty fulfillment of corporate bonds trustee manager □Applicable √Not Applicable VIII. Accounting data and financial indicators in the last two years of the Company at the end of the reporting period √Applicable □Not Applicable 122 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unit and Currency: RMB Key indicators 2018 2017 yoy change (%) EBITDA 16,235,696,024.33 15,043,238,436.36 7.93 Liquidity ratio 1.18 1.11 5.66 Quick ratio 0.90 0.84 7.26 Debt to assets ratio (%) 66.93 69.55 -2.62 Total liabilities ratio of EBITDA 20.69% 19.86% 0.83 Interest coverage ratio 8.94 8.34 7.21 Cash interest coverage ratio 12.93 11.67 10.76 EBITDA interest coverage ratio 11.09 10.51 5.46 IX. Interest payment of other bonds and debt financing instruments of the Company □Applicable √Not Applicable X. Bank credit business of the Company during the reporting period √Applicable □Not Applicable During the reporting period, the Company had bank credit business amounted to RMB70,942.38 million. XI. Execution status of promises or commitments in prospectus of corporate bonds during the reporting period √Applicable □Not Applicable On 24 December 2018, the Company fulfilled the issuance of convertible corporate bonds in accordance with the issuance scheme and schedule committed in the prospectus, and the proceeds of the issuance of convertible corporate bonds has been remitted to the Special-account of proceeds specified by the Company at the same day by the lead underwriter. (For details, please refer to the Announcement on Public Issuance Results of Convertible Corporate Bonds of Qingdao Haier Co., Ltd. (No. L2018-087)). XII. Impact of major events on operating status and solvency of the Company □Applicable √Not Applicable 123 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION XI RESPONSIBILITY STATEMENT “As the executive board of Qingdao Haier Co., Ltd, we hereby confirm to the best of our knowledge, and in accordance with the applicable reporting principles, that the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and the management report includes a fair review of the development and performance of the business including the results and the position of the company, together with a description of the principal opportunities and risks associated with the expected development of the company.‖ Qingdao, 29 April 2019 Qingdao Haier Co., Ltd The Board of Management Liang, Haishan __________________ Tan, Lixia __________________ Wu, Changqi __________________ Zhou, Hongbo __________________ Peng, Jianfeng __________________ Liu, Haifeng __________________ 124 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. SECTION XII FINANCIAL REPORT I. Audit Report √Applicable □ Not Applicable Audit Report Hexin Shen Zi. (2019) No.000266 To all shareholders of Qingdao Haier Co., Ltd.: I. AUDIT OPINION We have audited the financial statements of Qingdao Haier Co., Ltd. (hereinafter referred to as the ―Haier Co., Ltd.‖), which comprise the Consolidated and the Company‘s Balance Sheet as at 31 December 2018, the Consolidated and the Company‘s Income Statement, the Consolidated and the Company‘s Cash Flow Statement, the Consolidated and the Company‘s Statement of Changes in Shareholders‘ Equity for the year 2018, and notes related to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the Consolidated and the Company‘s financial position of the Haier Co., Ltd. as at 31 December 2018, and the Consolidated and the Company‘s financial performance and cash flow for the year 2018 in accordance with the requirements of Accounting Standards for Business Enterprises. II. BASIS OF OUR AUDIT OPINION We conducted our audit in accordance with China Standards on Auditing. Our responsibilities under those standards are further described in Auditor‘s responsibilities for the Audit of Financial Statements section of the report. We are independent of Haier Co., Ltd. in accordance with the CICPA‘s Code of Ethics for Professional Accountants (the Code), and we have fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. III. KEY AUDIT MATTERS Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.We identify the following matters as the key audit matters that need to be communicated in the audit report: 125 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Key Audit Matters Audit Response (Ⅰ) Provision for impairment of goodwill Relevant disclosures are included in notes V.27 We mainly implemented the following audit Other significant accounting policies and procedures on the provisions for the accounting estimates and notes V.18 Impairment of impairment of goodwill and intangible assets long-term assets to the financial statements. with indefinite useful life: As of 31 December 2018, the book value of (1) Compared the actual operating results of goodwill was RMB21.156 billion, and the book the related assets group with previous year‘s value of intangible assets with indefinite useful forecasted figures, to assess the reliability of lives was RMB1.339 billion, without any provision the management forecast on cash flow; for asset impairment. Whether the provision for (2) Compared the input of cash flow forecast impairment of long-term assets was sufficient had with historical data, approved budget and great influence to the financial statements. business plan; Significant management judgments are involved in (3) Tested the calculation accuracy of the calculation of asset group‘s recoverable amount, discounted cash flow model; such as revenue growth rate, gross margin, discount rate, etc. (4) Assessed the appropriateness of parameters in the cash flow conversion model, such as the Provision for impairment of goodwill and intangible discount rate and the perpetual growth rate. assets with indefinite useful lives is considered as The assessment is based our understanding of the key audit matter due to the significant amount the Company's businesses and the industry. and management judgement involved in calculation. (Ⅱ) Provision for impairment of inventory Relevant disclosures are included in notes VII.8 We mainly implemented the following audit Inventory to the financial statements. procedures on the provision for impairment of inventories: The Company's inventories are measured at the lower of cost and net realizable value. As of 31 (1) Obtained the calculation table for provision December 2018, the inventory balance was for impairment of inventory of the Company, RMB23.246 billion, and the provision for and reviewed the conditions and aging of the impairment of inventory was RMB869 million and products models stated in the table to see the book value was RMB22.377 billion.Whether the whether they are consistent with the provision for the impairment of inventories was information obtained through physical sufficient and accurate had great influence to the inventory on a sample basis; financial statements. (2) Compared the major parameters estimated The Company determines the net realizable value of by management with historical data, and inventory based on the estimated selling price assessed the appropriateness; minus the estimated selling expenses and related (3) Assessed the selling price estimated by the taxes. management, and checked the inventory Management estimates the selling price based on against the actual selling price after the balance the status of inventory. The estimation process sheet date on a sample basis; involves significant management judgments such as (4) Assessed selling expenses and related tax inventory status, repair rate, discount rate, etc. estimated by management and compared with Provision for inventories is considered as the key actual amounts incurred. audit matter due to the significant amount and management judgement involved in calculation. (III) Product warranty 126 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Relevant disclosures are included in notes VII. 42 We mainly implemented the following audit Provisions to the financial statements. procedures on the provisions: Provisions of the Company are mainly accrued due (1) Obtained the calculation table on to current obligations arising from product provisions of the management; warranty. As of 31 December 2018, the balance of (2) Compared the main parameters estimated the provision related to product warranty was by management with historical data; RMB2.822 billion, and whether the provision for warranty was sufficient and accurate had great (3) Tested the accuracy of the calculation on influence to the financial statements. provisions; Estimated provision for product warranty of the (4) Compared and analyzed the calculation Company was measured in accordance with the best results of the provisions and the Company‘s estimate of the cost to fulfill the relevant current actual operation; obligations. Calculation of the product warranty involves management‘s significant judgments based on historical experience, such as: replacement rate, repair rate, and loss due to disassemble product. Provisions are considered as the key audit matters due to the significant amount and management judgement involved in calculation. IV. OTHER INFORMATION The management of Haier Co.,Ltd.(hereinafter referred to as the―Management‖)is responsible for other information.Other information includes the information covered in the 2018 annual report of Haier Co.,Ltd.,but does not include the financial statements and our audit reports. Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements,our responsibility is to read the other information and,in doing so,consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If,based on the work we have performed,we conclude that there is a material misstatement of this other information,we are required to report that fact.We have nothing to report in this regard. V. RESPONSIBILITIES OF THE MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS The Management is responsible for the preparation of the financial statements that give a true and fair view in accordance with the requirements as set out in the Accounting Standards for Business Enterprises, and for such internal control as necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 127 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. In preparing the financial statements, the Management are responsible for assessing the ability of Haier Co., Ltd. to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the management either intends to liquidate Haier Co., Ltd. or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the financial reporting process of Haier Co., Ltd.. VI. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also perform the following tasks: (I) Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsible to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. (II) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. (III) Evaluate the appropriateness of accounting policies used by the Management and the reasonableness of accounting estimates and related disclosures made by the Management. (IV) Conclude on the appropriateness of the Management‘s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cause significant doubt on the ability of Haier Co., Ltd. to continue as a going concern. If we conclude that a material uncertainty exists, we are required by the auditing standards to draw attention in our audit report to the related disclosures in the financial statements or; if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our audit report. However, future events or conditions may cause Haier Co., Ltd. to cease to continue as a going concern. 128 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (V) Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. (VI) Obtain sufficient and appropriate audit evidence regarding the financial information of the entities or business activities within Haier Co., Ltd. to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit, and remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that are of most significance in the audit of the financial statements of the current period and therefore constitute the key audit matters. We describe these matters in our audit report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our audit report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Shandong Hexin Certified Public Accountants LLP Certified Public Accountant: Wang Hui (Engagement Partner) Certified Public Accountant: Wang Lin Jinan, China 29 April 2019 129 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. II. Financial Statements CONSOLIDATED BALANCE SHEETS 31 December 2018 Prepared by: Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Notes 31 December 2018 31 December 2017 Current assets: Cash and cash equivalents VII. 1 37,456,355,407.28 35,825,439,039.22 Provision of settlement fund Funds lent Financial assets held for trading VII. 2 1,775,648,387.76 Financial assets measured at fair VII. 3 value and changes of which 20,681,695.50 included in current profit and loss Derivative financial assets VII. 4 96,723,164.37 Bills receivable and accounts VII. 5 24,652,130,810.52 25,924,283,460.99 receivable Including: bills receivable 14,220,937,323.02 13,033,083,520.99 accounts receivable 10,431,193,487.50 12,891,199,940.00 Prepayments VII. 6 594,555,015.00 628,892,321.35 Premiums receivable Reinsurance accounts receivable Reinsurance contract reserves receivable Other receivables VII. 7 1,626,975,864.98 1,192,291,302.17 Financial assets purchased under resale agreements Inventories VII. 8 22,377,191,121.53 22,537,617,217.87 Contract assets VII. 9 456,781,406.54 Assets held for sale VII. 10 144,091,213.39 27,453,950.07 Non-current assets due in one year Other current assets VII. 11 5,079,878,909.67 4,425,579,572.68 Total current assets 94,260,331,301.04 90,582,238,559.85 Non-current assets: Loans and advances granted Debt investments 130 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Available-for-sale financial assets VII. 12 1,415,354,307.82 Other debt investments Held-to-maturity investments Long-term receivables 245,791,343.37 289,785,899.38 Long-term equity investments VII. 13 13,966,481,596.07 12,987,255,645.28 Investments in other equity VII. 14 1,400,316,460.34 instruments Other non-current financial VII. 15 327,358,825.57 assets Investment properties VII. 16 30,879,147.42 31,214,015.99 Fixed assets VII. 17 17,319,638,881.37 17,202,199,462.03 Construction in progress VII. 18 3,873,492,230.24 1,610,615,034.68 Biological assets for production Oil and gas assets Intangible assets VII. 19 9,209,242,721.71 8,226,559,783.38 Development cost VII. 20 538,382,288.33 966,051,333.81 Goodwill VII. 21 21,155,552,557.16 20,344,616,586.99 Long-term prepaid expenses VII. 22 230,763,172.48 177,755,371.21 Deferred tax assets VII. 23 1,815,624,736.13 2,076,635,630.12 Other non-current assets VII. 24 2,325,688,982.56 1,254,064,181.76 Total non-current assets 72,439,212,942.75 66,582,107,252.45 Total assets 166,699,544,243.79 157,164,345,812.30 Current liabilities: Short-term borrowings VII. 25 6,298,504,892.57 10,878,580,275.18 Borrowings from central bank Absorbing deposit and deposit in inter-bank market Placements from banks Financial liabilities held for VII. 26 218,748,280.33 trading Financial liabilities measured at fair value and changes of which VII. 27 2,524,569.45 included in current profit and loss Derivative financial liabilities VII. 28 35,603,754.54 Bills payable and accounts VII. 29 47,385,218,141.38 42,616,065,864.06 payable 131 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Receipts in advance VII. 30 14,681,466.58 5,861,949,182.62 Contract liabilities VII. 31 5,482,325,888.59 Disposal of repurchased financial assets Fees and commissions payable Payables for staff‘s remuneration VII. 32 2,651,399,418.05 2,480,636,328.53 Taxes payable VII. 33 1,838,440,727.39 1,970,178,186.86 Other payables VII. 34 12,685,677,402.91 11,309,575,304.78 Reinsurance accounts payable Deposits for insurance contracts Customer deposits for trading in securities Amounts due to issuer for securities underwriting Liabilities held for sale VII. 35 32,362,267.88 Non-current liabilities due within VII. 36 3,015,060,105.58 6,149,302,981.65 one year Other current liabilities VII. 37 423,638,804.62 42,961,121.03 Total current liabilities 80,081,661,150.42 81,311,773,814.16 Non-current liabilities: Long-term borrowings VII. 38 15,541,466,325.22 16,036,492,809.81 Bonds payable VII. 39 9,191,896,302.70 6,211,088,362.68 Including: preference shares perpetual bonds Long-term payables VII. 40 106,763,243.99 106,020,029.74 Long-term payables for staff‘s VII. 41 934,974,735.49 950,505,434.38 remuneration Provisions VII. 42 2,839,741,079.48 2,660,788,654.43 Deferred income VII. 43 643,551,987.30 497,141,088.72 Deferred tax liabilities VII. 23 405,343,787.76 343,846,086.34 Other non-current liabilities VII. 44 1,823,866,693.93 1,197,485,422.75 Total non-current liabilities 31,487,604,155.87 28,003,367,888.85 Total liabilities 111,569,265,306.29 109,315,141,703.01 Owners’ equity (or shareholders’ equity): Paid-in capital (or share capital ) VII. 45 6,368,416,700.00 6,097,402,727.00 132 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Other equity instruments VII. 46 904,485,788.71 431,424,524.07 Including: preference shares perpetual bonds Capital reserve VII. 47 2,208,773,474.57 2,312,322,267.08 Less: treasury stock Other comprehensive income VII. 48 772,632,347.35 4,424,024.90 Special reserve Surplus reserve VII. 49 2,288,301,317.10 2,103,057,782.41 General risk provisions Undistributed profits VII. 50 26,859,741,163.95 22,350,952,230.17 Total equity attributable to 39,402,350,791.68 33,299,583,555.63 owners of the Parent Company Minority equity interests 15,727,928,145.82 14,549,620,553.66 Total owners‘ equity (or 55,130,278,937.50 47,849,204,109.29 shareholders‘ equity) Total liabilities and owners‘ 166,699,544,243.79 157,164,345,812.30 equity (or shareholders‘ equity) Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Balance Sheet of the Parent Company 31 December 2018 Prepared by: Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Notes 31 December 2018 31 December 2017 Current Assets: Cash and cash equivalents 7,068,899,574.96 2,070,527,802.97 Financial assets held for trading Financial assets measured at fair value and changes of which included in current profit and loss Derivative financial assets Bills receivable and accounts XVIII. 1 222,622,017.43 288,499,726.07 133 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. receivable Including: bills receivable accounts receivable 222,622,017.43 288,499,726.07 Prepayments 28,809,797.43 20,000,000.00 Other receivables XVIII. 2 2,082,767,166.58 1,206,903,377.12 Inventories 124,773,163.23 89,650,514.91 Contract assets Assets held for sale Non-current assets due within one year Other current assets 109,865,313.53 87,165,597.70 Total current assets 9,637,737,033.16 3,762,747,018.77 Non-current assets: Debt investments Available-for-sale financial 5,818,587.80 assets Other debt investments Held-to-maturity investments Long-term receivables 8,600,000,000.00 Long-term equity investments XVIII. 3 33,844,234,315.30 23,581,254,928.08 Investments in other equity 5,262,480.92 instruments Other non-current financial assets Investment properties Fixed assets 119,546,157.40 118,553,830.32 Construction in progress 37,655,076.18 13,594,976.50 Biological assets for production Oil and gas assets Intangible assets 17,186,540.33 14,601,582.38 Development cost Goodwill Long-term prepaid expenses 5,779,229.64 Deferred tax assets 81,511,748.07 106,347,777.99 Other non-current assets 28,632,829.14 134 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Total non-current assets 34,139,808,376.98 32,440,171,683.07 Total assets 43,777,545,410.14 36,202,918,701.84 Current liabilities: Short-term borrowings 1,500,000,000.00 Financial liabilities held for trading Financial liabilities measured at fair value and changes of which included in current profit and loss Derivative financial liabilities Bills payable and accounts 334,747,358.40 310,387,267.67 payable Receipts in advance 2,465,908,721.32 Contract liabilities 2,391,211,509.89 Payables for staff‘s 65,387,056.03 51,533,384.22 remuneration Taxes payable 67,279,606.39 62,255,803.87 Other payables 21,834,869,774.34 21,268,590,528.36 Including: interest payable dividends payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities 2,089,282.56 12,498,265.43 Total current liabilities 26,195,584,587.61 24,171,173,970.87 Non-current liabilities: Long-term borrowings Bonds payable 2,510,530,062.86 Including: preference shares perpetual bonds Long-term payable 20,000,000.00 20,000,000.00 Long-term payables for staff‘s remuneration Provisions Deferred income 67,360,000.00 37,700,000.00 135 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Deferred tax liabilities 29,485,678.28 36,152,815.34 Other non-current liabilities Total non-current liabilities 2,627,375,741.14 93,852,815.34 Total liabilities 28,822,960,328.75 24,265,026,786.21 Owners’ equity (or shareholders’ equity): Paid-in capital (or share 6,368,416,700.00 6,097,402,727.00 capital ) Other equity instruments 473,061,264.64 Including: preference shares perpetual bonds Capital reserve 4,182,825,672.98 2,317,907,947.71 Less: treasury stock Other comprehensive income 7,791,344.47 -43,234,737.77 Special reserve Surplus reserve 1,683,155,091.65 1,437,313,649.93 Undistributed profits 2,239,335,007.65 2,128,502,328.76 Total owners‘ equity (or 14,954,585,081.39 11,937,891,915.63 shareholders‘ equity) Total liabilities and owners‘ equity (or shareholders‘ 43,777,545,410.14 36,202,918,701.84 equity) Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Consolidated Income Statement January-December 2018 Unit and Currency: RMB Items Notes 2018 2017 Ⅰ.Total operating revenue VII. 51 183,316,560,236.03 163,428,825,488.56 Including: operating revenue VII. 51 183,316,560,236.03 163,428,825,488.56 interest income insurance premiums earned fee and commission income Ⅱ. Total cost of operations 174,866,506,302.15 156,375,381,544.85 136 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Including: operating cost VII. 51 130,154,144,638.08 112,607,222,004.03 interest expenses Fee and commission expenses Insurance withdrawal payment Net payment from indemnity Net provisions withdrew for insurance contract Insurance policy dividend paid Reinsurance cost Taxes and surcharges VII. 52 857,232,037.80 821,897,157.16 Selling expenses VII. 53 28,653,223,738.07 28,996,237,421.82 Administrative expenses VII. 54 8,324,327,164.18 7,164,848,718.59 R&D expenses VII. 55 5,080,604,505.93 4,509,850,773.96 Financial expenses VII. 56 939,176,200.46 1,603,968,750.90 Including: interest expenses 1,464,649,826.98 1,431,139,429.49 interest income 475,642,501.12 332,391,211.97 Loss on assets impairment VII. 57 760,284,186.13 671,356,718.39 Loss on credit impairment VII. 58 97,513,831.50 Add: other income VII. 57 894,644,138.22 912,008,519.02 Investment income (losses are VII. 58 1,923,204,044.99 1,482,994,709.82 represented by ―-‖) Including: Investment income 1,324,848,299.56 1,190,693,804.93 of associates and joint ventures Gains on net exposure hedges (losses are represented by ―-‖) Income from change in fair VII. 61 -145,191,723.49 614,071,259.47 value (losses are represented by ―-‖) Gain from disposal of assets VII. 62 267,800,599.46 13,512,402.32 (losses are represented by ―-‖) Exchange gain (losses are represented by ―-‖) Ⅲ. Operating profit (losses are 11,390,510,993.06 10,076,030,834.34 represented by ―-‖) Add: non-operating income VII. 63 474,156,808.14 689,516,709.14 137 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Less: non-operating expenses VII. 64 235,290,974.40 262,270,333.43 Ⅳ. Total profit (total losses are 11,629,376,826.80 10,503,277,210.05 represented by ―-‖) Less: income tax expense VII. 65 1,858,776,965.55 1,474,868,894.11 Ⅴ. Net profit (net losses are 9,770,599,861.25 9,028,408,315.94 represented by ―-‖) (I) Classification by continuous operation 1. Net profit from continuous operation (net losses are represented 9,770,599,861.25 9,028,408,315.94 by ―-‖) 2. Net profit from discontinued operation (net losses are represented by ―-‖) (II)Classification by ownership of the equity 1. Net profit attributable to 7,440,228,855.90 6,907,629,188.39 shareholders of the Parent Company 2. Profit or loss attributable to 2,330,371,005.35 2,120,779,127.55 minority shareholders VI. Other comprehensive income, net VII. 66 843,463,106.56 -554,105,703.86 of tax Other comprehensive income attributable to owners of the Parent 727,607,989.62 -553,401,257.78 Company, net of tax (I) Other comprehensive income that cannot be reclassified into the 51,065,061.29 -3,683,444.37 profit or loss 1. Changes arising from re-measurement of defined benefit 80,039,412.97 -3,683,444.37 plans 2. Other comprehensive income that cannot be transferred into profit or loss under equity method 3. Changes in fair value of investments in other equity -28,974,351.68 instruments 138 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 4. Changes in fair value of credit risks of the enterprise (II) Other comprehensive income to be reclassified into the 676,542,928.33 -549,717,813.41 profit or loss 1. Other comprehensive income that can be transferred into 166,426,767.08 -307,016,515.96 profit or loss under equity method 2. Changes in fair value of other debt investments 3. Profit or loss from changes in fair value of available-for-sale -3,059,092.10 financial assets 4. Reclassified financial assets that are credited to other comprehensive income 5. Profit or loss arising from reclassification from held-to-maturity investments to available-for-sale financial assets 6. Credit impairment provision for other debt investments 7. Reserve for cash flow hedging (effective portion of profit or -5,946,207.24 11,682,207.38 loss arising from cash flow hedging) 8. Exchange differences on translation of financial statements 516,062,368.49 -251,324,412.73 denominated in foreign currencies 9. Others Other comprehensive income attributable to minority shareholders, 115,855,116.94 -704,446.08 net of tax Ⅶ. Total comprehensive income 10,614,062,967.81 8,474,302,612.08 Total comprehensive income attributable to the owners of Parent 8,167,836,845.52 6,354,227,930.61 Company Total comprehensive income 2,446,226,122.29 2,120,074,681.47 139 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. attributable to the minority shareholders Ⅷ . Earnings per share: (I) Basic earnings per share XIX. 1 1.210 1.133 (RMB/share) (II) Diluted earnings per share XIX. 1 1.182 1.085 (RMB/share) The party being absorbed in the business combination under common control incurred in the current period recorded a net profit of RMB -59,792,419.70 before the combination. Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Income Statement of the Parent Company January-December 2018 Unit and Currency: RMB Items Notes 2018 2017 Ⅰ. Operating revenue XVIII. 4 3,260,311,127.79 3,452,002,347.60 Less: Operation cost XVIII. 4 2,233,751,914.63 2,383,868,807.01 Taxes and surcharges 23,431,092.16 25,962,529.33 Selling expenses 297,812,493.19 223,849,142.89 Administrative expenses 484,750,355.15 468,862,149.99 R&D expenses 234,134,826.42 247,120,344.03 Financial expenses 191,246,337.05 107,748,195.00 Including: interest expenses 288,596,787.96 252,486,855.12 interest income 108,547,077.81 148,760,720.22 Loss in assets impairment 2,609,224.31 9,321,788.24 Loss on credit impairment -974,670.56 Add: Other income 41,275,162.37 104,805,952.53 Investment income (losses are XVIII. 5 2,649,879,889.56 1,290,751,070.45 represented by ―-‖) Including: investment income of associates and joint ventures Gains on net exposure hedges (losses are represented by ―-‖) Income from change in fair 140 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. value (losses are represented by ―-‖) Gain from disposal of assets 25,693.17 (losses are represented by ―-‖) Ⅱ. Operating profit (losses are 2,484,730,300.54 1,380,826,414.09 represented by ―-‖) Add: non-operating income 49,665,765.66 74,298,043.16 Less: non-operating expenses 311,781.90 1,041,948.86 Ⅲ. Total Profit (total losses are 2,534,084,284.30 1,454,082,508.39 represented by ―-‖) Less: income tax expense 75,669,867.06 24,059,104.64 Ⅳ. Net Profit (net losses are 2,458,414,417.24 1,430,023,403.75 represented by ―-‖) (I) Net profit from continuous operations (net losses are represented 2,458,414,417.24 1,430,023,403.75 by ―-‖) (II) Net profit from discontinued operations (net losses are represented by ―-‖) V. Other comprehensive income, net 35,908,964.35 -32,353,134.62 of tax (I) Other comprehensive income that cannot be reclassified into the -472,690.84 profit or loss 1. Changes arising from re-measurement of defined benefit plans 2. Other comprehensive income that cannot be transferred into profit or loss under equity method 3. Changes in fair value of investments in other equity -472,690.84 instruments 4. Changes in fair value of credit risks of the enterprise (II) Other comprehensive income to be reclassified into the profit or 36,381,655.19 -32,353,134.62 loss 141 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 1. Other comprehensive income that can be transferred into profit or 36,381,655.19 -32,642,433.78 loss under equity method 2. Changes in fair value of other debt investments 3. Profit or loss from changes in fair value of available-for-sale 289,299.16 financial assets 4. Reclassified financial assets that are credited to other comprehensive income 5. Profit or loss arising from reclassification from held-to-maturity investments to available-for-sale financial assets 6. Credit impairment provision for other debt investments 7. Reserve for cash flow hedging (Effective portion of profit or loss arising from cash flow hedging) 8. Exchange differences on translation of financial statements denominated in foreign currencies 9. Others VI. Total comprehensive income 2,494,323,381.59 1,397,670,269.13 VII. Earnings per share: (I) Basic earnings per share (RMB/ share) (II) Diluted earnings per share (RMB/share) Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Consolidated Cash Flow Statement January-December 2018 Unit and Currency: RMB 142 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Items Notes 2018 2017 Ⅰ. Cash flow from operating activities: Cash received from the sale of 188,502,180,240.53 167,634,360,394.07 goods and rendering of services Net increase in consumer and inter-bank deposits Net increase in borrowing from the central bank 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 received from interest, fee and commissions Net increase in cash borrowed Net increase in cash received from repurchase operation Refunds of taxes 1,020,648,785.98 1,138,156,799.93 Cash received from other VII. 67 1,399,241,411.60 1,132,225,428.45 related operating activities Sub-total of cash inflows 190,922,070,438.11 169,904,742,622.45 from operating activities Cash paid on purchase of 129,527,764,143.78 113,457,029,529.02 goods and services Net increase in loans and advances of customers Net increase in deposits in the PBOC and inter-bank 143 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Cash paid for compensation payments under original insurance contract Cash paid for interest, fee and commissions Cash paid for insurance policy dividend Cash paid to and on behalf of 19,535,008,791.13 17,488,214,316.24 employees Cash paid for all types of taxes 8,929,864,726.88 7,883,550,053.38 Cash paid to other operation VII. 68 13,995,179,877.16 14,372,163,443.83 related activities Sub-total of cash outflows 171,987,817,538.95 153,200,957,342.47 from operating activities Net cash flow from VII. 73 18,934,252,899.16 16,703,785,279.98 operating activities Ⅱ. Cash flow from investing activities: Cash received from disposal of 732,403,890.79 600,030,958.51 investments Cash received from return on 241,445,771.93 282,045,768.46 investments Net cash received from the disposal of fixed assets, 471,243,957.95 201,509,894.89 intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other 660,267,394.34 23,620,711.45 operating entities Cash received from other VII. 69 124,732,422.41 191,730,448.52 investment related activities Sub-total of cash inflows 2,230,093,437.42 1,298,937,781.83 from investing activities Cash paid on purchase of fixed assets, intangible assets and other 6,757,036,466.58 4,334,646,288.63 long-term assets Cash paid for investments 3,016,793,911.86 2,653,531,765.16 144 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Net increase in secured loans Net cash paid on acquisition of subsidiaries and other operating 103,834,291.75 52,334,438.58 entities Cash paid on other investment VII. 70 18,073,550.00 13,281.59 related activities Sub-total of cash outflows 9,895,738,220.19 7,040,525,773.96 from investing activities Net cash flow from -7,665,644,782.77 -5,741,587,992.13 investing activities Ⅲ. Cash flow from financing activities: Cash received from capital 2,968,757,948.54 1,379,989,798.26 contributions Including: cash received from capital contributions by minority shareholders of subsidiaries Cash received from 12,700,627,739.40 18,694,640,060.56 borrowings Cash received from issuing 2,983,580,454.50 6,796,000,000.00 bonds Cash received from other VII. 71 55,243,447.30 financing related activities Sub-total of cash inflows 18,708,209,589.74 26,870,629,858.82 from financing activities Cash paid on repayment of 22,418,202,111.13 23,246,738,489.11 borrowings Cash paid on distribution of dividends, profits or interest 3,819,915,954.99 2,898,969,569.61 expenses Including: dividend and profit paid to minority shareholders by subsidiaries Cash paid on other financing VII. 72 2,959,445,042.86 214,444,807.19 related activities Sub-total of cash outflows 29,197,563,108.98 26,360,152,865.91 from financing activities 145 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Net cash flow from -10,489,353,519.24 510,476,992.91 financing activities Ⅳ. Effect of fluctuations in exchange rates on cash and 277,347,107.36 -362,172,916.04 cash equivalents Ⅴ. Net increase in cash and 1,056,601,704.51 11,110,501,364.72 cash equivalents Add: balance of cash and cash equivalents at the beginning of VII. 74 34,988,175,709.53 23,877,674,344.81 the period Ⅵ. Balance of cash and cash equivalents at the end of the VII. 74 36,044,777,414.04 34,988,175,709.53 period Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Cash Flow Statement of the Parent Company January-December 2018 Unit and Currency: RMB Items Notes 2018 2017 Ⅰ. Cash flow from operating activities: Cash received from the sale of 1,919,626,804.58 3,062,693,505.16 goods and rendering of services Refunds of taxes 30,486,213.87 27,750,963.05 Cash received from other 153,333,607.15 104,679,759.70 related operating activities Sub-total of cash inflows 2,103,446,625.60 3,195,124,227.91 from operating activities Cash paid on purchase of 902,047,204.49 2,094,136,731.85 goods and services Cash paid to and on behalf of 786,264,085.93 679,495,971.97 employees Cash paid for all types of taxes 195,198,666.67 181,894,997.28 Cash paid to other operation 187,916,659.58 194,723,652.37 related activities 146 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Sub-total of cash outflows 2,071,426,616.67 3,150,251,353.47 from operating activities Net cash flow from operating 32,020,008.93 44,872,874.44 activities Ⅱ. Cash flow from investing activities: Cash received from disposal of 505,207,895.00 investments Cash received from return on 1,173,089,808.18 421,211,612.57 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 20,000,000.00 investment related activities Sub-total of cash inflows 1,678,297,703.18 441,211,612.57 from investing activities Cash paid on purchase of fixed assets, intangible assets and other 67,865,088.69 32,789,662.23 long-term assets Cash paid for investments 1,291,347,820.45 1,006,813,576.50 Net cash paid on acquisition of subsidiaries and other operating entities Cash paid on other investment related activities Sub-total of cash outflows 1,359,212,909.14 1,039,603,238.73 from investing activities Net cash flow from 319,084,794.04 -598,391,626.16 investing activities Ⅲ. Cash flow from financing activities: Cash received from capital 2,187,186,732.01 147 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. contributions Cash received from 1,500,000,000.00 borrowings Cash received from issuing 2,983,580,454.50 bonds Cash received from other 326,374,080.44 462,368,825.80 financing related activities Sub-total of cash inflows 6,997,141,266.95 462,368,825.80 from financing activities Cash paid on repayment of borrowings Cash paid on distribution of dividends, profits or interest 2,280,582,650.27 1,725,900,890.96 expenses Cash paid on other financing 52,345,130.43 1,041,960.00 related activities Sub-total of cash outflows 2,332,927,780.70 1,726,942,850.96 from financing activities Net cash flow from 4,664,213,486.25 -1,264,574,025.16 financing activities Ⅳ. Effect of fluctuations in exchange rates on cash and -16,946,517.23 -2,820.43 cash equivalents Ⅴ. Net increase in cash and 4,998,371,771.99 -1,818,095,597.31 cash equivalents Add: balance of cash and cash equivalents at the beginning of 2,070,527,802.97 3,888,623,400.28 the period Ⅵ. Balance of cash and cash equivalents at the end of the 7,068,899,574.96 2,070,527,802.97 period Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke 148 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Consolidated Statement of Changes in Owner’s Equity January-December 2018 Unit and Currency: RMB 2018 Equity attributable to owners of the Parent Company Total Minority Items Other equity Other General owners‘ Less: Undistri equity Share instruments Capital compreh Special Surplus risk treasury buted equity capital Preferen Perpetua reserve ensive reserve reserve provisio Others stock profits ce share l bonds income n Ⅰ . Closing balance for the 6,097,402 431,424,524. 826,883,093.8 -36,363,809.9 2,103,057,78 22,793,110,88 14,534,490,935.9 46,750,006,137.3 previous year ,727.00 07 4 6 2.41 4.09 1 6 Add: changes in accounting -54,905,584.4 40,604,722.79 -7,036,266.71 -21,337,128.37 policies 5 Error correction for prior year Business combination 1,485,439,173 -442,158,653. 40,787,834.86 15,129,617.75 1,099,197,971.93 under common control .24 92 Others - Ⅱ. Opening balance for the 6,097,402 431,424,524. 2,312,322,267 2,103,057,78 22,296,046,64 14,542,584,286.9 47,827,866,980.9 45,028,747.69 current year ,727.00 07 .08 2.41 5.72 5 2 Ⅲ. Increase/decrease for the 271,013,9 473,061,264. -103,548,792. 727,603,599.6 185,243,534. 4,563,694,518 current period (decrease is 1,185,343,858.87 7,302,411,956.58 73.00 64 51 6 69 .23 represented by ―-‖) (I) Total comprehensive 727,607,989.6 7,440,228,855 10,614,062,967.8 2,446,226,122.29 income 2 .90 1 (II) Capital contribution and 271,013,9 473,061,264. -103,548,792. -4,389.96 -60,597,907. -545,381,163. -692,115,415.19 -657,572,430.37 149 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. withdrawal by shareholders 73.00 64 51 03 32 1. Ordinary shares invested 271,013,9 -125,885,336. -692,115,415.19 -546,986,778.87 by shareholders 73.00 68 2. Capital contribution by 473,061,264. holders of other equity 473,061,264.64 64 instruments 3. Share-based payment included in shareholders‘ equity 4. Others -60,597,907. -545,381,163. 