行情中心 数据中心 公司公告 龙虎榜 大宗交易 研究中心 重大事项 拟上市公司 个股新闻 标签

海尔智家(600690)2019年半年度报告(英文版)(一)

2019 Interim Report

Haier Smart Home Co., Ltd

1 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Important Notice

I. The Board of Directors, the Board of Supervisors, directors, supervisors and senior

management of Haier Smart Home Co., Ltd. ('the Company') are individually and collectivelyresponsible for the content set out therein and hereby assure that the content set out in theinterim report is true, accurate and complete, and free from any false record, misleadingrepresentation or material omission.

II. All directors attend the Board of Directors.

III. The interim report is unaudited.

IV. Liang Haishan (legal representative of the Company), Gong Wei (chief financial officer of

the Company) and Ying Ke (the person in charge of accounting department) hereby certifythat the financial report set out in the interim report is true, accurate and complete.

V. Proposal of profit distribution or proposal of converting capital reserves into share

capital for the reporting period examined and reviewed by the Board

Not Applicable

VI. Disclaimer in respect of forward-looking statements

√Applicable Not Applicable

Forward-looking statements such as future plans, development strategies as set out in thisreport do not constitute our substantial commitment to investors. Investors are advised to payattention to investment risks.

VII. Is there any fund occupation by controlling shareholders and their related parties fornon-operational purposes?

No

VIII. Is there any provision of external guarantee in violation of prescribed

decision-making procedures?

No

IX. Important risk warnings

For the possible risks which the Company may encounter, please refer to the relevantinformation set out in the section of 'DISCUSSION AND ANALYSIS ON OPERATIONS' in thisreport.

2 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

X. Others

Applicable√Not Applicable

Chairman of the Board: Liang Haishan

Haier Smart Home Co., Ltd.

29 August 2019

(Note: This Report has been prepared in both Chinese and English. Should there be any discrepanciesor misunderstandings between the two versions, the Chinese version shall prevail.)

3 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Contents

SECTION I DEFINITIONS ...................................................................................................5

SECTION II GENERAL INFORMATION OF THE COMPANY AND KEY FINANCIAL

INDICATORS .........................................................................................................................7

SECTION III SUMMARY OF THE COMPANY'S BUSINESS .........................................11

SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS ..................................19

SECTION V SIGNIFICANT EVENTS................................................................................43

SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT

SHAREHOLDERS ...............................................................................................................58

SECTION VII RELEVANT INFORMATION OF PREFERRED SHARES .......................63

SECTION VIII DIRECTORS, SUPERVISORS, SENIOR MANAGEMENT ....................64

SECTION IX RELEVANT INFORMATION OF CORPORATE BONDS .........................66

SECTION X RESPONSIBLITY STATEMENT ..................................................................70

SECTION XI FINANCIAL REPORT ..................................................................................71

SECTION XI DOCUMENTS AVAILABLE FOR INSPECTION.....................................226

4 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION I DEFINITIONS

Unless otherwise stated in context, the following terms should have the following meanings in thisreport:

Definition of frequently used terms

CSRC China Securities Regulatory Commission

SSE Shanghai Stock Exchange

The Company, Haier Smart Haier Smart Home Co., Ltd, its original name is 'Qingdao Haier Co.,

Home Ltd.', and the original short name is 'Qingdao Haier'

Four Major Securities Newspapers China Securities Journal, Shanghai Securities News, Securities Times,

Securities Daily

Haier Electrics, 1169 Haier Electronics Group Co., Ltd. (a company listed in Hong Kong,

stock code: 01169.HK)

GEA GE Appliances, namely household appliances assets and business of

General Electric Group, has currently been acquired by the Company.

FPA Fisher & Paykel Appliances Holdings Limited 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/area across the world. In

July 2018, the Company completed the acquisition of 100% equity

interest in Haier New Zealand Investment Holding Company Limited,

thus FPA became a wholly-owned subsidiary of the company.

Candy Candy Group is an international professional appliances manufacturer

from Italy. Since its establishment in 1945, it has been committed to

enabling the global users to enjoy a higher quality of life through

innovative technologies and quality services. Candy Group has been

prestigious in the global market with users all over the world via its ten

self-owned professional household appliance brands. In January 2019,

Candy officially became a wholly-owned subsidiary of the Company.

CMM China Market Monitor Co., Ltd., as a nationally recognized market

research institute in appliance area, was established in 1994 and has

been focusing on research of retail sales in China consumption market

ever since.

Euromonitor Euromonitor, established in 1972, is the leading strategic market

information supplier and owns over 40-years of 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.

All View Cloud All View Cloud (AVC) is a big data integrated solution provider

perpendicular to the smart home field, providing enterprises with big

data information services, regular data information services and special

data services.

IEC The International Electrotechnical Commission. Founded in 1906, it is

the world's first organization for the preparation and publication of

international electrotechnical standardization and is responsible for

international standardization for electrical engineering and electronic

engineering. The goals of the commission include: to effectively meet

the needs of the global market; to ensure that the standards and

conformity assessment programs are applied globally in a prioritized

manner and to the greatest extent; to assess and improve the quality of

products and services involved in its standards; to create conditions for

the common use of complicated systems; to improve the effectiveness

of the industrialization process; to improve human health and safety,

and to protect the environment.

13 Interconnected Factories Shenyang Refrigerator Interconnected Factory, Foshan Front-Loading

5 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Washing Machine Interconnected Factory, Zhengzhou Air-conditioner

Interconnected Factory, Qingdao Mold Interconnected Factory, Qingdao

Water Heater Interconnected Factory, Qingdao FPA Electrical Machine

Interconnected Factory, Jiaozhou Air-Conditioner Interconnected

Factory, Huangdao Central Air-Conditioner Interconnected Factory,

Huangdao Smart Kitchen Appliance Range Hood Interconnected

Factory, Huangdao Smart Kitchen Appliance Stove Interconnected

Factory, Qingdao Front-Loading Washing Machine Interconnected

Factory, Qingdao Refrigerator Interconnected Factory, Laiyang

Smart Kitchen Appliance Interconnected Factory

'5+7+N' smart full-scene '5' refers to five physical spaces where Haier keeps upgrading, including

customized full set program smart living room, smart kitchen, smart bathroom, smart bedroom and

smart balcony. '7' represents seven whole-house solutions, namely

whole-house air, whole-house water, whole-house cleansing and

maintenance, whole-house security, whole-house interaction,

whole-house health and whole-house internet, while N refers to

variables, i.e. users may customize their own smart living scene freely

based on their living habit, realizing unlimited possibilities.

Model of RenDanHeYi 'Ren' is an employee who has the spirit of two creations

(entrepreneurship, innovation); 'Dan' is the value of users. Each

employee creates value for the user in a different self-employed

business, thereby realizing his own value, and the corporate value and

shareholder value are naturally reflected.

IEEE The Institute of Electrical and Electronics Engineers, an international

association of electronic technology and information science engineers,

is currently the largest non-profit professional technology society in the

world. It is committed to the development and research of electrical,

electronic, computer engineering and science-related fields, and has

now developed into an international academic organization with great

influence in terms of the fields of space, computer, telecommunications,

biomedicine, power and consumer electronics.

6 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION II GENERAL INFORMATION OF THE COMPANY AND

KEY FINANCIAL INDICATORS

I. Information of the Company

Chinese name 海尔智家股份有限公司

Chinese short name 海尔智家

English name Haier Smart Home Co., Ltd.

English short name Haier Smart Home

Legal representative Liang Haishan

II. Contact person and contact Information

Secretary to the Board Representative of IR Others

securities affairs

Global

Name Ming Guozhen Liu Tao Sophie (孙瑶) Customer

Service

Hotline

Department of Securities Department of Securities Haier Deutschland /

of Haier Smart Home of Haier Smart Home GmbH,

Address Co., Ltd. Haier Co., Ltd. Haier Hewlett-Packard-Str.

Information Industrial Information Industrial 4,61352 Bad

Park, No.1 Haier Road, Park, No.1 Haier Road, Homburg, Germany

Qingdao City Qingdao City

Tel 0532-88931670 0532-88931670 +49 160 9469 3601 4006 999 999

(Germany)

Fax 0532-88931689 0532-88931689 / /

Email finance@haier.com finance@haier.com Y.sun@haier.de /

III. Summary of the changes in general information

Registered address Haier Industrial Park, Laoshan District, Qingdao City

Postal code of the registered 266101

address

Business address Haier Information Industrial Park, Laoshan District, Qingdao City

Postal code of the business 266101

address

Website http://www.haier.net/cn/

Email 9999@haier.com

IV. Movement of place for information disclosure and deposit

Designated newspaper for Shanghai Securities News, Securities Times, China Securities

information disclosure Journal, Securities Daily

Website for publishing interim report www.sse.com.cn

as designated by the CSRC

Website for publishing annual report www.xetra.com, www.dgap.de

by other websites

Department of Securities of Haier Smart Home Co., Ltd.

Deposit place of interim report Haier Information Industrial Park, No.1 Haier Road, Qingdao

City

7 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

V. 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

A share Shanghai Stock Haier Smart Home 600690 Qingdao Haier

Exchange

D share Frankfurt Stock Haier Smart Home 690D Qingdao Haier

Exchange

VI. Other related information

√ Applicable Not Applicable

During the reporting period, the Chinese name of the Company changed from '青岛海尔股份有限公司' to '海尔智家股份有限公司', the English name of the Company changed from 'Qingdao Haier Co.,Ltd.' to 'Haier Smart Home Co., Ltd. ', the stock short name of the Company changed from ' QingdaoHaier ' to 'Haier Smart Home', and the English short name of the Company changed from 'QingdaoHaier' to ' Haier Smart Home '.

VII. Key accounting data and financial indicators of the Company

(I) Key accounting data

Unit and Currency:RMB

The corresponding period of last year Increase/decrease

for the reporting

Key accounting For the reporting period compared

data period After adjustment Before Adjustment with the

(January-June) corresponding

period of last year

(%)

Operating 98,979,793,121.16 90,488,122,206.31 88,591,626,626.07 9.38

revenue

Net profit

attributable to

shareholders of 5,150,869,558.02 4,787,943,825.16 4,858,795,529.42 7.58

the listed

Company

Net profit after

deduction of

non-recurring

profit or loss 4,703,180,815.00 4,475,991,565.27 4,475,991,565.27 5.08

attributable to

shareholders of

the listed

Company

Net cash flows

from operating 3,633,833,497.74 5,598,474,992.24 5,368,385,954.02 -35.09

activities

As at the end of last year Increase/decrease

As at the end of the as at the end of the

reporting period After adjustment Before adjustment reporting period

compared with the

end of last year (%)

Net assets

attributable to

shareholders of 42,180,337,843.33 39,402,350,791.68 39,402,350,791.68 7.05

the listed

Company

8 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Total assets 181,141,384,287.40 166,699,544,243.79 166,699,544,243.79 8.66

(II) Key financial indicators

For the reporting The corresponding period Increase/decrease for the

Key financial period of last year reporting period compared

indicators (January-June) After Before with the corresponding

adjustment adjustment period of last year (%)

Basic earnings per 0.809 0.785 0.797 3.06

share (RMB / share)

Diluted earnings per 0.778 0.785 0.786 -0.89

share (RMB / share)

Basic earnings per

share after deducting 0.739 0.734 0.734 0.68

non-recurring profit or

loss (RMB / share)

Weighted average Decrease by 1.20 pct pts

return on net assets(% 12.29 13.49 14.10

Weighted average Decrease by 1.77 pct pts

return on net assets

after deducting 11.22 12.99 12.99

non-recurring profit or

loss(%)

Explanation of the key accounting data and financial indicators of the Company

Applicable √Not Applicable

VIII. Differences in accounting data under domestic and overseas accounting standards

Applicable √Not Applicable

IX. Non-recurring profit or loss items and amount

√Applicable Not Applicable

Unit and Currency: RMB

Non-recurring profit or loss items Amount

Profit or loss from disposal of non-current assets 4,303,058.02

Government grants included in current profit or loss,

except that closely related to the normal operating

business, complied with requirements of the national 279,256,033.50

policies, continued to be granted with the amount and

quantity determined under certain standards

Profit and loss of changes in fair value arising from

holding of financial assets held for trading, derivative

financial assets, financial liabilities held for

trading and derivative financial liabilities except for

valid hedging business relevant to normal 156,198,964.91

business of the company, as well as investment gain

realized from disposal of financial assets

held for trading, derivative financial assets,

financial liabilities held for trading , derivative

financial liabilities and other debt investments

9 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Other non-operating income and expenses except the 164,885,043.50

aforementioned items

Effect of minority equity interests -94,052,101.37

Effect of income tax -62,902,255.54

Total 447,688,743.02

X. Others

Applicable√Not Applicable

10 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION III SUMMARY OF THE COMPANY'S BUSINESS

I. Introduction of major business, operating model of the Company and industry backgroundduring the reporting period

The Company mainly engages in research, development, production and sales of home appliances

with product portfolios covering refrigerators/freezers, washing machines, air-conditioners, water

heaters, kitchen appliance products, small home appliances, U-home smart home business, etc., offeringcomplete sets of smart home solutions to our consumers through rich portfolio of product and brand tocreate a better life experience, and the Company's channel integration service business mainly providescustomers with full-process services such as distribution, logistic and after-sale service of householdappliances and other products, as well as other value-added services.

Since its establishment, the Company has been upholding the concept of 'regarding the user as rightand ourselves as wrong', while adhering to the spirit of entrepreneurship, innovation and the strategy of

keeping up with new developments of the era. The Company has always adhered to overseas

independent brand building and through its persistent efforts and industry integration, it has successivelyacquired the white goods business of Sanyo of Japan, the household appliances business of GE, Fisher &Paykel business in New Zealand, held 48.41% of equity in MABE in Mexico, and acquired Italy-basedcompany Candy, to construct the global competitiveness of the 3-in-1 layout of 'R&D, manufacturingand marketing'. Through continuous optimization of resource integration capabilities and global strategicsynergies, the Company achieved global layout and operation by combining seven world-class brands,including Haier, Casarte, Leader, GE Appliances in the USA, Fisher & Paykel in New Zealand, AQUAin Japan and Italy-based Candy. In the first half of 2019, revenue from overseas operation represented 47%of the total revenue of the Company, while near 100% of the revenue was generated from self-ownedbrands.

According to 2018 global retail sales statistics on the large home appliances published byEuromonitor, a world's leading independent provider of strategic market research, sales volume of Haierlarge home appliances ranked No. 1 in the world for the 10th consecutive year. Meanwhile, global salesof Haier's refrigerators, washing machines, wine cellars and freezers continued to rank No. 1 in theworld. Sales of Haier Health self-cleaning air-conditioner represented a global market share of 40.7%and ranked No. 1 in the world in the year of 2018.

Facing opportunities and challenges arising in the Internet of Things ('IoT') era, the Company,through strategic market moves, has initiated the transformation to embrace IoT, continuously focusingon iterations of the best user experience. By offering smart homes solutions and introducing full-rangesmart life experiences to consumers, Haier is dedicating itself to satisfy users’ needs of a better andcustomized life .

Industry summary for the first half of 2019

11 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

In the first half of 2019, we could find that the global economic growth slowed down, the growthmotivation of developed countries was inadequate, and the growth momentum of emerging economiesdeclined. Unilateral trade protectionism seriously interfered with the operation of global industrialchains. The global economic growth is facing more serious and uncertain external environment. Theglobal manufacturing PMI index initiated by JP Morgan fell to 49.4% in June, the lowest since October2012.

In terms of domestic economy, China's real GDP grew by 6.3% as compared with last year in thefirst half of 2019, and the overall operation was stable. Among them, real GDP in Q2 increased by 6.2%as compared with last year. Manufacturing boom declined in the first half of 2019, weak externaldemand and repeated Sino-US trade frictions have a negative impact on exports. It is expected thatChina's economic growth will still face a downturn pressure in the second half of 2019, but will remainwithin the target range of 6.0%-6.5% under the synergy of various counter-cyclical control policies.

(I) Domestic household appliances market

1. In the environment of constantly downward macro-economy, the domestic householdappliances market remained depressed in the first half of 2019. Influenced by many factors such asshrinking demanding scale, high inventory and penetration of E-commerce channels, price wars weremore frequent and competition was further intensified. At the same time, the channel format, producttechnology and consumption trends are also undergoing profound changes. The industry transformationfrom 'mass manufacturing + mass distribution' to 'brand manufacturing + efficient retailing' is imperative,and enterprises must accelerate the transformation from selling single items to providing smart homesfull set solutions.

According to the report of CMM, in the first half of 2019, the total retail sales volume of China'swhole-category household appliances market (excluding 3C) was RMB465.6 billion, decreased by 4.9%from the same period last year, being a new low since 2012. Among them, ①White goods industry.Retail sales of refrigerators, washing machines and air conditioners decreased by 2.3%, 3.9% and 8.2%from the same period last year, respectively. ②Kitchen and bathroom industry. Retail sales of kitchenappliances and water heaters fell by 2.9% and 1.0%, respectively.

2. Increases and decreases in average price varied from household appliances' categories. ①The refrigerator and washing machine industry benefits from the leading companies' continuous effortsto launch innovative products, which promote structural optimization, industry upgrading and averageprices increasing. According to China Market Monitor Co., Ltd (CMM), the average price of refrigeratorand washing machine industry in the offline market increased by 4.7% and 5.0% respectively in the firsthalf of 2019 as compared with last year; ②Affected by price wars, the average offline market price in

the air-conditioning industry dropped by 1.7%; ③ The average offline market price of kitchen

appliances and water heaters showed a negative growth of 2%.

3. In the market structure, the concentration continued to improve in refrigerator, washing

12 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

machine and air-conditioning industries, the concentration declined in kitchen appliances, and theInternet companies entered the home appliance industry to divert users. According to CMM data,the aggregate TOP3 (refrigerators, washing machines and air conditioners) retail sales shares in theoffline market were 58.57%, 63.24% and 74.61% respectively, increased by 2.34, 1.57 and 0.53 pct ptsover the same period of last year. Affected by the weak demand, continuous entry of new brands andlower prices of mid-to-high-end brands, the kitchen appliance market's leading brands share was diluted,TOP3 retail sales share decreased by 1.95 pct pts and market concentration was dispersed. Internet

companies use 'smart connections' and 'low-cost products' as selling points to divert new users,

especially younger users.

4. Channel format changed significantly. ①E-commerce channels broke the existing channelpattern by actively penetrating into third and fourth-tier markets and obtaining user traffic throughlow-cost products, and some small and medium-sized brands entered the township markets through

commercial channels, thus the competition was intensified. ②The sales of household appliances

increased significantly in the home market. Under the trend of full decoration and integrated design ofhousehold appliances, the characteristics of one-stop shopping and experiential consumption in homemarket are conducive to the whole-category enterprises to effectively transform traffic through 'scenariocombination, whole-house program', thus improving the unit price and sales of outlets. With the rapidexpansions of large-scale home market, such channel will take a larger proportion in the offline retailsales of household appliances.

(II) Overseas household appliances market

Due to the level of economic development and holding quantity of household appliances in each

region, the performance of overseas market varied. Among them: ①The US market continued to

decline, with the sales volume of major household appliances falling by 5.6% (kitchen appliances,washing machines, dishwashers, refrigerators, freezers and home-use air conditioners falling by 5.5%,1.3%, 3.2%, 3.6%, 8.6% and 20.3%, respectively) in the first half of 2019. ②The European market wasaffected by the slowdown in overall GDP growth, and the performance was weak. Among them, thesales volume of refrigerators and washing machines increased by 1.1% and 0.6% respectively over thesame period of last year, and the sales volume of kitchen appliances decreased by 1% over the sameperiod of last year. ③South Asia: The Indian market grew by 9% overall, with refrigerator, washingmachine and air-conditioner increased by 9%, 6% and 12% respectively; the Pakistani market wasaffected by such factors as the sharp depreciation of exchange rate by nearly 25% and tax reform, thesales volume of which decreased by 5%. ④The Southeast Asia market grew steadily, in which washingmachines grew by about 3%, and air conditioners increased by 15% due to the stable economic growth

and strong demand in hot early summer. ⑤The Japanese market's sales volume of white goods were flat

year-on-year, with sales volume of refrigerator increased by 1.4% and sales volume of washing

machines flat. ⑥The Australian market, which was affected by factors such as economic slowdown,

13 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

decline in consumer confidence index, falling consumer spending and house prices, witnessed a negativegrowth in household appliances market and the sales in New Zealand retail market fell by 2.3%.II. Significant changes of the Company's major assets during the reporting period Applicable √Not Applicable

III. Analysis on core competitiveness during the reporting period√ Applicable Not Applicable

Since incorporation in 1984, the Company has always adhered to the principle of driving the

sustainable and healthy development with innovation system focusing on user's need, and it has

successfully turned itself from a collectively owned small factory which had deficit and was on the vergeof bankruptcy into one of the largest home appliances manufacturers in the world. The Company iscommitted to constantly realizing development across different cycles through continued innovations in

corporate development strategy, management method, brand operation, technology R&D, smart

manufacturing and expansion into foreign and domestic markets to achieve competitiveness regardingdynamic market changes.

