Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. S tock Co de : 60 06 90 Sh ort Na me: H aier S mart Ho me Convertible Bond Code: 110049 Convertible Bond Name: Haier Convertible Bonds Convertible Stock Code: 190049 Convertible Stock Name: Haier Converted Stocks Haier Smart Home Co., Ltd. Third Quarterly Report of 2019 1 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Contents I. Important Notice ..........................................................................................................................3 II. Company Profile ....................................................................................... ....................................3 III. Important Events ....................................................................................................................... 11 IV. Appendix ................................................................................................ ....................................21 2 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. I. Important Notice 1.1 The Board of Directors, the Board of Supervisors and directors, supervisors and senior management of Haier Smart Home Co., Ltd. (the “Company”) hereby assure that the content set out in the quarterly 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. 1.2 All directors of the Company attend the Board Meeting of Directors to review the quarterly report. 1.3 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 statement set out in the quarterly report is true, accurate and complete. 1.4 This Third Quarterly Report of the Company has not been audited. II. Company Profile 2.1 Key financial information Unit and Currency: RMB Increase/decrease As at the end of last year as at the end of the As at the end of reporting period the reporting After Before compared with the period adjustment adjustment end of last year (%) Total assets 184,273,943,674.56 167,623,755,907.07 166,699,544,243.79 9.93 Net assets attributable to shareholders of the listed 44,881,019,057.59 39,527,134,756.93 39,402,350,791.68 13.54 company From the From the beginning of last year Increase/decrease beginning of the to the end of the reporting period compared with year to the end of last year (January to the corresponding of the reporting September) period of last year 3 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. period (January After Before (%) to September) adjustment adjustment Net cash flows from 9,006,912,568.45 10,902,332,232.22 11,049,179,807.06 -17.39 operating activities From the From the beginning of last year beginning of the to the end of the reporting period Increase/decrease year to the end of last year (January to compared with of the reporting September) the corresponding period (January After Before period of last year to September) (%) adjustment adjustment Operating revenue 148,896,109,856.46 138,227,311,459.35 138,138,774,411.21 7.72 Net profit attributable to shareholders of the listed 7,772,860,902.81 6,161,001,081.50 6,126,787,121.21 26.16 company Net profit after deduction of non-recurring profit or loss 5,834,398,305.26 5,522,473,377.30 5,522,473,377.30 5.65 attributable to shareholders of the listed Company Weighted average return on 18.17 18.02 17.42 Increased by 0.15 pct net assets (%) Basic earnings per share 1.221 1.010 1.005 20.89 (RMB per share) Diluted earnings per share 1.131 1.010 0.987 11.98 (RMB per share) Note: During the reporting period, the Company followed the strategy of smart home leadership. Driven by the Rendanheyi model, the Company managed to achieve continuous growth against the adverse economic situation through continued product innovation, deepened retail transformation, global operation and multibrand operation. The Company also leaded the scenario transformation of eco brand and accelerated the landing of '5+7+N' smart home, all-scenario, customized and complete-set solutions and creation of eco-scenario; and promoted the construction from the networked appliances to scenario to ecology and built an eco brand in the IoT era. In 2019, Haier was listed in “BrandZ Top 100 Most Valuable Global Brands in 2019” and became the first and only IOT eco brand listed in the Top 100 in BrandZ’s history. 1. As the logistics business would not be consolidated by the Company in Q3 of 2019, the revenue increased by 4.6% in this quarter. If we exclude the impact from logistics equity swap, on a LOL basis, 4 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. the revenue from July to September would increase by 9.1% yoy and 9.5% for the first three quarters this year. The disposal of logistics business resulted in investment income of RMB1.44 billion. 2. Continuously rising market share of online and offline whole-category products in domestic market. According to the statistics from China Market Monitor Co., Ltd (CMM), ①Offline market: the Company's retail sales shares of refrigerators, washing machines, air conditioners, water heaters and kitchen appliances increased by 1.4, 2.7, 0.7, 1.9 and 0.8 pct from January to September 2019, respectively. In terms of refrigerators and washing machines, the Company maintained the top 1 in the industry and continued to expand its leading advantages, with the market share being 3.3 and 2.1 times as high as that of the second place, respectively. ②Online market: the Company's retail sales shares of refrigerators, washing machines, air conditioners, water heaters and kitchen appliances have increased by 1.9, 1.3, 0.1, 1.5 and 1.1 pct, respectively. 3. Accelerating Growth of high-end brand Casarte. Revenue of Casarte brand from January to September increased by 25%, of which the revenue from July to September increased by 42%; Casarte refrigerators and washing machines achieved absolute leading advantage in terms of the market share of products priced over RMB10,000, which amounted to 40.6% and 76.8%, respectively. 4. Air conditioner business achieved breakthrough in high-end market. Casarte’s air conditioners achieved multiple growth through launching Commander series and expanding the product lineup with a revenue growth from January to September of 120%; the market share of Casarte air conditioners priced over RMB10,000 nearly doubled, achieving 10.2%; and the high-end market share of products priced over RMB15,000 amounted to 41.24%, ranking top among the competitors; in the overseas market, the Company insisted on self-owned brand, and the self-owned brand of Haier air conditioner ranked top in terms of export for two consecutive years. 5. Global brand corporate value demonstrated, overall growth in overseas market achieved and the high-end presence established with remarkable success. The revenue from overseas market increased by 25%, representing 47% of the total revenue, while nearly 100% of the revenue from overseas was generated from self-owned brands. The revenue from all regional markets have realized increase with the North America, Europe, South Asia, Southeast Asia, Japan, Australia and New Zealand and Mid&East Africa increased by 11.6%, 224.5%, 14.1%, 22.4%, 9.7%, 3.2% and 9.2%, respectively. 5 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. The Company merged Italian brand Candy this year, and after 3 quarters of platform integration on logistics, finance, after sales and human resources, and adopting measures in procurement and R&D synergy, the results of the third quarter improved significantly, and the fruits on operation have gradually come into being. 