22,336,544.17 -4,389.96 -583,646,916.14 03 32 (III) Profit distribution 245,841,441. -2,331,153,17 -2,654,078,580.8 -568,766,848.23 72 4.35 6 1. Appropriation of surplus 245,841,441. -245,841,441. reserves 72 72 2. Appropriation of provisions for general risks 3. Distribution to owners (or -2,085,311,73 -2,654,078,580.8 -568,766,848.23 shareholders) 2.63 6 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 150 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. share capital) 3. Surplus reserves used for remedying loss 4. Changes in defined benefit plans carried forward to retained earnings 5. Other comprehensive income carried forward to retained earnings 6. Others (V) Special reserve 1. Appropriation for the period 2. Utilization for the period (VI) Others Ⅳ. Closing balance for the 6,368,416 904,485,788. 2,208,773,474 772,632,347.3 2,288,301,31 26,859,741,16 15,727,928,145.8 55,130,278,937.5 period ,700.00 71 .57 5 7.10 3.95 2 0 2017 Equity attributable to owners of the Parent Company Total Minority Items Other equity Other General owners‘ Less: Undistri equity Share instruments Capital compreh Special Surplus risk treasury buted equity capital Preferen Perpetua reserve ensive reserve reserve provisio Others stock profits ce share l bonds income n Ⅰ. Closing balance for the 6,097,630 566,987,435.5 2,076,460,077 17,614,768,75 11,242,352,161.1 37,680,540,387.7 83,383,194.51 1,041,960.00 previous year ,727.00 7 .78 1.70 6 2 151 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Add: changes in accounting policies Error correction for prior year Business combination 1,166,287,869 -423,995,521. -9,162,152.89 3,910,765.98 737,040,961.90 under common control .85 04 Others Ⅱ. Opening balance for the 6,097,630 1,249,671,064 557,825,282.6 2,076,460,077 17,190,773,23 11,246,262,927.1 38,417,581,349.6 1,041,960.00 current year ,727.00 .36 8 .78 0.66 4 2 Ⅲ. Increase/decrease for the -228,000. 431,424,524. 1,062,651,202 -553,401,257. 5,160,178,999 current period (decrease is -1,041,960.00 26,597,704.63 3,303,357,626.52 9,431,622,759.67 00 07 .72 78 .51 represented by ―-‖) (I) Total comprehensive -553,401,257. 6,907,629,188 2,120,074,681.47 8,474,302,612.08 income 78 .39 (II) Capital contribution and -228,000. 431,424,524. 1,062,651,202 -20,869,660.7 -187,826,947. -1,041,960.00 1,468,630,144.08 2,754,823,222.92 withdrawal by shareholders 00 07 .72 9 16 1. Ordinary shares invested 1,468,630,144.08 1,468,630,144.08 by shareholders 2. Capital contribution by 431,424,524. holders of other equity 431,424,524.07 07 - instruments 3. Share-based payment included in owners‘ equity 4. Others -228,000. 1,062,651,202 -20,869,660.7 -187,826,947. -1,041,960.00 854,768,554.77 00 .72 9 16 (III) Profit distribution -1,559,623,24 -1,797,503,075.3 47,467,365.42 -285,347,199.03 1.72 3 152 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 1. Appropriation of surplus -47,467,365.4 47,467,365.42 reserves 2 2. Appropriation of provisions for general risks 3. Distribution to owners (or -1,512,155,87 -1,797,503,075.3 -285,347,199.03 shareholders) 6.30 3 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. Changes in defined benefit plans carried forward to retained earnings 5. Other comprehensive income carried forward to retained earnings 6. Others (V) Special reserve 1. Appropriation for the 153 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. period 2. Utilization for the period (VI) Others Ⅳ. Closing balance for the 6,097,402 431,424,524. 2,312,322,267 2,103,057,782 22,350,952,23 14,549,620,553.6 47,849,204,109.2 4,424,024.90 period ,727.00 07 .08 .41 0.17 6 9 Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke Statement of Changes in Owners’ Equity of the Parent Company January-December 2018 Unit and Currency: RMB 2018 Other equity Other Less: Total Items Share instruments Capital comprehen Undistribu treasury Special Surplus owners‘ capital reserve sive reserve reserve ted profits Preference Perpetual stock equity Others income share bonds Ⅰ. Closing balance for the 6,097,402,72 2,317,907,94 1,437,313,649. 2,128,502,328. 11,937,891,915. -43,234,737.77 previous year 7.00 7.71 93 76 63 Add: changes in accounting 15,117,117.89 -16,428,564.00 -1,311,446.11 policies Error correction for prior year Others Ⅱ. Opening balance for the 6,097,402,72 2,317,907,94 1,437,313,649. 2,112,073,764. 11,936,580,469. -28,117,619.88 current year 7.00 7.71 93 76 52 Ⅲ. Increase/decrease for the 271,013,973. 473,061,264.6 1,864,917,72 3,018,004,611.8 35,908,964.35 245,841,441.72 127,261,242.89 current period (decrease is 00 4 5.27 7 154 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. represented by ―-‖) (I) Total comprehensive 2,458,414,417. 2,494,323,381.5 35,908,964.35 income 24 9 (II) Capital contribution and 271,013,973. 473,061,264.6 1,864,917,72 2,608,992,962.9 withdrawal by shareholders 00 4 5.27 1 1. Ordinary shares invested by 271,013,973. 1,861,549,59 2,132,563,563.4 owners 00 - 0.47 7 2. Capital contribution by 473,061,264.6 holders of other equity 473,061,264.64 4 instruments 3. Share-based payment included in owners‘ equity 4. Others 3,368,134.80 3,368,134.80 (III) Profit distribution -2,331,153,174.-2,085,311,732.6 245,841,441.72 35 3 1. Appropriation of surplus -245,841,441.7 245,841,441.72 reserves 2 2. Distribution to owners (or -2,085,311,732.-2,085,311,732.6 shareholders) 63 3 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 155 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. remedying loss 4. Changes in defined benefit plans carried forward to retained earnings 5. Other comprehensive income carried forward to retained earnings 6.Others (V) Special reserve 1. Appropriation for the period 2. Utilization for the period (VI) Others IV. Closing balance for the 6,368,416,70 473,061,264.6 4,182,825,67 1,683,155,091. 2,239,335,007. 14,954,585,081. 7,791,344.47 period 0.00 4 2.98 65 65 39 2017 Other equity Other Less: Total Items Share instruments Capital comprehen Undistribu treasury Special Surplus owners‘ capital reserve sive reserve reserve ted profits Preference Perpetual stock equity Others income share bonds Ⅰ. Closing balance for the 6,097,630,72 2,061,597,73 1,389,846,284.5 2,258,102,166.7 11,795,253,354. 1,041,960.00 -10,881,603.15 previous year 7.00 9.78 1 3 87 Add: changes in accounting policies Error correction for prior 156 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. year Others Ⅱ. Opening balance for the 6,097,630,72 2,061,597,73 1,389,846,284.5 2,258,102,166.7 11,795,253,354. 1,041,960.00 -10,881,603.15 current year 7.00 9.78 1 3 87 Ⅲ. Increase/decrease for the 256,310,207. current period (decrease is -228,000.00 -1,041,960.00 -32,353,134.62 47,467,365.42 -129,599,837.97 142,638,560.76 93 represented by ―-‖) (I) Total comprehensive 1,430,023,403.7 1,397,670,269.1 -32,353,134.62 income 5 3 (II) Capital contribution and 256,310,207. -228,000.00 -1,041,960.00 257,124,167.93 withdrawal by shareholders 93 1. Ordinary shares invested -15,248,846. -228,000.00 -1,041,960.00 -14,434,886.94 by owners 94 Capital contribution by holders of other equity instruments 2. Share-based payment included in owners‘ equity 4. Others 271,559,054. 271,559,054.87 87 (III) Profit distribution -1,559,623,241. -1,512,155,876. 47,467,365.42 72 30 1. Appropriation of surplus 47,467,365.42 -47,467,365.42 reserves 2. Distribution to owners (or -1,512,155,876. -1,512,155,876. shareholders) 30 30 3. Others 157 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (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 3. Changes in defined benefit plans carried forward to retained earnings 4. Other comprehensive income carried forward to retained earnings 5. Others (V) Special reserve 1. Appropriation for the period 2. Utilization for the period (VI) Others IV. Closing balance for the 6,097,402,72 2,317,907,94 1,437,313,649.9 2,128,502,328.7 11,937,891,915. -43,234,737.77 period 7.00 7.71 3 6 63 Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke 158 / 333 2018 Annual Report of 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 TiGai [1989] No.3 on 24 March 1989, based on the reconstruction of the original Qingdao Refrigerator Factory, a limited company was set up by directional fund raising of RMB150 million. In March and September 1993, as approved by the document of Qing Gu Ling Zi [1993] No. 2 and No. 9 issued by the pilot leading team of Qingdao joint stock company, the Company was converted from a directional offering company to a public subscription company and issued additional 50million shares to the public and listed with trading on Shanghai Stock Exchange in November 1993. The Company‘s registered office is located at the Haier Industrial Park of Laoshan District, Qingdao, Shandong Province, and the headquarters is located at the Haier Industrial Park of Laoshan District, Qingdao, Shandong Province. 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. In the opinion of the directors, the ultimate holding company of the Company is Haier Group Corporation (―Haier Corp‖), which is established in the PRC. These financial statements have been approved for publication by the Board of the Company on 29 April 2019. Under the Company‘s Articles of Association, these financial statements shall be submitted for consideration at general meetings. 2. Scope of consolidated financial statements √Applicable □ Not Applicable For details of changes in the scope of consolidated financial statements for the current period, please refer to ―VI. Changes in Consolidation Scope‖ and ―VII. Interest 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 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 159 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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. Continuous 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.10); the measurement of inventories (Note V.11); the depreciation and amortization of the investment properties (Note V.13); the depreciation of fixed assets (Note V.14), the amortization of intangible assets (Note V.17), the criterion for determining of long-term assets impairment (Note V.18); and the date of revenue recognition (Note V.23), 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, operation result, changes in shareholders‘ equity and cash flow of the Company. 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. 160 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 5. Accounting methods of business combinations under common control and not under common control √Applicable □ Not Applicable A business combination is a transaction or event that brings together two or more separate entities into one reporting entity. Business combinations are classified into business combinations under common control and business combinations not under common control. (1) Business combinations under common control A business combination under common control is a business combination in which all of the combining entities are ultimately controlled by the same party or parties both before and after the combination, and that control is not transitory. For business combination under common control, the party that obtains the control over the other parties on the combination date is the acquirer, and other parties involving in the business combination are the transferors. The combination date is the date on which the acquiring party effectively obtains the control over the party being acquired. In case the consideration for long-term equity investments formed in business combination under common control is paid by ways of cash, transfer of non-cash assets or assumption of debts, the Company will regard the share of carrying amounts of the net assets of the transferor in the ultimate controller‘s consolidated financial statements obtained as the initial investment cost of long-term equity investments as at the date of combination. For carrying value of net assets of the transferor is negative as at the date of combination, investment cost of long-term equity investment is calculated as zero. In case the transferor is controlled by the ultimate controller by the business combination under non-common control before combination, the initial investment cost of the long-term equity investment of the acquirer includes relevant goodwill. The Company should adjust the capital reserve (capital premium or share premium) in accordance with the differences between initial investment cost of the long-term equity investment and the cash paid, the non-cash assets transferred and the carrying value of liability assumed; in case the balance of the capital reserve (capital premium or share premium) is insufficient for the elimination, the surplus reserves and undistributed profits shall be used to dilute such expenses in order. In case 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 161 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. investment cost of long-term equity investments and aggregate nominal value of shares issued shall be adjusted to capital reserve (capital premium or share premium), in case the capital reserve (capital premium or share premium) is insufficient for the elimination, the surplus reserves and undistributed profits shall be used to dilute such expenses in order. Intermediary fees (such as audit, legal services and valuation consultancy) and other relevant management fees incurred in the business combination by the acquirer are credited in profit or loss in the period when they occurred. Trading expenses in direct relation to the issuance of equity instrument as the consideration for the combination is written down to the capital reserve (share premium), where the capital reserve (share premium) is insufficient, and to surplus reserves and undistributed profits in order. Trading expenses in direct relation to the issuance of debt instrument as the consideration for the combination is included in the initial recognition amount of the debt instrument. For business combination under common control realized through several transactions step by step, in case of a package transaction, all the transactions are accounted as one transaction that has acquired the control; in case of not a package transaction, in the financial statement of parent company the capital reserve ( share premium) is adjusted by the difference between the initial investment cost and the sum of the carrying value of the original long-term equity investment and the book value of the new payment consideration for further acquisition of shares with the share of acquirer's owner's equity on the date of combination in case calculated on the proportion of shareholding on the date of combination as its initial investment cost; where the capital reserve is insufficient, the retained earnings will be used to offset such expenses. In the consolidated financial statements, the long-term equity investment held by the combining party before the date of acquiring control of the combined parties, and the profit and loss, the other comprehensive income and changes in the other owners‘ equity recognized during the period between the later of the date of acquisition and the date when the combining and the combined parties are under the common control of the same party and the date of combination, are written down to the retained earnings or profit or loss at the beginning of the comparative reporting period, respectively. (2) Business combinations involving entities not under common control 162 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. A business combination not under common control is an business combination in which all of the combining entities are not ultimately controlled by the same party or parties both before and after the combination. For business combination not under common control, the party that obtains the control of the other parties at the combination date is the acquirer; other parties involving in the business combination are the transferors. The combination date is the date on which the acquirer effectively obtains control of the transferors. In business combination involving entities not under common control, the cost of combination shall be the sum of the assets paid, obligations incurred or assumed and the fair value of the equity securities issued by the acquirer for obtaining control of the transferor at the date of acquisition. Intermediary fees (such as audit, legal services and valuation consultancy) and other relevant management fees incurred by the acquirer for the purpose of business combination are credited in profit or loss in the period when they occurred. Transaction fees for the equity instruments or debt instruments issued by the acquirer as combination consideration is included in the initial recognition amount of such equity instruments or debt instruments. Contingent consideration involved shall be recorded as the combination cost based on its fair value on the acquisition date. Should any new or further evidence arise within 12 months after the acquisition date and makes it necessary to adjust the contingent consideration on the acquisition date, the goodwill arising from the business combination shall be amended accordingly. The cost of combination and identifiable net assets obtained by the acquirer in an business combination are measured at fair value on the acquisition date. Where the cost of the combination exceeds the acquirer‘s interest in the fair value of the transferor‘s identifiable net assets, the difference is recognized as goodwill; where the cost of combination is lower than the acquirer‘s interest in the fair value of the transferor‘s identifiable net assets, the difference is initially recognized in profit or loss for the current year after a review of computation for the identifiable assets, liabilities or fair value of contingent liabilities and combination cost, and where the combination cost is still lower than the fair value of the identifiable net assets of the transferor obtained during the course of combination, then the difference is recorded in the profit and loss. In business combination involving entities not under common control that is realized in phases through multiple exchange transactions, in the Company individual financial statements, the sum of the 163 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. book value of the equity investment of the transferor held before the date of acquisition and the cost of new investment on the date of acquisition are recognized as the initial investment cost of such investment. In the consolidated financial statement, the equity of the transferor held before the date of acquisition is re-measured at the fair value on the date of acquisition, and the difference between the fair value and book value is included in current investment income; where the equity of the transferor held before the date of acquisition involves the other comprehensive income, such equity and relevant other comprehensive income are transferred to current investment income on the date of acquisition, other than the other comprehensive income that cannot be reclassified in the profit or loss. The fair value on the acquisition date of equity interest in the transferor prior to the acquisition date and the fair value of the considerations paid for the acquisition of the new equity on the acquisition date are regarded as the combination costs of the Company, comparing with acquirer's share of the fair value on the acquisition date of the transferor's net identifiable assets on the proportion of the shareholding on the acquisition date to confirm the goodwill that required to be recognized on the acquisition date or the amount that shall be included in the profit or loss. 6. Preparation method of consolidated financial statements √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 164 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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 owner‘s equity item in the consolidated balance sheet. The long-term equity investment of the Company held by the subsidiaries, deemed as treasury stock of the corporate group as well as the reduction of owners‘ equity, shall be presented as ―Less: Treasury stock‖ under the owner‘s equity item in the consolidated balance sheet. (4) Accounting treatment of subsidiaries acquired from combination For subsidiaries acquired from business combination under common control, the assets, liabilities, operating results and cash flow 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 business 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 165 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. of the Company; (3) recognize revenue from disposal of joint operations in appropriation to the share of the Company; (4) recognize revenue from disposal of joint operations in appropriation to the share of the Company; (5) recognize fees solely occurred by the Company and recognize fees from joint operations in appropriation to the share of the Company. When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets do not constitute a business, the same below) from joint operations, the Company shall only recognize the part of profit or lost from this transaction attributable to other parties of joint operations before these assets are sold to a third party. In case of an impairment loss incurred on these assets which meets the requirements as set out in ―Accounting Standards for Business Enterprises No. 8 – Asset Impairment‖, the Company shall full recognize the amount of this loss in relation to its investment in or sale of assets to joint operations or recognize the loss according to the Company‘s share of commitment in relation to the its purchase of assets from joint operations. Joint ventures refer to a joint arrangement during which the Company only is entitled to net assets of this arrangement. Investment in joint venture is accounted for using the equity method according to the accounting policies referred to under ―13 Long-term equity investment‖ of Note V. 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 166 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. rates of exchange ruling at the balance sheet date. All foreign exchange difference are credited in the profit or loss, except ①those 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; ②those arising from the other changes in the balance other than amortized cost of available-for-sale monetary items denominated in foreign currency are recognized in the other comprehensive income. Non-monetary items in foreign currency measured at historical cost are translated using the spot exchange rate prevailing on the date when transaction occurred and its functional currency shall remain unchanged. Non-monetary items denominated in foreign currencies that are measured at fair value are translated using the foreign exchange rate at the date the fair value is determined; the exchange differences between the translated and original amounts of functional currencies are recognized in the statement of profit or loss or other comprehensive income as changes in fair value (including changes in exchange rate). (2) Translation of foreign currency financial statements If the functional currencies used as the bookkeeping base currency by the subsidiaries, joint ventures and associates under the control of the Company are different from that of the Company, their financial statements denominated in foreign currencies shall be translated to perform accounting and prepare the consolidated financial statements. The assets and liabilities of the balance sheet are translated using the spot exchange rate at the balance sheet date; all items except for ―undistributed profits‖ of the owner‘s equity are translated at the spot exchange rate on the transaction date. The revenue and expenses in the income statement are translated using the approximate rate of the spot exchange rate on the transaction date. Differences arising from the translation of foreign currency financial statements are presented as the ―other comprehensive income‖ in the owner‘s equity of the balance sheet. Foreign currency cash flow 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. 167 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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 in the current period of disposal. 10. Financial instruments √Applicable □ Not Applicable A financial instrument refers to any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. A financial asset or financial liability is recognized when the Company becomes a party to the contract of a financial instrument. (1) Financial assets 1) Classification and measurement According to the business model for managing financial assets and the contractual cash flow characteristics of financial assets, the Company classifies financial assets into: (1) Financial assets measured at amortized cost; (2) financial assets measured at fair value through other comprehensive income; (3) financial assets measured at fair value through profit or loss of the current period. Financial assets are measured at fair value upon initial recognition. For financial assets measured at fair value through profit and loss of the current period, related transaction costs are directly included in profit and loss of the current period; for other types of financial assets, related transaction costs are included in their initial recognized amounts. For the accounts receivable or bills receivable arising from the sale of products or the provision of labor services that do not contain or consider the significant financing components, the Company shall take the consideration amount entitled to be received as the initial recognized amount. a. Debt instrument The debt instruments held by the Company refer to the tools that are in conformity with the definition of financial liability from the perspective of the issuing party, which are measured in the following three ways, respectively: (a) Measured at amortized cost: The Company's business model for managing such financial assets is: With the aim of obtaining 168 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. contractual cash flow, the contractual cash flow characteristics of such financial assets shall be consistent with the basic lending arrangements, that is, the cash flow generated on a specific date is only the payment for the principal and the interest based on the outstanding principal amount. For such financial assets, the Company recognizes the interest income in accordance with the effective interest method. Such financial assets mainly include cash and cash equivalents, bills receivable and accounts receivable, other receivables, creditor's right investment and long-term receivables. The Company lists the creditor's rights investments and long-term receivables matured within one year (including one year) from the balance sheet date as non-current assets matured within one year; the creditor's rights investments matured within one year (including one year) when being obtained are listed as other current assets. (b) Measured at fair value through other comprehensive income: The Company's business mode for managing such financial assets is: With the aim of obtaining contractual cash flow and selling the financial assets, the contractual cash flow characteristics of such financial assets shall be consistent with the basic lending arrangements. Such financial assets are measured at fair value through other comprehensive income, but impairment gains and losses, exchange gains and losses, and interest income calculated by the effective interest method are included in profit and loss of the current period. Such financial assets are listed as other creditor's rights investments. Other creditor's rights investments matured within one year (including one year) from the balance sheet date are listed as non-current assets matured within one year; other creditor's rights investments matured within one year (including one year) when being obtained are listed as other current assets. (c) Measured at fair value through profit or loss of the current period: The Company lists its held debt instruments that are neither measured at amortized cost nor at fair value through other comprehensive income as financial assets held for trading measured at fair value through profit or loss of the current period. At the time of initial recognition, in order to eliminate or significantly reduce accounting mismatch, the Company designated some financial assets as financial assets measured at fair value through profit or loss of the current period. Investments that are matured more than one year and are expected to be held for more than one year from the balance sheet date are listed as other non-current financial assets. b. Equity instruments 169 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The Company lists equity instrument investments that have no control, joint control and significant influence on itself as financial assets held for trading measured at fair value through profit or loss of the current period; investments that are expected to be held for more than one year from the balance sheet date are listed as other non-current financial assets. In addition, the Company designated some non-trading equity instrument investments as financial assets measured at fair value through other comprehensive income, which are listed as other equity instrument investments. The relevant dividends and interest income of such financial assets are included in profit and loss of the current period. 2) Impairment For financial assets measured at amortized cost and debt instrument investments measured at fair value through other comprehensive income, contract assets and financial guarantee contracts, the Company recognizes the loss provision based on the expected credit losses. The Company considers reasonable and reliable information about past events, current conditions and forecasts of future economic conditions, and takes the risk of default as a weight, and calculates the probability-weighted amount of the present value of the difference between the cash flow receivable and the cash flow expected to be received of the contract to confirm the expected credit losses. On each balance sheet date, the Company measures the expected credit losses of financial instruments in different phases. If the credit risk has not increased significantly since the initial recognition, the financial instruments are in the first phase. The Company measures the loss provision according to the expected credit losses in the next 12 months; if credit risk has increased significantly but credit impairment has not yet occurred since the initial recognition, the financial instruments are in the second phase. The Company measures the loss provision according to the expected credit losses of the instruments during the entire duration; if credit impairment has occurred since the initial recognition, the financial instruments are in the third phase. The Company measures the loss provision according to the expected credit losses of the instruments during the entire duration. For financial instruments with lower credit risk on the balance sheet date, the Company measures the loss provision according to the expected credit losses in the next 12 months, assuming that its credit risk has not increased significantly since the initial recognition. For financial instruments in the first phase and second phase and financial instruments with 170 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. relatively lower credit risk, the Company calculates interest income based on their book balance before the deduction of provisions and effective interest rate. For financial instruments in the third phase, the Company calculates interest income based on their amortized cost after the impairment provision has been deducted from the book balance and effective interest rate. For bills receivable, accounts receivable and contractual assets, whether there exist significant financing components, the Company measures loss provision based on expected credit loss over the entire duration. The Company classifies accounts receivable into groups on the basis of shared credit risk characteristics, and calculates the expected credit losses on groups, the bases of group determination are as follows: For each group of bills receivable, the Company applies exposure at default and expected credit losses rate over the entire duration to calculate the expected credit losses by taking into account the historical credit losses experience, the existing conditions and forecast of future economic conditions. For each group of accounts receivable, the Company makes the comparison of expected credit losses rates of accounts receivable in overdue days and over the entire duration to calculate the expected credit losses by taking into account the historical credit losses experience, the existing conditions and forecast of future economic conditions. For each group of other accounts receivable, the Company applies exposure at default and expected credit losses rate within the next 12 months or over the entire duration to calculate the expected credit losses by taking into account the historical credit losses experience, the existing conditions and forecast of future economic conditions. The Company recognizes the loss impairment provision or reversed in profit or loss of the current period. For held debt instruments at fair value through other comprehensive income, the Company recognizes loss/gain on impairment in profit or loss of the current period, and adjusts other comprehensive income at the same time. 3) Derecognition A financial asset is derecognized when any of the below criteria is met: a. the contractual rights to receive the cash flow from the financial asset have been transferred; b. the financial asset has been transferred and the Company transfers substantially all the risks and rewards of ownership of the 171 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. financial asset to the transferee; c. the financial asset has been transferred and the Company has not retained control of the financial asset, although the Company neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset. On de-recognition of other equity instruments investment, the difference between the book balance and the sum of the consideration received and any cumulative profit or loss of fair value that had been recognized in other comprehensive income is recognized in the retained earnings. On de-recognition of other financial assets, the difference between the book balance and the sum of the consideration received and any cumulative profit or loss of fair value that had been recognized in other comprehensive income is recognized in the profit and loss of the current period. (2) Financial liabilities Financial liabilities are classified as financial liabilities measured at amortized cost and financial liabilities at fair value through profit and loss of the current period at initial recognition. The financial liabilities of the Company are financial liabilities measured at amortized cost, including bills payable, accounts payable, other payables, borrowings, bonds payable, etc. Such financial liabilities are recognized initially at fair value less transaction costs and subsequently measured using the effective interest method. Financial liabilities with a maturity of less than one year (including one year) are listed as current liabilities: those with maturity of more than one year but are mature within one year from the balance sheet date (including one year) are listed as non-current liabilities due within one year; the rest are presented as non-current liabilities. When all or partial current obligations of financial liabilities have been discharged, such financial liabilities or the part with obligations discharged are derecognized by the Company. The difference between the carrying amount of a financial liability de-recognized and the consideration paid is recognized in the profit and loss of the current period. (3) Determination of fair value of financial instruments The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the active market. The fair value of a financial instrument that is not traded in an active market is determined by using a valuation technique. During the valuation, the Company adopts an applicable valuation technique under current conditions and there are enough available data and other information to support. Those inputs should be consistent with the inputs a market participant would use when 172 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. pricing the asset or liability, and the Company should maximize the use of relevant observable inputs. When related observable inputs can‘t be acquired or are not feasible to be acquired, then use unobservable inputs. (4) Significant accounting estimates and judgments 1) Significant accounting estimates and key assumptions Measurement of expected credit loss The Company applies exposure at default and expected credit loss rate to calculate expected credit loss, and determines expected credit loss rate based on probability of default and loss given default. For the determination of expected credit loss rate, the Company applies data including internal historical credit losses experience, and adjusts historical data taking account current conditions and forward-looking information. Regarding forward-looking information, indicators used by the Company include economic downturn risk, growth in expected unemployment rate, changes in external market environment, technology environment and customer status. The Company monitors and reviews assumptions related to the calculation of expected credit loss on a regular basis. No major change occurred in the above-mentioned estimate techniques and key assumptions in 2018. ②Critical judgments on application of accounting policies a. Classification of financial assets On classification of financial assets, critical judgments considered by the Company include the business mode, an analysis of contractual cash flow characteristics and others. From the dimension of financial asset portfolio, the Company determines the business mode of financial asset management. Considerations cover assessments, reporting methods of financial asset performance to key management personnel, risks impacting financial asset performance and relevant management methods, as well as methods of relevant business management personnel receiving remuneration. In assessing the consistency between contractual cash flow of financial assets and the basic lending arrangements, the Company makes the following major judgments: Whether the time distribution or amount of the principal changes during the duration of the financial assets due to prepayment, etc; and whether the interest includes considerations for the currency time value, credit risk, as well as other basic borrowing risks, costs and profits. For example, whether the prepayment amount merely reflects 173 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. the principal unpaid and interest incurred by the principal unpaid, as well as reasonable compensation paid due to premature termination of contracts. b. Judgment that credit risk increases significantly The main standards for the Company to judge significant increase in credit risk are that overdue days are more than 30 days, or that significant changes occur in one or more of the following indicators: Business environment of debtors, internal and external credit rating, actual or expected business performance, value of collaterals or significant drop in credit rating of guarantors. The main standards for the Company to judge incurred credit impairment are that overdue days are more than 90 days (i.e. default occurred), or that one or more of the following conditions are met: a debtor is under significant financial difficulty; other ongoing debt restructuring or high possibility of bankruptcy. 