(I) World-renowned brand competitiveness and leading capability for smart homes full setsolutions

1. World-renowned brand competitiveness. According to the data published by Euromonitor,Haier has been ranked No. 1 among global large home appliances brands for 10 consecutive years. Insegments of refrigerators, washing machines, wine cellars and freezers, the Company continues to be No.1 in the world. To meet the personalized and diversified product needs of users, the Company has brokendown the global technical barriers in the household appliances industry and promoted the healthydevelopment of the industry through the global strategic synergy among seven brands of householdappliances, namely Haier, Casarte, Leader, GE Appliances in the U.S., Fisher&Paykel in New Zealand,AQUA in Japan and Candy in Italy, realizing a full coverage in global markets and user communities.The Company is leading the high-end market. From January to June of 2019, Casarte's market share ofair conditioners above RMB10,000 is 50.4%, representing an increase of 1.9 pct pts; the market share ofFisher & Paykel, the world's top household appliance brand, is No. 1 in New Zealand and maintains itsmarket leadership.

2. Leading capability for smart homes full set solutions. Based on the all-round deploymentand leadership of brand, research and development, intellectual building, channel, service, ecologyand U+ smart home platform, Haier has built up one of the world's leading white goods, kitchen andbathroom industry clusters, covering all types of full set products such as refrigerators and freezers,washing machines, air conditioners, water heaters and kitchen appliances, and provides consumers with

14 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

'Full set, Customized, Iterative '5+7+N' smart full set solutions. 'Full set' is a one-stop solution to solvethe users' demands of whole-house appliances through a full set service that integrates smart homewhole-house product solutions and household appliances. 'Customized' enables users to customize smarthome whole-house scenes based on Haier's 8 business and 140 product categories. 'Iterative' refers toupgrade and iterate smart home technology, performance and experience by user's habits and scenerequirements, and constantly adapt to user's need by collecting and analyzing product use data with U+smart platform.

(II) Industry-leading R&D and technological competitiveness1. Global R&D resources deployment: Relying on 10 R&D centers across the world and multiple(N) innovation centers that focus on user's pain point, Haier has built a '10+N'open innovation system toform a global network of resources and users, and attracted world-class resources to participate with its'cooperation, win-win and sharing' mechanism. Haier therefore plays a leading role in the developmentof products and technologies in the industry, and realizes the goal that 'R&D of Haier goes to whereveruser's need and innovations resources are', providing users with perfect experience.2. Leader in the development of international standards: As of June 2019, Haier, as a householdappliance enterprise proposed the most proposals for international standard in China, has participated in

preparation and revision of 60 international standards and submitted 98 international standard

preparation and revision proposals. At the same time, Haier is also the household appliance enterpriseleading the most industry standards in China and has led and participated in 530 national / industrialstandards preparation and revisions cumulatively. In addition, Haier is the only Chinese householdappliance enterprise with a seat in the International Electrotechnical Commission's Market Strategy

Bureau (IEC/MSB), and the only household appliance enterprise in China that undertakes the

membership in International Standards Technical Subcommittee. Haier took the lead in setting up theIEC TC59/SC59M WG4 Refrigerator Preservation International Standard Working Group and led thedevelopment of new international standards for refrigerator preservation. Haier also led the developmentand official release of the world's first AI standard white paper. In addition, the Smart Home, Internet ofClothing, the Internet of Food and other international standard projects under the leadership of Haierwere approved by IEEE.

3. Leadership in technical patents: As of 30 June 2019, Haier has applied for more than 48,000patents cumulatively cover the world, of which over 60% are invention patents, representing a relativelyhigh patent quality. With more than 10,000 overseas invention patents in 28 different countries, Haier isthe household appliance enterprise with the most overseas invention patents in China. The Companyranked No. 1 in '2018 Hurun Report on IP Competitiveness' in China. In the 20th China Patent Awards inNovember 2018, Haier won 1 gold award for patent and 1 gold award for designing, and 12 excellenceawards for patents. In terms of patent awards, Haier has won 7 gold awards cumulatively during pastChina Patent Awards and the total number of gold awards was the highest in the industry, among which,the gold awards for invention patents account for 60% within the industry. In addition, Haier has won 15

15 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

State Prizes for Progress in Science and Technology, the highest honor in China's science and technologysector, becoming the household appliance enterprise with the most such prizes, accounting for over halfof the prizes within the industry.

4. Innovative R&D mechanism through the HOPE platform: In parallel to independent

innovation, the Company opened its global resources, built HOPE (an innovation platform) to

incorporate users, enterprises and resources into the same interactive ecosystem, to break down barriers

between users and resources. In addition, Haier continued to make cross-border and disruptive

innovation achievements through the effective collaboration and zero-distance interaction of different

roles within the community. Currently, the platform offers over 6,000 creative ideas each year,

supporting leadership in products / technology of various industries and new fields.

(III) Competitiveness of industrial smart manufacturing that leads to change

The core competitiveness of Haier's smart manufacturing is its commitment to long-term value ofusers through its user-centered approach and the transition from large-scale manufacturing to large-scalecustomization. In practice, Haier has established 13 global-leading interconnected factory pilots, and the

interconnected capabilities and ecological system cover the whole process. Such businesses cover

refrigerators, washing machines, air-conditioners, water heaters, kitchen appliances, electric motors,

molds and other fields, fulfilling user's demand for perfect experiences in high-end personalized

products and services. Such initiatives resulted in notable effects: the orders from mass customizationwith full user involvement accounted for 19%, and the orders from mass customization with full clientinvolvement accounted for 52%. This achieved a breakthrough, which eliminated or shortened the periodof products in the warehouses. In addition, operational efficiency throughout the process has beenenhanced (e.g. the new product R&D cycle has been shortened by more than 50%).

COSMOPlat platform combined Haier's interconnected factory model with the digitization and

productization of knowledge to build an industrial Internet platform with independent intellectual

property rights, which integrated Haier's existing functionalities, such as intelligent equipment,

intelligent control, mold and research institutes, and has already collaborated with relevant companies in15 industries, offered comprehensive solutions and value-added services by the combination of software

and hardware as well as click-and-mortar for the enterprises' upgrading and smart manufacturing

transformation.

(IV) The layout of efficient and in-depth distribution channels and logistics network

1. Through an omni-channel distribution system, the Company has achieved full coverage of thefirst, second, third and fourth-tier domestic markets and provided convenient shopping experienceanywhere, anytime. The Company also maintained strong strategic cooperation with professional chainstores for household appliances, such as Gome and Suning, as well as e-commerce platforms, such as

Tmall and JD.com. In respect of self-owned channels, Haier has established more than 8,000

county-level exclusive stores, and more than 30,000 town-level stores. In the comprehensive store

16 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

channel, the Company has established a number of clubs, such as V58 and V140 Clubs, to maintainclose relationship with major regional distribution enterprises of household appliances. In addition, theCompany has accelerated the construction of the front channel contact point including building materialsand home improvement. Relying on the advantage of multi-brand and product, the Company will buildsmart complete-set scenario experience stores to provide a full set of displays, design, sales and servicesin the end-market.

2. A whole-process information system is constructed. 'Jushanghui'(巨商汇) platform covers theorders management of 100% of dealers' customers to achieve online procurement, sales and settlementand reduce the management cost; 'Yilihuo' (易理货) platform covers purchase, sale and inventorymanagement of over 30,000 township customers and their membership management. The Company hasrealized the direct distribution of logistics to the town through the cloud warehouse system, and hasrealized the provision of services, products, resources, goals, incentives and training to the town throughYilihuo.

3. By the end of June 2019, the storage area of Gooday Logistics occupies an area of 5.40 millionsquare meters with 100,000 registered vehicles. Gooday Logistics offers all-weather 24/7 delivery andinstallation services, and it dedicated to provide users with comprehensive and timely services once andfor all.

(V) Excellent global operational capability

Focusing on 'independent brand building', the Company has completed its deployment of a 3-in-1layout comprising R&D, manufacturing and marketing in overseas markets, and targets to identify and

meet local consumers' demand. The Company is succeeding in transforming from single-brand

globalization to multi-brand cross-production lines cross-regional globalization. The Company targets aleap from 'going out, going in' to 'going up' through the integration of global resources. The Companyhas accelerated the implementation of the transformation of 'RenDanHeYi' overseas, and continued topromote the ignition of leading smart home in the IoT era solutions overseas. In the first half of 2019,revenue from overseas operation represented 47% of the total revenue of the Company while near 100%of the revenue was generated from self-owned brands.

(VI) Integrity of corporate culture and the win-win under RenDanHeYi management

Integrity culture based on quality and service is the inherent gene of Haier's development and thecore driver of Haier's continued success. Leveraging on 'user-oriented' and 'persistent honesty' values,Haier has turned itself from a collectively owned small factory which was on the verge of bankruptcyinto the largest white goods manufacturers in the world, while keeping a leading position in world-wideinnovation in the Internet era. Haier upholds a value of 'the user is always right', and this valuestimulates the spirit of innovation, revolution and entrepreneurship of Haier and motivates Haier to

follow the trend and continuously improve and challenge itself, in order to seize development

opportunities. The value of 'win-win under RenDanHeYi' is the assurance of sustainable development of

17 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Haier. Haier is the Haier of all stakeholders, mainly including employees, users, shareholders,

counterparties and the society. In the era of network, Haier has formed a networked organization jointlywith the sub-suppliers and partners to establish communities of interests which would co-create andshare the win-win value. Only if the continued win-win benefits of all stakeholders are made, Haier canachieve sustainable operation. In order to achieve this goal, Haier continues to carry out innovation on

business model, developing and refining the win-win model under RenDanHeYi with Haier

characteristics. 'Ren' refers to employees who have the spirit of entrepreneurship and innovation, and'Dan' refers to the value of users. Each employee creates value for the users in a different self-employedbusiness, thereby realizing their own value, and the corporate's value and the shareholder's value arenaturally realized.

18 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION IV DISCUSSION AND ANALYSIS ON OPERATIONS

I. Discussion and analysis on operations

The Company followed the strategy of smart home leadership. Driven by the Rendanheyi model,the Company promoted the development of the self-driven system of Ecosystem Micro-community(EMC). Through continued product solution guidance, deepened retail transformation, global operationand multi-brand operation, the Company managed to achieve continuous growth of the revenue andprofit against the adverse economic situation and increase the market share. Facing deep changes of thenew era in the needs of users and in the industry, the Company created competing edge catering to theera and the competing ability to confront the future through deep down revolution. The Company alsoaccelerated the landing of '5+7+N' smart, all-scenario, customized and complete-set solutions; achieved

the transformation from sale of individual goods to complete-set, smart solutions of household

appliances; built efficient retailing system through the integration of 'four networks' and the adoption ofunified warehousing and distribution system; and promoted the transformation from distribution to retail.In the first half of 2019, the revenue of the Company amounted to RMB98.98 billion, representing a

year-on-year increase of 9.38%; and the net profit attributable to owners of the Parent Company

amounted to RMB5.15 billion, representing a year-on-year increase of 7.58%.

(I) Rising domestic market share of all products: According to the data from China MarketMonitor Co., Ltd (CMM), the Company's offline and online market shares of refrigerators, washingmachines, home-use air conditioners, water heaters and kitchen appliances have maintained a continuousupward trend. In terms of refrigerators and washing machines, the Company continued to expand itsleading advantages, with the offline market share of refrigerators being 3.1 and 2.0 times as high as thatof the second place, while the online market share of washing machines being 2.0 and 2.1 times as highas that of the second place.

19 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(II) Significant growth on revenue achieved by overseas market: The Company always insiststhe strategy of independent brand building and the construction of a 3-in-1 layout operation ability of

'R&D, manufacturing, marketing' to accumulate the momentum for sustained growth and the

contribution to the Company's result is gradually increased in the overseas market. In the first half of2019, the Company's overseas revenue amounted to RMB46.7 billion, representing a year-on-yearincrease of 24% and accounting for 47%, up by 5 pct pts of the Company's overall revenue.(III) Full promotion of smart home strategy, and preliminary results of complete-set smarthousehold appliance:

By creating 'Complete-set', 'customized' and 'iterative' '5+7+N ' smart home solutions, buildingsmart home cloud with cloud brain, cloud chip, UhomeOS operating system and 'Xiaoyou' assistant, and

constructing the experience store, the Company integrated the whole-industry and full-process

advantages, proactively promoted the implementation of smart home network layout. In the first half ofthe year, the average retailing price of the Company's smart home channel whole-network package wasRMB10,271, representing an increase of 9%; the complete-set sales of the Company's smart homeproducts accounted for 28.3% of the overall sales, up by 2.7 pct pts, with sales of the high-end smartcomplete-set products achieving the most significant growth, registering an sequential growth of 24% inthe second quarter; the registration number of intelligent household appliances increased by 54%, andthe number of smart home users increased by 9.6%.

(IV) Honors of the Company: On 10 January 2019, the Company won the certificate of 'GlobalNo. 1 Brand of Large Household Appliances for 10 Consecutive Years (2009-2018) ' awarded byEuromonitor, a world well-known market research institute. On 22 January, the Company was listed inFortune magazine as 'The Most Appreciated Enterprise in the World in 2019', and became the only Asianhousehold appliances company on the list. On 6 May, the Company (as the only listed IOT eco brand)was listed in 'BrandZ Top 100 Most Valuable Chinese Brands in 2019'. On 22 July, the Company wasre-listed in Fortune 500, ranking ascended by 51.

Main achievements in the first half of 2019:

(I) Focusing on original technology, and creating mega-hit productsThe Company continuously promoted the collaboration between global R&D center and innovationcenter, maintained the global leading level in modular technology, products and R&D resources, andensured its market and brand leadership in various regions. Focusing on the competitiveness of mega-hit

products, the Company enhanced the efficiency of R&D platform, reduced the procurement and

manufacturing costs through modular design, streamlining the number of SKUs and creating mega-hitproducts.

1. Refrigerator/freezer business

As the global leader in the refrigerator industry, the Company genuinely provided users with

20 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

healthy, smart and artistic high-quality delicacy solutions through comprehensive and sustainedtechnological innovation and product iteration, thus leading the industry development and trendrevolution in an all-round way. (1) Healthy and fresh-keeping technology was upgraded constantly.

Casarte MSA oxygen-controlling and fresh-keeping technology doubled the preservation time by

reducing the oxygen concentration in a specific room, and the nutrient loss rate was less than 1/10 of thatin an ordinary refrigerator. The breeze technology pioneered the main control temperature to realize theconstant temperature care of food: with temperature more accurate - fluctuation reduced from 2℃ to0.2℃; and faster refrigeration effect - refrigeration time shortened from 270 seconds to 0.1 second. (2)

Technical investment was strengthened in the field of intelligent and household appliances

integration to satisfy the deep-seated needs of users for intelligent control and household

integration. For example, iterative TFT smart screen technology can not only be used as refrigeratorintelligent control center for temperature adjustment, function setting and intelligent reminder, but alsoas family health center to record the health information of family members and provide value-addedservices such as diet plan and healthy recipes. The Company was awarded 'the First Prize for Scientificand Technological Progress' and 'the Second Prize for Scientific and Technological Progress' by China

National Light Industry Council for two projects, namely, 'the R&D and industrialization of the

micro-core IOT security operation system and the intelligent IOT technology', and 'the application of

intelligent interactive technology in refrigerators'. (3) The proportion of high-end products was

increased by leading products. ①A new generation of Casarte Free Embedded 'YingAi (婴爱)' Series551 refrigerators was introduced, which satisfied the food storage needs of parents at different stages ofpregnancy, lactation and infant through infrared constant temperature storage and double sterilizationsolution. The sales of such refrigerators ranked Top 1 in the first launching month. ②Casarte Free

Embedded 'HunRanTianCheng (浑然天成)' Series satisfied the demands of families where three

generations live together for large capacity preservation, and drove the share of Casarte refrigerator overRMB30,000 to exceed 84.0%. In the first half of 2019, the revenue of Casarte refrigerators increased by25% against the industry downturn, which increased 2 pct pts in the proportion of domestic sales ofrefrigerators in the Company.

2. Washing machine business

As a global leader in washing industry, the Company created the washing experience of health,intelligence, comfort and energy conservation through original technologies including iterating airwash and direct drive motor. (1) New technologies including IoT, Smart and Artificial Intelligencewere launched and applied to introduce solutions, such as smart and exclusive laundry which canautomatically calculate and match the best washing procedures based on the information of clothing type,material, stain type and water quality and realize the high-grade exclusive wash. (2) Newly-launchedHaier 'XianHe (纤合)' washing machines adopted ultrasonic 'air wash' technology to stimulate theactivity of the fabric fibers and quickly remove wrinkles by transforming water into micron-sized foggy

particles which permeate the fabric fibers layer by layer, and realize no ironing for clothes; Such

21 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

washing machines have the largest cylinder diameter (601MM) in the industry, which makes it possibleto wash clothes in a more extending manner; Special care procedures are set for wool, silk, down feather,shirt, mink and large pieces, thus providing comprehensive care from washing to drying and ironing;Haier 'YiRen (颐人)' free-of-cleaning washing machines initiated the technology of 'no barrel', whichsolved the industry problem of dirt accumulation in barrels and avoided the secondary pollution ofclothing, thus creating an experience of 'anti-sensitive health'. (3) The product layout of Leader wasstrengthened to better satisfy the needs of young consumers and serve users with industry-leadinglogistics system, after-sales security, technical reserves, and product quality. ①Based on advantageousresources, the 'Super Excellent Product' series such as 'Super air wash+ smart' and 'large diameter +smart' products were launched, equipped with carrying voice, IOT and other intelligent technologies. ②With super-high cost-performance, 'Happy Mrs. Chick (快乐小鸡)' Series in line with the tastes ofyoung people were launched to build product strength with hard-core strength . In the first half of 2019,the revenue from Leader washing machines increased by 23%.

3. Household air conditioner business

The Company was the first enterprise in the industry to provide a complete range of one-stopand complete-set air solutions. Group research was refined through user interaction and big dataanalysis of Haier Smart Air, to improve the air experience of health, comfort, intelligence, energysaving and environmental protection. (1) Smart self-cleaning, purification self-cleaning and fresh airself-cleaning technologies were updated to satisfy the demands of clean air conditioning, clean air andfresh air. ①The pioneering fresh air conditioners adopted the dual-power air purification technology,and solved the endangering human health problem caused by indoor CO2 concentration exceeding thestandard in case of staying indoor. ②The world's first batch of 5G air conditioners were developed andapplied in large-scale commercial use. Haier 5G IoT shared air conditioners provided campus smart airsolutions with the functions of power-on-line, remote online control and authorization sharing withvarious persons, covering more than 300 colleges and universities at the market share of more than 50%.

(2) Innovation, research and development were made for all-dimensional, full-space, full-scenario

intelligent and healthy air intelligent adjustment solutions. Indoor temperature, humidity and other airparameters can be tested, and user's habits were analyzed with big data on Haier smart air. Therefore, theself-regulation and self-treatment of air equipment were achieved, and air conditioners realize activeservice. Such solution has been used in Casarte Yunding (云鼎), Casarte TX (天玺), Haier SmartSelf-Cleaning and Haier Fresh Air Self-Cleaning. (3) Brand product combinations were enriched, andthe future development space was expanded. ①Product lineup and price coverage were expanded forCasarte air conditioners to occupy the high-end and middle-end market, and in the first half of 2019,Casarte's air conditioner increased over 40% with the share over RMB15,000 is two times that of thesecond place. Casarte Commander air conditioner cabinet machine won the MWE Design Award. ②Focusing on Internet channels, 'Suprair (小超人)' air conditioners were launched for younger internet

22 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

users by virtue of the simple appearance design and the healthy, self-cleaning, intelligence and

convenience.

