Stock Code: 600690 Short Name: Qingdao Haier
Qingdao Haier Co., Ltd.
2017Annual Report
2017 Annual Report of Qingdao Haier Co., Ltd.
Important Notice
I. The Board of Directors, the Board of Supervisors, directors, supervisors and senior management
of Qingdao Haier Co., Ltd. (“the Company”) hereby assure that the content set out in the
annual report is true, accurate and complete, and free from any false record, misleading
representation or material omission, and are individually and collectively responsible for the
content set out therein.
II. Information of Directors absent from Meeting
Position of director Name of director absent Reason for the absence of
Name of proxy
absent from meeting from meeting director from meeting
Independent Director Dai Deming Personal affair Shi Tiantao
III. Shandong Hexin Certified Public Accountants (LLP) has issued a standard and unqualified
audited report for the Company.
IV. Liang Haishan (legal representative of the Company), Gong Wei (chief financial officer of the
Company) and Ying Ke (the person in charge of accounting department) hereby certify that the
financial report set out in the annual report is true, accurate and complete.
V. Proposal of profit distribution and proposal of capitalizing capital reserves for the reporting
period examined and reviewed by the Board
Proposal of profit distribution for the reporting period examined and reviewed by the Board: to
declare a cash dividend of RMB3.42 per 10 shares (tax inclusive) based on the total number of shares as
at the registration date in respect of future proposal for profit distribution.
VI. Disclaimer in respect of forward-looking statements
Applicable Not applicable
Forward-looking statements such as future plans, development strategies as set out in this report do
not constitute our substantial commitment to investors. Investors are advised to pay attention to
investment risks.
VII. Is there any fund occupation by controlling shareholders and their related parties for
non-operational purposes?
No
VIII. Is there any provision of external guarantee in violation of prescribed decision-making
procedures?
No
2017 Annual Report of Qingdao Haier Co., Ltd.
IX. Important Risk Warnings
For the possible risks which the Company may encounter, please refer to the relevant information
set out in the Section of ―DISCUSSION AND ANALYSIS ON OPERATIONS‖ in this report.
X. Others
Applicable Not applicable
Chairman: Liang Haishan
Qingdao Haier Co., Ltd.
24 April 2018
Note:
1) This Report and its abstract have been prepared in both Chinese and English. Should there be
any discrepancies or misunderstandings between the two versions, the Chinese version shall
prevail.
2) Amendment notification: This report is translated from 2017 Annual Report of Qingdao
Haier Co., Ltd. (―Chinese Version Annual Report‖). Please note that this
report is the updated version because there are some discrepancies between the one published on
May 22 and the Chinese Version Annual Report.
2017 Annual Report of Qingdao Haier Co., Ltd.
Contents
Section I DEFINITIONS .................................................................................................................... 4
Section II GENERAL INFORMATION OF THE COMPANY AND FINANCIAL INDICATORS .. 6
Section III SUMMARY OF THE COMPANY‘S BUSINESS ............................................................ 12
Section IV DISCUSSION AND ANALYSIS ON OPERATIONS ...................................................... 20
Section V SIGNIFICANT EVENTS ................................................................................................. 50
Section VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS .............. 87
Section VII RELEVANT INFORMATION OF PREFERRED SHARES .......................................... 100
Section VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT AND EMPLOYEES....... 101
Section IX CORPORATE GOVERNANCE ..................................................................................... 114
Section X RELEVANT INFORMATION ON CORPORATE BONDS .......................................... 123
SECTION XI FINANCIAL REPORT ................................................................................................... 126
Section XII DOCUMENTS AVAILABLE FOR INSPECTION............................................................ 299
Section I DEFINITIONS
I. Definitions
Unless otherwise stated in context, the following terms should have the following meanings in this
report:
Definition of frequently used terms
CSRC China Securities Regulatory Commission
MOFCOM Ministry of Commerce of the PRC
SSE Shanghai Stock Exchange
The Company,
Qingdao Haier Co., Ltd.
Qingdao Haier
Four Major Securities China Securities Journal, Shanghai Securities News, Securities
Newspapers Times, Securities Daily
KKR Home Investment S.àr. l., a wholly owned subsidiary of KKR
KKR, KKR China Growth Fund L.P., is a project company incorporated in
(Luxembourg) Luxembourg in accordance with international practices for the sole
purpose of strategic investment in the Company
Haier Electronics Group Co., Ltd. (a company listed in Hong Kong,
Haier Electrics, 1169
stock code: 01169.HK)
GE Appliances, Household Appliance Assets and Business of
GEA
General Electric
Fisher & Paykel Appliances Holdings Limited (Chinese Name:斐雪
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 oven, freezer, washing machine, clothes dryer and etc.
Its business covers over 50 countries/regions across the world. In
FPA 2012, it became a wholly owned subsidiary of Haier Group. In
order to perform the undertaking of Haier Group in respect of
eliminating horizontal competition, the Company entered into the
Trust Agreement on Fisher & Paykel Appliances Holdings Limited
between Haier Group Corporation and Qingdao Haier Co., Ltd. on
25 May 2015, whereby Haier Group entrusted its assets held in
Fisher & Paykel Appliances Holdings Limited to the Company for
operation and management.
China Market Monitor Co., Ltd., established in 1994, has been
focusing on research on retail sales in China consumption market
CMM
for a long term and is the nationally recognized market research
institute in terms of appliance area.
Euromonitor, established in 1972, is the leading strategic market
Euromonitor information supplier and owns over 40-year experience in respect
of publishing market report, commercial reference data and on-line
database. They create data and analysis on thousands of products
and services around the world.
Based in Kentucky, the U.S., the firm is an institution specializing
in market survey, research and analysis. The market research and
analysis business of the Company started in 1995. Its ―TraQline‖
The Stevenson
product is a world-famous survey and research report on market
Company
share. The ―TraQline‖ product offers customers with analysis based
on global market share and consumer behaviors and supports the
decision-making of various businesses.
The International Electrotechnical Commission. Founded in 1906, it
is the world‘s first organization for the preparation and publication
of international standards of electro technologies, and is responsible
for international standardization for electrical engineering and
electronic engineering. The goals of the commission include: to
ensure that the standards and conformity assessment programs are
IEC
applied globally in a prioritized manner and to the greatest extent;
to assess and improve the quality of products and services involved
in its standards; to create conditions for the common use of
complicated systems; to improve the effectiveness of the
industrialization process; to improve human health and safety, and
to protect the environment.
Shenyang Refrigerator Interconnected Factory, Foshan
Front-Loading Washing Machine Interconnected Factory,
Zhengzhou Air-conditioner Interconnected Factory, Qingdao Mold
9 Interconnected Interconnected Factory, Qingdao Water Heater Interconnected
Factories Factory, Qingdao FPA Electrical Machine Interconnected Factory,
Jiaozhou Air-Conditioner Interconnected Factory, Huangdao
Central Air-Conditioner Interconnected Factory, Huangdao Smart
Kitchen Interconnected Factory
―4‖ refers to the four areas where Haier keeps upgrading: smart
lounge, smart kitchen, smart bathroom and smart bedroom. ―7‖
―4+7+N‖ smart full
refers to the air, water, cleansing and maintenance, security,
scene & customized
voice-control, health and informatization of a house while ―N‖
solution package
refers to variables, i.e. users may customize their own smart living
scene based on their living habit, realizing unlimited possibilities.
―Ren‖ means staff; ―Dan‖ means the need of users, rather than the
―orders‖, the English word of ―Dan‖, in narrow sense. The
Model of
―RenDanHeYi Model‖ encourages the integration of staff with
RenDanHeYi
users, in order to realize every employee‘s value while creating
value for users.
Section II GENERAL INFORMATION OF THE COMPANY AND
FINANCIAL INDICATORS
I. Information of the Company
Chinese name 青岛海尔股份有限公司
Chinese short name 青岛海尔
English name QINGDAO HAIER CO., LTD.
English short name HAIER
Legal representative Liang Haishan
II. Contact Person and Contact Information
Secretary to the Board Representative of securities affairs
Name Ming Guozhen Liu Tao
Department of Securities of Department of Securities of
Qingdao Haier Co., Ltd. Qingdao Haier Co., Ltd.
Address
Haier Information Industrial Park, Haier Information Industrial Park,
No.1 Haier Road, Qingdao City
No.1 Haier Road, Qingdao City
Tel 0532-88931670 0532-88931670
Fax 0532-88931689 0532-88931689
Email finance@haier.com finance@haier.com
III. General Information
Registered address Haier Industrial Park, Laoshan District, Qingdao
City
Postal code
Business address Haier Information Industrial Park, Laoshan District,
Qingdao City
Postal code
Website http://www.haier.net/cn/
Email 9999@haier.com
IV. Place for Disclosure and Deposit of Information
Designated newspaper for information Shanghai Securities News, Securities Times, China
disclosure Securities Journal, Securities Daily
Website for publishing of annual report as
www.sse.com.cn
designated by the CSRC
Department of Securities of Qingdao Haier Co.,
Deposit place of annual report Ltd. Haier Information Industrial Park, No.1 Haier
Road, Qingdao City
V. Summarized Information of Shares of the Company
Summarized information of shares of the Company
Type of Shares Stock Exchange of Stock Short Name Stock Code Stock Short Name
Shares Listed Before Variation
Shanghai Stock
A shares Qingdao Haier 600690 /
Exchange
VI. Other Related Information
Accounting Shandong Hexin Certified Public Accountants
Name
firm engaged (LLP)
by the 26th – 27th Floor, Century Building, No.39
Business address
Company Donghai Road West, Qingdao City
(domestic) Name of signing accountant Wang Hui (王晖), Han Xiaojie（韩晓杰）
China International Capital Corporation
Name
Financial Limited
advisor 27th & 28th Floor, China World Tower 2, 1
Business address
responsible for Jianguomenwai Avenue, Beijing
continuing Name of signing
supervision representative of financial Chen Jingjing (陈静静), Hu Xiaojun (胡霄俊)
during the advisor
reporting
period Period of continuing 12 January 2017 to 31 December 2018
supervision
Notes:
（1） Financial advisor responsible for continuing supervision during the reporting period:
On 12 January 2017, the Company issued the Report on the Execution of Acquisition
of Significant Assets by Qingdao Haier Co., Ltd., according to which, the acquisition
of significant assets related to the acquisition of the appliance assets of General
Electric had been completed. As the financial advisor for this acquisition of
significant assets, China International Capital Corporation Limited will carry out
continuing supervision on the Company during the continuing supervision period
from 12 January 2017 to 31 December 2018.
（2） Sponsor responsible for continuing supervision during the reporting period: During
the reporting period, the Company had a public issuance of convertible bonds. As at
the disclosure date of this report, the issue has not yet completed. China International
Capital Corporation Limited, the sponsor of such issue, will carry out continuing
supervision on the Company starting from the completion of such issuance of
convertible bonds.
VII. Key accounting data and financial indicators for the last three years
(I) Key accounting data
Unit and Currency: RMB
Key accounting 2016 YoY change
2017
data (%)
After adjustment Before adjustment
Operating
159,254,466,909.46 119,132,261,662.60 119,065,825,201.51 33.68 89,797,165,994.89
revenue
Net profit
attributable to
6,925,792,321.27 5,041,782,280.78 5,036,652,240.84 37.37 4,303,751,562.92
shareholders of
the Company
Net profit after
deduction of
non-recurring
profit or loss 5,624,061,708.46 4,332,453,050.07 4,332,453,050.07 29.81 3,674,952,510.15
attributable to
shareholders of
the Company
Net cash flows
from operating 16,086,588,028.31 8,135,878,351.88 8,054,704,601.30 97.72 5,604,166,955.11
activities
As of December 31 As of December 31 2016 YoY change As of December
2017 After adjustment Before adjustment (%) 31 2015
Net assets
attributable to
32,215,515,201.45 26,438,188,226.56 26,364,725,409.83 21.85 22,733,334,660.35
shareholders of
the Company
Total assets 151,463,110,707.63 131,469,157,348.79 131,255,290,325.24 15.21 75,960,718,327.49
(II) Key financial indicators
2016 YoY
Key financial indicators 2017 After Before change
adjustment adjustment (%)
Basic earnings per share
1.136 0.827 0.826 37.36 0.706
(RMB per share)
Diluted earnings per share
1.088 0.824 0.823 32.04 0.706
(RMB per share)
Basic earnings per share after
0.922 0.71 0.71 29.86 0.603
deducting non-recurring
profit or loss (RMB per
share)
Weighted average return on Increased
23.59 20.38 20.41 by 3.21 pct 16.22
net assets (%)
pts
Weighted average return on
net assets after deducting Increased
19.15 17.56 17.56 by 1.59 pct 13.86
non-recurring profit or loss pts
(%)
Explanation of the key accounting data and financial indicators of the Company as at the end of
the reporting period for the previous three years
Applicable Not applicable
VIII. Differences in accounting data under domestic and overseas accounting standards
(I) Differences in net profit and net asset attributable to shareholders of listed company in
financial report disclosed simultaneously according to international accounting standards
and according to accounting standards in the PRC
Applicable Not applicable
(II) Differences in net profit and net asset attributable to shareholders of listed company in
financial report disclosed simultaneously according to overseas accounting standards and
according to accounting standards in the PRC
Applicable Not applicable
(III) Reasons for the difference between the domestic and overseas accounting standards:
Applicable Not applicable
IX. Key financial data of 2017 by quarters
Unit and Currency: RMB
Q1 Q2 Q3 Q4
(January-March) (April-June) (July-September) (October-December)
Operating revenue 37,741,143,448.27 39,834,606,531.83 41,613,863,654.10 40,064,853,275.26
Net profit
attributable to
1,738,763,572.81 2,688,304,831.70 1,255,293,313.13 1,243,430,603.63
shareholders of the
Company
Net profit after
deduction of
non-recurring
profit or loss 1,461,794,756.85 2,315,544,698.1 917,996,951.12 928,725,302.39
attributable to
shareholders of the
Company
Net cash flows
from operating 5,809,318,531.26 2,583,882,374.92 5,766,852,092.76 1,926,535,029.37
activities
Reasons for difference between quarterly data and regular reporting data
Applicable Not applicable
X. Non-recurring Profit or Loss Items and Amount
Applicable Not applicable
Unit and Currency: RMB
Non-recurring profit or loss items
Loss and profit from disposal of non-current assets 64,634,658.86
Tax refund, reduction or exemption with approval exceeding authority or
without official approval or occasionally
Government grants included in current profit or loss, except that closely
related to the normal operating business, complied with requirements of the
527,612,997.16
national policies, continued to be granted with the amount and quantity
determined under certain standards
Gains from the costs of investment in the acquisition of subsidiaries,
associated companies and joint ventures being lower than the share of the fair 9,660,529.47
value of the transferor‘s identifiable net assets
Enterprises‘ restructuring costs, such as the replacement cost of employees,
-120,358,066.45
the cost of integration, etc.
Current net profit or loss of subsidiaries from the consolidation of enterprises
500,041.82
under common control from the opening of the period to consolidation date
In addition to the effective hedging business related to the normal operations
of the Company, profit or loss of changes in fair value arising from holding
of trading financial assets and trading financial liabilities, as well as 663,407,128.53
investment gain realized from disposal of trading financial assets, trading
financial liabilities and financial assets available for sale
Trust fee income from entrusted business 2,830,188.68
Other non-operating net income and expenses expect the aforementioned
523,346,200.57
items
Minority interests -250,957,566.29
Income tax -118,945,499.54
Total 1,301,730,612.81
XI. Items Measured by Fair Value
Applicable Not applicable
Unit and Currency: RMB
Opening
Name Closing balance Change Impact on profit
balance
Forward foreign
81,620,979.45 117,512,866.08 35,891,886.63 663,407,128.53
currency contract
Interest rate swap
16,502,325.25 51,339,181.17 34,836,855.92
agreement
Contingency
-5,384,860.29 -5,384,860.29
consideration
Available-for-sale
30,354,194.80 26,931,420.99 -3,422,773.81 369,851.42
financial assets
Total 128,477,499.50 190,398,607.95 61,921,108.45 663,776,979.95
XII. Other
Applicable Not applicable
Section III SUMMARY OF THE COMPANY’S BUSINESS
I. Introduction of Major Business, Operating Model and Industry Background
(I) Major Business of the Company
The Company mainly engages in research, development, production and sales of home
appliances with product portfolios covering refrigerators/freezers, washing machines,
air-conditioners, water heaters, kitchen appliance products, small home appliances, U-home smart
home business, etc., offering integrated smart home solutions to our consumers, and channel
integration service business including logistics, home appliances and other product distribution,
after-sale and other value-added business.
Since its establishment, the Company has been upholding the concept of ―taking the user as
right and ourselves as wrong‖, while adhering to the spirit of entrepreneurship and innovation and
the strategy of keeping up with new developments. Through its persistent efforts and the
acquisition of the white goods business of Sanyo of Japan and the household appliances business
of GE, the entrusted management of the Fisher & Paykel business in New Zealand, and shares of
MABE in Mexico, the Company has established its competitive edge with integrated capabilities
in R&D, manufacturing and marketing at home and abroad, realizing a layout deployment and
global operation of a world-class brand. In 2017, revenue from overseas operation represented
42% of the total revenue while near 100% of the revenue was generated from self-owned brands.
According to retail sales statistics on the large home appliances published by Euromonitor,
the world‘s leading independent provider of strategic market research, in 2017, sales of Haier‘s
large home appliances represented a global market share of 10.6%, and ranked No. 1 in the world
for the 9th consecutive year. Meanwhile, global sales of Haier‘s refrigerators, washing machines,
wine cellars and freezers continued to rank No. 1 in the world. The Company‘s smart
air-conditioners accounted for 30.5% of global sales, ranking No. 1 in the segment of
interconnected air-conditioners (including smart air-conditioners) for the 2nd consecutive year.
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. By offering smart homes solutions
and introducing full-range smart life experiences to consumers, Haier has satisfied the needs of a
better life for its customers.
(II) Industry Background
2017 witnessed a global economic recovery and a steady growth in the global home
appliance market. According to the statistics of Euromonitor, an annual increase of 4% for the
sales volume of global home appliances and an increase of 6% in sales were recorded in 2017. In
terms of regions, sales in the Asia Pacific region maintained an increment of 7%, performing
better than other regions including a 4% increase for Middle and East Africa, and 2% increase for
North America, Latin America, Australia and Europe individually.
In 2017, economic performance of the PRC economy was steady with continuous
improvement while increasing domestic income further supported the consumer confidence index.
In terms of cost, with significant increase in bulk materials prices, the profit margin of the industry
was pressured. Fluctuations in foreign exchange rates, especially the strong performance of RMB
in the second half of 2017, have led to challenges in the home appliances export business of the
Company. In terms of demand, the white goods sector in the domestic market grew at different
rates in various sub-sectors: (1) the air-conditioner sector experienced rapid growth due to high
ambient temperatures, development of the real estate industry, higher penetration in rural areas
and other factors. According to the statistics of CMM, in 2017, retail sales and retail volume of
air-conditioners increased by 27.5% and 32.6%, respectively; (2) the refrigerator sector
experienced a turnaround in growth rate, from negative to positive 3.7%. Benefiting from the
increase in price caused by enhanced market structure, retail sales increased by 9.8%; (3) growth
in washing machines maintained stable while its retail sales and retail volume increased by 6.2%
and 11.4%, respectively; (4) the domestic kitchenware and sanitary ware market saw steady
growth: growth rates of retail sales for water heaters and kitchen appliances were 9.69% and
15.26%, respectively.
Demands for upgrading to a new generation of white goods led the development of the
domestic market. Brand, quality, design and technology have become decision-making factors for
consumers who are willing to pay a higher price for 'quality goods'. Consumption of upgraded
appliances is therefore inevitable. Products with larger volume, intelligent and stylish design
become more welcomed in the market with average prices stepping up steadily. With the
promising growth of the intelligent home appliances market, sales of intelligent air-conditioners
accounted 34.7% of all air-conditioner sales, while the corresponding share of washing machines
and refrigerators was 23.1% and 13.1%, respectively.
Competent players are getting stronger under the current market condition. By leveraging on
comprehensive advantages gained from long-term competition, leading enterprisers which have
focused on long-term research and development, establishment of quality brands and leading the
market trend will continue to benefit from rewards generated by domestic consumption upgrade
and market centralization.
The rapid development of IOT, Big Data, Cloud computation, Artificial Intelligence (―AI‖)
and other technologies has enhanced the connections between human and equipment and between
equipment and ecosystem. Also, users' consumption habits have been gradually changed and the
trend of consumption has developed towards advanced economy, social group economy and
sharing economy. Frequent replacement with newer products and sectoral changes have resulted
in shifting competition focus, from product competition to users' value and experience, which
have forced the transformation of enterprises and the change of business model, from selling
products to selling services.
Industry Outlook
Influenced by factors such as favorable conditions for the air-conditioner sector and
regulatory policies of the real estate industry, the growth rate of overall demand for national home
appliances is expected to slow down in 2018 and progress with moderate growth driven by life
quality-enhancing product consumption. According to CMM, white goods sales in the PRC are
expected to reach RMB370.5 billion, with a year-on-year increment of 0.3%. While demand for
white goods and black appliances in general are denominated by upgrading and replacement,
kitchen appliances and home appliances will become the new growing points of consumption,
with expected year-on-year growth of 11.5% and 13.5%, respectively. Online and offline retail
channels moved closer together. Online business in 2018 is expected to keep its rapid growth trend
and CMM expects that the market share of online home appliances will account for 33% in 2018.
The home appliance industry is expected to demonstrate a development trend with product
upgrading, intelligent products and brand centralization.
II. Explanation on significant change on major assets of the Company
□Applicable √Not Applicable
III. Analysis on core competitiveness
√Applicable □ Not Applicable
Since the foundation in 1984, the Company always adhered to the principle of driving the
sustainable and healthy development with innovation focusing on the needs of users, and over the
decades has successfully turned itself from a debt-burdened collective small factory which was on
the verge of shutdown into one of the largest home appliances manufacturers in the world. The
Company is committed to realizing sustainable development across different cycles through
continued innovations on corporate strategy and operating mode, brand, research and development,
intelligent manufacturing, establishment of foreign and domestic markets to achieve
competitiveness and remain adapting to ever-changing conditions.
(I) World-class brand competitiveness, comprehensive layout
According to the data published by Euromonitor, Haier has ranked No. 1 among global large
home appliances brands for 9 consecutive years. In the segments of refrigerators, washing
machines, wine cellars, freezers, the Company continues to be No. 1 in the world. To meet the
personalized and diversified needs of users, we have broken down the global technical barriers in
the household appliances industry and promoted the healthy development of the industry through
the global strategic synergy among six brands of household appliances, namely Haier, GE
Appliances in the USA, Fisher & Paykel in New Zealand, AQUA in Japan, Casarte and Leader.
Haier has built the largest household appliances industry cluster in the world, which covers the
global market and communities.
High-end brand, leader in market share. In 2017, Casarte accounted for 35% of the market
of home appliances priced at RMB10,000 or above, up 9 pct pts. MONOGRAM, a high-end home
appliance brand of GEA, accounted for 20% of the high-end market in the USA, up 1 pct pt.
Fisher & Paykel, a world-known home appliance brand, accounted for 36% of the New Zealand
market, up 1 pct pt.
(II) Leader in R&D and technological competitiveness
1. Layout of R&D resources around the world: with its 10 large R&D centers around the
world, Haier has established its global network of resources and users by establishing an open and
innovative system ―10+N‖ based on ―N‖ innovative centers, which are accessible for users
seeking solutions. Haier has also attracted world-class resources to participate in R&D with its
―cooperation, win-win and sharing mechanism‖, thus playing a leading role in the development of
products and technologies in the industry and providing excellent experience for its users.
2. Leadership in industrial standards. With its sustained innovation capacity, Haier has
become a leader in the household appliances industry in the PRC and worldwide. As at December
2017, Haier holds a total of 66 expert seats in IEC and ISO, two international standardization
organizations. Haier also holds 28 expert seats in the UL standardization organization. Haier has
participated in the development of and amendment of 56 international standards and has put
forward 90 proposals. Haier ranks No. 1 among household appliances companies in the PRC in
terms of the number of proposals raised. Haier also ranks No. 1 among domestic home appliances
companies in terms of the number of national standards initiated, leading or participating in 445
developments of national/industry standards and their amendments in total, while 391 of which
have been promulgated, and has been granted 11 national innovative contribution awards. In terms
of international participations, Haier is the only home appliance company in the PRC, which
joined the Market Strategic Board of International Electrotechnical Commission (hereinafter
―IEC/MSB‖). Haier, as the only PRC home appliance company joining a technology
sub-committee of an international standards commission, takes up secretary assignment for the
IEC/SC59A International Washing Machines Sub-committee, and has participated in the
establishment of IEC TC59/SC59M WG4 Refrigerators and Fresh-keeping International Standards
Working Group, taking a leading role in the formulation of first international standards for
fresh-keeping capabilities of refrigerators, which has realized a breakthrough in the home
appliances sector.
3. Currently, Haier has accumulated more than 25,000 patents application, and more than
15,000 of which are invention patents, covering 25 countries and regions, making Haier the leader
in household appliances companies in the PRC in terms of overseas invention patents. In 2017,
among more than 7,000 patent applications, the proportion of invention patents was higher than
60%, leading the sector in terms of patents. In the 19th PRC Patent Awards held in December
2017, Haier was honored with a gold award in patent, the only winner in the home appliance
sector, and 2 appearance design gold awards. It was also awarded with 5 patent outstanding
awards. Haier has won 5 gold awards from all the previous PRC Patent Awards, ranking No. 1
among the competitors in terms of total number of gold awards. Haier has become the only
household appliance enterprise being awarded twice with gold awards and the only enterprise
gained 3 gold awards in one time for the past 29 years. Haier has been awarded 14 national
technology advancement awards, representing two-thirds of the sector.
4. Innovating the R&D mechanism through the HOPE platform. Through HOPE, its online
open innovation platform, Haier has been facilitating the matching of resources from the
beginning of innovation to its materialization, producing cross-border and disruptive innovation
continuously. As the leading open innovation platform, currently the platform can reach 3.8
million world-leading resources, more than 400,000 registered users, and offers over 6,000
creative ideas on average per year, thus supporting the maintenance of our leading position in
products/technologies.
(III) Competitiveness of smart manufacturing, leading the transformation
1. The core competitiveness of Haier‘s smart manufacturing lies in its commitment to
realizing long-term value for users through its user-oriented approach and the transition from
large-scale manufacturing to large-scale customization. In practical operation, Haier has
established 9 global-leading sample interconnected factories, as well as the interconnected
capabilities and ecological system covering the whole process. Such businesses cover refrigerators,
washing machines, air-conditioners, water heaters, kitchen appliances, electric motors, molds and
other fields, meeting our user's need for perfect experience in high-end personalized products and
services. Such initiatives have produced notable effects: the orders from large-scale customization
in which users are involved in the whole process accounted for 16% of the total, while the orders
from large-scale customization in which customers are involved accounted for 52% and achieved
a breakthrough which eliminated or shortened the period of products in warehouses. In addition,
operational efficiency throughout the process has been enhanced. For example, the development
cycle for new products has been reduced by more than 50%.
2. COSMOplat - China‘s first and global-leading industrial internet platform with
independent intellectual property rights was built on the basis of interconnected factories, as well
as best practices in digitalization and product development. This platform, combined with existing
capabilities such as smart equipment, smart control, mold and Smart Research Institute, has been
in collaboration with relevant companies in seven major industries, and will be able to offer
comprehensive solutions and value-added services featured by the combination of software and
hardware as well as the mix of virtual and real factors for the transformation and upgrading of
smart manufacturing.
(IV) Efficient and in-depth networking channels and logistics layout
1. Through our diversified channel system, we have achieved full coverage of the first,
second, third and fourth-tier domestic market and provide convenient shopping experience
anywhere, anytime. We have also maintained strong strategic cooperation relationship with
professional chains for household appliances, such as Gome and Suning, as well as e-commerce
platforms, such as Tmall and JD. In respect of our own channels, Haier has established more than
8,000 county-level stores, and more than 30,000 stores within town and country-level network.
With regard to our comprehensive store channel, we have established a number of clubs, such as
the V58 and V140 Clubs, and maintained close cooperation with major enterprises engaging in
regional distribution of household appliances. By leveraging on the comprehensive advantages of
its product lines, Haier has established experience stores with full scene experience of smart life,
realizing full demonstration, design, sales and services to sales terminals and enhancing the
loyalty of sales terminals.
2. The network of the warehouses of Gooday Logistics covers more than 100 cities and
regions in the PRC, with a total storage area of 3.6 million square meters, and 90,000 motor
vehicles for deployment. Gooday Logistics offers around-the-clock service combining delivery
and installation, and is dedicated to providing users with comprehensive, timely and care-free
services.
(V) Excellent global operation capability
We have been adhering to the strategy of building our own brand independently. Through
self-development and mergers and acquisitions, the Company has completed its triple network
comprising of R&D, manufacturing and marketing for major overseas markets, which helped us
gain insight into and meet the needs of local consumers in a short time. The successful global
transformation from single-brand to cross-border and cross-sector multi-brand demonstrated its
achievements by going global and developing integrated global resources. As at the end of 2017,
its capacity of overseas markets (America, Europe, South Asia and other regions) reached more
than 20 million units while revenues from overseas markets in 2017 amounted to 42% with almost
100% generated from self-owned brands.
(VI) Based on credibility culture and model of RenDanHeYi
Credibility culture based on quality and service is the core driver of Haier‘s growth, and is
also the essential reason for the constant success of Haier. Leveraging the credibility culture of
―user-oriented‖ and ―persistent honesty‖, Haier has turned itself from a small collective factory
which was on the verge of shutdown into one of the largest white goods manufacturers in the
world, while keeping a leading position in world-wide innovation in the internet era. Haier
upholds the concept of ―always take the users as right and ourselves as wrong‖. This concept
stimulates the spirit of innovation, revolution and entrepreneurship of Haier and motivates it to
progress into the future and continuously improve and challenge itself, in order to seize
development opportunities. The model of RenDanHeYi is the assurance of a sustainable operation
of Haier. In exploring the ―Individual-Order combination 2.0‖, \"Co-create‖ and ―Win-win
ecosystem‖, Haier endeavors to build a win-win ecosystem based on user value interaction in the
new stage of e-commerce to make every employee his/her own CEO and realize their own value
while creating value for users, so as to achieve a win-win situation, which is critical to all parties
in the system.
Section IV DISCUSSION AND ANALYSIS ON OPERATIONS
In 2017, the Company focused on technological innovation and leading position in products,
deepened corporate retail transformation, and adhered to global branding and the local triple
network layout. Thus, it achieved quality results growth, with revenue, net profit and net cash flow
from operating activities hitting historical highs.
Revenue of the year reached RMB159.254 billion, representing an increase of 33.68%. ①
Excluding the effect of consolidating the financial results of GEA, the original businesses of the
Company, i.e. refrigerator, washing machine, air-conditioner and kitchen products recorded
increases of 18%, 20%, 48% and 25%, respectively, each representing their highest growth in
recent years; ② GEA recorded a revenue of RMB 45.894 billion, a new high in the past ten years.
③ High-end brand Casarte recorded an increase in revenue of 41% in 2017.
Net profits attributable to the parent company for the year was RMB6.926 billion, up by
37.37%; Net profit after deduction of non-recurring profit or loss attributable to the shareholders
of Company was RMB5.624 billion, with an increase of 29.81%. Net cash flow from operating
activities amounted to RMB16.087 billion, representing a year-on-year increase of 97.72%.
Noticeable increase in market share: ① In the global market, according to the data as
published by Euromonitor, in 2017, the market share of brands of Haier’s large household
appliances reached 10.6%, the top ranking for nine consecutive years. ② In the domestic
market, a full range of products recorded increases in market shares: according to the data
released by CMM, retail market shares of refrigerator, washing machine, air-conditioner, water
heater, ventilator and gas stove of Haier increased by 3.4, 2.3, 0.5, 1.3, 1.12 and 1.06 pct pts.,
respectively; the refrigerator and washing machine businesses maintained and continued to extend
their leading position, with retail sales accounting for 31.83% and 29.89%, which were 2.5 times
and 1.7 times of the brands in second places, respectively, reinforcing the Company‘s leading
position. ③ In the U.S. market, according to a report issued by the Stevenson Company, in terms
of sales, GEA‘s market share in the U.S. household appliances market was 20.4% in 2017. The
breakdown of share by products was as follows: 28.7% for kitchenware, 21.2% for dishwasher,
19.8% for refrigerator, 15.4% for washing machine. In particular, the market shares of
kitchenware ranked No. 1 in the industry with a clear competitive edge.
The Company’s works in 2017 were mainly as follows:
1. Capitalizing on the open innovation system of 10+N under the global layout, the
Company led the industry with product differentiation through technological upgrades and
disruptive innovation, and promoted structural adjustment: regarding brands, Casarte‘s
revenue increased by 41%; and regarding product category, mid-to-high end products continued to
grow at a rapid rate. For instance, revenue from side-by-side & multi-door refrigerators and
front-loading washing machines increased by 45% and 43%, respectively, in the domestic market.
Refrigerators/freezers industry: the Company led the trend of integrated home services and
health preservation in the industry, introduced resolutions for free-embedded, cell-level
preservation and full-space preservation, etc., satisfying users‘ demands for quality life. The
Company kept its leading position driven by iterations, maintained the leading position in each
price range while achieving a breakthrough in the high-end market. According to the data of
CMM, retail sales of refrigerators above RMB10,000 increased by 59.6%, and retail sales of
refrigerators above RMB15,000 increased by 221.1%, respectively.
The free-embedded F+MSA nutrition controlling and preservation 520 multi-door refrigerator
launched by the Company adopts the advanced MSA nutrition controlling and preservation
technology which is able to reduce the concentration of oxygen in a specific compartment, achieve
a double preservation period, and lower the loss rate to around 1/10 than that of the ordinary
refrigerators. The storage period for strawberry can reach 8 days with a nutrient loss rate of only
1.5%, while the storage period for strawberry of the ordinary refrigerators can reach only 3 days
with a nutrient loss rate of 12%.
Washing machine industry: with the application of advanced technologies such as washing
in clean water, smart laundry and identification of laundries, the Company kept upgrading its
washing solutions to cater the needs of healthier, more water saving, partition washing, and large
drum diameter demands. According to the data of CMM, the market share of washing machines
above RMB8,000 was 60%.
Casarte ―Fiber Care‖ (纤见) washing machine launched by the Company is the world‘s first
washing machine product equipped with an IOT fiber-level washing program. Adopting the
direct-drive variable frequency motor of Fisher & Paykel, a luxury brand from New Zealand,
through innovating washing technology, upgrading the internal structure and creating a 601 mm
super large drum diameter, the Casarte ―Fiber Care‖ washing machine expands the laundry
capacity, makes picking-up and placing of laundry more convenient, while its larger washing
space can better protect the clothing. At the same time, being connected to the IOT intelligent
detection of fiber and combined with automatically set washing programs, it provides an exclusive
washing solution with one-button control for users, which gives tender care precisely to every 1ml
fiber at a temperature of 2° ensuring perfect protection of silk, Su embroidery, fur and other
materials.
Household air-conditioner industry: in view of the evolving consumers‘ demand towards
healthy, comfortable, smart and customized products, the Company is dedicated to leveraging on
leading technologies to create a differentiated consumer experience, and to forge differentiated
core competitiveness with a focus on innovation of intelligent, effective and healthy products. In
2017, the Company realized a new type of air-conditioner from blowing clean airflow to allowing
users to breath clean air, and launched the air purification-integrated series, Casarte Yunding (云
鼎) and Tianxi (天玺) series, clean cool series and other differentiated products, which are able to
complete home air purification in just 15 minutes, allowing users to enjoy clean air at home.
Riding on the competitiveness brought by product and technological innovation, product are
continuously improved. According to the statistics of CMM, there is an obvious increase in market
shares of Haier‘s mid-to-high-end air-conditioners, where market shares of wall-mounted air
conditioners in the price range of above RMB4,100 and packaged air conditioners in the price
range of above RMB8,000 increased by 6.8 pct pts. to 15.2% and by 10.5 pct pts. to 22.9%,
respectively, and the market share of packaged air conditioners in the price range of above
RMB16,000 ranked the first place in the industry, amounting to 40%, with a ratio to the second
placed of 1.70.
Euromonitor issued a certification for Haier air-conditioners: according to retail market sales
statistics of the 2017 interconnected air-conditioners (including smart air-conditioners), Haier
ranked first in the world with a market share of 30.5%, the top ranking for two consecutive years.
According to the 2017 export statistics, Haier air-conditioner ranked first in China‘s own-brand
air-conditioner exports, accounting for 22%.