11. Inventories √Applicable □ Not Applicable (1) Classification of inventories: Inventories refer to the finished goods or commodities held for sale in daily activities, goods in progress in the production process, consumed materials and supplies in the production process or providing services of the Company, which mainly include raw materials, revolving materials, entrusted processed materials, wrap page, low-cost consumables, goods in progress, self-made semi-finished goods, finished goods (merchandise inventory) and engineering construction, etc. (2) Measurement of inventories transferred out At delivery, inventories are accounted using the weighted average method (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 174 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. inventory held for performance of sales contract or labor service contract is determined based on the contractual price; in case the amount of inventory held by the enterprise exceeds the contractual amount, the net realizable value of the excess portion of inventory is calculated using the normal saleable price. Provision for impairment of inventories is made for individual inventory. For items of inventories that is produced and marketed in the same geographical area and with the same or similar end uses or purposes, which cannot be practicable evaluated separately from other items, cost and net realizable value of inventories may be determined on an aggregate basis. For large quantity and low value items of inventories, cost and net realizable value of inventories may be determined on types of inventories. Provision for impairment of inventories is made and recognized as profit or loss when the cost is higher than the net realizable value on the balance sheet date. If the factors that give rise to the provision in prior years are not in effect in current year, provision would be reversed within the impaired cost, and recognized in the profit or loss. (4) Inventory system The Company adopts perpetual inventory system. (5) Amortization of low-value consumables and packaging Low-value consumables and packages of the Company are amortized by one-time write-off. 12. 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 ①For 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; 175 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. ②For the long-term equity investment acquired in a manner other than business 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 Where the investor has a control over the investee, long-term equity investments are measured using cost method. For long-term equity investments using cost method, unless increasing or reducing the investment, the carrying value is unchanged. The Company‘s share of the profit distributions or cash dividends declared by the investee are recognized as investment income. ② Equity method Investor‘s long-term equity investments in associates and joint ventures are measured using equity method. Where part of the equity investments of an investor in its associates are held indirectly through venture investment institutions, common fund, trust companies or other similar entities including investment linked insurance funds, such part of equity investments indirectly held by the investor shall be measured at fair value through profit or loss according to relevant requirements of Accounting Standards for Business Enterprises No.22—Recognition 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. 176 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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 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 177 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. equity method when changing the equity method. ② Change of measurement at fair value or accounting under equity method to cost method: the equity investment of the investee held by the investor with no control, joint control or significant impact and accounted according to the financial instrument recognition and measurement criteria, or the long-term equity investment in associates or joint venture originally held that can control the investee due to addition of investment, shall be accounted in accordance with the long-term equity investment formed by combination of enterprises. ③ Change of accounting under equity method to measurement at fair value: the long-term equity investment originally held with common control or significant impact on the investee that cannot conduct common control or significant impact on the investee due to the decrease of shareholding as a result of factors such as partial disposal, shall be accounted in accordance with Standards for Recognition and Measurement of Financial Instruments, and the difference between the fair value on the date when the common control or significant impact is lost and the book value is included in profit or loss in the relevant year. ④ Change of cost method to equity method: where control on the investee change to significant impact or common control with other investors due to factors such as disposal of investment, the long-term equity investment cost that ceased to be recognized shall first be carried forward on the proportion of the investment disposed. Then comparing the cost of the remaining long-term equity investment with the attributable fair value of the identifiable net assets of the investee at the original investment calculated on proportion of the remaining shareholding, where the former larger than the later, it belongs to the goodwill as showed in deciding the investment price and will not adjust the carrying amount of the long-term equity investment; where the former less than the later, the retained earnings will be adjusted along with the adjustment of the long-term equity investment. (4) Basis of conclusion for common control and significant influence over the investee ① Joint control over an investee refers to activities which have a significant influence on return of an arrangement could be decided only by mutual consent of the investing parties sharing the control, which includes the sales and purchase of goods or services, management of financial assets, acquisition and disposal of assets, research and development activities and financing activities, etc. ② Significant influence on the investee refers to significant influence over the investee exists when 178 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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; 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 flow. (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. 13. 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 179 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. intangible assets. At the balance sheet date, the Company reviews whether there is impairment indicator for investment properties. When there is impairment indicator, the recoverable amount is recognized through an impairment test and impairment is provided based on the difference between the carrying value and the recoverable amount. Impairment is not reversed in subsequent periods. 14. 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 has made provisions for all the fixed assets except for the fixed assets that have been fully depreciated and still in use. Type of fixed assets Useful lives Expected net residual Land ownership - value - 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 180 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. At the balance sheet date, the Company reviews whether there is impairment indicator for the fixed assets. When there is an impairment indicator, the recoverable amount is estimated and impairment is provided based on the difference between the carrying value and the recoverable amount once the impairment of an asset is recognized, it will not be reversed in the subsequent accounting period. (4)Basis for Recognition, 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: ①upon expiry of the lease term, the ownership of the leased asset is transferred to the lessee; ②the 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; ③the lease term approximates the useful life of the leased asset even if the ownership is not transferred; ④at the inception of the lease, the present value of the minimum lease payments is substantially equivalent to the fair value of the leased asset; ⑤the 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. 15. Construction in progress √Applicable □ Not Applicable (1) Types of construction in progress Construction in progress for the Company is self-operated construction. (2) Standard and date of transfer from construction in progress to fixed assets 181 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The construction in progress of the Company is transferred to fixed assets when the project is completed and ready for its intended use, which shall satisfy one of the following conditions: ① The construction of the fixed assets (including installation) has been completed or substantially completed; ② The fixed asset has been used for trial operation and it is evidenced that the asset can operate ordinarily or produce steadily qualified products; or the result of trial operation proves that it can operate normally; ③ Further expenditure incurred for construction is very minimal or remote; ④ The constructed fixed asset reaches or almost reaches the design or the requirements of contract, or complies with the design or the requirements of contract. (3)Impairment test and provision of impairment of construction in progress 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. 16. 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 the current profit and loss when incurred. Qualifying assets for capitalization 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 182 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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: ①Specific 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; ②Normal borrowings utilized are calculated based on the weighted average of expenses of the aggregate asset exceeding the asset expenses of the portion of special borrowings multiplied by the capitalization ratio of the normal borrowings utilized. Capitalization ratio is calculated based on weighted average interest rate of normal borrowings; ③For 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. 17. Intangible assets Intangible assets are the identifiable non-monetary assets which have no physical shape and are possessed or controlled by the Company. (1)Valuation method 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: ①Intangible 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 183 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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: ①For 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; ②the period in which generating benefits for the Company still 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: ①the technical feasibility of completing the intangible asset so that it will be available for use or for sale; ②the intention to complete the intangible asset for use or for sale; ③how the intangible asset will generate economic benefits, 184 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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; ④the availability of adequate technical, financial and other resources to complete the development and the ability to use or sell the intangible asset; ⑤the 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 refers to 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 obtained from the research stage in a plan or design to produce new or substantially improved materials, equipment and products is regarded as development stage, which has the characteristics of pinpointing and is very likely to form results. All the expenditures on research and development which cannot be distinguished between research stage and development stage are recognized in the profit or loss when incurred. 18. 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 flow 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 can 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 185 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. business combination, shall be allocated to the related asset groups on reasonable basis since the acquisition date, or to the related asset group portfolios if it is difficult to be allocated to the related asset groups. When the carrying amount of the goodwill is allocated to the related asset groups or asset group portfolios, it shall be allocated in the proportion of the fair value of each asset group or asset group portfolio against the total fair value of related asset groups or asset group portfolios. If it is difficult to measure the fair value reliably, it shall be allocated in the proportion of the carrying amount of each asset group or asset group portfolio against the total carrying amount of related asset groups or asset group portfolios. When impairment test is made to the related asset groups or asset group portfolios including goodwill, if there is an indication that the related asset groups or asset group portfolios 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. 19. Long-term prepaid expense √Applicable □ Not Applicable Long-term prepaid expenses 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. 186 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 20. Employee benefits Employee benefits are all forms of compensation and other relevant expenditure given by the Company in exchange for services rendered by employees, including short-term employee benefits, post-employment benefits, termination benefits and other long-term benefits. (1). Accounting method for short-term employee benefits √Applicable □ Not Applicable Short-term employee benefits include short-term salaries, bonus, allowance, subsidies, staff‘s welfare, housing provident fund, union funds and employee education funds, medical insurance fees, injury insurance fees, maternity insurance fees, short-term paid absence, short-term profit-sharing plans, etc. During the accounting period when employees render services, short-term benefits payable that actually incurred shall be recognized as liabilities and credited into profit and loss or relevant assets cost on an accrual basis for the benefit objects. (2). Accounting method for post-employment benefits √Applicable □ Not Applicable Post-employment benefits mainly include the basic pension insurance, supplementary pension, etc., In accordance with the risks and obligations undertaken by the Company, the post-employment benefits are classified as defined contribution plans and defined benefit pension plans. Defined contribution plans: the Company shall recognize the sinking fund paid to individual entity on balance sheet date as a liability in exchange of services from the employee in accounting period, and credited into profits or losses or related assets costs in accordance with the benefit objects. Defined benefit plans: the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations being carried out by independent actuary at the interim and the annual balance sheet date. Staffs' benefit costs incurred by the defined benefit plan of the Group are categorized as follows: (1) service cost, include current period service cost, past-service cost and settlement profit or loss. Current period service cost means the increase of the present value of defined benefit obligation resulted from the current year service offered by employee. Past-service cost means the increase or decrease of the present value of defined benefit obligation resulted from the revision of the defined benefit plans related to the prior 187 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. period service offered by employee; (2) interest costs of defined benefit plans; (3) changes related to the remeasurement of defined benefit plans liabilities. Unless other accounting standards require or permit to charge the employee benefits into assets cost, the Company charges (1) and (2) above into profit or loss and recognized (3) above as other comprehensive income without transferring to profit or loss in subsequent accounting periods. (3). Accounting method for termination benefits √Applicable □ Not Applicable Termination benefits: the indemnity proposal provided by the Company for employees for the purpose of terminating labor relation with the employees before the expiry of the labor contract or encouraging employees to accept downsizing voluntarily, when the following conditions are met, recognize and at the same time credited into profit or loss the accrued liabilities arising from the indemnity as a result of terminating labor relation with the employees: the Company has made a formal plan for termination of employment relationship or has made an offer for voluntary redundancy which will be implemented immediately; and the Company could not unilaterally withdraw from the termination plan or the redundancy offer. Early retirement benefits will adopt same principles as the termination benefit. The Company will credit the salaries and social benefits intend to pay for these early retirees during the periods from the date of early retirement to the normal retirement date to profit or loss for the year ended 2017 when recognition conditions for accrued liabilities are met. (4). Accounting method for other long-term employee benefits □Applicable √Not Applicable 21. Provision √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 188 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (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. 22. 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 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 year 2018 shall, based on the best estimate of exercise, be recognized in relevant costs or expenses at the fair value of the liability assumed by the Company, and the liabilities shall be adjusted correspondingly. At each balanced sheet date and the settlement date prior to the settlement of liabilities, the fair 189 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. value of the liability is re-measured with its change consolidated in profit/loss. When there is changes to the Company's share-based payment plans, if the modification increases the fair value of the equity instruments granted, corresponding recognition of service increase in accordance with the increase in the fair value of the equity instruments; if the modification increases the number of equity instruments granted, the increase in fair value of the equity instruments is recognized as a corresponding increase in service achieved. Increase in the fair value of equity instruments refer to the difference between the fair values of the equity instrument on the modified date before or after the modification. If the Company modifies the exercisable conditions in such manner conductive to the employees, including the shortening of the vesting period, change or cancellation of the performance conditions (rather than market conditions), the Company shall consider the modified exercisable conditions upon the disposal of exercisable conditions. If the modification reduces the total fair value of shares paid or the Company uses other methods not conductive to employees to modify the terms and conditions of share-based payment plans, it will continue to be accounted for the services obtained in the accounting treatment, as if the change had not occurred, unless the Company cancelled some or all of the equity instruments granted. During the vesting period, if the Company cancel equity instruments granted will be treated as accelerating the exercise of rights and the remaining vesting period should be recognized immediately in the profit or loss, while at the same time recognize the capital reserve. Employees or other parties can choose to meet non-vesting conditions, but for those that are not met in the vesting period, the Company will treat it as cancellation of equity instruments granted. 23. Revenue Revenue is the total inflow of economic benefits formed by the company and its subsidiaries during day-to-day operations which might lead to increase of shareholders‘ equity and be irrelevant to capital invested by shareholders. The company and its subsidiaries performed performance obligations stated in the contract, i.e, recognized revenue when the client obtains control right of relevant Goods or services. Where the contract includes two or several performance obligations, during the starting date of 190 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. the contract, the company and its subsidiaries allocate transaction price to various single performance obligation in accordance with the relevant proportion of separate selling price of goods or services promised by various single performance obligation, and record revenue in accordance with transaction price allocated to various single performance obligation. Transaction price is the amount of consideration that the company and its subsidiaries are expected to be entitled to collect due to transfer of goods and services transferred to the client, excluding the amount collected for any third party. The transaction price confirmed by the company and its subsidiaries does not exceed the amount of recognized revenue when relevant uncertainties are eliminated and might not incur material carrying back. The amount that is expected to be returned to the client is taken as liability of returned goods and is not recorded in transaction price. When one of the following conditions is met, the company and its subsidiaries perform performance obligations during a certain time horizon, otherwise, it belongs to fulfilling performance obligations at a certain time point. ①The client obtains and consumes economic benefits brought by performance of the company and its subsidiaries when the company and its subsidiaries perform the contract. ②The client is able to control goods under construction during the process of performance of the company and its subsidiaries; ③Goods produced by the company and its subsidiaries during the process of performance have the non-replaceable usages, and the company and its subsidiaries are entitled to collect the amount for the cumulative completed and performed portion till now during the entire contractual period. For the performance obligations performed during a certain time horizon, the company and its subsidiaries recognize revenue in accordance with the schedule of performance during such time horizon. When the schedule of performance can‘t be reasonably recognized, where the costs that have been incurred by the company and its subsidiaries are estimated to be compensated, revenue shall be recognized in accordance with the amount of costs that has been incurred until the schedule of performance can be reasonably confirmed. For performance obligations performed during a certain time point, the company and its subsidiaries recognize revenue at the time point when the client obtains control right of relevant 191 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. goods or services. When judging whether the client has obtained control right over goods or services, the company and its subsidiaries will consider the following signs: ①The company and its subsidiaries enjoy the right of instant collection over such goods and services; ②The company and its subsidiaries have transferred the material objects of such goods to the client; ③ The company and its subsidiaries have transferred statutory ownership right of the goods or major risks and remuneration of the ownership right to the client; ④ The client has accepted such Goods or service. The right that the company and its subsidiaries are entitled to collect the consideration for having transferred goods or services to the client (and such right depends on other factors other than time lapse) is presented as contractual asset, and contractual asset is provisioned impairment on the basis of expected credit losses. The right owned by and unconditionally collected from the client by the company and its subsidiaries (only depend on time lapse) shall be presented as accounts receivable. Obligations that the company and its subsidiaries have collected or shall collect consideration from the client and shall transfer goods or services to the client are presented as contractual obligations. Specific accounting policies relating to major activities that the company and its subsidiaries obtain revenue are described as follows: (1)Sale of goods Generally, contracts for sale of goods between the company and its clients only include performance obligation of transferring the whole machine of home appliance. Generally, on the basis of taking into account the following factors comprehensively, revenue is recognized based on the time point of transfer of control right of goods: the right of instant collection for obtaining goods, transfer of major risks and remuneration on ownership right of goods, transfer of statutory ownership right of goods, transfer of assets of material objects of goods, the client‘s acceptance of such goods. (2)Construction contract income Construction contract between the company and the client generally includes performance 192 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. obligations of construction and installation of commercial air-conditioner and smart home, because the client is able to control goods under construction during the company‘s performance process, the company takes them as performance obligations performed during a certain time horizon, and recognizes revenue in accordance with the schedule of performance, and it is an exemption when the schedule of performance can‘t be reasonably confirmed. The company confirms the schedule of performance of services provided in accordance with the investment approach. When the schedule of performance can‘t be reasonably confirmed, where the costs of the company that have been incurred can be compensated, recognize revenue in accordance with the amount of costs that has been incurred until the schedule of performance can be reasonably confirmed. (3)Warranty obligations According to contractual rules and regulations of laws, the company provides quality assurance for goods sold and project constructed. For assurance class of quality assurance in order to ensure the client that goods sold comply with existing standards, the company conducts accounting treatment in accordance with estimated liabilities. For service class of quality assurance in order to ensure the client to provide a separate service other than that the goods sold comply with existing standards, the company takes it as a separate performance obligation, and allocates partial transaction price to service class assurance in accordance with the relevant proportion of separate selling price of quality assurance of goods and services, and recognizes revenue when the client obtains control right over services. When assessing whether quality assurance provides a separate service other than ensuring the client that the goods sold comply with existing standards, the company shall consider factors such as whether such quality assurance is statutory requirements or industrial practices, term of quality assurance and the nature of the company‘s promise for performing tasks. 24. Government grants √Applicable □ Not Applicable (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 193 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. government grants are mainly divided into asset-related government grants and revenue-related government grants. (2)Accounting treatment of government grants Asset-related government grants shall be recognized as deferred income in profit or loss for year ended 31 December 2018 on an even basis over the useful life of the asset;government grants measured at nominal amount shall be recorded directly in profit and loss for the year ended 31 December 2018. Revenue-related government grants shall be treated as follows: ①those used to compensate relevant expenses or losses to be incurred by the enterprise in subsequent periods are recognized as deferred income and recorded in profit or loss for the year ended 31 December 2018 when such expenses are recognized; ②those used to compensate relevant expenses or losses that have been incurred by the enterprise are recorded directly in profit or loss for the year ended 31 December 2018. (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 194 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Asset-related government grant received by the Company is recognized as deferred revenue and is evenly amortized to the profit or loss over the estimated useful life of the relevant asset starting from the date the asset is available for use. (5)Recognition of government grants Government grant measured at the amounts receivable is recognized at the end of period when there is clear evidence that the conditions set out in the financial subsidy policies and regulation are fulfilled and the receipt of such financial subsidy is assured. Other government grants other than those measured at the amount of receivables are recognized upon actual receipt of such subsidies. 25. Deferred tax assets / deferred tax liabilities √Applicable □ Not Applicable Deferred tax assets and deferred tax liabilities of the Company are recognized: (1)Based on the difference between the carrying amount and the tax base amount of an asset or a liability (items not recognized as assets and liabilities but their tax base is ascertained by the current tax laws and regulation, the tax base is the difference), deferred income tax asset or deferred income tax-liability is calculated using the applicable tax rate prevailing at the expected time of recovering the relevant asset or discharging the relevant liability. (2)Deferred tax asset is recognized to the extent that there is enough taxable income for the utilization of the deductible temporary difference. At the balance sheet date, if there is sufficient evidence that there would be enough taxable benefit for the utilization of the deductible temporary difference, the deferred income tax asset not previously recognized is recognized in current period. If there is no sufficient evidence that there would be enough future taxable income for the deduction of the deferred income tax asset, the carrying value of the deferred income tax asset is reduced. (3)Deferred tax liability is recognized for taxable temporary difference arising from investments in subsidiaries and associated companies, unless the Company could control the reversal of the temporary differences and the temporary differences would not be probably reversed in the foreseeable future. For deductible temporary differences arising from investments in subsidiaries and associated 195 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. companies, deferred income tax asset is recognized if the temporary difference will be very probably reversed in foreseeable future and there will be sufficient future taxable profit to deduct the deductible temporary difference. (4)No deferred tax liability is recognized for a temporary difference arising from the initial recognition of goodwill. No deferred income tax asset or deferred income tax liability is recognized for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets and deferred 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. 26. Lease (1)Accounting method for 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 lessor of the assets bears the lease related expenses which should be undertaken by the Company, the Company shall deduct that part of expense from the rent and amortize the net amount over the lease term and credited to current expense. ② Rental income received from assets rented out is amortized on a straight-line basis over the lease term (including rent-free periods), and recognized as lease income. Initial direct costs 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 method for Finance lease 196 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. √Applicable □ Not Applicable ① When 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. ② When 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. 27. Other significant accounting policies and accounting estimations √Applicable □ Not Applicable (1) 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 securities to investors. 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. 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. ① The financial asset is derecognized when the Company transfers substantially all the risks and rewards of ownership of the financial asset; 197 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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. (2) Hedge accounting Hedge refers to risk management activities that enterprises designate financial instruments as hedge instruments in order to manage risk exposure caused by specific risks such as foreign exchange risk, interest rate risk and credit risk, allow to expect changes in fair value or cash flow of hedge instruments to offset all or partial changes in fair value or cash flow of hedge projects. Hedged projects refer to projects which make enterprises face risks of changes in fair value or cash flow and are designated as hedge objects and can be reliably measured. A hedging instrument is a financial instrument designated by an enterprise for the purpose of hedging, whose fair value or cash flow changes are expected to offset the change in the fair value or cash flow of the hedged item. The company continuously conducts assessment over whether hedge relationship complies with requirements of hedge effectiveness on the starting date of hedge and follow-on period. Hedge effectiveness refers to the extent that changes in fair value or cash flow of hedge instruments can offset changes in fair value or cash flow of hedge projects caused by the risks of being hedged. The portion that the changes in fair value or cash flow of hedge instruments is greater or less than changes in fair value or cash flow is the ineffective portion of hedge. (3) Explanations on significant accounting estimates Judgments, estimates and assumptions shall be made to book value of the financial statements items, which could not be measured accurately, due to the inherent uncertainties of operating activities, while applying accounting policy. Such judgments, estimates and assumptions were based on the 198 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. management‘s historical experience and made after considered other various factors. These judgments, estimates and assumptions will influence the amount of revenues, expenses, assets and liabilities presented in financial reports and the disclosure of contingent liabilities on the balance sheet date. However, the actual results caused by the uncertainties of these estimations may be different from the current estimates of the management, and thus cause a material adjustment to the carrying amounts of assets and liabilities affected in the future. The judgments, estimates and assumptions mentioned above shall be reviewed on a going concern basis. If the revisions to accounting estimates only affected for the year ended 31 December 2017, relevant adjustment due to the effect shall be recognized for the year ended 31 December 2017; if the revision affects both the current and future period, the effect shall be recognized in the current and future period. On the balance sheet date, the significant fields involving judgments, estimates and assumptions about financial report items are listed as follows: ① Provision Provision for product quality guarantee, estimated onerous contracts, and other estimates shall be recognized in accordance with the terms of contract, current knowledge and historical experience. If the contingent event has formed a practical obligation which probably results in outflow of economic benefits from the Company, an estimated liability shall be recognized on the basis of the best estimate of the expenditures to settle relevant practical obligation. Recognition and measurement of the estimated liability significantly rely on the management‘s judgments. In the process of judgment, the Company takes into consideration the assessment of relevant risks, uncertainties, time value of money and other factors related to the contingent events. Among them, the Company will undertake estimated liabilities with respect to the after-sales services provided for the return, maintenance and installation of goods. When estimating liabilities, the Company has considered the maintenance information in recent years, but the previous maintenance experiences may fail to reflect the future circumstances. Any increase or decrease in this provision is likely to affect the profits and losses of the next year. ②Provision of expected credit losses The company calculates the credit losses in accordance with breach risk exposure and expected credit risk ratio, and confirms credit loss rate on the basis of breach possibilities and breach loss rate. When confirming expected credit loss rate, the company uses data such as internal historical credit loss 199 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. experiences, and conducts adjustments over historical data in combination with current status and forward-looking information. When considering forward-looking information, indexes used by the company include risks such as economic downturn, growth of unemployment rate, external market environment, technological environment and changes in client conditions. The company regularly monitors and reviews relevant assumptions relating to calculation of expected credit losses. The aforesaid techniques and key assumptions have not changed substantially in 2018. ③ Provision of inventories Inventories are measured by lower of historical cost or net realizable value method according to the accounting policies of inventories; for obsolete and unsalable inventories or whose costs are higher than the net realizable, provision for impairment of inventories shall be incurred. The carrying value of inventory shall be written down to the net realizable value on the basis of the salability of inventories and the net realizable value. Inventory impairment requires the management‘s obtaining of solid evidence, and their judgment and estimations made after considering the purpose of holding inventories and the effect of events after the balanced sheet date and etc. The difference between the actual outcome and the previously estimated outcome will influence the carrying value of inventories and the provision or reversal of impairment of inventories during the period accounting estimates are changed. ④ Fair value of financial instruments For financial instruments where there is no active market, the Company will determine the fair value through a variety of valuation methods. Such valuation methods include discounted cash flow analysis. In the valuation, the Company shall estimate the future cash flow, credit risk, market volatility and correlation, and select the appropriate discount rate. Such related assumptions are uncertain, and their changes may affect the fair value of financial instruments. ⑤Impairment of investment in other equity instruments The company largely relies on judgments and assumptions of the management when determining whether investments of other equity instruments are impaired to determine whether it is needed to confirm impairment. During the process of conducting judgments or making assumptions, the company shall assess the extent and duration period that the fair value of such investments is below the cost, as well as financial conditions and short-term business prospects of the invested objects, including industry conditions, technological reform, credit rating, breach rate and risks of counterparties. 