4. Central air conditioner business

We accelerated product program innovation and core technology layout, and launched aseries of smart IoT, energy-saving and healthy products to enhance market share. In the first halfof 2019, the market share of the central air-conditioning increased by 0.6 pct pt. (1) We deepenedthe R&D layouts of IoT cloud service and NB-IoT. ①The Company established the world's first 'JointLaboratory of IOT 5G Application' with China Household Electrical Appliances Research Institute,China Telecom Institute, China Mobile and Huawei Corporation, focusing on 5G central air conditioner,5G smart building applications and 5G intelligent manufacturing applications. ②We launched a series

of IOT central air conditioners. ③With APP and WEB clients as the contact points, E + IoT cloud

platform provided users with full-space, full-scenario and full-dimension smart air solutions. (2) Welaunched the first humidifying central air conditioner in the industry, which intelligently regulated indoor

temperature and humidity. The maximum humidifying capacity is 870 ml/h, and it is possible to

humidify the full space in only a quarter of an hour. The evaporation humidifier is uniform without anywater mist, and with low operating noise. (3) We introduced Casarte central air conditioner controller,which adopted crystal violet appearance in fashionable design and realized full touch screen operation.The controller was embedded with AI mode and various functions including sleep curve display, faultviewing to optimize user experience. (4) We expanded customers of new industries. We developed

seawater source heat pump unit with dual-titanium tube for fishery, which can be used for both

refrigeration and heating. It adopted multi-head design and achieved the capacity of 160KW for singleunit. The energy can be increased step by step to satisfy waterbody demands of mariculture.

5. Water heater business

Focusing on the whole-house water and heating program, sales volume became No. 1 in termsof online (throughout the internet) and offline (from all channels) shares of water heaters throughfull-category layout (including electric water heaters, gas water heaters, heat pump and solarwater heaters) and brand combination strategy. (1) Electric water heater: ①Relying on the uniquedual-drive quadruple-core heating system and patented advection thermal power system, Casarte Tianmu(天沐) PRO-C series, a fiber-tanked and instant-heating product, had super-large water volume withcapacity increased by 12 times. Through homogeneous fiber tank and VIP vacuum composite insulationtechnology, the thinnest fuselage (278mm) in the industry was created, which can be freely embedded inall kinds of bathroom environment. ②Haier water purification technology upgraded simple bathing to

care by using double-effect scale inhibition and level-III purification technology to remove scale,

residual chlorine, impurities and bacteria. ③Haier AI technology-cloud SMART, relying on U+ big data

platform, automatically obtained information such as water temperature, weather, power price, andlearned user's water use habits. It formed continuously optimized and intelligent heating program under

23 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

intelligence, and realized precise customization of water quantity and mode. Users had no need to handlesuch matters, and it helped to save half of power consumption. In March 2019, Tianmu MAX electricwater heaters won the AWE Award for Innovative Products. (2) Gas water heater: CRT8 water heatersof Casarte Waterfall Washing adopted the innovative waterfall washing technology, and the output ofwater was increased by more than 70%. Relying on the hot water power system and AI 'WaterfallWashing' chips to precisely control the proportion of gas, air and water, and to achieve the goal ofconstant temperature and comfort while providing large amount of water. Waterfall washing technology

has obtained the European three-star certification for the highest level of hot water comfort. The

technology of actively eliminating carbon monoxide has obtained the internationally leading

certification. The technology of waterfall washing with zero-cold water has been awarded the annualtechnical innovation award by CHEARI. (3)Heat pump: Casarte, with all-weather central hot water,used air energy to lead the new technology APF3.6 to provide villa level bath experience, thus realizing'more, fast, good, and saving' . 'More' means more water, more areas, more functions; 'Fast' reafers tofast heating, fast heat transfer, fast preheating; 'Good' stands for good quality, good warranty, goodservice; 'Saving' : save time and worry, save electricity and save money, more use, more saving. In June

2019, it won the second prize of China patent award for energy conservation and environmental

protection. (4) Solar water heater: We introduced space energy water heater based on the technology of

solar energy and heat pump. The product realized sectional heating through all-weather and

high-efficiency for heating, being both energy-saving and efficient. COP value of space energy productsis above 4.2, reaching the first-class national energy efficiency standard of air source heat pump.

6. Kitchen appliance business

Adhering to smart, high-end and complete-set development, we integrated FPA and GEA globalleading technology platforms to accelerate our leading position in products layout and to achieve ahigh-end complete intelligent kitchen solution for users. We strengthened the layout of Casarte kitchenappliances, and enhanced the competitiveness in high-end market. High-end products generated anoverall growth in kitchen appliance against a downward trend.

Range hoods. Casarte Commander (指挥家) range hoods adopted the latest centrifugal air curtaintechnology, and iteratively optimized the fluid technology through integration of global resources, thusrealizing zero vibration, low noise and more uniform air outflow. 'Zero touch' gesture control of the

product experienced iterative upgrade upon launching of wind-power range hoods. And through

optimized algorithm, the product reduced the interference of smoke on the signal, and improved theoperation sensitivity without manual operations. By in-depth integration of global resources and iterativeoptimization and upgrades of the direct-drive and frequency-conversion technology, it increased the airpressure by 14% to 820Pa, thus satisfying the smoke exhaust needs of high-rise residential users, andenhancing the personalized user's experience continuously.

Gas stoves. The automatically cooking gas stoves realized the free conversion between large andsmall fires through E-GAS technology. E-GAS system can adjust the internal and external rings of fire at

24 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

the same time and NTC sensor was used to detect the bottom temperature of the pot to avoid overflow.Disinfection cabinets. Base on the subdivided user's need, we upgraded the light-wave Pasteurdisinfection cabinet to infant & mom level, and become the only disinfection cabinet passing the infant& mom evaluation by CHEARI in the industry. Casarte Commander Series upgraded the originaltechnology to three-dimensional light source, and integrated Western-style dish warming cabinets intoChinese-style products for the first time, thus realizing the integration of disinfection and storage.Ovens. We were the first to release RF ovens in the industry, which overturned the heating mode ofovens. Casarte Commander series first created the automatic door-opening and closing technology andwireless probe technology in the industry. They also designed multi-recipe guided cooking menus forChinese consumers in three life scenarios: enjoying life, fast life and casual baking/steaming. Privatemenus were customized through OTA(Over the Air) online upgrading technology, and the cookingexperience was updated.

(II) Chinese segment: Deepening channel revolution & retail transformation and multi-brandoperation to facilitate the implementation of high-end smart complete-set solutions.In respond to the profound changes in customer needs, channel formats and sales models, the

Company took integration of four networks which include marketing network, logistics network,

after-sales network and information network as the starting point and unified warehousing and

distribution as the key method for organizational reform and better operating efficiency. Based on theadvantages of whole industrial chain operation and multiple product categories, the Company expeditedthe deployment of resources into new front-end channels and the development of five abilities of contactpoints in packaged solutions, covering a whole-process service which ranges from home design todelivery and installation of household appliances. As a result, the user stickiness was enhanced and theyshowed increased willingness to buy complete sets of household appliances. Moreover, the Companydeepened multi-brand operation and segment user groups, leading to multi-dimensional and in-depthcoverage of users group.

1. Integrating marketing network, logistics network, after-sales network and informationnetwork and unifying warehousing and distribution to improve the efficiency. The service system ofintegrating marketing network, logistics network, after-sales network and information network has theability to achieve the interconnection among the information of products, customers, users and staff, andto improve the service quality during the whole process. This system enables marketing activities and

management in towns, rapid handling of defective products and visual query of order logistics

information during the whole process, thereby enhancing refined operation in village and town marketsthrough the coverage of the unified warehousing and distribution model, and digital operational systemin the market of villages and towns; and the retail competitiveness which drives the service providers tofocus on the village and town market can inspire good word of mouth through the synchronous delivery

25 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

and installation services and services to customers in village and town. The Company has completed the

trial implementation of the unified warehousing and distribution model, which is sustainable and

replicable in the first half of the year.

2. The Company opened up new front-end channels for user acquisition while continuing totap the potential of the traditional channel and e-commerce channel. ①Development and upgradingof smart home contact point network. Complete-set design in place, complete-set sales and services weremade a reality, enabling the Company to provide 'one-stop, omni-scenario and customized' solutions.User experience at sales outlets was enhanced owing to the demonstration of interconnection betweenvoice and scenarios. In the first half of 2019, The Company actively promotes the layout of smart homenetworks. The average retail price of all smart home channels amounted to RMB10,271, up by 9%; andthe retail sales of comprehensive products accounted for 28.3% of the total sales, up by 2.7 pct pts;retail sales from home decoration and home furnishing channels increased by 50%; ②Tap the potentialof traditional offline channels of outlets. Terminal development was strengthened through the setup ofexhibition stands, training programs and experience marketing. Community air washing, outlet airwashing and members' laundry day and other activities were organized in order to ensure preciseinteraction and user conversion. Dealers were driven to take the initiative to acquire the users. In theurban market, they established direct relationship with community residents by offering 'Aidaojia (爱到家)' door-to-door services; in the rural market, they created user traffic through household appliancereplacement programs; ③E-commerce channel. The Company focused on improving product planningand layout on retail channels expansion of e-commerce, thereby enhancing terminal competitiveness and

promoting geographic expansion. The Company carried out marketing on the company website,

improved content construction, and enhanced brand awareness and conversion rate. In the 618 Tmalllive streaming competition, Haier streaming ranked No. 1 among household appliance category and No.2 among all categories; ④B2B business. In the first half of 2019, there were more than 80 strategiccooperation clients in industries such as real estate, hospitality, apartment and education. We received

market recognitions for providing industry-wide complete-set smart product solutions, including

'Preferred Smart Home Provider of Top 500 Chinese Real Estate Developers in 2019 and 'PreferredSmart Decoration Brand of China’s Real Estate Industry in 2019'.

3. The strategy of multi-brand operation enables extensive coverage of users. (1) The Casartebrand maintains rapid growth and expands its high-end market share. In the first half of 2019, ourrevenue increased by 15%. In terms of refrigerators and washing machines over RMB10,000, weaccounted for a market share of 39.6% and 78.8%, increased by 3.6 pct pts and 4.9 pct pts; in terms ofdomestic air conditioner over RMB15,000, we accounted for a market share of 36.5%, increased by 7.6pct pts During the reporting period, ①we accelerated the transformation to high-end smart complete-set

products. The 'Commander' series comprising 21 new products such as refrigerator, wine cabinet,

washing machine, air conditioner and kitchen appliance was launched, offering omni-scenario smart

26 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

solutions for the elite class; ②We focused on community economy, experience economy and sharingeconomy, and achieved precise interaction and preparing for users' future experience fermentationthrough community based marketing; ③We created warm contact points with our clients at our 'brandcenter, experience center, interaction center and service center', presented them with Casarte smart home'5+7+N' solution and expanded the number of stores. (2) Leader strengthened the brand image of“simplicity, fashion and intelligence” and created the preferred brand for young people in the pursuit ofsmart life. In the first half of 2019, the sales from online channels increased by 37%. The offline channelpromotes the expansion of network from the third- and fourth-tier markets to the first- and second-tiermarkets. We released best sellers on all e-commerce platforms at the same price, leading to strongmarket penetration and significant increase in brand awareness and user loyalty.(III) Overseas segment : Focusing on high-end brand building to release growth momentumCentering on brand premium and improvement of efficiency, the Company accelerated the high-endbrand building to realize continuous growth. The Company recorded RMB46.7 billion in its overseasrevenue, representing a year-on-year growth of 24%. The revenue increase was 13% if excludingCandy's influence.

(1) Product leadership. Relying on global leading product platform, we created a high-end brandimage. In the first half of 2019, the high-end products of Haier brand increased by 49%, and high-endrevenues of refrigerators, washing machines, air conditioners, and kitchen appliances all had an increaseof over 30%. (2) Brand marketing: w ith its focus on high-end brand building strategy, Haier’s

leadership in market was consolidated through continuous brand marketing activities, including

international exhibitions, sport events sponsorship and outdoor advertisement and so on. According tothe latest user’s research report of Kantar, the overseas popularity of Haier brand has exceeded 75%. In

terms of improving retail competitiveness, Haier established country-region-headquarter three-level

system for promter coordinated promotion in overseas markets, significantly enhancing its ability andefficiency in selling middle-end and high-end products. In addition, through constantly strengthenedinteraction with community users, our fans on Facebook platform has exceeded 8.6 million and thenumber of fans in-depth interaction has reached 1.26 million with a year-on-year increase of 62%. (3)Channels: with the goal of increasing the premium of best sellers, we endeavored to optimize the

channel structure and expanding the internet coverage. We heated the network and improved the

awareness of Haier brand through the upgrade of retail model. By learning from China's marketingmodel in Southeast Asia, South Asia and Russia, the sales for the first half of 2019 and sales volume ofmid-end and high-end products increased gradually with promoter as the ultimate contact points, drivingregional retail transformation. In Europe, we tried to adopt differentiated display methods and intensifythe training efforts to enhance differentiated competitiveness, thus laying a foundation for realizingbrand premium. (4) IT: the whole value chain operation was upgraded through promoting the digitaltransformation of R&D, supply chain, sale, logistics, service business; we realized the end to end digital

27 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

operation management of salesmen, distributors and promoter and built a digital management foundationfor Haier's global marketing through the GTM (Go to Market) project. (5) After-sales service: Takingservice as a part of the brand, we further expanded the direct and franchised service network. The servicespeed in 2019 was increased by 50%. Combining with the development stages and characteristics ofvarious overseas countries, we have established a differentiated service model, and established servicereputation. (6) Integration and Collaboration: we have completed the integration of Haier and Candyin platforms such as logistics, finance, after-sales service and HR. We promoted the procurement andR&D collaboration, so as to realize the high-end differences of Candy&Hoover and enhance the brandimage. In the first half of 2019, Candy achieved revenue goal beyond our budget and it’s market shareexperienced a growth of 0.5 pct pts year on year, and its overall market share (including France, Italy,UK, Ireland and Spain) amounted to 6.5%.

The performances of major markets were summarized as follows:(1) In the North America market, in the downturn of the US household appliance industry, GEAcontinued to grow against the trend and recorded an increase of 12.6% in the first half of 2019 ascompared to the same period in the previous year. According to the data of the third-party organizationStevenson, GEA's core household appliance share increased 2.3 pct pts.GEA continued to explore the IoT transformation of the Internet of Things of traditional householdappliance companies in the process of implementing RenDanHeYi model, and was awarded 'SmartAppliance Company in the Year of 2019' by IoT Breakthrough. In the first half of 2019, the newconnected product Kitchen Hub was launched, which drove the sales of complete-set smart householdappliance. Cafébrand (high-end brand) sales increased by 30% in the first half of 2019. Furthermore, thenew complete-set glass appearance products were launched to strengthen market competitiveness.

(2) In the European market, the revenue (including Candy) amounted to RMB7.2 billion,

representing an increase of 244%. The revenue of Haier brand increased by 22% as compared with thesame period of last year. The market share of washing machines of Haier and Candy ranked No.2 inEurope (except Germany), at 13.1%. It has the fastest growth rate of the washing machine industry.However, in terms of the fastest growing dryer category in the market, dryers of Haier and Candy havethe fastest growth rate and ranked No.1 with market share of 23.8% in the UK; in Italian market, theoverall market share of Haier and Candy household appliance ranked third; in the major countries ofWestern Europe, Haier Brand refrigerators gradually built a high-end brand image with an average priceof 1.35 times over that of the industry, among which multi-door refrigerators have achieved high-enddifferentiation advantages with market share ranking No.1.

We determined a multi-brand development strategy collaborating Haier, Candy and Hoover.

Focusing on the high-end channel, we endeavored to establish a middle- and high-end brand image.①Candy continued to play a leading role in the dryers, large capacity untra-thin washing machines andwashing and drying machines, launching a series of new products such as intelligent ovens and vacuum

cleaner. ② Haier brand continued to expand middle-and high-end products with its refrigerators

concentrating on the differentiated services of preservation and convenience. The washing machines can

28 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

improve the users’ experience owing to the silence and stability of direct-drive motor of FPA. The newproduct, PuriCool (high-end air conditioners) can realize cooling/heating goal and can purify the airthrough its AC and air purifier integration technology.(3) In the South Asia market, the revenue amounted to RMB4.2 billion, representing an increaseof 16%. In the Indian market, the refrigerators of BM“no-need-to bow”and Turbo-Cooling technology,

washing machines’ partition washing functions and variable-frequency direct-drive technology,

intelligence of air conditioners and air purifier integration technology strengthened the leading position.Our service network can make a 24-hour rapid reaction in over 90% of the region. In the Indian Phase IIindustrial park, we completed overall design and carried out the work on schedule. In Pakistan market,we maintained an advantage in the air purification-integrated conditioners and one-button high-endautomatic washing machine we launched.

(4) In the Australia and New Zealand market: we recorded a revenue of RMB2.5 billion,representing an increase of 2.6%. The promotion and installation of FPA global complete kitchen displaywas achieved beyond goal, which increased the transformation rate of sale. We gradually released F&Pbrand 7 series, 9 series OBC embedded oven, 12KG front-loading washing machine, and 9 series fullyembedded refrigerator and freezer into the market. The channel sale of New Zealand constructorsincreased actively. Our top three retail channels consisting of TGG, HarveyNorman and Narta allachieved growth in Australia, with a double-digit increase in Narta.(5) In the Japanese market: In the first half of 2019, we recorded a revenue of RMB1.5 billion,representing an increase of 6.1%. We launched AQUA ultra-thin TZ series super-big refrigerators andput them into 1500 stores in order to improve our brand image, and the sales of super-big refrigeratorsand major refrigerators increased by 83% and 19% year-on-year in the first half of 2019 respectively.The vertical washing and drying machine grew by 400%, and washing machine of variable frequencyincreased by 22%.

(6) In the Southeast Asian market: In the first half of 2019, we recorded a revenue of RMB2.0

billion, representing an increase of 10%. We put T-door and hinged door refrigerators, smart

self-cleaning air-conditioners, twin drum washing machine, and 525 big inner tube washing machineinto the market, which drove the share of high-end sales. In Thailand, air conditioners and freezersachieved a TOP3 market share; in Vietnam, refrigerators and washing machines achieved a TOP3 marketshare.

(IV) Smart home life platform: Focusing on smart home solutions, creating the smart home"eco-cloud" leading the world with AI+IoT core competencyThe Company strived to create a "complete", "customized" and "iterative" "5+7+N" smart home

solution by integrating and incorporating industrywide advantages. In the first half of 2019, the

Company’s smart home complete set sales accounted for 28.29%, increased by 2.71pct pts, of which thesales volume of high-end smart complete-set products increased by 24% in the second quarter. The

29 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

number of connected appliances increased by 54%, and the number of smart home users increased by9.6%. The eco revenue from IoT was RMB1.937 billion, representing an increase of 53% year over year.

(1) Focusing on smart home domain solutions, the Company will create a globally-led

'eco-cloud' through the active scenario and the integration of ecological services. In the first half of2019, the Company focused on improving the interconnection experience, smart appliance activationsincreased by 30%. It created artificial intelligence voice interaction system and capabilities for smarthomes, built a unified voice interaction platform, and formed differentiated competitiveness in terms ofvoice interaction and comprehension. By transforming traditional capabilities into the core capabilitiesof smart home Cloud, Haier is active through highly frequent scenario with ecological services togenerate eco revenue.