The air purification-integrated, clean cool and self-cleaning air-conditioner released by the
Company, is the only professional air-conditioner equipped with purifying function, and it is able
to complete home air purification rapidly to create a clean air environment for users. The products
realized full-mode purification by adopting direct-extraction technology and electric purification
technology of the space capsule purification system, enabling itself to automatically capture dust
and high purifying efficiency assisted by negative ion purification technology. With
humidity-coupled sensing technology and PID flexible variable frequency humidity-control
technology innovated on the basis of flexible variable frequency humidity technology, it is able to
adjust the indoor air environment to the comfort zone of the human body and optimize the air
quality. Supported by Haier‘s inner and outer self-cleaning technology, which was granted six
patents, it makes the air cleaner and healthier. Assisted with unique patented technology of natural
airflow and positioning airflow, combined with smart app management, it provides users with a
comfortable and healthy air experience and smart and convenient use in an all-round way.
Central air-conditioner industry: to cater users‘ needs of energy-saving in the industry, the
Company continued to make iteration of magnetic levitated products, leading the industry with
magnetic levitated central air-conditioners, and realizing ―multi-speed‖ growth of magnetic
levitated products. In the meantime, the Company launched the first IOT central air-conditioner in
the world, realized integration of IOT and central air-conditioners for the first time and gained a
leading position of IOT central air-conditioners capitalizing on a differentiated experience of
automatic connection to the internet, automatic energy saving and independence. Simultaneously,
the Company introduced temperature and humidity independently-controlled, cloud service and
smart cloud control and other technologies to maintain its leading advantage in respect of energy
saving and intelligence, continued to implement innovation in order to achieve product innovation
driven by differentiation. According to data released by China Industry Online, in 2017, the
domestic market share of Haier‘s central air-conditioner achieved the greatest growth in the
industry with an increase in market share of 1.9 pct pts. year-on-year.
For instance, ① on top of the leading position of magnetic levitated products and in the face
of customization needs of the industry community, the Company launched evaporative cooling
magnetic levitated air-conditioners applicable to the rail transit industry, corrosion-resistant
magnetic levitated air-conditioners applicable to the aluminum oxidation industry, free cooling
magnetic levitated air-conditioners applicable to the data center industry and other differentiated
customized products to achieve continuous leadership of magnetic levitated air-conditioners; ② to
cater the growing demand for central air-conditioning updates, the Company launched multi-split
central air-conditioners as a new product, the industry‘s first new product of 5 no‘ (no pipe
changing, no line changing, no indoor unit changing, no decoration destroying and no affecting of
business), and achieved ―no renovation destroying while changing new central air-conditioner‖,
occupying a leading position in central air conditioning retrofits. ③ in view of the needs and
growth of unmanned convenience stores and unmanned gas stations and other stores, the
Company took the lead in the industry to launched central air-conditioning for unmanned shops,
and obtained the first share.
Water heater industry: Relying on the full range of layout of electric, gas, solar and heat
pump water heaters, the Company carried out core technological innovations and product structure
upgrades to provide consumers with comfortable bathing solutions. ① In respect of electric water
heaters, the Company introduced ―instantaneous heating & washing technology‖ which realizes
rapid heating and capacity expanding and solves the pain points‘ of long waiting time for heating.
The Company introduced the ―double-effect discharge inhibition technology and three-level
purification technology‖ to effectively inhibit the generation of discharge and purify and remove
harmful substances such as sediment, residual chlorine and bacteria in water, so as to better
protect mothers and babies. ② In respect of gas water heaters, the Company released six major
core technologies such as the active elimination of carbon monoxide safety systems and
zero-cold-water systems in response to user values such as safety and constant temperature.
According to the data of CMM, our water heaters obtained a market share of 18.77% in terms of
retail sales volume in the domestic market, taking first place.
To strengthen the Company‘s technological reserves in power plants and thermosiphon, in
May 2017, the Company acquired 51% equity interests in GREENoneTEC Solarindustrie GmbH
(―GoT‖), the largest solar thermal power plants manufacturer in the world located in Austria. GoT
has advanced technology and facilities in the fields of solar thermal power plants and large-scale
multi-source water heating systems.
The Company released the Haier instantaneous heating electricity insulation wall water heater
Plus9. Equipped with a unique instantaneous heating waterfall washing, discharge-inhibiting
cleaning washing, heating electricity insulation wall 3.0, cloud SMART 2.0 smart technology and
outer shaped design and black technologies, the products tackled lots of pain points‘ of users,
such as slow heating, small amount of water, dirty washing, disconnection and big white bucket,
which are typical challenges of the electric water heater industry, and gained the ―APE Appliance
Innovation Award‖ beating more than 500 exhibits.
Kitchen appliances industry: The Company manufactures a variety of kitchen appliances in
all segmented markets, with particular focus on smart home appliances that can be interconnected
to form a ―smart kitchen‖. Leveraging on the R&D resources of Fisher & Paykel and GEA, the
Company has also developed tailor-made products for Chinese consumers to meet their
requirements for Chinese cuisine, and covered segmented markets of different consumer groups
with 5 major brands, namely luxury brand‘s social kitchen Fisher & Paykel, high-end Italian
embedded kitchen Casarte, professional complete set of American kitchen GEA, the public brand
smart kitchen Haier, and the young market kitchen brand Leader. The Company took the lead in
publishing the industry‘s first ―dry heating prevention home gas cooker standard (防干烧家用燃
气灶具标准)‖ and ―residential open kitchen standard (住宅开放式厨房标准)‖, leading the
industry standards. Our core kitchen products include range hoods, stoves, built-in ovens, steamers,
coffee makers and dishwashers. In 2017, revenue from kitchen appliances in the domestic market
increased by 47% year-on-year; the sales volume of high-end brand Casarte kitchen appliances
increased by more than 125% in 2017 while the share increased by 1 pct pt year-on-year.
The Company has released a series of star products. ① Range hoods of Yunchu (云厨) series.
it can be operated through the touch screen and mobile application to achieve convenient functions
such as entertainment and recipes in the kitchen. It is equipped with a unique deep cavity and
Fisher & Paykel variable frequency motor to achieve ultra-quiet large suction effect. Its unique net
core module tackled the biggest kitchen ―paint point‖ of users, the difficulty to clean hardened oil.
② Gas stove products with dry heating prevention. Supported by the Company‘s unique patented
technology of dry heating prevention and inter-connection technology, it is able to detect the
temperature inside the pot automatically, therefore, under the circumstance where the pan is dried
up, the gas will be cut to prevent harmful consequences for safety risks, which sets a global safety
& dry heating prevention standard. ③ Casarte steam oven. Its steam surrounds the cell-grade
nutrition. Supported by three core technologies, a steam cruise system and steam surround system,
it meets people‘s needs for a delicious and healthy diet. ④ High-temperature self-cleaning oven
products. With the application of the exclusive hot air with constant temperature technology
developed by GEA, the product is capable of performing carbonization decomposition of oil
pollutants at a temperature of 420 degrees and is easy to clean, thus releasing users from the
trouble of cleaning.
(II) Domestic market: Focusing on user experience and customer value, deepening
network, optimizing efficiency and improving structure.
In 2017, the Company continued to promote retail transformation of its China business and
enhanced the market competitiveness of the entire process. It achieved more than 20% revenue
growth for five consecutive quarters since the fourth quarter of 2016, and an increase in market
share. By increasing the proportion of mid-to-high-end products, the average price of the
Company‘s white home appliance in the domestic market increased by more than 10 pct pts in
2017.
Further penetration of store network and operation improvement of stores. ① The
Company upgraded the business district core store showroom to realize the transformation from
product display to full-scale scene-based experience, and promoted the refinement of the store‘s
―people-to-store-to-model‖ to increase the order conversion rate. ② In the home building
materials channel, the Company promoted the construction of smart complete set of scene
experience stores, provided users with ―one-stop, full-scene, customized‖ solutions with package
display, package design, package sales and package services. By the end of 2017, the Company
has built one city experience center, 100 smart home experience stores, and 800 smart home
integration stores. ③ The Company propelled the construction of smart cloud stores, built
asset-light stores based on the principle of ―small but smart‖, and achieved deep coverage of
users‘ touchpoints in communities, decoration companies, townships and village-level networks.
In terms of e-commerce channels, the Company further improved the layout of JD.com
assistance, JD.com POP, and Tmall authorized stores to achieve channel structure optimization
and expansion of users‘ touchpoints; increased the proportion of mid- to high-end products and
differentiated delivery of products based on channels; strengthened content marketing and realized
strong interaction with users. In 2017, e-commerce revenue increased by more than 70% and the
average price of products increased by more than 20%.
The Shunguang (顺逛) platform connects on-line stores, off-line stores and micro-enterprises
by integrating the three into one, and coordinating marketing, logistics, information and service
network, and build a multi-entry and 24 x 7 community interaction platform. Based on community
interaction, the Company addresses users‘ pain points‘ and consumer trends, promotes product
and service upgrades and iterations, provided community foundation and user orientation for the
implementation of Haier‘s full scene-based and customized smart solution package, and builds a
differentiated competitive edge for Haier‘s smart family. In 2017, the Shunguang platform
actively took advantage of the entire process chain to open up its entrance, build a comprehensive
community ecosystem with rich resource, and upgraded the value of a single brand to the win-win
platform of the whole ecosystem. In 2017, the Shunguang platform had 800,000 micro-store
owners, 20,000 offline stores, 30,000 user communities in aggregate, and reached total platform
transactions of RMB4.5 billion.
Constantly increasing the construction of Casarte brand in terms of product portfolio
brand marketing, network layout and point-of-sales experience to address the domestic
consumer trend upgrading. In 2017, revenues from Casarte brand increased by 41%. In the
domestic high-end home electric appliances market above RMB10,000, the market share of
Casarte reached 35%, an increase of 9 pct pts over 2016. In the refrigerators and washing
machines market above RMB10,000, market shares of Casarte refrigerator and washing machine
were 30% and 69%, respectively; in the air-conditioner market of above RMB16,000, market
share of Casarte air-conditioner reached 40%.
Upgrading digital marketing platform to improve operational efficiency: The Company
realized online real-time purchase, sales and inventory management on town and country-level
network through Yilihuo (易理货) platform, facilitating product delivery to customers and users
of town and country-level at the fastest speed and the lowest cost. The Company promoted the
construction of smart cloud store platforms, and through digitizing product information and
training video integrated with the delivery of the latest product information to the terminal in a
timely fashion and accurate manner, it optimized the product launch cycle. By the end of 2017, the
number of screen coverage reached 110,000.
Innovation on marketing model. ① In the point-of-sales stores, through the coin activities
of washing machines, the Company provided users with clothes ―air wash‖ services to
demonstrate non-copyable leading technology in an intuitive and vivid way, and achieved strong
word-of-mouth promotion; ②Through various types of marketing investment such as the CCTV
national brand plan, local media cooperation, product placement in a variety of show, film and
television dramas, the Company achieved a strong brand recognition.
The Company stimulated the vitality of the organization by micro-market mechanism and the
model of RenDanHeYi. The Company promoted self-operation under the micro-micro mechanism,
and realized the exercise of employment rights, allocation rights and decision-making rights.
Through the excess profit sharing mechanism, the Company facilitated driver enhancement of
employees, changes in personnel concepts and ability. And through the model of RenDanHeYi, the
Company promoted the collaboration in parallel and operational innovation of the entire-process
logistics hubs focusing on the market.
(III) Overseas market: Building brands, establishing high-end image, concentrating on
experience in an attempt to boost synergies and comprehensive development
During the reporting period, the overseas market concentrated on branding and earnings,
facilitated the implementation of the model of RenDanHeYi in respective regions, promoted
integration of culture and mindset, boosted synergies with GEA concerning procurement, products
and R&D, which delivered healthy performance.
Principle operating conditions in respective regional markets are as follows:
1. The European market. Revenue from the European market increased by 16% in
2017. ① Products: a. Revenue from refrigerators increased by 37% through high-end products
including the launch of third-generation products of Italian refrigerators, 521-series hinged door
refrigerators; boosted synergies with GEA in the European market, launched GE air-conditioners
targeted at the mid to high-end market in Italy. Household air conditioners and commercial air
conditioners increased by 15% and 29% in 2017, respectively. b. Air-cooled refrigerators with
large capacity, front-loading washing machines with large diameter and direct-drive electric motor
rolled out in the Russian market continued to enhance structure and price, with retail price index
of refrigerators and washing machines amounting to 150% and 130%, respectively; market share
of household air-conditioners ranked No.1 with retail price index reaching 115%. ② Regarding
retailing, the Company established shop-in-shop in important channels and engaged direct sellers
to interact directly with users with a view to enhance operating efficiency; strengthened strategic
cooperation with core channel M.V in the Russian market; expanded chain channels in the region
and commenced comprehensive strategic cooperation with national chain channel SULPAK in
Kazakhstan. ③ Increased productivity and efficiency at local manufacturing base. Production
capability of the refrigerator factory in Russia doubled in 2017; actively capitalized on the
opportunities brought by the national development strategy of ―Belt and Road‖ and started special
railway transport to lower material transportation costs and increase gross profit of products in the
second half of the year; facilitated procurement with localization rate increasing to 65%.
2. South Asian market. The South Asian region continued to grow rapidly in 2017, of which
the Indian market achieved an increase of 40% in revenue, four times higher than the growth in
the industry; revenue from the Pakistan market increased by 42%, four times higher than the
growth in the industry. The market shares of white goods ranked No.1, which was 1.5 times higher
than that of the second largest market participant.
①Adhered to the positioning of high-end products, accomplished branding
transformation and consolidated its position as a branding leader. In the Indian market, the
Company launched mid to high-end and differentiated products covering BM refrigerators,
washing machines featured partition washing functions and variable-frequency air-conditioners
that targeted at local market needs and habits. The market shares of BM refrigerators accounted
for 71% in terms of the same segment, lead to an increase of 19% in the average selling price of
refrigerators and an increase of 50% in revenue. In the Pakistan market, refrigerators offered the
best food preservation experience through the ―TURBO COOLING‖ product program; with the
leading ―A-PAM‖ technology and full DC inverter technologies, and through high-end intelligent
product terminal standardization display, air-conditioner products successfully consolidated its
leading market position and won the favor of customers. ② the Company exerted its efforts in mid
to high-end product marketing, promoted point-of-sales retail transformation. Establishing store
display standardized system, the Company focused on competitive product segments and stores,
strengthened the display of products well-received in the market; enhanced group training for
direct sellers, increased output efficiently per capita. ③ By the end of 2017, Haier Industrial Park
in India was put into production. The production capability of refrigerators, washing machines,
air-conditioners, water heaters increased by 3.8 million units, which will efficiently improve speed
and cater to the needs of the local market.
3. Asia Pacific Region. (1) Japan market: the Company promoted adjustment in channel
structure and product structure to optimize profitability; the AQUA commercial washing machine
was upgraded through an IOT system, the market share of which exceeded 75% in 2017. (2)
Southeast Asia market: ① consolidated product and manufacturing resources in the headquarter,
improved brand image through the launch of glass hinged door refrigerator, T-type four-door
refrigerator, twin drum washing machine, front-loading washing machine, self-cleaning
air-conditioner and other products and optimized product structure and profitability. ② Expanded
local chain channels and established specialty stores channels. ③ Lowered costs through focused
design and promoted lowering of costs through competition mechanism introduced at suppliers
under global procurement platforms; introduced SAP system in Vietnam and Indonesia‘s
manufacturing base to accomplish IT upgrade and standardization in factory operations.
4. Other markets. ① Established whole process synergy mechanism with MABE team in
Latin American market, interacted with the market to enhance product R&D to ensure main
product projects in countries in Latin America so as to successively roll out new products. The
Company entered the largest retail channel ―falabella‖ in the Chilean market to introduce a
product series to the market. ② Middle East and African Market: despite the stagnant economy
and sluggish demand in the region, profitability increased through branding strategy
transformation; launched leading products covering T-door and hinged door refrigerators, DD
direct-drive electric motor front-loading washing machines and other products; initiated agency‘s
strategic transformation from trading to branding; established more than 300 Haier specialty stores
in Nigeria and Saudi Arabia. The implementation of measures mentioned above effectively
enhanced the industry position of the Company in the region. The market shares of T-door
refrigerators increased from 5% in 2016 to 15% in 2017 in Israel, ranking top 3 in the market; the
market shares of refrigerator and washing machine products maintained its leading market
position in Nigeria.
5. GEA’s adoption of the model of RenDanHeYi has helped improve the business’
performance, including: continued strong sales growth in a highly competitive environment, with
GEA outpacing the industry and achieving its highest sales revenues in recent history; share
increases in every product category, with cooking products continuing to hold the leading position
in the industry. GEA share of refrigeration, washing machines, air-conditioners and dishwasher
products has increased by 0.1pts, 0.4pts, 9pts and 0.3pts, respectively.
① With model of RenDanHeYi, GEA shifted its view of users and the marketplace and
restructured into eight product microenterprises that focus on delivering for users and achieving
market-leading goals. The business introduced new profit-sharing approaches to drive
microenterprises success, with team members awarded for achieving leadership with users.
②GEA also is transforming its approach to marketing and branding to know and reach users
better than anyone. The business conducted deep research into consumer behavior and the
identification of target user segments for each of its brands. As a result, GEA is developing a new
mass premium strategy for the Café brand, with plans for a new, iconic look and full-featured
cooktop, door-in-door refrigerator and built-in oven. For the Black Friday holiday event in Nov.
2017, GEA altered its previous strategy. First, it carried out a series of premium brand experience
marketing activities to allow it to adopt a differentiated channel strategy and get closer to the right
customer for each channel. As a result, GEA‘s sales growth for the whole Black Friday week was
twice as that of the whole industry, and sales revenue for GEA‘s brand in the mass premium
channel, increased by 40% compared with the Black Friday in 2016.
Global business synergies released continuously: ① Procurement synergy. In 2017, 261
global synergy projects were conducted, resulting in savings of US$89 million worldwide during
the year. The Company expects total savings from procurement synergies for the period
2016-2019 to exceed expectations. ② R&D synergy. Global R&D collaboration and synergy
projects are focused on four leading principles: product leading, technology leading, efficiency
leading and innovative culture leading. Progress was achieved in each area in 2017 through a
variety of projects and initiatives, including: A. Two Global Product Council Summits resulted in
agreement on 18 global universal product platforms. Of all the product lines, more than 10
products were launched into the market in 2017, and more than 50 products are in R&D progress,
which are estimated to be launched between 2018 and 2019. B. Haier Home Appliances Industry
Group opened an innovation center in the Silicon Valley, developing various disruptive innovation
synergies with Haier‘s global R&D center. C. CVI(Component Value Initiating) system online.
All product component data from GEA, MABE and Fisher & Paykel, along with some data from
Qingdao, is now included in an online CVI system. The system dramatically boosts the global
universality of product components, accelerates R&D process and reduces related procurement
cost. ③ Market synergy. Eight GE Appliances Experience Centers were opened in China in
2017, benefiting from the strength of Haier‘s channel leadership and relationships., Likewise, with
GEA‘s strong commercial relationships in the US Haier has established strategic cooperative
relationships with mainstream large retailer channels like The Home Depot. ④ Manufacturing
synergy. Haier and GEA are working closely together to bring the interconnected factory model
to GEA. With mass-scale customization, GEA could realize zero-distance to users through end-to
end interaction.
(IV) Continuous and stable growth in the logistics business.
The business of Gooday Logistics continued to grow solidly and rapidly in 2017, of which
e-commerce logistics and household furniture logistics both achieved rapid growth. The
e-commerce logistics sector provides warehousing, line-haul transportation and last-mile delivery
and installation services to Tmall platform, JD.com platform and Haier‘s online shopping mall.
While providing customers with integrated supply chain solutions, the Company also enhanced
the capability in value-added businesses such as reverse logistics and maintenance. During the
11.11 Shopping Carnival, Gooday Logistics‘ on-time delivery rate reached 92.7%, which was
higher than the industry average.
Leveraging on the advantage in the field of bulky home appliances and the understanding of
the household furniture industry by Boyol New Brothers, a subsidiary of Gooday Logistics,
Gooday Logistics actively expanded the service capability in household product logistics, and the
revenue of online household furniture sector increased by more than 40% in 2017. We developed
our nationwide household furniture delivery and installation network through franchises,
standardized our service process and provided training for the network, and planned to set up
household furniture logistics centers in Guangdong to provide warehousing and collection services
for customers at the household furniture distribution areas. Shanghai Boyol New Brothers
recorded a growth of 18.4% in revenue during the year. Along with the increase in orders from its
existing major customers such as IKEA and Kohler, Boyol New Brothers also actively expanded
its customer base into household furniture, household chemicals and nutritional products. During
the year, we completed an investment in Shanghai Grand Logistics Co., Ltd. and realized a
controlling shareholding. We also further developed the cold chain logistics and fresh food supply
chain businesses. During the year, Gooday Logistics actively arranged its warehousing and
transportation platforms and tested automatic sorting warehouses for bulky items such as home
appliance products. By the end of 2017, the total area of the warehouses amounted to 3.60 million
square meters. Targeting the bulky home appliances market, Gooday Logistics is exploring the
automated warehouse in the country in order to have differentiated competitiveness in the aspects
of smart equipment, smart management and smart services and set up the industry standards for
bulky goods logistics.
(V) The core capability of U+ SmartLife platform secured its leading position, and the
effective implementation of smart scenes contributed to substantial growth in platform scale.
① Continued to carry out technological innovation, standardized output, and enhance
product experience in smart household appliances sector. In 2017, UHomeOS was approved by
the authorities as a CIB project, becoming the only CIB project with IOT security operating
system in the industry; the U+ IoT platform passed EAL3 security certificate, the IOT security of
which was approved; launched the first AI voice solution program and open platform in the
industry, realizing voice interconnectivity and coherent experience; Haier took the leading role in
the formulation of IEC/MSB first AI standard white paper, providing strategic guidance for
industry development, accelerating the integration of AI and the industry and forming global AI
standard. ② Pioneered in the global market to launch the complete set of smart household
appliances equipped with interconnected features of whole-scenes, providing users with more than
200 smart home scenes covering four spaces of living room, kitchen, bathroom and bedroom.
Released Store, the first scene of smart home to make it more convenient for users to customize
their own scene solutions on the U+ app. In 2017, the number of devices on the U+ SmartLife
platform underwent a breakthrough in growth, the sales of which achieved a growth of 100%. The
accumulated number of user access devices on the platform exceeded 20 million, becoming the
largest IOT platform in the smart home industry. ③ Promoted the establishment of ecosystem and
sought opportunities for business model transformation, such as the transformation of the smart
kitchen ecosystem from IOT food management to household health; created extreme washing
experience for users in the washing ecosystem with a view to accomplishing the upgrade from
smart control to the internet of clothes ecosystem.
(VI) Promoted the establishment of COSMOplat and accelerated smart manufacturing
transformation.
During the reporting period, the Company actively promoted the transformation of the
internal supply chain system from inventory production to user production. In 2017, the Company
developed Huangdao Smart Kitchen Interconnected Factory with the total number of 9 connected
factories, which in turn enhanced the capability and ecosystem of interconnectivity during the
whole process and improved operating efficiency of the supply chain; the rate for products without
being stored reached 69% and the order delivery cycle shortened to 50%, thereby achieving high
efficiency in a precise manner.
Strengthened the development of the smart manufacturing industry: Acquired Fisher &
Paykel Appliances Holdings Limited (―PML‖), integrated mutual resources and created a smart
equipment business platform; incorporated COSMOline developed by PML into COSMOplat and
encouraged its establishment and promotion. In February 20118, COSMOplat was approved by
authorities as the first industrial internet demonstration platform at a national level to accomplish
cross-industry and cross-field expansion and services; based on 9 interconnected factories. The
Company copied the model to 12 industries and 11 regions to accelerate the transformation and
upgrade of manufacturing corporations in China to commence smart manufacturing with a view to
lead the trend of smart manufacturing in the future.
II. Principle operating conditions during the reporting period
Please refer to relevant information contained in this Section headed ―I. DISCUSSION AND
ANALYSIS OF OPERATIONS‖.
(I) Analysis of principal business
Table of movement analysis on the related items in income statement and cash flow
statement
Unit and Currency: RMB
Items Corresponding
Current period Change (%)
period of last year
Operating revenue 159,254,466,909.46 119,132,261,662.60 33.68
Operating cost 109,889,621,609.45 82,166,530,321.02 33.74
Sales expense 28,276,014,979.78 21,254,103,195.32 33.04
Administration expenses 11,133,225,318.88 8,404,150,036.49 32.47
Financial expenses 1,392,872,274.21 720,408,216.53 93.34
Net cash flows generating from 97.72
16,086,588,028.31 8,135,878,351.88
operating activities
Net cash flows generating from 85.81
-5,621,820,618.20 -39,625,802,967.02
investing activities
Net cash flows generating from -96.91
922,886,793.22 29,849,765,650.55
financing activities
Loss of impairment on assets 655,916,881.23 490,548,371.52 33.71
Income from change in fair value 614,071,259.47 94,648,076.07 548.79
Income from disposal of assets 10,764,209.65 231,246,918.49 -95.35
Other income 908,561,990.40
Non-operating income 692,963,237.76 1,170,564,378.20 -40.8
Analysis of the relatively significant changes in indicators is as follows:
1) Operating revenue increased by 33.68% as compared with the corresponding
period, which was mainly due to the endogenous growth of the original business of the
Company and revenue contribution from GEA acquired by the Company;
2) Operating cost increased by 33.74% as compared with the corresponding period,
which was mainly due to the growth in sales that resulted in the corresponding increase in
costs;
3) Loss of impairment on assets increased by 33.71% as compared with the
corresponding period, which was mainly due to an increase in inventory impairment balance
at the end of the year;
4) Income from change in fair value increased by 548.79% as compared with the
corresponding period, which was mainly due to the impact from the change in fair value of
derivative financial instruments such as forward exchange contract;
5) Income from disposal of assets decreased by 95.35% as compared with the
corresponding period, which was mainly due to disposal of assets occurred more last year
than this year;
6) Other income increased by 100% as compared with the corresponding period,
which was mainly attributable to the implementation of the Accounting Standards for
Business Enterprises No. 16 - Government grants (2017 Revision) at the time, as requested
by the MOF during the year. Government grants included in current profit or loss and related
to daily operation in 2017 were recognized in other income, while such item was not restated
in the comparative financial statement of 2016;
7) Non-operating income decreased by 40.8% as compared with the corresponding
period, which was mainly attributable to the implementation of the Accounting Standards for
Business Enterprises No. 16 - Government grants (2017 Revision) at the time, as requested
by the MOF during the year. Government grants included in current profit or loss and related
to daily operation in 2017 were recognized in other income, while such item was not restated
in the comparative financial statement of 2016.
(1). Operating activities by industries, products and regions
Unit and Currency: RMB0‘000
Principle operating activities by products
Gross
profit
Gross Operating Operating cost
margin
Operating Operating profit revenue increased/
By product increased
Revenue cost margin increased/decre decreased yoy
/
(%) ased yoy (%) (%)
decreased
yoy (%)
Decreased
Air-conditioners 2,874,455.50 1,960,798.49 31.79 53.91 55.05 by 0.50 pct
pts
Refrigerators 4,711,359.49 3,198,458.88 32.11 29.95 31.84 Decreased
by 0.97 pct
pts
Decreased
Kitchenware and
2,856,036.26 1,720,507.33 39.76 50.21 53.78 by 1.40 pct
sanitary ware
pts
Increased
Washing
3,089,540.91 1,990,340.38 35.58 31.58 29.70 by 0.94 pct
machines
pt
Decreased
Equipment
302,483.38 283,388.23 6.31 14.09 14.98 by 0.72 pct
components
pts
Channel
Decreased
integrated
2,038,758.31 1,830,188.76 10.23 10.21 13.69 by 2.75 pct
services business
pts
and others
Principle operating activities by regions
Gross
profit
Operating
Operating cost margin
revenue
Gross increased/ increased
increased/
Operating Operating profit decreased /decrease
Region decreased
revenue cost margin when d when
when compared
(%) compared with compared
with last
last year (%) with
year (%)
last year
(%)
Decreased
Mainland China 9,168,668.15 6,235,336.38 31.99 28.34 28.89 by 0.29 pct
pts
Increased
Other
6,703,965.70 4,748,345.69 29.17 42.23 41.21 by 0.51 pct
countries/regions
pts
Information on operating activities by industries, products and regions
□Applicable √Not Applicable
(2). Analysis of production and sales
√Applicable □ Not Applicable
Main Production Inventory
Sales volume
Products Sales increased/ increased/
Production Inventory increased/decreased
(10k units volume decreased decreased
yoy (%)
/set) yoy (%) yoy (%)
Home 6,566 8,193 1,227 23.07 24.42 51.29
appliance
(3). Analysis of cost
Unit: RMB0‘000
Sub-industry
% as of % as of Changes
Component
Sub-industry 2017 total 2016 total in amount Remark
of cost
cost cost (%) s
Raw
7,625,896.27 85.97 5,450,795.44 85.92 39.90
materials
Household
Labor 614,318.47 6.93 406,834.63 6.41 51.00
electric
Depreciation 163,758.71 1.85 137,048.97 2.16 19.49
appliance
Energy 39,436.93 0.44 49,489.27 0.78 -20.31
industry
Others 426,694.69 4.81 299,852.54 4.73 42.30
Other information on Analysis of cost
□Applicable √Not Applicable
(4). Major customers and major suppliers
√Applicable □ Not Applicable
Revenue from the top five customers was RMB31,831.3952 million, representing 20.0% of
the total sales for the year; among the revenue from the top five customers, the revenue from
related parties was 0, representing 0% of the total sales for the year.
The purchase amount from the top five suppliers amounted to RMB36,745.4741 million,
representing 24.6% of the total purchase amount for the year; among the purchase amount from
the top five suppliers, the purchase amount from related parties was RMB26,177.0483 million,
representing 17.5% of the total purchase amount for the year.
1. Expenses
√Applicable □ Not Applicable
1) Selling expenses increased by 33.04% compared with the corresponding period, which
was mainly due to the inclusion of selling expenses of GEA (the corresponding period only
included the selling expenses of GEA during the period from 6 June to 30 June 2016);
2) Administration expenses increased by 32.47% compared with the corresponding period,
which was mainly due to the inclusion of selling expenses of GEA (the corresponding period
only included the selling expenses of GEA during the period from 6 June to 30 June 2016);
3) Financial expenses increased by 93.34% compared with last year, which was mainly due
to the increase of the average balance of borrowings for the year as compared with the
corresponding period of last year.
2. R&D expenditure
Table of R&D expenditure
√Applicable □ Not Applicable
Unit: RMB
R&D expenditure 4,334,471,020
Capitalized R&D expenditure 254,515,080
Total R&D expenditure 4,588,986,100
Total R&D expenditure as a percentage in operating revenue (%) 2.88
Number of R&D personnel 11,301
Number of R&D personnel as a percentage in total employees (%) 14.70
Proportion of capitalization of R&D expenditure (%) 5.55
Information on R&D expenditure
□Applicable √Not Applicable
3. Cash flows
√Applicable □ Not Applicable
1) Net cash flow from operating activities increased by 97.72% from the corresponding
period, which was mainly due to an increase in revenue and enhancement in supply chain
management this year;
2) Net cash flow from investing activities decreased by 85.81% from the corresponding
period, which was mainly due to higher payment for acquisition of GEA during the
corresponding period last year;
3) Net cash flow from financing activities decreased by 96.91% from the corresponding
period, which was mainly due to substantial debt financing for acquisition of GEA during the
corresponding period last year but decreased this year.
(II) Explanation of non-operating business leading to significant changes in profit
□Applicable √Not Applicable
(Ⅲ)Analysis of assets and liabilities
√Applicable □ Not Applicable
1. Assets and liabilities
Unit: RMB0‘000
As a As a
percentage percentage
Change in
As the end of of As the end of of
Items percentage Remarks
2017 total assets 2016 total
yoy
in assets in
(%)
2017 (%) 2016 (%)
Cash Capital 3,517,727.69 23.22 2,358,223.90 17.94 49.17
Financial assets
measured at fair
value with change 2,068.17 0.01 8,043.24 0.06 -74.29
included in current
profit and loss
Interest receivable 20,363.75 0.13 13,531.98 0.10 50.49
Dividend receivable 452.45 0.00 10,164.89 0.08 -95.55
Inventories 2,150,352.48 14.20 1,528,490.43 11.63 40.68
Other current assets 438,976.00 2.90 265,746.22 2.02 65.19
Other non-current
125,406.42 0.83 85,846.14 0.65 46.08
assets
Short-term
1,087,858.03 7.18 1,816,553.19 13.82 -40.11
borrowing
Bills payable 1,637,869.97 10.81 1,240,488.98 9.44 32.03
Interests payable 5,765.65 0.04 3,057.03 0.02 88.60
Bonds payable 621,108.84 4.10 100.00
Deferred income 49,714.11 0.33 34,282.56 0.26 45.01
Deferred income tax
27,911.46 0.18 13,324.31 0.10 109.48
liabilities
Other non-current
117,093.68 0.77 58,278.51 0.44 100.92
liabilities
Other equity
43,142.45 0.28 100.00
instruments
Capital reserve 82,688.31 0.55 8,338.32 0.06 891.67
Treasury stock 104.20 0.00 -100.00
Other
comprehensive -3,636.38 -0.02 56,698.74 0.43 -106.41
income
Other explanations
1) Cash Capital increased by 49.17% as compared with the beginning of the year, which
was mainly due to an increase in net cash flows from operating activities during the year;
2) Financial assets measured at fair value and its change included in profit or loss for the
period decreased by 74.29% as compared with the beginning of the year, which was mainly
due to the change in fair value of derivative financial instruments such as exchange contracts
for the year;
3) Interests receivable increased by 50.49% as compared with the beginning of the year,
which was mainly due to the increase of interest of wealth management products recognized
but yet received for the year;
4) Dividend receivable decreased by 95.55% as compared with the beginning of the year,
which was mainly attributable to the declared and unpaid dividend by participating
companies received during the year;
5) Inventories increased by 40.68% as compared with the beginning of the year, which was
due to concentrated stock preparation by the Company based on the order and future
estimates at the end of the year;
6) Other current assets increased by 65.19% as compared with the beginning of the year,
which was mainly due to new wealth management products for the year;
7) Other non-current assets increased by 46.08% as compared with the beginning of the
year, which was mainly due to the change in fair value of forward exchange contracts held by
the Company at the end of the year;
8) Short-term borrowings decreased by 40.11% as compared with the beginning of the year,
which was mainly due to repayment of certain borrowings by the Company during the year;
9) Bills payable increased by 32.03% as compared with the beginning of the year, which
was mainly due to substantial procurement made by the Company at the end of the year
based on the order and future expectations;
10) Interests payable increased by 88.6% as compared with the beginning of the year,
which was mainly due to the increase of interest which has been provided but not paid;
11) Bonds payable increased by 100% as compared with the beginning of the year,
which was mainly due convertible bonds issued by the Company during the year that were
attributable to liabilities;
12) Deferred income increased by 45.01% as compared with the beginning of the year,
which was mainly due to the increase of government grants related to assets for the year;
13) Deferred income tax liabilities increased by 109.48% from the beginning of the
year, which was mainly due to the increase of reserved foreign enterprise income tax;
14) Other non-current liabilities increased by 100.92% as compared with the beginning
of the year, which was mainly due to the increase in the repurchase obligations of minority
interest and the decrease in change in fair value of hedging instruments;
15) Other equity instruments increased by 100% as compared with the beginning of the
year, which was mainly due to exchangeable bonds issued by the Company this year that
were attributable to equity;
16) Capital reserve increased by 891.67% from the beginning of the year, which was
mainly due to changes in other owners‘ equity for investee accounted for using the equity
method during the year on prorate basis by the Company;
17) Treasury stock decreased by 100% as compared with the beginning of the year,
which was mainly due to the cancellation of restricted shares by the Company for the year.
18) Other comprehensive income decreased by 112.59% as compared with the
beginning of the year, which was mainly due to the decrease of other comprehensive income
to be subsequently reclassified into profit or loss and changes in translation reserve.
2. Restrictions on major assets at the end of reporting period
□Applicable √Not Applicable
3. Other explanations
□Applicable √Not Applicable
(IV) Analysis on industry operating information
□Applicable √Not Applicable
(V) Analysis on investment
1. Overall analysis on external equity investment
√Applicable □ Not Applicable
During the reporting period, investments in external significant equities of the Company
amounted to RMB856 million.
Name of Principle Percentage Amount Amounted
Remarks
company operating of of Invested
invested activities the investment (RMB 100
equity (RMB 100 million)
interest million)
of
the
company
invested
(%)
Manufacturing
of automatic
and customized For details, please refer to the
Fisher & intelligent Announcement on the Transfer of the
Paykel equipment and 100% Equity of Fisher & Paykel
Production offering Production Machinery Limited by
100 3.31
Machinery businesses such Qingdao Haier Co., Ltd. and
Limited as solutions for Connected Transaction disclosed on
(―PML‖) the 21 June 2017 as well as relevant
management announcement of the Board.
system of
factories
For details, please refer to the
Announcement on the Transfer of
Qingdao Communication
Certain Equity of Qingdao Haier
Haier equipment,
Multi-media Co., Ltd. (青岛海尔多
Multi-media home
20.20 媒体有限公司) by Qingdao Haier 5.25
Co., Ltd. (青 appliances,
Co., Ltd. and Capital Increase and
岛海尔多媒 R&D, sales,
Connected Transaction disclosed on
体有限公司) etc.