200 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. ⑥ Provision of long-term assets impairment On the balance sheet date, the Company shall judge whether there is any possible indication of impairment against non-current assets other than financial assets. The intangible assets with indefinite useful life must be tested for impairment on an annual basis as well as when there is any indication of impairment. Other non-current assets other than financial assets shall be tested for impairment when there is an indication showing that the carrying value is not recoverable. Impairment occurs while the carrying value of an asset or asset group is higher than the recoverable value, which is the higher of the net of fair value deducted disposal 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 flow. 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 flow for such assets groups or asset group portfolios allocated with goodwill. When estimating the present value of future cash flow, the Company shall not only estimate the future cash flow generated by such asset groups or asset group portfolios, and select the appropriate discount rate to determine the present value of such future cash flow. ⑦ Depreciation and amortization Investment properties, fixed assets and intangible assets are depreciated and amortized by a straight-line approach over their estimated useful life by taking into consideration the residual value. Useful life shall be periodically reviewed to determine the depreciation and amortization expenses for each reporting period and be determined on the basis of historical experience regarding analogous assets and the expected technological innovation. Significant changes to previous accounting estimates will result in adjustments against depreciation and amortization expenses in the future periods. ⑧ Deferred tax assets Deferred tax asset is recognized for all the uncompensated tax losses to the extent that there are 201 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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 Rebate accrual The Company and its subsidiaries adopt the policy of rebate for all consumers. According to the relevant conventions in the sales agreement, the review of specific transactions, the market situation, the pipeline inventory levels and the historical experiences, the Company and its subsidiaries estimate and accrue rebate on a regular basis with reference to the completion of agreed assessment indexes. Rebate accrual involve the judgment and estimates of the management. In case of any significant changes in the previous estimates, the difference above will have an impact on the rebate during the period when significant changes occur. 28. Significant changes on accounting policies and accounting estimates (1). Significant changes on accounting policies √Applicable□ Not Applicable Ministry of Finance promulgated Accounting Standard for Business Enterprises No. 22 — Recognition and Measurement of Financial Instruments, Accounting Standard for Business Enterprises No. 23 — Transfer of Financial Assets and Accounting Standard for Business Enterprises No. 37 — Presentation of Financial Instruments, etc., (collectively the ―New Financial Instrument Standards‖) as well as Accounting Standard for Business Enterprises No. 14 — Income, respectively in 2017, and promulgated the Notice of the Ministry of Finance on Revising and Issuing the Format of Financial Statements of General Enterprises for 2018 《财政部关于修订印发 2018 年度一般企业财务报表格式 的通知》) (Cai Kuai (2018) No.15) in 2018. the Company and its subsidiaries have started to implement the above amendments to the Accounting Standards for Business Enterprises and the Notice, and adjusted the relevant contents of accounting policies and financial statements accordingly since 1 January 2018. 202 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The Company and its subsidiaries implemented the New Financial Instrument Standards and income standard initially for the current period. According to the requirements under the Interpretation of Issues Relating to the Format of the Financial Statements of General Enterprises for 2018(《关于 2018 年度一般企业财务报表格式有关问题的解读》)issued by the Accounting Bureau of the Ministry of Finance, the above changes in accounting policies cause influence on the opening amounts of the consolidated balance sheet as follows: Unit and Currency: RMB Book value on Adjustment 31 December influence of Adjustment Book value on 1 Items 2017 financial influence of Items January 2018 (Before instrument income standards (After changing) changing) standards Financial assets measured at fair value and changes 20,681,695.50 -20,681,695.50 Not applicable of which included in current profit and loss 20,681,695.50 Financial assets 20,681,695.50 Not applicable held for trading Available-for-sale 1,415,354,307.82 -1,415,354,307.82 Not applicable financial assets 6,556,627.26 Financial assets 6,556,627.26 Not applicable held for trading Investments in Not applicable 1,408,797,680.56 other equity 1,408,797,680.56 instruments Financial liabilities measured at fair value and changes 2,524,569.45 -2,524,569.45 Not applicable of which included in current profit and loss Financial Not applicable 2,524,569.45 liabilities held 2,524,569.45 for trading Accounts 12,891,199,940.00 138,793,125.19 Accounts 13,029,993,065.19 receivable receivable 984,129,285.50 19,750,854.12 Other 1,003,880,139.62 Other receivables receivables 2,076,635,630.12 -58,846,528.69 16,849,858.75 Deferred tax 2,034,638,960.18 Deferred tax assets assets Long-term Long-term equity 12,987,255,645.28 -31,654,957.77 12,955,600,687.51 equity investments investments Inventories 22,537,617,217.87 -187,935,341.47 Inventories 22,349,681,876.40 Not applicable 427,848,311.65 Contract assets 427,848,311.65 239,912,970.18 Contract 239,912,970.18 Not applicable liabilities 5,861,949,182.62 -5,824,511,466.48 Receipts in 37,437,716.14 Receipts in advance advance 203 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 5,824,511,466.48 Contract 5,824,511,466.48 Not applicable liabilities 4,425,579,572.68 120,603,680.27 Other current 4,546,183,252.95 Other current assets assets Other Other non-current 1,254,064,181.76 1,140,535.90 1,255,204,717.66 non-current assets assets Other current 42,961,121.03 301,420,575.54 Other current 344,381,696.57 liabilities liabilities Provisions 2,660,788,654.43 -73,446,879.39 Provisions 2,587,341,775.04 Other Other comprehensive 4,424,024.90 40,604,722.79 comprehensive 45,028,747.69 income income 22,350,952,230.17 -10,028,324.57 -44,877,259.88 Undistributed 22,296,046,645.72 Undistributed profits profits Minority equity 14,549,620,553.66 37,466,094.63 -44,502,361.35 Minority equity 14,542,584,286.94 interests interests The impact on the opening balance of the balance sheet of the Parent Company is as follows: Book value on Adjustment 31 December influence of Adjustment Book value on 1 Items 2017 financial influence of Items January 2018 (Before instrument income standards (After changing) changing) standards Available-for-sale 5,818,587.80 -5,818,587.80 Not applicable financial assets Investments in Not applicable 5,818,587.80 other equity 5,818,587.80 instruments Bills receivable Accounts 288,499,726.07 13,278,745.63 301,778,471.70 and accounts receivable receivable 15,895,048.43 708,860.00 Other 16,603,908.43 Other receivables receivables 106,347,777.99 -2,098,140.84 Deferred tax 104,249,637.15 Deferred tax assets assets 2,128,502,328.76 -16,428,564.00 Undistributed 2,112,073,764.76 Undistributed profits profits 2,465,908,721.32 -2,465,908,721.32 Receipts in Receipts in advance advance 2,465,908,721.32 Contract 2,465,908,721.32 Not applicable liabilities Other Other comprehensive -43,234,737.77 15,117,117.89 comprehensive -28,117,619.88 income income Long-term Long-term equity 23,581,254,928.08 -13,200,910.90 23,568,054,017.18 equity investments investments The Company and its subsidiaries prepared the 2018 financial statements in accordance with the financial statements format specified in Cai Kuai (2018) No. 15, and changed the presentation of relevant financial statements using the retrospective adjustment method. 204 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. The impact of the related presentation adjustment on the consolidated balance sheet at the beginning of the period is as follows: Book value on 31 Book value on 1 Presentation impact of Items December 2017 Items January 2018 financial statement (Before changing) (After changing) Not Bills receivable 13,033,083,520.99 -13,033,083,520.99 Applicable Accounts Not 13,029,993,065.19 -13,029,993,065.19 receivable Applicable Accounts receivable and Not Applicable 26,063,076,586.18 26,063,076,586.18 Bills receivable Not Interest receivable 203,637,543.83 -203,637,543.83 Applicable Dividend Not 4,524,472.84 -4,524,472.84 receivable Applicable Other Other receivables 1,003,880,139.62 208,162,016.67 1,212,042,156.29 receivables Fixed assets 17,146,390,653.22 55,808,808.81 Fixed assets 17,202,199,462.03 Disposals of fixed Not 55,808,808.81 -55,808,808.81 assets Applicable Not Bills payable 16,378,699,659.77 -16,378,699,659.77 Applicable Not Accounts payables 26,237,366,204.29 -26,237,366,204.29 Applicable accounts Not Applicable 42,616,065,864.06 payables and 42,616,065,864.06 Bills payable Not Interest payable 235,683,220.62 -235,683,220.62 Applicable Not Dividends payable 153,756,315.64 -153,756,315.64 Applicable Other Other payables 10,920,135,768.52 389,439,536.26 11,309,575,304.78 payables The impact of the related presentation adjustment on the parent company's opening balance sheet is as follows: Book value on 31 December Presentation impact of Book value on 1 Items Items 2017 financial statement January 2018 205 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (Before changing) (After changing) Bills Not receivable Applicable Accounts Not 301,778,471.70 -301,778,471.70 receivable Applicable Accounts Not receivable 301,778,471.70 301,778,471.70 Applicable and Bills receivable Interest Not 220,157,282.75 -220,157,282.75 receivable Applicable Dividend Not 970,851,045.94 -970,851,045.94 receivable Applicable Other Other 16,603,908.43 1,191,008,328.69 1,207,612,237.12 receivables receivables Bills Not payable Applicable Accounts Not 310,387,267.67 -310,387,267.67 payables Applicable Accounts Not 310,387,267.67 payables and 310,387,267.67 Applicable bills payable Interest Not 156,447,167.63 -156,447,167.63 payable Applicable Dividends Not payable Applicable Other Other 21,112,143,360.73 156,447,167.63 21,268,590,528.36 payables payables The effect of the related presentation adjustment on the concurrency of the consolidated income statement is as follows: Amount of 2017(Before Presentation impact of Amount of 2017 Items Items changing) financial statement (After changing) Administrative Administrativ 11,953,733,922.64 -4,509,850,773.96 7,443,883,148.68 expenses e expenses R&D Not Applicable 4,509,850,773.96 4,509,850,773.96 expenses The effect of the related presentation adjustment on the number of simultaneous periods of the parent company's income statement is as follows: 206 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Amount of 2017(Before Presentation impact of Amount of 2017 Items Items changing) financial statement (After changing) Administrativ Administrativ 715,982,494.02 -247,120,344.03 468,862,149.99 e expenses e expenses Not R&D 247,120,344.03 247,120,344.03 Applicable expenses (3) . Significant changes on accounting estimates □Applicable √Not Applicable VI. Taxation 1. Main tax categories and rates Main tax categories and rates √Applicable □Not Applicable Tax types Basis of taxation Tax rate Taxable revenue from sales of goods or Value-added tax 6%, 11% or 10%, 17% or 16% rendering services City maintenance and Circulation tax payable 7% construction tax Statutory tax rate or preferential rates as EIT Taxable income follows (Local)Education Circulation tax payable 1%、2%、3% surcharge Disclosure of tax entities with different EIT rates □Applicable √Not Applicable 2. Preferential tax √Applicable □Not Applicable Companies subjected to preferential tax: 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 207 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 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., Limited 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 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 entitled to the preferential taxation policies Qingdao Meier Plastic Powder Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Hai Gao Design and Manufacture Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Hai Gao Design and Manufacture Co., Ltd. 15% as a hi-tech enterprise Qingdao Haier (Jiaozhou) Air-conditioning Co., entitled to the preferential taxation policies 15% Limited 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 Qingdao Haier Industry Intelligence Research Institute entitled to the preferential taxation policies 15% Co., Ltd. as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Central Air Conditioning Co., Ltd. 15% as a hi-tech enterprise 208 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. entitled to the preferential taxation policies Qingdao Haier Air Conditioner Gen Corp., Ltd. 15% as a hi-tech enterprise Qingdao Household Appliance Technology and entitled to the preferential taxation policies 15% Equipment Research Institute as a hi-tech enterprise entitled to the preferential taxation policies Beijing ASU Tech Co., Ltd. 15% as a hi-tech enterprise Haier U+smart Intelligent Technology (Beijing) Co., entitled to the preferential taxation policies 15% Ltd. as a hi-tech enterprise entitled to the preferential taxation policies Beijing Zero Micro Technology Co., Ltd. 15% as a hi-tech 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 Co., Ltd. 15% as a hi-tech enterprise Qingdao Economic and Technological Development entitled to the preferential taxation policies 15% Zone 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 Rishun Supply Chain Co., Ltd. 15% as a hi-tech enterprise Qingdao Haier New Energy Electric Appliance Co., entitled to the preferential taxation policies 15% Ltd. as a hi-tech enterprise entitled to the preferential taxation policies Foshan Shunde Haier Intelligent Electronics Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Washing Appliance Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Rishun Lexin Cloud Technology Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Hefei Haier Drum Washing Machine Co., Ltd. 15% as a hi-tech enterprise entitled to the preferential taxation policies Qingdao Haier Technology Co., Ltd. 10% as a key software enterprise entitled to the preferential policies as a Wuhan Haier Energy and Power Co., Ltd. 10% small/micro enterprise 209 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Qingdao Haier Zhiyan Investment Management Co., entitled to the preferential policies as a 10% Ltd. small/micro enterprise entitled to the preferential taxation policies Chongqing Haier Electronics Sales Co., Ltd. and some 15% under the Western Development initiative of Western companies the PRC entitled to the preferential taxation policies Chongqing Xinri Rishun Electric Sales Co., Ltd. and 15% under the Western Development initiative of some Western companies the PRC entitled to the preferential taxation policies Chongqing Haier Air-conditioning Co., Ltd. 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Refrigeration Appliance Co., Ltd. 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Guizhou Haier Electronics Co., Ltd.. 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Precision Plastic Co., Ltd. 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Intelligent Electronics Co., Ltd. 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Washing Machine Co., Ltd 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Water Heater Co., Ltd 15% under the Western Development initiative of the PRC entitled to the preferential taxation policies Chongqing Haier Drum Washing Machine Co., Ltd 15% under the Western Development initiative of the PRC VII. Explanatory Notes for Items in Consolidated Financial Statements Unless otherwise specified, the following closing balance refers to the amount as of 31 December 2018. The opening balance refers to the amount as of 31 December 2017. The amount for the current period refers to the amount in the period from 01 January to 31 December 2018. The amount of the previous period refers to the amount of the period from 01 January to 31 December 2017. 1. Cash and cash equivalents 210 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. √ Applicable □ Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Cash on hand 1,380,614.79 513,781.37 Cash in bank 35,483,724,835.69 33,643,046,621.48 Other cash balances 1,971,249,956.80 2,181,878,636.37 Total 37,456,355,407.28 35,825,439,039.22 Include: total amount deposit overseas 9,093,415,529.92 8,733,283,521.59 Other explanation The cash deposited in Haier Group Finance Co., Ltd. was RMB13,966,602,551.68 on 31 December 2018, the balance of which included a fixed deposit of RMB2,884,500,000.00. The investment fund in the closing balance of other cash balances was RMB464,138,144.13, deposit in third party payment platform was RMB95,533,819.43 and the security deposit was RMB1,411,577,993.24. 2. Financial assets held for trading Items Closing balance Foreign exchange contacts 188,677,068.41 Short-term wealth management products 1,567,648,908.00 Investment in other equity instruments 19,322,411.35 Total 1,775,648,387.76 3. Financial assets measured at fair value and changes of which included in current profit and loss Items Opening balance Foreign exchange contacts 20,681,695.50 Total 20,681,695.50 4. Derivative financial assets √ Applicable □ Not Applicable Unit and Currency: RMB Items Closing balance 211 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Cash flow hedging-Interest rate swap agreement 57,228,769.39 Foreign exchange contacts 39,494,394.98 Total 96,723,164.37 5. Bills receivable and Accounts receivable Summary table (1). Classification √ Applicable □ Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Bills receivable 13,033,083,520.99 Accounts receivable 12,891,199,940.00 Total 25,924,283,460.99 Bills receivable (1). Classification of the bills receivable √ Applicable □ Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Bank acceptance notes 1,946,518,710.06 Commercially acceptance notes 11,086,564,810.93 Total 13,033,083,520.99 (2) The Bills receivable pledged by the Company at the end of the period was RMB 11,138,358,490.13. Provision for bad debts is made on a portfolio basis: □ Applicable √ Not Applicable Accounts receivable (1) Accounts receivable are disclosed by aging as follow: Aging Closing balance Opening balance Within one year 10,263,880,759.15 12,918,403,104.88 1-2 years 271,695,855.39 181,839,082.06 212 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2-3years 103,360,570.79 121,785,776.81 Over 3 years 136,030,844.12 113,600,676.66 Accounts receivable balance 10,774,968,029.45 13,335,628,640.41 Allowance for bad debts 343,774,541.95 444,428,700.41 Accounts receivable net 10,431,193,487.50 12,891,199,940.00 (2) The total amount of the top 5 accounts receivable at the end of the period is RMB2,848,459,329.64, accounting for 26.44% of the book balance of accounts receivable. (3) Changes in bad debts of accounts receivable in the current period: Increase for the period Decrease for the period Opening Write-off / Closing Items Other balance Provision Reversal other balance movement movement Allowance 444,428,700. 92,808,600. 16,381,442. 13,742,006. 196,102,194. 343,774,541. for bad 41 09 70 36 89 95 debts (4) Actual write-off of accounts receivable in the current period The amount of accounts receivable actually written off in the current period is RMB35,099,796.70, and there is no important bad debt write-off of accounts receivable. (5) The company's accounts receivable that were terminated due to the transfer of financial assets in the current period. In the current period, the amount of accounts receivable that the company terminated due to the transfer of financial assets was RMB5,578,649,196.23, and the transfer method was selling-type factoring/asset securitization. (6) Current limited accounts receivable: The amount of accounts receivable pledged at the end of the period is RMB1,355,896,435.78. √ Applicable □ Not Applicable 6. Prepayments (1)Prepayments are disclosed by aging as follows: Aging Closing balance Opening balance Within one year 519,750,663.00 537,816,736.27 1-2 years 33,047,876.47 72,204,251.35 2-3years 39,033,032.18 11,114,367.98 213 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Over 3 years 2,723,443.35 7,756,965.75 Total 594,555,015.00 628,892,321.35 (2)The amount of the top 5 in the prepayments at the end of the period totals RMB142,731,918.18, which accounts for 24.01% of the prepayment balance. 7. Other receivables Summary table (1). Classification √ Applicable □ Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Interest receivable 228,701,210.90 203,637,543.83 Dividend receivable 4,524,472.84 4,524,472.84 Other receivables 1,393,750,181.24 984,129,285.50 Total 1,626,975,864.98 1,192,291,302.17 (1)Interest receivable Closing balance Opening balance Aging Book value balance Proportion Book value balance Proportion Within one year 173,671,073.91 75.94% 202,405,171.56 99.39% 1-2 years 55,030,136.99 24.06% 1,232,372.27 0.61% Total 228,701,210.90 100.00% 203,637,543.83 100.00% (2)Dividend receivable Closing balance Opening balance Aging Book value balance Proportion Book value balance Proportion Within one year 1-2 years 2-3years Over 3 years 4,524,472.84 100.00% 4,524,472.84 100.00% Total 4,524,472.84 100.00% 4,524,472.84 100.00% Other receivables 214 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. ① Other receivables are disclosed by aging as follows: Aging Closing balance Opening balance Within one year 1,312,078,849.50 902,737,002.87 1-2 years 49,455,084.68 66,140,386.24 2-3years 31,974,245.15 46,034,571.34 Over 3 years 76,587,635.07 46,113,807.65 Other receivables balance 1,470,095,814.40 1,061,025,768.10 Allowance for bad debts 76,345,633.16 76,896,482.60 Other receivables net 1,393,750,181.24 984,129,285.50 ② The total amount of the top 5 other receivables at the end of the period is RMB539,926,492.56, which accounts for 36.73% of the book balance of other receivables. ③ Changes in bad debt provision for other receivables in the current period: Increase for the period Decrease for the period Opening Closing Items Other Write-off / other balance Provision Reversal balance movement movement Allowanc e for bad 76,896,482.60 20,044,406.15 4,659,681.06 1,597,168.38 23,657,768.27 76,345,633.16 debts ④ Other receivables written off during the period: The amount of other receivables actually written off in the current period is RMB4,599,704.69, and no significant other receivables are written off for bad debts. Other receivables mainly include deposits, quality guarantees, employee loans, tax refunds, and advance payments, etc. 8. Inventories (1)Details of Inventories Closing balance Opening balance Items Impairment Impairment Book value balance Book value balance Provision Provision Raw materials 2,530,152,656.33 90,663,625.24 3,705,431,126.34 61,368,820.74 Work in progress 197,994,231.57 262,223,204.08 Unsettled payments of 187,935,341.58 completed projects 215 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Finished goods 20,518,186,150.85 778,478,291.98 19,159,801,024.68 716,404,658.07 Total 23,246,333,038.75 869,141,917.22 23,315,390,696.68 777,773,478.81 (2)Impairment provision of inventories Increase for the Decrease for the period period Closing Items Opening balance Other Provisio Write-off / balance movemen Reversal n other movement t Raw 53,757,3 61,368,820.74 24,462,544.00 90,663,625.24 materials 48.50 Finished 499,748, 778,478,291.9 716,404,658.07 437,674,434.49 goods 068.40 8 553,505, 869,141,917.2 Total 777,773,478.81 462,136,978.49 416.90 2 9.Contract assets Items Closing balance Contract assets 456,781,406.54 Total 456,781,406.54 10. Assets held for sale Items Closing balance Opening balance 7.71% equity of Shengfeng Logistics 106,010,000.00 Group Co., Ltd Assets in Shanghai Guangfulai Co., 38,081,213.39 Ltd. disposal of Mexican plants and plots 27,453,950.07 by FPA Total 144,091,213.39 27,453,950.07 In 2018, Haier Electronics Group Co., Ltd., a subsidiary of the Company, agreed to sell all of its 58.08% shares held by Shengfeng Logistics Group Co., Ltd in RMB798,354,000, of which 50.37% was disposed of in 2018, and the remaining 7.71% was planned to be disposed of in 2019. The fair value of the remaining shares is RMB106,010,000, which will be transferred to the account for holding assets for sale at the end of the period. 216 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. In 2018, Haier Electronics Group Co., Ltd., a subsidiary of the company, agreed to sell all of its 67.45% shares held by Shanghai Guangfulai Co., Ltd. (indirect subsidiary) in RMB5,059,000. The transaction plan was completed in 2019. At the end of the period, the assets of Shanghai Guangfulai Co., Ltd. will be transferred to the account for holding assets for sale. 11. Other current assets (1)Details Closing balance Opening balance Items Impairment Impairment Book balance Book balance provision provision Bank deposit for 2,838,231,840.90 2,007,051,839.52 financial products Deductible taxes 1,658,820,457.08 5,489,980.82 1,948,744,388.70 Returns cost 322,726,264.39 162,998,678.53 receivables Others 428,589,006.65 469,783,344.46 Total 5,248,367,569.02 168,488,659.35 4,425,579,572.68 (2)Impairment provision Increase for the period Decrease for the period Opening Closing Items Other Revers Write-off / other balance Provision balance movement al movement Deductible 5,489,980.82 5,489,980.82 input tax Returns cost 162,998,678.53 120,480,319.76 120,480,319.76 162,998,678.53 receivables Total 168,488,659.35 120,480,319.76 120,480,319.76 168,488,659.35 The impact of the first implementation of the new income standard on the opening balance amounted to RMB120,480,319.76. 12. Available-for-sale financial assets Opening balance Items Book balance Impairment provision Book Value Available-for-sale equity instrument: Measured at fair value 26,931,420.99 26,931,420.99 Measured at cost 1,418,647,886.83 30,225,000.00 1,388,422,886.83 Total 1,445,579,307.82 30,225,000.00 1,415,354,307.82 217 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 13. Long-term equity investments √Applicable □Not Applicable Increase/decrease for the period Investment Opening Adjustment Declaration profit or loss Other Investees Investment in other of cash balance recognized changes in increase comprehensi dividends or under equity equity ve income profits method Associate: Haier Group Finance Co., 4,682,887,227.73 690,345,752.84 32,725,358.50 Ltd. Bank of Qingdao Co., 2,462,624,099.78 145,975,987.29 97,656,431.65 -77,995,640.00 Ltd. (Qingdao) Haier Medical and 332,230,371.89 21,705,851.27 Laboratory Products Co., Ltd. Wolong Electric 118,897,337.40 4,384,464.99 (Jinan) Motor Co., Ltd. Qingdao Haier Software 17,899,331.07 294,188.08 Investment Co., Ltd. Qingdao Haier SAIF Smart Home Industry 270,536,881.98 91,843,339.31 Investment Center (Limited Partnership) Qingdao Haier Special Steel Plate 106,068,803.08 Research and Development Co.,Ltd. Hefei Haier Special 140,494,521.67 Steel Plate 218 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Research and Development Co., Ltd. Mitsubishi Heavy Industries Haier 529,934,750.95 149,480,863.71 -56,772,000.00 (Qingdao) Air-condition ers Co., Ltd. Qingdao Haier Carrier Refrigeration 305,185,137.09 27,537,989.41 Equipment Co., Ltd. Beijing Mr. Hi Network Technology 3,757,759.75 Company Limited Qingdao Haier 543,768,656.24 8,201,709.19 3,114,251.28 multimedia Co., Ltd. Beijing Xiaobao 2,687,341.82 Technology Co., Ltd. Beijing ASU 19,217,902.9 Tech Co., 10,844,124.86 3 Ltd. Shenzhen Genyuan Environment 7,849,992.00 al Protection Technology Co., Ltd. Qingdao Hegang New Material 246,563,324.75 15,721,032.90 Technology Co., Ltd. Qingdao Haimu Investment 2,450,000.00 -371,658.63 Management Co., Ltd. Qingdao Haimu Zhijia 48,000,000.00 1,070.25 Investment Partnership 219 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (Limited Partnership) Guangzhou Heying Investment 152,047,535.44 24,017,274.24 Partnership (Limited Partnership) Fuzhou Jinan District Shengfeng 80,226,595.74 Guorong Microfinance Co., Ltd. Fujian Bafang Shengfeng 13,117,748.43 272,053.43 -400,000.00 Logistics Co., Ltd. Qingdao Home Wow Cloud 1,755,356.84 -538,775.52 Network Technology Co., Ltd. Beijing Cangxiaowei Supply Chain 870,898.42 -79,581.45 Management Co., Ltd. Konan Electronic 64,856,526.75 6,499,278.16 3,713,693.88 -269,707.50 Co., Ltd. HNR Company 91,578,227.62 8,953,730.66 -9,455,919.48 (Private) Limited HPZ 80,588,570.01 5,197,713.05 3,014,049.49 LIMITED CONTROLA DORA 2,985,062,320.58 145,118,357.83 30,500,445.45 MABE S.A.de C.V. MIDDLEEA ST AIRCONDIT 22,050,543.42 3,921,365.30 932,743.10 IONING COMPANY, LIMITED 1,324,464,732.0 22,332,154.2 -135,437,347.5 Total 13,008,255,645.28 316,578,340.03 183,104,076.83 7 1 0 220 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (Continued) Increase/decrease for the period Impairmen t The disposal Investees Other Closing balance provisionCl of the movement osing investment balance Associate: 5,405,958,339. Haier Group Finance Co., Ltd. 07 -35,431,243 2,592,829,635. Bank of Qingdao Co., Ltd. .05 67 (Qingdao) Haier Medical and Laboratory -353,936,223. - Products Co., Ltd. 16 Wolong Electric (Jinan) Motor Co., Ltd. 123,281,802.39 Qingdao Haier Software Investment Co., Ltd. 18,193,519.15 Qingdao Haier SAIF Smart Home Industry 362,380,221.29 Investment Center (Limited Partnership) Qingdao Haier Special Steel Plate Research and -106,068,803. - Development Co.,Ltd. 08 Hefei Haier Special Steel Plate Research and -140,494,521. - Development Co., Ltd. 67 Mitsubishi Heavy Industries Haier (Qingdao) 622,643,614.66 Air-conditioners Co., Ltd. Qingdao Haier Carrier Refrigeration Equipment -21,000,00 332,723,126.50 Co., Ltd. 0.00 Beijing Mr. Hi Network Technology Company -3,757,759 3,757,759.75 Limited .75 Qingdao Haier multimedia Co., Ltd. 555,084,616.71 -2,687,341 Beijing Xiaobao Technology Co., Ltd. 2,687,341.82 .82 Beijing ASU Tech Co., Ltd. 30,062,027.79 Shenzhen Genyuan Environmental Protection 7,849,992.00 Technology Co., Ltd. Qingdao Hegang New Material Technology 262,284,357.65 Co., Ltd. Qingdao Haimu Investment Management Co., 2,078,341.37 Ltd. Qingdao Haimu Zhijia Investment Partnership 48,001,070.25 (Limited Partnership) Guangzhou Heying Investment Partnership 176,064,809.68 (Limited Partnership) 221 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Fuzhou Jinan District Shengfeng Guorong -80,226,595.7 - Microfinance Co., Ltd. 4 -12,989,801.8 Fujian Bafang Shengfeng Logistics Co., Ltd. - 6 Qingdao Home Wow Cloud Network 1,216,581.32 Technology Co., Ltd. Beijing Cangxiaowei Supply Chain 791,316.97 Management Co., Ltd. Konan Electronic Co., Ltd. 74,799,791.29 HNR Company (Private) Limited 91,076,038.80 HPZ LIMITED 88,800,332.55 12,472,813. 3,173,153,937. CONTROLADORA MABE S.A.de C.V. 14 00 MIDDLEEAST AIRCONDITIONING -8,696,527. 18,208,123.96 COMPANY, LIMITED 86 -31,654,957 -693,715,945. 13,993,926,697 -27,445,10 Total .77 51 .64 1.57 14. Investment in other equity instruments (1)Investment in other equity instruments √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance China Petroleum & Chemical Corporation 1,261,564,000.00 Other 138,752,460.34 Total 1,400,316,460.34 (2)Dividends from investment in other equity during current period Items Amount China Petroleum & Chemical Corporation 104,856,077.16 Other 389,059.17 Total 105,245,136.33 15. Other non-current financial assets √Applicable □Not Applicable 222 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Closing balance Long-term wealth management products 327,358,825.57 Total 327,358,825.57 16. Investment properties (1)The changes in investment properties measured at cost this year are as follows: Items Houses and buildings Land use rights Total I. Original book value 1.Opening balance 44,408,479.02 2,128,550.51 46,537,029.53 2.Increase for the period (1)Outsourced (2) Inventories\fixed assets\construction in progress 347,500.00 347,500.00 transferred in (3) Increase in business combinations 3. Decrease for the period (1)disposal (2)Disposal of subsidiary (3)Other transferring out 4. Exchange differences 1,243,753.76 1,243,753.76 5. Closing balance 45,999,732.78 2,128,550.51 48,128,283.29 II. Accumulated depreciation and accumulated amortization 1. Opening balance 14,853,338.04 469,675.50 15,323,013.54 2. Increase for the period (1)Provision or amortization 1,739,438.27 40,236.22 1,779,674.49 3. Decrease for the period (1)disposal (2)Disposal of subsidiary (3)Other transferring out 4.Exchange differences 146,447.84 146,447.84 5.Closing balance 16,739,224.15 509,911.72 17,249,135.87 I. Impairment provision 1.Opening balance 223 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2.Increase for the period (1)Provision 3、Decrease for the period (1)disposal (2)Disposal of subsidiary (3)Other transferring out 4.Exchange differences 5.Closing balance IV. Book Value 1. Closing book value 29,260,508.63 1,618,638.79 30,879,147.42 2. Opening book value 29,555,140.98 1,658,875.01 31,214,015.99 (2)The depreciation and amortization amount charge for the period is RMB1,779,674.49. (3)The recoverable amount of the investment real estate of the Company at the end of the period is not less than its book value, so no provision for impairment is made. 17. Fixed assets Summary table √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Fixed assets 17,319,507,210.44 17,146,390,653.22 Disposals of fixed assets 131,670.93 55,808,808.81 Total 17,319,638,881.37 17,202,199,462.03 (1) Fixed assets: Items Houses and buildings Land use rights Motor vehicles I. Original book value 1.Opening balance 9,007,272,416.23 17,061,589,200.05 291,452,462.31 2.Increase for the period (1)Acquisition 29,984,905.93 523,395,348.17 19,195,829.07 (2)Construction in progress 507,251,004.13 1,586,688,938.47 35,850,726.19 transferred in 224 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (3)Increase in business 1,708,641.82 combinations 3.Decrease for the period (1)Disposal or Write-off 168,101,034.11 697,662,644.79 21,740,950.09 (2)Disposal of subsidiary 163,430,690.98 11,702,286.08 91,934,008.22 (3)Transfer to hold for sale 179,974.94 4.Exchange differences 122,117,790.34 439,917,845.02 -792,278.13 5.Closing balance 9,335,094,391.54 18,902,226,400.84 233,560,448.01 II. Accumulated depreciation 1.Opening balance 2,543,989,090.81 7,064,750,705.40 146,735,735.65 2.Increase for the period (1)Provision 439,187,419.65 1,895,681,747.86 30,203,785.53 3.Decrease for the period (1)Disposal or Write-off 28,463,675.08 517,690,853.80 18,467,813.44 (2)Disposal of subsidiary 12,059,900.51 1,637,558.42 7,492,815.23 (3)Transfer to hold for sale 153,027.28 4.Exchange differences 32,114,619.57 192,275,009.53 -333,287.56 5.Closing balance 2,974,767,554.44 8,633,379,050.57 150,492,577.67 III. Impairment provision 1.Opening balance 30,703,168.88 11,490,036.50 2,019.29 2.Increase for the period (1)Provision 145,483.98 4,869,830.86 3.Decrease for the period (1)Disposal or Write-off 438,356.90 (2)Disposal of subsidiary (3)Transfer to hold for sale 4.Exchange differences 2,051,445.20 468,123.13 113.18 5.Closing balance 32,900,098.06 16,389,633.59 2,132.47 II. Book Value 1.Closing book value 6,327,426,739.04 10,252,457,716.68 83,065,737.87 2.Opening book value 6,432,580,156.54 9,985,348,458.15 144,714,707.37 (Continued) Items Office furniture Other Total 225 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. I. Original book value 1.Opening balance 477,241,309.19 688,128,896.92 27,525,684,284.70 2.Increase for the period (1)Acquisition 58,486,750.71 9,286,492.42 640,349,326.30 (2)Construction in progress 27,927,082.85 189,784,884.49 2,347,502,636.13 transferred in (3)Increase in business 1,828,933.42 3,537,575.24 combinations 3.Decrease for the period (1)Disposal or Write-off 27,166,247.31 15,016,780.55 929,687,656.85 (2)Disposal of subsidiary 17,191,941.92 284,258,927.20 (3)Transfer to hold for sale 39,589.80 219,564.74 4.Exchange differences 1,569,755.48 1,121,233.19 563,934,345.90 5.Closing balance 538,058,650.92 857,902,128.17 29,866,842,019.48 II.Accumulated depreciation 1.Opening balance 253,517,930.10 327,975,252.22 10,336,968,714.18 2.Increase for the period (1)Provision 63,353,631.13 117,859,110.68 2,546,285,694.85 3.Decrease for the period (1)Disposal or Write-off 9,332,225.37 12,323,752.62 586,278,320.31 (2)Disposal of subsidiary 8,506,623.69 29,696,897.85 (3)Transfer to hold for sale 10,641.84 163,669.12 4.Exchange differences 2,454,876.08 501,322.29 227,012,539.91 5.Closing balance 309,994,211.94 425,494,667.04 12,494,128,061.66 III.Impairment provision 1.Opening balance 129,692.63 42,324,917.30 2.Increase for the period (1)Provision 19,400.94 3,706,142.52 8,740,858.30 3.Decrease for the period (1)Disposal or Write-off 132,808.37 571,165.27 (2)Disposal of subsidiary (3)Transfer to hold for sale 4.Exchange differences 133,668.13 58,787.41 2,712,137.05 5.Closing balance 153,069.07 3,761,814.19 53,206,747.38 IV. Book Value 1.Closing book value 227,911,369.91 428,645,646.94 17,319,507,210.44 226 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 2.Opening book value 223,723,379.09 360,023,952.07 17,146,390,653.22 (2)In the current period, the balance of the construction in progress transferred to the original value of the fixed assets in total RMB2,347,502,636.13. (3)The amount of fixed assets mortgage at the end of the period is RMB55,317,000.00. (4)Disposals of fixed assets Reason for Items Closing balance Opening balance transferring to disposal International Refrigerator Assets Items 55,808,808.81 Demolition Wuhan Energy Items 131,670.93 Scrap cleanup Total 131,670.93 55,808,808.81 18. Construction in progress Summary table (1). Categories √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Construction in progress 3,873,492,230.24 1,610,615,034.68 Construction materials Total 3,873,492,230.24 1,610,615,034.68 Construction in progress (1). Construction in progress √Applicable □Not Applicable Unit and Currency: RMB Closing Balance Opening balance Items Impairment Impairment Book balance Book Value Book balance Book Value provision provision 227 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Closing Balance Opening balance Items Impairment Impairment Book balance Book Value Book balance Book Value provision provision Rishun Logistics 522,865,557.8 522,865,557.84 220,936,821.81 220,936,821.81 Supply Chain 4 Qingdao Special 409,431,912.3 Refrigeration 409,431,912.37 166,981.10 166,981.10 7 Appliances 386,754,022.6 Tianjin ririxin 386,754,022.65 108,020,326.49 108,020,326.49 5 QingdaoWashing 352,667,044.2 352,667,044.20 205,964,507.66 205,964,507.66 appliance 0 328,202,831.6 23,930,767.8 GEA 304,272,063.88 274,905,675.53 274,905,675.53 8 0 QingdaoSmartkitche 138,005,302.2 138,005,302.27 35,666,458.97 35,666,458.97 n 7 114,749,141.4 Chongqing roller 114,749,141.48 10,584,759.60 10,584,759.60 8 113,126,924.7 FPA 113,126,924.77 80,224,904.43 80,224,904.43 7 Hefei drum washing 97,615,033.96 97,615,033.96 19,049,839.70 19,049,839.70 machine Hefei air conditioner 95,282,014.97 95,282,014.97 25,181,280.17 25,181,280.17 Project LaiyangSmartkitche 64,617,334.97 64,617,334.97 n Hefei Air Conditioning 58,267,788.24 58,267,788.24 Electronics Mexico 58,005,438.10 58,005,438.10 58,343,819.44 58,343,819.44 Hefei refrigerator 54,798,396.31 54,798,396.31 55,478,420.33 55,478,420.33 Haier Dishwasher 53,552,923.14 53,552,923.14 65,228,651.96 65,228,651.96 Smart appliance 51,044,968.22 51,044,968.22 Shenyang 49,093,334.43 49,093,334.43 50,298,040.73 50,298,040.73 refrigerator Wuhan water heater 47,679,080.12 47,679,080.12 416,126.13 416,126.13 Jiaozhou 45,009,663.66 45,009,663.66 5,809,318.63 5,809,318.63 Air-Conditioner Tianjin washing 44,885,337.68 44,885,337.68 16,821,409.32 16,821,409.32 machine New energy 43,297,315.74 43,297,315.74 12,082,456.62 12,082,456.62 appliances 228 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Closing Balance Opening balance Items Impairment Impairment Book balance Book Value Book balance Book Value provision provision 768,471,631.2 other 768,471,631.24 365,435,236.06 365,435,236.06 4 3,897,422,998. 