(2) Focusing on the complete set from brand to program, cover all kinds of consumers.Relying on the global layout of seven major brands, the Company continued to iterate the '5+7+N'scenario solutions of home space and smart life and implement the series products of the seven major

brands: the Chinese Market launched new smart series of Haier Pinzhi Plus (品智 +), Casarte

Commander and Leader L-two; new smart home programs were locally launched in succession byoverseas markets, such as GE Appliances of the US, AQUA of Japan, Fisher & Paykal of New Zealandand Candy of Italy. The Company has upgraded the display stands and created the real-world experienceof diversified and specialized solutions through intelligent voice and APP functions. In order to satisfythe needs of high-end smart housing, Casarte Commander series cooperated with home improvementbusinesses to promote a integrated solution for home decoration of high-end household appliances.(3) Focusing on 'IoT+AI' to further upgrade the Smart Home cloud technology platform.Through exclusive chip 'cloud chip', IOT operating system 'UHomeOS', AI assistant 'Xiaoyou (小优)',and AI data intelligent brain "U+cloud brain", Haier smart home is able to realize the functions ofintelligent touch, voice interaction, self-learning, active service and continuous iteration. ①In order toaddress the issue of unstable connection, the product stability has reached the industry leading level by

upgrading the networked appliance connection technology, which created simple and convenient

operating experience. ②The Company has created a “personalized” and customized smart scenarioexperience and designed more than 40 sets of core one-button customization scenarios based on theultimate experience of hardware and software services; the Company provided “customized” products ofvarious categories of household appliances and design of household scene solutions according to thestructure and decoration style of the house. Users were granted the right of DIY scenario design throughfamily scene conditions (such as weather, geographical location, etc.). ③The Company researched anddeveloped 5G access technologies and interconnection schemes, established the worldwide first 5GSmart home Laboratory and built solutions of smart complete-sets of household appliances and scenewhich based on 5G technologies. ④By building AI voice interaction system and capability, we haveconstructed a unified voice interaction platform, which has formed differentiated competitive advantages

30 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

in voice interaction and comprehension. Moreover, we have gradually voice interaction scene by

focusing on active service. ⑤With regard to the positioning of brand interaction center, home controlcenter and home interaction center, we will optimize the functions of smart home APP to enhance theuser experience.

(4) We will continue the building of eco brand with initiatives such as the Internet of Food

and the Internet of Clothing. ①In terms of the Internet of Food, personalized healthy diet plan has

been formulated according to the family movement data and health data generated by users in theprocess of using Haier smart home services. In addition, reliable and traceable food ingredients havebeen provided by integrating authenticated farm, e-commerce of fresh products and other resources. Inthe first half of 2019, the eco revenue increased by 68% as compared with the same period over the lastyear. ②The Internet of Clothing, as the world's first clothing life cycle management platform based onthe Internet of Things, has attracted more than 4,000 eco-resource parties from nearly 13 industries, suchas clothing, household appliances, RFID IoT technology. The Internet of Clothing won the China MostInfluential IoT Ecological Award in 2018 by the IoT Industry Application Alliance. The Encoding Rulesand Specifications of Radio Frequency Identification (RFID) Labels for Clothing Commodities, whichwas formulated under the leadership by the Company, was officially released as a national standard, andbecame the first Internet of Clothing standard approved by IEEE in the world.

(V) COSMOPlat Industrial Internet Platform: Integrating advanced manufacturing with anew generation of artificial intelligence technology to help enterprises transform and upgrade andhelp with ecological empowerment.

During the reporting period, COSMOPlat Industrial Internet Platform established 1(main platform)

+7(modules)+N(industries) structure, and realized cross-industry and cross-field applications by

promoting platform innovation, technology innovation and ecological innovation. At present, it canprovide a comprehensive solution of soft and hard integration for enterprises of 15 industries such asceramics, RV and agriculture and cover 60 sub-industries.

1. Deeply empowering enterprises for transformation and upgrading. As of August 2019, 13interconnected factories have been built, with large-scale customization system centered on users in theIoT era, and forming the world's leading benchmark of high-end manufacturing. The seven modulesincluding “user interaction”, “R&D innovation”, “synergic procurement”, “intelligent manufacturing”,“smart logistics”, “precision marketing” and “intelligent service” of the COSMOPlat Industrial InternetPlatform have been digitized to form a complete solution empowering enterprises to transform and

upgrade. The five capacities including "pan-IoT", “knowledge accumulation”, “big data analysis”,

“ecological aggregation” and “security assurance” have been constructed to realize the continuousiteration of interconnection, digital insight and intelligent optimization of the ecological system. Forexample, COSMOPlat built the first intelligent plant in the RV industry, to solving the problem of

31 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

fragmentation of parts procurement in the industry. It provided more value-added services for users inbooking, transportation, travel and housing. In addition, the platform also provides value-added servicesto other enterprises by taking advantages of its centralized procurement system.

2. Research and development of technologies have been made in key fields such as

forward-looking intelligent manufacturing, artificial intelligence, virtual reality/augmented reality(VR/AR) and big data, a series of core scientific and technological products have been incubated.Based on its own industry accumulation and innovation practice, COSMOPlat platform launched several

leading products, including IoT platform capability-edge computing, SaaS innovative applications,

OpenAPI platform and intelligent solutions of industrial big data. In addition, aiming at the

shortcomings in the industrial application, the platform also explored a series of solutions, such as bigdata program of intelligent manufacturing, quality detection for noise (abnormal) sound, and security

protection system of COSMOPlat platform, thus putting the innovative products into practical

application.

3. Seize the leading opportunity of technological innovation to create a world-class industrial

Internet eco-brand by virtue of the completion of the world's first intelligent and 5G

interconnected factory. The world's first intelligent and 5G interconnected factory was launched

officially by Haier in conjunction with, among others, China Mobile and Huawei. Through data-basedsimulation modeling verification, efficient production collaboration and precise quality control, more

scenario-based and intelligent IoT products, intelligent combination solutions and AI technology

applications have been explored and practiced to achieve the maximum optimization of productivity in

production efficiency, manufacturing cost and non-warehousing rate. It is expected to achieve the

self-perception of full-process information, self-decision of full-factor events and self-iteration of

full-cycle scenarios, and strengthen the competitiveness of intelligent manufacturing. For example: ①Through the integration of AI and 5G technologies in the whole process, more than 200 new userexperience modes, such as second-level response, VR roaming and intelligent collaboration, have beencreated to empower the upgrade of user-centered mass customization; ②Through hundreds applicationsof AI and 5G technologies, a innovation system characterized by cross-border integration, ecological

win-win and technological iteration has been constructed to satisfy the multi-scenario high-end

manufacturing and empower interconnected factories to make self-decision of full-factor events. At thesame time, through the application of key technologies such as AI and 5G, the networked appliances areenpowered with eco scenarios such as interaction, design, experience, pre-sale, manufacturing anditeration, which boosts the self-iteration of the user experience scenarios.Haier COSMOPlat was selected as the Excellent Solution of Industrial Internet APP 2018 by MIITand the Ministry of Science and Technology in the 2018 National Key Research and DevelopmentProgram - Network Cooperative Manufacturing and Intelligent Factory; Haier COSMOPlat RV IndustrySolution and Provincial-National Industrial Internet Security Platform Docking with Enterprise wereselected as excellent application in 2018.

32 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(VI) Focusing on corporate social responsibility, insisting on promoting charitable projectssuch as precise poverty alleviation and Hope Project, and exploring the sustainable developmentbetween corporate and society in a harmonious and win-win manner.In 2017 to 2019, Haier initiated a charitable activity in respect of paying attention to left-behindchildren, namely 'Hug Me, Father(' '拥抱吧 爸爸'), with 'China Youth Development Foundation' and'China Charities Aid Foundation for Children'. The Company found the left-behind children throughHaier Hope Primary School and the village committee, bringing them to where their parents locatedduring the summer holidays. The Company helped the left-behind children to grow in a physically andmentally healthy manner by making the communicative bridge between the left-behind children andtheir parents.

As of July 2019, Haier assisted in building 305 Hope Primary Schools and 1 Hope Middle Schoolin total, becoming the Chinese enterprise that built the most Hope Schools in the Hope Project of theCenter Committee of Chinese Communist Youth League.

II. Development Plan for the Second Half of the Year

(I) Industry outlook

Domestic market. Affected by the slowdown of the economic and the controlling of the real estatemarket, domestic household appliances market is expected to continue its existing trend in the secondhalf of 2019. The competition has intensified and the concentration has further enhanced in the stockmarkets. Based on the category of products: ①The penetration rate has reached 97% in the refrigeratorand washing machine industry, with the sales becoming stabilized. The future growth will rely more on

consumption upgrade; ② In the air-conditioning industry: The markets growth will continue to

slowdown and the price competition is gradually normalized; ③Water heaters and kitchen appliances isgreatly affected by the real estate market, and the industry is still expected to decline in the second halfof 2019.

Overseas market. Uncertainty of global economic growth was exacerbated in 2019. Developedcountries focused on the needs of upgrading and replacing the products, while developing countries stillhave a large growth space in terms of penetration and product structure. (1) US market. The downwardtrend is expected to slow down in the second half of the year. The core household appliances market isexpected to decline by 1.6% throughout the year. (2) European market. It is expected to continue theexisting trend in the first half of the year due to the lack of macro catalyst. (3) South Asia market. TheIndian market continues to grow at a high rate with rapid product restructuring, while the Pakistanimarket is expected to show a negative growth due to the persistent depreciation of exchange rate, highCPI and tax reform; (4) Australian market. The RBA adjusted the interest rate from 1.5% to 1%, and thegovernment intended to reduce the proportion of down payment for the first-home, which will benefit

33 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

real estate markets and construction channel are expected to warm up again. (5) Southeast Asia market.Stable economic development, income growth and product upgrading were beneficial to continuing theincreasing trend in the first half of the year. (6) Japanese market. Stable economic increase is expected tocontinue the upgrade trend of the products in the first half of the year.(II) Development plan of the Company for the second half of the yearIn response to the challenges brought by the external environment, the Company will adhere to itsstrategy of product leadership, deepen retail transformation and globalized operations, and continue toenhance our competitiveness, we will expand leadership in the refrigerator, washing machines and waterheater industries, while accelerating the pace of development of the air-conditioner industry and kitchenappliance industry, and to realize growth in our household appliances business; focus on the smart homebusiness, continue to promote the business transformation of the Internet of Things, while promoting theformation of eco system, the creation of eco brands, and the cultivation of eco revenue.Domestic market. We will accelerate the thorough completion of retail transformation through two

directions, unified warehousing and distribution, and smart home. (1) We will complete the pilot

reproduction of the unified warehousing and distribution pilot throughout the country for the year, andrealize the comprehensive transformation of rual and township network, service providers, business

personnel, and enhance the competitiveness of Four Networks. (2) We will promote the pilot

reproduction of Haier Smart Home. Starting from Shanghai Experience Center of Haier Smart Home, wewill realize the experience iterative of Haier “5+7+N” program. In addition, we will realize the one-stopprogram to users through complete interaction, experience and service. Finally, we will construct abrand-new contact point network of Haier Smart Home.Overseas market. We will implement the service strategy of 'specialization and branding' throughthe continuous upgrading of product lineup and promoting the upgrade of terminal transformation in thesecond half of the year. We will construct and upgrade the 360°marketing mode of brand, industry andmarket nodes to realize the marketing of 'mega-hit products' and support the business development.Smart Home Platform. We enhanced the layout and construction of the 'IoT+AI' technology

platform system to further enhance the value of IoT connectivity and the user's experience of

empowering AI scenarios. We deepened the corporation with industry cloud platform, explored the valueof the scene brought by the interconnection; focused on promoting the implementation of the solutionsof voice interaction in various scenarios to enhance the ability of natural interaction of voice and

experience of distributed interaction; and enhanced the marketization and popularization of active

service by focusing on data intelligence.

COSMOPlat platform. The continuous iteration of new industrial ecology is driven by platforminnovation, technology innovation and ecology innovation. ①Capacity construction: The five corecapacities including 'pan-IOT', 'knowledge accumulation', 'big data analysis', 'ecological aggregation'and 'security assurance' have been constructed. ②Cross-industry and cross-region replication: Focusing

34 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

15 industries including agriculture, machinery, health care and energy, the construction of the six

functions of the regional center has been promoted to realize the rapid replication.

(I) Analysis of principal business

1 Table of movement analysis on the related items in financial statement

Unit and Currency: RMB

Items Current period Corresponding Change(%)

period of last year

Operating revenue 98,979,793,121.16 90,488,122,206.31 9.38

Operating cost 70,174,853,958.91 64,057,950,024.03 9.55

Selling expenses 14,596,335,114.01 13,522,931,745.64 7.94

Administrative expenses 4,525,786,069.23 4,033,672,258.19 12.20

Financial expenses 508,746,781.53 485,925,414.67 4.70

R&D expenses 2,741,563,815.81 2,252,630,555.38 21.70

Net cash flow generated from 3,633,833,497.74 5,598,474,992.24 -35.09

operating activities

Net cash flow generated from -7,750,867,969.99 -2,990,163,496.89 -159.21

investing activities

Net cash flow generated from 904,410,930.30 -4,680,026,409.14 119.32

financing activities

Other revenue 472,741,856.55 224,292,412.02 110.77

Gains on changes in fair value 57,409,956.80 36,661,921.50 56.59

Gains on disposal of assets 12,706,682.87 5,505,487.90 130.80

Non-operating expense 114,206,707.92 49,404,445.69 131.17

Reasons analysis of changes in indicators that change significantly:1) Net cash flow generated from operating activities decrease by 35.09% compared to the correspondingperiod of last year, which mainly resulted from the acquisition of Candy.

2) Net cash flow generated from investing activities decrease by 159.21% compared to the

corresponding period of last year, which mainly resulted from the cash expenditure generated from theacquisition of Candy.

3) Net cash flow generated from financing activities increase by 119.32% compared to the

corresponding period of last year, which mainly resulted from the borrowings generated from the

acquisition of Candy.

4) Others: the reasons analysis of changes in other indicators that change significantly are stated in therelevant contents of 'Detailed explanation on significant changes in the components of profit or sourcesof profit of the Company' and 'Assets and liabilities' of 'Analysis of assets and liabilities'.

2 Others

(1) Detailed explanation on significant changes in the components of profit or sources of profit of

the Company

√ Applicable Not Applicable

1) Other revenue increase by 110.77% compared to the corresponding period of last year, which iscaused by the growth of the government grant in the current period.

2) Gains on changes in fair value increase by 56.59% compared to the corresponding period of lastyear, which is caused by the changes in fair value of the forward foreign exchanges trading contract inthe current period.

3) Gains on disposal of assets increase by 130.80% compared to the corresponding period of lastyear, which is caused by the growth of the gains on disposal of assets recognized in the current period.

4) Non-operating expense increase by 131.17% compared to the corresponding period of last year,

35 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

which is caused by the growth of one-off expenditures recognized in the current period.(2) Others

√ Applicable Not Applicable

Principle operating activities by products and regions

Unit and Currency: RMB0'000

Principle operating activities by products

Operating Operating

revenue cost Gross profit

Operating Operating Gross increased/d increased/ margin

By products revenue cost profit ecreased de increased/d

margin (%) yoy creased ecreased

(%) yoy yoy (%)

(%)

Refrigerators 2,846,886.45 1,939,298.11 31.88 9.33 8.00 0.84

Washing 2,029,485.07 1,396,202.77 31.20 22.92 27.32 -2.38

machines

Air-conditioners 1,795,134.81 1,242,641.05 30.78 -6.55 -7.08 0.39

Kitchen

appliance 1,393,565.59 952,448.64 31.65 23.59 28.58 -2.65

products

Water heater 409,994.90 235,160.15 42.64 5.89 7.29 -0.75

Equipment

components and

channel 1,375,046.38 1,231,670.04 10.43 3.52 2.54 0.85

integrated

services

Principle operating activities by regions

Operating Operating Gross profit

Gross revenue cost margin

By regions Operating Operating profit increased/d increased/ increased/d

revenue cost margin (%) ecreased decreased ecreased

yoy yoy yoy (%)

(%) (%)

Mainland China 5,219,358.33 3,566,541.57 31.67 -1.01 -0.64 -0.25

Other

countries/region 4,630,754.87 3,430,879.19 25.91 23.60 22.49 0.67

s

Notes:①In the first half of 2019, the gross profit margin of domestic household appliance businessincreased by 0.9 pct pts; ②In the first half of 2019, overseas revenue increased rapidly by 5 pct pts,compared to the corresponding period of last year; The gross profit margin of overseas business is lowerthan domestic gross profit margin, affecting the overall gross profit margin performance structurally.(II) Explanations on the major changes in profits caused by non-principle businesses Applicable √Not Applicable

36 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(III) Analysis of assets and liabilities

√ Applicable Not Applicable

1. Assets and liabilities

Unit and Currency: RMB

Percentage

Percentage Percentage of change

of amount of amount in

Amount as at at Amount as at at the end amount

the the end of the of the from

Items end of the the end of last previous the end of Explanations

period period period period previous

over over period to

total assets total assets current

(%) (%) period

(%)

Mainly due

to the

decrease in

Financial short-term

assets held for 985,839,615.7 0.54 1,775,648,388 1.07 -44.48 wealth

trading management

products in

the current

period

Mainly due

to Candy

Accounts 14,414,459,807 7.96 10,431,193,488 6.26 38.19 was merged

receivable in the

current

period

Mainly due

to Candy

Other 2,255,319,757 1.25 1,626,975,865 0.98 38.62 was merged

receivables in the

current

period

Mainly due

to the

Other current 7,173,637,679 3.96 5,079,878,910 3.05 41.22 increase in

assets bank wealth

management

in the period

Mainly due

to the fact

that the new

Construction in 5,195,727,697 2.87 3,873,492,230 2.32 34.14 factory has

progress not been put

into use in

the current

period

Mainly due

Right-of-use to the

assets 3,286,464,710 1.81 0 0.00 100.00 right-of-use

assets

recognized

37 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

under the

new lease

criteria

Mainly due

to the

expiration

of the

Financial forward

liabilities held 7,055,018.07 0.00 218,748,280.3 0.13 -96.77 foreign

for trading exchange

trading

contacts in

the current

period

Mainly due

to the

Receipts in completion

advance 0 0.00 14,681,466.58 0.01 -100.00 of the

contract in

the previous

period

Mainly due

to the

reduction of

Liabilities held 14,097,210.09 0.01 32,362,267.88 0.02 -56.44 the

for sale proposed

disposal

company's

liabilities

Mainly due

to the

Non-current long-term

liabilities due 9,876,686,810 5.45 3,015,060,106 1.81 227.58 borrowings

within one year will due

within one

year

Mainly due

to the lease

Lease liabilities

liabilities 2,467,631,698 1.36 0 0.00 100.00 recognized

under the

new lease

criteria

Mainly due

Deferred to Candy

income tax 924,391,131.6 0.51 405,343,787.8 0.24 128.05 was merged

liabilities in the

current

period

Mainly due

Other to Candy

comprehensive 1,006,256,615 0.56 772,632,347.4 0.46 30.24 was merged

income in the

current

period

38 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2. Restrictions on major assets as of the end of reporting period

Applicable √Not Applicable

3. Other explanations

Applicable √Not Applicable

(IV) Analysis of investment

I. Overall analysis on external equity investment

√Applicable Not Applicable

During the reporting period, the external significant equity investment of the Company amounted toRMB3.805 billion.

Percentage of the Amount

Name of Major operating equity interest of Remark proposed

investees activities investees (%) to invest

(RMB)

For details, please refer to the

Production and Announcement on the Completion of

Candy S.p. sale of Acquiring 100% Shares of Italian 3.805

A household 100 Company Candy by Qingdao Haier billion

appliances Co., Ltd. disclosed on 29 September

2018 as well as relevant

announcement of the Board.

Note: The aforementioned amount is calculated based on the average middle RMB exchange rate in theinter-bank foreign exchange market on 28 September 2018 as announced by the People's Bank of China,which is EUR1 to RMB8.0111.

(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

Items Initial Sources of sale during during

investment cost funds during the the reporting the reporting

reporting period period

period

Bank of

Communications 1,803,769.50 Self-owned 40,867.56

(601328)

BAILIAN (600827) 154,770.00 Self-owned 53,567.68

Eastsoft (300183) 18,713,562.84 Self-owned 3,056,392.26

Wealth management 1,886,310,087.37 Self-owned -641,939,521.06 72,271,044.75 11,905,128.75

products

Interest rate swap Self-owned -60,862,333.33

agreement

Forward commodity Self-owned 3,965,800.01

39 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

contract

Forward foreign

exchange Self-owned 98,789,008.11 63,040,174.65

contract

Others 1,426,491,908.20 Self-owned 7,258,292.11 18,421,982.06 -31,532,537.76

Total 3,333,474,097.91 -634,681,228.95 189,482,034.92 -10,332,940.18Note: As of 30 June 2019, the aggregate balance of foreign exchange derivative transaction amounted toapproximately US$1.5 billion.