6. Leading the transformation of scenario solution replacing the product. Complete-set smart home solution gained market recognition. The Company replaced the past single product sales by providing the whole-house smart scenario solution ‘5+7+N’ to meet the user's personalized customization needs for smart home. Haier Smart Home 001 Experience Center opened on 6 September in Shanghai, landing the scene experience of ‘5+7+N’, providing the user with new experience of solutions including whole-house interactive voice, whole-house fresh air, smart kitchen providing whole family’ healthy food, whole-house water using, sanitation and security, empowering the sales of Haier smart home complete-set solutions with its differentiated advantages on all-scenario, complete-set and smart solutions. The total sales in a single month reached RMB20 million, the average price per customer of solutions of smart home appliances & household integration is RMB400,000, among which the average price per customer of solutions of smart home appliances scenario is RMB250,000, and the highest price per customer reached RMB700,000. The Company realized transformation from selling single product to providing comprehensive solutions of home appliances & household integration, and from products interaction to scenario interaction, and achieved iterative upgrades to enhance user’s value and viscosity with comprehensive premium sets, comprehensive smart sets, process integration of design, installation and after-sales and Smart Home’s cloud platform. 7. A leading eco system transformation with full industry coverage. The Company actively promoted the ecosphere construction of the Internet of Clothing, Internet of Food and Internet of Air, as well as the empowerment transformation of related industries. Haier’s ecosphere including the Internet of Clothing, Internet of Food and Internet of Air covering industries like clothing, textile, washing & dyeing and food with more than 1200 cooperative resource enterprises. During the reporting period, the ecological revenue of the Internet of Food, Internet of Clothing and Internet of Air increased by 40%, 46% and 79%, reaching RMB0.73 billion, RMB1.62 billion and RMB0.94 billion, respectively; the ecological revenue of smart home increased by 55%, reaching RMB3.37 billion; and the ecological 6 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. yield was 15%, increased by 3 pct. The Internet of Clothing of Haier provides users with the best experience throughout the whole process based on the clothing lifetime cycle management platform of IoT and reliant on the home appliances of the Internet of Clothing and the IoT technologies. By connecting fields, factories, stores and homes to label clothes with RFID ‘chip identity card’, and cooperating with clothing and textile industry, washing and dyeing industry, and the Internet of Clothing technology industry to construct smart scenario ecology together, the Company achieved digital management of smart clothes, provided users with lifetime cycle solutions from clothes purchase to washing, caring, management and matching, and facilitated the transformation and upgrading of industry chain-cluster of clothes in the IoT era. The Internet of Clothing promoted the application of IoT technologies in the clothing and textile industry, which enhanced the commodity management efficiency of the ecological resource enterprises, with the efficiency of receipt and delivery increased tenfold and the labor costs decreased by 50%. 8. We continued to expand the R&D investment of AI and IOT to create a dual-core drive capability of networked appliances intelligence and data intelligence. The voice interactive portal covers more than 60 types of networked appliances and more than 3,000 models. From January to September 2019, the binding amount of networked appliances and activation rate of intelligent white goods increased by 137% and 92%, respectively and the active users increased by 195% year-on-year. Leading the formulation of international/national standards: The Smart Home’s cloud platform fully deployed four major standard organizations including IEC, ISO, IEEE and OCF and realized an worldwide leading position in standard system of smart home cloud ecology. While leading the formulation of international standards for the IEEE food traceability; the Internet of Clothing released national standards for the GB clothing commodities encoding and RFID labels, initiated 4 international standards, and participated in the formulation of 10 national & international standards. Transforming from the networked appliances to scenario and to ecology will provide the consumers a smart & precise life solution and keep iterating. The Company also transforms from current low frequency sales to high frequency interaction with lifetime users to increase the users marginal revenue and create value among users and ecosystem stakeholders in a win-win situation. We realized diversified revenue expansion on the business model, such as revenue from the hardware to revenue from services, 7 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. platforms and others. 9. COSMOPlat Industrial Internet Platform: it established ‘1 (main platform) + 7 (modules) + N (industries) platform’ system, and realized cross-industry and cross-field applications by promoting platform innovation, technology innovation and ecological innovation. For the time being, it can provide a comprehensive solution of soft and hard integration for 15 industries such as ceramics, RV and agriculture, deeply empowering enterprises for transformation and upgrading. The revenue of COSMOPlat was RMB8.06 billion with an increase of 55%. 15 interconnected factories have been built by the Company, constructing a large-scale user-oriented customization leading system in the IOT era, and forming a world's leading benchmark of high-end manufacturing. Non-recurring Profit or Loss Items and Amount √Applicable □Not Applicable Unit and Currency: RMB Amount from the beginning Amount for the current period of the year to the end of the Items (July-September) reporting period (January-September) Profit or loss from disposal of 3,801,616,782.92 3,805,919,840.94 non-current assets Government grants included in current profit or loss, except those closely related to the normal operating business, complying with requirements 168,129,964.05 447,385,997.55 of the national policies, and continuing to be granted with the amount and quantity determined under certain standards Current net profit or loss of the subsidiaries from the consolidation of enterprises 13,950,738.83 13,950,738.83 under common control from the beginning of the period to consolidation date Profit or loss from contingencies not related to the ordinary operations of the 8 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Company Profit and loss of changes in fair value arising from holding of trading financial assets, derivative financial assets, trading financial liabilities and derivative financial liabilities except for valid straddle business relevant to normal -3,644,829.80 152,554,135.11 business of the company, as well as investment gain realized from disposal of trading financial assets, derivative financial assets, trading financial liabilities, derivative financial liabilities and other debt investments Other non-operating income and expenses except for the 139,277,208.60 304,162,252.10 above mentioned