28 February 2017 as well as relevant
announcement of the Board.
For details, please refer to the
Announcement on the Subscription
of Capital Increase of Haier Group
Haier Group
Finance Co., Ltd. by Qingdao Haier
Finance Co., Financing 42 2.10 2.10
Co., Ltd. and Connected Transaction
Ltd.
disclosed on 31 October 2017 as well
as relevant announcement of the
Board.
(1) Significant equity investment
√Applicable □ Not Applicable
Please refer to the content in ―1. Overall analysis on external equity investment‖ as set out
above.
(2) Significant non-equity investment
□Applicable √Not Applicable
(3) Financial assets measured at fair value
√Applicable □ Not Applicable
Current
Investment Changes in
purchase/
income fair value
Financial assets measured Initial cost of Sources of sale during
during the during the
at fair value investment funds the
reporting reporting
reporting
period period
period
Bank of Communications
1,803,769.50 Own funds 369,851.42 599,390.88
(601328)
BAILIAN (600827) 154,770.00 Own funds -34,267.56
Eastsoft (300183) 18,713,562.84 Own funds -4,299,273.00
Others 2,267,603.59 Own funds -91,193.43 364,636.08
Forward foreign exchange
49,335,869.06 614,071,259.47
contract
Total 22,939,705.93 -91,193.43 49,705,720.48 610,701,745.87
Note: As of 31 December 2017, the aggregate balance of foreign exchange derivative transactions
amounted to approximately US$3.2 billion.
(VI) Material Assets and Equity Disposal
□Applicable √Not Applicable
(VII) Analysis on Major Controlling Companies
√Applicable □ Not Applicable
Unit: RMB0000
Name of company Scope of business Total assets Net assets Net Profit
Haier Electronics Group Co., Production and sale
4,336,823 2,302,911 358,169
Ltd. of home appliances
Haier US APPLIANCE Shareholding in
4,643,124 1,504,903 189,598
SOLUTIONS, INC. GEA
Qingdao Haier Technology Co., Software and IT
111,871 99,640 77,104
Ltd. services
Note: The financial data of Haier Electronics Group Co., Ltd. is determined in accordance
with the accounting standards in the PRC and the accounting policies of the Company.
(VIII) Information on the Main Structure Controlled by the Company
□Applicable √Not Applicable
Ⅲ. Discussion and Analysis on the Future Development of the Company
(Ⅰ) General Conditions and Trends of the Industry
√Applicable □ Not Applicable
For details, please refer to ―Section III SUMMARY OF THE COMPANY‘S BUSINESS‖ in
this report.
(Ⅱ) Development Strategy of the Company
√Applicable □ Not Applicable
After more than 30 years of development, the Company has become into a global enterprise
with a dozen of world-class brands. The Company will promote its global market share and
operational efficiency by promoting the ―global user-oriented and multi-brand synergic
cooperation‖ through the ―global triple layout for the solution of best experience for users‖. In the
face of the opportunities and challenges in the IOT era, the Company will drive the transformation
from electric appliance to Internet appliance and further to website based on the orientation of
―building the ecological platform for smart homes in the IOT era,‖ and meet consumers‘ needs for
customized high-quality life through the implementation of Haier‘s smart homes. On the model of
RenDanHeYi, the Company continued to drive the global transformation in order to establish a
global system with small and micro-organizations as basic units, leading the explosive growth
globally.
(Ⅲ) Operation Plan
√Applicable □ Not Applicable
The Company will grasp the industry trend and lead the industry consumption upgrade
through product iterations in order to maintain the leading position of the global white home
appliance industry, and continue to strengthen the development of air-conditioner industry and
kitchen appliance industry, while maintaining leading advantages in the refrigerator and washing
machine and water heater industry. Focusing on Haier‘s smart homes, the Company will promote
the implementation of the full scene smart & customized solution package of ―4+7+N‖ in the
market to customize a high-quality life for consumers and promote the transformation of the
Company.
(I) Domestic market:
The Company aims to improve its differentiated competitiveness in the domestic market in
terms of brand, network as well as market models, and expand its leading edge. ① The Company
will accelerate the development of the Casarte brand and achieve a leading position of high-end
brands;② The Company aims to improve the differentiated competitiveness of town and
country-level networks, promote the transformation of service providers from ―wholesale to
service‖, make goals, activities, resources, personnel available for stores through information tools
such as Yilihuo, achieve a leading service capacity at town and country-level and establish a
platform mechanism to serve the town and country-level network; ③ The Company will promote
the implementation of smart home resolutions featured by package design, package sales and
service in building materials & home improvement, chain, specialty stores and other channels so
as to transform from selling products to selling solutions.
(II) Overseas market:
The Company aims to focus on branding and sustainable profitability and continue to
stimulate micro vitality through the implementation of localization of the model of RenDanHeYi.
① The Company aims to continue to pursue a high-end differentiated product strategy, increase
the proportion of high-end products and increase profitability. ② The Company aims to
continuously enhance the global supply chain layout, increase the proportion of local
manufacturing of products and improve the localization planning R&D capability, with an aim to
quickly meet the market demand. ③ The Company aims to achieve retail transformation of
service-oriented from overstock of policy-oriented, focus on mid-to-high end, strengthen
point-of-sales construction, enhance channel operation capabilities and optimize the retail network
layout in order to ensure business development.
(III) U+ SmartLife platform:
The Company aims to focus on the large-scale implementation of Haier‘s smart homes, and
strengthen its user interactive entrance, IoT+AI empowering scene experience and user service
scene customization. ① The Company aims to upgrade interactive entrance, enrich users‘
interactive entrance and modes to realize distributed multi-model interactive entrance that
supports app operation and control, voice interaction, touch interaction, and multi-screen
interaction. The Company will upgrade the U+ app to enhance the personalized experience of the
whole house smart scene. ② The Company aims to conduct an update of the platform engine to
realize smart IOT through the IoT + AI dual-engine empowerment, as well as smart active
services based on the combination of network big data and small data of users, upgrading user
experience of smart home appliances product. ③ The Company aims to be engaged in
customer-centric service scene customization, including customized interaction, customized scene
and customized services, in order to lead smart homes into the era of full scene service
customization.
(IV) Interconnected factories and creative convergence customization:
1. Interconnected factories: The Company aims to reorganize Haier‘s smart manufacturing
assets and business to turn the COSMOplat into a new industry of smart manufacturing ecological
services and provide overall solutions of transformation and upgrading in respect of smart
manufacturing for external enterprises.
2. The Company aims to promote the automation of the Company‘s own supply chain system,
the integration of information facilities and on-site implementation, and further improve the
efficiency of mass customization in its interconnected factories.
(V) Logistics business:
The Company aims to promote the construction of smart warehouse and delivery of
large-format logistics, improve the operational efficiency of warehousing, conduct more in-depth
expansion of product category in the large-format market, and build the end-to-end large-format
logistics network with most extensive coverage and deepest penetration in China.
(Ⅳ) Potential risks
√Applicable □ Not Applicable
1. Risk of soft demand due to a slowdown in macro-economic growth. As white home
appliance products fall into the category of durable consumer electronic products, the income level
and expectation on future income growth will have an effect on the purchase of white home
appliance. In the event of a slowdown in the macro economic growth, which will decrease the
purchasing power of consumers, growth of the industry will be adversely affected. In addition,
uncertainties from the real estate market will have some negative effect on market demand, which
will in turn have some indirect effect on demand for home appliance products.
2. Price war risk caused by intensifying industry competition. In a long run, the market
concentration of white home appliance industry continues to rise, but in short-term, due to the
imbalance between supply and demand caused by high capacity generated from industry
expansion and decreasing of industry demand in recent years, the industry inventory amount rises.
Under the background of product homogeneity, price war will become a short-term approach to
increase its market share.
3. Risk of rise in cost. Bulk raw materials such as copper, aluminum, steel plate, and
oil-related plastic particles and foam materials account for a large proportion in the cost of white
home appliance production. The Company will endure more cost pressure if price of raw material
continues to rise.
4. Operating risk in overseas market. The Company has set up several production bases,
research and development centers and marketing centers in a number of countries around the
world, leading to the continuous rise of overseas business. As the overseas market is subject to the
impact of local political and economic situation, legal system and supervisory system, significant
changes of such factors would pose risks to the Company‘s operation locally.
5. Risk of fluctuation in foreign currency exchange rate. Significant fluctuations in exchange
rates may not only have an adverse impact on the Company's exports, but may also result in an
exchange loss and an increase financial costs.
(V) Others
√Applicable □Not Applicable
Future capital expenditure plan: In 2018, the Company‘s investment will focus on the
research and development of leading technologies and modules, the construction of smart
interconnected factories at home and abroad, the construction of complete set of smart home
experience stores, and the investment and construction of U+ SmartLife and 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, equity financing and bond financing.
IV. Explanation of circumstances and reasons for non-disclosure by the Company in
consideration of inapplicable regulations, state secrets and commercial secretes
□Applicable √Not Applicable
Section V SIGNIFICANT EVENTS
I. Proposal for Profit Distribution of Ordinary Shares or Capital Reserve Conversion into
the Increase in Share Capital
(Ⅰ) Formulation, implementation or adjustment of the cash dividend policies
√Applicable □ Not Applicable
The Company‘s 2016 profit distribution plan was passed on its Annual General Meeting held
on 28 June 2017: based on the Company‘s total existing shares of 6,097,402,727, it is proposed
that the Company will distribute cash dividends of RMB2.48 (tax inclusive) per 10 shares to all
shareholders, with a total expected amount before tax of RMB1,512,155,876.30. The plan has
been implemented and completed in August 2017. Details are set out in the Announcement of
Qingdao Haier Co., Ltd. on the Implementation of Interests Distribution for 2016 (No. L 2017-026)
published by the Company on the four major securities newspapers and the website of Shanghai
Stock Exchange on 26 July 2017.
The Company has always applied the sustainable profit distribution policy. During the
reporting period, the Company strictly followed the requirements set out in the Articles of
Association and formulated the ―Shareholder Return Plan for the Next Three Years (2015-2017)‖.
During the formulation of the profit distribution plan, the Company took full account of return for
investors, the long-term interests of the Company, overall interests of all shareholders and
sustainable development of the Company, and provided investors an opportunity to share the
growth of value, so that investors could form the expectation of a stable return. The procedures
and mechanisms for decision-making such as Articles of Association and planning system of
return of shareholders were complete in compliance with laws and regulations. The process was
open and transparent while the standard and ratio of dividends was clear. Responsibilities of
independent directors were clear during the policy-making process, and independent directors
were given the opportunities to play their roles. Minority shareholders were also given the
opportunity to fully express their views and demands, and the legitimate interests of minority
shareholders were adequately protected.
The dividend distribution plan of 2017 of the Company: based on the total shares as at the
date of profit distribution, it is proposed that the Company will distribute cash dividend of
RMB3.42 per 10 shares (tax inclusive) with expected cash dividend of RMB2,085,311,732.63.
The remaining reserved profits were carried forward to the next year. The amount of this
distribution totally accounts for 30.11% of the net profit attributable to parent company of the
Company in 2017. All dividend of bonus scheme is paid in cash.
(Ⅱ) Plans or Proposals for Dividends of Ordinary Shares Distribution and for Capital
Reserve Conversion into Share Capital of the Company in Recent Three Years (Including
the Reporting Period)
Unit and Currency: RMB
Percentage of
Net profit the net profit
Cash
Number Number attributable to attributable to
dividend shareholders of
of bonus of shares the ordinary
per 10 ordinary shares of shareholders
share for converted Cash dividend
Year shares the Company in of the
per 10 per 10 (tax inclusive)
(RMB) the consolidated Company in
shares shares financial statement the
(tax
(share) (share) during the year of consolidated
inclusive)
financial
distribution
statement (%)
2017 0 3.42 0 2,085,311,732.63 6,925,792,321.27 30.11
2016 0 2.48 0 1,624,803,749.32 5,036,652,240.84 32.26
2015 0 2.12 0 1,340,094,420.82 4,300,760,542.82 31.16
(Ⅲ) Share Repurchased by Cash and Included in Cash Dividend
□ Applicable √Not Applicable
(Ⅳ) The Company made profits and the profits for distribution to the shareholders of
ordinary shares of the Parent Company was positive during the reporting period, but no
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
II. Performance on Undertakings
(I) The undertakings made by the actual controllers, shareholders, related parties, acquirer as well as the Company and
other relevant parties during or up to the reporting period
√Applicable □ Not Applicable
Performed
A deadline in a
Background Type Covenanter Content Date and term for timely
performance and strict
way
During the period from September 2006 to May 2007, the Company issued shares
to Haier Group Corporation (―Haier Group‖) to purchase the controlling equity in
its four subsidiaries, namely Qingdao Haier Air-Conditioner Electronics Co., Ltd.
(青岛海尔空调电子有限公司), Hefei Haier Air-conditioning Co., Limited (合肥
海尔空调器有限公司）, Wuhan Haier Electronics Co., Ltd. (武汉海尔电器股份
Eliminate the 有限公司), and Guizhou Haier Electronics Co., Ltd. (贵州海尔电器器有限公司).
Undertaking 27 September
right defects With regard to the land and property required in the operation of Qingdao Haier
related to Haier Group 2006,
in land Air-Conditioner Electronics Co., Ltd. ( 青岛海尔空调电子有限公司) , Hefei YES YES
significant Corporation long
property and Haier Air-conditioning Co., Limited (合肥海尔空调器有限公司), and Wuhan term
reorganization
etc. Haier Electronics Co., Ltd. (武汉海尔电器股份有限公司) (the ―Covenantees‖),
Haier Group made an undertaking (the ―2006 Undertaking‖). According to the
content of 2006 Undertaking and current condition of each Covenantee, Haier
Group will constantly assure that Covenantees will lease the land and property
owned by Haier Group for free. Haier Group will make compensation in the event
that the Covenantees suffer loss due to the unavailability of such land and property.
Haier Group Corporation undertakes that it will assure Qingdao Haier and its
subsidiaries of the constant, stable and unobstructed use of the leased property. In
the event that Qingdao Haier or any of its subsidiaries suffers any economic loss
due to the fact that leased property has no relevant ownership certificate, Haier
Group Corporation will make compensation to impaired party in a timely and
sufficient way and take all reasonable and practicable measures to support the
impaired party to recover to normal operation before the occurrence of loss. Upon
the expiration of relevant leasing period, Haier Group Corporation will grant or
take practicable measures to assure Qingdao Haier and its subsidiaries of priority
to continue to lease the property at a price not higher than the rent in comparable
Eliminate the market at that time. Haier Group Corporation will assure Qingdao Haier and its
right defects subsidiaries of the constant, stable, free and unobstructed use of self-built property 24 December
Haier Group
in land and land of the Group. In the event that Qingdao Haier or any of its subsidiaries 2013 YES YES
Corporation
property and fails to continue to use self-built property according to its own will or in original long term
etc. way due to the fact that self-built property has no relevant ownership certificate,
Haier Group Corporation will take all reasonable and practicable measures to
Undertaking eliminate obstruction and impact, or will support Qingdao Haier or its affected
related to subsidiaries to obtain alternative property as soon as possible, if Haier Group
refinancing Corporation anticipates it is unable to cope with or eliminate the external
obstruction and impact with its reasonable effort. For details, please refer to the
Announcement of Qingdao Haier Co., Ltd. on the Formation, Current Situation of
the Defective Property, the Influence on Operation of Issuer Caused by
Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L
2014-005) published by the Company on the four major securities newspapers and
the website of Shanghai Stock Exchange on 29 March 2014.
The Company undertakes that it will eliminate the property defects of the
Company and main subsidiaries within five years with reasonable business effort
Eliminate the since 24 December 2013, so as to achieve the legality and compliance of the
right defects Qingdao Company and main subsidiaries in terms of land and property. For details, please 24 December
in land Haier Co., refer to the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current 2013 YES YES
property and Ltd. Situation of the Defective Property, the Influence on Operation of Issuer Caused by five years
etc. Uncertainty of Ownership, Solution for the Defect and Guarantee Measures (L
2014-005) published by the Company on the four major securities newspapers and
the website of Shanghai Stock Exchange on 29 March 2014.
Undertaking Qingdao With regard to its share option incentive scheme, the Company has undertaken not 11 April 2014,
related to the Haier Co., to provide loan or any other kind of financial support to incentive object in long term
share option Other Ltd. exercising option under the share option incentive scheme or purchase of restricted YES YES
incentive shares, including providing guarantee for its loan.
scheme
Inject the assets of Fisher & Paykel to the Company or dispose such assets through
other ways according to the requirements of the domestic supervision before June
Other Asset Haier Group 2020. For more details, please refer to the Announcement of Qingdao Haier Co., May 2015-June
YES YES
undertakings injection Corporation Ltd. on the Changes of Funding Commitment (L 2015-015) published on the four 2020
major securities newspapers and the website of Shanghai Stock Exchange on 26
May 2015.
Inject the assets of Haier Photoelectric to the Company or dispose such assets December
through other ways according to the requirements of the domestic supervision 2015-June
Other Asset Haier Group before June 2020. For more details, please refer to the Announcement of Qingdao 2020
YES YES
undertakings injection Corporation Haier Co., Ltd. on the Changes of Funding Commitment of Haier Group
Corporation (L 2015-063) published on the four major securities newspapers and
the website of Shanghai Stock Exchange on 23 December 2015.
In December 2015 and January 2016, the meeting of the Board of Directors and
general meeting of the shareholders considered and approved the matters in
relation to the acquisition of minority equity interest of Mitsubishi Heavy
Industries Haier and Carrier Refrigeration Equipment held by Haier Group. The
Company signed the Profit Compensation Agreement with Haier Group to forecast
Profit December
Other Haier Group the profits achieved by the aforementioned two companies in 2015-2018. If the
forecast and 2015-Decembe YES YES
undertakings Corporation profits are not reached during the commitment period, the difference part will be
compensation r 2018
made up to the Company by Haier Group in cash. For more details, please refer to
the Announcement of Qingdao Haier Co., Ltd. on the Acquisition of Equity in
Sino-foreign Joint Venture Held by Haier Group Corporation and Related-party
Transaction (L 2015-062) published on the four major securities newspapers and
the website of Shanghai Stock Exchange on 23 December 2015.
(II) The Company’s explanation on whether the earnings estimate on assets or projects was met and
its reasons in the situation that earnings in the Company’s assets or projects is estimated, and the
period of which includes the reporting period.
□Reached √Not reached □Not Applicable
In December 2015 and January 2016, the meetings of the Board of Directors/Shareholders of the
Company reviewed and approved related resolutions to acquire 45% equity of Mitsubishi Heavy Industries
Haier (Qingdao) Air Conditioner Co., Ltd. (hereinafter referred to as ―Mitsubishi Heavy Industries Haier‖)
and 49% equity of Qingdao Haier Carrier Refrigeration Equipment Co., Ltd. (hereinafter referred to as
―Haier Carrier‖) held by Haier Group Corporation. According to the Profit Compensation Agreement
signed between the Company and Haier Group, the corresponding predictive net profit from 2015 to 2018
of Mitsubishi Heavy Industries Haier are RMB90.66 million, RMB92.86 million, RMB100.66 million and
RMB108.69 million, respectively and the corresponding predictive net profit from 2015 to 2018 of Haier
Carrier are RMB76.05 million, RMB76.05 million, RMB76.72 million, and RMB76.98 million
respectively. If the audited net profit in any year of the target companies during the commitment period is
lower than the predictive net profit, the gap will be compensated by Haier Group in cash (For more details,
please refer to the Announcement of Qingdao Haier Co., Ltd. on the Acquisition of Equity in Sino-foreign
Joint Venture Held by Haier Group Corporation and Related Party Transaction (L 2015-062) published on
the four major securities newspapers and the website of Shanghai Stock Exchange on 23 December 2015).
According to the Special Verification Report on the Completion of the Predictive Profit [―Hexin
Zhuan Zi (2018) No.000076‖ and ―Hexin Zhuan Zi (2018) No. 000077‖] and Special Statement of
Qingdao Haier Co., Ltd on the Completion of the Predictive Profit in 2017 issued by Shandong Hexin
Accountants LLP, the actual net profit of Mitsubishi Heavy Industries Haier in 2017 was RMB157.62
million，cumulative net profit of RMB369.98 million in 2015 to 2017,the actual net profit exceeded the
Predictive Profit; the actual net profit of Haier Carrier was RMB10.38 million, cumulative net profit of
RMB 162.97 million in 2015 to 2017.The gap between the actual net profit and the predictive profit has
been made up to the Company by Haier Group in cash.
III. Misappropriation and repayment plan of funds during the reporting period
□ Applicable √Not Applicable
IV. Explanation of the Company on the “non-standard audit report” issued
by the accounting firm
□ Applicable √Not Applicable
V. Explanation of the Company’s analysis on reasons and effects of changes in accounting policies
and accounting estimates or correction of significant accounting errors
(I) Explanation of the Company’s analysis on reasons and effects of changes in accounting policies
and accounting estimates
□ Applicable √Not Applicable
(II) Explanation of the Company’s analysis on reasons and effects of correction of significant
accounting errors
□ Applicable √Not Applicable
(III) Communication with former accounting firm
□ Applicable √Not Applicable
(IV) Other explanations
√Applicable □ Not Applicable
In 2017, the Ministry of Finance issued the Accounting Standards for Business Enterprises No. 42 –
Non-current Assets Held for Sale, Disposal Groups and Discontinued Operations, effected on 28 May
2017. The non-current assets held for sale, disposal groups and discontinued operations existing on the
date of the implementation shall be handled with prospective application method. The Ministry of Finance
also revised the Accounting Standard for Business Enterprises No. 16 – Government Grant, the revised
standard shall be implemented since 12 June 2017. The government grant existing on 1 January 2017 shall
be handled with prospective application method; and the new government grant from 1 January 2017 to
the date of the implementation shall also be adjusted according to the revised standard.
The resolution on the Change in Accounting Policies of Qingdao Haier Co., Ltd. was considered and
approved at the 7th meeting of the 9th session of the Board of the Company on 25 August 2017, the
change of the aforesaid accounting policies were considered on the meeting.
VI. Appointment and Dismissal of Accounting Firm
Unit and Currency: RMB0‘000
Current appointment
Name of domestic accounting firm Shandong Hexin Accountants LLP
Remuneration of domestic accounting firm
Audit period of domestic accounting firm
Name Remuneration
Internal control audit accounting firm Shandong Hexin Accountants LLP
Financial Adviser China International Capital 2,236.5
Corporation Limited
Information on Appointment and Dismissal of Accounting Firm
□ Applicable √Not Applicable
Explanation of change of accounting firm during the auditing period
□ Applicable √Not Applicable
VII. Possibility of listing suspension
(Ⅰ) Reasons of listing suspension
□ Applicable √Not Applicable
(II) Response to be taken by the Company
□ Applicable √Not Applicable
VIII. Circumstances and reasons for listing termination
□ Applicable √Not Applicable
IX. Matters relating to bankruptcy and restructuring
□ Applicable √Not Applicable
X. Material litigation and arbitration matters
□Material litigation and arbitration matters during the year √ No material litigation and arbitration
matters in the reporting year
XI. Penalties to the Listed Company and its Directors, Supervisors, Senior Management,
Controlling Shareholders, Actual Controllers, Acquires and the Issue of Rectification
□ Applicable √Not Applicable
XII. Explanation of the integrity status of the Company and its controlling shareholders and actual
controller during the reporting period
□ Applicable √Not Applicable
XIII. The Company’s share option incentive scheme, employee shareholding plan or other employee
incentive measures and its influence
(Ⅰ) Matters disclosed in temporary announcements and without any subsequent progress or
change
√Applicable □ Not Applicable
Summary Index for details
Cancelation of Exercise/Unlocking of Equity For details, please refer to the Announcement
under Phase IV Share Option Incentive Scheme: on Cancelation Arrangement of
on 28 April 2017, the 5th meeting of the 9th Exercise/Unlocking Part of Retained Equity
session of Board of Directors of the Company Interests under Phase IV Share Option
considered and approved the Resolution on Incentive Scheme of Qingdao Haier Co., Ltd.
Cancelation of Exercise/Unlocking of Retained
(L 2017-014) disclosed on 29 April 2017 and
Equity Interests under Phase IV Share Option
other relevant announcements on resolutions of
Incentive Scheme of Qingdao Haier Co., Ltd.
As the 2016 annual result of the Company did Board Meeting, Announcement on Cancelation
not reach the exercise/unlocking condition, the of Repurchased Restricted Shares under the
Company canceled the exercise/unlocking of the Share Option Incentive Scheme (L 2017-025)
equity incentives based on the evaluation period disclosed on 19 July 2017.
of 2016.
(Ⅱ) Share incentives not disclosed in temporary announcements or with subsequent progress
Share option incentive
□ Applicable √Not Applicable
Other explanations
□ Applicable √Not Applicable
Employee shareholding plan
√Applicable □ Not Applicable
（1） Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme: The Company
considered and adopted the Phase II Stock Ownership Scheme of Core Employees Stock Ownership
Scheme of Qingdao Haier Co., Ltd. (Draft) and its Summary (the ―Stock Ownership Scheme‖) at the 4th
meeting of the 9th session of the Board of Directors held on 27 February 2017. The total number of the
participants of the Stock Ownership Scheme is 576, all of them are the directors (excluding independent
directors), supervisors, senior management of the Company and regular employees who serve at the
Company and its subsidiaries and sign employment contracts with the Company or its subsidiaries and
receive remuneration from them, and the amount of incentive fund is RMB266.10 million. On 29 March
2017, the Announcement of Qingdao Haier Co., Ltd. regarding the Completion of Share Subscription of
the Phase II Stock Ownership Scheme of Core Employees Stock Ownership Scheme (the
―Announcement‖) was disclosed by the Company. 兴证证券资产管理有限公司 (Industrial Assets
Management Co., Ltd.*) was entrusted to manage the Stock Ownership Scheme by establish the
directional assets management plan for the Phase II Stock Ownership Scheme of Core Employees Stock
Ownership Scheme of Qingdao Haier Co., Ltd. (the ―Assets Management Plan‖). As of 28 March 2017,
the Assets Management Plan has purchased 22,820,787.00 shares of the Company in total, representing
0.37% of the total share capital of the Company, from the secondary market at an average trading price
of approximately RMB11.43 per share with a trading volume of approximately RMB260,768,338.35,
according to which, the share subscription of the Phase II Stock Ownership Scheme of Core Employees
Stock Ownership Scheme has been completed. The shares subscribed as above were locked as required.
The lock-up period was 12 months from the date of the Announcement, i.e. from 29 March 2017 to 28
March 2018.
（2） Initial vesting of the Phase I Core Employees Stock Ownership Scheme: On 7 December 2017, the
Announcement of Qingdao Haier Co., Ltd. regarding the Allocation and Vesting of the Phase I Core
Employees Stock Ownership Scheme was disclosed by the Company, pursuant to which, on 30
November 2017, the management commission reviewed and determined that 9,138,000 shares (with a
market value of RMB91.56 million) shall be vested to 490 participants of the Phase I of Stock
Ownership Scheme for Core Employees according to the annual result of 2016. According to the
appraisal of individual performance, the relevant shares of 25 participants among the aforesaid
participants would not be vested tentatively or would be adjusted due to the failure to complete
satisfactorily performance or dimission. 1,722,200 shares shall be vested to seven of the directors,
supervisors and senior management (pursuant to the application by Mr. Gong Wei, the Chief financial
officer and vice president, 121,325 shares under his name would not be vested tentatively), the actual
number of vested shares in this vesting was 1,600,900. Any changes of shareholdings of the directors,
supervisors and senior management of the Company shall be subject to the Management Rule for
Shareholdings and the Changes of the Directors, Supervisors and Senior Management of the Listed
Company and other requirements.
Other incentives
□ Applicable √Not Applicable
XIV. Significant Related-party Transactions
(Ⅰ) Related-party transaction from routine operation
1. Matter disclosed in temporary announcements and with no subsequent progress or change
□ Applicable √Not Applicable
2. Matter disclosed in temporary announcements and with subsequent progress or change
√Applicable □ Not Applicable
The Company made a forecast on the daily related-party transaction matters of the Company for the
year of 2017 at the 5th meeting of the 9th session of Board Meeting held on 28 April 2017, and relevant
proposals were reviewed and approved at 2016 Annual General Meeting on 28 June 2017. For details,
please refer to the Announcement of Qingdao Haier Co., Ltd. regarding the Anticipation on the Daily
Related-party Transactions for 2017 and the announcement on the relevant resolutions of the Board
disclosed on 29 April 2017, and 2016 Annual General Meeting Announcement disclosed by the Company
on 29 June 2016.
For the details of actual implementation of the Related-party transaction of 2017, please refer to
―Note12–Related Parties and Related-party Transactions‖ under Section XI ―FINANCIAL REPORT‖ set
out in this report.
3. Matter not disclosed in temporary announcements
□ Applicable √Not Applicable
(Ⅱ) Related-party transactions regarding acquisition or disposal of assets/equity
1. Matter disclosed in temporary announcements and with no subsequent progress or change
√Applicable □ Not Applicable
Summary Index for details
Acquisition the shareholding of PML Company: in order to
consolidate and expand the strengths in smart manufacturing,
and to facilitate the establishment and implementation of the For details, please refer to the
digital platform of smart manufacturing (COSMOplat), the Announcement of Qingdao Haier Co.,
Company acquired 100% shareholding of Fisher & Paykel Ltd. regarding the Acquisition of
Production Machinery Limited (斐雪派克生产设备有限公司, 100% Shareholding of Fisher &
―PML Company‖) holding by Fisher & Paykel Appliances Paykel Production Machinery Limited
Limited ( 斐 雪 派 克 电 器 有 限 公 司 , ―Fisher & Paykel‖, a and Related-party Transaction
overseas subsidiary of Haier Group Corporation) through an (L2017-022) disclosed on 21 June
overseas subsidiary by cash, the overseas subsidiary of the 2017.
Company paid considerations in cash of US$48.62 million
(equivalent to RMB330.68 million) to acquire PML Company.
Acquisition the shareholding of Multi-media company: in order For details, please refer to the
to further facilitate the implementation of U+ Smart Life Announcement of Qingdao Haier
strategy, along with the establishment of the layout in respect of Co., Ltd. regarding the Acquisition of
the ecological circle of smart family, and further grasp the Part of Shareholding of Qingdao
economic entrance of living room by the carrier of TV, the Haier Multi-media Co., Ltd.（青岛海
Company acquired part of the shareholding of Qingdao Haier 尔 多 媒 体 有 限 公 司 ） and Capital
Multi-media Co., Ltd.（青岛海尔多媒体有限公司）, and Increase and Related-party
subscribed part of the new registered capital, the total amount Transaction (L 2017-003) disclosed
was RMB525 million. on 28 February 2017.
Subscription for Capital Increase of Finance company: in order
to increase the capital adequacy ratio and support the business
development, Finance company intended to increase registered
capital by transferring the undistributed profit into the additional For details, please refer to the
capital contribution, pursuant to which, the registered capital Announcement of Qingdao Haier
would be increase from RMB6,000 million to RMB6,500 Co., Ltd. regarding the Subscription
million. According to above capital increase, the holding for Capital Increase of Haier Group
subsidiaries and related parties of the Company have subscribed Finance Co., Ltd. and Related-party
the additional capital contribution in proportion to each of their Transaction (L2017-039) disclosed
existing shareholding; of which the additional capital on 31 October 2017.
contribution subscribed by the holding subsidiaries and related
parties of the Company was RMB210 million and RMB290
million, respectively.
2. Matter disclosed in temporary announcements and with subsequent progress or change
□ Applicable √Not Applicable
3. Matter not disclosed in temporary announcements
□ Applicable √Not Applicable
4. If performance agreement is involved, the performance achieved during the reporting period
shall disclosed
√Applicable □ Not Applicable
For more details of performance agreement on acquisition of minority equity interests of Mitsubishi
and Carrier (please refer to the 2015 Annual Report disclosed by the Company on 29 April 2016 for
details), please refer to the relevant statements in ―The Company‘s explanation on whether the earnings
estimate on assets or projects was met and its reasons in the situation that earnings in the Company‘s
assets or projects is estimated, and the period of which includes the reporting period.‖ in this section.
(Ⅲ) Significant related-party transactions of joint external investment
1. Matter disclosed in temporary announcements and with no subsequent progress or change
√Applicable □ Not Applicable
For details, please refer to the statements in ―Acquisition the shareholding of Multi-media
Company‖ and ―Subscription for Capital Increase of Finance Company‖ in ―(Ⅱ) Related-party
transactions regarding acquisition or disposal of assets/equity - 1. Matter disclosed in temporary
announcements and with no subsequent progress or change‖ in this section.
2. Matter disclosed in temporary announcements and with subsequent progress or change
□ Applicable √Not Applicable
3. Matter not disclosed in temporary announcements
□ Applicable √Not Applicable
(Ⅳ) Amounts due to or from related parties
1. Matter disclosed in temporary announcements and with no subsequent progress or change
□ Applicable √Not Applicable
2. Matter disclosed in temporary announcements and with subsequent progress or change
□ Applicable √Not Applicable
3. Matter not disclosed in temporary announcements
□ Applicable √Not Applicable
(Ⅴ) Others
□ Applicable √Not Applicable
XV. Significant Contracts and Their Execution
(Ⅰ) Trusteeship, contracting and leasing
1. Trusteeship
□ Applicable √Not Applicable
During the reporting period, there was no material trusteeship. To date, the following trusteeships
have been considered and approved on the general meeting of the Company and still within the validity
period:
(1) According to the 2011 Haier Group's commitment to further support the development of
Qingdao Haier and resolve intra-industry competition to reduce related-party transactions, Haier Group
should strive to resolve the problems of intra-industry competition with the Company within five years.
However, based on the current market and financial factors of FPA, Haier Group was unable to transfer
the assets under custody to the Company before the completion of the aforementioned commitment. In
order to resolve the problems of intra-industry competition between Haier Group and the Company,
Haier Group intends to entrust the Company with the operation and management of assets under custody
and will pay RMB1 million custodian fee to the Company each year during the period of custody.
(2) According to the Haier Group's commitment in 2011 to further support the development of
Qingdao Haier and resolve intra-industry competition to reduce related-party transactions, and given the
fact that Qingdao Haier Photoelectric Co., Ltd. and its subsidiaries, who purchase of the color TV
business from Haier Group, are still under transformation and consolidation period and their financial
performance fails to reach the expectation of the Company. Therefore, Haier Group is unable to
complete the transfer before the aforementioned commitment period. Haier Group intends to entrust the
Company with the operation and management of assets under custody and will pay RMB1 million
custodian fee to the Company each year during the period of custody.
2. Contracting
□ Applicable √Not Applicable
3. Leasing
□ Applicable √Not Applicable
(Ⅱ) Guarantee
√Applicable □Not Applicable
Unit and Currency: RMB0‘000
External guarantees provided by the Company (excluding guarantees for subsidiaries)
Relationsh Date of Whethe
ip between occurrenc Whethe Overdu
Whethe r is
the Amount e of the Starting Expiratio r the e Whether there
Type of r the related
Guarant guarantor Secure of guarantee date of n date of guarant amount is a Relationsh
guarant guarant party
or and the d party guarant (date of guarant guarante ee has of the counter-guarant ip
ee ee is guarant
listed ee agreemen ee e been guarant ee
overdue ee or
company t) fulfilled ee
not
Total amount of guarantee occurred during the reporting period
(excluding guarantees for subsidiaries)
Total balance of guarantee at the end of the reporting period (A)
(excluding guarantees for subsidiaries)
Guarantees provided by the Company and its subsidiaries for subsidiaries
Total amount of guarantees for subsidiaries occurred during the 3,833,144.91
reporting period
Total balance of guarantees for subsidiaries at the end of the 2,907,898.74
reporting period (B)
Total amount of guarantees provided by the Company (including guarantees for subsidiaries)
Total guarantee (A + B)
2,907,898.74
Ratio of total amount of guarantees to net assets of the Company 90.43%
(%)
Among which:
Amount of guarantees for shareholders, actual controllers and
their related parties (C)
Amount of debt guarantees provided directly or indirectly for the
secured party with asset-liability ratio exceeding 70% (D) 797,128.51
The amount of total amount of guarantee in excess of 50% of net 1,297,122.98
assets (E)
Total amount of the above three guarantees (C + D + E) 2,094,251.50
Explanation of possibly bearing related discharge duty for None
premature guarantees
1. In 2016, the Company acquired the assets of GEA at a total consideration of US$5.61
billion, which was sourced from self-owned funds and loan for merger, of which, the loan for
merger in the amount of US$3.3 billion was applied for by Haier US Appliance Solutions, Inc., a
wholly-owned subsidiary of the Company, to China Development Bank Co., Ltd. The loan was
fully secured by the Company and Haier Group Corporation. At the end of the reporting period,
the amount of guarantee was equivalent to approximately RMB16.411 billion. The balance of
the guarantee amounted to RMB13.862 billion as at the end of the reporting period. The
Explanation of guarantee status provision of guarantee had been considered and approved by the Board and the general meeting
of shareholders of the Company;
2. In June 2017, the resolution on the Expected Provision of Guarantee for a Subsidiary in
2017 was passed on the 2016 Annual General Meeting of the Company, according to which,
the Company had provided guarantee in respect of the application for comprehensive facility
made by certain subsidiaries to financial institutions. During the reporting period, the
accumulated amount of guarantee offered by the Company to subsidiaries was approximately
RMB21.921 billion. As at the end of the reporting period, the balance of the guarantee was
RMB15.217 billion.