(V) Sale of material assets and equity

√ Applicable Not Applicable

Haier COS.mo IOT Ecological Technology Co., LTD. (海尔卡奥斯物联生态科技有限公司)(hereinafter referred to as 'COS.mo'), the subsidiary of the Company, is principally engaged in operationof industrial internet platform, industrial intelligence research, and business segments such as precisionmold, intelligent control, intelligent equipment and automation. Relying on industrial internet platformCOSMOPlat, it provides whole-process and large-scaled customization solutions, interconnected factoryintelligent manufacturing solutions, supply of core software and hardware, IOT system integration, bigdata and product-level IOT, and artificial smart solution services for enterprises. To boost industrial IoTplatform of the Company, COS.mo proposed to acquire the smart power & energy segment held by

Haier Group Corporation (hereinafter referred to as 'Haier Group') at a consideration of

RMB375,540,417 by way of private placement of registered capital of RMB74,434,124 to Haier Group,including the 95% equity interests in Qingdao Haier Energy & Power Co., Ltd., the 97.57% equityinterests in Qingdao Economy and Technology Development Zone Haier Energy & Power Co., Ltd., the95.57% equity interests in Hefei Haier Energy & Power Co., Ltd., and the 80% equity interests in DalianHaier Energy & Power Co., Ltd. (collectively, the 'Target Energy & Power Equity') ; in order to enhanceits financial strength and facilitate the promotion of industrial internet ecological platform; COS.moaccepts that the Private Equity Fund intended to be established by Qingdao HaizhiHuiying Equity

Investment Management Co., Ltd. subscribes for the newly-increased registered capital of

RMB67,827,236 of COS.mo through capital contribution of RMB342,206,865 in cash (collectively, the'Transaction'). The total amount of the Transaction is RMB717,747,282. The pricing of the Transaction isbased on the valuation report issued by Chung RuiWorldunion Assets Appraisal (Beijing) Co., Ltd. (中瑞世联资产评估(北京)有限公司), which is qualified for carrying out businesses related to securitiesand futures, and is deemed fair as negotiated among the relevant parties. Upon completion of theTransaction, COS.mo will be owned by Haier Group and the Private Equity Fund as to 6.40% and5.83%.

For details of above-mentioned matters, please refer to the Announcement on Acquisition of Assetswith Newly-increased Registered Capital and Introduction of Investors by Controlled Subsidiary andRelated-Party Transaction of Haier Smart Home Co., Ltd. published by the Company on 3 July 2019and other relevant contents disclosed on the same day.

40 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(VI) Analysis on major subsidiaries and Investees

√ Applicable □Not Applicable

Unit and Currency: RMB0'000

Name of company Scope of business Total assets Net assets Net Profit

Haier Electronics Group Production and sale of household 4,696,974 2,650,676 187,712

Co., Ltd. appliances

Remark: The financial data of Haier Electronics Group Co., Ltd. is determined in accordance with theaccounting standards in the PRC and the accounting policies of the Company.

(VII) Structured entities controlled by the Company

□ Applicable √Not Applicable

II. Other disclosures

(I) Warning and explanation for any prediction of accumulated net loss from the beginning of the

year to the end of the next reporting period or substantial change in accumulated net profit as

compare to the same period last year

□Applicable √Not Applicable

(II) Potential risks

√Applicable □ Not Applicable

1. Risk of decreased demand due to a slowdown in macro-economic growth. As white homeappliance products fall into the category of durable consumer electronic products, the income level ofconsumers and expectation on future income growth will have influence 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,

slow-down in the growth of the real estate market will have some negative effect on market demand,which will in turn have some indirect effect on demand for home appliance products.

2. Price war risk caused by intensifying industry competition. The industry of white goodsproducts has intense competition with a high homogeneity of products. In recent years, the industry hasshown a trend of increasing concentration. In addition, the increase of industry inventory caused byimbalance between supply and demand in individual sub-industries may lead to price wars and otherrisks.

3. Risk of price fluctuation of raw materials. The Company's products and core components aremainly made of metal raw materials such as steel, aluminum and copper, as well as plastics, foamingmaterials and other bulk raw materials. If the prices of raw materials are increasing, they may pose acertain pressure on the Company's production and operation.

4. Operating risk in overseas market. With the stable development of business globalization, theCompany has set up several production bases, research and development centers and marketing centersin a number of countries around the world, leading to the continuous rise of overseas business. As the

41 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

overseas market is subject to the impact of local political and economic situation, legal system andsupervisory system, significant changes of such factors would pose risks to the Company's operationlocally. Under the influence of global trade protectionism, the emergence of a series of problems, such as

superpower games, trade frictions, tariff barriers, foreign exchange fluctuations, together with the

complexity of global politics and economy, will increase the international trade cost, labor cost andforeign exchange transaction cost, as well as the uncertainty of the Company's overseas operations.5. Risk of fluctuation in foreign currency exchange rate. With the deepening of the Company'sglobal layout, the import and export of Company's products involve the exchange of foreign currenciessuch as US dollars, Euro and Japanese yen. If the exchange rate of relevant currencies fluctuates, theCompany's financial situation may be influenced to some extent and its financial costs may be increased.6. Risk of policy changes. The industry of household appliances is closely related to the consumergoods market and real estate market. The changes in macroeconomic policy, consumption investmentpolicy, real estate policy and other relevant laws and regulations will influence user's need of products,and in turn may influence sales of the Company's products.

(III) Other disclosures

□Applicable √ Not Applicable

42 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION V SIGNIFICANT EVENTS

I. Introduction to the general meeting of shareholders

Meeting Date Index for details of websites designated for publishing Date of

resolutions disclosure

2018 Annual 18 June For details, please refer to the Announcement on 19 June

General Meeting 2019 Resolutions Passed at the 2018 Annual General 2019

Meeting of Qingdao Haier Co., Ltd. (L2019-040)

published by the Company on the website of Shanghai

Stock Exchange (www.sse.com.cn) and the four major

securities newspapers.

Explanation of Shareholders' general meeting

√Applicable □Not Applicable

During the reporting period, the 2018 Annual General Meeting of the Company was held by way ofon-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 18 June 2019, considering the annual report ofthe Company and the relevant resolutions on the re-election of the Board of Directors and the Board of

Supervisors. The Company's share capital in aggregate amounted to 6,368,416,700 shares. 314

shareholders and proxies attended the meeting, holding a total of 3,732,277,507 shares, representing58.61% of the total number of shares of the Company with voting rights. The Directors, supervisors andsenior management of the Company as well as the lawyers engaged by the Company also attended themeeting. The 2018 AGM was convened by the Board of the Company. Chairman Mr. Liang Haishan,presided over the 2018 AGM. The Company had 9 Directors, of whom 4 Director attended the 2018AGM (Directors Wu Changqi, Peng Jianfeng, Zhou Hongbo, Wu Cheng and Liu Haifeng David wereunable to attend the 2018 AGM due to personal engagement); the Company had 3 supervisors, all ofwhom attended the 2018 AGM. The secretary to the Board of the Company attended the 2018 AGM andother members of senior management of the Company were invited to attend the 2018 AGM.

II. Proposal of profit distribution or capitalization of capital reserve

(I) Proposal for interim profit distribution and proposal for reverse conversion into share capital

Whether distributed or converted No

III. Performance on undertakings

(I) The undertakings made by the ultimate controllers, shareholders, related parties, acquirer

as well as the Company and other relevant parties during or up to the reporting period√Applicable □Not Applicable

43 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Whether

Background Type of Date and Any performed in a

of undertak Coven Contents of undertakings term of deadline timely

undertakings ings anter undertaking for and

s performance strict

way

Undertaking Eliminat Haier During the period from September 2006 to May 2007, the Company issued 27 Yes Yes

related to e the Group shares to Haier Group Corporation ('Haier Group') to purchase the controlling September

significant right Corpo equity in its four subsidiaries, namely Qingdao Haier Air-Conditioner Electronics 2006,

reorganizatio defects ration Co., Ltd. (青岛海尔空调电子有限公司), Hefei Haier Air-conditioning Co., long-term

n in land Limited (合肥海尔空调器有限公司), Wuhan Haier Electronics Co., Ltd. (武汉

property 海尔电器股份有限公司), Guizhou Haier Electronics Co., Ltd. (贵 州海尔电器

etc. 有限公司). With regard to the land and property required in the operation of

Qingdao Haier Air-Conditioner Electronics Co., Ltd. (青岛海尔空调电子有限

公司), Hefei Haier Air-conditioning Co., Limited (合肥海尔空调器有限公司),

Wuhan Haier Electronics Co., Ltd. (武汉海尔电器股份有限公司) (the

'Covenantees'), Haier Group made an undertaking (the '2006 Undertaking').

According to the content of 2006 Undertaking and current condition of each

Covenantee, Haier Group will constantly assure that Covenantees will lease the

land and property owned by Haier Group for free. Haier Group will make

compensation in the event that the Covenantees suffer loss due to the

unavailability of such land and property.

Eliminat Haier Haier Group Corporation undertakes that it will assure Haier Smart Home and its 24 Yes Yes

e Group subsidiaries of the constant, stable and unobstructed use of the leased property. In December

the right Corpo the event that Haier Smart Home or any of its subsidiaries suffers any economic 2013,

Undertaking defects ration loss due to the fact that leased property has no relevant ownership certificate, long-term

related to in Haier Group Corporation will make compensation to impaired party in a timely

refinancing land and sufficient way and take all reasonable and practicable measures to support

property the impaired party to recover to normal operation before the occurrence of loss.

and etc. Upon the expiration of relevant leasing period, Haier Group Corporation will

grant or take practicable measures to assure Haier Smart Home and its

subsidiaries of priority to continue to lease the property at a price not higher than

the rent in comparable market at that time. Haier Group Corporation will assure

44 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Haier Smart Home and its subsidiaries of the constant, stable, free and

unobstructed use of self-built property and land of the Group. In the event that

Haier Smart Home or any of its subsidiaries fails to continue to use self-built

property according to its own will or in original way due to the fact that self-built

property has no relevant ownership certificate, Haier Group Corporation will

take all reasonable and practicable measures to eliminate obstruction and impact,

or will support Haier Smart Home or its affected subsidiary to obtain alternative

property as soon as possible, if Haier Group Corporation anticipates it is unable

to cope with or eliminate the external obstruction and impact with its reasonable

effort. For details, please refer to the Announcement of Qingdao Haier Co., Ltd.

on the Formation, Current Situation of the Defective Property, the Influence on

Operation of Issuer Caused by Uncertainty of Ownership, Solution for the Defect

and Guarantee Measures (L2014-005) published by the Company on the four

major securities newspapers and the website of Shanghai Stock Exchange on 29

March 2014.

Eliminat Haier The Company undertakes that it will eliminate the property defects of the 24 Yes Yes

e the Smart Company and main subsidiaries within five years with reasonable business effort December

right Home since 24 December 2013, to achieve the legality and compliance of the Company 2013, eight

defects Co., and main subsidiaries in terms of land and property. For details, please refer to years

in land Ltd. the Announcement of Qingdao Haier Co., Ltd. on the Formation, Current

property Situation of the Defective Property, the Influence on Operation of Issuer Caused

etc. by Uncertainty of Ownership, Solution for the Defect and Guarantee Measures

(L2014-005) published by the Company on the four major securities newspapers

and the website of Shanghai Stock Exchange on 29 March 2014. During the

aforesaid period, the Company has formulated relevant performance guarantee

measures, including the re-application by the Company and its main subsidiaries

to the competent government department for the property ownership certificate

and to procure Haier Group Corporation to make guarantee undertakings in

respect of the defective property owned by it and its subsidiaries. As of the

expiration date, the Company has resolved the property defects of itself and its

eight major subsidiaries, while that of the other remaining five major subsidiaries

is in process. The Company will make reasonable business efforts to resolve the

property defects of these five major subsidiaries. Because of historical issues and

other reasons, the approval procedure involved in solving some defective

property problems is complicated, including that of multiple government

45 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

departments, and it takes a long time to handle and coordinate related matters.

Due to the above external factors, the Company was unable to complete the

above undertakings within the original undertaking period. Therefore, after the

approval of the board meeting held by the Company on 5 November 2018 and

the general meeting held on 21 December 2018, the term of the above

undertakings was extended for three years based on the original deadline.

Asset Haier Inject the assets of Fisher & Paykel to the Company or dispose such assets May 2015 Yes Yes

injection Group through other ways according to the requirements of the domestic supervision to June

Corpo before June 2020. For more details, please refer to the Announcement of Qingdao 2020

Other ration Haier Co., Ltd. on the Changes of Funding Commitment (L2015-015) published

undertakings on the four major securities newspapers and the website of Shanghai Stock

Exchange on 26 May 2015. During the reporting period, after considered and

approved by the 13th meeting of the 9th session of the Board of Directors and

2017 Annual General Meeting of the Company, the Group has injected the above

assets into the Company and this commitment has been completed.

Asset Haier Inject the assets of Haier Photoelectric to the Company or dispose such assets December Yes Yes

injection Group through other ways according to the requirements of the domestic supervision 2015 to

Other Corpo before June 2020. For more details, please refer to the Announcement of Qingdao June 2020

undertakings ration Haier Co., Ltd. on the Changes of Funding Commitment of Haier Group

Corporation (L2015-063) published on the four major securities newspapers and

the website of Shanghai Stock Exchange on 23 December 2015.

Profit Haier In December 2015 and January 2016, the meeting of the Board of Directors and December Yes Yes

forecast Group general meeting of the shareholders considered and approved the matters in 2015 to

and Corpo relation to the acquisition of minority equity interest of Mitsubishi Heavy December

compens ration Industries Haier and Carrier Refrigeration Equipment held by Haier Group. The 2018

ation Company signed the Profit Compensation Agreement with Haier Group to

Other forecast the profits to be achieved by the aforementioned two companies in

undertakings 2015-2018. If the profits are not reached during the commitment period, the

difference part will be made up to the Company by Haier Group in cash. For

more details, please refer to the Announcement of Qingdao Haier Co., Ltd. on the

Acquisition of Equity in Sino-foreign Joint Venture Held by Haier Group

Corporation and Related-party Transaction (L2015-062) published on the four

major securities newspapers and the website of Shanghai Stock Exchange on 23

December 2015.

46 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

IV. Appointment and dismissal of accounting firm

Explanation of appointment and dismissal of accounting firm

√Applicable □Not Applicable

During the reporting period, the Company considered and approved the resolution on there-appointment of accounting firm on the 2018 annual general meeting: in order to ensure the smoothimplementation of the financial and internal auditing and the continuity of the auditing work in 2019, theCompany re-appointed Shandong Hexin Certified Public Accountants (LLP) as the audit institution ofthe financial report and internal control of 2019, and the audit fees amounted to RMB9.60 million (ofwhich, financial report of RMB7.15 million, internal report of RMB2.45 million).Explanation of change of accounting firm during the auditing period

□Applicable √Not Applicable

Explanation of the Company on the 'non-standard audit report' issued by the accounting firm

□Applicable √Not Applicable

Explanation of the Company on the 'non-standard audit report' issued by the certified public accountantsas set out in the financial report in the annual report last year

□Applicable √Not Applicable

V. Matters relating to bankruptcy and restructuring

□Applicable √Not Applicable

VI. Material litigation and arbitration matters

□Material litigation and arbitration matter during the reporting period √No material litigation andarbitration matters during the reporting period

VII. Punishment and correction on the listed company and its directors, supervisors, senior

management, controlling shareholders, ultimate controllers and acquirers and the issue of

rectification

□ Applicable √ Not applicable

VIII. Explanation of the integrity status of the Company and its controlling shareholders and

ultimate controller during the reporting period

□ Applicable √ Not applicable

IX. The Company's share option incentive scheme, employee shareholding scheme or other

employee incentive measures and its influence

(I) Matters that have been disclosed in temporary announcements and without any subsequent

progress or change

□ Applicable √ Not applicable

47 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(II) Share incentives not disclosed in temporary announcements or with subsequent progress

Share Option Incentive

□ Applicable √ Not applicable

Other explanations

□ Applicable √ Not applicable

Employees shareholding scheme

√ Applicable □ Not applicable

(1) The Phase IV Employees Stock Ownership Scheme launched and opened a position: On 29April 2019, the Company considered and approved relevant resolutions such as the Phase IV StockOwnership Scheme of Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. (Draft)(《青岛海尔股份有限公司核心员工持股计划之第四期持股计划(草案)及摘要》) and it's Summaryat the 27th meeting of the 9th session of the Board of Directors. The 635 staffs who participated into the

Stock Ownership Scheme are the directors (excluding independent directors), supervisors, senior

management of the Company and regular employees who serve at the Company and its subsidiaries andsign employment contracts with the Company or its subsidiaries and receive remuneration from them,

together holding RMB273 million in the fund. On 2 July 2019, the Company disclosed the

Announcement on Implementation Progress of Phase IV Stock Ownership Scheme of Core EmployeesStock Ownership Scheme of Haier Smart Home Co., Ltd. (《海尔智家股份有限公司核心员工持股计划之第四期持股计划实施进展公告》), and the Employees Stock Ownership Scheme has been entrustedto Industrial Securities Assets Management Co., Ltd.(兴证证券资产管理有限公司), who will establisha single asset management plan for the Phase IV Stock Ownership Scheme of Core Employees StockOwnership Scheme of Qingdao Haier Co., Ltd. ('Assets Management Plan') for the management. As of30 June 2019, the Assets Management Plan has purchased an aggregate of 13,613,978 shares of theCompany, representing 0.21% of the total share capitals of the Company through the secondary marketat an average trading price of RMB15.95 per share with a trading volume of RMB 217,193,832.97.(2)Allocation of the employee stock ownership plan (ESOP): During the reporting period, thesecond vesting of the Company's Phase II ESOPs (Draft) and Summary under Key Employee StockOwnership Plan of Qingdao Haier Co., Ltd. (《青岛海尔股份有限公司核心员工持股计划之第二期持股计划(草案)及摘要》) (referred to as 'Phase II ESOPs') has been completed, and the conditions of thefirst vesting of the Company's Phase III ESOPs (Draft) and Summary under Key Employee StockOwnership Plan of Qingdao Haier Co., Ltd. (《青岛海尔股份有限公司核心员工持股计划之第三期持股计划(草案)及摘要》) (referred to as 'Phase III ESOPs') has been completed. According to the AuditReport of Qingdao Haier Co., Ltd. (《青岛海尔股份有限公司审计报告》) (Hexin Shen Zi. (2019)No.000266) issued by Shandong Hexin Certified Public Accountant LLP, the annual net profits vested inparent company shareholders with allowance for non-recurring gains and losses in 2018 increased by

48 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

17.38% compared to 2017.

On 23 May 2019, the ESOPs Management Committee of the Company convened a meeting,determing: (1) 544 holders of Phase III ESOPs to be allocated with 12,248,613 shares according toperformances for the year 2018 and the results of personal assessment, the shares of the remainingholders with unsatisfactory assessment or who resigned were suspended for allocation or adjusted fortheir shares; (2) 616 holders of Phase II ESOPs to be allocated with 5,869,169 shares according toperformances for the year 2018 and the results of personal assessment, the shares of the remainingholders with unsatisfactory assessment or who resigned were suspended for allocation or adjusted for

their shares; (3) 177,812 shares that were vested suspend before Phase I Core Employees Stock

Ownership Scheme shall also be vested this time (for details on the progress of Stock Ownership

Scheme, please refer to the Announcement in relation to Second Quota Distribution and Equity

Allocation in Phase I Core Employees Stock Ownership Scheme of Qingdao Haier Co., Ltd. announcedby the Company on 15 December 2018). A total of 3,538,840 shares can be allocated to the directors, thesupervisors and the senior managements of the Company this time. Any change of the shares they holdmust be subject to provisions of the Rules Governing the Holding of Shares in the Company by Directors,Supervisors and Senior Managements of Listed Companies and Changes thereof.

In summary, according to the aforementioned resolutions, the Company has completed the transferof relevant stocks at China Securities Depository and Clearing Corporation Shanghai Branch on 29 May2019, with a total of 18,295,594 shares.

Other incentive measures

□ Applicable √ Not applicable

X. Significant related-party transactions

(I) Related-party transactions from routine operation

1. Matters that have been disclosed in temporary announcements and with no subsequent

progress or change

□ Applicable √ Not applicable

2. Matters that have been disclosed in temporary announcements and with subsequent progress

or change

√ Applicable □ Not applicable

The Company made a forecast on the related-party transaction matters of the Company for the yearof 2019 at the 27th meeting of the 9th session of Board Meeting held on 29 April 2019. For details,please refer to the Announcement of Qingdao Haier Co., Ltd. regarding the Anticipation on the Daily

Related-party Transactions for 2019 and relevant announcement on the resolutions of the Board

disclosed on 30 April 2019.