Effect of minority equity -2,169,874,488.09 -2,263,926,589.46 interests, net of tax Income tax effect -458,681,521.98 -521,583,777.52 Total 1,490,773,854.53 1,938,462,597.55 2.2 Total number of shareholders, top ten shareholders and top ten shareholders holding circulating shares (or shareholders not subject to selling restrictions) as of the end of the reporting period Unit: share Total number of shareholders 168,418 Shareholdings of top ten shareholders Number of Status of shares Number of shares pledged or frozen Percent Name of Shareholder shares held at held with Nature of age (full name) the end of the selling Statu shareholder (%) Number period restriction s s Domestic Haier Electric Appliances non-state-o 1,258,684,824 19.76 Nil 1,258,684,824 International Co., Ltd. wned legal entity 9 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Domestic non-state-o Haier Group Corporation 1,072,610,764 16.84 Nil 1,072,610,764 wned legal entity Hong Kong Securities Unkn 763,164,487 11.98 763,164,487 Unknown Clearing Co., Ltd. own China Securities Finance Unkn 182,592,697 2.87 182,592,697 Unknown Corporation Limited own Qingdao Haier Venture & Domestic Investment Information Unkn non-state-o 172,252,560 2.70 172,252,560 Co., Ltd. (青岛海尔创业 own wned legal 投资咨询有限公司) entity Unkn GIC PRIVATE LIMITED 171,682,422 2.70 171,682,422 Unknown own Bank of China Limited- E Unkn Fund's small and 94,000,098 1.48 94,000,098 Unknown own medium-sized CLEARSTREAM Unkn 91,222,350 1.43 91,222,350 Unknown BANKING S.A. (Note) own Qingdao Haichuangzhi Domestic Management Consulting non-state-o 73,011,000 1.15 Nil 73,011,000 Enterprise (Limited wned legal Partnership) entity National social security Unkn 72,009,282 1.13 72,009,282 Unknown fund, Portfolio 103 own Shareholdings of top ten shareholders without selling restrictions Number of tradable Class and number of shares Name of shareholder shares held without Class Number selling restrictions Haier Electric Appliances International Co., 1,258,684,824 RMB ordinary 1,258,684,824 Ltd. Haier Group Corporation 1,072,610,764 RMB ordinary 1,072,610,764 Hong Kong Securities Clearing Co., Ltd. 763,164,487 RMB ordinary 763,164,487 China Securities Finance Corporation Limited 182,592,697 RMB ordinary 182,592,697 Qingdao Haier Venture & Investment Information Co., Ltd. (青岛海尔创业投资咨 172,252,560 RMB ordinary 172,252,560 询有限公司) GIC PRIVATE LIMITED 171,682,422 RMB ordinary 171,682,422 Bank of China Limited- E Fund's small and 94,000,098 RMB ordinary 94,000,098 medium-sized 10 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Overseas listed CLEARSTREAM BANKING S.A. 91,222,350 91,222,350 foreign shares Qingdao Haichuangzhi Management 73,011,000 RMB ordinary 73,011,000 Consulting Enterprise (Limited Partnership) National social security fund, Portfolio 103 72,009,282 RMB ordinary 72,009,282 (1)Haier Electric Appliances International Co., Ltd. is a holding subsidiary of Haier Group Corporation. Haier Group Corporation holds 51.20% of its equity. Qingdao Haier Related parties or parties acting in concert Venture & Investment Information Co., Ltd. (青岛海尔创业 投 资 咨 询 有 限 公 司 ) and Qingdao Haichuangzhi among the aforesaid shareholders Management Consulting Enterprise (Limited Partnership) is a party acting in concert with Haier Group Corporation; (2) The Company is not aware of the existence of any connections of other shareholders. Explanation of preferential shareholders with restoration of voting rights and their N/A shareholdings Note: This account is the Clearstream Banking 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. 2.3 Table of total number of preferential shareholders, top ten preferential shareholders, top ten preferential shareholders without selling restrictions by the end of the reporting period □Applicable√ Not Applicable III. Important Events 3.1 The major changes and reasons for the items of accounting statement and financial indicators √Applicable □Not Applicable Reasons for the changes with the amount of variation exceeding ±30% are as follows: 1) Financial assets held for trading decreased by 53.97% as compared to the beginning of the period, mainly due to the decrease of wealth management products during the current period; 2) Prepayments increased by 54.03% as compared to the beginning of the period, mainly due to the increase of prepayments for materials. 11 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 3) Assets held for sale decreased by 98.46% as compared to the beginning of the period, mainly due to the finished disposal of the assets to be disposed; 4) Long-term equity investments increased by 42.81% as compared to the beginning of the period, mainly due to the equity changes in the subsidiaries of Haier Electronics; 5) Development expenses decreased by 71.93% as compared to the beginning of the period, mainly due to the transfer to intangible assets upon completion; 6) Short-term borrowings increased by 43.78% as compared to the beginning of the period, mainly due to the increase of loans resulted from merging candy; 7) Financial liabilities held for trading decreased by 71.31% as compared to the beginning of the period, mainly due to the expiration of forward foreign exchange contacts during the current period; 8) Receipts in advance decreased by 100% as compared to the beginning of the period, mainly due to the completion of contract performance during the last period; 9) Liabilities held for sale decreased by 57.37% as compared to the beginning of the period, mainly due to the equity changes in the subsidiaries of Haier Electronics; 10) Non-current liabilities due within one year increased by 222.09% as compared to the beginning of the period,mainly due to the reclassification of long-term loans due within one year; 11) Lease liabilities increased by 100% as compared to the beginning of the period, mainly due to the lease liabilities recognized pursuant to the new lease standard; 12) Long-term payable increased by 103.09 % as compared to the beginning of the period, mainly due to the increase of subsidiary’s items long-term payable. 13) Deferred income tax liabilities increased by 352.14% as compared to the beginning of the period, mainly due to the liabilities brought in by candy merged during the current period and the equity changes in the subsidiaries of Haier Electronics; 14) Other non-current liabilities decreased by 94.66% as compared to the beginning of the period, mainly due to the equity changes in the subsidiaries of Haier Electronics; 15) Capital reserve decreased by 39.95% as compared to the beginning of the period, mainly due to the 1169 logistics business moved off the financial statements; 16) Other comprehensive income increased by 110.99% as compared to the beginning of the period, mainly due to the contribution from candy merged during the current period; 17) Other income increased by 32.40% as compared to the same period of last year, mainly due to 12 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. the increase in the government grants during the current period; 18) Investment income increased by 275.83% as compared to the same period of last year, mainly due to the equity changes in the subsidiaries of Haier Electronics; 19) Losses and gains on change of fair value increased by 116.48% as compared to the same period of last year, mainly due to the change of fair value in forward foreign exchange contracts during the current period; 20) Gains on asset disposal decreased by 111.91% as compared to the same period of last year, mainly due to the gains on asset disposal from the same period of the last year (current period: nil); 21) Non-operating income increased by 51.03% as compared to the same period of last year, mainly due to the increase in one-off income during the current period; 22) Non-operating expenses increased by 125.45% as compared to the same period of last year, mainly due to the increase in one-off expenses during the current period; 23) Income tax expenses increased by 56.42% as compared to the same period of last year, mainly due to the equity changes in the subsidiaries of Haier Electronics. 