(Ⅲ) Entrusted others to manage cash assets
1. Entrusted wealth management
(1). Overall of entrusted wealth management
√Applicable □ Not Applicable
Unit and Currency: RMB
Type Sources of Amount Premature Past due uncollected
funds balance amount
Principal-guaranteed
wealth management
Own funds 1,974,265,336 1,974,265,336 0.00
products and
structured deposit
Note: As an independently operating Hong Kong listed company, Haier Electric Co., Ltd. has
purchased some short-term principal-protected wealth management and structural deposits from the
four major banks in order to increase the efficiency of the use of idle funds within the authorities of the
management. In the purchase process, all the necessary board reports were subject to the procedures
such as filling and management‘s review according to the regulations requirements for Hong Kong
listed company, so as to ensure sufficient funds for the day-to-day operations of the main business and
improve the shareholders' returns.
Others
□ Applicable √Not Applicable
(2). Individual entrusted wealth management
√Applicable □ Not Applicable
Unit and Currency: RMB
Provision
Expected Any future for
Commencement Expiration date Whether
Type of entrusted Amount of return Actual plan for impairment
date of entrusted of entrusted Sources Determination of Annualized approved loss (if
Trustee wealth management entrusted wealth Investment gains or Collection entrusted
wealth wealth of funds return yield by due any)
product management losses wealth
management management process
(if any) management
Qingdao branch
of Mitsubishi Principal-guaranteed Own Annualized yield
Tokyo UFJ wealth management 260,449,305.68 29 April 2016 28 April 2017 3.37% 8,874,665 8,874,665 Collected YES
funds 3.37%
Bank
Qingdao branch
Principal-guaranteed 10 March 2017 9 June 2017 Own Annualized yield
of Bank of 176,000,000.00 4.25% 1,864,877 1,864,877 Collected YES
wealth management funds 4.25%
Communications
Qingdao branch
Principal-guaranteed 12 June 2017 20 July 2017 Own Annualized yield
of Bank of 177,000,000.00 4.40% 810,805 810,805 Collected YES
wealth management funds 4.4%
Communications
Haier Road
sub-branch of Principal-guaranteed 5 September Own Annualized yield
195,000,000.00 8 June 2017 3.90% 1,854,370 1,854,370 Collected YES
Construction wealth management 2017 funds 3.9%
Bank
Beijing branch 14 September
Principal-guaranteed 15 June 2017 Own Annualized yield
of Societe 197,551,588.60 2017 4.50% 2,247,149 2,247,149 Collected YES
wealth management funds 4.5%
Generale
Qingdao branch 16 October
Principal-guaranteed 21 July 2017 Own Annualized yield
of Bank of 178,000,000.00 2017 4.40% 1,866,805 1,866,805 Collected YES
wealth management funds 4.4%
Communications
China Minsheng 20 October Own Annualized yield
Structured deposit 100,000,000.00 20 July 2017 4.20% 1,073,333 1,073,333 Collected YES
Bank 2017 funds 4.2%
Qingdao branch
of Mitsubishi Principal-guaranteed 26 October Own Annualized yield
269,323,971.08 28 April 2017 4.25% 5,754,930 5,754,930 Collected YES
Tokyo UFJ wealth management 2017 funds 4.25%
Bank
Haier Road
sub-branch of Principal-guaranteed 31 October Own Annualized yield
100,000,000.00 2 August 2017 3.90% 961,644 961,644 Collected YES
Construction wealth management 2017 funds 3.9%
Bank
Qingdao branch 1 November
Principal-guaranteed 1 August 2017 Own Annualized yield
of Bank of 100,000,000.00 2017 3.80% 957,808 957,808 Collected YES
wealth management funds 3.8%
China
Qingdao branch
of Mitsubishi Principal-guaranteed 2 November Own Annualized yield
Tokyo UFJ 100,000,000.00 2 August 2017 4.20% 1,073,333 1,073,333 Collected YES
wealth management 2017 funds 4.3%
Bank
Qingdao branch 10 November
Principal-guaranteed 11 November 2016 Own Annualized yield
of Bank of 200,000,000.00 2017 2.90% 5,784,110 5,784,110 Collected YES
wealth management funds 2.9%
China
Haier Road
sub-branch of Principal-guaranteed 6 December Own Annualized yield
205,000,000.00 7 September 2017 3.90% 1,971,370 1,971,370 Collected YES
Construction wealth management 2017 funds 3.9%
Bank
Haier Road Principal-guaranteed 400,000,000.00 Own Annualized yield 3.70% 3,649,315 3,649,315 Collected YES
sub-branch of wealth management 14 December funds 3.7%
15 September 2017
Construction
Bank
Qingdao branch 20 December
Principal-guaranteed 19 October 2017 Own Annualized yield
of Bank of 180,000,000.00 2017 4.20% 1,284,164 1,284,164 Collected YES
wealth management funds 4.2%
Communications
Qingdao branch
of Mitsubishi Principal-guaranteed 21 December Own Annualized yield
199,878,741.21 21 September 2017 4.26% 2,152,361 2,152,361 Collected YES
Tokyo UFJ wealth management 2017 funds 4.26%
Bank
China Minsheng 19 January Own Annualized yield
Structured deposit 101,070,000.00 20 October 2017 4.25% 1,070,927 YES
Bank 2018 funds 4.25%
Qingdao branch
Principal-guaranteed 21 December 2017 20 April 2018 Own Annualized yield
of Bank of 181,000,000.00 4.90% 2,915,836 YES
wealth management funds 4.9%
Communications
Qingdao branch
Principal-guaranteed 20 July 2017 21 April 2018 Own Annualized yield
of Bank of 100,000,000.00 3.90% 2,938,356 YES
wealth management funds 3.9%
China
Qingdao branch
of Mitsubishi Principal-guaranteed 26 October 2017 26 April 2018 Own Annualized yield
275,078,900.39 4.30% 5,897,993 YES
Tokyo UFJ wealth management funds 4.3%
Bank
Haier Road Principal-guaranteed 100,000,000.00 Own Annualized yield 4.00% 2,038,356 YES
sub-branch of wealth management funds 4%
2 November 2017 7 May 2018
Construction
Bank
Qingdao branch
Principal-guaranteed 2 November 2017 7 May 2018 Own Annualized yield
of Bank of 100,000,000.00 4.00% 2,038,356 YES
wealth management funds 4%
China
Qingdao branch
of Mitsubishi Principal-guaranteed Own Annualized yield
Tokyo UFJ 101,085,333.00 2 November 2017 9 May 2018 4.30% 2,238,832 YES
wealth management funds 4.3%
Bank
Qingdao branch
Principal-guaranteed 13 November 2017 9 May 2018 Own Annualized yield
of Bank of 206,000,000.00 4.00% 3,995,836 YES
wealth management funds 4%
China
Haier Road
sub-branch of Principal-guaranteed 15 December 2017 13 June 2018 Own Annualized yield
208,000,000.00 4.30% 4,410,740 YES
Construction wealth management funds 4.3%
Bank
Haier Road
sub-branch of Principal-guaranteed 21 December 2017 20 June 2018 Own Annualized yield
400,000,000.00 4.50% 8,926,027 YES
Construction wealth management funds 4.5%
Bank
Qingdao branch
of Mitsubishi Principal-guaranteed 21 December 2017 20 June 2018 Own Annualized yield
202,031,102.12 4.65% 4,658,616 YES
Tokyo UFJ wealth management funds 4.65%
Bank
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
Name of Initial Opening Amount Amount Impairment Closing Actual
Closing
party Type of investment provision (if balance of profit or
Commencement Expiration balance of of of balance of
operating derivatives amount in any) investment loss for
date date investment purchase disposal investment
the investment derivatives amount as a the
amount
derivatives investment amount during during percentage reporting
investment the the of the net period
asset
reporting reporting
period period
Forward
Bank exchange 110,525 2017/1/1 2017/12/31 110,525 508,170
7,370
contract
Interest rate
Bank /exchange 907,055 2016/5/1 2021/6/2 907,055 1,594,081
-2,063
rate swap
Source of funds for derivative
Entirely internal funds of the Company
investment
Market prices or fair value change of Change in market price or product fair value:
invested derivatives during the
1、 Profit or loss of foreign exchange forward contract during the reporting period was RMB73.70 million;
reporting period, including the specific
2、 Profit or loss of interest rate/exchange rate during the reporting period was RMB-20.63 million.
methods, assumptions and parameters
Specific methods, assumptions and parameters: quotes for swaps and forwards of foreign exchange and interest
adopted in the analysis of the fair
rate provided by financial institutes.
values of the derivatives
(IV) Other Major Contracts
□ Applicable √Not Applicable
XVI. Other Major Events
√Applicable □ Not Applicable
During the Reporting Period, the Company disclosed the following information and all the
information will be disclosed on SSE (www.sse.com.cn):
Name of Announcement Name of Newspaper and Page Date
Report of Qingdao Haier Co., Ltd. on the Securities Times page B034, Shanghai Securities 12 January
Acquisition of Major Assets News page 93, China Securities Journal page 2017
A76, Securities Daily page D84
Announcement of Qingdao Haier Co., Securities Times page B088, Shanghai Securities 28 February
Ltd. regarding the Resolution of the 4th News page 53, China Securities Journal page 2017
Meeting of the 9th Session of the Board B077, Securities Daily page D81
of Directors (L 2017-001)
Announcement of Qingdao Haier Co., Securities Times page B088, Shanghai Securities 28 February
Ltd. regarding the Resolution of the 4th News page 53, China Securities Journal page 2017
Meeting of the 9th Session of the Board B077, Securities Daily page D81
of Supervisors (L 2017-002)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acquisition of Part of
Securities Times page B088, Shanghai Securities
Shareholding of Qingdao Haier 28 February
News page 53, China Securities Journal page
Multi-media Co., Ltd.（青岛海尔多媒体
B077, Securities Daily page D81
有 限 公 司 ） and Capital Increase and
Related-party Transaction (L 2017-003)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Resolutions of the
Securities Times page B036, Shanghai Securities
First Participants Meeting of the Phase II 14 March
News page 108, China Securities Journal page
Stock Ownership Scheme of Core
B046, Securities Daily page A4
Employees Stock Ownership Scheme (L
2017-004)
Indicative Announcement of the
Holding Subsidiary Haier Electronics Securities Times page B001, Shanghai Securities
23 March
Group Co., Ltd. of Qingdao Haier Co., News page 108, China Securities Journal page
Ltd. regarding the Release of Annual B006, Securities Daily page D8
Result of 2016 (L 2017-005)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Completion of Share Securities Times page B145, Shanghai Securities
29 March
Subscription of the Phase II Stock News page 164, China Securities Journal page
Ownership Scheme of Core Employees A09, Securities Daily page D31
Stock Ownership Scheme (L 2017-006)
Summary of 2016 Annual Report of Securities Times page B125, Shanghai Securities 29 April
Qingdao Haier Co., Ltd. News page 361, China Securities Journal page 2017
B236, Securities Daily page C97
First Quarterly Report 2017 of Qingdao Securities Times page B125, Shanghai Securities 29 April
Haier Co., Ltd. News page 361, China Securities Journal page 2017
B236, Securities Daily page C98
Announcement of Qingdao Haier Co., Securities Times page B125, Shanghai Securities 29 April
Ltd. on the Resolution of the 5th Meeting News page 361, China Securities Journal page 2017
of the 9th Session of the Board of B236, Securities Daily page C99
Directors (L 2017-007)
Announcement of Qingdao Haier Co., Ltd. Securities Times page B127, Shanghai Securities 29 April
on the Resolution of the 5th Meeting of the News page 362, China Securities Journal page 2017
9th Session of the Board of Supervisors (L B236, Securities Daily page C100
2017-008)
Announcement of Qingdao Haier Co., Securities Times page B127, Shanghai Securities 29 April
Ltd. regarding the Renewal of News page 362, China Securities Journal page 2017
Engagement of B237, Securities Daily page C98
Accounting Firm (L 2017-009)
Announcement of Qingdao Haier Co.,
Securities Times page B127, Shanghai Securities
Ltd. regarding the Expected Daily 29 April
News page 362, China Securities Journal page
Related-party Transaction for 2017 (L
B237, Securities Daily page C99
2017-010)
Announcement of Qingdao Haier Co.,
Securities Times page B126, Shanghai Securities
Ltd. regarding the Expected Provision 29 April
News page 362, China Securities Journal page
of Security for a Subsidiary in 2017 (L
B237, Securities Daily page C100
2017-011)
Announcement of Qingdao Haier Co., Securities Times page B126, Shanghai Securities
29 April
Ltd. regarding the Foreign Exchange News page 362, China Securities Journal page
Derivatives Business (L 2017-012) B237, Securities Daily page C98
Announcement of Qingdao Haier Co.,
Ltd. regarding the Adjustment the Price Securities Times page B126, Shanghai Securities
29 April
of Retained Equity Interests under Phase News page 362, China Securities Journal page
IV Share Option Incentive Scheme (L B237, Securities Daily page C98
2017-013)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Cancelation of Securities Times page B126, Shanghai Securities
29 April
Exercise/Unlocking of Retained Equity News page 362, China Securities Journal page
Interests under Phase IV Share Option B237, Securities Daily page C97
Incentive Scheme (L 2017-014)
Announcement of Qingdao Haier Co., Securities Times page B126, Shanghai Securities
29 April
Ltd. regarding the Modification on the News page 363, China Securities Journal page
Articles of the Company (L 2017-015) B237, Securities Daily page C100
Notice on 2016 Annual General Meeting Securities Times page B126, Shanghai Securities
29 April
of Qingdao Haier Co., Ltd. (L News page 363, China Securities Journal page
2017-016) B237, Securities Daily page C100
Announcement of Qingdao Haier Co., Securities Times page B127, Shanghai Securities
Ltd. on the Notice to the Creditor News page 363, China Securities Journal page
29 April
regarding Repurchase and Cancelation of B237, Securities Daily page C100
the Restricted Shares under the Share
Option Incentive Scheme (L 2017-017)
Announcement of Qingdao Haier Co.,
Securities Times page B016, Shanghai Securities
Ltd. regarding the Pre-listing Disclosure
News page 56, China Securities Journal page 17 June 2017
of the Reduction of Shareholding for
B016, Securities Daily page C64
Senior Management (L 2017-018)
Supplemental Notice on 2016 Annual Securities Times page B016, Shanghai Securities 17 June 2017
General Meeting of Qingdao Haier Co., News page 56, China Securities Journal page
Ltd. (L 2017-019) B016, Securities Daily page C64
Announcement of Qingdao Haier Co., Securities Times page B013, Shanghai Securities 21 June 2017
Ltd. on the Resolution of the 6th Meeting News page 77, China Securities Journal page
of the 9th Session of the Board of B052, Securities Daily page D68
Directors (L2017-020)
Announcement of Qingdao Haier Co., Securities Times page B013, Shanghai Securities 21 June 2017
Ltd. on the Resolution of the 6th Meeting News page 77, China Securities Journal page
of the 9th Session of the Board of B052, Securities Daily page D68
Supervisors (L2017-021)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acquisition of 100% Securities Times page B013, Shanghai Securities
Shareholding of Fisher & Paykel News page 77, China Securities Journal page 21 June 2017
Production Machinery Limited and B052, Securities Daily page D68
Related-party Transaction (L 2017-022)
Announcement of Qingdao Haier Co., Securities Times page B012, Shanghai Securities 29 June 2017
Ltd. on the Resolutions Passed at 2016 News page 92, China Securities Journal page
Annual General Meeting (L 2017-023) B047, Securities Daily page D50
Announcement of Qingdao Haier Co., Securities Times page B056, Shanghai Securities 11 July 2017
Ltd. regarding the Listing and Dealing of News page 92, China Securities Journal page
Restricted Shares under Non-public B011, Securities Daily page D53
Issuance (L 2017-024)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Cancelation of the Securities Times page B104, Shanghai Securities
19 April
Repurchased Restricted Shares under the News page 76, China Securities Journal page
Share Option Incentive Scheme (L B006, Securities Daily page D39
2017-025)
Announcement of Qingdao Haier Co., Securities Times page B037, Shanghai Securities 26 April
Ltd. on the 2016 Interests Distribution (L News page 76, China Securities Journal page 2017
2017-026) B045, Securities Daily page D46
Indicative Announcement of the
Holding Subsidiary Haier Electronics Securities Times page B148, Shanghai
25 August
Group Co., Ltd. of Qingdao Haier Co., Securities News page 948, China Securities
Ltd. regarding the Release of Half-year Journal page B039, Securities Daily page D130
Result of 2017 (L 2017-027)
Securities Times page B40, Shanghai Securities
Summary of 2017 Half-year Report of 28 August
News page 817, China Securities Journal page
Qingdao Haier Co., Ltd.
B039, Securities Daily page D160
Announcement of Qingdao Haier Co., Securities Times page B40, Shanghai Securities
Ltd. on the Resolution of the 7th News page 817, China Securities Journal page 28 August
Meeting of the 9th Session of the Board B039, Securities Daily page D160
of Directors (L2017-028)
Announcement of Qingdao Haier Co., Securities Times page B40, Shanghai Securities
Ltd. on the Resolution of the 7th News page 817, China Securities Journal page 28 August
Meeting of the 9th Session of the Board B039, Securities Daily page D160
of Supervisors (L2017-029)
Securities Times page B40, Shanghai
Announcement of Qingdao Haier Co.,
Securities News page 817, China Securities 28 August
Ltd. regarding the Changes in
Journal page B039, Securities Daily page 2017
Accounting Policies (L 2017-030)
D160
Securities Times page B7/8, Shanghai
Proposal of Qingdao Haier Co., Ltd. for
Securities News page 34/35, China Securities 9 September
Public Offering of Convertible
Journal page B023, Securities Daily page 2017
Corporate Bonds
C21/22
Announcement of Qingdao Haier Co., Securities Times page B7, Shanghai Securities 9 September
Ltd. on the Resolution of the 8th News page 34, China Securities Journal page 2017
Meeting of the 9th Session of the Board B024, Securities Daily page C23
of Directors (L 2017-031)
Announcement of Qingdao Haier Co., Securities Times page B7, Shanghai Securities 9 September
Ltd. on the Resolution of the 8th News page 34, China Securities Journal page 2017
Meeting of the 9th Session of the Board B024, Securities Daily page C22
of Supervisors (L 2017-032)
Announcement of Qingdao Haier Co., Securities Times page B7, Shanghai Securities
Ltd. regarding the Risk Warnings and News page 34, China Securities Journal page
Remedial Measures of Qingdao Haier B024, Securities Daily page C23 9 September
Co., Ltd. for Dilution of Current
Returns by Public Offering of
Convertible Corporate Bonds
(L2017-033)
Announcement of Qingdao Haier Co., Securities Times page B7, Shanghai Securities
Ltd. on Increase the Estimated Caps of News page 34, China Securities Journal page
9 September
the Daily Related-party Transaction B024, Securities Daily page C23
regarding Procurement for 2017 (L
2017-034)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Participation in the Securities Times page B32, Shanghai Securities 13
―Online Collective Reception Day News page 77, China Securities Journal page September
Activity Held for Investors‖ (L B012, Securities Daily page D74
2017-035)
Announcement of Qingdao Haier Co.,
Securities Times page B44, Shanghai Securities
Ltd. regarding the Progress of the 10 October
News page 85, China Securities Journal page
Reduction of Shareholding for Senior
B032, Securities Daily page D52
Management (L 2017-036)
Third Quarterly Report 2017 of Securities Times page B201, Shanghai 31 October
Qingdao Haier Co., Ltd. Securities News page 149, China Securities 2017
Journal page B149, Securities Daily page D113
Announcement of Qingdao Haier Co., Securities Times page B201, Shanghai Securities
Ltd. on the Resolution of the 9th Meeting News page 149, China Securities Journal page 31 October
of the 9th Session of the Board of B076, Securities Daily page D113
Directors (L2017-037)
Announcement of Qingdao Haier Co., Securities Times page B201, Shanghai Securities
Ltd. on the Resolution of the 9th Meeting News page 149, China Securities Journal page 31 October
of the 9th Session of the Board of B076, Securities Daily page D113
Supervisors (L2017-038)
Announcement of Qingdao Haier Co., Securities Times page B201, Shanghai Securities
Ltd. regarding the Subscription for News page 149, China Securities Journal page
31 October
Capital Increase of Haier Group Finance B076, Securities Daily page D113
Co., Ltd. and Related-party Transaction
(L2017-039)
Notice on the First EGM in 2017 of Securities Times page B201, Shanghai Securities
31 October
Qingdao Haier Co., Ltd. (L 2017-040) News page 149, China Securities Journal page
B076, Securities Daily page D113
Announcement of Qingdao Haier Co., Securities Times page B037, Shanghai Securities
Ltd. regarding the of News page 68, China Securities Journal page
Issuance
8 November
Convertible Corporate Bonds by the B019, Securities Daily page D44
Overseas Wholly-owned Subsidiary (L
2017-041)
Announcement of Qingdao Haier Co., Securities Times page B037, Shanghai Securities 8 November
Ltd. on the Resolution of the 10th News page 68, China Securities Journal page 2017
Meeting of the 9th Session of the Board B019, Securities Daily page D44
of Supervisors (L2017-042)
Announcement of Qingdao Haier Co.,
Securities Times page B004, Shanghai Securities
Ltd. regarding the Result of the 11 November
News page 41, China Securities Journal page
Reduction of Shareholding for Senior
B022, Securities Daily page C46
Management (L 2017-043)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Completion of Securities Times page B4, Shanghai Securities
22 November
Issuance of Convertible Corporate Bonds News page 76, China Securities Journal page
by the Overseas Wholly-owned B046, Securities Daily page C4
Subsidiary (L 2017-044)
Announcement of Qingdao Haier Co., Securities Times page B65, Shanghai Securities
24 November
Ltd. on the Resolutions Passed at the News page 93, China Securities Journal page
First EGM in 2017 (L 2017-045) B009, Securities Daily page C4
Announcement of Qingdao Haier Co.,
Securities Times page B28, Shanghai Securities
Ltd. regarding the Allocation and Vesting 7 December
News page 85, China Securities Journal page
of the Phase I Core Employees Stock
B032, Securities Daily page D37
Ownership Scheme (2017-046)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Acceptance by the Securities Times page B64, Shanghai Securities
15 December
CSRC of the Application for Public News page 52, China Securities Journal page
Offering of Convertible Corporate Bonds B045, Securities Daily page D44
(L 2017-047)
Announcement of Qingdao Haier Co.,
Ltd. regarding the Capital Increase on the Securities Times page B28, Shanghai Securities
19 December
Overseas Wholly-owned Subsidiary News page 77, China Securities Journal page
Haier US Appliance Solutions Inc. (L B015, Securities Daily page D69
2017-048)
XVII. Proactive Performance of Social Responsibilities
（I）Information on initiatives taken to help people out of poverty
√Applicable □ Not Applicable
1. Targeted measures in poverty alleviation plan
In accordance with the national plan for targeted measures in poverty alleviation and the
requirements set out in relevant documents, the Company places great emphasis on poverty
alleviation, and carries out initiatives of targeted measures in poverty alleviation within the
scope as authorized by the general meetings on related matters (such as donation). Over the
years, the Company has been devoted to education undertakings and making significant
contributions, with a view to targeting the weakest area of education and to blocking the
transmission of poverty between generations through focused efforts in raising the basic
cultural quality in poverty and the skill levels of labor force from poor families. As at the end
of the reporting period, the Company and the Haier Group Corporation (its actual controller)
and its subsidiaries (referred to as the ―Haier Group‖) has built more than 200 hope schools,
covering 26 provinces, municipalities directly under the central government and autonomous
regions in China. These initiatives have effectively enhanced the basic educational capabilities
in poverty-stricken areas and improved the quality of education.
2. Summary of targeted measures in poverty alleviation during the year
In 2017, the Company‘s expenditures on targeted measures in poverty alleviation was
approximately RMB12.96 million, which was mainly utilized in the education improvement,
physical and mental health development of adolescents and children. At the same time, as part
of its initiatives in response to the government and the performance of its social
responsibilities, Haier Group has also made investments in many aspects, such as poverty
alleviation through agricultural development, and poverty alleviation through improvement of
the health of farmers.
3. Results of Poverty Alleviation
Unit and Currency: RMB0‘000
Indicators Amount and the status
I. General information 1,296
Funds 1,296
II. Breakdown of the use of funds
1. Overcoming poverty through education
1.1 Amount of investment for the purpose of 1,281
improving the resources of education in
poverty-stricken areas
2. Basic guarantees
2.1 Amount of investment for the purpose of
helping the disabled living in poverty
4. Subsequent targeted measures in poverty alleviation plans
In 2018, the Company will make concerted efforts with Haier Group and continue to
implement the proposition of the documents issued by the central government in respect of
poverty alleviation, dedicate to improve the education in poverty-stricken areas and other
initiatives, and will perform our social responsibilities in a proactive manner.
The company and Haier Group are also working in the fields such as poverty alleviation
through agricultural development and improvement of farmers‘ health, for details, please refer
to ―Social Responsibility‖ and other relevant sections in the ―Social Responsibility Report of
Qingdao Haier Co., Ltd. for 2017‖ disclosed on the date of the Announcement.
(II)Performance of social responsibilities
√Applicable □ Not Applicable
For details, please refer to the ―Social Responsibility Report of Qingdao Haier Co., Ltd. for
2017‖ disclosed on the date of this report.
(III) Environmental Information
1. Explanation of the environmental protection status of companies and their important
subsidiaries that are key emission units announced by the environmental protection
department
√Applicable □ Not Applicable
According to the laws and regulations, the Company established standardized discharge
outlets, and an on-line sewage monitoring system was set up at the front of the sewage outlets
to monitor the amount of the discharged sewage in real time. The wastewater is discharged
after being collected and treated in compliance with regulations. All pollutants are discharged
in accordance with the national and local environmental standards. The applicable standard of
effluent wastewater is Grade B of the ―Water Quality Standard for Sewage Discharge into
Urban Sewers‖ (CJ343-2010). The main pollutants are COD and ammonia nitrogen. The
emission concentration standard of COD and ammonia nitrogen was 500 mg/L and 45 mg/L,
respectively. The actual emissions are strictly performed under the standard. Taking Qingdao
Industrial Park as an example, the actually emission concentration of COD and ammonia
nitrogen was 49.6 mg/L and 6.08 mg/L, respectively, so the discharge amount reached the
standard. The annual emission of COD and ammonia nitrogen was 10.8t and 1.59t,
respectively.
In 2017, the energy consumption was 8.33 kg of standard coal per ten thousand RMB,
represent a year-on-year decrease of 13.22%. Photovoltaic power generation projects have
achieved a total installed capacity of 62MW and a total generating capacity of 130 million
KWh, which is equivalent to save 15,977 tons of standard coal and reduce carbon dioxide
emissions by 41,859.74 tons.
Trigeneration (i.e. combined gas, cooling, heat and power) is currently applied in Haier
China-German Industrial Park（海尔中德工业园区）. It is equivalent to save 10,000 tons of
standard coal and reduce of 26,200 tons of carbon dioxide emissions. It will be applied in
other new parks of Haier. In 2017, we implemented energy saving and emission reduction
projects such as smart lighting, waste heat recovery, and raw material substitution to achieve
energy savings of 19,498.50 tons of standard coal, which represented a significant energy
saving and emission reduction effect.
Data transmission, real-time monitoring, real-time warning measures have been applied
among all the environmental protection departments of the Company and the smart energy
center of Haier Group. Various types of pollution control facilities are included in the TPM
management area of the equipment to ensure normal operation of the equipment. In
accordance with the requirements of laws and regulations, the Company has formulated the
―Plan of Emergency Preparedness for Emergency Environmental Incidents‖ and organized
drills. Based on the results of the drills, the Company continued to optimize and upgrade the
plan. Haier Smart Energy Center is the leading energy big data analysis system in the industry.
It uses centralized automation, information technology, and centralized management to
implement centralized dynamic monitoring and digital management of water, electricity, gas,
and other major energy consumption of all factories across the country. The system
automatically and accurately collects energy data, and completes the prediction and analysis
of energy consumption data, optimizes energy scheduling, and reduces production energy
consumption of single unit, thereby realizing low-carbon production.
In March 2017, the Company successfully passed the ISO14001 environmental
management system certification. From 13 to 16 March 2018, the first surveillance audit for
the Company‘s operation of the new version of the 2017 ISO14001 system was conducted by
a professional certification body, the Company passed the first surveillance audit successfully
and the system was proved to be operated well.
For other relevant information, please refer to ―Social Responsibility‖ and other
relevant sections on the ―Social Responsibility Report of Qingdao Haier Co., Ltd. for 2017‖
disclosed on the date of the Announcement.
2. Companies other than key emission units
√Applicable □ Not Applicable
During the reporting period, all units of the Company carried out the implementation and
production of construction projects in accordance with laws and regulations, and went
through the procedures of environmental impact assessment by strictly following the
environmental protection requirements, which required the construction, projects
environmental protection must be carry out at the same time. All units passed the
environmental assessment and acceptance, and there was no environmental violation issue
during the reporting period, such as unlicensed construction.
3. Other explanations
□ Applicable √Not Applicable
（IV）Other explanations
□ Applicable √Not Applicable
XVIII. Convertible corporation bonds
(I) Information on the issuance of convertible bonds
√Applicable □ Not Applicable
On 9th of September, 2017, after reviewed and approved at the 8th meeting of the 9th session
board of directors, the Company disclosed a proposal for the issuance of convertible bonds. The
proceeds raised from the issuance of convertible bonds will be RMB5.64 billion. The proceeds
will be used in leading consumption upgrades, practicing large kitchen appliances strategy, and
improving the innovation capabilities and other opportunities. As of the disclosure date of this
report, the scheme was accepted by the CSRC with further feedback, and the Company made
responses to the feedback.
(II) Information on holders and guarantors of convertible bonds during the reporting period
□ Applicable √Not Applicable
(III) Information on the change in convertible bonds during the reporting period
□ Applicable √Not Applicable
Information on the accumulated number of convertible bonds being converted into shares
during the reporting period
□ Applicable √Not Applicable
(IV) Information on the past adjustment of prices for conversion into shares
□ Applicable √Not Applicable
(V) Information on the indebtedness, changes in creditability of the Company and the cash
arrangement for repayment of debts in the coming years
□ Applicable √Not Applicable
(VI) Explanation on other information regarding convertible bonds
□ Applicable √Not Applicable
Section VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS
I. CHANGES IN SHARES
（I） Table of Changes in Ordinary Shares
1. Table of Changes in Ordinary Shares
Unit: share
Prior to the change Increase and decrease of the change (＋,－) Balance
New Shares
Bonus
Number % shares converted Others Subtotal Number %
shares
issued from reserve
I. Shares with selling restrictions 606,213,988 9.942 -606,213,988 -606,213,988 0
1. Shares held by the state
2. Shares held by the state-owned legal
entities
3. Other shares held by other domestic
228,000 0.004 -228,000 -228,000 0
investors
Including:
shares held by domestic non-state
-owned legal entities
shares held by domestic
228,000 0.004 -228,000 -228,000 0
individuals
4. Shares held by foreign investors 605,985,988 9.938 -605,985,988 -605,985,988 0
Including:
605,985,988 9.938 -605,985,988 -605,985,988 0
shares held by foreign legal entities
shares held by foreign
individuals
II. Tradable shares without selling
5,491,416,739 90.058 605,985,988 605,985,988 6,097,402,727 100.000
restrictions
1. RMB ordinary shares 5,491,416,739 90.058 605,985,988 605,985,988 6,097,402,727 100.000
2. Domestic listed foreign shares
3. Overseas listed foreign shares
4. Others
III. Total shares 6,097,630,727 100.000 -228,000 -228,000 6,097,402,727 100.000
2. Statement on the changes in ordinary shares
√Applicable □ Not Applicable
(1) Approved by ―Reply on Approval of Non-public Issuance of Shares of Qingdao Haier
Co., Ltd.‖ by China Securities Regulatory Commission (Zheng Jian Xu Ke [2014] No. 436),
Qingdao Haier Co., Ltd. (hereinafter referred to as the \"Company\") issued 302,992,994 ordinary
shares of RMB (A share) by way of Non-public Issuance of Shares at an issue price of RMB 10.83
per share to KKR Home Investment S.à r.l. (hereinafter referred to as ―KKR (Luxembourg)‖) on
17 July 2014. On the same date, the Company completed the registration of the above issued
shares and the restricted shares. The lock-up period for the non-public issued shares is 36 months.
In June 2015, the Company‘s share capital changed and the number of restricted shares held by
KKR (Luxembourg) increased from 302,992,994 shares to 605,985,988 shares due to the
implementation of the Company's 2014 profit distribution and plans for capital reserve conversion
into share (10 shares for every 10 shares for RMB4.92). In July 2017, the aforementioned
605,985,988 shares were released by the Company, then listed and circulated on 17 July 2017.
The release of locked-up resulted in a change in the Company's equity structure (the number of
share capital has not changed). For more details, please refer to the Announcement of Qingdao
Haier Co., Ltd. on End of the Lock-up Period for A Shares Issued under the Non-public Issuance
(L 2017-024) disclosed by the Company on 11 July 2017.
（2）On 28 April 2017, the fifth meeting of 9th session of Board of Directors of the Company
reviewed and approved the Resolution on Cancellation of Exercise/Unlocking of Retained Equity
under Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. The Company
intended to cancel the exercise of the stock option under the second exercise period of the portion
of Retained Equity and to repurchase and cancel the restricted shares under the second exercise
period due to the lack of exercise/unlocking conditions. According to the resolution, the Company
has repurchased a total of 228,000 restricted shares, which were cancelled on 19 July 2017. After
the cancellation, the share capital of the Company has been changed from 6,097,630,727 to
6,097,402,727. For more details, please refer to the Announcement of Qingdao Haier Co., Ltd. on
Cancellation of Repurchased Restricted Shares under the Share Option Incentive Scheme (L
2017-025) disclosed by the Company on 19 July 2017.
3. Effect of changes in ordinary shares on the financial indicators such as earnings per share
and net assets per share (if any) over the last year and the last reporting period
□ Applicable √Not Applicable
4. Other disclosure deemed necessary by the Company or required by securities regulatory
authorities
□ Applicable √Not Applicable
(Ⅱ) Changes in shares with selling restrictions
√Applicable □ Not Applicable
Unit: share
Number
of shares Number of Number of
Number of
with shares shares Date of
new Reasons
selling released with release
Name of shares for
restrictions from selling from
shareholder with selling selling
at the selling restrictions selling
restrictions restrictions
beginning restrictions at the end restrictions
in 2017
of in 2017 of 2017
Individual
shareholders
Share
(target for the
Option
retained part of
Incentive
the fourth share 228,000 0 -228,000
Shares
option
subject to
incentive
restrictions
of the
Company)
Total 228,000 0 -228,000 0 / /
Note: During the reporting period, since the annual results of the Company in 2016 did not
fulfill the conditions for unlocking, the Board reviewed and approved relevant resolution on
cancellation of unlocking of part of the restricted shares involved in Phase IV Share Option
Incentive Scheme of the Company. According to the resolution, some restricted shares held by the
scheme participants of Phase IV Share Option Incentive Scheme at the beginning of the period
should be repurchased and cancelled. The repurchase and cancellation of such shares had been
completed on 19 July 2017, and the total number of shares being cancelled was 228,000. For
details, please refer to the Announcement of Qingdao Haier Co., Ltd. on Cancellation of
Repurchased Restricted Shares under the Share Option Incentive Scheme (L 2017-025) disclosed
by the Company on 19 July 2017.