For the actual implementation of the Related-party transaction of January to June 2019, please refer to

49 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

“XII. Related parties and related-party transactions under section X - Financial and Accounting Report

set out in this regular report.

3. Matters not disclosed in temporary announcements

□ Applicable √ Not applicable

(II) Related-party transactions regarding acquisition or disposal of assets/equity

1. Matters disclosed in temporary announcements and with no subsequent progress or change

√ Applicable □ Not applicable

Summary Index for details

Related-party transactions of Acquisition of Assets For details, please refer to the Haier Smart Home

with Newly-increased Registered Capital and Co., Ltd. Announcement on Acquisition of Assets

Introduction of Investors by COS.mo: for details, with Newly-increased Registered Capital and

please refer to '(V)Sale of material assets and Introduction of Investors by Controlled Subsidiary

equity' of 'Section IV Discussion and Analysis on and Related-Party Transaction of Haier Smart

Operations' in this report. Home Co., Ltd. (L2019-049) and relevant

announcements disclosed by the Company on 2 July

2019.

2. Matters that have been disclosed in temporary announcements and with subsequent progress

or change

□ Applicable √ Not applicable

3. Matters not disclosed in temporary announcements

□ Applicable √ Not applicable

4. If performance agreement is involved, the performance achieved during the reporting period

shall be disclosed

□ Applicable √ Not applicable

(III) Significant related-party transactions of joint external investment

1. Matters that have been disclosed in temporary announcements and with no subsequent

progress or change

□ Applicable √ Not applicable

2. Matters that have been disclosed in temporary announcements and with subsequent progress

or change

□ Applicable √ Not applicable

3. Matters not disclosed in temporary announcements

□ Applicable √ Not applicable

(IV) Amounts due to or from related parties

50 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

1. Matters that have been disclosed in temporary announcements and with no subsequent

progress or change

□ Applicable √ Not applicable

2. Matters that have been disclosed in temporary announcement and with subsequent progress

or change

□ Applicable √ Not applicable

3. Matters that haven't been disclosed in temporary announcements

□ Applicable √ Not applicable

(V) Other significant related-party transactions

□ Applicable √ Not applicable

(VI) Others

□ Applicable √ Not applicable

XI. Significant contracts and their execution

1 Trusteeship, contracting and leasing

□ Applicable √ Not applicable

2 Guarantee

√Applicable □Not Applicable

Unit and Currency: RMB0'000

External guarantees provided by the Company (excluding guarantees for subsidiaries)

Relati Date

onship of

betwee occurr Wheth Wheth Wheth Wheth

n the ence Com Expiry er the er Overdu er er

guaran Secure Amoun of the mence date Type guaran the e there Relate Rel

Guara tor d t of guara ment of of tee has guarant amount is a d- atio

ntor and party guarant ntee date guarant guara been ee is of the counter party nshi

the ee (date of ee ntee fulfille overdu guarant -guaran guarant p

listed of guara d e ee tee ee

compa agree ntee or not

ny ment)

)

Total amount of guarantee occurred during 0

the reporting period (excluding guarantees for

subsidiaries)

Total balance of guarantee at the end of the 0

reporting period (A) (excluding guarantees

for subsidiaries)

Guarantees provided by the Company for subsidiaries

Total amount of guarantees for subsidiaries 3,087,978.05

occurred during the reporting period

Total balance of guarantees for subsidiaries 2,863,947

at the end of the reporting period (B)

51 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Total amount of guarantees provided by the Company (including guarantees for subsidiaries)

Total amount of guarantee (A + B) 2,863,947

Ratio of total amount of guarantees to net 67.90

assets of the Company (%)Including:

Amount of guarantees for shareholders,

ultimate controllers and their related parties 0

(C)

Amount of debt guarantees provided directly

or indirectly for the secured party with 2,063,422.58

asset-liability ratio exceeding 70% (D)

The amount of total amount of guarantee in 754,930.11

excess of 50% of net assets (E)

Total amount of the above three guarantees 2,818,352.69

(C + D + E)

Explanation of possibly bearing related

discharge duty for premature guarantees

Explanation of guarantee status The total amount of the aforementioned guarantees consists

of two parts:

1. In 2016, the Company acquired the assets of GEA at a

total consideration of US$5.61 billion, which was sourced

from self-owned funds and loan for merger, of which, the

loan for merger in the amount of US$5.61 billion was

applied for by Haier US Appliance Solutions, Inc., a

wholly-owned subsidiary of the Company, to China

Development Bank Co., Ltd. The loan was fully secured by

the Company and Haier Group Corporation, and the amount

of which was equivalent to approximately RMB8.875 billion

as at the end of the reporting period. The balance of the

guarantee amounted to approximately RMB7.645 billion as

at the end of the reporting period. The provision of guarantee

had been considered and approved by the Board and the

general meeting of shareholders of the Company;

2. In June 2019, the resolution on the Expected Provision of

Guarantee for subsidiaries in 2019 was passed on the 2018

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 RMB22.005

billion. As of the end of the reporting period, the balance

guaranteed was RMB20.985 billion.

3 Other Major Contracts

□Applicable √Not Applicable

XII. Information on poverty alleviation of the listed companies

√Applicable □Not Applicable

1. Targeted measures in poverty alleviation plan

√Applicable □Not Applicable

52 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

In accordance with the national plan for targeted measures in poverty alleviation and therequirements 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 bythe general meetings on related matters (such as donation). Over the years, the Company has beendevoted to education undertakings and making significant contributions, with a view to targeting theweakest area of education and to blocking the transmission of poverty between generations throughfocused efforts in raising the basic cultural quality in poverty and the skill levels of labor force frompoor families. As of July 2019, the Company and the Haier Group Corporation (its ultimate controller)and its subsidiaries (referred to as the 'Haier Group') has built 305 hope primary schools and 1 hope

middle school, covering 26 provinces, municipalities directly under the central government and

autonomous regions in China, and continuously provide the above-mentioned schools support in

materials and other respects in each year including the reporting period. These initiatives have

effectively enhanced the basic educational capabilities in poverty-stricken areas and improved the

quality of education.

2. Summary of targeted measures in poverty alleviation during the reporting period

√Applicable □Not Applicable

In the first half of 2019, the Company's expenditures on targeted measures in poverty alleviationwas approximately RMB3.08 million, which was mainly utilized in the education improvement, physicaland mental health development of adolescents and children and social welfare. At the same time, as partof its initiatives in response to the government and the performance of its social responsibilities, HaierGroup has also made investments in many aspects, such as poverty alleviation through agriculturaldevelopment, poverty alleviation through improvement of the health of farmers.

3. Results of targeted measures in poverty alleviation

√Applicable □Not Applicable

Unit and Currency: RMB0'000

Indicator Amount and the status

I. General information

Including:1.Fund 308

II. Breakdown of the use of funds

1.Poverty alleviation through education

1.1 Increase the amount of educational 102resources invested in poverty-stricken areas

2.Basic guarantees

2.1 Amount invested in helping poor people 35with disabilities

3.Poverty alleviation in the society

3.1 Charity funds for poverty alleviation 171Note: If the above donation occurs in foreign currency, the exchange rate is calculated based on theaverage middle RMB exchange rate in the inter-bank foreign exchange market on 28 June 2019 asannounced by the People's Bank of China.

53 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

4. Phased progress in performing social responsibilities of targeted poverty alleviation

√Applicable □Not Applicable

In addition to material input in adolescents' and children's education improvement, physical andmental health development, etc., the Company also explores feasible methods in agricultural povertyalleviation. For example, for rural entrepreneurs, Haier customizes skills improvement solutions forthem, such as Xiaoshun Business School jointly established by RRS Health and Haier University. Amulti-level training system has been developed by centering on rural talent revitalization strategy toenhance farmers' entrepreneurial skills. By providing local platforms and employment opportunities, wehave built a sound brain circulation ecological system that can 'cultivate and retain competent talents'. Inaddition, the Company has customized the entrepreneurial poverty alleviation model for the economic

conditions in different rural areas, with programs, platforms, networks and results made, and

practicability to follow. The national targeted poverty alleviation strategy is implemented to fully

advance rural poverty alleviation.

5. Subsequent targeted measures in poverty alleviation plans

√Applicable □Not Applicable

In the second half of the year, the Company will make concerted efforts with Haier Group andcontinue to implement the proposition of the documents issued by the central government in respect of

poverty alleviation, dedicate to improve the education in poverty-stricken areas, promote the

revitalization of rural talents and other initiatives, and will perform our social responsibilities in aproactive manner.

XIII. Convertible corporation bonds

√Applicable □Not Applicable

(I) Information on the issuance of convertible bonds

On 23 November 2017, the Proposal of the Plan of Public Offering of Convertible CorporateBonds of Qingdao Haier Co., Ltd. was passed at the 2017 First Extraordinary General Meeting of theCompany. In accordance with the resolutions passed at this general meeting and the documents approvedby China Securities Regulatory Commission, the Company has completed the issuance of convertiblecorporate bonds in December 2018, which issued convertible corporate bonds of RMB 3.00749 billionin total. Such bonds have been listed on 18 January 2019, with the listed name 'Haier Convertible Bonds'and the Bonds Code is 110049. For details, please refer to relevant documents, such as the Company'sProspectus on the Public Issuance of the A Share Convertible Corporate Bonds of Qingdao Haier Co.,Ltd. disclosed on 14 December 2018 and the Announcement on the Listing of the Convertible CorporateBonds of Qingdao Haier Co., Ltd. disclosed on 16 January 2019.

(II) Information on holders and guarantors of convertible bonds during the reporting period

Number of convertible bond holders at the end of the period 5,137

Guarantor of the convertible bonds of the Company Null

Top ten convertible bond holders are as below:

Name of convertible corporate bond holders Bonds held at Proportions

54 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

the (%)

end of the

period

(RMB)

Specific accounts for bonds repurchase and pledge under the registration 205,236,000 6.83

and settlement system (Industrial and Commercial Bank of China)

Specific accounts for bonds repurchase and pledge under the registration 165,770,000 5.51

and settlement system (China Construction Bank)

GIC PRIVATE LIMITED 129,872,000 4.32

Specific accounts for bonds repurchase and pledge under the registration 125,710,000 4.18

and settlement system (Bank of China)

Specific accounts for bonds repurchase and pledge under the registration

and settlement system (Shenwan Hongyuan 100,000,000 3.33

Securities Co., Ltd.)

Specific accounts for bonds repurchase and pledge under the registration 77,957,000 2.59

and settlement system (China Merchants Bank Co., Ltd.)

Specific accounts for bonds repurchase and pledge under the registration 68,483,000 2.28

and settlement system (China Minsheng Bank Corp., Ltd.)

Hall Capital Limited - Hall Capital China Value - added Funds 55,867,000 1.86

Ontario Pension Board - private capital 53,629,000 1.78

UBS AG 50,245,000 1.67

(III) Information on the change in convertible bonds during the reporting period

Unit and Currency: RMB

Name of Prior to the change Increase and decrease of the change After the change

convertible corporate bonds Conversion Redemption Back-sell

Haier Convertible Bonds 3,007,490,000 712,000 3,006,778,000

(IV) Information on the accumulated number of convertible bonds being converted into

shares during the reporting period

Amount of conversion during the reporting period 712,000

(RMB)

Converted shares during the reporting period (share) 48,856

Accumulated converted shares (share) 48,856

Proportion of accumulated converted shares to total 0.001

issued shares of the Company before conversion (%)

Amount of remaining convertible bonds not 3,006,778,000

converted (RMB)

Proportion of amount of remaining convertible bonds 99.976

to total issued convertible bonds (%)

(V) Information on the past adjustment of prices for conversion into shares

Unit and Currency: RMB

Conversion price as of the end of the reporting period 14.55

(VI) Information on the indebtedness, changes in creditability of the Company and the cash

arrangement for repayment of debts in the coming years

At the end of the reporting period, the Company's liabilities amounted to RMB123,078.3680million in total, including current liabilities of RMB91,483.3243 million and non-current liabilities ofRMB 31,595.0437 million.

Through the evaluation of the credit status of the Company and the public issuance of convertible

55 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

corporate bonds, United Credit Ratings Co., Ltd. determined the long-term credit rating of the Companyis AAA, the rating outlook is 'stable' and the bond credit rating is AAA.

The Company's operations in all aspects are stable, the asset structure is reasonable, and the creditstatus is good, thus being able to provide stable and sufficient working capital for the payment ofconvertible corporate bonds interest and repayment of principle in the future.

(VII) Explanation on other information regarding convertible bonds

No

XIV.Environmental Information

(I) 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

(II) Statement on environmental protection information of the companies not on the list of

critical pollutant dischargers

√Applicable □Not Applicable

Innovation drive and green development are the development goals of modern manufacturing. TheCompany continues to promote green development, actively promote green consumption, enhance the

application of energy-saving technologies, and integrate low carbon, cycling, energy saving and

emission reduction into all aspects of enterprise development. Besides, the Company also continues topromote technological innovation, research and develop the products integrating smart IoT and greendevelopment to strive to increase the green of products at full life span, extend the green supply chain,lead innovation, green, interaction and win-win of the industry, and contribute to the national greendevelopment.

All units of the Company perform the implementation and production of construction projectsaccording to the requirements of laws and regulations. We complete environmental impact evaluationprocedures in strict accordance with the Three Simultaneous system for environmental protection ofconstruction projects. They have been approved in the environmental impact assessment. There are noenvironmental violations such as construction without approval.

The Company has established Haier Smart Energy Center, an industry-leading energy big data

analysis system. It uses automation, information technology and centralized management mode to

implement centralized dynamic monitoring and digital management of main energy consumption such aswater, electricity and gas in all factories across the country; automatically and accurately collects energy

data, and completes the prediction and analysis of energy consumption data, optimizes energy

deployment and reduce the energy consumption of single product production, thus truly achievinglow-carbon production.

(III) Statement on reasons for non-disclosure of environmental information by the companies noton the list of critical pollutant dischargers

□Applicable √Not Applicable

56 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(IV) Statement on subsequent progress or changes in the environmental information disclosedduring the reporting period

√Applicable □Not Applicable

The Company will continue to maintain and keep optimizing existing results and allows

up-to-standard discharge in strict accordance with existing environmental discharge and emission

standards.

XV. Statement on Other Significant Events

(I) Comparing with the last accounting period, information and reasons for the changes in

accounting policies, accounting estimation and accounting method, and their impacts

□Applicable √Not Applicable

(II) Information, the corrected amount, reasons and impacts for retrospective restatement to

correct major accounting errors during the reporting period

□Applicable √Not Applicable

(III) Others

√Applicable □Not Applicable

Entrusted wealth management: By the end of the reporting period, the balance of the Company'sentrusted wealth management amounted to RMB6.291 billion, including two parts: (1) temporarily-idlefundraising wealth management: at the end of December 2018, the Company's proceeds for the

issuance of convertible corporate bonds were fully landed. In order to improve the yield of

temporarily-idle funds, the Company intended to carry out cash management with the amounts notexceed RMB1.5 billion after approved by the Board of Directors. By the end of the reporting period, thebalance of the entrusted wealth management amounted to RMB1.429 billion; (2) wealth management

of the Company's Hong Kong listed subsidiary: Haier Electronics Group Co., Ltd. (hereinafter

referred to as 'Haier Electronics', stock code: 01169.HK), the holding subsidiary of the Company, haspurchased some short-term principal-protected wealth management and structural deposits from thelarge commercial banks as an independently operating Hong Kong listed company in order to increasethe efficiency of the use of idle funds within the authorities of the management and on the premise ofsafeguarding funds security. In the purchase process, all the necessary board reports were subject to theprocedures such as filling and management' s review according to the regulations requirements for HongKong listed company, so as to ensure sufficient funds for the day-to-day operations of the main businessand improve the shareholders' returns. By the end of the reporting period, the balance of the entrustedwealth management amounted to RMB4.861billion.

57 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION VI CHANGES IN ORDINARY SHARES AND INFORMATION ABOUT SHAREHOLDERS

I. Changes in share capital

(I) Table of Changes in shares

1. Table of Changes in shares

Unit: share

Prior to the change Increase and decrease of the change (+,-) After the change

Percentage New shares Bonus Shares Percentage

Number (%) issued shares converted Others Sub-total Number (%)

from reserve

I. Shares with selling restrictions

1. Shares held by the state

2. Shares held by the state-owned

legal entities

3. Shares held by other domestic

investors

Including: shares held by domestic

non-state -owned legal entities

Shares held by domestic

individuals

4.Shares held by foreign investors

Including: shares held by foreign

legal entities

Shares held by foreign individuals

II. Tradable shares without selling 6,368,416,700 100.00 48,856 48,856 6,368,465,556 100.00

restrictions

1. RMB ordinary shares 6,097,402,727 95.74 48,856 48,856 6,097,451,583 95.74

2. Domestic listed foreign shares

3. Overseas listed foreign shares 271,013,973 4.26 271,013,973 4.26

4. Others

III. Total shares 6,368,416,700 100.00 48,856 48,856 6,368,465,556 100.00

58 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2. Statement on the changes in shares

√Applicable □Not Applicable

As approved by the Reply on Approving the Public Issuance of Convertible Corporate Bonds by Qingdao Haier Co., Ltd.(Zheng Jian Xu Ke [2018] No. 1912)issued by the China Securities Regulatory Commission (hereinafter referred to as the 'CSRC'), On 18 December 2018, the Company publicly issued 30,074,900convertible corporate bonds at a par value of RMB 100 each, and the total amount issued of RMB3,007,490,000 for a term of 6 years. With the approval from theShanghai Stock Exchange Self-regulation Decision [2019] No. 14, the convertible corporate bonds of RMB3,007,490,000 issued by the Company will be listed andtraded on Shanghai Stock Exchange on 18 January 2019. The bonds are referred to as 'Haier Convertible Bonds' and the bond code is '110049'.

According to the relevant requirements of Prospectus of Qingdao Haier Co., Ltd. on Public Issuance of A-share Convertible Bonds, Haier Convertible Bond bythe Company in this issuance can be converted into A-share of the Company since 25 June 2019, the conversion period commenced from 25 June 2019 to 17December 2024. By the end of the reporting period, the total number of convertible bonds is 48,856, and the share capital of the Company changed from6,368,416,700 shares to 6,368,465,556 shares. For details, please refer to the Announcement on Results of Conversion of Convertible Bonds and Changes in ShareCapital of Haier Smart Home Co., Ltd. (No.: L2019-051) disclosed on 3 July 2019.3. Effect of changes in shares on the financial indicators such as earnings per share and net assets per share (if any) after the reporting period to thedisclosure date of interim report

√Applicable □Not Applicable

As the Company's convertible bonds are still in the conversion period, the latest announcement (please refer to the Announcement on Results of Conversion ofConvertible Bonds and Changes in Share Capital of Haier Smart Home Co., Ltd. disclosed by the Company on 2 August 2019 for details) before the disclosure ofthis periodic report, a total of 8,976 shares were converted during July 2019, and the share capital of the Company changed from 6,368,465,556 share to6,368,474,532 share.

In the first half of 2019, the Company achieved net profit attributable to shareholders of the Parent Company of RMB5,150,869,558.02,equity attributable toowners of the Parent Company of RMB42,180,337,843.33, in terms of total share capital of 6,368,465,556 shares of the Company at the end of the reporting period,revenue was RMB0.809 per share and net asset was RMB6.623 per share accordingly; in terms of total share capital of 6,368,474,532 at the end of July 2019,

59 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

revenue was RMB0.809 per share and net asset was RMB6.623 per share accordingly.

4. Other disclosure deemed necessary by the Company or required by securities regulatory authorities

□Applicable √Not Applicable

(II) Changes in shares with selling restrictions

□Applicable √Not Applicable

II. Information on shareholders

(I) Total number of shareholders:

Total number of ordinary shareholders by the end of the reporting period 164,863

Total numbers of preferential shareholders with restoration of voting rights by the end of the Not applicable

reporting period

(II) Table of shareholdings of top ten shareholders, top ten shareholders of tradable shares (or shares without selling restrictions) by the end of the

reporting period

Unit: share

Shareholdings of top ten shareholders

Increase/ Number of Number of Status of

Name of shareholder (full decrease shares held Percentage shares held shares Nature

name) during the at the end of (%) with selling pledged of

reporting the period restrictions or frozen shareholder

period Status Number

Haier Electric Appliances 1,258,684,824 19.76 Nil Domestic

International Co., Ltd. non-state-owned

Haier Group Corporation 1,072,610,764 16.84 Nil legal entity

Hong Kong Securities 648,698,187 10.19 Unknown Foreign legal entity

Clearing Co., Ltd.