3.2 Analysis on the progress of significant events and their impacts and solutions √Applicable □Not Applicable (1) External Guarantees:As of the end of the reporting period, the external guarantees of the Company and its subsidiaries are all guarantees among the Company and its subsidiaries, and the balance of the external guarantees amounted to RMB29.255 billion in total (the balance of guarantees for the loan funds used to acquire GEA amounted to RMB7.875 billion, and the balance of guarantees for daily business amounted to RMB21.380 billion), representing 65.2% of the net assets of the Company for the latest period, and 15.9% of the total assets for the latest period. (2) Foreign Exchange Derivatives:As of the end of the reporting period, the balance of the Company’s Foreign Exchange Derivatives amounted to approximately US$1.442 billion in total. (3) Entrusted wealth management: By the end of the reporting period, the balance of the Company’s entrusted wealth management amounted to RMB3.695 billion, including three parts: ① temporarily-idle fundraising wealth management: at the end of December 2018, the Company’s proceeds for the issuance of convertible corporate bonds were fully landed. In order to improve the yield of temporarily-idle funds, the Company intends to carry out cash management with the amounts not 13 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. exceed RMB1.5 billion after approved by the Board of Directors. By the end of the reporting period, the balance of the entrusted wealth management amounted to RMB0.728 billion; ② wealth management of the Company’s Hong Kong listed subsidiary: Haier Electronics Group Co., Ltd. (hereinafter referred to as “Haier Electronics” , stock code “01169.HK”), the holding subsidiary of the Company, has purchased some short-term principal-protected wealth management and structural deposits from the large commercial banks as an independently operating Hong Kong listed company in order to increase the efficiency of the use of idle funds within the authorities of the management and on the premise of safeguarding funds security. 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. By the end of the reporting period, the balance of the entrusted wealth management amounted to RMB2.962 billion. ③Some subsidiaries of the Company use temporarily-idle funds to manage their finances: In order to increase the yield of temporarily-idle funds, some subsidiaries of the Company use temporarily-idle funds to conduct cash management within the authority of the general manager's office. By the end of the reporting period, the balance of the entrusted wealth management amounted to RMB5 million. 14 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 3.3 The undertakings that have been past due and not been performed during the reporting period □Applicable √Not applicable By the end of the reporting period, the Company has no undertakings that have past due but not performed. The undertakings that are still in the performance period are as follows: Wheth er it is Whether perfor Cove it has a med in Backgr Time and Type nante Content term for a ound term r perform timely ance and strict manner During the period from September 2006 to May 2007, the Company issued shares to Haier Group Undert Corporation (“Haier Group”) to purchase the controlling equity in its four subsidiaries, namely Qingdao aking Elimin Haier Air-Conditioner Electronics Co., Ltd. (青岛海尔空调电子有限公司), Hefei Haier Air-conditioning related ate the Haier to propert Grou 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 27 signifi y right p September 公司), Guizhou Haier Electronics Co., Ltd. (贵州海尔电器有限公司). With regard to the land and YES YES cant defects Corp 2006, long assets in land oratio property required in the operation of Qingdao Haier Air-Conditioner Electronics Co., Ltd. (青岛海尔空调 term reorga and n 电子有限公司) , Hefei Haier Air-conditioning Co., Limited (合肥海尔空调器有限公司), Wuhan Haier nizatio etc. n 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 15 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 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. Haier Group Corporation undertakes that it will assure Haier Smart Home and its subsidiaries of the constant, stable and unobstructed use of the leased property. In the event that Haier Smart Home or any of its subsidiaries suffers any economic loss due to the fact that leased property has no relevant ownership certificate, Haier Group Corporation will make compensation to impaired party in a timely and sufficient way and take all reasonable and practicable measures to support the impaired party to recover to normal Elimin operation before the occurrence of loss. Upon the expiration of relevant leasing period, Haier Group Undert ate the Haier aking propert Grou Corporation will grant or take practicable measures to assure Haier Smart Home and its subsidiaries of 24 related y right p December priority to continue to lease the property at a price not higher than the rent in comparable market at that YES YES to defects Corp 2013, long refinan in land oratio time. Haier Group Corporation will assure Haier Smart Home and its subsidiaries of the constant, stable, term cing and n free and unobstructed use of self-built property and land of the Group. In the event that Haier Smart Home etc. 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 fact that self-built property has no relevant ownership certificate, Haier Group Corporation will take all reasonable and practicable measures to eliminate obstruction and impact, or will support Haier Smart Home or its affected subsidiary to obtain alternative property as soon as possible, if Haier Group Corporation anticipates it is unable to cope with or eliminate the external obstruction and impact with its 16 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. reasonable effort. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of the Defective Property, the Influence on Operation of Issuer Caused by Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L 2014-005) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange on 29 March 2014. The Company undertakes that it will eliminate the property defects of the Company and main subsidiaries within five years with reasonable business effort since 24 December 2013, so as to achieve the legality and compliance of the Company and main subsidiaries in terms of land and property. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of the Defective Elimin Haier Property, the Influence on Operation of Issuer Caused by Uncertainty of Ownership, Solution for the ate the Smar propert Defect and Guarantee Measures (L2014-005) published by the Company on the four major securities 24 t y right December Hom newspapers and the website of Shanghai Stock Exchange on 29 March 2014. During the aforesaid period, YES YES defects 2013, e in land the Company has formulated relevant performance guarantee measures, including the re-application by the eight years Co., and Ltd. Company and its main subsidiaries to the competent government department for the property ownership etc. 