II. ISSURANCE AND LISTING OF SECURITIES
（I） Issuance of securities during the reporting period
√Applicable □ Not Applicable
Unit: 0‘000 shares Currency: RMB
Number
Type of Price
of shares
shares and (or Number of Date of Date of
Date of issue under
its derivative interest Issuance listing termination
listing
securities s rate)
approval
Ordinary shares
RMB ordinary 20 June
244.04 488.08
shares grant
of restricted
shares under
7 July 2014 7.73
the Share 20 June
366.06 /
Option
Incentive
Scheme
Non-public
Issuance
17 July
of RMB 17 July 2014 10.83 30,299.30 60,598.60
ordinary
shares
RMB ordinary
shares exercise November 10.11 477.92 477.92
of share
December
option and
grant of November 10.36 1,122.60 1,122.60
restricted shares 2014
under 8 April 2015 5 August
10.06 19.00 /
the Share
Option 28 July 2015
5 August
Incentive 8.07 3,090.40 3,090.40
Scheme
Details of issuance of securities as of the reporting period (please specify separately for bonds
with different interest rates within the duration):
√Applicable □ Not Applicable
(1) In April 2014, the Company introduced Phase IV Share Option Incentive Scheme. The
Scheme involves 54,560,000 options, of which, 49,110,000 options (including 42,879,000 share
options and 6,231,000 restricted shares) were granted under the first grant and 5,450,000 options
(including 4,761,000 share options and 689,000 restricted shares) were reserved shares. After no
objection filing with the CSRC and the approval of the Scheme at a general meeting of the
shareholders of the Company, the Board determined the date of the First Grant was 20 June 2014
and 48,780,000 options (including 42,679,000 share options at the exercise price of RMB16.63
per share; and 6,101,000 restricted shares at the grant price of RMB7.73 per share) were granted
to scheme participants (adjusted after one participant left the Company) under the first grant. The
registration of transfer of the abovementioned restricted shares was completed on 7 July 2014. For
details, please refer to the Announcement of Completion of Registration of Restricted Shares
Granted under the Phase IV Share Option Incentive Scheme of Qingdao Haier Co., Ltd. (L
2014-038) published by the Company on the four major securities newspapers and the website of
Shanghai Stock Exchange (www.sse.com.cn) on 8 July 2014.
(2) In September 2013, the Company induced a proposal on the introduction of the strategic
investor through non-public issuance of no more than 305 million A ordinary shares to KKR
(Luxembourg) with proceeds of not more than RMB3.447 billion. After the approval received
from the general meeting of the shareholders of the Company, Ministry of Commerce and CSRC,
the Board of the Company conducted relevant share transfer procedures in July 2014 and
determined 302,992,994 shares to be issued at the issue price of RMB10.83 per share. The listing
of the relevant share will be effective on 17 July 2017. For details, please refer to Announcement
on Results of Non-public Issuance of Shares and Change in Share Capital of Qingdao Haier Co.,
Ltd. (L 2014-041) published by the Company on the four major securities newspapers and the
website of Shanghai Stock Exchange (www.sse.com.cn) on 22 July 2014.
(3) In November 2014, the conditions for the third exercise period of Phase Ⅱ Share Option
Incentive Scheme, the second exercise period of Phase III Share Option Incentive Scheme of
the Company have been fulfilled. On 25 November 2014, the Company directionally issued
additional 4,779,200, and 11,226,000 ordinary shares to determined and qualified participants of
Phase II and Phase III Share Option Incentive Scheme at prices of RMB10.11 and RMB10.36 per
share respectively. The aggregate 16,005,200 shares above mentioned were listed on 2 December
2014. For details, please refer to Announcement on the Exercise Arrangement for the Third
Exercise period of Phase II Share Option Incentive Scheme by the Board of Qingdao Haier Co.,
Ltd. (L 2014-064), Announcement on the Exercise Arrangement for the Second Exercise period of
Phase Ⅲ Share Option Incentive Scheme by the Board of Qingdao Haier Co., Ltd. (L
2014-065)and the Announcement on the Exercise Result for the share Option Incentive Scheme
and the Listing of Additional shares of Qingdao Haier Co., Ltd. (L2014-067) published by the
Company on the four major securities newspapers and the website of Shanghai Stock Exchange
(www.sse.com.cn) on 12 November 2014 and 27 November 2014, respectively.
(4) In February 2015, according to the Company‘s reserved equity under the Phase IV Share
Option Incentive Scheme, an aggregate of 650,000 share options were granted with the exercise
price of RMB20.44 per share while 190,000 restricted shares were granted with the granting price
of RMB10.06 per share. The Board of Directors determined that the Grant date was 26 February
2015. Registration and transfer issues of the restricted shares have been completed on 8 April
2015. For details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the Completion
of Registration of Reserved Restricted Shares Granted under the Phase IV Share Option Incentive
Scheme (L 2015-011) published by the Company in the four major securities newspapers and the
Shanghai Stock Exchange website (www.sse.com.cn) on 9 April 2015.
(5) In July 2015, the conditions of the first exercise/unlocking of equity initially granted
under Phase IV Share Option Incentive Scheme were fulfilled. The Company directionally issued
additional 30,904,000 ordinary shares to determined and qualified participants of the first exercise
of equity granted under Phase IV Share Option Scheme at a price of RMB8.07 per share. The
above shares were listed on 5 August 2015. For details, please refer to the Announcement of
Qingdao Haier Co., Ltd. on the Share Option Incentive Exercise Result and New Shares Listing
under the Share Option Incentive Scheme (L 2015-031) published in the four major securities
newspapers and the Shanghai Stock Exchange website (www.sse.com.cn) on 30 July 2015.
(II) Changes in total shares and shareholder structure as well as assets and liabilities
structure of the Company
□Applicable √Not Applicable
(III) Information on existing shares held by the staff
□Applicable √ Not Applicable
III. Information on shareholder and actual controllers
(Ⅰ) Total number of shareholders
Total number of ordinary shareholders up to the
172,905
end of the reporting period
Total number of ordinary shareholders as at the
end of the last month prior to the disclosure day of 202,628
the annual report
(Ⅱ) Table of top ten shareholders, top ten common shareholders (or the shareholders
without selling restrictions) by the end of the reporting period
Unit: share
Shareholdings of top ten shareholders
Status of
Chan Numbe
shares
ge r of
pledged
durin Number of shares Nature
Percent or frozen
g the shares held held of
Name of shareholder (full name) age N
repor at the end of with sharehol
(%) u
ting the period selling der
Status m
perio restrict
be
d ions
r
Domesti
c
Haier Electric Appliances non-state
1,258,684,824 20.64 0 Nil
International Co., Ltd. -owned
legal
entity
Domesti
c
non-state
Haier Group Corporation 1,072,610,764 17.59 0 Nil
-owned
legal
entity
Hong Kong Securities Unkno Unknow
533,989,517 8.76
Clearing Co., Ltd. wn n
Foreign
KKR HOME INVESTMENT
484,037,988 7.94 0 Nil legal
S.A R.L.
entity
China Securities Finance
Unkno Unknow
Corporation 219,306,498 3.60
wn n
Limited
Foreign
Unkno
GIC PRIVATE LIMITED 184,486,626 3.03 0 legal
wn
entity
Domesti
Qingdao Haier Venture & c
Investment Information Co., non-state
172,252,560 2.83 0 Nil
Ltd.(青岛海尔创业投资咨询有 -owned
限公司) legal
entity
National social security fund, Unkno Unknow
104,888,894 1.72 0
Portfolio 104 wn n
Central Huijin Asset Unkno Unknow
69,539,900 1.14 0
Management Ltd. wn n
Foreign
Unkno
UBS AG 43,545,196 0.71 0 legal
wn
entity
Shareholdings of top ten shareholders without selling restrictions
Number of tradable Class and number of shares
Name of shareholder shares without selling
Class Number
restrictions
Haier Electric Appliances International
1,258,684,824 RMB ordinary 1,258,684,824
Co., Ltd.
Haier Group Corporation 1,072,610,764 RMB ordinary 1,072,610,764
Hong Kong Securities Clearing Co., Ltd. 533,989,517 RMB ordinary 533,989,517
KKR HOME INVESTMENT S.A R.L. 484,037,988 RMB ordinary 484,037,988
China Securities Finance Corporation
219,306,498 RMB ordinary 219,306,498
Limited
GIC PRIVATE LIMITED 184,486,626 RMB ordinary 184,486,626
Qingdao Haier Venture & Investment
Information Co., Ltd.(青岛海尔创业投资 172,252,560 RMB ordinary 172,252,560
咨询有限公司)
National social security fund, Portfolio
104,888,894 RMB ordinary 104,888,894
104
Central Huijin Asset Management Ltd. 69,539,900 RMB ordinary 69,539,900
UBS AG 43,545,196 RMB ordinary 43,545,196
(1) Haier Electric Appliances International Co., Ltd. is a holding
subsidiary of Haier Group Corporation. Haier Group Corporation
holds 51.20% of its equity. Qingdao Haier Venture & Investment
Related-parties or parties acting in concert
Information Co., Ltd.(青岛海尔创业投资咨询有限公司) is a
among the aforesaid shareholders
party acting in concert with Haier Group Corporation;
(2) The Company is not aware of the existence of any connections
of other shareholders.
Number of shares held by top ten shareholders with selling restrictions and the selling
restrictions
□ Applicable √Not Applicable
(Ⅲ) Strategic investors or general legal persons who became the top ten shareholders due to
placing of new shares
√Applicable □ Not Applicable
Name of strategic investor or general legal Starting date of Expiration date of
person agreed shareholding agreed shareholding
KKR HOME INVESTMENT S.A R.L. 17 July 2014 17 July 2017
According to the Share Purchase Agreement entered
into between the Company and KKR in 2013, the
shares of the Company subscribed by it shall not be
Statement of the terms of the agreed
transferred within 36 months after the date of issuance.
shareholding of the strategic investors or
The summary of the agreement sets out in the
ordinary legal persons involved in
announcement regarding the Proposal of Qingdao Haier
placing new shares
Co., Ltd. on Non-public Issuance of A-share (《青岛海
尔股份有限公司非公开发行 A 股股票预案》) (L
2013-023) of the Company dated 8 October 2013.
IV. Controlling shareholder and the ultimate controller
（I） Status of controlling shareholder
1 Legal person
√Applicable □ Not Applicable
Name Haier Electric Appliances International Co., Ltd
The person in charge of the
Company or legal Zhang Ruimin (张瑞敏)
representative
Establishment date 1988-06-30
Manufacturing of freezer, electromagnetic stove, house electrical
fan, hairdryer, freezing machine, gas fire, air cleaner, dishwasher,
electric heater, electric cooker, water dispenser, vacuum cleaner,
Principal business kitchen ventilator, gas stove and oven focal; the export of the
products produced by the Company, the import and export of
technology and equipment for the Company's own use and the
import business of raw materials for production.
2 Natural person
□ Applicable √Not Applicable
3 Explanation on the absence of controlling shareholders of the Company
□ Applicable √Not Applicable
4 Index and dates in respect of the changes in controlling shareholders during the
reporting period
□ Applicable √Not Applicable
5 Framework of the ownership and controlling relationship between the Company and its
controlling shareholder
√ 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
Zhang Ruimin (张瑞敏)
Company 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
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
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
remunerati
on
received
from Whether
Shareholdi Increase/
the receive
Appointme Expiration Shareholdings ngs decrease in Reason for
Title Company remuneration
Name Gender Age nt date of at the beginning at the end shares for increase/
(note) during the from the
date appointment of the year of the decrease
reporting Company‘s
the year year
period related party
(RMB0‘00
0)
(before
tax)
Chairman
Liang
& male 52 2016-05-31 2019-05-30 10,079,840 10,904,065 824,225 190 NO
Haishan
CEO
Employee No receipt
shareholding plan of
Tan Vice vested remunerati
female 48 2016-05-31 2019-05-30 4,613,360 5,272,740 659,380 YES
Lixia president on
from the
Company
Peng
Director male 57 2016-05-31 2019-05-30 20 NO
Jianfeng
Wu
Director male 63 2016-05-31 2019-05-30 20 NO
Changqi
Honbo
Director male 56 2016-05-31 2019-05-30 20 NO
Zhou
Liu
Haifeng Director male 48 2016-05-31 2019-05-30 0 NO
David
Independ
Wu
ent male 78 2016-05-31 2019-05-30 20 NO
Cheng
director
Independ
Dai
ent male 56 2016-05-31 2019-05-30 20 NO
Deming
director
Independ
Shi
ent male 56 2016-05-31 2019-05-30 20 NO
Tiantao
director
Chairman
No receipt
of
of
the
Wang remunerati
superviso male 61 2016-05-31 2019-05-30 27,004 27,004 YES
Peihua on
ry
from the
committe Employee
Company
e shareholding plan
vested No receipt
of
Ming Supervis remunerati
male 58 2016-05-31 2019-05-30 17,612 17,612 YES
Guoqing or on
from the
Company
Wang Supervis
female 43 2016-05-31 2019-05-30 2,231 2,231 16 NO
Yuqing or
Chief
financial Reduction in the
Gong Wei officer, male 45 2016-05-31 2019-05-30 1,400,000 1,050,000 -350,000 secondary market 65 NO
vice
president
Secretary
to Employee
Ming
the board female 54 2016-05-31 2019-05-30 874,000 944,446 70,446 shareholding plan 60 NO
Guozhen
of vested
directors,
vice
president
Total / / / / / 16,967,200 18,218,098 1,250,898 / 441 /
Name
Major work experience
Male, born in 1966, is a senior engineer. He had served as director of enterprise management office of Qingdao Refrigerator
General Factory, head of the quality department of Qingdao Haier Refrigerator Co., Ltd., director of personnel department of
certification center of Haier Group Corporation, general manager and secretary of the party committee of Qingdao Haier Air
Liang Conditioner Gen Corp., Ltd, head and secretary of the party committee of Haier logistics department, senior vice president of Haier
Haishan Group, executive vice president of Haier Group. He is chairman and CEO of 9th session of the Board of Qingdao Haier Co., Ltd.; he
was rewarded National May 1st Labor Medal, Outstanding Leadership Award of the National Light Industry Enterprise Information
(全国轻工业企业信息化优秀领导奖), Top 10 Leaders in China Strategic Emerging Industries in recent year; Prize of Technology
Advancement for China Household Appliances, First Prize Award of Science and Technology Progress of China National Light
Industry Council.
Female, born in 1970, had served as assistant to director and general manager of Haier Air Conditioning Electronics Import
and Export Company (海尔空调电子进出口公司), the head of integrated department, deputy director, director of department of
Tan overseas market development of Haier Group, and head of department of financial management of Haier Group; currently serves as
the executive vice president and chief financial officer of Haier Group, the president of Haier Financial Holdings Limited, the vice
Lixia
chairman of the 9th session of the Board of Qingdao Haier Co., Ltd.. In recent years, she was successively awarded Model Worker
of Shandong Province, Outstanding Entrepreneur of the State, \"March 8 Red-Banner Holders of the State \", PRC CFO of the Year,
China Top Ten Women in Economic Area, China Top Ten Brand Female (中国十大品牌女性) and so on.
Male, born in 1961, professor and tutor of doctorate students of School of Labor and Human Resources of Remin University of
Peng China, president of China Stone Management Consulting Group, vice chairman of China Human Resource Development
Jianfeng Association, vice director of Management Consulting Committee of China Enterprise Confederation, director of the 9th session of
the Board of Qingdao Haier Co., Ltd.. He once was the deputy dean of School of Labor and Human Resources of Remin University
of China.
Male, born in 1955, professor and tutor of doctorate students of department of Strategic Management of Guanghua School of
Management of Peking University. He graduated from Shandong University in 1982 with a bachelor degree in economics. He
graduated from Katholieke Universiteit Leuven in Belgium in 1990, with a MBA degree and a doctorate degree in applied
Wu economics successively. He was an assistant professor and associate professor of Department of Economics of School of Business
Changqi and Management of Hong Kong University of Science and Technology, professor and director of Department of Strategic
Management of Guanghua School of Management of Peking University, deputy dean of Guanghua School of Management, Peking
University, Director of EMBA degree programme center and so on. He is currently the president of the National Hi-Tech Industrial
Development Zone Strategy Research Institute of Peking University (国家高新技术产业开发区发展战略研究院) and president of
Guanghua Leadership Institute (in collaboration with CISCO), director of the 9th session of the Board of Qingdao Haier Co., Ltd..
Male, born in 1962, chairman of UbiLink, member of the board of directors of Beijing Hanbang Technology Co., Ltd.,
part-time chief scientist of Kyland Technology Co., Ltd (东土科技); he was once the general manager of Beiqi iFoton Co., Ltd. (北
汽福田车联网公司), chief software specialist of Tsinghua Tongfang, senior engineer / manager of research and development of
IBM / BEA and other companies in the United States, postdoctoral researcher of Oak Ridge National Laboratory of America etc. He
Honbo has engaged in the research and development work in supercomputing and cloud computing. He was distinguished expert of Beijing,
Zhou Guiyang and other municipal government; part-time professor of Beijing Jiaotong University, University of Electronic Science and
Technology of China and other colleges; He was the pioneer engaged in IOT development in Tsinghua Tongfang after his return
from abroad in 2003, and has published three treatises at home and abroad, and he is one of the nine global IOT experts interviewed
by the internationally renowned magazine \"Economist\". He is currently a director of the 9th session of the Board of Qingdao Haier
Co., Ltd..
Male, born in 1970, currently is the joint founder and president of Dehong Capital（德弘资本）and was the KKR global partner,
co-head of KKR Asian Private Equity (KKR 亚洲私募业务) and CEO of KKR Greater China Region, and member of KKR's Asian
Private Equity Investment Committee, Asia Portfolio Management Committee and China Growth Fund Investment Committee. He
Liu
once served as the managing director of Morgan Stanley and co-head of the Direct Investment Department of Morgan Stanley Asia.
Haifeng
In years of direct investment career, he achieved an excellent long-term investment performance, he was responsible for and led a
David
number of successful and pioneering direct investment projects in the Greater China region, such as: Ping An Insurance, China
Mengniu Dairy, Qingdao Haier, Sunner Development, Belle International, Far East Horizon, Nanfu Battery, China Modern Dairy,
United Envirotech Ltd., China International Capital Corporation Limited (CICC), China Cord Blood Corporation, Yongle
Household Appliances, Hengan International, COFCO Meat, Guangdong Feed(粤海饲料), Asia Dairy, Uxin Limited, Tarena
Education and etc. He graduated from Columbia University, and achieved the highest honor of science degree in Department of
Electronic Engineering; he is a member of Tau Beta Pi (National Engineering Honor Society of America) (全美工程荣誉学会), and
he has won the Edwin Howard Armstrong Award as the most outstanding electronic engineering student of Columbia University.
Male, born in 1940, expert in informationization and automation, academician of Chinese Academy of Engineering. He
Wu graduated from Tsinghua University in 1962 and got a postgraduate degree of Tsinghua University in 1966. He is a professor and
Cheng doctoral supervisor of department of Automation of Tsinghua University, head of National CIMS Engineering Research Center,
independent director of the 9th session of the Board of Qingdao Haier Co., Ltd.
Male, born in 1962. He is a professor and doctoral supervisor of the accounting department of School of Business at Remin
Dai University of China. He also concurrently holds other positions such as a vice-chairman of Accounting Society of China, and a
Deming vice-chairman of Beijing Society of Auditing, Independent director of the 9th session of the Board of Directors of Haier. He served
as an independent director for CSR Corporation Limited and other companies.
Male, born in 1962. He currently serves as a professor and doctoral supervisor of the School of Law at Tsinghua University as
well as director of Finance & Law Research Center under the School of Law at Tsinghua University. He also serves on the 9th
Shi Session of the Board of Directors of Qingdao Haier as an independent director. Meanwhile, he concurrently holds other positions
Tiantao such as a vice president of the Chinese Research Association of Securities Law, an arbitrator of CIETAC, a specially-designated
supervisor of the Supreme People's Court and a member of the Case Guidance Committee. He was a deputy dean of the School of
Law at Tsinghua University.
Male, born in 1957, senior political analyst, he has served as the deputy secretary of Party Committee of Haier Group
Wang Air-Conditioner Head Office (海尔集团空调本部), Washing Machine Head Office (洗衣机本部), and Haier Group Freezer &
Peihua Heater Head Office (海尔集团冷柜电热本部), chairman of the labor union of Haier Group Technology and Equipment Head
Office, deputy secretary of Discipline Inspection Committee etc.. He is the head of the Organizational Department of Haier Group,
the president of the 9th session of the Board of Supervisors of Qingdao Haier Co., Ltd..
Male, born in 1960, senior political analyst, has served as deputy secretary of Discipline Inspection Committee of Qingdao
Ming Refrigerator General Factory, party branch secretary and assistant manager of Qingdao Haier Transportation Company (青岛海尔运
Guoqing
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 Female, born in 1975, has served as the worker supervisor of the Board of Supervisors of Qingdao Haier Co., Ltd. and the
Yuqing office secretary of Qingdao Haier Co., Ltd.. She is a supervisor of the 9th session of the board of supervisors of Qingdao Haier Co.,
Ltd., and head of the general manager office of Qingdao Haier Co., Ltd..
Male, born in 1973, has served as the financial manager of Qingdao Haier Co., Ltd., senior financial manager and senior
financial analyst of Haier Group, chief financial officer of Haier Washing Machine Head Office (海尔洗衣机本部), chief financial
Gong
officer of Haier Air-Conditioner Head Office (海尔空调本部), chief financial officer of White Goods Group, he is the vice president
Wei and chief financial officer of Qingdao Haier Co., Ltd.. He was granted the honorary titles such as Outstanding Youth in Post of
Qingdao City, Outstanding Accounting Workers of Shandong Province, National Outstanding Accounting Workers and so on, and
won the awards of Top Ten CFO in China as appraised by \"New Money\" Magazine (《新理财杂志》) in 2011.
Female, born in 1964, senior economist, was the lecturer of the investment department of China Institute of Finance, deputy
head of the Teaching and Research section of Investment Economy Department, a member of treasury department of Everbright
International Investment Consultancy Company, deputy director and director of general manager office, general manager of business
Ming management department and general manager of personnel department, assistant to the general manager of the Company, executive
Guozhen vice president of Everbright International Investment Consultancy Company; she was the office director of analysts professional
committee of the Securities Association of China, vice director of Qualification Management Department of the Association, vice
director of Practice Standards Committee (执业标准委员会) of the Association. She is currently the vice general manager and
secretary to the Board of Directors of Qingdao Haier Co., Ltd..
Other information
□Applicable √Not Applicable
(II) Incentive share option granted to directors and senior management during the reporting period
□Applicable √Not Applicable
II. Positions Held by Current and Retired Directors, Supervisors and Senior Management during the Reporting Period
(I) Positions held in shareholders’ entities
√Applicable □Not Applicable
End date of
Name Company Position Appointment date
appointment
Liang Haishan Haier Electric Appliances Director November 1997
International Co., Ltd.
Tan Lixia Haier Electric Appliances Director
International Co., Ltd.
Tan Lixia Qingdao Haier Venture & Supervisor March 2009
Investment Information Co., Ltd. (青
岛海尔创业投资咨询有限公司)
Tan Lixia Haier Group Corporation Executive vice president, February 2016
chief financial officer
Wang Peihua Haier Group Corporation Head of Organizational
Department
Ming Guoqing Haier Group Corporation Chairman of the Labor Union
Positions in shareholders Nil
entities
(II) Positions held in other entities
√Applicable □Not Applicable
End date of
Name Company Positions Appointment date
appointment
Liang Haishan Haier Group Finance Co., Ltd. Director
Liang Haishan Haier Financial Holdings Limited Director
Liang Haishan Fisher & Paykel Appliances Holdings Limited Director
Ming Guozhen Qingdao Overseas Chinese Industrial Holding Co., Ltd. Director July 2008
Tan Lixia Haier Group Finance Co., Ltd. Supervisor
Tan Lixia Haier Financial Holdings Limited Legal
representative,
director
Tan Lixia Fisher & Paykel Appliances Holdings Limited Director
Wu Cheng Tsinghua University Professor February 1967
Wu Cheng Kingdee International Software Group Company Limited Independent March 2018
Non-executive
director
Wu Changqi Peking University Professor
Wu Changqi Huaxia Bank Co., Ltd. (华夏银行股份有限公司) Supervisor 12 May 2015 11 May 2018
Wu Changqi Beijing Electronic Zone Investment and Development Independent 28 December 2012 27 December 2018
Co., Ltd. director
Honbo Zhou Beijing Hanbang Technology Co., Ltd. （北京汉邦高科 Independent November 2017 November 2020
数字技术股份有限公司） director
Shi Tiantao Tsinghua University Professor 2000
Shi Tiantao Jiajiayue Group Holding Co., Ltd. (家家悦集团股份有 Independent
限公司) director
Shi Tiantao Kunlun Trust Co., Ltd.（昆仑信托有限责任公司） Independent
director
Shi Tiantao Rongtong Fund Management Co., Ltd.（融通基金管理有 Independent
限责任公司） director
Liu Haifeng Far East Horizon Co., Ltd.（远东宏信有限公司） Non-executive October 2009
David director
Liu Haifeng China International Capital Corporation Limited（中国国 Non-executive February 2015
David 际金融股份有限公司） director
Liu Haifeng Sunpower Group (中圣集团) Non-executive
David director
Dai Deming Beijing Capital Development Co., Ltd.（北京首都开发股Independent September 2015
份有限公司） director
Dai Deming China Zheshang Bank Co., Ltd.（浙商银行股份有限公 Independent March 2015
司） Non-executive
director
Dai Deming BOC Aviation Limited（中银航空租赁有限公司） Independent May 2016
Non-executive
director
Dai Deming China Securities Co., Ltd.（中信建投证券股份有限公 Independent August 2016
司） Non-executive
director
Peng Jianfeng Beijing Chinastone Enterprise Management Consulting President
Co., Ltd.（北京华夏基石企业管理咨询有限公司）
Peng Jianfeng School of Labor and Human Resources of Remin Professor
University of China
Peng Jianfeng Qingdao Haier Co., Ltd. Director
Peng Jianfeng China Merchants Shekou Industrial Zone Holdings Co., Independent
Ltd. director
Peng Jianfeng Chow Tai Seng Jewellery Company Limited Independent
director
Peng Jianfeng Jinko Power Technology Co., Ltd.（晶科电力科技股份 Independent
有限公司） director
Honbo Zhou Beijing Hanbang Technology Co., Ltd. Director November 2017 November 2020
Positions in
shareholders Nil
entities
III. Remuneration of Directors, Supervisors and Senior Management
√Applicable □Not Applicable
Decision-making procedures of the The procedures for decision- making of remuneration of directors, supervisors and senior
remuneration of directors, supervisors management of the Company are establishing platform, clearing standards, communication and
and senior management 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 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.
The management personnel salary system of the Company in 2017 is linked to the vertical and
horizontal 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
Determination basis of the the 9th session of the board of directors of the Company is RMB200,000 (before tax) in total per
remuneration of directors, supervisors year, including the fixed allowances of RMB150,000 per year, the highest performance allowance
and senior is RMB50,000 per year, and the exact amount of performance allowance will be determined based
Management on the comprehensive consideration of the contribution of directors to the Board decision making,
the effectiveness of the proposals and recommendations to the board of directors, the participation
of the meetings of the Board, attendance rate of all Board meetings and other factors. The travelling
expense for attending the meetings of the board of directors and shareholders and other expenses
necessary for performing their duties pursuant to the Articles of Association shall be fully
reimbursed.
Remuneration payables of directors,
Paid as required.
supervisors and senior management
Total actual remuneration of all the
directors, supervisors and senior
RMB4.41 million
management at the end of the reporting
period
IV. Changes in Directors, Supervisors and Senior Management of the Company
□Applicable √Not Applicable
V. Punishment by the Securities Supervisory Institute in last three years
□Applicable √Not Applicable
Ⅵ. Staff of the Company and Principal Subsidiaries
(I) Staff information
Number of staff of the Company 2,866
Number of staff of principle subsidiaries 74,030
Total number of staff 76,896
Number of employees whose retirement
expenses are borne by the Company and the
principle subsidiaries
Breakdown by function
Function Number
Production 48,882
Sales 14,175
R&D 11,301
Financial 1,028
Administrative 1,510
Total 76,896
Breakdown by education
Education Number
Bachelor and above 16,148
College 18,702
Technical secondary school and others 42,046
Total 76,896
(II) Remuneration policies
√Applicable □Not Applicable
The Company conducted the system of ―salary paid by users‖, individual paid
separately and entirety paid in advanced, which originates from the strategic balance sheet
of Haier, and carried out the evaluation of the four aspects, namely the creation of user
values, the enhancement of emerging small companies, the budget implementation of the
leading targets and the continuous optimization based on the vertical and horizontal
matching statement and the win-win value-added statement. The incentive system leads to
―salary paid by users‖, win-win sharing through everybody creating values to the users who
will pay for the values, achieving the emerging small companies and the leading platform.
(III) Personnel training
√Applicable □Not Applicable
Please also refer to relevant content set out in \"Social Responsibility Report in 2017
of Qingdao Haier Co., Ltd.\" published on the same date as this report.
(Ⅳ) Labor Outsourcing
□Applicable √Not Applicable
Ⅶ. Other
□Applicable √Not Applicable
Section IX CORPORATE GOVERNANCE
I. EXPLANATION OF CORPORATE GOVERNANCE
√Applicable □Not Applicable
During the reporting period, the Company strictly complied with the requirements under the
Company Law, the Securities Law, Code on Corporate Governance for Listing Company and the
requirements of the relevant laws and regulations, to improve its corporate governance structure,
regulate its operation, improve its information disclosure system, strengthen the communication with
investors and elevate the standard of the Company‘s corporate governance. In respect of corporate
governance structure, the general meeting, the Board and the management standardized its operation to
practically guarantee the legal interests of the Company and its shareholders; all Directors duly
discharged their duties in a diligent way; each committee of the Board of the Company performed their
work according to their respective detailed working rules to ensure that the Board operate in a more
effective and scientific way; independent Directors fulfilled their duties independently and issued
independent opinion on major matters in order to effectively protect the interests of the Company as a
whole and the lawful rights and interests of medium and small investors. In respect of information
disclosure, the Company strictly executed the registration and management system for insiders, achieved
the management of inside information on significant events and eliminating the act of using the
Company‘s inside information for stocks trading by insider. Meanwhile, the Company reinforced the
accountability of people who are responsible for annual report disclosure and enhanced the quality and
transparency of information disclosure in annual reports. The Company has placed a lot of emphasis on
information disclosure and disclosed relevant information on a true, accurate, complete and timely basis
strictly in accordance with the requirements of laws and regulations to ensure all shareholders have
equal access to such information. In respect of the management of investor relation, in accordance with
guideline of the Management System for Investor Relation, the Company integrated business and
financial resources by the office of board secretary and realized positive and all-around access to
investors in a multi-layer and diversified format through introduction reference, result announcement
conference and online forum. Meanwhile, the Company replied investors on a timely basis by ways of
interview, e-mail, phone, fax and the website (http://sns.sseinfo.com) and enhanced interaction with
investors, so as to respect and protect the interests of various investors, with the aim of achieving
harmonious and mutual success with the Company, staff and investors. The corporate governance
structure of the Company is sound and there is no difference between the corporate governance structure
and the requirement of relevant documents from CSRC.
（1）Shareholders and general meeting of shareholders:
The Company could ensure that all shareholders, especially the minority shareholders enjoy equal
treatment and are able to fully exercise their rights; during the reporting period, the Company convened
and held two shareholders‘ general meetings in compliance with the requirements of the Articles of
Association and Rules Governing Shareholders‘ General Meeting of the Company. Attendance of
Shareholders at the meeting is relatively high, which ensured that the shareholders fully excised voting
rights; the Company also engaged lawyers who possess the qualification to engage in securities business
to attend and witness the shareholders‘ general meeting; the resolutions were considered and approved in
accordance with legal procedures, which could guarantee the power and rights of minority shareholders.
（2）Relationship between controlling shareholders and the Company:
The controlling shareholders acted normatively and did not interfere with the Company‘s
management decisions and operations, directly or indirectly. The Company and the controlling
shareholders are independent of each other in terms of their staff, assets, finance, organization and
business. Their respective board of directors, the supervisory committee and internal administrative
departments are all independent of each other. The specific requirements for regulating Related-party
transactions and fund flow are set out in the Articles of Association, Fair Decision-Making System for
Related-party Transactions and the Administrative System for Regulation of Fund Flow between the
Company and Related Parties, Risk Control System for Related-party Transaction with Haier Group
Finance Co., Ltd., and Proposal for Emergency Response System for Risk of Deposits with Haier Group
Finance Co., Ltd., which guaranteed the interests of investors. The daily related-party transactions are
subject to the consideration and approval at the annual general meeting and set specialized execution
procedure. The basis of pricing and reasonability of operation agreement shall be supervised and
reviewed by special departments, so as to regulate the execution of related-party transactions and protect
the interests of minority shareholders and non-related shareholders. During the reporting period, further
enhanced self-procurement capability and scope of the self-procurement companies Qingdao Haidarui
Procurement Service Co., Ltd.(青岛海达瑞采购服务有限公司) and Qingdao Haidayuan Procurement
Service Co., Ltd.(青岛海达源采购服务有限公司) and strengthened the procurement capability of the
Company, which further reduced related-party transactions. The revenue of the above two companies
amounted to RMB17.59 billion and RMB26.87 billion respectively in 2017, with procurement efforts
continued to increase.
（3）Directors and the Board:
During the reporting period, the Board of the Company operated in accordance with rules and
continued to perform their duties under the Articles of Association and relevant laws and regulations
better and practically implement relevant decisions at the shareholders‘ general meeting. The number
and composition of the members of the Board complied with relevant laws and regulations; the Directors
attended the board meeting and shareholders‘ general meeting with diligent and responsible attitude and
protected the interests of the Company. In accordance with the requirements in the Code of Corporate
Governance for The Company, the Company has 7 external Directors, of which three are independent
Directors, representing approximately three quarters of the total number of the Directors (9 in total) of
the Company. Each of the independent Directors of the Company respectively acted as member of the
nomination committee, remuneration and appraisal committee and audit committee of the Board and
practically carried out their duties.
During the reporting period, all Directors and independent Directors performed their duties
earnestly strictly in compliance with the Articles of Association, the Rules of Procedure for the Board of
Directors, the System for Independent Directors and relevant requirements under laws and regulations
and each committees of the Board operated normatively according to its own work rules. During the
reporting period, the Board of the Company considered and approved the following matters: the Phase II
employee incentive scheme and periodical reports, so as to encourage the Company to further
consolidate its resources to better implement the networking and globalize development strategy.
（4）Supervisors and the Supervisory Committee:
During the reporting period, the Supervisory Committee operated in accordance with rules and
continued to practically perform their duties under the Articles of Association and relevant laws and
regulations. The number and composition of the members of the Supervisory Committee complied with
requirements under laws and regulations. During the reporting period, the Supervisors of the Company
performed their duties earnestly and adhered to the principle of being responsible to the Company and
all shareholders to supervise legality and compliance on finance matters of the Company and
performance of duty by the Company‘s Directors, managers of the Company and other senior
management strictly in accordance with requirements under the Articles of Association, the Rules of
Procedure for the Supervisory Committee and relevant laws and regulations.
（5）Performance evaluation and incentive and disciplinary mechanism:
In accordance with the Articles of Association, the Board shall appoint or remove the general
manager and the secretary of the Board; the Board shall appoint or remove the deputy general manager
and other senior management (including the chief financial officer) of the Company based on the
nomination by the general manager and determine their remunerations and rewards and penalties. The
human resource department of the Company shall make routine appraisal and evaluation on the
performance of Directors, supervisors and senior management and Remuneration and Appraisal
Committee shall make inspection and evaluation on their performance to determine their remunerations
at the end of the year.
During the reporting period, the Company adopted the Phase II employee incentive scheme which
further perfected the incentive and disciplinary mechanism and mechanism of the shareholders shares
benefits and risks with the management of the Company, so as to enhance the competitiveness and
promote the sustainable and sound development of the Company.
（6）Stakeholders:
The Company was able to fully respect and protect the lawful rights and interests of banks, other
creditors, employees, consumers and other stakeholders. Meanwhile, the Company actively took part in
public welfare undertaking in such place where it operates, placed a lot of emphasis on environment
protection, performed its social duties earnestly and worked together with these stakeholders actively
with good communication to promote the sustainable and sound development of the Company. For
details, please refer to relevant information in 2017 Social Responsibility Report of Qingdao Haier Co.,
Ltd. published on the same date of this report.
（7）Information disclosure and transparency:
During the reporting period, the Company positively disclosed the relevant information in a true,
accurate and complete manner which was strictly in accordance with relevant laws and regulations
including the Articles of Association, Administrative Measure for Information Disclosure and
requirements in the Information Disclosure Management System of the Company, Work Rules and
Procedures Regarding the Annual Report and the Management System for Investor Relation, proactively
communicated with regulatory authorities and investors and designated newspapers including Shanghai
Securities News, China Securities Journal, Securities Times and Securities Daily for information
disclosure to ensure that all shareholders access to such information equally. The Company authorized
the secretary to the Board to take charge of information disclosure, reception of visits by shareholders
and handling of shareholder's enquiries. Meanwhile, the Company broadened communication channels
for investors to get relevant information of the Company through telephone conference calls after
periodical reporting and occasionally holding on-site and online forums. With respect to the significant
Related-party transactions, the Company performed necessary approval procedures and disclosed
relevant information strictly in compliance with the Articles of Association and Fair Decision-Making
System for Related-party Transactions to protect the interests of investors. During the reporting period,
the Company further perfected the confidentiality procedure for information disclosure strictly in
compliance with the Registration System of Insiders, the Responsibility System for Major Errors in
Information Disclosure in Annual Reports and the Management System of External Information Users to
ensure the fairness and equity of information disclosure.