GIC PRIVATE LIMITED 202,726,380 3.18 Unknown Foreign legal entity

China Securities Finance 182,592,697 2.87 Unknown Unknown

Corporation Limited

60 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Qingdao Haier Venture & Domestic

Investment Information 172,252,560 2.70 Nil non-state-owned

Co., Ltd.(青岛海尔创业投 legal entity

资咨询有限公司)

CLEARSTREAM 90,924,856 1.43 Unknown Foreign legal entity

BANKING S.A. (note)

National social security 83,572,690 1.31 Unknown Unknown

fund, Portfolio 104

Bank of China Limited- E Unknown

Fund's small and 81,000,071 1.27 Unknown

medium-sized hybrid

securities investment funds

Qingdao Haichuangzhi Unknown

Management Consulting 73,011,000 1.15 Nil

Enterprise (Limited

Partnership)

Shareholdings of top ten shareholders without selling restrictions

Number of tradable Class and number of shares

Name of shareholder shares held without Class Number

selling restrictions

Haier Electric Appliances International Co., Ltd. 1,258,684,824 RMB ordinary 1,258,684,824

Haier Group Corporation 1,072,610,764 RMB ordinary 1,072,610,764

Hong Kong Securities Clearing Co., Ltd. 648,698,187 RMB ordinary 648,698,187

GIC PRIVATE LIMITED 202,726,380 RMB ordinary 202,726,380

China Securities Finance Corporation Limited 182,592,697 RMB ordinary 182,592,697

Qingdao Haier Venture & Investment

Information Co., Ltd.(青岛海尔创业投资咨询 172,252,560 RMB ordinary 172,252,560

有限公司)

Overseas listed

CLEARSTREAM BANKING S.A. (note) 90,924,856 foreign 90,924,856

shares

National social security fund, Portfolio 104 83,572,690 RMB ordinary 83,572,690

Bank of China Limited- E Fund's small and 81,000,071 RMB ordinary 81,000,071

medium-sized hybrid securities investment funds

61 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Qingdao Haichuangzhi Management Consulting 73,011,000 RMB ordinary 73,011,000

Enterprise (Limited Partnership)

(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 Information Co., Ltd.(青岛

Related-parties or parties acting in concert 海尔创业投资咨询有限公司) and Qingdao Haichuangzhi Management Consulting Enterprise (Limited

among the aforesaid shareholders Partnership) is a party acting in concert with Haier Group Corporation;

(2) The Company is not aware of the existence of any connections of

other shareholders.

Explanation of preferential shareholders with Not applicable

restoration of voting rights and their

shareholdings

Note: This account is the Deutsche Bank collection account for the Company's D shares, which is the original data provided by the Clearstream Bank CollectionAccount to the Company after the merger according to local market practices and technical settings, not representing the ultimate shareholder.Number of shares held by top ten shareholders with selling restrictions and the selling restrictions Applicable √Not Applicable

(III) Strategic investors or general legal persons who became the top ten shareholders due to placing of new shares Applicable √Not Applicable

III. Changes in controlling shareholder and the ultimate controller Applicable √Not Applicable

62 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION VII RELEVANT INFORMATION OF PREFERRED

SHARES

Applicable √Not Applicable

63 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION VIII DIRECTORS, SUPERVISORS, SENIOR

MANAGEMENT

I. Changes of Shareholding

(I) Changes of shareholding of current and retired directors, supervisors and senior managementduring the reporting period

√Applicable Not Applicable

Unit: share

Shareholdings Shareholdings Increase/

at at the end of decrease in Reason for

Name Title the beginning the shares during increase/

of period the reporting decrease

the period period

Liang Haishan Director 12,859,062 14,483,466 1,624,404

Tan Lixia Director 6,836,737 8,136,260 1,299,523 Employee

Li Huagang Director 482,214 653,306 171,092 shareholding

Wang Peihua Supervisor 91,213 144,764 53,551 plan vested

Ming Guoqing Supervisor 59,518 94,505 34,987

Gong Wei Senior 1,450,556 1,671,903 221,347

management

Ming Guozhen Senior 1,106,579 1,240,515 133,936

management

Other explanations

Applicable √Not Applicable

(II) Incentive share option granted to directors, supervisors and senior management during thereporting period

Applicable √Not Applicable

II. Changes in directors, supervisors and senior management of the Company

√Applicable Not Applicable

Name Position Changes

Peng Jianfeng Director Designation

Zhou Hongbo Director Designation

Liu Haifeng Director Designation

Wu Cheng Independent director Designation

Lin Sui Director Election

Yan Yan Director Election

Li Huagang Director Election

Qian Daqun Independent director Election

Liang Haishan General manager Designation

Li Huagang General manager Appointment

Explanations on the change in directors, supervisors and senior management of the Company

√ Applicable Not Applicable

During the reporting period, the Ninth session of Board of Directors and Board of Supervisors of theCompany expired. After the deliberation and approval of the Company's 2018 Annual General Meeting,elected new session (10th) of Board of Directors and Board of Supervisors and appointed a new seniormanagement of the Company.

64 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

III. Other explanations

Applicable √Not Applicable

65 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION IX RELEVANT INFORMATION OF CORPORATE BONDS

√ Applicable Not Applicable

I. Basic information of corporate bonds

Unit and Currency: RMB0'000

Method

Balance of Places of

Name of Short Code Issuing Date of of Interest capital transacti

bonds name date expiry bonds rate (%) repayme on

nt with

interest

Convertib Hair 11004 18 17 300,677. Interest On an Shanghai

le Convertib 9 Decemb Decemb 80 rates for annual Stock

Corporate le Bonds er 2018 er 2024 the first to basis Exchang

Bonds of sixth years e

Hair are 0.2,

Smart 0.5, 1.0,

Home 1.5, 1.8,

Co., Ltd and 2.0,

respectivel

y.

Interest payment for corporate bonds

Applicable √Not Applicable

The interest of convertible corporate bonds in this Issuance is paid on an annual basis, while theprincipal and the interest for the last year of convertible corporate bonds which do not convert to sharesshall be returned when expired. The interest payment day for each year is the date of first anniversary ofthis issuance of convertible corporate bonds. Based on the issuance date, the first interest payment day is

18 December 2019. As such, interest payment and repayment within the reporting period is not

applicable.

Other explanations of corporate bonds

Applicable √Not Applicable

II. Contact person and contact method of corporate bonds trustee manager and contact method ofcredit rating agency

Name United Credit Ratings Co., Ltd.

Bonds trustee manager Office address 12th Floor, PICC Office Tower, No.2 Jianguomen

Outer Street, Chaoyang District, Beijing, China

Other explanations:

Applicable √Not Applicable

III. Use of funds raised from corporate bonds

√ Applicable Not Applicable

The Company received net proceeds of RMB2,983,580,500 from the public issuance of convertiblecorporate bonds (the amount of proceeds of RMB3,007,490,000 net of sponsorship and underwritingfees paid) on 24 December 2018, out of which RMB1,336,148,100 has been used in the first half of

66 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2019. For details, please refer to the Specific Audit Report on the Deposit and Actual use of CapitalRaised in the first half of 2019 of Haier Smart Home Co., Ltd disclosed on the same day of this report.IV. Information of corporate bonds rating

√ Applicable Not Applicable

During the reporting period, the credit rating agency, United Credit Ratings Co., Ltd., of Convertible

Corporate Bonds of the Company in this issuance issued the Result Announcement of the 2019

Follow-up Rating on the Convertible Corporate Bonds of Qingdao Hair Co., Ltd., according to thisrating report, the main credit rating of the Company is AAA and the credit rating of convertiblecorporate bonds is AAA. During the period of convertible corporate bonds, the United Credit RatingsCo., Ltd. will perform regular follow-up rating on an annual basis.

V. Corporate bonds credit enhancement mechanism, solvency plan and others during the

reporting period

√ Applicable Not Applicable

The interest of convertible corporate bonds in this issuance is paid on an annual basis, while theprincipal and the interest for the last year of convertible corporate bonds which do not convert to sharesshall be returned when expired. The coupon rate of convertible corporate bonds in the issuance is: 0.20%for the first year, 0.50% for the second year, 1.00% for the third year, 1.50% for the fourth year, 1.80%for the fifth year and 2.00% for the sixth year.

VI. Meeting of corporate bondholders

√ Applicable Not Applicable

During the reporting period, the first bondholders' meeting in 2019 of the Company was convenedwith both on-site voting and network voting. The meeting was held on the afternoon of 29 May 2019 inroom A108, Haier University, Haier Information Park, No.1 Haier Road, Qingdao City, to review theProposal on Changing Part of the Investment Projects of Funds Raised from Convertible CorporateBonds of Qingdao Haier Co., Ltd. The total number of the convertible corporate bonds is 30,074,900(each with a nominal value of RMB100), and the total number of bondholders and entrusted proxiesattending this bondholders' meeting is 75, representing bonds outstanding for the current period shall be6,062,140 in aggregate, accounting for 20.16% of the aggregate number of the Company's convertible

corporate bonds. In addition, the supervisors, senior management and attorney appointed by the

Company attended this bondholders' meeting. The general meeting of shareholders was convened by theBoard of Directors of the Company, and the secretary of the Company's Board of Directors presidedover the meeting. The poll results of the above proposal in this meeting were: the number of affirmativevotes is 6,062,140, accounting for 100.00% of the aggregate number of valid voting bonds attending thisbondholders' meeting; the number of dissenting votes is 0, accounting for 0.00% of the aggregatenumber of valid voting bonds attending this bondholders' meeting; the number of abstaining votes is 0,

accounting for 0.00% of the aggregate number of valid voting bonds attending this bondholders'

67 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

meeting.

VII. Duty fulfillment of corporate bonds trustee manager

Applicable √Not Applicable

VIII. Accounting data and financial indicators as of the end of the reporting period and the end ofprevious year (or as of the reporting period and the corresponding period of previous year)

√ Applicable Not Applicable

Unit and Currency: RMB

Increase/decrease at

the end of the

Key indicators At the end of this At the end of the reporting period

reporting period previous year compared with the

end of the last year

(%)

Current ratio 1.08 1.14 -0.06

Quick ratio 0.81 0.86 -0.05

Gearing ratio (%) 67.95 67.86 0.12

Increase/decrease at

the end of the

The reporting The corresponding reporting period

period period of the compared with the

(January - June) previous year corresponding

period of last year

(%)

EBITDA 10,340,752,025.46 9,056,313,330.87 14.18

EBITDA interest coverage ratio 11.68 13.25 -1.57

Interest coverage ratio 9.20 11.00 -1.79

Note: The data involved in the balance sheet in the corresponding period of the previous year wasbased on the data without retrospective adjustment when calculating above indicators.IX. Notes to overdue debts

Applicable √Not Applicable

X. Interest payment of other bonds and debt financing instruments of the Company Applicable √Not Applicable

XI. Bank credit business of the Company during the reporting period√Applicable Not Applicable

During the reporting period, the Company had bank credit business amounted to RMB77,655.26million.

XII. Execution status of promises or commitments in prospectus of corporate bonds of the

Company during the reporting period

√ Applicable Not Applicable

68 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

During the reporting period, the Company signed a storage supervision agreement for raised fundsaccount with each of the project implementation entities, sponsor and banks to promote the use of raisedfunds in a compliance manner in accordance with the provisions of the prospectus.

XIII. Major events of the Company and its impact of major events on operating status and

solvency of the Company

Applicable √Not Applicable

69 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION X RESPONSIBLITY STATEMENT

“As the executive board of Qingdao Haier Co., Ltd, we hereby confirm to the best of ourknowledge, and in accordance with the applicable reporting principles, that the financialstatements give a true and fair view of the assets, liabilities, financial position and profit orloss of the company; and the management report includes a fair review of the developmentand performance of the business including the results and the position of the company,

together with a description of the principal opportunities and risks associated with the

expected development of the company.”

Qingdao, 29 April 2019

Qingdao Haier Co., Ltd

The Board of Management

Liang Haishan __________________

Tan Lixia ______________________

Li Huagang ____________________

Wu Changqi ___________________

Lin Sui _______________________

Yan Yan ______________________

70 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

SECTION XI FINANCIAL REPORT

I. Audit report

Applicable √Not Applicable

II. Financial statements

Consolidated Balance Sheet

30 June 2019

Prepared by: Haier Smart Home Co., Ltd.

Unit and Currency: RMB

Items Notes 30 June 2019 31 December 2018

Current assets:

Monetary funds VII. 1 33,735,043,658.23 37,456,355,407.28

Provision of settlement fund

Funds lent

Financial assets held for VII. 2 985,839,615.67 1,775,648,387.76

trading

Financial assets measured at

fair value and changes of

which included in current

profit and loss

Derivative financial assets VII. 3 70,865,506.67 96,723,164.37

Bills receivable VII. 4 14,526,971,971.94 14,220,937,323.02

Accounts receivable VII. 5 14,414,459,806.74 10,431,193,487.50

Financing receivables

Prepayments VII. 6 702,154,686.43 594,555,015.00

Premiums receivable

Reinsurance accounts

receivable

Reinsurance contract

reserves receivable

Other receivables VII. 7 2,255,319,756.61 1,626,975,864.98

Including: interest 298,632,646.33 228,701,210.90

receivables

Dividends receivables 99,275,355.94 4,524,472.84

Financial assets purchased

under resale agreements

Inventories VII. 8 23,867,526,314.79 22,377,191,121.53

Contract assets VII. 9 489,724,604.83 456,781,406.54

Assets held for sale VII. 10 126,669,725.09 144,091,213.39

Non-current assets due in

one year

Other current assets VII. 11 7,173,637,678.57 5,079,878,909.67

Total current assets 98,348,213,325.57 94,260,331,301.04

Non-current assets:

Loans and advances granted

Debt investments

Available-for-sale financial

assets

Other debt investments

Held-to-maturity

investments

71 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Long-term receivables 312,685,538.19 245,791,343.37

Long-term equity VII. 12 14,244,547,862.10 13,966,481,596.07

investments

Investments in other equity VII. 13 1,379,193,042.19 1,400,316,460.34

instruments

Other non-current financial VII. 14 328,487,584.54 327,358,825.57

assets

Investment properties VII. 15 29,978,648.23 30,879,147.42

Fixed assets VII. 16 18,815,614,587.35 17,319,638,881.37

Construction in progress VII. 17 5,195,727,696.62 3,873,492,230.24

Biological assets for

production

Oil and gas assets

Right-of-use assets VII. 18 3,286,464,710.49

Intangible assets VII. 19 11,317,290,593.27 9,209,242,721.71

Development cost VII. 20 663,309,436.00 538,382,288.33

Goodwill VII. 21 23,219,540,741.21 21,155,552,557.16

Long-term prepaid expenses VII. 22 267,669,407.03 230,763,172.48

Deferred income tax assets VII. 23 1,798,629,815.21 1,815,624,736.13

Other non-current assets VII. 24 1,934,031,299.40 2,325,688,982.56

Total non-current assets 82,793,170,961.83 72,439,212,942.75

Total assets 181,141,384,287.40 166,699,544,243.79Current liabilities:

Short-term borrowings VII. 25 8,108,137,605.85 6,298,504,892.57

Borrowings from central

bank

Funds borrowed

Financial liabilities held for VII. 26 7,055,018.07 218,748,280.33

trading

Financial liabilities

measured at fair value and

changes of which included in

current profit and loss

Derivative financial VII. 27 33,952,526.10 35,603,754.54

liabilities

Bills payable VII. 28 17,569,622,873.92 19,626,099,061.60

Accounts payables VII. 29 30,604,644,390.27 27,759,119,079.78

Receipts in advance VII. 30 14,681,466.58

Disposal of repurchased

financial assets

Absorbing deposit and

deposit in inter-bank market

Customer deposits for

trading in securities

Amounts due to issuer for

securities underwriting

Payables for staff's VII. 32 2,557,362,440.33 2,651,399,418.05

remuneration

Taxes payable VII. 33 1,951,932,360.24 1,838,440,727.39

Other payables VII. 34 16,413,360,559.11 12,685,677,402.91

Including:Interest payables 94,121,291.76 104,522,208.28

Dividends payables 2,914,608,547.77 162,205,193.05Fees and commissions

payable

72 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Reinsurance Accounts

payables

Contract liabilities VII. 31 3,899,786,072.98 5,482,325,888.59

Liabilities held for sale VII. 35 14,097,210.09 32,362,267.88

Non-current liabilities due VII. 36 9,876,686,810.40 3,015,060,105.58

within one year

Other current liabilities VII. 37 446,686,462.78 423,638,804.62

Total current liabilities 91,483,324,330.14 80,081,661,150.42

Non-current liabilities:

Deposits for insurance

contracts

Long-term borrowings VII. 38 12,260,679,425.08 15,541,466,325.22

Bonds payable VII. 39 9,353,004,100.04 9,191,896,302.70

Including: preference shares

perpetual bonds

Lease liabilities VII. 40 2,467,631,697.84

Long-term payables VII. 41 115,402,960.78 106,763,243.99

Long-term payables for VII. 42 1,033,636,909.72 934,974,735.49

staff’s remuneration

Estimated liabilities VII. 43 2,862,028,886.09 2,839,741,079.48

Deferred income VII. 44 664,747,867.34 643,551,987.30

Deferred income tax VII. 23 924,391,131.64 405,343,787.76

liabilities

Other non-current liabilities VII. 45 1,913,520,681.51 1,823,866,693.93

Total non-current 31,595,043,660.04 31,487,604,155.87

liabilities

Total liabilities 123,078,367,990.18 111,569,265,306.29Owners' equity (or

shareholders' equity):

Paid-in capital (or share VII. 46 6,368,465,556.00 6,368,416,700.00

capital)

Other equity instruments VII. 47 904,373,795.11 904,485,788.71

Including: preference shares

perpetual bonds

Capital reserve VII. 48 1,893,257,835.04 2,208,773,474.57

Less: treasury stock

Other comprehensive VII. 49 1,006,256,614.53 772,632,347.35

income

Special reserve

Surplus reserve VII. 50 2,288,301,317.10 2,288,301,317.10

General risk provisions

Undistributed profits VII. 51 29,719,682,725.55 26,859,741,163.95

Total equity attributable to

owners (or shareholders) of 42,180,337,843.33 39,402,350,791.68

the Parent Company

Minority shareholders' 15,882,678,453.89 15,727,928,145.82

interests

Total owners' equity (or 58,063,016,297.22 55,130,278,937.50

shareholders' equity)

Total liabilities and

owners' equity (or 181,141,384,287.40 166,699,544,243.79

shareholders' equity)

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

73 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Balance Sheet of the Parent Company

30 June 2019

Prepared by: Haier Smart Home Co., Ltd.