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 17 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 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. Inject the assets of Haier Photoelectric to the Company or dispose such assets through other ways Haier Grou according to the requirements of the domestic supervision before June 2020. For details, please refer to the Other Asset December p Announcement of Qingdao Haier Co., Ltd. on the Changes of Funding Commitment of Haier Group undert injecti 2015 to YES YES Corp akings on Corporation (L2015-063) published by the Company on the four major securities newspapers and the June 2020 oratio n website of Shanghai Stock Exchange on 23 December 2015. Haier On August 2018, Guan Mei (Shanghai) Enterprise Management Co., Ltd. (贯美(上海)企业管理有限公 Elect Profit ric 司) (hereinafter referred to as the “Guan Mei Company”), an indirectly controlled subsidiary of the Other forecas Appli By 30 undert t and Company swapped the 55% equity interest held by it in Bing Ji (Shanghai) Enterprise Management Co., YES YES ances April 2021 akings compe Inter Ltd. (冰戟(上海)企业管理有限公司) for the 51% equity interests held by Haier Electric Appliances nsation natio International Co., Ltd. (hereinafter referred to as the “Haier International”) in Qingdao HSW Water nal 18 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Co., Appliance Co., Ltd. (hereinafter referred to as the “Water Appliance”). In this regard, Haier International Ltd. has made a commitment that the accumulated actual net profit realized by the Water Appliance during the three fiscal years of the profit compensation period shall not be lower than its accumulated forecasted net profit in the corresponding year. Otherwise, Haier International shall be required to make performance compensation to Guan Mei Company according to the Asset Replacement Agreement. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on Related-party Transaction of Planning to Conduct Equity Replacement by Holding Subsidiary and Haier Electronics International Co., Ltd. (L2018-047) published by the Company on the four major securities newspapers and the website of Shanghai Stock Exchange on 31 August 2018. 19 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 3.4 Warning and explanation on reasons for accumulated net profit for the period from the beginning of the year to the end of the next reporting period to be at a loss or expected to have material change as compared to that of the corresponding period of last year □ Applicable √Not Applicable Name of company Haier Smart Home Co., Ltd. Legal representative Liang Haishan Date 29 October 2019 20 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. IV. Appendix 4.1 Financial Statements Consolidated Balance Sheet 30 September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited Items 30 September 2019 31 December 2018 Current Assets: Monetary capital 35,856,337,564.34 38,158,102,172.38 Provision of settlement funds Placements with banks Trading financial assets 817,293,602.82 1,775,648,387.76 Financial assets measured at fair value and changes of which included in current profit and loss Derivative financial assets 99,546,069.86 96,723,164.37 Bills receivable 14,650,736,013.47 14,220,937,323.02 Accounts receivable 13,204,139,379.93 10,495,278,842.04 Financing receivables Prepayments 910,259,648.49 590,980,171.13 Premiums receivable Reinsurance accounts receivable Reinsurance contract reserves receivable Other receivables 1,434,336,096.31 1,636,778,239.70 Including: interests receivables dividends receivables Financial assets purchased under resale agreements Inventories 25,080,406,390.86 22,404,245,381.62 Contract assets 477,276,371.01 456,781,406.54 Assets held for sale 2,217,741.47 144,091,213.39 Non-current assets due within one year Other current assets 4,821,325,942.71 5,079,878,909.67 Total current assets 97,353,874,821.27 95,059,445,211.62 Non-current assets: Loans and advances granted Debt investments Available-for-sale financial assets Other debt investments 21 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Held-to-maturity investments Long-term receivables 297,211,749.56 245,791,343.37 Long-term equity investments 19,945,696,979.72 13,966,481,596.07 Investments in other equity instruments 1,384,953,324.55 1,400,316,460.34 Other non-current financial assets 297,154,021.76 327,358,825.57 Investment properties 30,275,677.92 30,879,147.42 Fixed assets 19,036,592,854.99 17,321,414,060.72 Construction in progress 4,102,243,059.68 3,873,492,230.24 Biological assets for production Fuel assets Right-of-use assets 2,321,431,186.89 Intangible assets 10,648,632,131.33 9,245,145,461.56 Development expenses 151,144,366.25 538,382,288.33 Goodwill 23,572,632,908.06 21,238,727,027.17 Long-term deferred expenditures 255,397,223.75 230,763,172.48 Deferred income tax assets 2,208,623,545.82 1,819,870,099.62 Other non-current assets 2,668,079,823.01 2,325,688,982.56 Total non-current assets 86,920,068,853.29 72,564,310,695.45 Total assets 184,273,943,674.56 167,623,755,907.07 Current liabilities: Short-term borrowings 9,055,915,599.35 6,298,504,892.57 Borrowings from central bank Placements from banks Trading financial liabilities 62,765,149.64 218,748,280.33 Financial liabilities measured at fair value and changes of which included in current profit and loss Derivative financial liabilities 43,501,550.19 35,603,754.54 Bills payable 18,461,702,634.57 19,968,443,915.65 Accounts payable 29,705,955,855.01 27,796,822,200.51 Receipts in advance 14,681,466.58 Disposal of repurchased financial assets Absorbing deposit and deposit in inter-bank market Customer deposits for trading in securities Amounts due to issuer for securities underwriting Payables for staff’s remuneration 2,724,912,733.60 2,663,184,629.15 Taxes payable 2,233,732,585.46 1,843,147,094.27 Other payables 14,666,728,149.38 12,772,914,813.88 Including: interests payable 22 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. dividends payable Fees and commissions payable Reinsurance accounts payable Contract liabilities 5,609,586,733.28 5,484,483,418.15 Liabilities held for sale 13,797,499.41 32,362,267.88 Non-current liabilities due within 9,711,065,124.20 3,015,060,105.58 one year Other current liabilities 464,624,078.32 423,638,804.62 Total current liabilities 92,754,287,692.41 80,567,595,643.71 Non-current liabilities: Deposits for insurance contracts Long-term borrowings 12,259,244,217.02 15,541,466,325.22 Debentures payable 9,596,777,288.62 9,191,896,302.70 Including: preference shares perpetual bonds Lease liabilities 2,091,697,133.96 Long-term payable 216,828,987.86 106,763,243.99 Long-term payable for staff’s 1,069,153,829.26 934,974,735.49 remuneration Estimated liabilities 2,813,252,681.93 2,846,762,176.35 Deferred income 609,023,725.49 643,551,987.30 Deferred income tax liabilities 1,832,730,126.06 405,343,787.76 Other non-current liabilities 97,468,826.91 1,823,866,693.93 Total non-current liabilities 30,586,176,817.11 31,494,625,252.74 Total liabilities 123,340,464,509.52 112,062,220,896.45 Owners’ equity(or shareholder’s equity) Paid-in capital (or share capital ) 6,368,482,759.00 6,368,416,700.00 Other