（8）Implementation of corporate governance campaign in 2017:
During the reporting period, the Company continued to carry out works relating to ―solution of
business competition and reduction of related-party transactions‖. In 2017, trading volume of
related-party transactions regarding procurement amounted to RMB35.80 billion, which accounted for
24.0% of the similar transactions, remaining flat as compared to the same period of the previous year.
Trading volume of related-party transactions regarding sales amounted to RMB5.25 billion, which
accounted for 3.3% of the similar transactions, representing a decrease of 0.4 pct pt compared with last
year. The effective optimization of the related-party transactions in the previous period has been
maintained. The Company will continue to increase investment in independent purchase and promote the
continuous optimization of related-party transactions.
Leveraging on the further implementation of governance campaign and enhancing the
establishment of fundamental systems, the Company further improved the corporate governance
structure and improved the corporate governance. The Company carried out various activities to
strengthen the consciousness of learning and further strengthened the consciousness on regulating
governance in the Company among Directors, Supervisors and senior management of the Company with
organizational training to improve the ability to regulate governance and continuously improve and
perfect corporate governance of the Company, thus to protect the minority equity interests and to
guarantee and promote the healthy, stable and sustainable development of the Company.
Whether there is a significant difference between the corporate governance and requirements of relevant
provisions of the CSRC; if so, the reasons should be explained
□Applicable √ Not Applicable
II. Introduction to the General Meeting of shareholders
Index for details of websites designated for Date of
Meeting Date
publishing resolutions disclosure
For details, please refer to the Announcement
on Resolutions Passed at the 2016 Annual
2016 Annual General Meeting of Qingdao Haier Co., Ltd.
General 28 June 2017 (L2017-023) published by the Company on the 29 June 2017
Meeting website of Shanghai Stock Exchange
(www.sse.com.cn) and the four major securities
newspapers.
For details, please refer to the Announcement
on Resolutions Passed at the 2017 First
2017 First
Extraordinary General Meeting of Qingdao
Extraordinary 23 November 24 November
Haier Co., Ltd. (L2017-045) published by the
General 2017
Company on the website of Shanghai Stock
Meeting
Exchange (www.sse.com.cn) and the four
major securities newspapers.
Explanation of Shareholders‘ general meetings
√Applicable □Not Applicable
（1）The 2016 Annual General Meeting of the Company (the ―2016 AGM‖) was held by way of
on-site voting and network voting by poll at Room A108, Haier University, Haier Information Park,
No.1 Haier Road, Qingdao, the PRC in the afternoon on 28 June 2017. The Company‘s share capital in
aggregate amounted to 6,097,630,727 shares. 171 shareholders and proxies attended the meeting,
holding a total of 3,696,722,055 shares, representing 60.63% of the total number of shares of the
Company with voting rights. The Directors, Supervisors and senior management of the Company as well
as the lawyers engaged by the Company also attended the meeting. The 2016 AGM was convened by the
Board of the Company. Vice president Ms. Tan Lixia presided over the 2016 AGM. The Company had 9
Directors, of whom 4 Directors attended the 2016 AGM (Directors Liang Haishan, Zhou Hongbo, Peng
Jianfeng, Wu Cheng, Liu Haifeng David were unable to attend the 2016 AGM due to personal
engagement); the Company had 3 Supervisors, all of whom attended the 2016 AGM. The secretary to
the Board of the Company attended the 2016 AGM and other members of senior management of the
Company were invited to attend the 2016 AGM.
（2）The 2017 First Extraordinary General Meeting of the Company (the ―2017 First EGM‖) was held
by way of on-site voting and network voting by poll at Room A108, Haier University, Haier Information
Park, No.1 Haier Road, Qingdao, the PRC in the afternoon on 23 November 2017. The Company‘s share
capital in aggregate amounted to 6,097,402,727 shares. Attendance of shareholders and proxies at the
2017 First EGM is as follows: there were 96 shareholders of the Company in attendance either in person
or by proxy at the 2017 First EGM, holding a total of 3,613,884,883 shares, representing 59.27% of the
total number of shares of the Company with voting rights. The Directors, Supervisors and senior
management of the Company as well as the lawyers engaged by the Company also attended the 2017
First EGM. The 2017 First EGM was convened by the Board of the Company. Mr. Liang Haishan,
Chairman of the Board, presided over the 2017 First EGM. The Company had 9 Directors, of whom 2
Directors attended the 2017 First EGM (Directors Wu Changqi, Peng Jianfeng, Zhou Hongbo, Liu
Haifeng David, Wu Cheng, Shi Tiantao, Dai Deming were unable to attend the 2017 First EGM due to
personal engagement); the Company had 3 Supervisors, all of whom attended the 2017 First EGM. The
secretary to the Board of the Company attended the 2017 First EGM and other members of senior
management of the Company were invited to attend the 2017 First EGM.
III. Performance of Duties by Directors
(I) Attendance of board meetings and general meetings by directors
Attendance
Attendance of Board meetings
of general
meetings
Whether an Absence
Name
Independent Required Attendanc from two
of Attendance
Director or attendanc Attendanc e consecutiv
Director Attendanc Absenc s
not es e By e meetings
e by proxy e at general
of Board in person telecommu in person
meetings
meetings nication or not
Liang
NO 7 7 3 0 0 NO
Haishan
Tan
NO 7 7 2 0 0 NO
Lixia
Peng
NO 7 7 6 0 0 NO
Jianfeng
Wu
NO 7 7 7 0 0 NO
Changqi
Zhou
NO 7 7 7 0 0 NO
Hongbo
Liu
Haifeng NO 7 7 6 0 0 NO
David
Dai
YES 7 7 6 0 0 NO
Deming
Wu
YES 7 7 7 0 0 NO
Cheng
Shi
YES 7 7 7 0 0 NO
Tiantao
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
Of which: Number of on-site meetings
Number of meetings held by telecommunication
Number of meetings held both on site and by
telecommunication
(II) Independent Directors’ objection to the relevant matters of the Company
□Applicable √Not Applicable
(III) Other
□Applicable √Not Applicable
IV. Major Opinions and Suggestions of the Special Committees of the Board in Performing Their
Duties during the Reporting Period, Details Should Be Disclosed If Any Disagreements
√Applicable □Not Applicable
（1）Audit Committee: during the reporting period, the Company convened 5 meetings of the Audit
Committee to consider the annual report audit-related work for three times, namely, pre-audit, mid-audit
and post audit and made relevant arrangement. The Audit Committee believed that the 2016 financial
and accounting statement issued by the Company was in compliance with the requirements of the
Accounting Standards for Business Enterprises, and gave a true and fair view of the Company‘s assets
and liabilities as of 31 December 2016 and operating results and cash flow for the year 2016. There was
no significant unresolved disagreement between accounting and auditing. There was no material risk
affecting the Company‘s operation. The Company operated prudently and would be able to continue as a
going concern. Other meetings considered the plans for the annual budget of related-party transactions,
internal control self-assessment reports, profit distribution plan, engagement of accounting firm, change
of accounting policies, issuance of convertible bonds, assigning of multimedia equity/PML equity,
subscription of increase of capital of Finance Company, issuance of exchangeable bonds and the 2016
annual report, the first quarterly report/the semi-annual report/the third quarterly report of 2017. The
Audit Committee agreed the above resolutions and submitted the same to the Board for consideration.
（2）Remuneration and Appraisal Committee: during the reporting period, the Company convened
2 meeting of the Remuneration and Appraisal Committee to consider the Phase II Stock Ownership
Scheme of Core Employees Stock Ownership Scheme and the annual remuneration package of Directors,
supervisors and senior management. The Remuneration and Appraisal Committee agreed the above
resolutions and submitted the same to the Board for consideration.
（3）Nomination Committee: during the reporting period, the Company convened 1 meeting of the
Nomination Committee to summarize the annual performance of duties by Directors, supervisors and
senior management. The Nomination Committee agreed the above resolutions.
（4）Strategy Committee: during the reporting period, the Company convened 7 meetings of the
Strategy Committee to consider and approve the plan for assigning of multimedia equity/PML equity,
performance of duties, issuance of convertible bonds and issuance of exchangeable bonds. The Strategy
Committee agreed the above resolutions and submitted the same to the Board for consideration.
V. Supervisory Committee’s Explanation on Risks about the Company
□Applicable √Not Applicable
VI. Statements of the Company on Inability to Maintain the Independence or the Ability of
Independent Operations between the Company and the Controlling Shareholders with respect to
Business, Personnel, Assets, Organization and Finance
□Applicable √Not Applicable
Corresponding solutions, working progress and subsequent working plans of the Company in case of
horizontal competition
√Applicable □Not Applicable
In recent years, the Company made constant efforts in solving the horizontal competition, and reduced
the number of related-party transactions. As of the end of the reporting period, the Company effectively
solved the horizontal competition, and reduced the number of related-party transactions by acquiring the
Group‘s upstream and downstream assets and setting up an independent platform for independent
procurement and sales. In 2017, the trading amount of related-party transactions regarding procurement
amounted to RMB35.80 billion, which accounted for 24.0% of similar transactions, remaining flat as
compared to the same period of the previous year; the trading amount of related-party transactions
regarding sales amounted to RMB5.25 billion, which accounted for 3.3% of similar transactions,
representing a year-on-year decrease of 0.4 pct pt.
VII. Establishment and Implementation of Appraisal and Incentive Mechanism for Senior
Management during the Reporting Period
√Applicable □Not Applicable
In 2017, the Company adopted a system ―salary paid by users‖ individual paid separately and
entirety paid in advanced, which is linked to the vertical and horizontal matching statement and the
win-win value-added statement for management personnel, of which the tool is the two-dimensional
lattice model (二维点阵模型). The two-dimensional lattice (二维点阵) could reflect the strategy
support, emerging small companies and leading platform vertically, and the global leading market
competitiveness horizontally. The competitiveness of compensation was determined by such elements as
―support for strategy‖, ―competitiveness of market leading target‖ and ―emerging small companies,
leading platform‖. The senior management receives annual appraisal of the annual performance, which
was the key factor to performance bonus and development. On one hand, the Company‘s ―salary paid by
users‖ overall compensation system of connecting sales force with their orders and remuneration
diversified the way of salary incentive of the management, and made the compensation mechanism for
management more flexible on the other hand, which drove the innovation of management.
Meanwhile, the Company‘s salary incentive system was further improved, the incentive and
restriction mechanism was strengthened and a mechanism that shares interests and risks with the
Company and the management was formulated in the principle of ―salary paid by users‖ by
implementing such initiatives as employee shareholding plan.
VIII. Whether to Disclose the Self-Assessment Report on Internal Control
√Applicable □Not Applicable
For details, please refer to the 2017 Internal Control Assessment Report of Qingdao Haier Co., Ltd
disclosed on the same date of this report.
Explanations on Material Defects Found in Internal Control during the Reporting Period
□Applicable √Not Applicable
IX. Relevant Explanations on the Audit Report of Internal Control
√Applicable □Not Applicable
The Company‘s auditor Shandong Hexin Accountants LLP (山东和信会计师事务所（特殊普通合
伙）) has audited the efficiency of internal control relating to the financial report of the Company, and
has issued its standard unqualified auditor‘s report for the Company‘s internal control (Hexin Shen Zi
(2018) No.000268).
For further details of the Audit Report of Internal Control of Qingdao Haier Co., Ltd., please refer
to relevant announcements published on the website of the Shanghai Stock Exchange (www.sse.com.cn)
on 26 April 2018.
Whether to disclose the audit report on internal control: Yes
X. Other
□Applicable √Not Applicable
Section X RELEVANT INFORMATION ON CORPORATE BONDS
□Applicable √Not Applicable
On 9 September 2017, with the consideration and approval at the 8th meeting of the 9th session of
the Board of Directors, the Company disclosed the proposal for issuance of convertible bonds, under
which convertible bonds of RMB5.64 billion were intended to be issued. The fund would be utilized as
the Company‘s investments in such aspects as the leading of the consumption upgrades, the
implementation of the large kitchen appliances strategy and the enhancement of the innovation
capabilities. As of the disclosure date of this report, the proposal was accepted by the CSRC with further
feedback. Accordingly, the Company made responses to the feedback.
SECTION XI FINANCIAL REPORT
I. Auditor’s Report
√Applicable □ Not Applicable
Auditor’s Report
Hexin ShenZi(2018) No.000267
To the shareholders of Qingdao Haier Co., Ltd:
1. OPINION
We have audited the accompanying financial statements of Qingdao Haier Co., Ltd. (hereinafter
the ―Company‖), which comprise the consolidated and company balance sheets as at 31 December 2017,
and the consolidated and company income statements, the consolidated and company statements of
changes in shareholders‘ equity and the consolidated and company cash flow statements for the year
then ended, and notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated and company‘s financial position of the Company as at 31 December 2017, and their
financial performance and cash flows for the year then ended in accordance with the requirements of
Accounting Standards for Business Enterprises.
2. BASIS FOR OPINION
We conducted our audit in accordance with China Standards on Auditing. Our responsibilities
under those standards are further described in the Auditor‘s responsibilities for the audit of the
consolidated financial statements section of our report. We are independent of the Company in
accordance with the CICPA‘s Code of Ethics for Professional Accountants (the ―Code‖), and we have
fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the consolidated financial statements of the current period. These matters were addressed
in the context of our audit of the consolidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our
description of how our audit addressed the matter is provided in that context.
Key audit matter How our audit addressed the key audit matter
（Ⅰ）Impairment testing of goodwill
Relevant disclosures are included in notes V.28
Other significant accounting policies and
Our audit procedures include:
accounting estimates and notes VII.19
(1) Compared the actual operating results of the
Impairment of long-term assets.
related assets group with previous year‘s
As of December 31, 2017, the book value of
forecasted figures, to assess the reliability of the
goodwill was RMB 19,843 million, and the book
management forecast on cash flow;
value of intangible assets with finite useful lives
(2) Compared the input of cash flow forecast
was RMB 621 million, without any provision for
with historical data, approved budget and
impairment.
business plan;
Significant management judgments are involved
(3) Tested the accuracy of the discounted
in calculation of asset group‘s recoverable
cashflow model;
amount, such as revenue growth rate, gross
(4) Assessed the appropriateness of the
margin, discount rate, etc.
parameters in the discounted cashflow model,
Provision for impairment of goodwill and
like discount rate and terminal growth rate,
intangible assets with infinite useful lives is
which is based on our understanding of business
considered as the key audit matter due to the
and industry.
significant amount and management judgement
involved in calculation.
（Ⅱ）Provision for Inventories
Relevant disclosures are included in notes VII. 12 Our audit procedures include:
Inventory to the financial statements. (1) Obtained the calculation report for provision
Inventories of the company are measured at the of inventories, and review their conditions and
lower of cost and net realizable value. As at aging to see whether they are consistent with the
December 31, 2017, inventory balance was RMB information obtained through physical inventory
22,234 million, provision for inventory on a sample basis;
impairment was RMB 731 million, and book (2) Compared the major parameters estimated by
value was RMB 21,503 million. management with historical data, and assess the
The company determines the net realizable value appropriateness;
of inventory based on the estimated selling price (3) Assessed the selling price estimated by the
minus the estimated selling expenses and related management, and checked the inventory against
taxes. the actual selling price after the balance sheet
Management estimates the selling price based on date on a sample basis;
the status of inventory. The estimation process (4) Assessed selling expenses and related tax
involves significant judgments such as inventory estimated by management and compared with
status, repair rate, discount rate, etc. actual amounts incurred.
Provision for inventories is considered as the key
audit matter due to the significant amount and
management judgement involved in calculation.
（Ⅲ）Product Warranty
Relevant disclosures are included in notes VII. 22
Provisions to the financial statements.
Provisions are mainly accrued due to obligations
arising from product warranty. As of December
31, 2017, the balance of the provision related to
Our audit procedures include:
product warranty was RMB 2.60 billion.
(1) Obtained the provision estimation process;
Product warranty was measured in accordance
(2) Compared the main parameters estimated by
with the best estimate of the cost to fulfill the
management with historical data;
relevant obligations.
(3) Tested the accuracy;
Calculation of the product warranty involves
(4) Compared and analyzed the estimation with
management‘s significant judgments based on
company‘s actual operation.
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.
4. OTHER INFORMATION INCLUDED IN THE ANNUAL REPORT
The management of the Company is responsible for the other information. The other information
comprises the information included in the Annual Report, other than the consolidated financial
statements and our auditor‘s report thereon.
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
5. RESPONSIBILITIES OF THE MANAGEMENT AND GOVERNANCE
FOR THE CONSOLIDATED FINANCIAL STATEMENTS
The management of the Company is responsible for the preparation of the consolidated financial
statements that give a true and fair view in accordance with Accounting Standard for Business
Enterprises, and for such internal control as the management determine is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the consolidated financial statements, the management of the Company is responsible
for assessing the Company‘s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless the management of the
Company either intends to liquidate the Company or to cease operations or have no realistic alternative
but to do so.
The governance of the Company is in charge of overseeing the Company‘s financial reporting
process.
6. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
CONSOLIDATED FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an
auditor‘s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with Auditing Standards, we exercise professional judgement and
maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company‘s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the management.
Conclude on the appropriateness of the management‘ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company‘s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor‘s report
to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor‘s report. However, future events or conditions may cause the Company to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain solely
responsible for our audit opinion.
We communicate with the Governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide the Governance with a statement that we have complied with relevant ethical
requirements regarding independence and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Governance, we determine those matters that were of
most significance in the audit of the consolidated financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor‘s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Shandong Hexin Certified Public Accountants LLP CICPA: Wang Hui（王晖）
China Jinan （Engagement Partner）
CICPA:Han Xiaojie（韩晓杰）
24 April 2018
II. Financial Statements
CONSOLIDATED BALANCE SHEETS
31 December 2017
Prepared by: Qingdao Haier Co., Ltd. Currency: RMB Yuan
Notes Closing Balance Opening Balance
Current Assets:
Cash VII.1 35,177,276,903.91 23,582,239,011.20
Clearing settlement funds
Placements with banks
Financial assets measured at fair value with changes included VII.2 20,681,695.50 80,432,384.17
in current profit and loss
Derivative financial assets
Notes receivable VII.3 13,033,083,520.99 13,796,561,238.05
Accounts receivable VII.4 12,448,004,833.06 12,265,195,443.40
Prepayments VII.5 590,693,658.21 592,510,116.61
Premiums receivable
Reinsurance accounts receivables
Reinsurance contract reserves receivable
Interest receivable VII.6 203,637,543.83 135,319,774.41
Dividends receivable 4,524,472.84 101,648,913.10
Other receivables VII.7 961,263,981.87 1,180,418,052.75
Financial assets purchased under resale agreements
Inventories VII.8 21,503,524,800.18 15,284,904,331.04
Held-for-sale assets
Other non-current assets due in one year
Other current assets VII.9 4,389,760,018.83 2,657,462,188.89
Total Current Assets 88,332,451,429.22 69,676,691,453.62
Non-current assets:
Loans and advances granted
Available-for-sale financial assets VII.10 1,415,354,307.82 1,555,878,717.05
Held-to-maturity investments
Long term receivables
Long-term equity investments VII.11 12,992,767,394.28 11,057,819,628.14
Investment properties VII.12 31,214,015.99 34,600,393.37
Fixed assets VII.13 16,017,523,376.11 15,544,099,343.40
Construction in progress VII.14 1,530,390,130.25 1,786,167,265.52
Construction materials
Disposals of fixed assets VII.15 55,808,808.81 55,808,808.81
Productive living assets
Oil and gas properties
Intangible assets VII.16 7,005,186,296.28 7,274,440,410.94
Development expenditure VII.17 966,051,333.81 913,283,796.32
Goodwill VII.18 19,843,317,357.30 21,004,123,145.39
Long-term prepaid expenses VII.19 123,768,671.33 115,773,592.78
Deferred tax assets VII.20 1,895,213,404.67 1,592,009,404.59
Other non-current assets VII.21 1,254,064,181.76 858,461,388.86
Total Non-current Assets 63,130,659,278.41 61,792,465,895.17
TOTAL ASSETS 151,463,110,707.63 131,469,157,348.79
Current Liabilities:
Short-term borrowings VII.22 10,878,580,275.18 18,165,531,879.15
Financial liabilities measured at fair value with changes VII.23 2,524,569.45 2,340,213.20
included in current profit and loss
Derivative financial liabilities
Notes payable VII.24 16,378,699,659.77 12,404,889,760.05
Accounts payable VII.25 25,654,013,649.96 20,601,681,120.03
Accounts received in advance VII.26 5,833,552,815.05 5,737,348,712.97
Financial assets sold under repurchase agreements
Fees and commissions payable
Employee benefits VII.27 2,349,189,122.90 2,408,525,656.48
Taxes payable VII.28 1,909,260,527.42 1,620,588,401.27
Interest payable VII.29 57,656,458.79 30,570,328.66
Dividends payable VII.30 153,756,315.64 148,690,489.01
Other payables VII.31 10,805,162,943.62 9,459,636,746.05
Held-for-sale liabilities
Other non-current liabilities due in one year VII.32 2,850,325,000.00 2,966,808,509.55
Other current liabilities 21,729,198.70 17,228,645.29
Total Current Liabilities 76,894,450,536.48 73,563,840,461.71
Non-current Liabilities:
Long-term borrowings VII.33 16,036,492,809.81 15,530,801,311.80
Bonds payable VII.34 6,211,088,362.68 -
Including: Preference shares
Perpetual Note
Long-term payable VII.35 106,020,029.74 115,783,382.28
Long-term employee benefits VII.36 898,160,742.53 1,209,218,564.79
Payables for specific projects
Provisions VII.37 2,619,699,551.41 2,310,119,430.60
Deferred revenue VII.38 497,141,088.72 342,825,593.35
Deferred tax liabilities VII.20 279,114,620.35 133,243,146.68
Other non-current liabilities VII.39 1,170,936,828.55 582,785,069.86
Total Non-current Liabilities 27,818,654,033.79 20,224,776,499.36
Total Liabilities 104,713,104,570.27 93,788,616,961.07
Equity:
Share capital VII.40 6,097,402,727.00 6,097,630,727.00
Other equity instruments VII.41 431,424,524.07
Including: Preference shares
Perpetual note
Capital reserve VII.42 826,883,093.84 83,383,194.51
Less: Treasury shares VII.43 - 1,041,960.00
Other comprehensive income VII.44 -36,363,809.96 566,987,435.57
Special reserve
Surplus reserve VII.45 2,103,057,782.41 2,076,460,077.78
General reserve
Retained Earnings VII.46 22,793,110,884.09 17,614,768,751.70
Total equity attributable to owners of the Company 32,215,515,201.45 26,438,188,226.56
Non-controlling interests 14,534,490,935.91 11,242,352,161.16
Total Equity 46,750,006,137.36 37,680,540,387.72
TOTAL LIABILITIES AND EQUITY 151,463,110,707.63 131,469,157,348.79
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
BALANCE SHEET OF THE COMPANY
31 December 2017
Prepared by: Qingdao Haier Co., Ltd. Currency: RMB Yuan
Notes Closing Balance Opening Balance
Current Assets:
Cash 2,070,527,802.97 3,888,623,400.28
Financial assets measured at fair value with changes
included in current profit and loss
Notes receivable
Accounts receivable XVIII. 1 288,499,726.07 265,438,220.39
Prepayments 20,000,000.00 10,000,000.00
Interest receivable 220,157,282.75 85,452,583.16
Dividends receivable 970,851,045.94 329,713,897.32
Other receivables XVIII.2 15,895,048.43 322,953,279.90
Inventories 89,650,514.91 69,799,065.47
Held-for-sale assets
Other non-current assets due in one year
Other current assets 87,165,597.70 94,935,174.83
Total Current Assets 3,762,747,018.77 5,066,915,621.35
Non-current Assets:
Available-for-sale financial assets 5,818,587.80 5,478,235.84
Held-to-maturity investments
Long term receivables 8,600,000,000.00 8,600,000,000.00
Long-term equity investments XVIII.3 23,581,254,928.08 22,342,078,877.07
Investment properties
Fixed assets 118,553,830.32 116,840,195.32
Construction in progress 13,594,976.50 22,611,979.50
Construction materials
Disposals of fixed assets
Productive living assets
Oil and gas properties
Intangible assets 14,601,582.38 8,578,922.84
Development expenditure
Goodwill
Long-term prepaid expenses
Deferred tax assets 106,347,777.99 62,346,256.82
Other non-current assets
Total Non-current Assets 32,440,171,683.07 31,157,934,467.39
TOTAL ASSETS 36,202,918,701.84 36,224,850,088.74
Current Liabilities:
Short-term borrowings - -
Financial liabilities measured at fair value with changes - -
included in current profit and loss
Notes payable - -
Accounts payable 310,387,267.67 1,142,008,704.07
Accounts Received in Advance 2,465,908,721.32 1,844,082,827.50
Employee benefits 51,533,384.22 39,919,748.55
Taxes payable 62,255,803.87 57,218,867.86
Interest payable 156,447,167.63 117,705,327.18
Dividends payable - -
Other payables 21,112,143,360.73 21,170,550,089.69
Held-for-sale liabilities
Other non-current liabilities due in one year - -
Other current liabilities 12,498,265.43 4,841,867.91
Total Current Liabilities 24,171,173,970.87 24,376,327,432.76
Non-current Liabilities:
Long-term borrowings - -
Bonds payable - -
Including: Preference shares
Perpetual Note
Long-term payable 20,000,000.00 20,000,000.00
Long-term employee benefits - -
Payables for specific projects - -
Provisions - -
Deferred revenue 37,700,000.00 17,700,000.00
Deferred tax liabilities 36,152,815.34 15,569,301.11
Other non-current liabilities - -
Total Non-current Liabilities 93,852,815.34 53,269,301.11
Total Liabilities 24,265,026,786.21 24,429,596,733.87
Equity:
Share capital 6,097,402,727.00 6,097,630,727.00
Other equity instruments
Including: Preference shares
Perpetual note
Capital reserve 2,317,907,947.71 2,061,597,739.78
Less: Treasury shares - 1,041,960.00
Other comprehensive income -43,234,737.77 -10,881,603.15
Special reserve
Surplus reserve 1,437,313,649.93 1,389,846,284.51
Retained Earnings 2,128,502,328.76 2,258,102,166.73
Total Equity 11,937,891,915.63 11,795,253,354.87
Total Liabilities and Equity 36,202,918,701.84 36,224,850,088.74
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
CONSOLIDATED INCOME STATEMENTS
FY2017
Currency: RMB Yuan
Notes 2017
Total Revenue 159,254,466,909.46 119,132,261,662.60
Including: Operating revenue VII.47 159,254,466,909.46 119,132,261,662.60
Interest income
Earned premiums
Fee and commission income
Total Cost 152,156,542,051.80 113,723,647,827.22
Including: Cost of sales VII.47 109,889,621,609.45 82,166,530,321.02
Interest expenses
Fee and commission expenses
Insurance withdrawal payment
Net claims incurred
Net provisions for insurance contract
Insurance policy dividend paid
Reinsurance cost
Taxes and surcharges VII.48 808,890,988.25 687,907,686.34
Selling and distribution expenses VII.49 28,276,014,979.78 21,254,103,195.32
General and administrative expenses VII.50 11,133,225,318.88 8,404,150,036.49
Finance income/(expenses) VII.51 1,392,872,274.21 720,408,216.53
Asset impairment (loss)/reversal VII.52 655,916,881.23 490,548,371.52
Add: Gains/(losses) on changes in fair value VII.53 614,071,259.47 94,648,076.07
Gains/(losses) on investment VII.54 1,481,800,064.82 1,619,717,433.78
Gains/(losses) on disposal of non-current assets VII.55 10,764,209.65 231,246,918.49
Other income VII.56 908,561,990.40
Operating Profit 10,113,122,382.00 7,354,226,263.72
Add: Non-operating income VII.57 692,963,237.76 1,170,564,378.20
Less: Non-operating expenses VII.58 261,629,717.99 336,173,701.05
Total Profit 10,544,455,901.77 8,188,616,940.87
Less: Income tax expenses VII.59 1,492,806,717.73 1,492,636,755.32
Net Profit 9,051,649,184.04 6,695,980,185.55
Profit for the year attributable to:
Continuing Operations 9,051,649,184.04 6,695,980,185.55
Discontinued Operations
Profit for the year attributable to:
Non-controlling interests 2,125,856,862.77 1,654,197,904.77
Owners of the Company 6,925,792,321.27 5,041,782,280.78
Post-Tax Other Comprehensive Income VII.60 -604,055,691.61 -36,691,538.51
Attributable to owners of the company: -603,351,245.53 -61,126,461.87
(I) Other comprehensive income that will not be reclassified subsequently -3,683,444.37 -22,891,322.68
to profit or loss
1. Changes in net liabilities or net assets arising from re-measurement of -3,683,444.37 -22,891,322.68
defined benefit plans
2. Share of the other comprehensive income of the investee accounted for
using equity method which cannot be reclassified subsequently to profit and
loss
(II) Other comprehensive income to be reclassified subsequently to profit or -599,667,801.16 -38,235,139.19
loss
1. Share of the other comprehensive income of the investee accounted for -307,016,515.96 -16,103,941.93
using equity method which will be reclassified subsequently to profit and
loss
2. Gain or loss from change in fair value of available-for-sale financial -3,059,092.10 -449,464,796.67
assets
3. Gain or loss arising from reclassification from held-to-maturity
investments to available-for-sale financial assets
4. Gains or losses on effective cash flow hedging 27,853,868.22 11,869,020.64
5. Translation of foreign currency financial statements -317,446,061.32 415,464,578.77
6. Others
Attributable to non-controlling interests: -704,446.08 24,434,923.36
Total Comprehensive Income for the Year 8,447,593,492.43 6,659,288,647.04
Attributable to owners of the Company 6,322,441,075.74 4,980,655,818.91
Attributable to non-controlling interests 2,125,152,416.69 1,678,632,828.13
Earnings per Share:
Basic XIX.1 1.136 0.827
Diluted XIX.1 1.088 0.824
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
INCOME STATEMENT OF THE COMPANY
FY2017
Currency: RMB Yuan
Notes 2017
Revenue XVIII.4 3,452,002,347.60 3,251,045,387.75
Less: Cost of sales XVIII.4 2,383,868,807.01 2,285,513,749.93
Taxes and surcharges 25,962,529.33 19,258,535.31
Selling and distribution expenses 223,849,142.89 248,141,771.37
General and administrative expenses 715,982,494.02 706,718,455.37
Finance income/(expenses) 107,748,195.00 34,902,973.23
Asset impairment (loss)/reversal 9,321,788.24 20,652,209.72
Add: Gains/(losses) on changes in fair value
Gains/(losses) on investment XVIII.5 1,290,751,070.45 493,291,535.21
Gains/(losses) on disposal of non-current assets 91,412.75
Other income 104,805,952.53
-
Operating Profit 1,380,826,414.09 429,240,640.78
Add: Non-operating income 74,298,043.16 146,236,590.90
Less: Non-operating expenses 1,041,948.86 1,306,239.11
Total Profit 1,454,082,508.39 574,170,992.57
Less: Income tax expenses 24,059,104.64 2,180,021.90
Net Profit 1,430,023,403.75 571,990,970.67
Profit for the year attributable to continuing Operations 1,430,023,403.75 571,990,970.67
Profit for the year attributable to discontinued Operations
Post-Tax Other Comprehensive Income -32,353,134.62 -29,723,625.40
(I) Other comprehensive income that will not be reclassified subsequently
to profit or loss
1. Changes in net liabilities or net assets arising from re-measurement of
defined benefit plans
2. Share of the other comprehensive income of the investee accounted for
using equity method which cannot be reclassified subsequently to profit and
loss
(II) Other comprehensive income to be reclassified subsequently to profit or -32,353,134.62 -29,723,625.40
loss
1. Share of the other comprehensive income of the investee accounted for -32,642,433.78 -14,448,296.09
using equity method which will be reclassified subsequently to profit and
loss
2. Gain or loss from change in fair value of available-for-sale financial 289,299.16 -15,275,329.31
assets
3. Gain or loss arising from reclassification from held-to-maturity
investments to available-for-sale financial assets
4. Gains or losses on effective cash flow hedging
5. Translation of foreign currency financial statements
6. Others
Total Comprehensive Income for the Year 1,397,670,269.13 542,267,345.27
Earnings per Share:
Basic
Diluted
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
CONSOLIDATED CASH FLOW STATEMENTS
FY2017
Currency: RMB Yuan
Notes 2017 2016 Notes 2017
Ⅰ. Cash Flows from Operating Activities: Net cash received from disposal of 23,620,711.45 41,133,607.21
subsidiaries and other business units
Cash received from sales of goods or rendering of 163,243,966,287.71 136,620,390,069.20
services
Net increase in customer deposits and deposits from Cash received relating to other investing VII.63 191,730,448.52 10,042,470.81
banks and other financial institutions activities
Net increase in borrowing from PBOC Sub-Total of Cash Inflows 964,073,284.73 1,124,838,284.58
Net cash increase in borrowing from other financial Cash paid to acquire fixed assets, intangible 3,967,160,912.29 2,627,363,433.78
institutes assets and other long-term assets
Cash received from premiums under original
insurance contract
Net cash received from reinsurance business Cash paid to acquire investments 2,566,398,552.06 1,448,790,904.93
Net increase in deposits of policy holders and Net increase in secured loans
investment
Net increase from the disposal of financial assets Net cash paid to acquire subsidiaries and 52,334,438.58 36,647,350,833.82
measured at fair value with fair value changes other business units
included in profit and loss for the year
Cash received from interest, fee and commissions Cash paid on other investment related 27,136,079.07
activities
Net increase in cash borrowed Sub-Total of Cash Outflows from 6,585,893,902.93 40,750,641,251.60
Investing Activities
Net increase in cash received from repurchase Net Cash Flows from Investing Activities -5,621,820,618.20 -39,625,802,967.02
operation
Refund of taxes and surcharges Ⅲ. Cash Flows from Financing Activities:
1,138,156,799.93 805,140,490.26
Cash received relating to other operating activities VII.61 Cash received from capital contributions 1,379,989,798.26 94,182,889.43
1,097,869,725.17 1,349,184,967.43
Sub-Total of Cash Inflows from Operating 165,479,992,812.81 138,774,715,526.89 Including: Cash received from capital
Activities contributions by non-controlling
Cash paid for goods and services 111,342,509,878.34 101,379,852,303.83 shareholders of subsidiaries
Net increase in loans and advances Cash received from borrowings 18,694,640,060.56 43,446,247,876.57
Net increase in deposits in PBOC and interbank Cash received from issuing bonds 6,796,000,000.00
Cash paid for claims under original insurance Cash received from other financing related 24,716,628.63
contract activities
Cash paid for interest, fee and commission Sub-Total of Cash Inflows From 26,870,629,858.82 43,565,147,394.63
Financing Activities
Cash paid for insurance policy dividend Cash repayments of borrowings 22,922,113,456.97 11,685,054,603.51
Cash paid to and on behalf of employees 12,171,909,848.22 Cash payments for interest expenses and 2,898,969,569.61 1,807,044,796.22
16,328,642,238.15 distribution of dividends or profits
Payments of taxes and surcharges Including: Cash payments for dividends or
7,835,178,863.95 6,348,293,330.29 profit to non-controlling shareholders of
Cash paid relating to other operating activities VII.62 10,738,781,692.67 subsidiaries
13,887,073,804.06
Sub-Total of Cash Outflows 149,393,404,784.50 130,638,837,175.01 Cash payments relating to other financing VII.64 126,660,039.02 223,282,344.35
activities
Net Cash Flows from Operating Activities VII.65 Sub-Total of Cash Outflows From 25,947,743,065.60 13,715,381,744.08
16,086,588,028.31 8,135,878,351.88 Financing Activities
Ⅱ. Cash Flows from Investing Activities: Net Cash Flows from Financing Activities 922,886,793.22 29,849,765,650.55
Ⅳ. Effect of Fluctuations in Exchange -342,880,074.16 209,746,501.09
Cash received from disposal of investments 275,405,926.37 682,200,570.32
Rates on Cash and Cash Equivalents
Cash received from returns on investments Ⅴ. Net Increase in Cash and Cash 11,044,774,129.17 -1,430,412,463.50
282,045,768.46 130,529,291.68 Equivalents
Net cash received from disposal of fixed assets, Add: balance of cash and cash equivalents at VII.66 23,295,239,445.05 24,725,651,908.55
intangible assets and other long-term assets 191,270,429.93 260,932,344.56 the beginning of the period
Ⅵ. Balance of Cash and Cash VII.66 34,340,013,574.22 23,295,239,445.05
Equivalents at the End of the Period
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
CASH FLOW STATEMENT OF THE COMPANY
FY2017
Currency: RMB Yuan
Notes 2017
Ⅰ. Cash Flows from Operating Activities:
Cash received from sales of goods or rendering of services 3,062,693,505.16 4,807,305,663.14
Refund of taxes and surcharges 27,750,963.05 40,093,606.18
Cash received relating to other operating activities 104,679,759.70 83,279,056.52
Sub-Total of Cash Inflows from Operating Activities 3,195,124,227.91 4,930,678,325.84
Cash paid for goods and services 2,094,136,731.85 1,435,151,669.31
Cash paid to and on behalf of employees 679,495,971.97 584,720,717.20
Payments of taxes and surcharges 181,894,997.28 140,362,961.29
Cash paid relating to other operating activities 194,723,652.37 391,453,674.63
Sub-Total of Cash Outflows 3,150,251,353.47 2,551,689,022.43
Net Cash Flows from Operating Activities 44,872,874.44 2,378,989,303.41
Ⅱ. Cash Flows from Investing Activities:
Cash received from disposal of investments
Cash received from returns on investments 421,211,612.57 250,135,174.02
Net cash received from disposal of fixed assets, intangible assets and
other long-term assets
Net cash received from disposal of subsidiaries and other business units
Cash received relating to other investing activities 20,000,000.00
Sub-Total of Cash Inflows 441,211,612.57 250,135,174.02
Cash paid to acquire fixed assets, intangible assets and other long-term 32,789,662.23 12,468,050.25
assets
Cash paid to acquire investments 1,006,813,576.50 15,893,337,507.50
Net cash paid to acquire subsidiaries and other business units
Cash paid on other investment related activities 338,162,467.03
Sub-Total of Cash Outflows from Investing Activities 1,039,603,238.73 16,243,968,024.78
Net Cash Flows from Investing Activities -598,391,626.16 -15,993,832,850.76
Ⅲ. Cash Flows from Financing Activities:
Cash received from capital contributions
Cash received from borrowings
Cash received from issuing bonds
Cash received from other financing related activities 462,368,825.80 18,373,218,934.98
Sub-Total of Cash Inflows from Financing Activities 462,368,825.80 18,373,218,934.98
Cash repayments of borrowings
Cash payments for interest expenses and distribution of dividends or 1,725,900,890.96 1,292,697,714.12
profits
Cash payments relating to other financing activities 1,041,960.00 139,884,839.50
Sub-Total of Cash Outflows from Financing Activities 1,726,942,850.96 1,432,582,553.62
Net Cash Flows from Financing Activities -1,264,574,025.16 16,940,636,381.36
Ⅳ. Effect of Fluctuations in Exchange Rates on Cash and Cash -2,820.43 3,558.31
Equivalents
Ⅴ. Net Increase in Cash and Cash Equivalents -1,818,095,597.31 3,325,796,392.32
Add: balance of cash and cash equivalents at the beginning of the 3,888,623,400.28 562,827,007.96
period
Ⅵ. Balance of Cash and Cash Equivalents at the End of the Period 2,070,527,802.97 3,888,623,400.28
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FY2017
Currency: RMB Yuan
Equity attributable to owners of the Company Non-controlling Total Equity
Share Other Equity Instruments Capital Less: Other Special Surplus General Retained Interests
Capital Preference Perpetual Others Reserve Treasury Comprehensive Reserve Reserve reserve Earnings
Share Note Stock Income
Ⅰ. Closing balance in 6,097,630,727.00 83,383,194.51 1,041,960.00 566,238,911.96 2,074,118,571.01 17,544,395,965.35 11,215,641,001.64 37,580,366,411.47
2016
Add: changes in accounting
policies
Errors correction for prior
year
Business combination under