23,930,767.8 3,873,492,230. 1,610,615,034.6 1,610,615,034.6 Total 04 0 24 8 8 (2)Details of significant changes of construction in progress for the period Exchange Project Opening Increase for Transfer to Other Closing Source of difference name balance the period fixed assets decrease balance fund s Rishun Logistics 220,936,821. 472,163,738. 170,235,002. 522,865,5 Self-fundi Supply 81 05 02 57.84 ng Chain Project Qingdao Special Refrigeratio 409,264,931. 409,431,9 Self-fundi 166,981.10 n 27 12.37 ng Appliances Project Tianjin 108,020,326. 280,207,285. 386,754,0 Self-fundi ririxin 1,473,589.70 49 86 22.65 ng project QingdaoWa 205,964,507. 334,684,697. 187,982,160. 352,667,0 Self-fundi shing 66 04 50 44.20 ng appliance 274,905,675. 639,752,590. 601,659,937. 15,204,5 328,202,8 Self-fundi GEA 53 77 69 03.07 31.68 ng QingdaoSm 35,666,458.9 167,067,966. 64,729,123.4 138,005,3 Self-fundi artkitchen 7 70 0 02.27 ng Project Chongqing 10,584,759.6 140,684,269. 36,519,887.3 114,749,1 Self-fundi roller 0 18 0 41.48 ng project 80,224,904.4 33,412,891.8 -510,871. 113,126,9 Self-fundi FPA 3 2 48 24.77 ng 229 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Hefei drum 19,049,839.7 194,514,481. 115,949,286.8 97,615,03 Self-fundi washing 0 06 0 3.96 ng machine Hefei air 25,181,280.1 167,114,291.2 97,013,556.4 95,282,01 Self-fundi conditioner 7 2 2 4.97 ng Project LaiyangSma 64,617,334.9 64,617,33 Self-fundi rtkitchen 7 4.97 ng Project Hefei Air Conditionin 166,411,923.9 108,144,135. 58,267,78 Self-fundi g 2 68 8.24 ng Electronics Project Mexico 58,343,819.4 90,306,200.6 93,528,097.2 2,883,51 58,005,43 Self-fundi Project 4 8 5 5.23 8.10 ng Hefei 55,478,420.3 95,670,185.7 96,350,209.7 54,798,39 Self-fundi refrigerator 3 3 5 6.31 ng Project Haier 65,228,651.9 12,864,138.8 24,539,867.7 53,552,92 Self-fundi Dishwasher 6 8 0 3.14 ng Project Smart 51,044,968.2 51,044,96 Self-fundi appliance 2 8.22 ng Project Shenyang 50,298,040.7 49,093,33 Self-fundi 6,628,207.42 7,832,913.72 refrigerator 3 4.43 ng Wuhan 82,556,339.3 35,293,385.3 47,679,08 Self-fundi 416,126.13 water heater 4 5 0.12 ng Jiaozhou 79,890,415.2 40,690,070.2 45,009,66 Self-fundi Air-Conditi 5,809,318.63 7 4 3.66 ng oner Tianjin 16,821,409.3 28,063,928.3 44,885,33 Self-fundi washing 2 6 7.68 ng machine New energy 12,082,456.6 56,305,316.6 25,090,457.5 43,297,31 Self-fundi appliances 2 5 3 5.74 ng 365,435,236. 1,050,651,50 640,470,955. 7,362,428. 218,273. 768,471,6 Self-fundi other 06 5.51 08 84 59 31.24 ng 1,610,615,03 4,623,877,60 2,347,502,63 7,362,428. 17,795,4 3,897,422 Total 4.68 7.92 6.13 84 20.41 ,998.04 230 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (3)Impairment of construction in progress Opening Increase for Transfer to Other Exchange Closing Project name balance the period fixed assets decrease differences Balance 23,104,150. 23,930,767. GEA 826,617.79 01 80 19. Intangible assets Items Proprietary technology Licenses and franchises Land use rights I.Original book value 1.Opening balance 1,493,156,923.88 3,731,908,727.04 1,850,616,814.28 2.Increase for the current period (1)Purchase 3,833,123.00 395,068,151.40 (2)Internal research and 77,063,969.15 development (3)Increase in business combination 3.Decrease for the current period (1)Disposal 13,252,262.00 108,576,175.00 (2)Disposal subsidiary 61,672,619.98 (3)Transfer to hold for sale 4.Exchange differences 32,968,654.60 187,197,556.67 957,287.64 5.Closing balance 1,593,770,408.63 3,919,106,283.71 2,076,393,458.34 II. Accumulated amortization 1.Opening balance 390,405,143.93 162,639,167.73 182,818,222.79 2.Increase in the current period (1)Accrual 146,320,109.65 92,872,244.38 39,655,604.58 3.Decrease for the current period (1)Disposal 1,310,145.39 7,962,252.82 (2)Disposal subsidiary 4,664,776.95 (3)Transfer to hold for sale 4.Exchange differences 8,542,580.93 11,722,352.21 -138,658.34 5.Closing balance 543,957,689.12 267,233,764.32 209,708,139.26 IIIImpairment provision 1.Opening balance 2.Increase in the current period 231 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (1)Accrual 3.Decrease for the current period (1)Disposal (2)Disposal subsidiary (3)Transfer to hold for sale 4.Exchange differences 5.Closing balance IV.Book Value 1.Closing balance 1,049,812,719.51 3,651,872,519.39 1,866,685,319.08 2.Opening balance 1,102,751,779.95 3,569,269,559.31 1,667,798,591.49 (Continued) Application management Items Trademark rights Total software and others I.Original book value 1.Opening balance 1,220,553,965.68 1,333,141,203.40 9,629,377,634.28 2.Increase in the current period (1)Purchase 1,713,867.88 199,820,192.06 600,435,334.34 (2)Internal research and 777,037,492.41 854,101,461.56 development (3)Increase in business 15,759.00 15,759.00 combination 3.Decrease for the current period (1)Disposal 5,967,032.12 127,795,469.12 (2)Disposal subsidiary 21,555,691.06 83,228,311.04 (3)Transfer to hold for sale 170,439.00 170,439.00 4.Exchange differences 31,443,746.32 52,453,017.36 305,020,262.59 5.Closing balance 1,253,711,579.88 2,334,774,502.05 11,177,756,232.61 II.Accumulated amortization 1.Opening balance 656,064,725.62 1,391,927,260.07 2.Increase in the current period (1)Accrual 1,978.77 272,482,892.54 551,332,829.92 3.Decrease for the current period (1)Disposal 4,439,373.60 13,711,771.81 (2)Disposal subsidiary 1,267,713.94 5,932,490.89 (3)Transfer to hold for sale 94,994.05 94,994.05 4.Exchange differences 14,901,294.90 35,027,569.70 232 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 5.Closing balance 1,978.77 937,646,831.47 1,958,548,402.94 IIIImpairment provision 1.Opening balance 10,890,590.83 10,890,590.83 2.Increase in the current period (1)Accrual 3.Decrease for the current period (1)disposal 928,924.48 928,924.48 (2)Disposal subsidiary (3)Transfer to hold for sale 4.Exchange differences 3,441.61 3,441.61 5.Closing balance 9,965,107.96 9,965,107.96 IV.Book Value 1.Closing balance 1,253,709,601.11 1,387,162,562.62 9,209,242,721.71 2.Opening balance 1,220,553,965.68 666,185,886.95 8,226,559,783.38 At the end of the period, the intangible assets developed through the Company accounted for the 11.63% of the original value at the end of the period. 20. Development cost Decrease for the period Included in Opening Increase for Confirmed as Exchange Closing Items current balance the period an intangible differences balance profit and asset loss 91ABD.ERP 952,488,465 229,257,555. 704,405,239 30,958,453. 508,299,23 PROGRAM .55 70 .70 35 4.90 13,562,868. 88,546,644.4 72,632,252. 169,811.3 30,083,053. Other 775,604.81 26 0 72 2 43 966,051,333 317,804,200. 777,037,492 169,811.3 31,734,058. 538,382,28 Total .81 10 .42 2 16 8.33 21 Goodwill Increase for the Decrease for the Exchange Items Opening balance Closing balance period period differences GEA 19,418,454,197.34 971,843,039.25 20,390,297,236.59 Shengfeng Logistics 317,954,690.69 317,954,690.69 GroupCo., 233 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Ltd. Other 608,207,698.96 161,083,812.45 -4,036,190.84 765,255,320.57 Total 20,344,616,586.99 161,083,812.45 317,954,690.69 967,806,848.41 21,155,552,557.16 Goodwill of FPA project is recognized from previous business combination not under common control of FISHER&PAYKEL APPLIANCES HOLDINGS LIMITED through current period business combination under common control of HAIER NEWZEALAND INVESTMENT HOLDING COMPANY LIMITED. In the case of a goodwill impairment test, the Group compares the carrying amount of the relevant asset group or asset group combination (including goodwill) with its recoverable amount. If the recoverable amount is less than the book value, corresponding difference will be recognized in profit or loss. The recoverable amount of the asset group or asset group combination is based on a management-approved 5-10 year budget, which is then estimated based on discounted cash flow method with a fixed growth rate. Key assumptions for discounted cash flow discount method for material goodwill at the end of the period: Items GEA Forecast period growth rate 4.84%-5.50% Forecast period profit rate 5.44%-6.18% Forecast period 10years Stable period growth rate 2% Discouting rate before tax 10.84% According to the results of the impairment test, the goodwill has not been impaired for current period. 22.Long-term prepaid expenses Opening Increase for Other Exchange Closing Items Amortization balance the period decrease differences balance Renovatio 7,658,358.06 3,311,142.64 4,081,865.62 6,887,635.08 n Improvem ent on 137,706,774.01 68,293,235.30 25,937,733.12 12,432,310.59 -358,215.40 167,271,750.20 leased property 234 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Other 32,390,239.14 43,481,367.15 10,471,898.06 8,800,597.40 4,676.37 56,603,787.20 Total 177,755,371.21 115,085,745.09 40,491,496.80 21,232,907.99 -353,539.03 230,763,172.48 23. Deferred tax assets and Deferred tax liabilities (1)Deferred tax assets balance before elimination Items Closing balance Opening balance Provision for assets impairment 240,924,037.86 185,051,809.02 Provision for assets impairment 1,444,791,976.30 1,647,219,516.35 Unrealized earnings eliminated due to 464,499,951.47 418,158,297.39 Other 668,254,961.84 588,386,676.36 Total 2,818,470,927.47 2,838,816,299.12 (2)Deferred tax liabilities balance before elimination Items Closing balance Opening balance Trademark rights 151,412,213.82 163,788,551.88 Disposal of subsidiaries and movement in 94,972,688.60 104,746,820.17 other equity instruments Withholding income tax of overseas 77,190,532.32 161,690,532.32 enterprises Depreciation and amortization 995,433,739.85 548,550,440.41 Interest rate swap agreement 12,431,766.10 13,902,650.26 Changes of the fair value 4,416,607.36 5,298,198.09 Others 72,332,431.05 108,049,562.21 Total 1,408,189,979.10 1,106,026,755.34 (3)The deferred tax assets and the deferred tax liabilities eliminated at the end of this year was RMB1,002,846,191.34. 24. Other non-current assets Items Closing balance Opening balance Prepayments for equipment and land 2,118,776,080.18 757,518,103.03 Foreign exchange contacts 343,283,948.90 Other 206,912,902.38 153,262,129.83 Total 2,325,688,982.56 1,254,064,181.76 25.Short-term borrowings 235 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (1). Categories √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Borrowings - secured by pledge 359,230,849.08 3,914,042,669.00 Borrowings - secured by mortgage 46,843,046.04 130,394,916.35 Borrowings - secured by guarantor 3,983,541,155.25 2,501,400,000.00 Borrowings - unsecured 1,908,889,842.20 4,332,742,689.83 Total 6,298,504,892.57 10,878,580,275.18 26. Financial liabilities held for trading Items Closing balance Forward foreign exchange trading contacts 211,934,956.99 Forward foreign exchange option 6,813,323.34 Total 218,748,280.33 27. Financial liabilities measured at fair value with changes included in current profit and loss Items Opening balance Forward foreign exchange trading contacts 2,524,569.45 Total 2,524,569.45 28. Derivative financial liabilities √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Forward foreign exchange trading contacts 24,384,482.19 Forward commodity contracts 11,219,272.35 Total 35,603,754.54 29. Bills payable and accounts payables Summary table (1). Categories √Applicable □Not Applicable Unit and Currency: RMB 236 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Items Closing balance Opening balance Bills payable 19,626,099,061.60 16,378,699,659.77 accounts payables 27,759,119,079.78 26,237,366,204.29 Total 47,385,218,141.38 42,616,065,864.06 Bills payable (1)Bills payable □Applicable □Not Applicable Unit and Currency: RMB Categories Closing balance Opening balance Commercially acceptance notes 2,402,746,892.66 2,165,982,670.54 Bank acceptance notes 17,223,352,168.94 14,212,716,989.23 Total 19,626,099,061.60 16,378,699,659.77 Accounts payables (1). Accounts payables √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance accounts payables 27,759,119,079.78 26,237,366,204.29 Total 27,759,119,079.78 26,237,366,204.29 The ending balance was mainly the unpaid expenditures on material, equipment and labor. 30. Accounts received in advance (1) .Accounts received in advance √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Accounts received in advance 14,681,466.58 5,861,949,182.62 Total 14,681,466.58 5,861,949,182.62 31. Contract liabilities 237 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (1). Contract liabilities √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Contract liabilities 5,482,325,888.59 Total 5,482,325,888.59 The book balance at the end of the period is mainly the receipt in advance. 32. Employee benefits (1)Employee benefits Increase for the Decrease for the Items Opening balance Closing balance period period Short-term employee benefits 2,254,648,207.39 18,477,887,062.60 18,281,799,628.70 2,450,735,641.29 Post-employment benefits: 51,241,291.07 1,041,419,932.48 1,063,434,543.01 29,226,680.54 defined contribution plan Termination benefits 14,959,967.19 19,777,703.39 20,509,006.11 14,228,664.47 Other benefits due in one year 159,786,862.88 7,678,375.71 10,256,806.84 157,208,431.75 Total 2,480,636,328.53 19,546,763,074.18 19,375,999,984.66 2,651,399,418.05 (2)Short-term employee benefits Increase for the Decrease for the Items Opening balance Closing balance period period Salaries, bonus, allowances 1,329,482,124.90 12,996,968,311.91 12,852,443,321.28 1,474,007,115.53 Employee welfare 297,270,715.36 265,856,143.45 266,699,278.06 296,427,580.75 Social security 147,366,747.95 1,793,189,911.42 1,780,825,787.46 159,730,871.91 Housing fund 7,727,158.93 318,585,805.05 320,307,857.05 6,005,106.93 Union fund and education fund 2,875,359.31 87,883,665.56 87,046,840.75 3,712,184.12 Short-term paid leave 228,449,498.75 235,131,253.54 230,430,105.19 233,150,647.10 Other 241,476,602.19 2,780,271,971.67 2,744,046,438.91 277,702,134.95 Total 2,254,648,207.39 18,477,887,062.60 18,281,799,628.70 2,450,735,641.29 (3)Defined contribution plan: Increase for the Decrease for the Items Opening balance Closing balance period period Pension 49,927,087.85 1,008,990,635.00 1,030,138,287.94 28,779,434.91 238 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unemployment insurance 765,277.29 25,305,432.13 25,776,840.25 293,869.17 Supplementary pension 548,925.93 7,123,865.35 7,519,414.82 153,376.46 Total 51,241,291.07 1,041,419,932.48 1,063,434,543.01 29,226,680.54 (4)Termination benefits Items Closing balance Opening balance Termination compensation 14,228,664.47 14,959,967.19 Total 14,228,664.47 14,959,967.19 33. Taxes payable √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Value-added tax 441,010,016.22 513,242,520.53 Corporate income tax 1,184,505,048.56 1,269,203,683.29 Individual income tax 78,544,332.63 22,166,570.93 City maintenance and construction tax 2,414,582.49 10,698,089.06 Education surcharge 3,839,538.40 4,651,788.94 Treatment fund for appliance and 67,359,180.79 77,767,756.79 electronic products waste Other taxes 60,768,028.30 72,447,777.32 Total 1,838,440,727.39 1,970,178,186.86 34. Other payables Summary table √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Interest payable 104,522,208.28 235,683,220.62 Dividends payable 162,205,193.05 153,756,315.64 Other payables 12,418,950,001.58 10,920,135,768.52 Total 12,685,677,402.91 11,309,575,304.78 (1)Interest payable Items Closing balance Opening balance 239 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Interest on long-term borrowings 57,626,542.89 224,965,386.82 Interest on short-term borrowings 46,895,665.39 10,717,833.80 Total 104,522,208.28 235,683,220.62 (2)Dividends payable Name of unit Closing balance Opening balance BRAVE LION (HK) LIMITED 122,756,874.10 122,756,874.10 Other minority shareholders 39,448,318.95 30,999,441.54 Total 162,205,193.05 153,756,315.64 (3)Other payables: Items Closing balance Opening balance Other payables 12,418,950,001.58 10,920,135,768.52 Total 12,418,950,001.58 10,920,135,768.52 The closing balance mainly included the incurred but unpaid costs. 35. Liabilities held-for-sale √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Liabilities of Shanghai Guangfulai Co., 32,362,267.88 Ltd.(上海广富来有限公司)_ Total 32,362,267.88 Other explanations: In 2018, Haier Electric Group Co., Ltd., a subsidiary of the Company, agreed to sell all of its 67.45% shares of Shanghai Guangfulai Co., Ltd.(上海广富来有限公司) (indirect subsidiary) at RMB 5,059,000. The transaction is expected to complete in 2019. At the end of the period, the liabilities of Shanghai Guangfulai Co., Ltd.(上海广富来有限公司) are treated as liabilities held-for-sale. 36. Non-current liabilities due within one year √Applicable □Not Applicable 240 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Closing balance Opening balance Long-term payables due within one year 3,015,060,105.58 6,149,302,981.65 Total 3,015,060,105.58 6,149,302,981.65 37. Other current liabilities Other current liabilities √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Payable refund 402,932,170.91 Tax amount to be written off 18,593,499.79 21,729,198.70 Others 2,113,133.92 21,231,922.33 Total 423,638,804.62 42,961,121.03 38. Long-term borrowings (1). Categories √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Borrowings - secured by mortgage 23,574,659.91 30,542,316.47 Borrowings - secured by guarantor and 6,214,107,126.89 10,489,849,095.99 mortgage Borrowings - secured by guarantor 9,213,273,265.96 5,227,360,000.00 Borrowings - unsecured 90,511,272.46 288,741,397.35 Total 15,541,466,325.22 16,036,492,809.81 Explanations on the categories of long-term borrowings Interest rate on long-term borrowings – secured by guarantor is the one as provided in the agreement plus LIBOR. Interest rate on domestic long-term borrowings – unsecured is the benchmark rate published by the People‘s Bank of China. 241 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Interest rate on offshore long-term borrowings – unsecured is the one as provided in the agreement plus LIBOR. Interest rate on long-term borrowings – secured by mortgage is the one as provided in the agreement plus LIBOR. 39. Bonds payable On 21 November 2017, HARVEST INTERNATIONAL COMPANY, the Company‘s wholly-owned subsidiary, issued a 5-year HK$8 billion exchangeable corporate bond, coupon rate is zero and rate of return is 1%. On 18 December 2018, the Company issued an RMB 3 billion convertible corporate bond. The convertible bond issued has a maturity of 6 years. The coupon rate is 0.2% in the first year, 0.5% in the second year, and 1.0 in the third year, 1.5% in the fourth year, 1.8% in the fifth year, and 2.0% in the sixth year. The bond was divided into liabilities and equities on initial recognition: Exchangeable bond issued in Convertible bonds issued in Items 2017 2018 Initial recognition: 6,731,131,007.13 2,980,024,754.50 Including: Equities of the exchangeable bond 431,424,524.07 473,061,264.64 Liabilities of the exchangeable bond 6,299,706,483.06 2,506,963,489.86 Changes in the liability portion of corporate bonds in the current period: Accrued Less: Reclassif bond bond Increase in ied to Opening interest interest Exchange Closing Items current maturity balance for the paid for rate impact balance period within current the one year period period Exchangeab le bond 6,211,088,3 18,652,2 451,625,6 6,681,366, issued in 62.68 71.09 06.07 239.84 2017 Exchangeab le bond 2,506,963,4 3,566,57 2,510,530, issued in 89.86 3.00 062.86 2018 242 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 6,211,088,3 2,506,963,4 22,218,8 451,625,6 9,191,896, Total 62.68 89.86 44.09 06.07 302.70 40. Long-term payables Summary table Items Opening balance Closing balance Investment from CDB development fund 93,000,000.00 93,000,000.00 Lease 13,763,243.99 13,020,029.74 Total 106,763,243.99 106,020,029.74 According to the Investment Contract of China Development Fund executed by the Company and its subsidiaries including Qingdao Haier Refrigerator Co., Ltd., Qingdao Haier Air Conditioner Gen Corp., Ltd., Qingdao Haier (Jiaozhou) Air-conditioning Co., Limited together with China Development Fund Co. Ltd. in 2015 and 2016, China Development Fund Co. Ltd. invested RMB20 million in Qingdao Haier Refrigerator Co., Ltd., and RMB73 million in Qingdao Haier (Jiaozhou) Air-conditioning Co., Limited. China Development Fund Co. Ltd. earns 1.2% of the annual profits by means of dividends or repurchase at a premium. The Company and its subsidiaries will repurchase the investments above in 2020 to 2027. 41. Long-term employee benefits payable √Applicable □Not Applicable (1)Long-term employee benefits payable √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance I. Post-employment benefits: net 456,055,879.38 568,350,543.56 liability of defined benefit plan II. Termination benefits 230,752,405.39 114,972,723.07 III. Other long-term benefits IV. Provision for work-related injury 248,166,450.72 267,182,167.75 compensation Total 934,974,735.49 950,505,434.38 243 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (2)Defined benefit plan Some subsidiaries of the Company have participated in several defined benefit plans, in which eligible employees are entitled to the retirement benefits as planned. These plans are exposed to interest rate risks, changes in life expectancy of the beneficiary and other risks. The actuarial valuation of the assets and the present value of defined benefit obligations under such plans are determined by using the Projected Unit Credit (PUC) method. ①. The defined benefit plan of Haier Asia Co., Ltd., a subsidiary of the Company Actuarial assumptions used to set benefit plans Items Rate Discount rate 0.50% Expected rate of return 2.00% Change in Defined Benefit Obligation Items Amount Ⅰ. Opening balance 303,316,065.92 II. Cost recognized in current profit or loss 10,336,078.94 1. Current service cost 8,767,112.43 2. Past service cost 3. Settlement gains (loss indicated in ―-‖) 4. Interest cost 1,568,966.51 III. Cost recognized in other comprehensive income -525,589.67 1. Actuarial loss (gain indicated in ―-‖) -525,589.67 IV. Other changes 11,418,446.87 1. The consideration paid at the time of settlement 2. Benefit paid -9,544,898.72 3. Exchange differences 20,963,345.59 V. Closing balance 324,545,002.06 Change in Fair Value of Plan Assets Items Amount Ⅰ. Opening balance 307,323,897.90 244 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. II. Cost recognized in current profit or loss 1,465,566.47 1. Interest income 1,465,566.47 III. Cost recognized in other comprehensive income -9,084,258.13 1. Return on plan assets (except those included in net interests) -9,084,258.13 2. Changes in impact of asset cap (except those included in net IV. Other changes 26,698,341.89 1.Employer contributions 15,081,405.28 2. Benefit paid -9,544,898.72 3. Exchange differences 21,161,835.33 V. Closing balance 326,403,548.13 Neither the Company's ordinary shares or bonds, nor the properties occupied by the Company are included in the plan assets. Net liability (net asset) of defined benefit plan: Items Amount Ⅰ. Opening balance -4,007,831.98 II. Cost recognized in current profit or loss 8,870,512.47 III. Cost recognized in other comprehensive income 8,558,668.46 IV. Other changes -15,279,895.02 V. Closing balance -1,858,546.07 The average term for the defined benefit obligation is 14.70 years at the balance sheet date. ②.The defined benefit plan of ROPERCORPORATION, a subsidiary of the Company ROPERCORPORATION, a subsidiary of the Company, has provided post-employment defined benefit plan of health care benefits to eligible employees. Actuarial assumptions used to set benefit plans Items Rate Discount rate 3.98% Change in Defined Benefit Obligation Items Amount Ⅰ. Opening balance 145,677,081.28 II. Business combination not under common control III. Cost recognized in current profit or loss 20,315,841.27 245 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 1. Current service cost 6,071,687.59 2. Past service cost 8,810,645.66 3. Settlement gains (loss indicated in ―-‖) 4. Interest cost 5,433,508.02 IV. Cost recognized in other comprehensive incomes -44,078,858.04 1. Actuarial loss (gain indicated in ―-‖) -44,078,858.04 V. Other changes -3,567,871.35 1. The consideration paid at the time of settlement 2. Benefit paid -9,705,195.66 3. Exchange differences 6,137,324.31 VI. Closing balance 118,346,193.16 Net liability (net asset) of defined benefit plan: Items Amount Ⅰ. Opening balance 145,677,081.28 II. Business combination not under common control III. Cost recognized in current profit or loss 20,315,841.27 IV. Cost recognized in other comprehensive incomes -44,078,858.04 V. Other changes -3,567,871.35 VI. Closing balance 118,346,193.16 The average term for the defined benefit obligation is 12.14 years at the balance sheet date. ①.The defined benefit plan of HAIER U.S. APPLIANCE SOLUTIONS,INC., a subsidiary of the Company. HAIER U.S. APPLIANCE SOLUTIONS,INC., a subsidiary of the Company, has provided post-retirement defined benefit plan of health care benefits for the eligible employees. Actuarial assumptions used to set benefit plans Items Rate Discount rate 3.68% Change in Defined Benefit Obligation Items Amount Ⅰ. Opening balance 384,788,210.83 II. Business combination not under common control 246 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. III. Cost recognized in current profit or loss 11,520,541.65 1. Current service cost 2. Past service cost 3. Settlement gains (loss indicated in ―-‖) 4. Interest cost 11,520,541.65 IV. Cost recognized in other comprehensive incomes -55,254,047.36 1. Actuarial loss (gain indicated in ―-‖) -55,254,047.36 V. Other changes -14,241,866.08 1. The consideration paid at the time of settlement 2. Benefit paid -30,943,966.51 3. Exchange differences 16,702,100.43 VI. Closing balance 326,812,839.04 Net liability (net asset) of defined benefit plan: Items Amount Ⅰ. Opening balance 384,788,210.83 II. Business combination not under common control III. Cost recognized in current profit or loss 11,520,541.65 IV. Cost recognized in other comprehensive incomes -55,254,047.36 V. Other changes -14,241,866.08 VI. Closing balance 326,812,839.04 ②. The defined benefit plan of HAIERU.S.APPLIANCESOLUTIONS,INC., a subsidiary of the Company. HAIERU.S.APPLIANCESOLUTIONS,INC., a subsidiary of the Company, has provided defined benefit plan of pension for the eligible employees. Actuarial assumptions used to set benefit plans Items Rate Discount rate 3.21% Change in Defined Benefit Obligation Items Amount Ⅰ. Opening balance 333,354,980.83 II. Business combination not under common control 247 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. III. Cost recognized in current profit or loss 10,074,315.81 1. Current service cost 2. Past service cost 3. Settlement gains (loss indicated in ―-‖) 4. Interest cost 10,074,315.81 IV. Cost recognized in other comprehensive incomes -15,889,924.51 1. Actuarial loss (gain indicated in ―-‖) -15,889,924.51 V. Other changes -42,647,123.41 1. The consideration paid at the time of settlement 2. Benefits paid out -57,177,630.69 3. Exchange differences 14,530,507.28 VI. Closing balance 284,892,248.72 Change in Fair Value of Plan Assets Items Amount Ⅰ. Opening balance 226,737,778.94 II. Amount recognized in current profit or loss 675,345.36 1.Interest income 675,345.36 III. Amount recognized in other comprehensive incomes -2,863,462.49 1. Return on plan assets (except those included in net interests) -2,863,462.49 2. Changes in impact of asset cap (except those included in net interests) IV. Other changes -22,809,851.01 1. Employer contributions 24,209,417.13 2. Benefits paid out -57,177,630.69 3. Exchange differences 10,158,362.55 V. Closing balance 201,739,810.80 Net liability (net asset) of defined benefit plan: Items Amount Ⅰ. Opening balance 106,617,201.89 II. Business combination not under common control III. Cost recognized in current profit or loss 9,398,970.45 IV. Cost recognized in other comprehensive income -13,026,462.02 V. Other changes -19,837,272.40 Ⅵ.Closing balance 83,152,437.92 248 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (3)Provision for work-related injury compensation HAIERU.S.APPLIANCESOLUTIONS,INC. made a provision for the occupational injury claims filed by the injured due to production accidents starting from 1 January 1991. The provision was calculated by BEECHER CARLSON INSURANCE SERVICES, LLC., based on actuarial method. The discount rate used in the actuary is 3.72%. Items Amount Ⅰ. Opening balance 267,182,167.75 II. Business combination not under common control Ⅲ. Compensation recognized in current profit and loss 47,167,731.70 Ⅳ. Actual compensation paid -78,514,520.83 V. Other changes 12,331,072.10 Ⅵ.Closing balance 248,166,450.72 Classification of the balance of defined benefit plan Items Closing balance Opening balance Short-term salary 89,343,078.64 87,660,938.82 Long-term salary 456,055,879.38 568,350,543.56 Total 545,398,958.02 656,011,482.38 42. Provisions √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Active litigation 19,003,500.11 17,898,125.83 Others 880,213.00 191,660.00 Warranty and installation 2,640,904,941.32 2,821,651,293.65 Total 2,660,788,654.43 2,839,741,079.48 Other explanations, including important assumptions and estimates about important provisions: Important assumptions and estimates related to the estimated ―San Bao‖ installation fee: Significant assumptions and estimates related to warranty and installation: estimates are based on historical expenditures and sales, warranty policies, and realized sales in current period. 249 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 43. Deferred income Deferred income √Applicable □Not Applicable Unit and Currency: RMB Decrease for the Items Opening balance Increase for the period Closing balance period Government 494,192,627.62 277,868,707.95 128,509,348.27 643,551,987.30 grants Sale-leaseback 2,948,461.10 2,948,461.10 Total 497,141,088.72 277,868,707.95 131,457,809.37 643,551,987.30 44. Other non-current liabilities √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Obligation of repurchasing the minority 1,792,322,337.19 916,938,153.36 equity rights Contingent consideration 5,705,307.28 5,384,860.29 Forward foreign exchange trading contract 242,417,657.63 Changes of fair value in put option 6,196,157.28 Others 25,839,049.46 26,548,594.19 Total 1,823,866,693.93 1,197,485,422.75 45. Share capital Increase for the Decrease for the Category Opening balance Closing balance period period I. Restricted shares 1. State-owned shares 2. Shares held by domestic non-state-owned legal entities 3. Shares held by domestic individuals 4. Shares held by offshore non-state-owned legal 250 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. entities Ⅱ. Non-restricted shares 6,097,402,727 271,013,973 6,368,416,700 1. Ordinary shares in RMB 6,097,402,727 6,097,402,727 2. Domestic listed foreign Shares 3. Offshore listed foreign 271,013,973 271,013,973 Shares 4.Others Ⅲ. Total shares 6,097,402,727 271,013,973 6,368,416,700 46. Other equity instruments Increase for the Decrease for the Items Opening balance Closing balance period period Equity portion of 431,424,524.07 431,424,524.07 exchangeable bond Equity portion of 473,061,264.64 473,061,264.64 convertible bond Total 431,424,524.07 473,061,264.64 904,485,788.71 47. Capital reserve √Applicable □Not Applicable Unit and Currency: RMB Increase for the Decrease for the Items Opening balance Closing balance period period Capital premium 1,485,439,173.24 2,467,528,660.82 2,593,413,997.50 1,359,553,836.56 Other capital 826,883,093.84 22,336,544.17 849,219,638.01 reserve Total 2,312,322,267.08 2,489,865,204.99 2,593,413,997.50 2,208,773,474.57 Other explanations, including the changes in the current period and the reasons for the changes: The main reasons for the change in share premium: ① the company issued D shares in the current period, increasing the capital reserve RMB1,861,549,590.47; ② non-proportional capital injection in subsidiaries in the current period, reducing the share premium RMB501,995,753.91; ③ the business 251 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. combination under common control in the current period, reducing the share premium RMB2,091,418,243.59; ④ the current equity premium is insufficient to offset the corresponding carry-over retained earnings, increase the share premium RMB605,979,070.35. The main reasons for the change in other capital reserve: Changes on other equity of the investee accounted for using equity method, which results proportionate movement of other capital reserves by the Company. 48. Other comprehensive income Impact of adjustment of Book balance as at 31 Book balance as at 1 January Items financial instrument December 2017 2018 standards a -272,839,961.93 40,260,602.68 -232,579,359.25 b 45,295,954.96 45,295,954.96 c 238,761,979.41 238,761,979.41 d 3,074,994.11 344,120.11 3,419,114.22 e -9,868,941.65 -9,868,941.65 Total 4,424,024.90 40,604,722.79 45,028,747.69 (continued) Amount for the current period Book Amount Attributable Attributable Item balance as at Less: Closing before to the parent to minority s 1 January income tax Others balance current company, shareholders, 2018 expenses income tax after tax after tax -232,579,3 183,101,06 6,004,318. 166,426,767 10,669,982. -4,372. -66,156,96 a 59.25 8.60 55 .08 97 85 5.02 45,295,954. -8,479,693. -2,533,48 -5,946,207. 39,349,747 b - 96 54 6.30 24 .72 238,761,97 631,950,64 516,062,368 115,888,277 754,824,34 c 9.41 6.27 .49 .78 7.90 3,419,114.2 -45,366,490 -5,687,99 -28,974,351 -10,704,141 -25,555,25 d -17.11 2 .94 7.79 .68 .47 4.57 -9,868,941. 110,102,10 30,061,69 80,039,412. 70,170,471 e 997.66 65 9.97 9.34 97 .32 45,028,747. 871,307,64 27,844,53 727,607,989 115,855,116 -4,389. 772,632,34 Total 69 0.36 3.80 .62 .94 96 7.35 Notes: 252 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (1) Item a, b,and c are other comprehensive income that will be reclassified to profit or loss, the details are as follows: Item a represents other comprehensive income classified to profit and loss under the equity method. Item b represents cash flow hedge reserves (the effective part of the cash flow hedge profit and loss). Item c represents exchange differences from translation of foreign currency financial statements. (2) Item d and e are other comprehensive income that cannot be reclassified into profit or loss. Details are as follows: Item d represents the change in fair value of investments in other equity instruments. Item e represents changes arising from remeasurement of net liabilities or assets of defined benefit plans. 