equity instruments 904,334,798.56 904,485,788.71 Including: preference shares perpetual bonds Capital reserve 1,353,668,636.95 2,254,405,808.81 Less: treasury stock Other comprehensive income 1,630,175,147.24 772,632,347.35 Special reserve Surplus reserve 2,288,301,317.10 2,288,301,317.10 General risk provisions Undistributed profits 32,336,056,398.74 26,938,892,794.96 Total equity attributable to owners 44,881,019,057.59 39,527,134,756.93 (or shareholder) of the parent company Minority interests 16,052,460,107.45 16,034,400,253.69 Total owners’ equity (or shareholders’ 60,933,479,165.04 55,561,535,010.62 23 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. equity) Total liabilities and owners’ equities 184,273,943,674.56 167,623,755,907.07 (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 30 September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited Items 30 September 2019 31 December 2018 Current Assets: Monetary Capital 6,273,438,237.00 7,068,899,574.96 Trading financial assets Financial assets measured at fair value and changes of which included in current profit and loss Derivative financial assets Bills receivable Accounts receivable 253,995,942.79 222,622,017.43 Financing receivables Prepayments 12,994,199.46 28,809,797.43 Other receivables 2,236,872,809.17 2,082,767,166.58 Including: interests receivable dividends receivable Inventories 43,452,612.14 124,773,163.23 Contract assets Assets held for sale Non-current assets due within one year Other current assets 977,519,031.53 109,865,313.53 Total current assets 9,798,272,832.09 9,637,737,033.16 Non-current assets: Debt investments Available-for-sale financial assets Other debt investments Held-to-maturity investments Long-term receivables Long-term equity investments 35,173,766,050.97 33,844,234,315.30 Other equity instruments investments 5,262,480.92 5,262,480.92 Other non-current financial assets Investment properties 24 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Fixed assets 135,828,593.84 119,546,157.40 Construction in progress 38,778,876.61 37,655,076.18 Biological assets for production Oil and gas assets Right-of-use assets Intangible assets 16,296,591.72 17,186,540.33 Development expenses Goodwill Long-term prepaid expenses 5,791,081.40 5,779,229.64 Deferred income tax assets 81,511,748.07 81,511,748.07 Other non-current assets 28,632,829.14 Total non-current assets 35,457,235,423.53 34,139,808,376.98 Total assets 45,255,508,255.62 43,777,545,410.14 Current liabilities: Short-term borrowings 1,500,000,000.00 Trading financial liabilities Financial liabilities measured at fair value and changes of which included in current profit and loss Derivative financial liabilities Bills payable Accounts payable 329,194,017.09 334,747,358.40 Receipts in advance Contract liabilities 2,617,231,872.09 2,391,211,509.89 Payables for staff’s remuneration 55,566,564.83 65,387,056.03 Taxes payable 12,909,943.06 67,279,606.39 Other payables 26,706,442,400.01 21,834,869,774.34 Including: interests payable dividends payable Liabilities held for sale Non-current liabilities due within one year Other current liabilities 1,736,229.06 2,089,282.56 Total current liabilities 29,723,081,026.14 26,195,584,587.61 Non-current liabilities: Long-term borrowings Debentures payable 2,586,527,376.29 2,510,530,062.86 Including: preference shares perpetual bonds Leasing liabilities Long-term payable 20,000,000.00 20,000,000.00 Long-term payable for staff’s 25 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. remuneration Estimated liabilities Deferred income 37,820,000.00 67,360,000.00 Deferred income tax liabilities 31,441,449.14 29,485,678.28 Other non-current liabilities Total non-current liabilities 2,675,788,825.43 2,627,375,741.14 Total liabilities 32,398,869,851.57 28,822,960,328.75 Owners’ equity (or shareholders’ equity) Paid-in capital (or share capital) 6,368,482,759.00 6,368,416,700.00 Other equity instruments 472,910,274.49 473,061,264.64 Including: preference shares perpetual bonds Capital reserve 4,150,363,429.02 4,182,825,672.98 Less: treasury stock Other comprehensive income 12,245,064.39 7,791,344.47 Special reserve Surplus reserve 1,683,155,091.65 1,683,155,091.65 Undistributed profits 169,481,785.50 2,239,335,007.65 Total owners’ equity (or shareholders’ 12,856,638,404.05 14,954,585,081.39 equity) Total liabilities and owners’ equity 45,255,508,255.62 43,777,545,410.14 (or shareholders’ 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-September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited Third First three First three Third quarter quarter of quarters of quarters of of 2019 Items 2018 2019 2018 (July-Septemb (July-Septem (January-Sept (January-Sept er) ber) ember) ember) I. Total operating revenue 49,916,316,735.30 47,739,189,253.04 148,896,109,856.46 138,227,311,459.35 Including: operating revenue 49,916,316,735.30 47,739,189,253.04 148,896,109,856.46 138,227,311,459.35 Interest income Insurance premiums earned Fee and commission income 26 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. II. Total cost of operations 48,373,543,771.69 46,137,567,319.73 141,321,760,011.83 130,898,654,759.16 Including: operating cost 35,409,192,783.07 33,911,506,512.21 105,584,046,741.98 97,969,456,536.24 Interest expenses Fee and commission expenses Insurance withdrawal payment Net payment from indemnity Net provisions for insurance liability Insurance policy dividend paid Reinsurance cost Taxes and surcharge 282,495,267.19 245,701,371.99 683,425,767.84 653,678,813.51 Selling expenses 8,186,738,161.90 8,010,386,549.26 22,783,073,275.91 21,533,318,294.90 Administrative expenses 2,349,642,938.22 2,137,761,829.86 6,875,429,007.45 6,171,434,088.05 R&D expenses 1,718,648,297.19 1,557,183,175.74 4,460,212,113.00 3,809,813,731.12 Financial expenses 426,826,324.12 275,027,880.67 935,573,105.65 760,953,295.34 Including: interest 462,949,083.66 304,546,395.79 1,348,633,037.94 988,211,900.04 expenses Interest income 148,627,273.92 98,782,891.00 402,594,564.74 333,241,702.03 Add: other income 184,441,529.00 272,064,355.41 657,183,385.55 496,356,767.43 Investment income 4,231,473,916.77 459,606,206.41 4,987,525,354.22 1,327,065,195.37 (losses are represented by “-”) Including: investment income of associates and joint ventures Derecognition income on financial assets measured at amortized cost Exchange gain (losses are represented by “-”) Gains on net exposure hedges (losses are represented by “-”) Income from change in fair value (losses are -42,821,065.32 -125,212,550.50 14,588,891.48 -88,550,629.00 represented by “-”) Credit impairment loss -72,795,938.53 -88,495,545.44 -35,020,333.14 -47,956,263.17 (losses are represented by “-”) Impairment loss on 101,352.89 15,050,686.33 -257,646,552.31 -220,852,351.25 assets (losses are represented by 27 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. “-”) Gains on disposal of assets (losses are represented by -26,845,448.82 113,220,554.73 -14,138,765.95 118,726,042.63 “-”) III. Operating profit (losses are 5,816,327,309.60 2,247,855,640.25 12,926,841,824.48 8,913,445,462.20 represented by “-”) Add: non-operating income 201,041,445.23 93,349,629.54 470,639,594.05 311,624,408.41 Less: non-operating expenses 61,764,236.63 28,647,585.13 175,970,944.55 78,052,030.82 IV. Total profit (total losses are 5,955,604,518.20 2,312,557,684.66 13,221,510,473.98 9,147,017,839.79 represented by “-”) Less: income tax expense 918,909,482.84 282,349,549.53 