common control 748,523.61 2,341,506.77 70,372,786.35 26,711,159.52 100,173,976.25
Others
Ⅱ. Opening balance for
the current year 6,097,630,727.00 83,383,194.51 1,041,960.00 566,987,435.57 2,076,460,077.78 17,614,768,751.70 11,242,352,161.16 37,680,540,387.72
Ⅲ. Increase/decrease for
the current period -228,000.00 431,424,524.07 743,499,899.33 -1,041,960.00 -603,351,245.53 26,597,704.63 5,178,342,132.39 3,292,138,774.75 9,069,465,749.64
(decrease is represented
by “-”)
(I) Total comprehensive
income -603,351,245.53 6,925,792,321.27 2,125,152,416.69 8,447,593,492.43
(II) Capital contribution
and withdrawal by -228,000.00 431,424,524.07 743,499,899.33 -1,041,960.00 -20,869,660.79 -187,826,947.16 1,452,333,557.09 2,419,375,332.54
shareholders
1. Capital contribution by
shareholders 1,452,333,557.09 1,452,333,557.09
2. Capital contribution by
holders of other equity 431,424,524.07 - 431,424,524.07
instruments
3. Share-based payment
included in shareholders' -
equity
4. Others -228,000.00 743,499,899.33 -1,041,960.00 -20,869,660.79 -187,826,947.16 535,617,251.38
(III) Profit distribution
47,467,365.42 -1,559,623,241.72 -285,347,199.03 -1,797,503,075.33
1. Appropriation to surplus
reserves 47,467,365.42 -47,467,365.42
2. Appropriation for general
risks
3. Distribution to owners
(or shareholders) -1,512,155,876.30 -285,347,199.03 -1,797,503,075.33
4. Others
(IV) Internal transfer of
owner’s equity
1. Transfer of capital
reserves into capital (or
share capital)
2. Transfer of surplus
reserves into capital (or
share capital)
3. Surplus reserves used for
making up losses
4. Others
(V) Special reserve
1. Appropriation
2. Utilization
(VI) Others
Ⅳ. Closing balance for
2017 6,097,402,727.00 431,424,524.07 826,883,093.84 -36,363,809.96 2,103,057,782.41 22,793,110,884.09 14,534,490,935.91 46,750,006,137.36
Equity attributable to owners of the Company Non-controlling Total Equity
Share Other Equity Instruments Capital Less: Other Special Surplus General Retained Interests
Capital Preference Perpetual Others Reserve Treasury Comprehensive Reserve Reserve reserve Earnings
Share Note Stock Income
Ⅰ. Closing balance in
2015 6,123,154,268.00 83,383,194.51 77,604,544.70 633,183,460.03 2,026,585,301.23 13,944,632,981.28 9,708,285,895.93 32,441,620,556.28
Add: changes in accounting
policies
Errors correction for prior
year
Business combination
under common control -5,069,562.59 2,341,506.77 65,242,746.41 27,195,349.54 89,710,040.13
Others
Ⅱ. Opening balance for
the current year 6,123,154,268.00 83,383,194.51 77,604,544.70 628,113,897.44 2,028,926,808.00 14,009,875,727.69 9,735,481,245.47 32,531,330,596.41
Ⅲ. Increase/decrease for
the current period -25,523,541.00 -76,562,584.70 -61,126,461.87 47,533,269.78 3,604,893,024.01 1,506,870,915.69 5,149,209,791.31
(decrease is represented
by “-”)
(I) Total comprehensive
income -61,126,461.87 5,041,782,280.78 1,678,632,828.13 6,659,288,647.04
(II) Capital contribution
and withdrawal by -25,523,541.00 -76,562,584.70 -9,665,827.29 -86,992,445.58 56,237,351.07 10,618,121.90
shareholders
1. Capital contribution by
shareholders -25,523,541.00 -76,562,584.70 56,237,351.07 107,276,394.77
2. Capital contribution by
holders of other equity
instruments
3. Share-based payment
included in shareholders'
equity
4. Others -9,665,827.29 -86,992,445.58 -96,658,272.87
(III) Profit distribution 57,199,097.07 -1,349,896,811.19 -227,999,263.51 -1,520,696,977.63
1. Appropriation to surplus
reserves 57,199,097.07 -57,199,097.07
2. Appropriation for
general risks
3. Distribution to owners
(or shareholders) -1,292,697,714.12 -227,999,263.51 -1,520,696,977.63
4. Others
(IV) Internal transfer of
owner’s equity
1. Transfer of capital
reserves into capital (or
share capital)
2. Transfer of surplus
reserves into capital (or
share capital)
3. Surplus reserves used for
making up losses
4. Others
(V) Special reserve
1. Appropriation
2. Utilization
(VI) Others
Ⅳ. Closing balance for
2016 6,097,630,727.00 83,383,194.51 1,041,960.00 566,987,435.57 2,076,460,077.78 17,614,768,751.70 11,242,352,161.16 37,680,540,387.72
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
FY2017
Currency: RMB Yuan
Share Other Equity Instruments Capital Less: Other Special Surplus Retained Total
Capital Preference Perpetual Others Reserve Treasury Comprehensive Reserve Reserve Earnings Equity
Share Note Stock Income
Ⅰ. Closing balance in 2016 6,097,630,727.00 2,061,597,739.78 1,041,960.00 -10,881,603.15 1,389,846,284.51 2,258,102,166.73 11,795,253,354.87
Add: changes in accounting
policies
Errors correction for prior year
Others
Ⅱ. Opening balance for the
current year 6,097,630,727.00 2,061,597,739.78 1,041,960.00 -10,881,603.15 1,389,846,284.51 2,258,102,166.73 11,795,253,354.87
Ⅲ. Increase/decrease for the
current period (decrease is -228,000.00 256,310,207.93 -1,041,960.00 -32,353,134.62 47,467,365.42 -129,599,837.97 142,638,560.76
represented by “-”)
(I) Total comprehensive income -32,353,134.62 1,430,023,403.75 1,397,670,269.13
(II) Capital contribution and
withdrawal by shareholders -228,000.00 256,310,207.93 -1,041,960.00 257,124,167.93
1. Capital contribution by
shareholders -228,000.00 -15,248,846.94 -1,041,960.00 -14,434,886.94
2. Capital contribution by
holders of other equity
instruments
3. Share-based payment included
in shareholders' equity
4. Others 271,559,054.87 271,559,054.87
(III) Profit distribution
47,467,365.42 -1,559,623,241.72 -1,512,155,876.30
1. Appropriation to surplus
reserves 47,467,365.42 -47,467,365.42
2. Distribution to owners (or
shareholders) -1,512,155,876.30 -1,512,155,876.30
3. Others
(IV) Internal transfer of owner’s
equity
1. Transfer of capital reserves into
capital (or share capital)
2. Transfer of surplus reserves into
capital (or share capital)
3. Surplus reserves used for
making up losses
4.Others
(V) Special reserve
1. Appropriation
2. Utilization
(VI) Others
Ⅳ. Closing balance for 2017 6,097,402,727.00 2,317,907,947.71 -43,234,737.77 1,437,313,649.93 2,128,502,328.76 11,937,891,915.63
Share Other Equity Instruments Capital Less: Other Special Surplus Retained Total
Capital Preference Perpetual Others Reserve Treasury Comprehensive Reserve Reserve Earnings Equity
Share Note Stock Income
Ⅰ. Closing balance in 2015 6,123,154,268.00 2,229,511,649.19 77,604,544.70 18,842,022.25 1,332,647,187.44 3,036,008,007.25 12,662,558,589.43
Add: Changes in accounting
policies
Errors correction for prior year
Others
Ⅱ. Opening balance for the
current year 6,123,154,268.00 2,229,511,649.19 77,604,544.70 18,842,022.25 1,332,647,187.44 3,036,008,007.25 12,662,558,589.43
Ⅲ. Increase/decrease for the
current period (decrease is -25,523,541.00 -167,913,909.41 -76,562,584.70 -29,723,625.40 57,199,097.07 -777,905,840.52 -867,305,234.56
represented by “-”)
(I) Total comprehensive
income -29,723,625.40 571,990,970.67 542,267,345.27
(II) Capital contribution and
withdrawal by shareholders -25,523,541.00 -167,913,909.41 -76,562,584.70 -116,874,865.71
1. Capital contribution by
shareholders -25,523,541.00 -163,646,699.20 -189,170,240.20
2. Capital contribution by
holders of other equity
instruments
3. Share-based payment
included in shareholders' equity
4. Others -4,267,210.21 112,607,655.50 -116,874,865.71
(III) Profit distribution 57,199,097.07 -1,349,896,811.19 -1,292,697,714.12
1. Appropriation to surplus
reserves 57,199,097.07 -57,199,097.07
2.Distribution to owners (or
shareholders) -1,292,697,714.12 -1,292,697,714.12
3.Others
(IV) Internal transfer of
owner’s equity
1. Transfer of capital reserves
into capital (or share capital)
2. Transfer of surplus reserves
into capital (or share capital)
3. Surplus reserves used for
making up losses
4.Others
(V) Special reserve
1. Appropriation
2. Utilization
(VI) Others
Ⅳ. Closing balance for 2016 6,097,630,727.00 2,061,597,739.78 1,041,960.00 -10,881,603.15 1,389,846,284.51 2,258,102,166.73 11,795,253,354.87
Legal representative: Chief Financial Officer: Person in charge of accounting
Liang Haishan Gong Wei department: Ying Ke
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.
In the opinion of the directors, the ultimate holding company of the Company is Haier Group
Corporation (―Haier Corp‖), which is established in the PRC.
The Company is mainly engaged in manufacturing and trading as well as R&D of refrigerator,
air-conditioner, freezer, washing machine, water heater, dishwashers, gas stove and relevant
products and commercial circulation business.
These financial statements have been approved for publication by the Board of the Company
on 24 April 2018. Under the Company‘s constitution, these financial statements shall be submitted
for consideration at general meetings.
2. Scope of consolidated financial statements
√ Applicable □ Not Applicable
For details of changes in the scope of consolidated financial statements for 2017, please refer
to ―VIII. Changes in Consolidation Scope‖ and ―IX. Interest in Other Entities‖ of this note.
IV. Basis of Preparation of the Financial Statements
1.Basic 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 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:
According to the characteristics of its production and operation, the Company formulated a
series of specific accounting policies and accounting estimates, including the provisions for
impairment for accounts receivable (Note V.11); the measurement of inventories (NoteV.12); the
depreciation and amortization of the investment properties (NoteV.14); the depreciation of fixed
assets (NoteV.15), the amortization of intangible assets (NoteV.18), the criterion for determining
of long-term assets impairment (Note V.19); and the date of revenue recognition (NoteV.24), etc.
1) Statement of compliance with enterprise accounting standards
The financial statements prepared by the Company meet the requirements of the enterprise
accounting standards, which accurately and completely reflected information relating to the
financial condition as of 31 December 2017, operation result and cash flow of the Company in
2017.
2) Accounting period
The accounting year of the Company is from 1 January each year to 31 December of the same
year in solar calendar.
3) Operating cycle
√ 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.
5) 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 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
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 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
The consolidated financial statements shall be prepared on the basis of the balance sheets of
the Company and subsidiaries, which offset the internal transactions incurred between the
Company and subsidiaries and among subsidiaries. The owner‘s equity of the subsidiaries not
attributable to the Company shall be presented as ―minority equity‖ under the owners‘ equity item
in the consolidated balance sheet.
The long-term equity investment of the Company held by the subsidiaries, deemed as treasury
stock of the corporate group as well as the reduction of owners‘ equity, shall be presented as ―Less:
Treasury stock‖ under the owners‘ equity item in the consolidated balance sheet.
(4) Accounting treatment of subsidiaries acquired from combination
For subsidiaries acquired from enterprise combination under common control, the assets,
liabilities, operating results and cash flows of the subsidiaries are included in the consolidated
financial statements from the beginning of the period in which the combination took place, as if
the combination has taken since the ultimate controller began its control. When preparing the
consolidated financial statements, for the subsidiaries acquired from enterprise combination under
non-common control, separate financial statement will be adjusted on the basis of their fair values
of the identifiable net assets on the date of acquisition.
7) Classification of joint arrangement and accounting methods of joint operations
√ Applicable □ Not Applicable
A joint arrangement refers to an arrangement jointly controlled by two or more parties. In
accordance with the Company‘s rights and obligations under a joint arrangement, the Company
classifies joint arrangements into: joint operations and joint ventures.
Joint operations refer to a joint arrangement in which the Company is a party and is entitled
to relevant assets and obligations of this arrangement. The Company recognizes the following
items in relation to its interest in a joint operation, and accounts the same in accordance with
relevant accounting standards for business enterprises:
(1) recognize the assets held solely by the Company, and recognize assets held jointly by the
Company in appropriation to the share of the Company; (2) recognize the obligations assumed
solely by the Company, and recognize obligations assumed jointly by the Company in
appropriation to the share of the Company; (3) recognize revenue from disposal of joint operations
in appropriation to the share of the Company; (4) recognize revenue from disposal of joint
operations in appropriation to the share of the Company; (5) recognize fees solely occurred by the
Company and recognize fees from joint operations in appropriation to the share of the Company.
When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets
do not constitute a business, the same below) from joint operations, the Company shall only
recognize the part of profit or lost from this transaction attributable to other parties of joint
operations before these assets are sold to a third party. In case of an impairment loss incurred on
these assets which meets the requirements as set out in ―Accounting Standards for Business
Enterprises No. 8 – Asset Impairment‖, the Company shall full recognize the amount of this loss
in relation to its investment in or sale of assets to joint operations or recognize the loss according
to the Company‘s share of commitment in relation to the its purchase of assets from joint
operations.
Joint ventures refer to a joint arrangement during which the Company only is entitled to net
assets of this arrangement. Investment in joint venture is accounted for using the equity method
according to the accounting policies referred to under ―13 Long-term equity investment‖ of Note
III.
8) Recognition standard for cash and cash equivalents
Cash recognized in the cash flow statements represents the cash on hand and deposits
available for payment of the Company at any time.
Cash equivalents recognized in the cash flow statements refer to short-term, highly liquid
investments held by the Company that are readily convertible to known amounts of cash and
which are subject to an insignificant risk on change in value.
9) Foreign currency businesses and translation of foreign currency statements
√ Applicable □ Not Applicable
(1) Foreign currency transactions
If foreign currency transactions occur, they are translated into the amount of functional
currency by applying the spot exchange rate at the transaction date.
Monetary items denominated in foreign currencies are translated into functional currencies at
the rates of exchange ruling at the balance sheet date. All foreign exchange difference are credited
in the profit or loss, except ① those arising from the funds denominated in foreign currency
specially borrowed for the establishment of the qualifying assets are treated based on the principal
of capitalization of borrowing costs; ② those arising from the other changes in the balance other
than amortized cost of available-for-sale monetary items denominated in foreign currency are
recognized in the other comprehensive income.
Non-monetary items in foreign currency measured at historical cost are translated using the
spot exchange rate prevailing on the date when transaction occurred and its functional currency
shall remain unchanged. Non-monetary items denominated in foreign currencies that are measured
at fair value are translated using the foreign exchange rate at the date the fair value is determined;
the exchange differences between the translated and original amounts of functional currencies are
recognized in the statement of profit or loss or other comprehensive income as changes in fair
value (including changes in exchange rate).
(2) Translation of foreign currency financial statements
If the functional currencies used as the bookkeeping base currency by the subsidiaries, joint
ventures and associates under the control of the Company are different from that of the Company,
their financial statements denominated in foreign currencies shall be translated to perform
accounting and prepare the consolidated financial statements.
The assets and liabilities of the balance sheet are translated using the spot exchange rate at the
balance sheet date; all items except for ―undistributed profits‖ of the owner‘s equity are translated
at the spot exchange rate on the transaction date. The revenue and expenses in the income
statement are translated using the approximate rate of the spot exchange rate on the transaction
date. Differences arising from the translation of foreign currency financial statements are
presented as the ―other comprehensive income‖ in the owner‘s equity of the balance sheet.
Foreign currency cash flows are translated using the approximate rate of the spot exchange
rate on the transaction date. The impact of exchange rate changes on cash amount is reflected
separately in the cash flow.
When disposing overseas operations, the translation difference related to the overseas
operation shall be transferred together or as the percentage of disposing the overseas operation to
profit or loss for 2017 of disposal.
10) Financial instruments
√ Applicable □ Not Applicable
(1) Classification, recognition and measurement of financial instruments
A financial asset or a financial liability is recognized when the Company becomes a
contractual party of a financial instrument. Financial assets and financial liabilities are measured at
fair value upon initial recognition. Related transaction costs are recorded directly in the profit or
loss for financial assets and financial liabilities at fair value with its change consolidated in
profit/loss or included in the amount recognized initially for other types of financial assets and
financial liabilities.
Determination of the fair value of financial assets and financial liabilities: Fair value refers to
the price receivable from the exchange of an asset or payable for the settlement of a liability in a
fair transaction between knowledgeable and willing counterparties. The fair value of financial
instruments where there is an active market is determined based on the quoted price in such
market, which refers to the price regularly available from exchanges, brokers, trade associations
and pricing service agencies that represents the price adopted in an arm‘s length transaction which
actually occurred in the market. For financial instruments where there is no active market, the fair
value is determined using valuation techniques. Such techniques include reference to prices used
in recent market transactions between knowledgeable and willing counterparties, reference to the
current fair value of another instrument which is substantially the same, discounted cash flow
analysis and option pricing models or other valuation models.
Financial assets are classified, at initial recognition, as financial assets at fair value through
profit or loss, held-to-maturity investments, loans and receivables and available-for-sale
investments. Classification of financial asset other than receivables is based on the purpose and
capability of financial asset held by the Company and its subsidiaries. The financial liabilities are,
on initial recognition, classified into financial liabilities at fair value through profit or loss and
other financial liabilities.
Financial assets at fair value through profit or loss include financial assets held for trading and
financial assets designated as at fair value through profit or loss. All financial assets at fair value
through profit or loss are financial assets held for trading. Financial assets may be classified as
financial assets held for trading if one of the following conditions is met: ① the financial asset is
acquired principally for the purpose of sale or repurchase in the near term; ② the financial asset is
part of a portfolio of identified financial instruments that are managed together and for which
there is an objective evidence of recent pattern of short-term profit-taking; or ③ the financial asset
is a derivative, excluding the derivatives designated as effective hedging instruments, the
derivatives classified as financial guarantee contract, and the derivatives linked to an equity
instrument investment, which has no quoted price in an active market nor a reliably measured fair
value, and required to be settled through delivery of that equity instrument. A financial asset may
be designated as at fair value through profit or loss upon initial recognition only when one of the
following conditions is satisfied: ① such designation eliminates or significantly reduces a
measurement or recognition inconsistency that would otherwise result from measuring assets or
recognizing the gains or losses on them on different bases; ② the financial asset forms part of a
group of financial assets or a group of financial assets and financial liabilities, which is managed
and its performance is evaluated on a fair value basis, in accordance with the Company‘s
documented risk management or investment strategy, and information about the grouping is
reported to key management personnel on that basis; or ③ pursuant to Accounting Standards for
Enterprises No. 22 – Recognition and Measurement of Financial Instruments, the financial asset is
designated as combination instrument of financial assets measured at fair value through profit or
loss and related to embedded derivatives. A financial asset at fair value through profit or loss,
except for those falling under cash flow hedging, is subsequently measured at fair value. Any
gains or losses arising from changes in the fair value are recognized in profit or loss of changes in
the fair value. Interests or cash dividends received during the period in which such assets are held,
are recognized as investment income; on disposal, the differences between the consideration
received and initial recognized amount are recognized as investment income and the gain or loss
from changes in fair value shall be adjusted accordingly.
Held-to-maturity investments are non-derivative financial assets that have fixed or
determinable payments and fixed maturity and for which the Company has the positive intention
and ability to hold to maturity. Held-to-maturity investments are measured subsequently at
amortized cost by using the effective interest rate method. Gains or losses arising from
de-recognition, impairment or amortization are recognized in the profit or loss for the year ended
31 December 2017.
The effective interest method is a method of calculating the amortized cost of a financial asset
and of allocating interest income or expense over each period based on the effective interest of a
financial asset or a financial liability (including a group of financial assets or financial liabilities).
The effective interest rate is the rate that discounts future cash flows from the financial asset or
financial liability over its expected life or (where appropriate) a shorter period to the carrying
amount of the financial asset or financial liability. In calculating the effective interest rate, the
Company will estimate the future cash flows (excluding future credit losses) by taking into
account all contract terms relating to the financial assets or financial liabilities whilst considering
various fees, transaction costs and discounts or premiums which are part of the effective interest
rate paid or received between the parties to the financial assets or financial liabilities contracts.
Loans and receivables are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. Financial assets, including bills receivable, accounts
receivable, other receivables and long-term receivables are classified as loans and receivables by
the Company. Loans and receivables are subsequently measured at amortized cost using the
effective interest method. Gain or loss on derecognition, impairment or amortization is recognized
to the consolidated profit or loss for the year ended 31 December 2017.
Available-for-sale financial assets include non-derivative financial assets designated as
available-for-sale at initial recognition, and the financial assets other than financial assets at fair
value through profit or loss, loans and receivables, and held-to-maturity investments.
Available-for-sale financial assets are subsequently measured at fair value, the gains or losses
arising from changes in fair value, except for impairment losses and exchange difference related to
monetary financial assets and amortized cost which are recognized in profit or loss, are recognized
in other comprehensive income and reclassified to profit or loss when the financial assets are
derecognized. Interests calculated in the effective interest method during the holdings of
available-for-sale financial assets and cash dividends declared by investees are recognized in
investment incomes. On disposal, the differences between the consideration received and the
carrying amount of assets after deducting the accumulated fair value adjustments previously
recorded in capital reserves are recorded as investment income. However, an equity instrument
investment which has no quoted price in an active market nor a reliably measured fair value, and a
derivative financial asset (or derivative financial liability) linked to such equity instrument and
required to be settled through delivery of that equity instrument are measured at cost.
Derivative financial instruments include forward foreign exchange contracts and interest rate
swap contracts, etc. Derivative financial instruments are initially recognized at fair value at the
execution date of relevant contracts, and subsequently measured at fair value. Expect for the
derivative financial instruments designated as hedging instruments with a highly effective hedging,
of which the profit or loss arising from the changes in fair value will be included in the
corresponding profit or loss depending on the nature of hedging relations and the accounting
requirements of hedging tools, the changes in the fair value of all other derivative financial
instruments will be included in the profit or loss.
For hybrid instruments containing embedded derivatives, an embedded derivative is separated
from the hybrid instrument, where the hybrid instrument is not designated as a financial asset or
financial liability at fair value with its change consolidated in profit/loss, and treated as a
stand-alone derivative if the economic characteristics and risks of the embedded derivative are not
closely related to those of the host contract, and a separate instrument with the same terms as the
embedded derivative would be in compliance with the definition of a derivative. If the Group is
unable to measure the embedded derivative separately either at acquisition or at a subsequent
balance sheet date, it will designate the entire hybrid instrument as a financial asset or financial
liability at fair value through profit or loss.
Equity instruments refer to the contracts proving the ownership of the remaining equities in
the assets of the Company upon the deduction of all the liabilities. The consideration received
from the issue of the equity instruments increases the shareholders‘ equity upon the deduction of
the transaction costs. The allocations made by the Company to the holders of equity instruments
(excluding stock dividends) decrease shareholders‘ equity. The Company does not recognize the
change in the fair value of equity instruments.
(2) Recognition and measurement of transfers of financial asset
Financial asset that satisfied any of the following criteria shall be derecognized: ① the
contract right to recover the cash flows of the financial asset has terminated; ② the financial asset,
along with substantially all the risk and return arising from the ownership of the financial asset,
has been transferred to the transferee; or③ the financial asset has been transferred, and the
Company has given up the control on such financial asset, though it does not assign or maintain
substantially all the risk and return arising from the ownership of the financial asset.
When the Company does not either assign or maintain substantially all the risk and rewards of
ownership of the financial asset and does not give up the control on such financial asset, to the
extent of its continuous involvement in the financial asset, the Company recognizes it as a related
financial asset and recognizes the relevant liability accordingly. The extent of the continuous
involvement is the extent to which the Company exposes to changes in the value of such financial
assets.
On derecognition of a financial asset, the difference between the following amounts is
recognized in profit or loss in 2017: the carrying amount and the sum of the consideration received
and any accumulated changes in fair value that had been recognized originally and directly in
capital reserve. If a part of the financial assets qualifies for derecognition, the carrying amount of
the financial asset is allocated between the part that continues to be recognized and the part that
qualifies for derecognition, based on the fair values of the respective parts. The difference between
the following amounts is recognized in profit or loss in 2017 when the carrying amount of the part
that qualifies for derecognition and the sum of the consideration received and any accumulated
changes in fair value that had been recognized originally and directly in capital reserve.
Financial assets and financial liabilities are offset and the net amount is reported in the
balance sheet if there is currently an enforceable legal right to offset the recognized financial
assets and financial liabilities and there is an intention to settle on a net basis, or to realize the
assets and settle the liabilities simultaneously. Otherwise, financial assets and financial liabilities
are presented separately in the balance sheet without being offset.
(3) Classification, recognition and measurement of financial liabilities
The Company classifies financial liabilities and equity instruments according to the substance
of the contractual arrangements of the financial instrument and the definitions of a financial
liability and an equity instrument. Financial liabilities are classified as financial liabilities at fair
value through profit or loss and other financial liabilities at initial recognition.
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated as at fair value with its change consolidated in
profit/loss.
Financial liabilities may be classified as financial liabilities held for trading if one of the
following conditions is met: ① The financial liability is acquired principally for the purpose of
sale or repurchase in the near term; ② The financial liability is part of a portfolio of identified
financial instruments that are managed together and for which there is an objective evidence of
recent pattern of short-term profit-taking; or ③ The financial liability is a derivative, excluding
the derivatives designated as effective hedging instruments, the derivatives classified as financial
guarantee contract, and the derivatives linked to an equity instrument investment, which has no
quoted price in an active market nor a reliably measured fair value, and required to be settled
through delivery of that equity instrument.
A financial liability may be designated as at fair value with its change consolidated in
profit/loss upon initial recognition only when one of the following conditions is satisfied: ① such
designation eliminates or significantly reduces a measurement or recognition inconsistency that
would otherwise result from measuring liabilities or recognizing the gains or losses on them on
different bases; ② the financial liability forms part of a group of financial liabilities or a group of
financial liabilities and financial liabilities, which is managed and its performance is evaluated on
a fair value basis, in accordance with the Company‘s documented risk management or investment
strategy, and information about the grouping is reported to key management personnel on that
basis; or ③ pursuant to Accounting Standards for Enterprises No. 22 – Recognition and
Measurement of Financial Instruments, the financial liability is designated as combination
instrument of financial liabilities measured at fair value through profit or loss and related to
embedded derivatives.
Financial liabilities at fair value through profit or loss are subsequently measured at fair value.
The gain or loss arising from changes in fair value and dividend and interest incomes arising from
such financial liabilities are recognized in profit or loss for the year ended 31 December 2017.
Other financial liabilities: The derivative financial liabilities linked to and to be settled
through delivery of the equity instruments that are not quoted in an active market and the fair
value of which cannot be reliably measured, such equity instruments are subsequently measured at
cost. Other financial liabilities apart from the financial guarantee contracts are subsequently
measured at amortized cost using the effective interest rate method and the gains or losses arising
from de-recognition or amortization are recognized in profit or loss for the year ended 31
December 2017.
Financial guarantee contracts: Contracts in which the guarantor and the creditor agrees that
the guarantor will settle debts or assume liabilities in accordance with terms therein if the debtor
fails to make payment. Financial guarantee contracts other than those designated as financial
liabilities at fair value through profit or loss or loan commitments that are not designated at fair
value through profit or loss and granted at a rate below market rates are initially recognized at fair
value less directly attributable transaction fees, and shall be subsequently measured at the higher
of the following: the amount determined in accordance with Accounting Standard for Business
Enterprises No. 13 ―Contingencies‖ and the amount initially recognized less cumulative
amortization recognized in accordance with the principles set out in Accounting Standard for
Business Enterprises No. 14 ―Revenue‖.
Derecognition of financial liabilities: A financial liability shall be derecognized or partly
derecognized when the current obligation is discharged or partly discharged. When the Company
(debtor) and the creditor have signed a contract, which uses a new financial liability to replace the
existing financial liability, and the contract terms of the new financial liability are substantially
different with the existing financial liability, the existing financial liability shall be derecognized,
and the new financial liability shall be recognized at the same time. If a financial liability is fully
or partially derecognized, the difference between the book value of derecognized portion and the
consideration paid (including non-cash assets transferred out or new financial liability assumed) is
recognized in the profit or loss.
(4) Impairment of financial assets
The carrying values of all financial assets except financial assets at fair value with its change
consolidated in profit/loss should be tested for impairment. If impairment is demonstrated by
objective evidences, the provision of impairment should be prepared according to the impairment
test.
Objective evidences for recognition of impairment of financial asset include the following
observable matters:
① The issuer or debtor is experiencing significant financial difficulties;
② The debtor breaches the contractual terms, including default or delinquency in interest or
principal payments;
③ The Company, based on economic or legal or other factors, waive the debts;
④ It is highly probable that the debtor will enter bankruptcy or other financial reorganization;
⑤ The issuer is experiencing significant financial difficulties that the corresponding financial
instruments could not be traded in an active market;
⑥ When it is unable to determine whether cash flows of a specific instrument in a group of
financial assets decrease, but the cash flows since initial recognition of that group of financial
assets would decrease and be measurable, or the ability to repay by the debtors in that group of
financial asset deteriorate, or the unemployment rate of the country or region in which the debtors
situate increases, or the price of the underlying collateral decreases significantly in its region, or
the industry of the debtors is diminishing;
⑦ There are significant adverse changes in the technology, market, economy or legal
environments in issuance place of the equity instrument so that the investor could not recover its
investment costs;
⑧ There is significant or other than temporary decrease in fair value of equity instrument;
⑨ Other objective evidences show that the financial asset is impaired.
The Company shall carry out independent impairment test for financial assets of significant
single amounts. With regard to the financial assets with insignificant single amounts, an
independent impairment test shall be included in a combination of financial assets with similar
credit risk characteristics so as to carry out an impairment test. In the event, upon independent test,
the financial asset (including those financial assets with significant single amounts and those with
insignificant amounts) has not been impaired, it shall be included in a combination of financial
assets with similar characteristics so as to conduct another impairment test. Financial assets that
have conducted independent test as impairment loss shall not be included in a combination of
financial assets with similar risk characteristics so as to conduct another impairment test.
When held-to-maturity investments, loans and accounts receivables have been impaired, the
book value of the financial assets shall be written down to the current value of estimated future
cash flow discounted at the original effective interest rate, and the write-down amount is recorded
as impairment loss and written into profit or loss for the year ended 31 December 2017. When a
financial asset based on amortized cost is impaired, if there are objective evidences showing the
value of this financial asset is recovered and it is objectively related to the matters happened after
the impairment loss recognition, the impairment loss recognized shall be reversed. However, the
reversal shall not result in a carrying amount of the financial asset that exceeds the amortized cost
if the impairment had not been recognized at the date when the impairment is reversed.
If an available-for-sale financial asset is impaired, the cumulative loss arising from decline in
fair value that had been recognized directly in other comprehensive income is reclassified to the
profit or loss. The cumulative loss reclassified is the difference between its acquisition cost (net of
any principal repayment and amortization) and its current fair value, less any impairment loss
previously recognized in profit or loss. If there are objective evidences that the value of that
financial asset is recovered and it can be objectively related to an event occurred after the
impairment loss recognition, the impairment loss recognized shall be reversed, impairment losses
recognized for equity instruments classified as available-for-sale are reversed through other
comprehensive income, while impairment losses recognized for debt instruments classified as
available-for-sale are reversed through profit or loss.
If there‘s an objective evidence that an investment in equity instrument which has no quoted
price in an active market nor a reliably measured fair value or a derivative financial asset which is
linked to that equity instrument and required to be settled through delivery of that equity
instrument is impaired, the carrying amount shall be written down to the present value discounted
at the market rate of return on future cash flows of the similar financial assets, and the write-down
amount shall be recognized as impairment loss in profit or loss. Such impairment loss once
recognized shall no longer be reversed.
For investments in equity instruments, the specific quantitative criterion for the Company to
determine ―serious‖ or ―not temporary‖ decrease in their fair value are set out below:
Specific quantitative criterion on ―serious‖ decrease in Decrease in closing fair value relative to the
their fair value cost has reached or exceeded 50%.
Specific quantitative criterion on ―not temporary‖
Fall for 12 consecutive months.
decrease in their fair value
11) Receivables
Receivables of the Company include accounts receivables and other receivables. Recognition
and provision of bad debts of receivables:
(1) Individually significant receivables for which separate bad-debt provision is made
Individually significant receivables represent the receivables accounting for above 5% of the
closing balance. The Company conducted a separate impairment test for receivables that are
individually significant on the balance sheet date and made provision for its bad debts based on
the difference between the present value of its estimated future cash flows and its carrying
amount.
(2) Individually insignificant receivables for which separate bad-debt provision is made
Individual impairment test is made where there is a concrete evidence indicates that there is
an obvious difference in recoverability, and bad debts provision is made based on the difference
between the present value of its estimated future cash flows and its carrying amount.
(3) Accounts receivables for which collective bad debt provision is made
Receivables that are individually tested not impairment, is classified by similar credit risks
into several portfolio and then recognize the impairment loss and make bad debts provision on
prorate basis of the balance of the receivables on the balance sheet date.
12) 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 for the Company
and most of its subsidiaries and using the first in first out method for the remaining subsidiaries.
(3) Provision for inventory impairment
At balance sheet date, inventories are stated at the lower of cost or net realizable value.
The net realizable value of inventories (including finished products, merchandize and
materials for sale) that can be sold directly is determined using the estimated saleable price of such
inventory deducted by the cost of sales and relevant taxation. The net realizable value of materials
in inventory that are held for production is determined using the estimated saleable price of the
finished product deducted by the cost to completion, estimated cost of sales and relevant taxation.