49. Surplus reserve √Applicable □Not Applicable Unit and Currency: RMB Increase for the Decrease for the Items Opening balance Closing balance period period Statutory surplus 2,055,400,980.82 245,841,441.72 60,597,907.03 2,240,644,515.51 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 2,103,057,782.41 245,841,441.72 60,597,907.03 2,288,301,317.10 Explanations on surplus reserve, including the changes in the current period and the reasons for the changes: Pursuant to Company Law of the People‘s Republic of China and articles of association, the Company is required to appropriate the statutory surplus reserve at 10% of its net profit. Retained earnings was transferred to capital surplus due to insufficiency for offsetting, which results to a decrease for the period. 50. Undistributed profits √Applicable □Not Applicable Items Amounts Undistributed profits at the end of previous year 22,793,110,884.09 Add: correction of accounting errors 253 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Adjustment due to implementation of new accounting standard -54,905,584.45 Adjustment due to business combination under common control -442,158,653.92 Undistributed profits at the beginning of the year 22,296,046,645.72 Add: net profit attributable to owners of the Company 7,440,228,855.90 Profit available for appropriation for the year 29,736,275,501.62 Less: appropriation of statutory surplus reserve 245,841,441.72 Appropriation of staff incentive and welfare fund Dividend payable for ordinary shares 2,085,311,732.63 Business combination under common control 545,381,163.32 Undistributed profits at the end of period 26,859,741,163.95 51. Operating income and Operating cost (1) Operating income Items Amount for the current period Amount for the previous period Primary business 182,494,232,298.13 162,823,173,116.10 Other Business 822,327,937.90 605,652,372.46 Total 183,316,560,236.03 163,428,825,488.56 (2) Primary business income and primary business cost by product category Categories Amount for the current period Amount for the previous period Primary business Primary business Primary business Primary business income cost income cost Air conditioner 31,772,519,759.44 21,695,248,357.25 28,730,743,504.01 19,585,790,331.31 Refrigerator 54,339,167,693.16 37,841,043,547.32 48,486,975,895.30 32,948,895,952.96 Kitchen appliance 24,950,529,063.08 17,222,856,837.31 23,238,289,006.60 14,450,599,405.72 Water heater 7,924,121,254.31 4,310,655,990.24 7,107,960,322.15 4,029,798,034.84 Washing machine 36,268,485,954.44 23,967,326,298.29 31,521,936,295.71 20,048,711,163.15 Equipment 1,477,845,556.52 1,287,595,705.54 2,921,944,213.52 2,767,206,838.96 product Integrated channel services and 25,761,563,017.18 23,651,575,469.50 20,815,323,878.81 18,723,419,320.02 others 182,494,232,298.13 129,976,302,205.45 162,823,173,116.10 112,554,421,046.96 254 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 52. Taxes and surcharge √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous Items period City maintenance and construction tax 294,671,986.39 289,360,072.51 Education surcharge 210,834,078.09 207,436,359.71 Property tax 74,077,957.50 58,404,642.74 Land use tax 43,018,434.02 39,803,659.28 Stamp duty 190,497,783.55 164,204,646.62 Others 44,131,798.25 62,687,776.30 Total 857,232,037.80 821,897,157.16 53. Selling expenses √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous Items period Selling expenses 28,653,223,738.07 28,996,237,421.82 Total 28,653,223,738.07 28,996,237,421.82 The Company's Selling expenses are mainly salary expenses, transportation and storage fees, advertising and promotion fees, and after-sales expenses. 54. Administrative expenses √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous Items period Administrative expenses 8,324,327,164.18 7,164,848,718.59 Total 8,324,327,164.18 7,164,848,718.59 The Company's management expenses are mainly salary expenses, administrative office fees, rental fees, etc. 55. R&D expenses √Applicable □Not Applicable 255 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unit and Currency: RMB Amount for the current period Amount for the previous Items period R&D expenses 5,080,604,505.93 4,509,850,773.96 Total 5,080,604,505.93 4,509,850,773.96 The Company's R&D expenses are mainly salary expenses, research and development equipment expenses, inspection and testing fees. 56. Financial expenses √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous Items period Interest expense 1,464,649,826.98 1,431,139,429.49 Interest income -475,642,501.12 -332,391,211.97 Cash discount -170,820,924.61 -178,496,609.91 Exchange gains and losses -17,764,701.13 585,287,948.56 Others 138,754,500.34 98,429,194.73 Total 939,176,200.46 1,603,968,750.90 57. Impairment loss on assets Unit and currency: RMB Amount for the current period Amount for the previous Items period Loss from reducing inventory 553,505,416.90 548,962,901.14 Impairment losses on other current assets 168,488,659.35 Loss on bad debts 60,339,980.28 Impairment loss on fixed assets 8,740,858.30 4,033,767.06 Impairment loss on intangible assets 10,020,069.91 Impairment loss on construction in progress 23,104,150.01 Impairment loss on long-term equity 6,445,101.57 21,000,000.00 investments Impairment loss on financial assets held for 27,000,000.00 sale Total 760,284,186.13 671,356,718.39 256 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 58. Credit impairment loss Items Amount for the current period Loss on bad debts 97,513,831.50 Total 97,513,831.50 59. Other income √Applicable □Not Applicable Unit and Currency: RMB Amount for the current Amount for the previous Related to assets/ Items period period revenue Government grants 850,633,206.89 871,278,650.72 Related to revenue Government grants 44,010,931.33 40,729,868.30 Related to assets Total 894,644,138.22 912,008,519.02 60. Investment income Amount for the current period Amount for the previous Items period Long-term equity investments income 1,324,848,299.56 1,190,693,804.93 calculated by the equity method Investment income from disposal of long-term 259,839,279.75 154,563,929.68 equity investments Investment income from disposal of other 206,586.42 1,006,946.64 equity instrument investments Investment income from other equity 105,245,136.33 41,422,977.72 instrument investments during holding period Income from wealth management products 103,240,731.45 45,971,181.79 Investment income from disposal of financial assets measured at fair value with changes 129,824,011.48 49,335,869.06 included in current profit and loss Total 1,923,204,044.99 1,482,994,709.82 61. Gains on changes in fair value Amount for the previous Items Amount for the current period period Change in fair value of forward foreign -151,334,742.90 614,071,259.47 exchange trading contracts Changes in fair value of wealth management 8,697,646.20 257 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. products Others -2,554,626.79 Total -145,191,723.49 614,071,259.47 62. Gains on disposal of assets √Applicable □Not Applicable Unit and Currency: RMB Amount for the previous Items Amount for the current period period Gains on disposal of non-current assets 366,499,751.21 21,967,141.33 Losses on disposal of non-current assets -98,699,151.75 -8,454,739.01 Total 267,800,599.46 13,512,402.32 63. Non-operating income Amount for the previous Items Amount for the current period period Gains on disposal of non-current assets 816,958.25 60,431,217.90 Quality claims and fines 352,866,034.11 329,381,398.38 Others 120,473,815.78 299,704,092.86 Total 474,156,808.14 689,516,709.14 64. Non-operating expenses Amount for the previous Items Amount for the current period period Losses on disposal of non-current assets 54,178,221.66 162,690,446.49 Donation 9,266,130.17 13,073,364.86 Others 171,846,622.57 86,506,522.08 Total 235,290,974.40 262,270,333.43 65. Income tax expenses (1) Statement of income tax expenses Items Amount for the current period Amount for the previous period Current income tax expense 1,550,484,728.82 1,724,958,835.51 Deferred income tax expense 308,292,236.73 -250,089,941.40 Total 1,858,776,965.55 1,474,868,894.11 258 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (2) Reconciliation between accounting profit and income tax expenses for the period Items Amount for the current period Total accounting profit 11,629,376,826.80 Income tax calculated pursuant to statutory tax rate(s) 2,907,344,206.70 Impact from different tax rates applicable to subsidiaries -805,722,505.66 Impact from adjustment to income tax in prior periods -178,147,219.30 Impact from non-taxable income -222,789,201.89 Impact from non-deductible cost, expense and loss 88,008,649.57 Impact from utilizing deductible losses of unrecognized 93,316,905.08 deferred tax assets from previous period Impact from deductible provisional differences or deductible losses of unrecognized deferred tax assets -23,233,868.95 from this period Others 1,858,776,965.55 Total income tax expense 66. Other comprehensive income √Applicable □Not Applicable Please refer to VII. 48 for details 67. Cash received from other operating activities √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current period Deposits and securities 114,257,678.56 Government grants 653,623,290.10 Non-operating income excluding government grants 217,846,467.25 Interest income 393,696,366.02 Others 19,817,609.67 Total 1,399,241,411.60 68. Cash paid to other operating activities √Applicable □Not Applicable 259 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Unit and Currency: RMB Items Amount for the current period Operating expenses 8,249,811,984.16 General and administrative expenses 5,182,968,810.96 Financial expenses 121,883,162.26 Non-operating expenses 35,123,481.83 Others 405,392,437.95 Total 13,995,179,877.16 69. Other cash received from investing activities √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current period Gain on disposal of lock-exchange instruments 96,793,768.99 Recovery of the investment deposit paid 26,009,843.00 Others 1,928,810.42 Total 124,732,422.41 70. Other cash paid to other investing activities √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current period Others 18,073,550.00 Total 18,073,550.00 71. Cash received from financing activities √Applicable □Not Applicable Unit and Currency: RMB Items Amount for the current period Temporary brokerage issue fee 21,983,976.00 260 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Recovery of amounts pledged 30,140,985.25 Others 3,118,486.05 Total 55,243,447.30 72. Cash paid to other financing activities Unit and Currency: RMB Items Amount Payment of public issuance fee 122,394,796.91 Cash paid due to the withdrawal of non-controlling 1,899,485.00 shareholders Share repurchase 100,468,808.00 Acquisition of minority shareholding 673,491,399.63 Mergers and acquisitions under common control 2,057,989,346.35 Others 3,201,206.97 Total 2,959,445,042.86 73. Information of net profit adjusted to cash flow of operating activities Net profit adjusted to cash flow of Amount for the previous Amount for the current period operating activities period 1. Net profit 9,770,599,861.25 9,028,408,315.94 Add: impairment provision for assets 857,798,017.63 671,356,718.39 Depreciation of fixed assets 2,548,065,369.34 2,597,277,680.60 Amortization of intangible assets 551,332,829.92 473,044,960.22 Amortization of long-term prepaid 40,491,496.80 36,706,751.00 expenses Changes in fair value gains and losses -214,439,336.05 179,683,043.73 (―-‖ represents ―gains‖) Loss and gains on change of fair value 145,191,723.49 -614,071,259.47 (―-‖ represents ―gains‖) Financial expenses (―-‖ represents 1,382,703,691.88 1,361,310,778.01 ―gains‖) Loss on investments(―-‖ represents -1,923,204,044.99 -1,482,994,709.82 ―gains‖) Decrease in deferred tax assets (―-‖ 37,008,484.28 -393,048,359.88 represents ―increase‖) 261 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Increase of deferred tax liabilities (―-‖ 271,283,752.45 142,958,418.48 represents ―decrease‖) Decrease in inventories (―-‖ represents -680,273,520.74 -6,736,216,648.50 ―increase‖) Decrease of operational account 2,147,854,561.45 874,588,623.49 receivables (―-‖ represents ―increase‖) Increase of operational account 4,149,408,259.78 10,156,798,833.85 payables (―-‖ represents ―decrease‖) Others -149,568,247.33 407,982,133.94 Net cash flow generated from 18,934,252,899.16 16,703,785,279.98 operational activities 2 . Significant investment and financing activities not involving cash inflows and outflows: Capital transferred from debts Convertible corporate bonds due within one year Fixed assets under finance lease 3 . Net changes of cash and cash equivalents: Cash balance at the end of the period 36,044,777,414.04 34,988,175,709.53 Less: cash balance at the beginning of 34,988,175,709.53 23,877,674,344.81 the period 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 1,056,601,704.51 11,110,501,364.72 equivalents 74. Cash and cash equivalents Unit and currency: RMB Items Closing balance Opening balance I. Cash 36,044,777,414.04 34,988,175,709.53 Including: Cash on hand 1,380,614.79 513,781.37 Bank deposits always available for 35,483,724,835.69 33,643,046,621.48 262 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. payment Other cash and cash equivalents 559,671,963.56 1,344,615,306.68 always available for payment II. Cash equivalents Including: bond investments due within three months III. Closing balance of cash and cash 36,044,777,414.04 34,988,175,709.53 equivalents Including: cash and cash equivalents the use of which by the parent or subsidiaries of the Group is restricted 75. Monetary items in foreign currency Items Closing Balance Opening Balance Balance in foreign Exchange Balance in Balance in foreign Exchange Balance in currency rate RMB currency rate RMB Cash 7,328,552,87 8,196,005,63 USD 1,067,804,067.53 6.8632 1,254,324,268.11 6.5342 6.29 2.66 380,572,479. 164,102,625. EUR 48,497,251.17 7.8473 21,032,596.25 7.8023 12 69 140,482,337. 289,875,163. JPY 2,269,981,380.74 0.061887 5,007,949,887.01 0.057883 71 31 522,938,715. 860,319,925. HKD 596,825,742.94 0.8762 1,029,213,931.69 0.8359 96 50 1,381,212,75 1,280,897,58 Others 6.03 6.07 9,753,759,16 10,791,200,9 Subtotal 5.11 33.23 Accounts receivables 2,364,165,45 6,771,029,36 USD 344,469,847.01 6.8632 1,036,244,584.01 6.5342 3.98 0.84 445,511,959. 438,056,515. EUR 56,772,642.74 7.8473 56,144,536.32 7.8023 37 75 269,171,611. 224,298,339. JPY 4,349,404,743.03 0.061887 3,875,029,615.26 0.057883 33 22 2,186,781,15 2,174,927,52 Others 6.28 5.67 5,265,630,18 9,608,311,74 Subtotal 0.96 1.48 263 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Short-term borrowings 3,381,588,20 6,848,763,72 USD 492,713,050.43 6.8632 1,048,141,122.69 6.5342 7.73 3.88 74,973,938.5 88,321,274.6 EUR 9,554,106.32 7.8473 11,319,902.42 7.8023 1 5 190,940,210. 42,846,000.0 JPY 3,084,656,064.62 0.0619 740,217,334.97 0.057883 40 0 30,737,573.9 296,567,076. Others 0 35 3,678,239,93 7,276,498,07 Subtotal 0.54 4.88 Accounts payables 5,540,304,56 5,864,206,40 USD 807,248,013.94 6.8632 897,463,561.23 6.5342 9.25 1.79 667,595,459. 581,533,926. S$ 133,353,733.34 5.0062 119,091,136.10 4.8831 84 67 86,838,469.2 118,012,769. EUR 11,066,031.53 7.8473 15,125,382.24 7.8023 3 85 193,594,808. 199,988,120. JPY 3,127,541,332.15 0.0619 3,455,040,692.60 0.057883 46 41 879,303,256. 1,092,015,77 Others 98 5.11 7,367,636,56 7,855,756,99 Subtotal 3.76 3.83 Non-current liabilities due in one year 2,45 2,809,244,33 0,32 USD 409,319,900.19 6.8632 375,000,000.00 6.5342 8.98 5,00 0.00 205,815,766. Rbl 2,087,381,000.00 0.0986 60 3,29 8,97 S$ 675,590,911.85 4.8831 7,98 1.65 5,74 3,015,060,10 9,30 Subtotal 5.58 2,98 1.65 Long-term borrowings 15,159,504,5 16,005,950,4 USD 2,208,809,964.66 6.8632 2,449,565,439.28 6.5342 49.45 93.34 264 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 267,875,843. JPY 4,327,558,051.70 0.0619 40 72,878,712.3 Others 7 15,500,259,1 16,005,950,4 Subtotal 05.22 93.34 VIII. Changes of consolidation scope 1. Business combination not under common control √Applicable □Not Applicable Unit and Currency: RMB (1). Business consolidation not under common control occurring in the current period √Applicable □Not Applicable Unit and Currency: RMB Acquiree‘s Interest Acqui Acqu Recognition Acquiree‘s net Time of revenue from Acquiree acquired sition isitio basis of profit from acquisiti Acquisition cost acquisition Name (% ) metho n Acquisition acquisition date on date to the d date dates to the year end year end Guizhou Peiji 2018. shareholding 672,279,564. Logistics Co., 2,018.06 163,144,867.00 60.00 Cash 27,467,584.99 06 transferred 05 Ltd. (2)Acquisition cost and goodwill Items Guizhou Peiji Logistics Co., Ltd. ------Cash 163,144,867.00 Total acquisition cost 163,144,867.00 Less: fair value of identifiable net assets 2,061,054.55 acquired Goodwill 161,083,812.45 (3)Acquiree’s identifiable assets and liabilities at acquisition date: Guizhou Peiji Logistics Co., Ltd. Items Fair value Book Value Cash 10,699,559.01 10,699,559.01 Accounts receivables 448,446,035.96 448,446,035.96 Bills receivable 408,146.00 408,146.00 265 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Other current assets 2,063,930.85 2,063,930.85 Other receivables 54,915,966.40 54,915,966.40 Prepayments 30,852,283.68 30,852,283.68 Inventories 23,063,186.17 23,063,186.17 Fixed assets 3,537,575.24 3,537,575.24 Intangible assets 15,759.00 15,759.00 Deferred tax assets 4,956,728.75 4,956,728.75 Long-term equity investments 15,253.01 15,253.01 Long-term prepaid expenses 2,444,809.32 2,444,809.32 Short-term borrowings -165,000,000.00 -165,000,000.00 Accounts payables -314,992,087.95 -314,992,087.95 Taxes payables -18,398,695.99 -18,398,695.99 Employee benefits -4,067,745.97 -4,067,745.97 Dividends payable -14,970,000.00 -14,970,000.00 Interest payable -1,431,500.02 -1,431,500.02 Other payables -55,992,118.40 -55,992,118.40 Contract liabilities -5,669,852.75 -5,669,852.75 Net assets obtained 897,232.31 897,232.31 Less:Minority equity interests -2,537,858.61 -2,537,858.61 Net assets obtained 3,435,090.92 3,435,090.92 2. Business combination under common control √Applicable □Not Applicable (1)Business combination under common control for the current period Basis for recognition Recognition Acquisi as business basis of Name of acquiree % interest acquired tion combination under acquisition date common control dates Rights and obligations HAIERNEWZEAL Ultimately controlled related to target ANDINVESTMEN by Haier Group 100% 2018.7 shareholding THOLDINGCOMP before and after the have been ANYLIMITED transaction transferred to the Company Qingdao Jushanghui Originally held 24% of the ultimately controlled Rights and 2018.7 Network shares and counted as by Haier Group obligations 266 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Technology Co., Associate, it acquired another before and after the related to target Ltd. 25% of the shares on 9 July transaction shareholding 2018, and signed a concerted have been action agreement with another transferred to shareholder holding 11%, thus the Company obtaining control. (Continued) Income of the Net profit of the acquiree from the Net profit of acquiree from the Income of the beginning of the the acquiree beginning of the acquiree during Name of acquiree current during the current consolidation the comparison consolidation period comparison period to the period to the consolidation period consolidation date date HAIERNEWZEAL ANDINVESTMEN 5,524,659,014. 249,854,563. 3,132,068,605.17 -59,996,214.21 THOLDINGCOMP 17 21 ANYLIMITED Qingdao Jushanghui Network 21,266,455.08 203,794.51 16,383,548.22 -7,733,762.20 Technology Co., Ltd. (2)Acquisition cost HAIERNEWZEALANDINVESTM Qingdao Jushanghui Items ENTHOLDINGCOMPANYLIMIT Network Technology Co., ED Ltd. ------Cash $303,040,997.28 50,000,000.00 (3)Book value of assets and liabilities of acquirees on the Acquisition method HAIERNEWZEALANDINVESTMENTHOLDINGCOMPANYLI Items MITED Acquisition date Opening Balance Cash and cash equivalents 611,464,970.55 622,840,949.40 Accounts receivable 813,986,897.45 670,770,260.05 Prepayments 28,465,298.52 38,198,663.14 Other receivables 7,005,819.42 14,876,457.03 Inventories 1,235,895,814.00 1,034,092,417.69 Long term receivables 250,766,874.46 289,785,899.38 Fixed assets 1,306,966,016.81 1,128,821,693.06 267 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Construction materials 110,802,662.56 80,224,904.43 Intangible assets 1,148,112,030.96 1,221,047,084.73 Goodwill 503,495,869.74 501,299,229.69 Deferred tax assets 362,395,277.36 181,422,225.45 other assets 99,447,519.13 116,358,332.75 accounts payables -1,327,485,225.53 -822,059,589.75 Taxes payables -16,402,462.37 -60,884,850.08 Other payables -95,058,729.98 -107,715,659.91 Non-current liabilities due in one -3,383,613,879.72 -3,298,977,981.65 year Other liabilities -285,879,057.51 -409,267,764.36 estimated liabilities -75,804,646.13 -41,089,103.02 Deferred tax liabilities -219,538,926.19 -64,731,465.99 Other non-current liabilities -31,481,834.05 -26,548,594.20 Net assets obtained 1,043,540,289.48 1,068,463,107.84 Minority equity interests Net assets obtained 1,043,540,289.48 1,068,463,107.84 (Continued) Qingdao Jushanghui Network Technology Co., Ltd. Items Acquisition date Opening Balance Cash 41,441,583.10 30,119,757.11 Accounts receivable 615,908.70 924,226.82 Other receivables 5,637,244.00 5,640,277.02 Other current assets 147,215.02 901,871.05 Fixed assets 22,792.03 45,584.05 Intangible assets 270,447.69 326,402.37 Accounts payables -27,871.78 -1,818,627.66 Receipts in advance -173,368.26 -391,983.02 Employee benefits -1,787,201.83 Taxes payables -33,723.16 -32,809.36 Other payables -23,476,102.87 -9,707,166.59 Net assets obtained 24,424,124.47 24,220,329.96 Less:Minority equity interests Net assets obtained 24,424,124.47 24,220,329.96 268 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. 3. Disposal of subsidiary Whether there is a single disposal of the investment in the subsidiary(that is, the loss of control ) Jiangsu Goodaymart Changle Shengfeng Sunflower Supply Shengfeng Items Logistics Chain Management Logistics Co., GroupCo., Ltd Co., Ltd. Ltd. Equity disposal price 715,469.69 692,344,595.00 1,800,000.00 Proportion of disposal 51.00% 50.37% 55.17% Method Disposal Disposal Disposal Date of loss-of-control 2018/5/30 2018/11/30 Basis for determination of date of disposal disposal disposal loss-of-control Difference between consideration and its share of net assets of the 241,648.70 79,836,157.88 1,800,000.00 subsidiary as respect to the disposal in the consolidated level (Continued) Hunan Rishun Shandong Rishun Fujian Rishun Items Electric Co., Ltd. Electric Co., Ltd. Electric Co., Ltd. Equity disposal price 8,935,689.67 17,078,925.15 5,018,536.53 Proportion of disposal 100.00% 81.00% 81.00% Method Liquidation disposal disposal Date of loss-of-control 2018/10/18 2018/12/31 2018/12/31 Basis for determination of date of Liquidation disposal disposal loss-of-control Difference between consideration and its share of net assets of the -281,373.03 -2,323,022.83 subsidiary as respect to the disposal in the consolidated level (Continued) Hefei Hailan Hefei Haice Appliance Appliance Beijing ASU Tech Items Manufacturing Co., Manufacturing Co., Ltd. Ltd. Co., Ltd. Equity disposal price 30,000,000.00 Proportion of disposal 16.65% Method Liquidation Liquidation disposal 269 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. Date of loss-of-control 2018/5/30 2018/5/30 2018/1/1 Basis for determination of date of Liquidation Liquidation disposal loss-of-control Difference between consideration and its share of net assets of the 28,425,940.85 subsidiary as respect to the disposal in the consolidated level (Continued) Qingdao Haishengda Qingdao Haizhijie Beijing ASU Tech Items Refrigeration Electric Refrigeration Co., Co., Ltd. Co., Ltd. Ltd. Consideration Proportion of disposal 100.00% Method Liquidation Liquidation Liquidation Date of loss-of-control 2018/5/30 2018/5/30 2018/12/31 Basis for determination of date of Liquidation Liquidation Liquidation loss-of-control Difference between consideration and its share of net assets of the 660,799.01 subsidiary as respect to the disposal in the consolidated level 4. Changes of consolidation scope due to other reasons √Applicable □Not Applicable (1)Qingdao Haier Intelligent Technology Development Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Haier (Shanghai) Home Appliance Research and Development Center Co., Ltd. in 2018. (2)A subsidiary of the Company established a wholly-owned subsidiary Haier (Shenzhen) R&D Co., Ltd.for the period with a total shareholding of 100% at the end of the period. (3)Qingdao Haier Air Conditioner Gen Corp., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Guangzhou Haier Air Conditioner Co., Ltd. in 2018. (4)Haier Industrial Holding Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Qingdao Haier Institute of Investment Management Co., Ltd. in 2018. (5)Haier Digital Technology (Qingdao) Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Tianjin Haiyun Chuang Digital Technology Co., Ltd. in 2018. (6)Haier Digital Technology (Qingdao) Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Haier Digital Technology (Nanjing) Co., Ltd. in 2018. 270 / 333 2018 Annual Report of Qingdao Haier Co., Ltd. (7)Haier Digital Technology (Qingdao) Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Haier Digital Technology (Wuxi) Co., Ltd. in 2018. (8)Haier Digital Technology (Qingdao) Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Haier Digital Technology (Xi'an) Co., Ltd. in 2018. (9)MANIIQ(SINGAPORE)INTELLIGENTEQUIPMENTCO.LTD., a subsidiary of the Company established a wholly-owned subsidiary Facteon Intelligent Technology (Qingdao) Co., Ltd. in 2018. (10)Qingdao Haier Technology Investment Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Qingdao Yunshang Yuyi Technology Co., Ltd. for the period with a shareholding of 70% at the end of the period. (11)Qingdao Haier Technology Investment Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Haiyu (Shanghai) Intelligent Technology Co., Ltd. for the period with a shareholding of 70% at the end of the period. (12)Qingdao Haier Intelligent Electronics Co., Ltd.., a subsidiary of the Company, established a wholly-owned subsidiary Tianjin Haier Zhikong Electronics Co., Ltd. in 2018. (13)Qingdao Haier Intelligent Electronics Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Hefei Haier Intelligent Electronics Co., Ltd. in 2018. (14)Qingdao Haier Technology Investment Co., Ltd., a subsidiary of the Company, established a wholly-owned subsidiary Qingdao Haizhi Investment Management Co., Ltd. in 2018. 271 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report IX. Interests in other entities 1. Interests in subsidiaries (1).Composition of the Group Place Shareholding Principal of Name of subsidiary place of regist Nature of business Method business ratio Direct Indirect n Group company, which mainly engage in Business Mainland investment holding, combinat Haier Electronics Group of China Berm the production and 14.01% 30.95% ion under Co., Ltd. and Hong uda sale of washing common Kong machines and water control heaters, distribution service and logistics service Group company, Britis which mainly The US h engage in household WONDERGLOBAL(BVI)I and other Virgi Establish appliances 100.00% NVESTMENTLIMITED overseas n ment production and areas Islan distribution ds business Busines Group company, s which mainly combin Singapore Haier Singapore engage in household and other Singa ation Investment Holding Co., appliances 100.00% overseas pore under Ltd. production and areas commo distribution business n control Busines Group company, which mainly s HAIERNEWZEALANDIN New engaged in the combin New VESTMENTHOLDINGC Zeala production and 100.00% ation Zealand OMPANYLIMITED nd distribution of under household commo appliances. n 272 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report control Busines s Qing combin Qingdao Haier Air Qingdao dao Manufacture and ation Conditioner Gen Corp., High-tech High- sale of household 100.00% under Ltd. Zone tech air-conditioners Zone commo n control Huic huan Busines Huichua Distr s n ict, combin District, Zun Guizhou Haier Electronics Manufacture and ation Zunyi yi 59.00% Co., Ltd.. sale of refrigerator under City, City, commo Guizhou Guiz n Province hou control Prov ince Busines Hefe s i Hefei combin Hefei Haier Haie Manufacture and Haier ation Air-conditioning Co., r sale of 100.00% Industrial under Limited Indu air-conditioners Park commo strial n Park control Busines Wuh s an Wuhan combin Haie Manufacture and Wuhan Haier Electronics Haier ation r sale of 60.00% Co., Ltd. Industrial under Indu air-conditioners Park commo strial n Park control Qingdao Haier Qingdao Qing Manufacture and 100.00% Busines 273 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Air-Conditioner Electronics Developm dao sale of s Co.,Ltd. ent Zone Devel air-conditioners combin opme ation nt under Zone commo n control Busines s Qing combin Qingdao Haier Information Qingdao dao Manufacturing of ation Plastic Development Co., High-tech High- 100.00% plastic products under Ltd Zone tech Zone commo n control Dali Busines an s Dalian Exp combin Manufacture and Dalian Haier Precision Export ort ation sale of precise 90.00% Products Co., Ltd. Expressi Expr under plastics ng Zone essin commo g n Zone control Hefei Econ Busines Hefei omic s Economic & combin & Techn Hefei Haier Plastic Co., Manufacture and ation Technologi ologi 94.12% 5.88% Ltd. sale of plastic parts under c al c al Developm Devel commo ent Area opme n nt control Area Qing Busines R&D and Qingdao dao s Qingdao Haier Moulds Co., manufacture of High-tech High- 75.00% 25.00% combin Ltd. precise mold and Zone tech ation product Zone under 274 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report commo n control Busines s Qing Manufacture of combin dao Qingdao plastic powder, Qingdao Meier Plastic Devel ation Developm plastic sheet and 40.00% 60.00% Powder Co., Ltd. opme under ent Zone high-performance nt commo coatings Zone n control Jian Busines gbei s Jiangbei Distr Plastic products, combin Chongqing Haier Precision District, ict, sheet metal work, ation 90.00% 10.00% Plastic Co., Ltd. Chongqi Cho electronics and under ng City ngqi hardware commo ng n City control Jian Busines gbei s Jiangbei Distr Manufacture and combin Chongqing Haier sale of electronics District, ict, ation Intelligent Electronics Co., and automatic 90.00% 10.00% Chongqi Cho under Ltd. control system ng City ngqi equipment commo ng n City control Busines s Qing combin Qingdao dao Qingdao Haier Robot Co., R&D, manufacture ation High-tech High- 50.00% Ltd. and sale of robot under Zone tech Zone commo n control Qingdao Haier Refrigerator Qingdao Qing Manufacture and Establis 100.00% Co., Ltd. High-tech dao production of hment 275 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Zone High- fluorine-free tech refrigerators Zone Ping du Pingdu Dev Develop elop Qingdao Haier Refrigerator Manufacture of Establis ment ment 75.00% (International) Co., Ltd. refrigerators hment Zone, Zone Qingdao , Qing dao Research and Qing Qingdao Household development of Qingdao dao Appliance Technology and home appliances Establis High-tech High- 100.00% Equipment Research mold and hment Zone tech Institute technological Zone equipment Qing Research, Qingdao Haier Whole Set Qingdao dao development and Establis Home Appliance Service High-tech High- sales of 98.33% hment Co., Ltd. Zone tech health-related small Zone home appliance Qing Design, R&D of Qingdao dao Qingdao Haier Intelligent electronics and Establis High-tech High- 100.00% Electronics Co., Ltd. automatic control hment Zone tech system Zone Qing dao Manufacture and Qingdao Qingdao Haier Special Devel sales of Establis Developm 100.00% Refrigerator Co., Ltd. opme fluorine-free hment ent Zone nt refrigerators Zone Qing dao Qingdao Manufacture of dish Qingdao Haier Dishwasher Devel Establis Developm washing machine 100.00% Co., Ltd. opme hment ent Zone and gas stove nt Zone Qingdao Haier Special Qingdao Qing Research, 96.06% Establis Freezer Co., Ltd. Developm dao manufacture and 276 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report ent Zone Devel sales of freezer and hment opme other refrigeration nt products Zone Dali an Dalian Exp Dalian Haier Export ort Air conditioner Establis 90.00% Air-conditioning Co., Ltd. Expressi Expr manufacturing hment ng Zone essin g Zone Dali an Dalian Exp Refrigerator Dalian Haier Refrigerator Export ort Establis processing and 90.00% Co., Ltd.. Expressi Expr hment manufacturing ng Zone essin g Zone Qing Development, dao Qingdao assembling and Qingdao Haier Electronic Devel Establis Developm sales of plastics, 80.00% Plastic Co., Ltd. opme hment ent Zone electronics and nt product Zone Wuha n Econ Wuhan omic Economic & & Research, Techn Technologi manufacture and ologi Wuhan Haier Freezer Co., c al sales of freezer and Establis c al 95.00% 5.00% Ltd. Developm other refrigeration hment Devel ent Zone products opme High-tech nt Industrial Zone Park High- tech Indus 277 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report trial Park Qing Develop, purchase Qingdao Haidarui Qingdao dao and sell electrical Establis Procurement Service Co., High-tech High- 98.00% 2.00% products and hment Ltd. Zone tech components Zone Development and application of Qing household Qingdao Haier Intelligent Qingdao dao appliances, Establis Home Appliance High-tech High- 98.91% 1.09% communication, hment Technology Co., Ltd. Zone tech electronics and Zone network engineering technology Jian gbei Jiangbei Distr Manufacture and Chongqing Haier District, ict, Establis sales of air 76.92% 23.08% Air-conditioning Co., Ltd. Chongqi Cho hment conditioners ng City ngqi ng City Development and Qian manufacture of wang Qianwang precise plastic, an g Qingdao Haier Precision an g Road, metal plate, mold Establis Road, 70.00% Products Co., Ltd. Jiaonan and electronic hment Jiaon City products for an household City appliances Jiaon Manufacture of Qingdao Haier Air Jiaonan an household Establis Conditioning Equipment City, City, 70.00% appliances and hment Co., Ltd. Qingdao Qing electronics dao Dali Dalian Dalian Free Trade Zone an Export Establis Haier Air-conditioning Exp Domestic trade 100.00% Expressi hment Trading Co., Ltd. ort ng Zone Expr 278 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report essin g Zone Dali an Dalian Exp Dalian Free Trade Zone Export ort Establis Haier Refrigerator Trading Domestic trade 100.00% Expressi Expr hment Co., Ltd. ng Zone essin g Zone Qing dao Qingdao Ding Xin Qingdao Manufacturing and Devel Establis Electronics Technology Developm sales of electronic 100.00% opme hment Co., Ltd. ent Zone components. nt Zone Jian gbei Jiangbei Distr Chongqing Haier District, ict, Sales of household Establis 95.00% 5.00% Electronics Sales Co., Ltd. Chongqi Cho appliances hment ng City ngqi ng City Jian gbei Jiangbei Distr Chongqing Haier Processing and District, ict, Establis Refrigeration Appliance manufacturing of 84.95% 15.05% Chongqi Cho hment Co., Ltd. refrigerator ng City ngqi ng City Hefe Hefei i Processing and Hefei Haier Refrigerator Haier Establis Haie manufacturing of 100.00% Co., Ltd. Industrial hment r refrigerator Park Indu 279 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report strial Park Wuha Wuhan n Wuhan Haier Energy and Haier Haier Establis Energy service 75.00% Power Co., Ltd. Industrial Indus hment Park trial Park Qing dao Qingdao Qingdao Haier HVAC Devel Establis Developm Air-conditioning 100.00% Engineering Co., Ltd. opme hment ent Zone nt Zone Jian gbei Jiangbei Distr Chongqing Goodaymart Sales of household District, ict, Establis Electric Appliance Sale appliances and 51.00% Chongqi Cho hment Co., Ltd electronics ng City ngqi ng City Jiaoz Qingdao Haier (Jiaozhou) Jiaozhou hou Manufacture and Establis Air-conditioning Co., City, City, sale of 100.00% hment Limited Qingdao Qing air-conditioners dao Jiaoz Manufacture and Jiaozhou hou Qingdao Haier Component sales of plastic and Establis City, City, 100.00% Co., Ltd. precise sheet metal hment Qingdao Qing products dao Hon Haier Shareholdings (Hong Hong g Establis Investment 100.00% Kong) Limited Kong Kon hment g Cay HARVESTINTERNATIO Cayman Establis man Investment 100.00% NALCOMPANY Islands hment Islan 280 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report ds Shen bei Shenbei New New Shenyang Haier Area Manufacture and Establis Area, 100.00% Refrigerator Co., Ltd. , sales of refrigerator hment Shenyan Shen g City yang City Shans hui Shanshui Distri Foshan Haier Freezer Co., District, Manufacture and Establis ct, 100.00% Ltd. Foshan sales of freezer hment Fosha City n City Zhen gzho u Zhengzh Econ ou omic Economi and c and Manufacture and Zhengzhou Haier Tech Establis Technolo sales of air 100.00% Air-conditioning Co., Ltd. nolo hment gic al conditioner gic Develop al ment Dev Zone elop ment Zone Qing dao Develop, purchase Qingdao Haidayuan Qingdao Devel and sell electrical Establis Procurement Service Co., Developm 100.00% opme products and hment Ltd. ent Zone nt components Zone Qingdao Haier Intelligent Qingdao Qing Development and Establis Technology Development High-tec dao research of 100.00% hment Co., Ltd. h Zone High household 281 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report -tech appliances Zone Busines s Qing Design, combin Qingdao dao Qingdao Hai Gao Design manufacture and ation High-tec High 100.00% and Manufacture Co., Ltd. sales of product under h Zone -tech model and mould commo Zone n control Busines s Qing combin Qingdao dao Industrial design Qingdao Hai Gao Design ation High-tec High and prototype 75.00% and Manufacture Co., Ltd. under h Zone -tech production commo Zone n control Busines s Development, combin Beijing Haier Guangke Beiji promotion and ation Digital Technology Co., Beijing 55.00% ng transfer of under Ltd. technology commo n control Shanghai Haier Medical Shan Wholesale and retail Establis Shanghai 100.00% Technology Co., Ltd. ghai of medical facility hment Busines s Development and combin Qingdao Haier Technology Qing sales of software ation Qingdao 100.00% Co., Ltd. dao and information under product commo n control Qingdao Haier Technology Qingdao Qing Entrepreneurship 100.00% Establis 282 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Investment Co., Ltd. dao investment and hment consulting Development, Qingdao Casarte Smart Qing production Establis Qingdao 100.00% Living Appliances Co.,Ltd. dao and sales of hment appliances Sales of household Qingdao Haichuangyuan Qing Establis Qingdao appliances and 100.00% Appliances Sales Co., Ltd. dao hment digital products Sales of household Haier Overseas Electric Qing appliances, Establis Qingdao 100.00% Appliance Co., Ltd. dao international freight hment forwarding Busines s Sales of household combin Haier Group (Dalian) Dali appliances, ation Electrical Appliances Dalian 100.00% an international freight under Industry Co., Ltd. forwarding commo n control Production and sales of air Qingdao Haier Central Air Qing Establis Qingdao conditioners and 100.00% Conditioning Co., Ltd. dao hment refrigeration equipment Technology development Beijing Haier Yun Kitchen Beiji and transfer Establis Beijing 95.77% Technology Co., Ltd. ng Technology hment development and transfer Chongqing Haier Home Sales of household Establis Appliance Sale Hefei Co., Hefei Hefei 100.00% appliances hment Ltd. Beijing Haier Zhongyou Beiji Radio and television Establis Beijing 51.00% Netmedia Co., Ltd. ng program hment Qingdao Weixi Qingdao Weixi Smart Qing Establis Qingdao Smart Technology 71.43% Technology Co., Ltd. dao hment Co., Ltd. Haier U+smart Intelligent Beijing Beiji Software 100.00% Establis 283 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Technology (Beijing) Co., ng development hment Ltd. Qingdao Haier Industry Industrial Qing Establis Intelligence Research Qingdao intelligence 100.00% dao hment Institute Co., Ltd. technology Sales, research and Haier (Shanghai) Shan development of Establis Shanghai 100.00% Electronics Co., Ltd. ghai household hment appliances Business Haier Shanghai Zhongzhi management Shan Establis Fang Chuang Ke Shanghai consulting, 100.00% ghai hment Management Co., Ltd. chuangke management Industrial Haier Industrial Holding Qing investment, robotics Establis Qingdao 100.00% Co., Ltd. dao and automation hment R&D, etc. Internet of things, Maniiq (Qingdao) robot and Qing Establis Intelligent Equipment Co., Qingdao automation research 100.00% dao hment Ltd. and development, design, etc. Technology Haier digital technology Shan development Establis Shanghai 100.00% (Shanghai) Co., Ltd. ghai promotes transfer, hment material sales, etc. Production and Qingdao Haier Smart Qing sales of kitchen Establis Kitchen Appliance Co., Qingdao 100.00% dao smart home hment Ltd. appliances JIYI Appliance (Shanghai) Shan Sales of household Establis Shanghai 100.00% Co., Ltd. ghai appliances hment Develop, purchase Qingdao Hao Pin Hai Rui Qing and sell electrical Establis Information Technology Qingdao 100.00% dao products and hment Co., Ltd. components Busines Manufacturing of FISHER&PAYKELPROD new s new automation and UCTIONMACHINERYLI Zeal 100.00% combin Zealand customization MITED and ation special equipment under 284 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report commo n control MANIIQ(SINGAPORE)IN Sing Singapor Investment Establis TELLIGENTEQUIPMEN apor 100.00% e management hment TCO.LTD. e Hon Hong g Investment Establis MANIIQ(HK)INTELLIGE 100.00% NTEQUIPMENTCO.LTD. Kong Kon management hment g Qingdao Haier special Production and Qing Establis refrigerating Appliance Qingdao sales of household 100.00% dao hment Co., Ltd. appliances Promotion of Beijing Zero Micro Beiji Establis Beijing technological 55.00% Technology Co., Ltd. ng hment development Laiyang Haier Smart Production and Laiya Establis Kitchen Appliance Co., Laiyang sales of household 100.00% ng hment Ltd. appliances Aituling (Shanghai) Promotion of Shan Establis Information Technology Shanghai technological 72.22% ghai hment Co., Ltd. development Industrial Qingdao Blue Whale Qing Establis Qingdao intelligence 67.00% Technology Co., Ltd. dao hment technology Qingdao Hailian Industrial Qing Establis Rongchuang Technology Qingdao intelligence 100.00% dao hment Co., Ltd. technology Hefei Haier Air Production and Hefe Establis Conditioning Electronics Hefei sales of household 100.00% i hment Co., Ltd. appliances Qingdao Wine Intelligent Qing R&D and Sales of Establis Qingdao 100.00% Technology Co., Ltd. dao Wine Tools hment Promotion of Taizhou Haier Medical Taizh Establis Taizhou medical research 100.00% Technology Co., Ltd. ou hment and development Haier (Shanghai) Home Research and Appliance Research and Shan development of Establis Development Center Co., Shanghai 100.00% ghai household hment Ltd.