1,953,829,571.45 1,249,128,996.17 V. Net profit (net losses are 5,036,695,035.36 2,030,208,135.13 11,267,680,902.53 7,897,888,843.62 represented by “-”) (I) Classification by continuous operation 1.Net profit from continuous operation (net losses 1,724,566,022.73 1,794,560,157.49 7,955,551,889.90 7,662,240,865.98 are represented by “-”) 2. Net profit from discontinuous operation (net 3,312,129,012.63 235,647,977.64 3,312,129,012.63 235,647,977.64 losses are represented by “-”) (II) Classification by ownership of the equity 1. Net profit attributable to owners of the parent 2,621,991,344.79 1,373,057,256.34 7,772,860,902.81 6,161,001,081.50 company (net losses are represented by “-”) 2. Profit or loss of minority shareholders (net 2,414,703,690.57 657,150,878.79 3,494,819,999.72 1,736,887,762.12 losses are represented by “-”) VI. Other comprehensive 671,163,493.94 585,583,691.47 877,244,401.03 1,013,158,337.47 income, net of tax Other comprehensive income attributable to owners of the 623,918,532.71 530,340,096.74 857,542,799.89 833,824,709.33 parent company, net of tax (I) Other comprehensive income that can not be -3,931,545.48 -8,226,800.44 -16,174,504.60 32,404,205.47 reclassified to profit or loss 1.Changes arising from re-measurement of defined 655,808.28 -1,045,223.32 255,491.10 -7,997,491.05 benefit plans 2. Other comprehensive income that cannot be 28 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. transferred into profit or loss under equity method 3. Changes in fair value of investments in other equity -4,587,353.76 -7,181,577.12 -16,429,995.70 40,401,696.52 instruments 4. Changes in fair value of credit risks of the enterprise (II) Other comprehensive income to be reclassified into 627,850,078.19 538,566,897.18 873,717,304.49 801,420,503.86 profit or loss 1. Other comprehensive income that can be transferred 51,040,731.98 74,779,420.86 70,870,344.63 161,496,158.75 into 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 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 -10,608,611.29 -3,980,007.63 -36,007,555.07 42,876,348.23 profit or loss arising from cash flow hedging) 8. Exchange differences on translation of financial 587,417,957.50 467,767,483.95 838,854,514.93 597,047,996.88 statements denominated in foreign currencies 9. Others Other comprehensive income attributable to minority 47,244,961.23 55,243,594.73 19,701,601.14 179,333,628.14 shareholders, net of tax 29 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Ⅶ. Total comprehensive 5,707,858,529.30 2,615,791,826.60 12,144,925,303.56 8,911,047,181.09 income Total comprehensive income attributable to the owners of 3,245,909,877.50 1,903,397,353.08 8,630,403,702.70 6,994,825,790.83 parent company Total comprehensive income attributable to the minority 2,461,948,651.80 712,394,473.52 3,514,521,600.86 1,916,221,390.26 shareholders Ⅷ . Earnings per share: (I) Basic earnings per share 0.412 0.225 1.221 1.010 (RMB/share) (II) Diluted earnings per 0.353 0.225 1.131 1.010 share (RMB/share) The party being absorbed in the business combination under common control incurred in the current period recorded a net profit of RMB13,950,738.83 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-September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited First three First three Third quarter Third quarter quarters of quarters of of 2019 of 2018 Items 2019 2018 (July-Septem (July-Septemb (January-Sept (January-Sept ber) er) ember) ember) Ⅰ. Operating revenue 903,401,779.64 792,884,921.23 2,234,271,154.27 2,417,038,949.69 Less: Operation cost 665,370,343.10 555,280,503.90 1,615,752,876.42 1,675,343,056.16 Taxes and surcharge 5,324,414.17 6,419,524.05 14,118,655.09 16,393,690.67 Selling expenses 63,131,879.39 85,400,691.99 190,089,788.56 210,441,579.93 Administrative expenses 179,457,329.72 160,040,452.74 320,496,657.73 345,344,601.02 R&D expenses 54,550,067.46 64,104,050.19 156,533,395.84 166,500,505.81 Financial expenses 11,752,125.45 45,410,592.26 111,189,066.25 107,226,850.25 Including: interest 25,477,118.45 80,070,880.63 139,021,578.60 210,180,419.77 expenses Interest income 12,873,607.27 28,915,355.12 30,581,562.15 101,898,989.53 Add: other income 4,501,688.94 25,076,709.08 56,974,198.19 34,586,901.99 Investment income 8,374,916.12 306,404,376.82 253,943,029.70 525,924,446.67 (losses are represented by “-”) Including: investment income of associates and joint 30 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. ventures Derecognition income on financial assets measured at amortized cost Gains on net exposure hedges (losses are represented by “-”) Income from change in fair value (losses are represented by “-”) Credit impairment loss -7,920.79 86,152,801.78 979,217.15 -10,058,187.90 (losses are represented by “-”) Impairment loss on assets (losses are represented by “-”) Gains on disposal of assets (losses are represented by 25,693.17 51,118.46 25,693.17 “-”) II. Operating profit (losses are -63,315,695.38 293,888,686.95 138,038,277.88 446,267,519.78 represented by “-”) Add: non-operating income 3,590,569.68 6,536,549.52 13,003,372.98 34,283,951.35 Less: non-operating expenses 1,007,999.99 58,667.36 2,971,024.42 311,781.90 III. Total Profit (total losses are -60,733,125.69 300,366,569.11 148,070,626.44 480,239,689.23 represented by “-”) Less: income tax expense -123,118.24 -4,749,277.12 -17,410,712.14 -8,231,021.09 IV. Net Profit (net losses are -60,610,007.45 305,115,846.23 165,481,338.58 488,470,710.32 represented by “-”) (I) Net profit from continuous operation (net losses are -60,610,007.45 305,115,846.23 165,481,338.58 488,470,710.32 represented by “-”) (II) Net profit from discontinuous operation (net losses are represented by “-”) V. Other comprehensive 5,204,966.29 39,894.27 4,453,719.92 14,706,726.13 income, net of tax (I) Other comprehensive income that can not be -67,243.43 39,894.27 -410,391.76 reclassified to profit or loss 1.Changes arising from re-measurement of defined benefit plans 2. Other comprehensive 31 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. income that cannot be transferred into profit or loss under equity method 3. Changes in fair value of investments in other equity -67,243.43 39,894.27 -410,391.76 instruments 4. Changes in fair value of credit risks of the enterprise (II) Other comprehensive income to be reclassified into 5,272,209.72 4,453,719.92 15,117,117.89 profit or loss 1. Other comprehensive income that can be transferred 4,453,719.92 15,117,117.89 into 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 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 -55,405,041.16 305,155,740.50 169,935,058.50 503,177,436.45 income 32 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. 