The net realizable value of inventory held for performance of sales contract or labor service
contract is determined based on the contractual price; in case the amount of inventory held by the
enterprise exceeds the contractual amount, the net realizable value of the excess portion of
inventory is calculated using the normal saleable price. Provision for impairment of inventories is
made for individual inventory.
For items of inventories that is produced and marketed in the same geographical area and with
the same or similar end uses or purposes, which cannot be practicable evaluated separately from
other items, cost and net realizable value of inventories may be determined on an aggregate basis.
For large quantity and low value items of inventories, cost and net realizable value of inventories
may be determined on types of inventories.
Provision for impairment of inventories is made and recognized as profit or loss when the cost
is higher than the net realizable value on the balance sheet date. If the factors that give rise to the
provision in prior years are not in effect in current year, provision would be reversed within the
impaired cost, and recognized in the profit or loss.
(4) Inventory system
The Company adopts perpetual inventory system.
(5) Amortization of low-value consumables and packaging
Low-value consumables and packages of the Company are amortized by one-time write-off.
13) Long-term equity investments
√ Applicable □ Not Applicable
Long-term equity investments in this section refer to equity investments held by the Company
that give it control, joint control or significant influence over the investee. Long-term equity
investments where the Company does not exercise control, joint control or significant influence
over the investee are accounted for as available-for-sale financial assets.
(1) Recognition of initial cost of investment
① For long-term equity investment obtained from business consolidation under common
control, the initial cost is measured at the combining party‘s share of the carrying amount of the
equity of the combined party; for a long-term equity investment obtained from business
consolidation under non-common control, the initial cost is the consolidation cost at the date of
acquisition;
② For the long-term equity investment acquired in a manner other than enterprise
combination: the initial investment cost of the long-term equity investment acquired by payment
in cash shall be the total purchase price; the initial investment cost of the long-term equity
investment acquired by issuing equity securities shall be the fair value of the equity securities
issued；For long-term equity investment acquired by debt restructuring, the initial investment cost
shall be recognized in accordance with the requirements under Accounting Standards for
Enterprises No. 12 - Debt Restructuring. For long-term equity investment acquired by the
exchange of non-monetary assets, the initial investment cost shall be recognized in accordance
with relevant requirements under the Rules.
(2) Subsequent measurement and profit or loss recognition
① Cost method
Where the investor has a control over the investee, long-term equity investments are measured
using cost method. For long-term equity investments using cost method, unless increasing or
reducing the investment, the carrying value is unchanged. The Company‘s share of the profit
distributions or cash dividends declared by the investee are recognized as investment income.
② Equity method
Investor's long-term equity investments in associates and joint ventures are measured using
equity method. Where part of the equity investments of an investor in its associates are held
indirectly through venture investment institutions, common fund, trust companies or other similar
entities including investment linked insurance funds, such part of equity investments indirectly
held by the investor shall be measured at fair value through profit or loss according to relevant
requirements of Accounting Standards for Business Enterprises No.22—Recognization and
measurement of Financial Instruments regardless whether the above entities have significant
influence on such part of equity investments, while the remaining part shall be measured using
equity method.
Under the equity method, where the initial investment cost of a long-term equity investment
exceeds the Company‘s share of the fair value of the investee‘s identifiable net assets at the time
of acquisition, no adjustment is made to the initial investment cost. Where the initial investment
cost is less than the Company‘s share of the fair value of the investee‘s identifiable net assets at
the time of acquisition, the difference is recognized in profit or loss for the period, and the cost of
the long-term equity investment is adjusted accordingly.
For long-term equity investments accounted for using the equity method, the Company
recognizes the investment income and other comprehensive incomes according to its share of net
profit or loss and other comprehensive incomes of the investee, and the carrying amount of the
long-term equity investments shall be adjusted accordingly; the carrying amount of the investment
is reduced by the Company‘s share of the profit distribution or cash dividends declared by an
investee; for changes in owner‘s equity of the investee other than those arising from its net profit
or loss, other comprehensive income and profit distribution, the carrying amount of the long-term
equity investment shall be adjusted and recognized to capital reserve. When recognizing
attributable share of the net profit and losses of the investee, the net profit of the investee shall be
recognized after adjustment on the ground of the fair value of all identifiable assets of the investee
when it obtains the investment. If the accounting policies and accounting periods adopted by the
investee are different from those adopted by the Company, an adjustment shall be made to the
financial statements of the investee in accordance with the accounting policies and accounting
periods of the Company and recognize the investment incomes and other comprehensive incomes.
The Company‘s share of net losses of the investee shall be recognized to the extent that the
carrying amount of the long-term equity investment together with any long-term interests that in
substance form part of the investor‘s net investment in the investee are reduced to zero. If the
Company has to assume additional obligations, the estimated obligation assumed shall be
provided for and charged to the profit or loss as investment loss for the period. Where the investee
is making net profits in subsequent periods, the Company shall resume recognizing its share of
profits after setting off against the share of unrecognized losses.
(3) Change of the accounting methods for long-term equity investments
① Change of measurement at fair value to accounting under equity method: where the equity
investment held have no control, joint control or significant impact on the investee and that are
accounted according to the financial instrument recognition and measurement criteria can carry
out common control or place significant impact due to addition of investment which resulted in
the increase of shareholding, the investee shall plus the fair value of the equity investment
originally held determined in accordance with the Standards for Recognition and Measurement of
Financial Instruments and the fair value of the consideration payable for new investment as the
initial investment cost accounted under equity method when changing the equity method.
② Change of measurement at fair value or accounting under equity method to cost method:
the equity investment of the investee held by the investor with no control, joint control or
significant impact and accounted according to the financial instrument recognition and
measurement criteria, or the long-term equity investment in associates or joint venture originally
held that can control the investee due to addition of investment, shall be accounted in accordance
with the long-term equity investment formed by combination of enterprises.
③ Change of accounting under equity method to measurement at fair value: the long-term
equity investment originally held with common control or significant impact on the investee that
cannot conduct common control or significant impact on the investee due to the decrease of
shareholding as a result of factors such as partial disposal, shall be accounted in accordance with
Standards for Recognition and Measurement of Financial Instruments, and the difference between
the fair value on the date when the common control or significant impact is lost and the book
value is included in profit or loss in the relevant year.
④ Change of cost method to equity method: where control on the investee change to
significant impact or common control with other investors due to factors such as disposal of
investment, the long-term equity investment cost that ceased to be recognized shall first be carried
forward on the proportion of the investment disposed. Then comparing the cost of the remaining
long-term equity investment with the attributable fair value of the identifiable net assets of the
investee at the original investment calculated on proportion of the remaining shareholding, where
the former larger than the later, it belongs to the goodwill as showed in deciding the investment
price and will not adjust the carrying amount of the long-term equity investment; where the former
less than the later, the retained earnings will be adjusted along with the adjustment of the
long-term equity investment.
(4) Basis of conclusion for common control and significant influence over the investee
① Joint control over an investee refers to activities which have a significant influence on
return of an arrangement could be decided only by mutual consent of the investing parties sharing
the control, which includes the sales and purchase of goods or services, management of financial
assets, acquisition and disposal of assets, research and development activities and financing
activities, etc.
② Significant influence on the investee refers to significant influence over the investee exists
when holding more than 20% but less than 50% of the shares with voting rights or even if the
holding is below 20%, there is still significant influence if any of the following conditions
satisfied:
1) There is representative in the board of directors or similar governing body of the investee;
2) Participating in investee‘s policy setting process;
3) Assign management to investee;
4) The investee relies on the technology or technical information of the investor;
5) Major transactions with the investee.
(5) Impairment test and provision of impairment
At the balance sheet date, the Company reviews whether there is impairment indicator for the
long-term equity investments. When there is impairment indicator, the recoverable amount is
determined through impairment test and impairment is provided based on the difference between
the recoverable amount and the carrying value. Impairment loss is not reversed once provided.
The recoverable amount is the higher of net fair value of long-term equity investments on
disposal and the present value of estimated future cash flows.
(6) Disposal of long-term equity investments
For disposal of long-term equity investment, the difference between the considerations
received and the carrying amount of the disposed investment is recognized in profit or loss. For
long-term equity investment accounted for using the equity method, the part recognized in other
comprehensive income is accounted on pro rata basis upon disposal in the same way as the
relevant assets or liabilities are disposed of directly by the investee.
14) Investment properties
Investment properties of the Company include leased land use rights and leased buildings.
An investment property is initially measured at cost, and cost method is adopted for
subsequent measurement.
The buildings leased out of investment properties of the Company are depreciated over their
useful lives using the straight-line method. The specific measurement policy is the same as fixed
assets. For land use rights leased out or held for resale after appreciation in value, they are
amortized over their useful lives using the straight-line method. The specific measurement policy
is the same as that of intangible assets.
At the balance sheet date, the Company reviews whether there is impairment indicator for
investment properties. When there is impairment indicator, the recoverable amount is recognized
through an impairment test and impairment is provided based on the difference between the
carrying value and the recoverable amount. Impairment is not reversed in subsequent periods.
15) Fixed assets
(1). Recognition criteria of fixed assets
√ 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 of the fixed assets except for the fixed assets with full provision and used
continuously.
Expected net residual
Type of fixed assets Useful lives
value
Land ownership
Houses and buildings 8-40 years 0%-5%
Machinery equipment 4-20 years 0%-5%
Vehicles 5-10 years 0%-5%
Office equipment and others 3-10 years 0%-5%
（3）Test method and provision for impairment of fixed assets
At the balance sheet date, the Company reviews whether there is impairment indicator for the
fixed assets. When there is an impairment indicator, the recoverable amount is estimated and
impairment is provided based on the difference between the carrying value and the recoverable
amount once the impairment of an asset is recognized, it will not be reversed in the subsequent
accounting period.
（4）Basis for Recognition and measurement of fixed assets held under finance lease
√ Applicable □ Not Applicable
Basis for recognition of fixed assets held under finance lease: leases that transfer all the risks
and rewards related to the ownership of the relevant assets. The asset is recognized if one or more
of the following criteria is met: ① upon expiry of the lease term, the ownership of the leased asset
is transferred to the lessee; ② the lessee has the option to purchase the leased asset at a price
expected to be sufficiently lower than the fair value of the leased asset when the option is
exercised and at the inception of the lease, it is reasonably certain that the lessee will exercise the
option; ③ the lease term approximates the useful life of the leased asset even if the ownership is
not transferred; ④ at the inception of the lease, the present value of the minimum lease payments
is substantially equivalent to the fair value of the leased asset; ⑤ the leased assets are of such a
specialized nature that only the lessee can use them without major modification.
Measurement of fixed assets held under finance lease: fixed assets held under finance lease
are initially recognized at the lower of fair value of the leased assets at the inception of lease and
the present value of minimum lease payments.
Subsequent measurement of fixed assets held under finance lease is accounted for using the
depreciation and impairment policies of owned fixed assets.
16) Construction in progress
√ Applicable □ Not Applicable
(1) Types of construction in progress
Construction in progress for the Company is self-constructed.
(2) Standard and date of transfer from construction in progress to fixed assets
The construction in progress of the Company is transferred to fixed assets when the project is
completed and ready for its intended use, which shall satisfy one of the following conditions:
① The construction of the fixed assets (including installation) has been completed or
substantially completed;
② The fixed asset has been used for trial operation and it is evidenced that the asset can
operate ordinarily or produce steadily qualified products; or the result of trial operation proves that
it can operate normally;
③ Further expenditure incurred for construction is very minimal or remote;
④ The constructed fixed asset reaches or almost reaches the design or the requirements of
contract, or complies with the design or the requirements of contract.
(3) Impairment test and provision of impairment of construction in progress
At the balance sheet date, the Company reviews the construction in progress to check whether
there is any sign of impairment and an impairment test is needed to recognize the recoverable
amount when there are signs that construction in progress may impair. The impairment loss should
be the lower of the carrying value and recoverable amount and impairment loss cannot be reversed
in the following accounting period if it has been provided.
The recoverable amount of construction in progress should base on the higher value between
fair value of asset less disposal expense and present value of estimated cash flow in the future.
17) Borrowing costs
√ Applicable □ Not Applicable
（1）Recognition principles for borrowing cost capitalization
The Company‘s borrowing costs that are directly attributable to the acquisition or production
of a qualifying asset are capitalized into the cost of relevant assets. Other borrowing costs are
recognized as expenses in profit and loss for the year ended 31 December 2017 when incurred.
Qualifying assets include fixed assets, investment properties and inventories that necessarily take
a substantial period of time for acquisition, construction or production to get ready for their
intended use or sale.
（2）Computation of capitalized amount of borrowing costs
Capitalization period refers to the period from the commencement to the cessation of
capitalization of borrowing costs, excluding the periods in which capitalization of borrowing costs
is suspended.
Capitalization interruption period: Capitalization of borrowing costs is suspended during
periods in which the acquisition or construction of a qualifying asset is interrupted abnormally and
the interruption lasts for more than 3 months.
Computation of capitalized amount of borrowing costs: ① Specific borrowings will be
recorded based on the actual interest expense incurred in the period of special borrowings less the
interest income from unutilized borrowings placed at banks or investment gain from temporary
investment; ② Normal borrowings utilized are calculated based on the weighted average of
expenses of the aggregate asset exceeding the asset expenses of the portion of special borrowings
multiplied by the capitalization ratio of the normal borrowings utilized. Capitalization ratio is
calculated based on weighted average interest rate of normal borrowings; ③ For borrowings with
discount or premium, the discount or premium was amortized over the accounting periods
borrowings to adjust the interest in every period using the effective interest rates.
18) Intangible assets
Intangible assets are the identifiable non-monetary assets which have no physical shape and
are possessed or controlled by the Company.
Measurement of intangible assets
Intangible assets are initially recognized at costs. The actual costs of purchased intangible
assets include the consideration and relevant expenses paid. For intangible asset contributed by
investors, the value agreed in the investment contract or agreement is the actual cost of the
intangible asset. But if the value agreed in the investment contract or agreement is not a fair value,
the fair value of the intangible asset is regarded as the actual cost. The cost of a self-developed
intangible asset is the total expenditure incurred in bringing the asset to its intended use.
Subsequent measurement of intangible assets of the Company: ① Intangible assets with finite
useful lives are amortized on a straight-line basis; at the end of each year, the useful lives and
amortization policy are reviewed, and adjusted if there is any variance with original policies; ②
Intangible assets with indefinite useful lives are not amortized and the useful lives are reviewed at
each year end date. If there is objective evidence that the useful life of an intangible asset is finite,
the intangible asset is amortized using the straight-line method according to the estimated useful
life.
Criterion of determining indefinite useful life
The useful life of an intangible asset is indefinite if the period in which the future economic
benefits generated by the intangible asset could not be determined, or the useful life could not be
ascertained.
Criterion of determining intangible assets with indefinite useful lives: ① For intangible assets
derived from contractual rights or other legal rights and there are no explicit years of use
stipulated in the contract or laws and regulations; ② the period in which generating benefits for
the Company still could not be estimated after considering the industrial practice or relevant
expert opinion.
At the end of each year, the useful lives of the intangible assets with indefinite useful lives are
reviewed. The assessment is performed by the departments that use the intangible assets, using the
down-to-top approach, to determine if there are changes to the determining basis of indefinite
useful lives.
(3) Methods for impairment test and provision for impairment of intangible assets
As at the balance sheet date, the Company reviews the intangible assets to check whether
there is an indication of impairment and an impairment test is needed to recognize the recoverable
amount when there are signs that intangible assets may impair. The impairment provision should
be the lower of the recoverable amount and carrying value and provision for impairment loss
cannot be reversed in the following accounting periods once it has been provided.
The recoverable amount of intangible assets should be based on the higher value between the
net of fair value of asset less disposal expense and present value of estimated cash flow of assets
in the future.
(4) Basis for research and development stage for internal research and development project
and basis for capitalization of expenditure incurred in development stage
As for an internal research and development project, expenditure incurred in the research
stage is recognized in profit or loss in the period as incurred. Expenses incurred in the
development stage are recognized as intangible assets if all of the following conditions are met: ①
the technical feasibility of completing the intangible asset so that it will be available for use or for
sale; ② the intention to complete the intangible asset for use or for sale; ③ how the intangible
asset will generate economic benefits, including there is evidence that the products produced by
the intangible asset has a market or the intangible asset itself has a market; if the intangible asset is
for internal use, there is evidence that there exists usage for the intangible asset; ④ the availability
of adequate technical, financial and other resources to complete the development and the ability to
use or sell the intangible asset; ⑤ the expenditures attributable to the development of the
intangible asset could be reliably measured.
Basis for distinguishing research stage and development stage of an internal research and
development project: research stage is the activities carried out for the planned investigation and
search for obtaining new technology and knowledge, which has the characteristics of planning and
exploration; before commercial production or other uses, the application of achievements and
other knowledge obtained from the research stage in a plan or design to produce new or
substantially improved materials, equipment and products is regarded as development stage,
which has the characteristics of pinpointing and is very likely to form results.
All the expenditures on research and development which cannot be distinguished between
research stage and development stage are recognized in the profit or loss when incurred.
19) Impairment of long-term assets
√ Applicable □ Not Applicable
Long-term equity investment, investment properties measured based on cost model, fixed
assets, construction in progress, intangible assets and other long-term assets are tested for
impairment if there is any indication that an asset may be impaired at the balance date. If the result
of the impairment test indicates that the recoverable amount of the asset is less than its carrying
amount, a provision for impairment will be made for the difference will be recorded in impairment
loss. The recoverable amount is the higher of the net of the asset‘s fair value less disposal costs
and the present value of the future cash flows expected to be derived from the asset. Provision for
asset impairment is determined and recognized on the individual asset basis. If it is not possible to
estimate the recoverable amount of an individual asset, the recoverable amount of a group of
assets to which the asset belongs is determined. A group of assets is the smallest group of assets
that is able to generate independent cash inflows.
Goodwill is tested for impairment at least at each year end. In terms of impairment test of
the goodwill, the carrying amount of the goodwill, arising from enterprise combination, shall be
allocated to the related asset groups on reasonable basis since the acquisition date, or to the related
asset group portfolios if it is difficult to be allocated to the related asset groups. When the carrying
amount of the goodwill is allocated to the related asset groups or asset group portfolios, it shall be
allocated in the proportion of the fair value of each asset group or asset group portfolio against the
total fair value of related asset groups or asset group portfolios. If it is difficult to measure the fair
value reliably, it shall be allocated in the proportion of the carrying amount of each asset group or
asset group portfolio against the total carrying amount of related asset groups or asset group
portfolios. When impairment test is made to the related asset groups or asset group portfolios
including goodwill, if there is an indication that the related asset groups or asset group portfolios
are prone to impair, the Company shall firstly test for impairment for the asset groups or asset
group portfolios excluding goodwill and calculate the recoverable amount and recognize the
impairment loss accordingly by comparing with its carrying amount. The Company shall then test
for impairment for the asset groups or asset group portfolios including goodwill and compare the
carrying amount (including the carrying amount of allocated goodwill) with its recoverable
amount of related asset groups or asset group portfolios. Provision for impairment loss shall be
recognized when the recoverable amount of the related asset groups or asset group portfolios is
lower than its carrying amount.
Once the above impairment loss of assets is recognized, it shall not be reversed in any
subsequent accounting period.
20) Long-term prepaid expense
√ Applicable □ Not Applicable
Long-term prepayments are expenditures which have incurred but the benefit period is more
than one year (excluding one year). They are amortized evenly over the benefit period of each
item of expenses. If the long-term prepayments are no longer beneficial to the subsequent
accounting periods, the unamortized balance is then fully transferred to profit or loss for the
period.
21) Employee benefits
① Accounting method for short-term employee benefits
√ Applicable □ Not Applicable
Employee benefits are all forms of compensation and other relevant expenditure given by the
Company in exchange for services rendered by employees, including short-term employee
benefits, post-employment benefits, termination benefits and other long-term benefits.
Short-term employee benefits include short-term salaries, bonus, allowance, subsidies, staff‘s
welfare, housing provident fund, union funds and employee education funds, medical insurance
fees, injury insurance fees, maternity insurance fees, short-term paid absence, short-term profit
sharing plans, etc. During the accounting period when employees render services, short-term
benefits payable that actually incurred shall be recognized as liabilities and credited into profit and
loss or relevant assets cost on an accrual basis for the benefit objects.
②Accounting 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 gain or loss. Current period service cost means the increase of the present
value of defined benefit obligation resulted from the year 2017 service offered by employee.
Past-service cost means the increase or decrease of the present value of defined benefit obligation
resulted from the revision of the defined benefit plans related to the prior period service offered by
employee; (2) interest costs of defined benefit plans; (3) changes related to the remeasurement of
defined benefit plans liabilities. Unless other accounting standards require or permit to charge the
employee benefits into assets cost, the Company charges (1) and (2) above into profit or loss and
recognized (3) above as other comprehensive income without transferring to profit or loss in
subsequent accounting periods.
③Accounting 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.
22) 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
to the outflow of economic benefits and its amount can be reliably measured, such obligation
shall be recognized as estimated liability.
(2) Measurement of estimated liability
The best estimate of the expenditure from the performance of the current obligation is
initially recorded as accrued liability. When the necessary expenditures falls within a range
and the probability of each result in the range are identical, the best estimate is the median of
the range; if there are severable items involved, every possible result and relevant probability
are taken into account for the best estimation.
At the balance sheet date, the carrying value of estimated liabilities is reviewed. If there
is objective evidence that the carrying value could not reflect the current best estimate, the
carrying value is adjusted to the best estimated value.
23) Share-based payments
√ 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 2017 shall,
based on the best estimate of exercise, be recognized in relevant costs or expenses at the fair
value of the liability assumed by the Company, and the liabilities shall be adjusted
correspondingly.
At each balanced sheet date and the settlement date prior to the settlement of liabilities,
the fair value of the liability is re-measured with its change consolidated in profit/loss.
When there is changes to the Company's share-based payment plans, if the modification
increases the fair value of the equity instruments granted, corresponding recognition of
service increase in accordance with the increase in the fair value of the equity instruments; if
the modification increases the number of equity instruments granted, the increase in fair value
of the equity instruments is recognized as a corresponding increase in service achieved.
Increase in the fair value of equity instruments refer to the difference between the fair values
of the equity instrument on the modified date before or after the modification. If the Company
modifies the exercisable conditions in such manner conductive to the employees, including
the shortening of the vesting period, change or cancellation of the performance conditions
(rather than market conditions), the Company shall consider the modified exercisable
conditions upon the disposal of exercisable conditions. If the modification reduces the total
fair value of shares paid or the Company uses other methods not conductive to employees to
modify the terms and conditions of share-based payment plans, it will continue to be
accounted for the services obtained in the accounting treatment, as if the change had not
occurred, unless the Company cancelled some or all of the equity instruments granted.
During the vesting period, if the Company cancel equity instruments granted will be
treated as accelerating the exercise of rights and the remaining vesting period should be
recognized immediately in the profit or loss, while at the same time recognize the capital
reserve. Employees or other parties can choose to meet non-vesting conditions, but for those
that are not met in the vesting period, the Company will treat it as cancellation of equity
instruments granted.
24) Revenue
√ Applicable □ Not Applicable
(1) Sale of goods
Revenue from the sale of goods shall be recognized at the amount received or receivable
from buyers based on contractual or agreed prices, when all of the following conditions are
satisfied: ① the significant risks and rewards of ownership of the goods have been passed to the
buyer; ② the Company retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold; ③ the amount of revenue can
be measured reliably; ④ it is probable that the associated economic benefits will flow to the
enterprise; ⑤ the associated costs incurred or to be incurred can be measured reliably.
Recognition process of the Company‘s sales revenue: business personnel submit sales
application in the business system according to the consumers‘ orders; financial personnel review
the remaining credit of the consumers or whether the payment for goods is made in advance
according to the sales application, and notify the warehouse to handle the delivery formalities if
the delivery conditions are met. The Financial Department confirms that the major risks of
property in the goods and rewards have been transferred to the buyers upon the receipt of waybill
with the consumers‘ signature, and then issue sales invoices to confirm the sales revenue.
(2) Provision of labor services
At the balance sheet date, when the outcome of a transaction involving the rendering of
services can be estimated reliably, revenue from provision of services shall be recognized using
the percentage of completion method. The Company confirms the completion progress in
accordance with the ratio of actual cost accounting for the total estimated cost. At the balance
sheet date, when the outcome of the transaction involving the rendering of services cannot be
estimated reliably, it shall be dealt with in the following ways: ① if the cost of services incurred is
expected to be compensated, the revenue from the rendering of services is recognized to the extent
of actual cost incurred to date, and the relevant cost is transferred to cost of service; ② if the cost
of services incurred is not expected to be compensated, the cost incurred should be included in the
profit or loss, and no revenue from the rendering of services may be recognized.
(3) Assignment of asset use rights
Revenue from usage fee arising from assignment of intangible assets (such as trademark
rights, patent rights, franchise rights, software and copyright, etc.) and the use right of other assets
will be recognized in accordance with the time and method for charge as required under relevant
contract or agreement and at the same time satisfy the conditions that the economic benefit in
connection with transaction could flow into the Company and the amount of revenue could be
reliably measured.
(4) Construction contracts revenue
Where the outcome of a construction contract can be estimated reliably at the balance sheet
date, revenues and expenses associated are recognized using the percentage of completion method.
The term ―percentage of completion method‖ means a method by which the contractor recognizes
its revenues and costs in the light of the schedule of the contracted project. The Company
ascertained the completion schedule of a contract project according to the proportion of the
completed total contract cost against the expected total contract cost.
25) Government grants
(1) Types of government grants
Government grants refer to the monetary assets or non-monetary assets obtained by the
Company from the government for free, not including the investment made by the government as
an owner. The government grants are mainly divided into asset-related government grants and
revenue-related government grants.
(2) Accounting treatment of government grants
Asset-related government grants shall be recognized as deferred income in profit or loss for
year ended 31 December 2017 on an even basis over the useful life of the asset；government grants
measured at nominal amount shall be recorded directly in profit and loss for the year ended 31
December 2017. Revenue-related government grants shall be treated as follows: ① those used to
compensate relevant expenses or losses to be incurred by the enterprise in subsequent periods are
recognized as deferred income and recorded in profit or loss for the year ended 31 December 2017
when such expenses are recognized; ② those used to compensate relevant expenses or losses that
have been incurred by the enterprise are recorded directly in profit or loss for the year ended 31
December 2017.
(3) Basis for determination of asset-related government grant and revenue-related government
grant
If the government grant received by the Company is used for construction or other project that
forms a long-term asset, it is regarded as asset-related government grant.
If the government grant received by the Company is not asset-related, it is regarded as
revenue-related government grant.
Government grant received without clear objective shall be classified as asset-related
government grant or revenue-related government grant by:
① Government grant subject to a certain project shall be separated according to the
proportion of expenditure budget and capitalization budget, and the proportion shall be reviewed
and modified if necessary on the balance sheet date;
② Government grant shall be categorized as related to income if its usage is just subject to
general statement and no specific project in relevant document.
(4) Amortization method and determination of amortization period of deferred revenue related
to government grants
Asset-related government grant received by the Company is recognized as deferred revenue
and is evenly amortized to the profit or loss over the estimated useful life of the relevant asset
starting from the date the asset is available for use.
(5) Recognition of government grants
Government grant measured at the amounts receivable is recognized at the end of period when
there is clear evidence that the conditions set out in the financial subsidy policies and regulation
are fulfilled and the receipt of such financial subsidy is assured.
Other government grants other than those measured at the amounts receivables are recognized
upon actual receipt of such subsidies.
26) Deferred tax assets / deferred tax liabilities
√ 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 companies, deferred income tax asset is recognized if the temporary
difference will be very probably reversed in foreseeable future and there will be sufficient future
taxable profit to deduct the deductible temporary difference.
(4) No deferred tax liability is recognized for a temporary difference arising from the initial
recognition of goodwill. No deferred income tax asset or deferred income tax liability is
recognized for the temporary differences resulting from the initial recognition of assets or
liabilities due to a transaction other than a business combination, which affects neither accounting
profit nor taxable profit (or deductible loss). At the balance sheet date, deferred income tax assets
and deferred income tax liabilities are measured at the tax rates that are estimated to apply to the
period when the asset is realized or the liability is settled.
27) Lease
(1) Operating lease
√ Applicable □ Not Applicable
① Rental payments for asset rented are amortized on a straight-line basis over the lease term
(including rent-free periods), and credited into the current expenses. Initial direct costs that are
attributable to leasing transactions paid by the Company are credited to current expense.
When the lesser of the assets bears the lease related expenses which should be undertaken by
the Company, the Company shall deduct that part of expense from the rent and amortize the net
amount over the lease term and credited to current expense.
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）Finance lease
√ Applicable □ Not Applicable
①When the Company is a lessee, the leased asset is recorded at the amounts equal to the
lower of the fair value of the leased asset and the present value of the minimum lease payments on
the lease beginning date and the long-term payables is recorded at the amounts of the minimum
lease payments. The difference between the recorded amount of the leased asset and the minimum
lease payments is accounted for as unrecognized finance charge.
The unrecognized finance charge is amortized using the effective interest method over the
period of the lease and accounted in finance charge. Initial direct costs incurred by the Company
are credited in value of leased assets.
②When the Company is a lessor, the difference between sum of the lease receivables and
unguaranteed residual value and its present value is accounted for as unrealized finance income
and is recognized as rental income over the period of receiving rental. Initial direct costs
attributable to lease transaction incurred by the Company shall be accounted in the initial
measurement of finance lease receivables and reduced the amount of recognized during period of
the lease.
28) Other significant accounting policies and accounting estimations
√ Applicable □ Not Applicable
(1) Share repurchases
When the Company purchases its own shares to decrease its registered capital or reward its
staff, it shall be included in treasury stock against the amount actually paid.
When the Company awards the purchased shares to its staff under the equity-settled
share-based payment agreement, it shall be included in capital reserve (equity premium) against
the difference between the book balance of awarded treasury stock and the staff-paid cash and
capital reserve recognized upon the granting of equity instruments.
When cancelling the treasury stock, the share capital shall be cancelled against the total face
value of the cancelled treasury stock; the treasury stock shall be eliminated against the book
balance of the cancelled treasury stock; the capital reserve (equity premium) shall be eliminated
against the difference; if the equity premium is insufficient for elimination, the retained earnings
shall be adjusted accordingly.
(2) Asset securitization business
Some of the Company‘s receivables are securitized. The Company‘s underlying assets are
trusted to a special purpose entity which issues senior asset-backed securities to investors. The
Company holds subordinated asset-backed securities which are not transferrable before both the
principals and interests of the senior asset-backed securities are repaid. The Company serves as
the asset service supplier, providing services including asset maintenance and its daily
management, formulation of the annual asset disposal plan, formulation and implementation of the
asset disposal plan, signing relevant asset disposal agreements and periodic preparation of asset
service report. Meanwhile, the Company, as the liquidity support organization, provides liquidity
support before the principals of the senior asset-backed securities are fully repaid to make up the
differences of the interests or principals. Trust assets are prioritized to repay the principals and
interests of the senior asset-backed securities after the trust taxes and relevant fees are paid, and
the remaining trust assets upon the full repayment of the principals and interests will be owned by
the Company as returns of the subordinated asset-backed securities. The trust assets are not
derecognized because the Company retains substantially all the risks and rewards. At the same
time, the Company has de facto controls over the special purpose entity which are consolidated
into our financial statements.
The Company evaluates the extent to which it transfers the risks and rewards of ownership of
the assets to the other entities and determines whether it retains control while applying the
accounting policy in respect of asset securitization.
①The financial asset is derecognized when the Company transfers substantially all the risks
and rewards of ownership of the financial asset;
② The financial asset is continued to recognize when the Company retains substantially all
the risks and rewards of ownership of the financial asset;
③ When the Company neither transfers nor retains substantially all the risks and rewards of
ownership of the financial asset, the Company evaluates whether it retains control over the
financial asset. If the Company does not retain control, it derecognizes the financial asset and
recognizes separately as assets or liabilities any rights and obligations created or retained in the
transfer. If the Company retains control, it continues to recognize the financial asset to the extent
of its continuing involvement in the financial asset.
(3) Hedge accounting
① Hedges are classified as:
1) A fair value hedge is a hedge of the exposure to changes in fair value of a recognized asset
or liability or an unrecognized firm commitment (except foreign exchange risk).
2) Cash flow hedges is a hedge of the exposure to variability in cash flows that is either
attributable to a particular risk associated with a recognized asset or liability or a highly probable
forecast transaction, or a foreign currency risk in an unrecognized firm commitment.
3) Hedge of a net investment in a foreign operation is a hedge of the exposure to foreign
exchange risk associated with a net investment in a foreign operation. Net investment in a foreign
operation is the share of interest in the net asset of the foreign operation.
② Designation of the hedge relationship and recognition of the effectiveness of hedging:
At the inception of a hedge relationship, the Company formally designates the hedge
relationship and prepares documents relating to the hedge relationship, the risk management
objective and its strategy for undertaking the hedge. The documentation includes identification of
the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and
how the Company will assess the hedging instrument‘s effectiveness.
Hedging instrument‘s effectiveness means the degree of the change of fair value and cash
flow of the hedging instrument in offsetting the exposure to changes in the hedged item‘s fair
value or cash flows attributable to the hedged risk. The hedge is assessed by the Company for
effectiveness on an ongoing basis and judged whether it has been highly effective throughout the
accounting periods for which the hedging relationship was designated. A hedge is regarded as
highly effective if both of the following conditions are satisfied:
1) at the inception and in subsequent periods, the hedge is expected to be highly effective in
offsetting changes in fair value or cash flows attributable to the hedged risk during the period for
which the hedge is designated;
2) the actual results of offsetting are within a range of 80% to 125%.
③ Method of Hedge accounting:
1) Fair value hedges
The change in the fair value of a hedging derivative is recognized in the profit or loss. The
change in the fair value of the hedged item attributable to the risk hedged is recorded as a part of
the carrying amount of the hedged item and is also recognized in the profit or loss.
For fair value hedges relating to financial instruments carried at amortized cost, the
adjustment to carrying value of the hedged items is amortized through the profit or loss over the
remaining term from adjustment to maturity. Amortization based on the effective interest method
may begin as soon as an adjustment is made to the carrying amount and shall not be later than
when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk
being hedged.
If the hedged item is derecognized, the unamortized fair value is recognized immediately in
the profit or loss.
When an unrecognized firm commitment is designated as a hedged item, the subsequent
cumulative change in the fair value of the firm commitment attributable to the hedged risk is
recognized as an asset or liability with a corresponding gain or loss recognized in the profit or loss.
The changes in the fair value of the hedging instrument are also recognized in the profit or loss.
2) Cash flow hedges
The effective portion of the gain or loss on the hedging instrument is recognized directly as
capital reserve (other capital reserve), while the ineffective portion is recognized immediately in
the profit or loss.
Amounts taken to capital reserve (other capital reserve) are transferred to the profit or loss
when the hedged transaction affects the profit or loss, such as when hedged financial income or
financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost
of a non-financial asset or non-financial liability, the amounts taken to capital reserve (other
capital reserve) are transferred to the initial carrying amount of the non-financial asset or
non-financial liability (or the amounts originally recognized in capital reserve (other capital
reserve) will be transferred to the profit or loss for in the same period when the profit or loss are
affected by the non-financial asset or non-financial liability).
If the forecast transaction or firm commitment is no longer expected to occur, the
accumulated profit or loss hedging instruments previously recognized in shareholders‘ equity are
transferred to the profit or loss. If the hedging instrument expires or is sold, terminated or
exercised without replacement or rollover, or if its designation as a hedge is revoked, the amounts
previously recognized in other comprehensive income remain in there until the forecast
transaction or firm commitment affects the profit or loss.
3) Hedge of net investment in foreign operation
A hedge of a net investment in a foreign operation includes the hedge of the currency item as
a portion of net investment, its treatment is similar to cash flow hedge. The portion of the gain or
loss on a hedging instrument that is determined to be an effective hedge is included in other
comprehensive income. The ineffective portion is recognized in the profit or loss. When deal with
foreign operation, any accumulated profit or loss attributable to shareholders‘ equity will be
transferred to the profit or loss.
(4) Explanations on significant accounting estimates
Judgments, estimates and assumptions shall be made to book value of the financial
statements items, which could not be measured accurately, due to the inherent uncertainties of
operating activities, while applying accounting policy. Such judgments, estimates and assumptions
were based on the management‘s historical experience and made after considered other various
factors. These judgments, estimates and assumptions will influence the amount of revenues,
expenses, assets and liabilities presented in financial reports and the disclosure of contingent
liabilities on the balance sheet date. However, the actual results caused by the uncertainties of
these estimations may be different from the current estimates of the management, and thus cause a
material adjustment to the carrying amounts of assets and liabilities affected in the future. The
judgments, estimates and assumptions mentioned above shall be reviewed on a going concern
basis. If the revisions to accounting estimates only affected for the year ended 31 December 2017,
relevant adjustment due to the effect shall be recognized for the year ended 31 December 2017; if
the revision affects both the current and