(海尔(上海)家电研 appliances 发中心有限公司) 285 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Development, research and Haier (Shenzhen) R&D Shen technical services of Establis Co., Ltd.(海尔(深圳)研 Shenzhen 100.00% zhen household and hment 发有限责任公司) commercial electrical appliances Manufacturing of Guangzhou Haier Air Guan Guangdon Refrigeration and Establis Conditioner Co., Ltd.(广州 gdon 100.00% g Air Conditioning hment 海尔空调器有限公司) g Equipment Qingdao Haier Institute of Investment Management Qing Venture Capital Establis Qingdao 70.00% Co., Ltd.(青岛海尔智研院 dao business hment 投资管理有限公司) Tianjin Haiyun Chuang Research and Digital Technology Co., Tianji Establis Tianjin development of 100.00% Ltd.(天津海云创数字科技 n hment digital technology 有限公司) Haier Digital Technology Research and (Qingdao) Co., Ltd.(海尔 Qing Establis Qingdao development of 100.00% 数字科技(青岛)有限公 dao hment digital technology 司) Haier Digital Technology Research and (Nanjing) Co., Ltd.(海尔 Nanji Establis Nanjing development of 100.00% 数字科技(南京)有限公 ng hment digital technology 司) Haier Digital Technology Research and Establis (Wuxi) Co., Ltd.(海尔数字 Wuxi Wuxi development of 100.00% hment 科技(无锡)有限公司) digital technology Haier Digital Technology Research and Establis (Xi'an) Co., Ltd.(海尔数字 Xi'an Xi'an development of 100.00% hment 科技(西安)有限公司) digital technology Ficoteng Intelligent Technology (Qingdao) Co., Qing Intelligent device Establis Qingdao 100.00% Ltd.(斐科腾智能科技(青 dao integrated service hment 岛)有限公司) IoT technology Qingdao Yunshang Yuyi research and Technology Co., Ltd.(青岛 Qing Establis Qingdao development, sales 70.00% 云裳羽衣物联科技有限公 dao hment of household 司) appliances, digital 286 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report products and accessories, clothing shoes and hats, textiles, daily necessities, furniture. Haiyu (Shanghai) Rental of Intelligent Technology Co., Shan apartments, Establis Shanghai 70.00% Ltd.(海寓(上海)智能科 ghai intelligent hment 技有限公司) equipment, etc. Development and Tianjin Haier Zhikong Tianji manufacturing of Establis Tianjin 100.00% Electronics Co., Ltd. n automatic control hment system Development and Hefei Haier Intelligent manufacturing of Establis Hefei Hefei 100.00% Electronics Co., Ltd. automatic control hment system Qingdao Wine Intelligent Qing Asset management, Establis Qingdao 100.00% Technology Co., Ltd. dao equity investment hment All Small companies such as All over over Qingdao Hai Heng Feng Sales of household Establis the the Electrical Appliances Sale appliances hment & Service Co., Ltd. country coun try Reasons for including subsidiaries which the Company has 50% or less of the equity into the scope of consolidated financial statements: At the end of the reporting period, the Company had substantial control over the finance and operation of Haier Electronics Group Co., Ltd., and small companies like Qingdao Hai Heng Feng Electrical Appliances Sale & Service Co., Ltd, which were included into the scope of consolidated financial statements. (2). Material non-wholly owned subsidiaries √Applicable □Not Applicable Unit and Currency: RMB Shareholding Profit or loss Distribute Balance of Name of subsidiary of minority attributable to dividends to minority 287 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report shareholders minority minority shareholders' shareholders in the shareholders in equity at the end current period the current of the period period 15,060,812,762 Haier Electronics Group Co., Ltd. 55.04% 2,286,376,566.94 558,480,287.89 .54 Guizhou Haier Electronics Co., Ltd.. 41.00% 11,917,876.67 10,250,000.00 110,068,060.07 Wuhan Haier Electronics Co., Ltd. 40.00% 24,862,307.93 247,943,031.88 Qingdao Haier Refrigerator 25.00% 22,708,484.75 102,429,231.55 (International) Co., Ltd. Explanations on the shareholding of the minority shareholders of the subsidiary is different from the proportion of the voting rights: √Applicable □Not Applicable 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)INVESTMENTMANAGEMENTCO.,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. Other explanations: √Applicable □Not Applicable (3)Summarized financial information in respect of material non-wholly owned subsidiaries Closing balance Name of Non-current Current Non-current Total subsidiary Current assets Total assets assets liabilities liabilities liabilities Haier Electronics 21,188,488,145.6 36,493,282,147.17 10,443,489,712.55 46,936,771,859.72 18,022,551,867.68 3,165,936,277.94 Group Co., 2 Ltd. Guizhou Haier 522,694,157.33 49,721,058.77 572,415,216.10 302,856,533.06 1,100,000.00 303,956,533.06 Electronics Co., Ltd.. Wuhan Haier Electronics 941,594,837.71 149,527,217.84 1,091,122,055.55 471,264,475.86 471,264,475.86 Co., Ltd. 288 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Qingdao Haier Refrigerator 425,905,748.13 425,905,748.13 16,188,821.94 16,188,821.94 (International ) Co., Ltd. (continued) Opening balance Name of Non-current Current Non-current Total subsidiary Current assets Total assets assets liabilities liabilities liabilities Haier Electronics 20,339,118,941.8 34,425,125,631.08 8,943,099,505.92 43,368,225,137.00 18,004,664,972.39 2,334,453,969.47 Group Co., 6 Ltd. Guizhou Haier 382,643,646.95 36,428,561.26 419,072,208.21 154,508,222.80 173,294.24 154,681,517.04 Electronics Co., Ltd.. Wuhan Haier Electronics 978,695,296.94 131,215,185.69 1,109,910,482.63 551,805,602.69 403,070.08 552,208,672.77 Co., Ltd. Qingdao Haier Refrigerator 280,498,996.95 55,808,808.81 336,307,805.76 17,424,818.56 17,424,818.56 (International ) Co., Ltd. Amount for the current period Total Name of subsidiary cash flow from Operating revenue Net profit comprehensive operating activities income Haier Electronics Group Co., Ltd. 85,252,191,199.66 3,990,105,964.58 4,215,675,653.16 4,301,406,583.36 Guizhou Haier Electronics Co., 1,205,308,014.04 29,067,991.87 29,067,991.87 -63,792,645.00 Ltd.. Wuhan Haier Electronics Co., 2,250,957,874.26 62,155,769.83 62,155,769.83 -85,652,495.51 Ltd. Qingdao Haier Refrigerator 90,833,938.99 90,833,938.99 -2,290,767.20 (International) Co., Ltd. (continued) Amount for the previous period Name of subsidiary Total cash flow from Operating revenue Net profit comprehensive operating activities 289 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report income Haier Electronics Group Co., Ltd. 78,800,676,129.43 3,581,699,624.80 3,591,581,429.04 4,124,147,398.81 Guizhou Haier Electronics Co., 1,150,823,650.51 27,492,040.30 27,492,040.30 247,441,041.27 Ltd.. Wuhan Haier Electronics Co., Ltd. 2,497,891,874.47 64,205,652.56 64,205,652.56 152,962,111.33 Qingdao Haier Refrigerator 2,407,682.30 2,407,682.30 -287,141.80 (International) Co., Ltd. 2. Transactions leading to the change of shareholding in subsidiaries but not losing the control √Applicable □Not Applicable (1). Description of changes in the share of owners' equity in subsidiaries √Applicable □Not Applicable Capital contribution not on the original proportion of equity interest or acquisition of non-controlling interest, which results in changes of shareholdings ratio in the following subsidiaries: Beijing Haier Cloud Kitchen Technology Co., Ltd., Haier electric (India) Co., Ltd., Qingdao Wei Xi Intelligent Technology Co., Ltd., Beijing Yi Shu Technology Co., Ltd. ( 2 ) Impact of the transactions on non-controlling interest and the equity attributable to shareholders of the Company Items Haier Electronics Group Co., Ltd. Others Total Consideration for acquisition/disposal 665,174,080.63 390,738,560.00 Less: share of net assets of subsidiaries in respect 119,196,061.46 434,720,825.26 to the shareholding proportion acquired/disposed Difference -545,978,019.17 43,982,265.26 Including: capital reserve adjustment -545,978,019.17 43,982,265.26 3. Interests in joint ventures and associates √Applicable □Not Applicable (1)Associates Accounting Principal Place of Nature of Sharehol treatment Name of joint venture place of registrati business ding of business on investment Zhang Motor Equity Wolong Electric (Jinan) Motor Co., Ltd. Zhang Qiu 30.00% Qiu Manufacturing method Qingdao Hegang New Material Technology Qingdao Qingdao Steel plate 25.65% Equity 290 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Co., Ltd. manufacturing method Qingdao Haier SAIF Smart Home Industry Equity Qingdao Qingdao Venture Capital 63.00% Investment Center (Limited Partnership) method Manufacturing Mitsubishi Heavy Industries Haier (Qingdao) Equity Qingdao Qingdao of household 45.00% Air-conditioners Co., Ltd. method appliances Manufacturing Qingdao Haier Carrier Refrigeration Equity Qingdao Qingdao of household 49.00% Equipment Co., Ltd. method appliances Financial Equity Haier Group Finance Co., Ltd. Qingdao Qingdao 42.00% services method Software Equity Qingdao Haier Software Investment Co., Ltd. Qingdao Qingdao 25.00% development method Beijing Mr. Hi Network Technology Technology Equity Beijing Beijing 40.00% Company Limited development method commercial Equity Bank of Qingdao Co., Ltd. Qingdao Qingdao 9.47% Bank method Sales of Equity Beijing Xiaobei Technology Co., Ltd. Beijing Beijing household 45.00% method appliances R&D and sales Equity Qingdao Haier multimedia Co., Ltd. Qingdao Qingdao 20.20% of television method Technical service import Equity Beijing ASU Tech Co.Ltd Beijing Beijing 42.61% and export method business Shenzhen Genyuan Environmental Protection Technical Equity Technology Co., Ltd.(深圳根元环保科技有 Shanghai Shanghai advisory 20.40% method 限公司) services Qingdao Haimu Investment Management Investment Equity Co., Ltd.(青岛海慕 Investment management Qingdao Qingdao 49.00% management method 有限公司) Qingdao Haimu Zhijia Investment Investment Equity Partnership (Limited Partnership)(青岛海慕 Qingdao Qingdao 24.00% management method 智家投资合伙企业(有限合伙)) Guangzhou Heying Investment Partnership Guangzh Equity Guangzhou 投资 50.00% (Limited Partnership) ou method Qingdao Java Cloud Network Technology Home online Equity Qingdao Qingdao 24.93% Co., Ltd. service method ShBeijing Cangxiaowei Supply Chain E-commerce Equity Qingdao Qingdao 24.02% Management Co., Ltd.(北京仓小微供应链 platform method 291 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 管理有限公司) Motor Equity Konan Electronic Co., Ltd. Hunan Hunan 50.00% Manufacturing method Manufacturing Equity HPZ LIMITED Nigeria Nigeria of household 25.01% method appliances Manufacturing Equity HNR Company (Private) Limited Pakistan Pakistan of household 31.72% method appliances Manufacturing Equity CONTROLADORAMABES.A.deC.V. Mexico Mexico of household 48.41% method appliances Sales of MIDDLEEASTAIRCONDITIONINGCOMP Saudi Equity Saudi Arabia household 49.00% ANY,LIMITED Arabia method appliances (2) Maijor financial information of important associates: Finance company Items Closing balance/Amount for the Opening balance/Amount for current period the previous period Current assets 59,524,840,580.99 68,438,104,678.89 Non-current assets 6,772,155,247.83 7,913,830,198.85 Total assets 66,296,995,828.82 76,351,934,877.74 Current liabilities 51,568,658,834.34 62,029,645,645.42 Non-current liabilities 1,857,007,615.76 3,172,557,737.73 Total liabilities 53,425,666,450.10 65,202,203,383.15 Minority equity interests Equity attributable to shareholders of the 12,871,329,378.72 11,149,731,494.59 parent company Including: share of net assets calculated 5,405,958,339.07 4,682,887,227.73 per shareholding percentage Operating revenue 2,564,135,945.96 2,653,326,366.04 Net profit 1,643,680,363.91 1,427,455,671.54 Other comprehensive income 77,917,520.22 -59,881,122.33 Total comprehensive income 1,721,597,884.13 1,367,574,549.21 Dividend received from associates for 210,000,000.00 210,000,000.00 the year (continued) Items MABE 292 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Closing balance/Amount for the Opening balance/Amount for current period the previous period Current assets 6,401,986,096.80 5,825,075,945.00 Non-current assets 10,722,377,360.00 10,303,936,800.80 Total assets 17,124,363,456.80 16,129,012,745.80 Current liabilities 8,729,901,178.40 7,048,408,869.00 Non-current liabilities 4,762,051,909.60 5,836,693,752.60 Total liabilities 13,491,953,088.00 12,885,102,621.60 Minority equity interests Equity attributable to shareholders of the 3,632,410,368.80 3,243,910,124.20 parent company Including: share of net assets calculated 1,758,624,215.23 1,570,532,598.81 per shareholding percentage Operating revenue 20,407,164,879.93 19,990,494,697.46 Net profit 299,739,661.91 387,947,925.94 Other comprehensive income 62,998,185.36 -373,213,732.21 Total comprehensive income 362,737,847.27 14,734,193.73 Dividend received from associates for 33,883,079.64 the year (continued) BOQ Items Closing balance/Amount for the Opening balance/Amount for current period the previous period Current assets 181,349,759,000.00 130,366,445,000.00 Non-current assets 136,308,743,000.00 175,909,647,000.00 Total assets 317,658,502,000.00 306,276,092,000.00 Current liabilities 223,355,408,000.00 203,654,201,000.00 Non-current liabilities 66,806,370,000.00 76,498,682,000.00 Total liabilities 290,161,778,000.00 280,152,883,000.00 Minority equity interests 511,751,000.00 493,355,000.00 Equity attributable to shareholders of the 26,984,973,000.00 25,629,854,000.00 parent company Including: share of net assets calculated 2,592,829,635.67 2,462,624,099.78 per shareholding percentage Operating revenue 7,371,953,000.00 5,567,593,000.00 Net profit 2,043,389,000.00 1,903,607,000.00 Other comprehensive income 1,016,364,000.00 -948,623,000.00 Total comprehensive income 3,059,753,000.00 954,984,000.00 293 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Dividend received from associates for 77,995,640.00 76,868,897.00 the year (3). Summarized financial information of insignificant associates and joint ventures √Applicable □Not Applicable Unit and Currency: RMB Closing Opening balance/Amou balance/Amount for nt for the the previous period current period Associates: 123,281,802.3 118,897,337.40 Wolong Electric (Jinan) Motor Co., Ltd. 9 (Qingdao) (Qingdao) Haier Medical and Laboratory Products Co., 332,230,371.89 Ltd. 262,284,357.6 Qingdao Hegang New Material Technology Co., Ltd. 5 Qingdao HBIS composite new material 106,068,803.08 Hefei Hegang New Material Technology Co., Ltd. 140,494,521.67 555,084,616.7 543,768,656.24 Qingdao Haier multimedia Co., Ltd. 1 Qingdao Haier SAIF Smart Home Industry Investment Center 362,380,221.2 270,536,881.98 (Limited Partnership) 9 Mitsubishi Heavy Industries Haier (Qingdao) Air-conditioners Co., 622,643,614.6 529,934,750.95 Ltd. 6 332,723,126.5 305,185,137.09 Qingdao Haier Carrier Refrigeration Equipment Co., Ltd. 0 Qingdao Haier Software Investment Co., Ltd. 18,193,519.15 17,899,331.07 Beijing Mr. Hi Network Technology Company Limited 3,757,759.75 3,757,759.75 Beijing Xiaobei Technology Co., Ltd. 2,687,341.82 2,687,341.82 176,064,809.6 152,047,535.44 Guangzhou Heying Investment Partnership (Limited Partnership) 8 Fuzhou Jinan District Shengfeng Guorong Microfinance 80,226,595.74 Fujian Bafang Shengfeng Logistics Co., Ltd. 13,117,748.43 Qingdao Java Cloud Network Technology Co., Ltd. 1,216,581.32 1,755,356.84 ShBeijing Cangxiaowei Supply Chain Management Co., Ltd.(北京仓 791,316.97 小微供应链管理有限公司) 294 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 30,062,027.79 Beijing ASU Tech Co., Ltd. Shenzhen Genyuan Environmental Protection Technology Co., Ltd. 7,849,992.00 (深圳根元环保科技有限公司) Qingdao Haimu Investment Management Co., Ltd. ( 青 岛 海 慕 2,078,341.37 Investment management 有限公司) Qingdao Haimu Zhijia Investment Partnership (Limited Partnership) 48,001,070.25 (青岛海慕智家投资合伙企业(有限合伙)) Konan Electronic Co., Ltd. 74,799,791.29 64,856,526.75 HNR Company (Private) Limited 91,076,038.80 91,578,227.62 HPZ LIMITED 88,800,332.55 80,588,570.01 MIDDLEEASTAIRCONDITIONINGCOMPANY,LIMITED 18,208,123.96 22,050,543.42 2,821,984,785 2,877,681,997.19 Total book value of investment .90 Total count calculated based on shareholding percentage 343,024,634.1 189,321,542.39 --Net profit 1 --Other comprehensive income 22,221,841.23 -11,890,071.02 365,246,475.3 177,431,471.37 --Total comprehensive income 4 X. Segment report (1). Determine basis and accounting policy of reporting segment √Applicable □Not Applicable The Company principally engaged in manufacture and sales of household appliances and relevant services business, manufacture of household appliances parts, distribution of products of third-party, logistics and after-sale business. The Company has six business segments, including refrigerator segment, air-conditioner segment, washing machine segment, Kitchenware and bathroom appliances ware segment, equipment components segment, integrated channel services and other segment. The management of the Company assesses operating performance of each segment and allocates resources according to the division. Sales between segments were mainly based on market price. Refrigerator segment mainly engaged in manufacture and sales of refrigerator and freezers. 295 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Air-conditioner segment mainly engaged in manufacture and sales of household air conditioners and commercial air conditioners. Washing machine segment mainly engaged in manufacture and sales of washing machine. Kitchenware and bathroom appliances ware segment mainly engaged in manufacture and sales of water heater and kitchen appliances. Equipment components segment mainly engaged in procurement, manufacture and sales of upstream matching accessories for household appliances, manufacture and sales of mold. Segment of integrated channel services and others mainly engaged in distribution business, logistics business, after-sale business, small home appliance business and others. The Company‘s channel business at 3rd and 4th tier markets is treated as integrated channel services and assessed separately with other segments. Accordingly, operating profit from 3rd and 4th tier markets of refrigerator, air-conditioner, Kitchenware and bathroom appliances ware, washing machine business segment was not reflected in operating profit of each segment. As the centralized management under the headquarters or not being included in the assessment scope of segment management, the total assets of segment exclude cash, financial assets held for trading, dividends receivable, other current assets, available-for-sale financial assets, long-term equity investment, goodwill, deferred 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 tax liabilities; operating profit of segment exclude gains/(losses) on changes in fair value, gains/(losses) on investment, financial expenses, gains/(losses) on disposal of non-current assets, other income(exclude refundable VAT at filing), non-operating income and expense and income tax expenses. (1)Information of reportable segments Segment information for the period Washing Segment Air-conditioner Refrigerator Kitchen appliance Water heater machine information segment segment segment segment segment Segment 31,082,170,092.32 50,758,087,115.17 24,433,379,952.70 7,210,735,051.65 33,991,480,092.59 revenue Including: external 10,785,252,300.06 29,395,408,078.73 22,597,205,116.57 1,607,008,847.11 17,195,611,844.05 revenue 296 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Inter-segment 20,296,917,792.26 21,362,679,036.44 1,836,174,836.13 5,603,726,204.54 16,795,868,248.54 revenue Total segment 29,915,565,048.95 47,565,250,125.04 23,016,554,856.50 6,419,893,857.39 31,536,700,791.23 operating cost Segment 1,166,605,043.37 3,192,836,990.13 1,416,825,096.20 790,841,194.26 2,454,779,301.36 operating profit Total segment 16,206,841,690.16 15,115,039,922.90 11,633,383,101.30 2,149,982,914.96 12,962,546,971.94 assets Total segment 9,406,713,768.66 27,576,047,193.29 5,878,879,147.56 1,594,837,680.88 6,024,455,060.65 liabilities (continued) Equipment Integrated channel Segment Inter-segment components services and others Total information eliminations segment segment Segment revenue 56,245,954,501.87 108,609,268,041.50 -128,762,408,750.39 183,568,666,097.41 Including: 1,884,705,262.61 100,103,474,648.28 - 183,568,666,097.41 external revenue Inter-segment 54,361,249,239.26 8,505,793,393.22 -128,762,408,750.39 - revenue Total segment 55,846,938,008.55 108,174,290,301.58 -128,547,862,887.55 173,927,330,101.69 operating cost Segment 399,016,493.32 434,977,739.92 -214,545,862.84 9,641,335,995.72 operating profit Total segment 31,649,227,709.92 34,254,650,591.45 -40,740,475,732.79 83,231,197,169.84 assets Total segment 33,059,154,103.46 29,653,710,215.11 -40,611,668,998.89 72,582,128,170.72 liabilities Segment information for the previous years Washing Segment Air-conditioner Refrigerator Kitchen appliance Water heater machine information segment segment segment segment segment Segment 28,909,192,607.70 45,732,145,369.89 23,018,808,357.19 6,480,716,594.55 30,143,259,527.88 revenue Including: external 9,670,817,282.76 26,967,971,974.72 21,268,635,429.06 1,068,401,649.95 15,016,086,271.72 revenue Inter-segment 19,238,375,324.94 18,764,173,395.17 1,750,172,928.13 5,412,314,944.60 15,127,173,256.16 revenue Total segment 27,659,408,620.25 42,762,799,111.51 21,467,189,359.36 5,747,200,033.41 27,772,666,355.05 operating cost Segment operating 1,249,783,987.45 2,969,346,258.38 1,551,618,997.83 733,516,561.14 2,370,593,172.83 profit 297 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Total segment 14,104,898,843.71 16,358,608,084.20 12,408,213,982.35 1,528,663,785.89 11,668,733,519.49 assets Total segment 8,183,602,269.63 23,717,598,483.29 5,152,014,622.94 1,779,427,399.65 5,930,848,976.01 liabilities (continued) Equipment Integrated channel Segment Inter-segment components services and others Total information eliminations segment segment Segment revenue 43,694,604,946.39 99,149,300,299.06 -113,318,253,220.86 163,809,774,481.80 Including: 3,023,296,238.91 86,794,565,634.68 - 163,809,774,481.80 external revenue Inter-segment 40,671,308,707.48 12,354,734,664.38 -113,318,253,220.86 - revenue Total segment 43,333,219,091.51 98,619,588,869.08 -112,590,658,646.22 154,771,412,793.95 operating cost Segment 361,385,854.88 529,711,429.98 -727,594,574.64 9,038,361,687.85 operating profit Total segment 26,193,061,725.41 32,374,344,243.97 -34,889,505,172.62 79,747,019,012.40 assets Total segment 28,088,630,394.16 26,963,750,524.68 -33,486,947,098.74 66,328,925,571.62 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 revenue Items Amount for the current period Amount for the previous period Mainland China 106,368,759,896.57 92,360,096,766.30 Other countries/regions 77,199,906,200.84 71,449,677,715.50 Among of which: America 52,808,964,340.83 47,125,057,542.40 Australia 5,059,554,142.64 5,072,057,864.71 South Asia 5,971,048,523.39 4,791,577,543.43 Europe 4,139,629,938.57 3,310,984,195.98 Southeast Asia 3,197,828,869.18 3,835,815,419.55 Middle East 968,609,176.61 1,112,236,222.81 298 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Japan 2,957,892,839.19 2,698,044,198.68 Others 2,096,378,370.43 3,503,904,727.94 Total 183,568,666,097.41 163,809,774,481.80 Total non-current assets Items Closing balance Opening balance Mainland China 15,279,950,318.66 12,248,981,929.14 Other countries/regions 18,248,137,105.45 17,219,477,253.72 Total 33,528,087,424.11 29,468,459,182.86 Total non-current assets exclude: other equity instrument investments, long-term equity investments, goodwill, deferred tax assets, and other non-current financial assets. XI. Disclosure of fair value 1. Assets and liabilities measured at fair value The level to which the fair value measurement result belongs is determined by the lowest level to which the input value is significant to the fair value measurement as a whole: Level 1: Unadjusted quotes for the same asset or liability in an active market Level 2: Inputs that are directly or indirectly observable for related assets or liabilities, except for Level 1 inputs. Level 3: Unobservable inputs of related assets or liabilities. 2018 Items Input used for fair value measurement Quotes in an Important Important active market observable input unobservable Total (Level 1) (Level 2) input(Level 3) Continuously measured at fair value Financial assets held for 519,213.09 1,756,325,976.41 18,803,198.26 1,775,648,387.76 trading Including: Bank wealth management 1,567,648,908.00 1,567,648,908.00 products Forward exchange 188,677,068.41 188,677,068.41 contract Investment in 519,213.09 18,803,198.26 19,322,411.35 equity instruments Derivative financial 96,723,164.37 96,723,164.37 assets Including: Forward 39,494,394.98 39,494,394.98 exchange contract 299 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Interest rate swap 57,228,769.39 57,228,769.39 agreement Other equity instruments 17,420,711.90 1,382,895,748.44 1,400,316,460.34 Including: Equity instruments measured at fair value and changes 17,420,711.90 1,382,895,748.44 1,400,316,460.34 of which included in other comprehensive income Other non-current 327,358,825.57 327,358,825.57 financial assets Including: Bank wealth management 327,358,825.57 327,358,825.57 products Other non-current assets 49,499,757.96 46,019,000.00 95,518,757.96 Including: Other non-current 49,499,757.96 46,019,000.00 95,518,757.96 financial assets Financial liabilities held 218,748,280.33 218,748,280.33 for trading Including: Forward 211,934,956.99 211,934,956.99 exchange contract Forward foreign 6,813,323.34 6,813,323.34 exchange options Derivative financial 35,603,754.54 35,603,754.54 liabilities Including: Forward 24,384,482.19 24,384,482.19 exchange contract Forward commodity 11,219,272.35 11,219,272.35 contract Other non-current 1,587,403,337.19 210,624,307.28 1,798,027,644.47 liabilities Including: Obligation of repurchasing the 1,587,403,337.19 204,919,000.00 1,792,322,337.19 minority equity rights Contingent 5,705,307.28 5,705,307.28 consideration 2017 Input used for fair value measurement Items Quotes in an Important Important active market observable input unobservable Total (Level 1) (Level 2) input(Level 3) Continuously measured at fair value Available-for-sale 24,571,561.22 2,359,859.77 26,931,420.99 financial assets Including: Investment in 24,571,561.22 2,359,859.77 26,931,420.99 equity instruments Financial assets measured at fair value and changes of which 20,681,695.50 20,681,695.50 included in current profit and loss Including: Forward 20,681,695.50 20,681,695.50 exchange contract 300 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report other current assets 56,024,787.21 56,024,787.21 Including: Interest rate 51,339,181.17 51,339,181.17 swap agreement Exchange rate 4,685,606.04 4,685,606.04 hedging agreement Other non-current assets 343,283,948.90 45,741,914.80 389,025,863.70 Including: Forward 343,283,948.90 343,283,948.90 exchange contract Other non-current 45,741,914.80 45,741,914.80 financial assets Financial liabilities measured at fair value and changes of which 2,524,569.45 2,524,569.45 included in current profit and loss Including: Forward 2,524,569.45 2,524,569.45 exchange contract Other non-current 1,110,041,968.27 60,894,860.29 1,170,936,828.56 liabilities Including: Obligation of repurchasing the 861,428,153.36 55,510,000.00 916,938,153.36 minority equity rights Contingent 5,384,860.29 5,384,860.29 consideration Forward exchange 242,417,657.63 242,417,657.63 contract Forward foreign 6,196,157.28 6,196,157.28 exchange options For financial instruments traded in an active market, the Company determines its fair value based on its quotes in an active market; for financial instruments not traded in an active market, the Company uses valuation techniques to determine its fair value. 2. The basis for determining the market price of the continual Level 2 fair value measurement items: Items Fair value at the end of 2018 Valuation techniques Financial assets held for trading Including: Bank wealth management 1,567,648,908.00 Bank quote for similar products products Forward exchange contract 188,677,068.41 Bank quote for similar products Derivative financial assets Including: Forward exchange contract 39,494,394.98 Bank quote for similar products Interest rate swap agreement 57,228,769.39 Bank quote for similar products Other non-current financial assets Including: Bank wealth management 327,358,825.57 Bank quote for similar products products Other non-current assets Including: Other non-current financial 49,499,757.96 Discounted cash flow model assets 301 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Financial liabilities held for trading Including: Forward exchange contract 211,934,956.99 Bank quote for similar products Forward foreign exchange options 6,813,323.34 Bank quote for similar products Derivative financial liabilities Including: Forward exchange contract 24,384,482.19 Bank quote for similar products 11,219,272.35 Futures exchange quote for Forward commodity contract similar products Other non-current liabilities Including: Obligation of repurchasing the 1,587,403,337.19 Discount of fixed contract minority equity rights amount 3. Continual Level 3 fair value measurement major items, the valuation techniques adopted and information of important parameters Valuati Significant Fair value at the on Sensitivity of fair value to the input Items unobserva Range end of 2018 techniq ble input ue Other equity instruments 1. Average 1. 1% increase (decrease) in multiple P/E Including: would result in increase (decrease) in Valuati multiple of China 1. 15.61-15. fair value by RMB12,615,000. on peers Petrochemical 92 2. 1% increase (decrease) in the 1,261,564,000.00 multipl 2. Discount Marketing Co., 2. 14%-16% risk-free interest rate would result in es for lack of Ltd. decrease (increase) in fair value by marketabilit RMB14,841,000. y Other non-current liabilities 302 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 1. 0.5% increase (decrease) in the 1. Risk-free risk-free interest rate would result in interest rate 1. 0.47%-1. decrease (increase) in fair value by 2. Median Including: 47% RMB285,000. Monte volatility of Obligation of 2. 14.14%-1 2. 1% increase (decrease) in the median 204,919,000.00 Carlo comparable repurchasing 6.14% volatility of comparable companies Simulat companies the minority 3. would result in increase (decrease) in ion 3. Weighted equity rights 12.11%-14.1 fair value by RMB7,113,000. average 1% 3. 1% increase (decrease) in WACC cost of would result in decrease (increase) in capital fair value by RMB9,131,000. 4.Financial instruments not measured at fair value Items Closing book value Closing fair value Bonds payable (Exchangeable Bonds 6,629,825,951.00 6,681,366,239.84 issued in 2017) Bonds payable(Exchangeable Bonds issued 2,530,580,951.00 2,510,530,062.86 in 2018) Financial assets and financial liabilities not measured at fair value include: cash and cash equivalents, bills receivable, accounts receivable, other receivables, other current assets, long-term and short-term borrowings, bills payable, accounts payable, other payables, long-term payables, bonds payable, etc.. Except for the difference between the book value and fair value of bonds payable disclosed above, the difference between the book value and fair value of financial assets and financial liabilities not measured at fair value at the end of the period is small. XII. Related parties and Related-party transactions (Ⅰ)Explanation for basis of identifying related party According to Accounting Standards for Business Enterprises No. 36 — Related Party Disclosures, parties are considered to be related if one party has the ability to control or jointly control the other party or exercise significant influence over the other party. Parties (two or more than two) are also considered to be related if they are subject to common control, joint control or significant influence from other party. 303 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report According to Management Practices for Information Disclosure of Listed Company (China Securities Regulatory Commission Order No. 40), related legal entity or individual will be identified as related parties in certain occasions. (Ⅱ)Relationships between related parties 1. Information about the parent company and other companies holding shares of the Company Relations Type of Legal Interest Voting Registered Registered hips with Name enterpris represe in the rights to the place capital the e ntative Company Company Company Collectiv Qingdao e Haier Group High-tech 311,180,0 Zhang Parent ownershi 16.84% 16.84% Corporation Zone Haier 00 Ruimin Company p Park company Haier Qingdao Subsidiar Electric Joint-stoc High-tech 631,930,6 Zhang y of Appliances k 19.76% 19.76% Zone Haier 35 Ruimin Parent International company Park Company Co., Ltd. Qingdao Haier Parties Company Venture & Qingdao acting in with 923,000,0 Zhou Investment Free Trade concert of 2.70% 2.70% limited 00 Yunjie Information Zone Parent liability Co., Ltd. Company Qingdao Haichuangzhi Parties Limited Qingdao Management acting in partnershi High-tech 1,053,306, Zhang Consulting concert of 1.08% 1.08% p Zone Haier 000 Ruimin Enterprise Parent company Park (Limited Company Partnership) 2. Subsidiaries of the Company The details of the subsidiaries of the Company are detailed in Note VII.1 the disclosure of interests in subsidiaries. □Applicable √Not Applicable 3. Associates and joint ventures of the Company The details of the associates and joint ventures of the Company are detailed in Notes V. 11and Notes 304 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report VII. 3 □Applicable √Not Applicable Other associates and joint ventures that have related party transactions with the Company for the current period or have related party transactions with the Company for the previous period and have formed balances are as follows □Applicable √Not Applicable Other Explanations □Applicable √Not Applicable 4. Related company with no controlling relationship Relationship with the Name of company Company Holding subsidiary of the HAIERINTERNATIONAL(HK)LTD. parent company Holding subsidiary of the HAIERINTERNATIONALCO.,LTD parent company Holding subsidiary of the Haier Group Finance Co., Ltd. parent company Holding subsidiary of the Haier Group Electric Appliance Industry Co., Ltd. parent company Holding subsidiary of the Haier Energy & Power Co., Ltd. parent company Holding subsidiary of the Haier Brothers Animation Industry Co., Ltd. parent company Holding subsidiary of the Hefei Haier Logistics Co., Limited parent company Holding subsidiary of the Laiyang Haier Electrical Co. Ltd. parent company Holding subsidiary of the Qingdao Haier Whole House Home Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Tooling Development and Manufacturing Co., Ltd. parent company Holding subsidiary of the Qingdao Haier International Travel Agency Co., Ltd. parent company Qingdao Haier International Trading Co., Ltd. Holding subsidiary of the 305 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report parent company Holding subsidiary of the Qingdao Haier Household Integration Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Parts Procurement Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Strauss Water Equipment Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Special Plastic Development Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Communications Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Logistics Consulting Co., Ltd. parent company Holding subsidiary of the Qingdao Haiyongda Property Management Co., Ltd. parent company Holding subsidiary of the Brave Lion (HK) limited parent company Holding subsidiary of the Chongqing Haier Electrical Appliances Sales Co., Ltd. parent company Holding subsidiary of the Chongqing Haier Logistics Co., Ltd. parent company Holding subsidiary of the Suzhou Hai Xin InfoTech Ltd parent company Holding subsidiary of the Haier finance leasing (China) Co., Ltd. parent company Holding subsidiary of the Qingdao Haier Real Estate Group Co., Ltd. parent company Holding subsidiary of the Hefei Huadong Packing Co., Ltd. parent company Holding subsidiary of the Qingdao Shenghui Plastic Co., Ltd. parent company Holding subsidiary of the Xingyang International Co., Ltd.