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-September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited Items First three quarters of First three quarters of 2019 2018 (January-September) (January-September) I. Cash flows from operating activities: Cash received from the sale of goods and 147,718,346,195.03 136,441,116,163.62 rendering of services Net increase in customer and interbank deposits Net increase in borrowing from PBOC Net cash increase in borrowing from other financial institutes Cash received from premiums under original insurance contract Net cash received from reinsurance business Net increase in deposits of policy holders and investment Cash paid for interest, bank charges and commissions Net increase in cash borrowed Net increase in cash received from repurchase operation Net cash received from customer deposits for trading in securities Refunds of taxes 1,048,233,743.88 963,420,315.42 Cash received from other related 1,012,063,934.60 701,885,605.50 operating activities Sub-total of cash inflows from 149,778,643,873.51 138,106,422,084.54 operating activities Cash paid on purchase of goods and 104,960,738,805.82 93,872,519,963.32 33 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. services Net increase in loans and advances of customers Net increase in deposits in the PBOC and inter-bank Cash paid for compensation payments under original insurance contact Net increase in cash lent Cash paid for interest, bank charges and commissions Cash paid for insurance policy dividend Cash paid to and on behalf of employees 16,460,484,438.59 14,389,104,685.38 Cash paid for all types of taxes 6,235,299,504.77 6,417,113,647.40 Cash paid to other operation related 13,115,208,555.88 12,525,351,556.22 activities Sub-total of cash outflows from 140,771,731,305.06 127,204,089,852.32 operating activities Net cash flows from operating 9,006,912,568.45 10,902,332,232.22 activities II. Cash flows from investing activities: Cash received from disposal of 1,534,282,960.18 603,931,463.05 investments Cash received from return on investments 457,787,685.48 284,197,818.40 Net cash received from the disposal of fixed assets, intangible assets and other long 200,940,694.81 312,264,347.04 term assets Net cash received from disposal of 689,985,192.70 subsidiaries and other operating entities Cash received from other investment 279,515,688.66 95,500,810.35 related activities Sub-total of cash inflows from 2,472,527,029.13 1,985,879,631.54 investing activities Cash paid on purchase of fixed assets, 4,579,987,246.71 4,448,216,757.39 intangible assets and other long term assets Cash paid for investments 3,646,257,901.57 6,715,502,945.49 Net increase in secured loans Net cash paid on acquisition of 2,641,246,363.38 2,083,893,029.63 subsidiaries and other operating entities Cash paid on other investment related 1,167,045,427.42 22,762,249.49 activities Sub-total of cash outflows from 12,034,536,939.08 13,270,374,982.00 investing activities Net cash flows from investing -9,562,009,909.95 -11,284,495,350.46 34 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. activities III. Cash flows from financing activities: Cash received from investment 14,318,688.54 692,072,695.51 Including: cash received by subsidiaries from minority shareholders’ investment Cash received from borrowings 12,084,841,424.81 12,010,235,777.28 Cash received from other financing 7,139,182.47 1,914,860.72 related activities Sub-total of cash inflows from 12,106,299,295.82 12,704,223,333.51 financing activities Cash paid on repayment of borrowings 9,252,731,650.03 10,654,594,243.09 Cash paid on distribution of dividends, 3,074,473,283.20 2,762,302,769.13 profits, or interest expenses Including: dividend, profit paid to minority shareholders by subsidiaries Cash paid on other financing related 1,020,361,634.10 659,367,060.70 activities Sub-total of cash outflows from 13,347,566,567.33 14,076,264,072.92 financing activities Net cash flows from financing -1,241,267,271.51 -1,372,040,739.41 activities IV. Effect of fluctuations in exchange 585,698,697.12 372,251,814.37 rates on cash and cash equivalents V. Net increase in cash and cash -1,210,665,915.89 -1,381,952,043.28 equivalents Add: balance of cash and cash 36,044,777,414.04 35,094,902,336.87 equivalents at the beginning of the period VI. Balance of cash and cash equivalents 34,834,111,498.15 33,712,950,293.59 at the end of the 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-September 2019 Prepared by: Haier Smart Home Co., Ltd. Unit and Currency: RMB Unaudited Items First three quarters of Amount in the first three 2019 quarters of 2018 (January-September) (January-September) I. Cash flows from operating activities: Cash received from the sale of goods and 1,219,703,551.51 1,318,190,025.50 rendering of services Refunds of taxes 31,329,360.51 95,543,006.48 35 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Cash received from other related 182,304,374.25 173,528,179.29 operating activities Sub-total of cash inflows from 1,433,337,286.27 1,587,261,211.27 operating activities Cash paid on purchase of goods and 57,147,717.08 458,713,553.43 services Cash paid to and on behalf of employees 701,565,276.87 647,354,793.69 Cash paid for all types of taxes 116,443,799.11 139,250,644.36 Cash paid to other operation related 456,381,806.73 374,617,434.69 activities Sub-total of cash outflows from 1,331,538,599.79 1,619,936,426.17 operating activities Net cash flows from operating activities 101,798,686.48 -32,675,214.90 II. Cash flows from investing activities: Cash received from disposal of 505,207,895.00 investments Cash received from return on investments 1,513,456,657.45 1,153,009,979.01 Net cash received from the disposal of fixed assets, intangible assets and other long term assets Net cash received from disposal of subsidiaries and other operating entities Cash received from other investment 1,431,977,000.00 related activities Sub-total of cash inflows from 2,945,433,657.45 1,658,217,874.01 investing activities Cash paid on purchase of fixed assets, 30,442,256.39 46,367,088.81 intangible assets and other long term assets Cash paid for investments 3,521,662,503.09 73,572,235.00 Net cash paid on acquisition of subsidiaries and other operating entities Cash paid on other investment related 246,801,379.00 activities Sub-total of cash outflows from 3,798,906,138.48 119,939,323.81 investing activities Net cash flows from investing -853,472,481.03 1,538,278,550.20 activities III. Cash flows from financing activities: Cash received from investment Cash received from borrowings 1,500,000,000.00 Cash received from issuing bonds 424,802,503.30 Cash received from other financing 3,728,909,076.12 related activities 36 / 37 Third Quarterly Report of 2019 Haier Smart Home Co., Ltd. Sub-total of cash inflows from 3,728,909,076.12 1,924,802,503.30 financing activities Cash paid on repayment of borrowings 1,500,000,000.00 Cash paid on distribution of dividends, 2,262,440,498.23 2,106,817,045.14 profits, or interest expenses Cash paid on other financing related 8,419,159.30 activities Sub-total of cash outflows from 3,770,859,657.53 2,106,817,045.14 financing activities Net cash flows from financing -41,950,581.41 -182,014,541.84 activities IV. Effect of fluctuations in exchange -1,836,962.00 2,417.25 rates on cash and cash equivalents V. Net increase in cash and cash -795,461,337.96 1,323,591,210.71 equivalents Add: balance of cash and cash equivalents 7,068,899,574.96 2,070,527,802.97 at the beginning of the period VI. Balance of cash and cash equivalents 6,273,438,237.00 3,394,119,013.68 at the end of the period Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke 4.2 Status in relation to adjustments to the first implementation of relevant items in financial statements at the beginning of the year for implementation of New Financial Instruments Standard, New Income Standards and New Lease Standards for the first time □Applicable √Not Applicable 4.3 Explanation on retroactive adjustments of previously comparative data for implementation of New Financial Instruments Standards and New Lease Standards for the first time □Applicable √Not Applicable 4.4 Audit Report □Applicable √Not Applicable 37 / 37