(星洋国际有限公司) parent company Holding subsidiary of the Hefei Hai Zhi Real Estate Co., Ltd. parent company Associate for affiliate of Haier Qingdao Haier New Materials R & D Co., Ltd. Group 306 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report CONTROLADORAMABES.A.deC.V. Associate HNR Company (Private) Limited Associate Qingdao Haier Software Investment Co., Ltd. Associate Qingdao HBIS Composite New Material. Associate Hefei Hegang New Material Technology Co., Ltd. Associate Mitsubishi Heavy Industries Haier (Qingdao) Air-conditioners Co., Ltd. Associate Wolong Electric (Jinan) Motor Co., Ltd. Associate 5.Related-party transactions 1.The details of the Company's procurement of goods and services from related parties is as follows: √Applicable □Not Applicable Unit and Currency: RMB Amount for the current Amount for the previous Related parties period period CONTROLADORAMABES.A.deC.V. 9,113,096,659.92 7,402,437,722.16 Qingdao Haier Parts Procurement Co., Ltd. 5,921,843,450.68 8,788,819,505.91 Chongqing Haier Electrical Appliances Sales 4,680,091,481.07 5,802,696,369.58 Co., Ltd. Chongqing Haier Logistics Co., Ltd. 2,073,214,826.93 2,243,036,226.80 HNR Company (Private) Limited 1,840,370,751.33 1,382,295,370.15 Hefei Haier Logistics Co., Limited 1,582,350,911.61 2,635,311,120.52 Qingdao Haier International Trading Co., Ltd. 1,226,021,106.66 1,131,818,054.68 Qingdao Haier Strauss Water Equipment Co., 905,260,515.17 491,725,981.72 Ltd. Hefei Hegang New Material Technology Co., 734,384,802.58 741,061,609.82 Ltd. Qingdao Haier Special Plastic Development 719,843,177.61 722,409,540.37 Co., Ltd. Wolong Electric (Jinan) Motor Co., Ltd. 661,075,508.16 759,511,960.70 Qingdao HBIS Composite New Material. 626,568,343.81 621,080,904.82 Qingdao Shenghui Plastic Co., Ltd. 508,498,527.14 31,475,882.15 Haier Energy & Power Co., Ltd. 451,515,712.09 448,843,514.32 Qingdao Haier Tooling Development and 323,542,192.07 381,538,275.52 Manufacturing Co., Ltd. Qingdao Haiyongda Property Management 237,267,663.00 196,524,982.09 Co., Ltd. Hefei Huadong Packing Co., Ltd. 218,307,311.74 182,248,724.81 307 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report HAIERINTERNATIONALCO.,LTD 140,741,779.07 227,930,736.42 Mitsubishi Heavy Industries Haier (Qingdao) 85,390,255.89 78,433,710.84 Air-conditioners Co., Ltd. Qingdao Haier Household Integration Co., 54,710,255.06 16,811,242.24 Ltd. Qingdao Haier Whole House Home Co., Ltd. 54,224,184.50 237,032,081.27 HAIERINTERNATIONAL(HK)LTD. 16,770,615.17 282,924,819.61 Other related-party 1,415,368,799.43 1,030,755,699.39 Total 33,590,458,830.69 35,836,724,035.89 1. The details of the related parties to the Company's sales of goods to are as follows: √Applicable □Not Applicable Unit and Currency: RMB Amount for the current Amount for the previous Related parties period period CONTROLADORAMABES.A.deC.V. 715,307,126.17 427,074,898.76 Qingdao Haier Special Plastic Development 679,607,921.20 267,962,166.18 Co., Ltd. Haier International Trading Co., Ltd. Qingdao 622,373,513.67 638,554,200.89 HNR Company (Private) Limited 428,693,680.74 274,428,749.64 Qingdao Haier New Materials R & D Co., Ltd. 319,471,416.84 519,845,230.06 Chongqing Haier Electrical Appliances Sales 246,913,534.92 220,923,910.45 Co., Ltd. Wolong Electric (Jinan) Motor Co., Ltd. 241,476,982.52 567,996,750.61 Qingdao Haier Tooling Development and 225,731,209.43 138,168,574.82 Manufacturing Co., Ltd. Hefei Hegang New Material Technology Co., 219,541,831.54 720,039,062.34 Ltd. Qingdao HBIS Composite New Material. 131,806,476.71 336,114,667.51 Qingdao Haier International Travel Agency 117,712,848.11 38,678,257.43 Co., Ltd. Haier finance leasing (China) Co., Ltd. 63,821,463.04 32,786,700.84 Qingdao Haier Whole House Home Co., Ltd. 39,019,447.13 25,588,713.65 Haier Group Electric Appliance Industry Co., 56,071.59 72,815,827.07 Ltd. Other related-party 438,235,266.91 413,295,611.29 Total 4,489,768,790.52 4,694,273,321.54 Description of related party transactions for the purchase and sale of goods, provision and acceptance of labor services 308 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report □Applicable √Not Applicable 3. Related-party balances Items Closing Balance Opening Balance Bills receivable: Qingdao Haier New Materials R & D Co., Ltd. 34,632,882.73 Other related-party 7,356,564.87 827,490.67 Dividend receivable: Qingdao Haier Software Investment Co., Ltd. 4,524,472.84 4,524,472.84 Accounts receivable: HNR COMPANY (PRIVATE) LIMITED 280,435,010.88 157,468,011.66 CONTROLADORAMABES.A.deC.V. 149,908,002.70 85,868,137.29 Haier Group Electric Appliance Industry Co., 115,044,945.15 172,889,483.50 Ltd. Qingdao Haier International Travel Agency 82,564,510.88 33,535,331.94 Co., Ltd. Haier finance leasing (China) Co., Ltd. 80,643,117.12 33,979,469.96 Qingdao Haier Special Plastic Development 31,769,104.04 30,061,911.52 Co., Ltd. HAIERINTERNATIONALCO.,LTD 21,866,762.90 15,579,415.32 Haier Group Corporation 14,363,320.57 4,583,333.33 Hefei Hegang New Material Technology Co., 12,430,653.04 37,553,831.20 Ltd. Suzhou Hai Xin InfoTech Ltd 10,878,625.30 18,580,938.10 Qingdao Haier Household Integration Co., Ltd. 10,567,963.70 12,218,258.48 Qingdao Haier New Materials R & D Co., Ltd. 1,207,127.26 60,381,881.38 Other related-party 274,961,122.45 187,957,558.68 Prepayments: Qingdao Haier International Trading Co., Ltd. 52,377,466.40 25,694,085.49 Haier Group Electric Appliance Industry Co., 36,250,083.22 18,666,136.33 Ltd. Qingdao Haier Parts Procurement Co., Ltd. 6,232,019.51 26,855,446.50 Other related-party 36,146,173.00 57,909,844.51 Interest receivable: Haier Group Finance Co., Ltd. 8,558,831.18 16,597,598.16 Other receivables: Qingdao Haier Real Estate Group Co., Ltd. 69,280,000.00 309 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Haier Group Electric Appliance Industry Co., 4,932,361.04 5,054,271.27 Ltd. Other related-party 81,410,902.63 43,505,955.80 Notes payable: Laiyang Haier Electrical Co. Ltd. 60,572,756.31 56,557,892.89 Wolong Electric (Jinan) Motor Co., Ltd. 61,412,756.84 Other related-party 11,747,585.16 6,544,689.10 Accounts payable: Qingdao Haier Parts Procurement Co., Ltd. 1,709,722,192.99 975,508,354.98 Chongqing Haier Electrical Appliances Sales 887,619,722.87 90,092,109.31 Co., Ltd. CONTROLADORAMABES.A.deC.V. 448,791,729.31 359,468,427.60 Qingdao Haier International Trading Co., Ltd. 206,304,134.91 268,481,130.24 HAIERINTERNATIONALCO.,LTD 96,592,512.06 56,102,305.76 Dalian Haier International Trade Co., Ltd. 85,369,608.45 4,250,177.48 Qingdao Haier Strauss Water Equipment Co., 83,405,508.45 61,152,328.59 Ltd. HNR COMPANY (PRIVATE) LIMITED 83,263,372.49 49,389,796.48 Chongqing Haier Logistics Co., Ltd. 76,661,148.51 304,825,911.96 Qingdao HBIS Composite New Material. 66,411,374.50 44,091,885.24 Hefei Huadong Packing Co., Ltd. 59,264,205.80 63,977,207.96 Qingdao Haier Communications Co., Ltd. 48,474,102.93 4,801,675.32 Qingdao Haier Special Plastic Development 43,902,377.09 52,784,094.74 Co., Ltd. Mitsubishi Heavy Industries Haier (Qingdao) 28,603,458.79 3,561,326.45 Air-conditioners Co., Ltd. Qingdao Haier Tooling Development and 23,124,924.59 25,288,499.85 Manufacturing Co., Ltd. Hefei Haier Logistics Co., Limited 22,752,588.26 257,354,153.49 Qingdao Haier Whole House Home Co., Ltd. 27,345.53 33,084,367.38 HAIERINTERNATIONAL(HK)LTD. 162,909,377.32 Other related-party 185,177,884.47 280,129,939.47 Receipts in advance: Haier Group Electric Appliance Industry Co., 1,397.00 5,984,613.13 Ltd. Hefei Hai Zhi Real Estate Co., Ltd. 155,000,000.00 Other related-party 6,521,502.55 12,369,377.54 310 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Other payables: Haier Brothers Animation Industry Co., Ltd. 259,873,164.57 384,741,409.54 Chongqing Haier Logistics Co., Ltd. 51,830,739.06 51,830,739.06 Haier Energy & Power Co., Ltd. 19,548,568.72 42,485,111.74 Xingyang International Co., Ltd.(星洋国际有 13,885,076.40 13,885,076.40 限公司) Other related-party 182,225,144.61 170,143,584.68 Interest payable: Haier Group Finance Co., Ltd. 5,911,859.39 5,953,652.09 Dividends payable: Brave Lion (HK) limited 104,660,934.22 122,756,874.10 Other related-party 57,544,258.83 30,999,441.54 4. Others √Applicable □Not Applicable (1)Certain of the Company‘s subsidiaries entered into loan contracts with Haier Group Finance Co., Ltd.. The loan balance as of 31 December 2018 was RMB1.388 billion and the interest incurred for the period was RMB124 million. (2)Information of the guarantor of the Company's guaranteed loan at the end of the period: Borrower Loan amount Guarantor Haier Group HAIERU.S.APPLIANCESOLUTIONS,INC. 14,513,911,465.87 Corporation Haier Group Haier Singapore Investment Holding Co., Ltd. 7,134,552,054.20 Corporation Haier Group Qingdao Haidayuan Procurement Service Co., Ltd. 550,000,000.00 Corporation Total 22,198,463,520.07 (3)The interest income from deposits in Haier Group Finance Co., Ltd. for the current period was RMB105 million. (4)Haier Pakistan (Private) Limited, a Company‘s subsidiary, lend an amount of RMB289 million to HNR COMPANY (PRIVATE) LIMITED, the Company‘s associate at the end of the period. HAIERELECTRICALAPPLIANCESRUSLIMITED lend an amount of RMB17 million to HAIERRUSSIANTRADINGCOMPANYLLC.. (5)Qingdao Haier Goodaymart Logistic Co., Ltd., a subsidiary of the Company and other 311 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report companies provided logistics services to other related parties within Haier Group, the logistics income for the current period was RMB203 million. (6)Leasing Lease expense recognized Lessees Lessors Used for for the period Qingdao Haier Investment Subsidiaries of the and Development Co., Ltd. Production and operation 16,807,674.41 Company and its subsidiaries Subsidiaries of the Other companies of Haier Production and operation 101,682,366.08 Company Group Total 118,490,040.49 6. Pricing policy 1. Related-party sales Following the acquisition of the overseas white household appliances assets, the Company‘s original overseas sales model, being exports through the Group‘s exporting platform, was changed. The trading company under the company holding overseas white household appliances assets was fully responsible for sales of export-oriented products. Meanwhile, the trading company was also responsible for the overseas sales of some of the Group‘s products (such as brown goods). As such, the Company entered into a Sales Framework Agreement with Haier Group Corporation. Under which, it was agreed that the Company and Haier Group Corporation will sell products and provide sales-related services (including but not limited to agency sales services, after-sales services and technical support) on a reciprocal basis for a term of three years. Sales among Haier Electronics Group Co., Ltd. (―Haier Electronics‖), a holding subsidiary of the Company, Qingdao Haier Investment and Development Co., Ltd, Haier Group Corporation are carried out according to relevant provisions of Goods Export Agreement, After-sales Service Agreement, Logistics Service Agreement entered into among parties. 2. Related-party Procurement In addition to independent procurement platform, the Company entrusted Haier Group Corporation and its subsidiaries for procurements and delivery of part of raw materials, which is conducted according to the Purchase and Distribution Contract entered among the Company, Haier Group Corporation and 312 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report other parties. The price consists of the actual purchase price and the agency fee, of which the agency fee was calculated by 1.25% of the actual purchase price, while in principle the price of materials should not be higher than the price that the Company independently purchases from the market. Related-party procurements among Haier Electronics, Qingdao Haier Investment and Development Co., Ltd, Haier Group Corporation are carried out according to relevant provisions of Materials Procurement Agreement and Production and Experimental Equipment Procurement Agreement entered among parties. 3. Related-party Transactions on Financial and Logistics Services Some of the financial services such as deposit and loan service, discounting service and foreign exchange derivatives needed by the Company are provided by Haier Group Corporation, its subsidiaries and other companies. According to the Financial Service Agreement entered among the Company, Haier Group Corporation and other parties, the price is not less favorable than market price. The Company is entitled to decide whether to cooperate with them with the knowledge of the price prevailing on the market. While executing the agreement, the Company could also require other financial service institutions to provide related financial services. In order to mitigate foreign exchange fluctuation risk, the Company may choose Haier Group Finance Co., Ltd. (―Finance Company‖) to provide service after comparison. All foreign exchange business shall have a normal and reasonable business background without speculation. At the same time, the Company has specified the authority and responsibilities at all levels to avoid unauthorized access. Related-party transactions of financial services among Haier Electronics, Finance Company, Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation are carried out according to relevant provisions of Financial Service Agreement entered into among parties. In order to further standardize the administrative services provided by the related companies of Haier Group Corporation, the Company signed the Administrative Service Agreement with Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation, and entrusted the subsidiaries of Haier Group to provide energy and power, detection, equipment leasing, house rental and maintenance, landscaping and sanitation, gift purchasing, design, consultation, all kinds of booking and other services. In accordance with the Comprehensive Service Agreement, Promotion Agreement, Product Research and Development Agreement entered into among Haier Electronics, Qingdao Haier Investment and Development Co., Ltd and Haier Group Corporation, Haier Electronics entrusted subsidiaries of 313 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Haier Group to support on: energy, meeting, accommodation, ticket, product certification, software, catering, property decoration, house lease, finance and marketing, product research and development. 4. 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 contracted parties, the purchasing price shall be determined basing on the prices of which Haier Electronics purchases the same type of product in similar transactions from independent third parties in the market, and are not less favorable than the terms and conditions provided by the independent third parties to Haier Electronics; while Haier Electronics sales products to contract parties for their own use or distributes products through sales network, the selling price shall be determined basing on the prices of which Haier 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 (Jinan) 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 HBIS Composite New Material. 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 payments Not Applicable XIV. Commitments and Contingencies 1. Significant commitments □Applicable √Not Applicable 2.Contingencies √Applicable □Not Applicable 314 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report As of 31 December 2018, the Company has no significant contingencies that need to be disclosed. XV. Events after the balance sheet date 1. According to the resolution of the 27th meeting of the 9th session of the Board of Directors of the Company held on 29 April 2019, the profit for the year is proposed to be distributed on the basis of the total number of shares on the registration date when the plan is implemented in the future, the Company will declare cash dividend of RMB3.51 (including taxes) for every 10 shares to all shareholders. 2. On 28 September 2018, the 21st meeting of the ninth session of the Board of Directors of the Company has reviewed and approved the ―Proposal of Qingdao Haier Co., Ltd. on the acquisition of 100% shares of CANDY S.p.A‖ and agreed to acquire 100% shares of CANDY S.p.A held by BEPPE FUMAGALLI, ALDO FUMAGALLI and ALBE FINANZIARIA S.R.L in total. through the overseas wholly-owned subsidiary HAIER EUROPE APPLIANCE HOLDING B. V. (hereinafter referred to as "Haier Europe") The consideration for this transaction was Euros 475 million. On 4 January 2019, the parties to the transaction jointly signed and notarized the "Transfer Certificate" and other documents, confirming that all delivery conditions have been fulfilled, the Company has paid all the money including the consideration of the transaction and the 100 % share of Candy S.p.A was transferred to Haier Europe and the transaction has completed. Since the completion of the transaction, Haier Europe directly holds 100% of Candy S.p.A. The Company indirectly holds 100% of CANDY S.p.A. 3. An indirect holding subsidiary of the Company entered into an equity acquisition agreement, pursuant to which, it acquired 6.33%, 0.08% and 0.08% (totaling 6.49%) equity interests of Qingdao Haier Washing Machine Co., Ltd., an indirect and non-wholly-owned subsidiary of the Company, respectively, from Qingdao Haier New Economy Advisory Company Limited (青岛海尔新经济咨询有 限公司), Qingdao Haier Parts Procurement Co., Ltd. And Qingdao Haier International Trading Co., Ltd., being subsidiaries of Haier Group, at transaction considerations of RMB81,666,857, RMB1,032,125 and RMB1,032,125. Such acquisition was completed on 30 January 2019. 3. The Company has no other significant subsequent events that need to be disclosed. XVI. Risks Related to Financial Instruments √Applicable □Not Applicable The book value of various financial instruments on the balance sheet date is as follows: 315 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Financial assets Closing balance Financial assets Financial assets measured at fair measured at fair Items value and changes value and changes of Measured at of which included Total which included in amortized cost in other current profit and comprehensive loss income 37,456,355,407.28 37,456,355,407.28 Cash and cash equivalents Financial assets held for 1,775,648,387.76 1,775,648,387.76 trading 96,723,164.37 96,723,164.37 Derivative financial assets Bills receivable and 24,652,130,810.52 24,652,130,810.52 accounts receivable 1,626,975,864.98 1,626,975,864.98 Other receivables 2,838,231,840.90 2,838,231,840.90 Other current assets 1,400,316,460.34 1,400,316,460.34 Other equity instruments Other non-current 327,358,825.57 327,358,825.57 financial assets 95,518,757.96 95,518,757.96 Other non-current assets Financial assets (Continued) Opening balance Financial assets measured at fair Items Loans and value and changes of Available-for-sale accounts Total which included in financial assets receivable current profit and loss 35,825,439,039.22 35,825,439,039.22 Cash and cash equivalents Financial assets measured at fair value and changes 20,681,695.50 20,681,695.50 of which included in current profit and loss Bills receivable and 25,924,283,460.99 25,924,283,460.99 accounts receivable 1,192,291,302.17 1,192,291,302.17 Other receivables 867,526,626.75 1,195,550,000.00 2,063,076,626.75 Other current assets Available-for-sale 1,415,354,307.82 1,415,354,307.82 financial assets 389,025,863.70 389,025,863.70 Other non-current assets Financial liabilities Closing balance Financial liabilities Financial Financial liabilities Items measured at fair liabilities measured at fair Total value and changes of measured at value and changes which included in amortized cost of which included 316 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report current profit and in other loss comprehensive income Short-term borrowings 6,298,504,892.57 6,298,504,892.57 Financial liabilities held 218,748,280.33 218,748,280.33 for trading Derivative financial 35,603,754.54 35,603,754.54 liabilities Bills payable and accounts 47,385,218,141.38 47,385,218,141.38 payable Other payables 12,685,677,402.91 12,685,677,402.91 Non-current liabilities due 3,015,060,105.58 3,015,060,105.58 within one year Long-term borrowings 15,541,466,325.22 15,541,466,325.22 Bills payable 9,191,896,302.70 9,191,896,302.70 Long-term payables 106,763,243.99 106,763,243.99 Other non-current 1,798,027,644.47 1,798,027,644.47 liabilities Financial liabilities (Continued) Opening balance Financial liabilities measured at Items fair value and changes of which Financial liabilities Total included in current profit and measured at amortized cost loss Short-term borrowings 10,878,580,275.18 10,878,580,275.18 Financial liabilities measured at fair value and 2,524,569.45 2,524,569.45 changes of which included in current profit and loss Bills payable and accounts 42,616,065,864.06 42,616,065,864.06 payable Other payables 11,309,575,304.78 11,309,575,304.78 Non-current liabilities due 6,149,302,981.65 6,149,302,981.65 within one year Long-term borrowings 16,036,492,809.81 16,036,492,809.81 Bills payable 6,211,088,362.68 6,211,088,362.68 Long-term payables 106,020,029.74 106,020,029.74 Other non-current 1,170,936,828.56 1,170,936,828.56 liabilities Details on each of the financial instruments of the Company are disclosed in Note VII. Risks relating to these financial instruments and the risk management policies s to mitigate these risks are summarized below. The Company manages and monitors these risk exposures to ensure above risks are well under control. 1. Credit risk 317 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report The credit risk the Company exposed to mainly arise from cash in bank, notes receivable, accounts receivable, interest receivable, other receivable and financial products. (1)The Company‘s bank deposits and financial products are mainly deposited with Haier Group Finance Co., Ltd., national banks and other large and medium sized listed banks. The interest receivables mainly refer to the accrued interest from fixed deposits with them. The Group doesn‘t believe there is any significant credit risk due to defaults of its counterparties which would cause significant loss. (2)Accounts receivable and notes receivable: The Company only trades with approved and reputable third parties. All consumers who are traded by credit are subject to credit assessment, and the payment terms shall be determined on a reasonable basis. The Company monitors the balances of accounts receivable on an ongoing basis and mitigates the risk with credit insurances. (3) Other receivables mainly include export tax refund, loans and advances to its employees. The Company strengthened the management of these receivables and corresponding business activities based on historical data, and continued to monitor such receivables, so as to ensure that the Company‘s significant risk of bad debts are controllable and to be reduced. 2. Liquidity risk Liquidity risk is the risk that an enterprise may encounter deficiency of funds in fulfilling obligations associated with financial liabilities. The Company utilize various financing methods such as notes and bank loans, to strive for a sustainable and flexible financing. It also has facilities with several commercial banks to satisfy its needs for working capital and capital expenditures. 3. Exchange rate risk The Company‘s businesses are based in mainland China, USA, Japan, Southeast Asia, South Asia, central and east Africa, Europe, and Australia, etc. and are settled in RMB, USD, and other currencies. The Company‘s overseas assets and liabilities denominated in foreign currencies as well as transactions settled in foreign currencies expose the Company to fluctuations in exchange rates. The Company‘s finance department is responsible for monitoring the size of transactions in foreign currencies and assets and liabilities denominated in foreign currencies and enter into forward foreign exchange contracts to minimize the exposure. 4. Interest rate risk 318 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 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. XVII. Other Significant Events Guanmei (Shanghai) Enterprise Management Company Limited (贯美(上海)企业管理有限公司), an indirect holding subsidiary of the Company intends to replace the 55% equity interests of Icy Halbert (Shanghai) Enterprise Management Company Limited (冰戟(上海)企业管理有限公司) held by it with the 51% equity interests of Qingdao HSW Water Appliance Co., Ltd. held by Haier Electric Appliances International Co., Ltd. The above transaction has been approved by the shareholders of the Company at the special general meeting of the Company on 21 November 2018, and as at the approval date of these financial statements, it is still subject to the approval or agreement of the relevant government authority of China. The Company has no other significant events that need to be disclose XVIII. Notes to Main Items of Financial Statements of the Parent Company 1. Bills receivable and accounts receivable Summary table (1) . Categories √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Bills receivable Accounts receivable 222,622,017.43 288,499,726.07 Total 222,622,017.43 288,499,726.07 Provision for bad debts by group: □Applicable √Not Applicable Accounts receivable 319 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report ① The discousre of accounts receivable by ageing is as follows: Aging Closing balance Opening balance Within one year 205,461,418.79 274,306,287.64 1-2 years 9,306,599.70 29,377,634.54 2-3years 8,649,467.83 Over 3 years Accounts receivable balance 223,417,486.32 303,683,922.18 Allowance for bad debts 795,468.89 15,184,196.11 Net receivables 222,622,017.43 288,499,726.07 ② The total amount of the top 5 accounts receivable at the end of the period was RMB219,296,245.47, accounting for 98.16% of book balance of the accounts receivable. ③ Changes in bad debt provision for accounts receivable in the current period: Increase for the period Decrease for the period Opening Write-off / Closing Items Other balance Provision Reversal other balance movement movement Allowance 15,184,196.1 -13,278,745. 1,109,981. 795,468.8 for bad 1 63 59 9 debts Provision for bad debts by group: □Applicable √Not Applicable 2. Other receivables Summary table (1). Categories √Applicable □Not Applicable Unit and Currency: RMB Items Closing balance Opening balance Interest receivable 6,292,538.22 220,157,282.75 Dividend receivable 1,912,418,382.82 970,851,045.94 Other receivables 164,056,245.54 15,895,048.43 Total 2,082,767,166.58 1,206,903,377.12 320 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Interest receivable Aging Closing balance Opening balance Within 1 year 6,292,538.22 220,157,282.75 Over 1 years Total 6,292,538.22 220,157,282.75 Dividend receivable (1). Dividend receivable √Applicable □Not Applicable Unit and Currency: RMB Item (or investees) Closing balance Opening balance Within 1 year 1,912,418,382.82 970,851,045.94 Total 1,912,418,382.82 970,851,045.94 Other receivables ① The discousre of other receivables by ageing is as follows: Aging Closing balance Opening balance Within one year 164,319,278.07 16,731,629.93 More than 1 year Other receivables balance 164,319,278.07 16,731,629.93 Allowance for bad debts 263,032.53 836,581.50 Net other receivables 164,056,245.54 15,895,048.43 ② The total amount of the top 5 other receivables at the end of the period is RMB 157,482,051.47, accounting for 95.84% of book balance of other receivables. ③ Changes in bad debt provision for other receivables in the current period: Increase for the period Decrease for the period Opening Write-off / Closing Items Other balance Provision Reversal other balance movement movement Allowance 263,032.5 for bad 836,581.50 135,311.03 -708,860.00 3 debts 321 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 3. Long-term equity investment √Applicable □Not Applicable (1)Details of long-term equity investments: Closing balance Opening balance Items Provision for Provision for Book balance Book balance impairment impairment Long-term equity investments Including: long-term equity 30,675,167,530 20,490,178,326 7,100,000.0 7,100,000.00 investments to subsidiaries .39 .42 0 Long-term equity investments to 3,197,166,784. 21,000,000.0 3,119,176,601. 21,000,000. associates: 91 0 66 00 33,872,334,315 28,100,000.0 23,609,354,928 28,100,000. Total .30 0 .08 00 (2)Long-term equity investments to subsidiaries Increase / Impairment Investee Opening balance Closing balance Decrease provisions 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 402,667,504.6 Qingdao Haier Refrigerator Co., Ltd. 402,667,504.64 4 Qingdao Haier Special Refrigerator 329,832,047.2 329,832,047.28 Co., Ltd. 8 Qingdao Haier Information Plastic 102,888,407.3 102,888,407.30 Development Co., Ltd 0 Dalian Haier Precision Products Co., 41,836,159.33 41,836,159.33 Ltd. 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 -273,980,796 Qingdao Haier Moulds Co., Ltd. 273,980,796.30 .30 Qingdao Haier Intelligent Electronics -294,453,513 294,453,513.06 Co., Ltd. .06 322 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Qingdao Household Appliance Technology and Equipment Research 66,778,810.80 66,778,810.80 Institute Qingdao Meier Plastic Powder Co., 24,327,257.77 24,327,257.77 Ltd. Chongqing Haier Precision Plastic Co., 47,811,283.24 47,811,283.24 Ltd. Chongqing Haier Intelligent Electronics -11,870,511. 11,870,511.98 Co., Ltd. 98 Qingdao Haier Electronic Plastic Co., 48,000,000.00 48,000,000.00 Ltd. Dalian Haier Refrigerator Co., Ltd.. 99,000,000.00 99,000,000.00 Dalian Haier Air-conditioning Co., Ltd. 99,000,000.00 99,000,000.00 Guizhou Haier Electronics Co., Ltd.. 96,904,371.71 96,904,371.71 Hefei Haier Air-conditioning Co., 67,110,323.85 67,110,323.85 Limited Qingdao Haier Refrigerator 158,387,576.4 158,387,576.48 (International) Co., Ltd. 8 -3,149,188.6 Qingdao Haier Robot Co., Ltd. 3,149,188.69 9 Qingdao Haier Air-Conditioner 1,113,433,044.5 1,113,433,044. Electronics Co.,Ltd. 1 51 Qingdao Haier Air Conditioner Gen 220,636,306.0 218,245,822.50 2,390,483.52 Corp., Ltd. 2 Qingdao Haier Special Freezer Co., 442,684,262.7 442,684,262.76 Ltd. 6 206,594,292.8 Qingdao Haier Dishwasher Co., Ltd. 206,594,292.82 2 Wuhan Haier Freezer Co., Ltd. 47,310,000.00 47,310,000.00 100,715,445.0 Wuhan Haier Electronics Co., Ltd. 100,715,445.04 4 Chongqing Haier Air-conditioning Co., 100,000,000.0 100,000,000.00 Ltd. 0 Hefei Haier Refrigerator Co., Ltd. 49,000,000.00 49,000,000.00 Qingdao Haier Whole Set Home 118,000,000.0 118,000,000.00 Appliance Service Co., Ltd. 0 Chongqing Haier Refrigeration 91,750,000.00 91,750,000.00 Appliance Co., Ltd. 323 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Qingdao Haier Industry Intelligence -8,000,000.0 8,000,000.00 Research Institute Co., Ltd. 0 Haier Shareholdings (Hong Kong) 13,561,203,702. 10,063,343,0 23,624,546,78 Limited 07 85.45 7.52 100,000,000.0 Shenyang Haier Refrigerator Co., Ltd. 100,000,000.00 0 100,000,000.0 Foshan Haier Freezer Co., Ltd. 100,000,000.00 0 Zhengzhou Haier Air-conditioning Co., 100,000,000.0 100,000,000.00 Ltd. 0 Qingdao Haidayuan Procurement 20,000,000.00 20,000,000.00 Service Co., Ltd. Qingdao Haier Intelligent Technology 130,000,000.0 130,000,000.00 Development Co., Ltd. 0 Qingdao Haier Technology Investment 77,255,635.0 277,255,635.0 200,000,000.00 Co., Ltd. 0 0 Qingdao Casarte Smart Living 10,000,000.00 10,000,000.00 Appliances Co.,Ltd. Haier Overseas Electric Appliance Co., 40,000,000.00 40,000,000.00 Ltd. Haier (Shanghai) Electronics Co., Ltd. 12,500,000.00 12,500,000.00 Haier U+smart Intelligent Technology 143,000,000.0 143,000,000.00 (Beijing) Co., Ltd. 0 669,830,769.2 7,100,000.0 Haier Electronics Group Co., Ltd. 669,830,769.26 6 0 Qingdao Haidarui Procurement Service 107,800,000.0 107,800,000.00 Co., Ltd. 0 Haier Shanghai Zhongzhi Fang Chuang 2,000,000.00 2,000,000.00 Ke Management Co., Ltd. 633,454,010. 733,454,010.0 Haier Industrial Holding Co., Ltd. 100,000,000.00 03 3 Qingdao Haier special refrigerating 100,000,000.0 100,000,000.00 Appliance Co., Ltd. 0 Qingdao Haier Intelligent Household 326,400,000.0 326,400,000.00 Appliances Co.,Ltd. 0 20,490,178,326. 10,184,989,2 30,675,167,53 7,100,000.0 Total 42 03.97 0.39 0 324 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report (3)Long-term equity investments to associates: Increased / decreased amount for the current period Investment income Impairme Opening recognized Closing Associates nt Balance Increase / From balance Others provisions Decrease investments accounted for using equity method (Qingdao) Haier Medical and 229,914,790 -255,892,77 25,977,987.62 - Laboratory Products .86 8.48 Co., Ltd. Wolong Electric 106,957,786 115,124,133 (Jinan) Motor Co., 8,166,347.28 .56 .84 Ltd. Qingdao HBIS 106,068,803 -106,068,80 Composite New - .08 3.08 Material. Hefei Hegang New 109,289,567 -109,289,56 Material Technology - .00 7.00 Co., Ltd. Qingdao Haier SAIF Smart Home Industry 270,536,881 362,380,221 91,843,339.31 Investment Center .98 .29 (Limited Partnership) Bank of Qingdao Co., 917,520,227 -5,875, 966,031,978 54,387,479.41 Ltd. .90 728.48 .83 Mitsubishi Heavy Industries Haier -56,77 529,934,750 149,480,863.7 622,643,614 (Qingdao) 2,000. .95 1 .66 Air-conditioners Co., 00 Ltd. Qingdao Haier 305,185,137 332,723,126 21,000,00 Carrier Refrigeration 27,537,989.41 .09 .50 0.00 Equipment Co., Ltd. Qingdao Haier 543,768,656 3,114,2 555,084,616 8,201,709.19 multimedia Co., Ltd. .24 51.28 .71 Qingdao Hegang New 215,358,37 12,099 243,179,093 15,721,032.90 Material Technology 0.08 ,690.1 .08 325 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report Co., Ltd. 0 -47,43 3,119,176,6 -255,892,77 381,316,748.8 3,197,166,7 21,000,00 Total 3,787. 01.66 8.48 3 84.91 0.00 10 4. Operating revenue and operating cost (1) Operating revenue and operating cost √Applicable □Not Applicable Unit and Currency: RMB Amount for the current period Amount for the previous period Items Revenue Cost Revenue Cost Primary Business 3,199,683,163.9 2,200,981,641.6 3,396,281,592.1 2,383,460,866. Other Business 60,627,963.89 32,770,272.98 55,720,755.44 407,940.53 Total 3,260,311,127.7 2,233,751,914.6 3,452,002,347.6 2,383,868,807. 9 3 0 01 5. Investment income √Applicable □Not Applicable Unit and Currency: RMB Amount for the previous Items Amount for the current period period Income from long-term equity investments 381,316,748.83 251,182,511.39 accounted for using cost method Investment income from disposal of long-term 241,239,800.75 equity investment Investment income from long-term equity 2,027,080,177.86 1,039,337,401.79 investment accounted for using cost method Investment income from other equity instrument 243,162.12 231,157.27 investments during the holding period Total 2,649,879,889.56 1,290,751,070.45 XIX. Supplementary Information 326 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report 1. Basic earnings per share 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 21.00% 1.21 1.182 22.89% 1.133 1.085 the Company Net profit attributable to ordinary shareholders of the Company after 18.63% 1.074 1.046 19.15% 0.922 0.874 deduction of non-recurring profit or loss 2. Extraordinary profit or loss Amount for the Amount for the Items current period previous period Net profit attributable to ordinary shareholders of the 7,440,228,855.90 6,907,629,188.39 Company Less: Extraordinary profit or loss 838,723,256.11 1,283,567,479.93 Net profit attributable to ordinary shareholders of the 6,601,505,599.79 5,624,061,708.46 Company after deduction of extraordinary profit or loss Details of extraordinary profit and loss for the current period: Extraordinary profit or loss Items Amount for the current period Profit or loss from disposal of non-current assets 214,439,336.04 Profit from disposal of long-term equity investments 259,839,279.75 Government grants included in current profit or loss, except that closely related to the normal operating business, complied with requirements of the 640,822,529.56 national policies, continued to be granted with the amount and quantity determined under certain standards Gains from the costs of investment in the acquisition of subsidiaries, associated companies and joint ventures being lower than the share of the fair 185,413.85 value of the investee‘s identifiable net assets Profit or loss from fair value changes of financial assets/liabilities held for -15,161,125.59 trading, as well as investment gain/loss arising from disposal of financial 327 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report assets/liabilities held for trading and other equity instrument investments, except the effective hedging related to the normal operations of the Company, Trust fee income from entrusted business 1,493,710.69 Other non-operating income and expenses except the aforementioned items 292,041,683.31 Impact on non-controlling interests -333,421,256.64 The acquiree's net profit before business combination under common control -161,566,826.87 The acquiree's net profit before business combination under common control -59,949,487.99 Total 838,723,256.11 3.Difference on figures by domestic and foreign Accounting Standards □Applicable √Not Applicable 4.Other □Applicable √Not Applicable Qingdao Haier Co., Ltd. Legal representative of the Company: Liang Haishan 29 April 2019 328 / 333 Qingdao Haier Co., Ltd. 2018 Annual Report SECTION XIII DOCUMENTS AVAILABLE FOR INSPECTION Documents Available (I) Financial statements with signatures and seals of the legal representative, for Inspection chief accountant and person in charge of accounting department. Documents Available (II) Original audit report with seals of accounting firm, signatures and seals of for Inspection registered accountants. (III) Original of all documents and announcements of the Company which have Documents Available been publicly disclosed on the newspaper designated by China Securities for Inspection Regulatory Commission during the reporting period. Chairman of the Board: Liang Haishan, Date of approval for publication by the Board: 29 April 2019 Revised information □Applicable √Not Applicable 329 / 333