Unit and Currency: RMB

Items Notes 30 June 2019 31 December 2018

Current Assets:

Monetary funds 3,941,079,616.36 7,068,899,574.96

Financial assets held for

trading

Financial assets measured at

fair value and changes of

which included in current

profit and loss

Derivative financial assets

Bills receivable

Accounts receivable XVIII.1 214,400,331.67 222,622,017.43

Financing receivables

Prepayments 12,994,199.46 28,809,797.43

Other receivables XVIII.2 1,872,471,875.28 2,082,767,166.58

Including: interest 10,294,498.12 6,292,538.22

receivables

dividends 867,586,570.57 1,912,418,382.82receivables

Inventories 33,875,920.57 124,773,163.23

Contract assets

Assets held for sale

Non-current assets due

within one year

Other current assets 1,727,226,417.60 109,865,313.53

Total current assets 7,802,048,360.94 9,637,737,033.16

Non-current assets:

Debt investments

Available-for-sale financial

assets

Other debt investments

Held-to-maturity

investments

Long-term receivables

Long-term equity XVIII.3 34,605,975,384.56 33,844,234,315.30

investments

Investments in other equity 5,341,590.84 5,262,480.92

instruments

Other non-current financial

assets

Investment properties

Fixed assets 117,280,845.74 119,546,157.40

Construction in progress 52,398,316.91 37,655,076.18

Biological assets for

production

Oil and gas assets

Right-of-use assets

Intangible assets 16,417,575.24 17,186,540.33

74 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Development cost

Goodwill

Long-term prepaid expenses 6,176,952.97 5,779,229.64

Deferred income tax assets 81,511,748.07 81,511,748.07

Other non-current assets 28,632,829.14

Total non-current assets 34,885,102,414.33 34,139,808,376.98

Total assets 42,687,150,775.27 43,777,545,410.14Current liabilities:

Short-term borrowings 1,500,000,000.00

Financial liabilities held for

trading

Financial liabilities

measured at fair value and

changes of which included in

current profit and loss

Derivative financial

liabilities

Bills payable 199,892,131.66 334,747,358.40

Accounts payables

Receipts in advance

Contract liabilities 2,742,714,213.01 2,391,211,509.89

Payables for staff's 37,317,709.99 65,387,056.03

remuneration

Taxes payable 8,644,652.08 67,279,606.39

Other payables 24,112,050,515.96 21,834,869,774.34

Including: interest payable

dividends payable

Liabilities held for sale

Non-current liabilities due

within one year

Other current liabilities 2,383,520.12 2,089,282.56

Total current liabilities 27,103,002,742.82 26,195,584,587.61

Non-current liabilities:

Long-term borrowings

Bonds payable 2,560,865,849.82 2,510,530,062.86

Including: preference shares

perpetual bonds

Lease liabilities

Long-term payable 20,000,000.00 20,000,000.00

Long-term payables for

staff's remuneration

Estimated liabilities

Deferred income 37,820,000.00 67,360,000.00

Deferred income tax 31,576,433.87 29,485,678.28

liabilities

Other non-current liabilities

Total non-current liabilities 2,650,262,283.69 2,627,375,741.14

Total liabilities 29,753,265,026.51 28,822,960,328.75

Owners' equity (or

Shareholders' equity):

Paid-in capital (or share 6,368,465,556.00 6,368,416,700.00

capital)

Other equity instruments 472,949,271.04 473,061,264.64

Including: preference shares

75 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

perpetual bonds

Capital reserve 4,172,180,788.45 4,182,825,672.98

Less: treasury stock

Other comprehensive 7,040,098.10 7,791,344.47

income

Special reserve

Surplus reserve 1,683,155,091.65 1,683,155,091.65

Undistributed profits 230,094,943.52 2,239,335,007.65

Total owners' equity (or 12,933,885,748.76 14,954,585,081.39shareholders' equity)

Total liabilities and owners’ 42,687,150,775.27 43,777,545,410.14

equity (or shareholders' equity)

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

Consolidated Profit Statement

January-June 2019

Unit and Currency: RMB

Items Notes 2019 Interim 2018 Interim

Ⅰ.Total operating revenue VII. 52 98,979,793,121.16 90,488,122,206.31

Including: Operating revenue VII. 52 98,979,793,121.16 90,488,122,206.31

Interest income

Insurance premiums earned

Fee and commission income

Ⅱ. Total cost of operations 92,948,216,240.14 84,761,087,439.43

Including: Operating cost VII. 52 70,174,853,958.91 64,057,950,024.03

Interest expenses

Fee and commission expenses

Insurance withdrawal

payment

Net payment from indemnity

Net provisions withdrew for

insurance contract

Insurance policy dividend

paid

Reinsurance cost

Taxes and surcharges VII. 53 400,930,500.65 407,977,441.52

Selling expenses VII. 54 14,596,335,114.01 13,522,931,745.64

Administrative expenses VII. 55 4,525,786,069.23 4,033,672,258.19

R&D expenses VII. 56 2,741,563,815.81 2,252,630,555.38

Financial expenses VII. 57 508,746,781.53 485,925,414.67

Including: interest expenses 885,683,954.28 683,665,504.25

interest income 253,967,290.82 234,458,811.03

Add: other income VII. 58 472,741,856.55 224,292,412.02

investment income (losses are VII. 59 756,051,437.45 867,458,988.96

represented by '-')

Including: investment income

of associates and joint ventures

Income generated from the

derecognition of financial assets

measured at amortized cost (losses

76 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

are represented by '-')

Exchange gain (losses are

represented by '-')

Gains on net exposure hedges

(losses are represented by '-')

Income from change in fair VII. 60 57,409,956.80 36,661,921.50value (losses are represented by '-')

Loss on credit impairment VII. 61 37,775,605.39 40,539,282.27(losses are represented by '-')

Loss on assets impairment VII. 62 -257,747,905.20 -235,903,037.58(losses are represented by '-')

Gain from disposal of assets VII. 63 12,706,682.87 5,505,487.90(losses are represented by '-')

Ⅲ. Operating profit (losses are 7,110,514,514.88 6,665,589,821.95

represented by '-')

Add: non-operating income VII. 64 269,598,148.82 218,274,778.87

Less: non-operating expenses VII. 65 114,206,707.92 49,404,445.69

Ⅳ. Total profit (total losses are 7,265,905,955.78 6,834,460,155.13

represented by '-')

Less: income tax expense VII.66 1,034,920,088.61 966,779,446.64

Ⅴ .Net profit (net losses are 6,230,985,867.17 5,867,680,708.49

represented by '-')

(I) Classification by continuous

operation

1.Net profit from continuous

operation (net losses are represented 6,230,985,867.17 5,867,680,708.49

by '-')

2. Net profit from discontinued

operation (net losses are represented

by '-')

(II) Classification by ownership of

the equity

1. Net profit attributable to

shareholders of the Parent 5,150,869,558.02 4,787,943,825.16Company (net losses are represented

by '-')

2. Profit or loss attributable to

minority shareholders (net losses are 1,080,116,309.15 1,079,736,883.33

represented by '-')

VI. Other comprehensive income, net VII.67 206,080,907.09 427,574,646.00

of tax

Other comprehensive income

attributable to owners of the Parent 233,624,267.18 303,484,612.59

Company, net of tax

(I) Other comprehensive income

that cannot be reclassified into the -12,242,959.12 40,631,005.91

profit or loss

1.Changes arising from

re-measurement of defined benefit -400,317.18 -6,952,267.73

plans

2. Other comprehensive

income that cannot be transferred into

profit or loss under equity method

3. Changes in fair value of -11,842,641.94 47,583,273.64investments in other equity

77 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

instruments

4. Changes in fair value of

credit risks of the enterprise

(II) Other comprehensive

income to be reclassified into the 245,867,226.30 262,853,606.68

profit or loss

1. Other comprehensive

income that can be transferred into 19,829,612.65 86,716,737.89

profit or loss under equity method

2. Changes in fair value of

other debt investments

3. Profit or loss from changes

in fair value of available-for-sale

financial assets

4. Reclassified financial assets

that are credited to other

comprehensive income

5. Profit or loss arising from

reclassification from held-to-maturity

investments to available-for-sale

financial assets

6. Credit impairment

provision for other debt investments

7. Reserve for cash flow

hedging (effective portion of profit or -25,398,943.78 46,856,355.86

loss arising from cash flow hedging)

8. Exchange differences on

translation of financial statements 251,436,557.43 129,280,512.93

denominated in foreign currencies

9. Others

Other comprehensive income

attributable to minority shareholders, -27,543,360.09 124,090,033.41

net of tax

Ⅶ. Total comprehensive income 6,437,066,774.26 6,295,255,354.49

Total comprehensive income

attributable to the owners of Parent 5,384,493,825.20 5,091,428,437.75

Company

Total comprehensive income

attributable to the minority 1,052,572,949.06 1,203,826,916.74

shareholders

Ⅷ . Earnings per share:

(I) Basic earnings per share XIX.1 0.809 0.785

(RMB/share)

(II) Diluted earnings per share XIX.1 0.778 0.785

(RMB/share)

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

Profit Statement of the Parent Company

January-June 2019

Unit and Currency: RMB

Items Notes 2019 Interim 2018 Interim

I. Operating income XVIII.4 1,330,869,374.63 1,624,154,028.46

78 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Less: operating cost XVIII.4 950,382,533.32 1,120,062,552.26

Taxes and surcharges 8,794,240.92 9,974,166.62

Selling expenses 126,957,909.17 125,040,887.94

Administration expenses 141,039,328.01 185,304,148.28

R&D expenses 101,983,328.38 102,396,455.62

Financial expenses 99,436,940.80 61,816,257.99

Including: interest expenses 113,544,460.15 130,109,539.14

Interest income 17,707,954.88 72,983,634.41

Add: other income 52,472,509.25 9,510,192.91

investment income (losses are XVIII.5 245,568,113.58 219,520,069.85represented by '-')

Including: investment income

of associates and joint ventures

Derecognition income

on financial assets measured at

amortized cost (losses are represented

by '-')

Gains on net exposure hedges

(losses are represented by '-')

Income from change in fair

value (losses are represented by '-')

Loss on credit impairment 987,137.94 -96,210,989.68(losses are represented by '-')

Loss on assets impairment

(losses are represented by '-')

Gain from disposal of assets 51,118.46(losses are represented by '-')

II. Operating profit (losses are 201,353,973.26 152,378,832.83

represented by '-')

Add: non-operating income 9,412,803.30 27,747,401.83

Less: non-operating expenses 1,963,024.43 253,114.54

III. Total profit (total losses are 208,803,752.13 179,873,120.12

represented by '-')

Less: income tax expenses -17,287,593.90 -3,481,743.97

IV. Net profit (net losses are 226,091,346.03 183,354,864.09

represented by '-')

(I) Net profit from

continuous operations (net 226,091,346.03 183,354,864.09

losses are represented by

'-')

(II) Net profit from

discontinued operations

(net losses are represented

by '-')

V. Other comprehensive income, net -751,246.37 14,666,831.86

of tax

(I) Other comprehensive income

that cannot be reclassified into the 67,243.43 -450,286.03

profit or loss

1. Changes arising from

re-measurement of defined benefit

plans

2. Other comprehensive income

that cannot be transferred into profit

or loss under equity method

3. Changes in fair value of 67,243.43 -450,286.03

79 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

investments in other equity

instruments

4.Changes in fair value of credit

risks of the enterprise

(II) Other comprehensive

income to be reclassified into the -818,489.80 15,117,117.89

profit or loss

1. Other comprehensive income

that can be transferred into profit or -818,489.80 15,117,117.89

loss under equity method

2. Changes in fair value of other

debt investments

3. Profit or loss from changes in

fair value of available-for-sale

financial assets

4. Reclassified financial assets

that are credited to other

comprehensive income

5. Profit or loss arising from

reclassification from held-to-maturity

investments to available-for-sale

financial assets

6. Credit impairment provision

for other debt investments

7. Reserve for cash flow hedging

(effective portion of profit or loss

arising from cash flow hedging)

8. Exchange differences on

translation of financial statements

denominated in foreign currencies

9. Others

VI. Total comprehensive income 225,340,099.66 198,021,695.95

VII. Earnings per share:

(I) Basic earnings per share

(RMB/share)

(II) Diluted earnings per share

(RMB/share)

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

Consolidated Cash Flow Statement

January-June 2019

Unit and Currency: RMB

Items Notes 2019 Interim 2018 Interim

I. Cash flow from operating

activities:

Cash received from the sale of 96,268,046,242.21 90,665,692,910.26goods and rendering services

Net increase in customer and

inter-bank deposits

Net increase in borrowing

from the central bank

80 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Net cash increase in borrowing

from other financial institutes

Cash received from premiums

under original insurance contract

Net cash received from

reinsurance business

Net increase in deposits of

policy holders and investment

Cash received from interest,

fee and commissions

Net increase in cash borrowed

Net increase in cash received

from repurchase operation

Net cash received from

customer deposits for trading in

securities

Refunds of taxes 637,995,666.18 512,976,383.30

Cash received from other VII. 68 620,411,241.60 581,816,437.80related operating activities

Sub-total of cash inflows 97,526,453,149.99 91,760,485,731.36from operating activities

Cash paid on purchase of 69,957,474,883.31 63,905,630,870.53goods and services

Net increase in loans and

advances of customers

Net increase in deposits in the

PBOC and inter-bank

Cash paid for compensation

payments under original

insurance contact

Net increase in financial assets

held for trading purpose

Net increase in cash lent

Cash paid for interest, bank

charges and commissions

Cash paid for insurance policy

dividend

Cash paid to and on behalf of 10,761,490,344.11 9,873,261,910.82employees

Cash paid for all types of taxes 4,817,228,531.91 4,619,636,289.85

Cash paid to other operation VII. 69 8,356,425,892.92 7,763,481,667.92related activities

Sub-total of cash outflows 93,892,619,652.25 86,162,010,739.12from operating activities

Net cash flow from VII. 74 3,633,833,497.74 5,598,474,992.24operating activities

II. Cash flow from investing

activities:

Cash received from recovery 181,007,285.39 12,805,650.00of investments

Cash received from return on 234,041,242.12 243,774,322.52investments

Net cash received from the

disposal of fixed assets, 200,884,406.40 66,472,237.59

intangible assets and other

long-term assets

81 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Net cash received from

disposal of subsidiaries and other

operating entities

Other cash received from VII. 70 43,202,970.66 102,448,074.88

investment activities

Sub-total of cash inflows 659,135,904.57 425,500,284.99from investing activities

Cash paid on purchase of fixed

assets, intangible assets and other 3,585,721,702.92 2,911,363,874.16

long-term assets

Cash paid for investments 2,171,352,767.10 469,241,640.23

Net increase in secured loans

Net cash paid on acquisition of

subsidiaries and other operating 2,642,578,338.00

entities

Other cash paid on investment VII. 71 10,351,066.54 35,058,267.49

activities

Sub-total of cash outflows 8,410,003,874.56 3,415,663,781.88from investing activities

Net cash flow from -7,750,867,969.99 -2,990,163,496.89investing activities

III. Cash flow from financing

activities:

Cash received from capital 13,662,307.27 80,422,640.20

contributions

Including: cash received from

capital contributions by minority

shareholders of subsidiaries

Cash received from 9,175,976,703.38 4,509,988,283.98

borrowings

Cash received from issuing

bonds

Other cash received from

financing activities

Sub-total of cash inflows 9,189,639,010.65 4,590,410,924.18from financing activities

Cash paid on repayment of 6,680,842,142.48 6,532,600,142.68

loans

Cash paid on distribution of

dividends, profits or repayment 223,973,410.36 2,228,750,068.56

of interest expenses

Including: dividend and profit

paid to minority shareholders by

subsidiaries

Other cash paid to financing VII. 72 1,380,412,527.51 509,087,122.08

activities

Sub-total of cash outflows 8,285,228,080.35 9,270,437,333.32from financing activities

Net cash flow from 904,410,930.30 -4,680,026,409.14financing activities

IV. Effect of fluctuations in

exchange rates on cash and 115,212,720.27 34,040,308.53

cash equivalents

V. Net increase in cash and cash -3,097,410,821.68 -2,037,674,605.26

equivalents

Add: balance of cash and cash VII. 74 36,044,777,414.04 34,861,909,595.62

82 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

equivalents at the beginning of

the period

VI. Balance of cash and cash VII. 74

equivalents at the end of the 32,947,366,592.36 32,824,234,990.36

period

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

Cash Flow Statement of the Parent Company

January-June 2019

Unit and Currency: RMB

Items Notes 2019 Interim 2018 Interim

I. Cash flow from operating

activities:

Cash received from the sale of 918,342,631.75 1,026,490,616.31goods and rendering of services

Refunds of taxes 25,567,202.83 11,759,645.04

Other cash received from 110,143,217.54 150,663,743.56operating activities

Sub-total of cash inflows 1,054,053,052.12 1,188,914,004.91from operating activities

Cash paid on purchase of 189,337,944.61 334,977,272.61goods and services

Cash paid to and on behalf of 567,010,992.25 519,466,890.74employees

Cash paid for all types of 95,735,060.62 114,511,009.96taxes

Other cash paid to operation 93,648,702.91 213,818,898.29activities

Sub-total of cash outflows 945,732,700.39 1,182,774,071.60from operating activities

Net cash flow from operating 108,320,351.73 6,139,933.31activities

II. Cash flow from investing

activities:

Cash received from recovery 78,325.00of investments

Cash received from return on 1,233,656,109.64 1,053,181,844.07investments

Net cash received from the

disposal of fixed assets,

intangible assets and other

long-term assets

Net cash received from

disposal of subsidiaries and

other operating entities

Other cash received from 136,551,000.00investment activities

Sub-total of cash inflows 1,370,207,109.64 1,053,260,169.07from investing activities

Cash paid on purchase of

fixed assets, intangible assets 25,031,303.67 14,341,911.75

and other long-term assets

83 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Cash paid for investments 2,201,212,503.09 65,722,235.00

Net cash paid on acquisition

of subsidiaries and other

operating entities

Other cash paid on investment 183,351,121.00activities

Sub-total of cash outflows 2,409,594,927.76 80,064,146.75from investing activities

Net cash flow from -1,039,387,818.12 973,196,022.32investing activities

III. Cash flow from financing

activities:

Cash received from capital

injections

Cash received from 1,500,000,000.00borrowings

Cash received from issuing

bonds

Other cash received from

financing activities

Sub-total of cash inflows 1,500,000,000.00from financing activities

Cash paid on repayment of 1,500,000,000.00borrowings

Cash paid on distribution of

dividends, profits or repayment 27,105,937.50 2,089,308,295.14

of interest expenses

Other cash paid on financing 669,109,443.77 674,762,474.59activities

Sub-total of cash outflows 2,196,215,381.27 2,764,070,769.73from financing activities

Net cash flow from -2,196,215,381.27 -1,264,070,769.73financing activities

IV. Effect of fluctuations in

exchange rates on cash and -537,110.94 577.54

cash equivalents

V. Net increase in cash and -3,127,819,958.60 -284,734,236.56

cash equivalents

Add: balance of cash and cash

equivalents at the beginning of 7,068,899,574.96 2,070,527,802.97

the period

VI. Balance of cash and cash

equivalents at the end of the 3,941,079,616.36 1,785,793,566.41

period

Legal representative: Liang Haishan

Person in charge of accounting function: Gong Wei

Person in charge of accounting department: Ying Ke

84 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Consolidated Statement of Changes in Owner's Equity

January-June 2019

Unit and Currency: RMB

2019 Interim

Equity attributable to owners of the Parent Company

Items Paid-in Other equity Less: Other Spec Gener Minority Total

instruments al Undistribu equity owners'

capital prefere perpet Capital treas comprehe ial Surplus risk ted Oth Sub-total equity

(or share reserve ury nsive reser reserve provis profits ers

capital) nce ual Others stock income ve

shares bonds ion

I. Closing

balance for 6,368,416,700 904,485,788. 2,208,773,474. 772,632,347.3 2,288,301,317 26,859,741,16 39,402,350,791 15,727,928,14 55,130,278,93

the previous .00 71 57 5 .10 3.95 .68 5.82 7.50

year

Add:

changes in

accounting

policies

Error

correction

for prior

period

Busine

ss

combination

under

common

control

Others

II. Opening

balance for 6,368,416,700 904,485,788. 2,208,773,474. 772,632,347.3 2,288,301,317 26,859,741,16 39,402,350,791 15,727,928,14 55,130,278,93

the current .00 71 57 5 .10 3.95 .68 5.82 7.50

year

III.

Increase/dec 48,856.00 -111,993.60 -315,515,639.5 233,624,267.1 2,859,941,561. 2,777,987,051. 154,750,308. 2,932,737,35

rease for the 3 8 60 65 07 9.72

current

85 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

period

(decrease is

represented

by '-')

(I) Total 233,624,267.1 5,150,869,55 5,384,493,825. 1,052,572,94 6,437,066,77

comprehensi 8 8.02 20 9.06 4.26

ve income

(II) Capital

injection -315,515,639.5 -315,578,77 -349,305,402 -664,884,179

and 48,856.00 -111,993.60 3 7.13 .58 .71

reduction by

owners

1. Ordinary

shares 48,856.00 -111,993. -226,635,104.8 -226,698,24 -349,305,402 -576,003,645

invested by 60 7 2.47 .58 .05

owners

2. Capital

contribution

by holders

of other

equity

instruments

3.

Share-based

payment

included in

owners'

equity

4. Others -88,880,534 -88,880,534 -88,880,534.

.66 .66 66

(III) Profit -2,235,331,4 -2,235,331,410. -534,534,085 -2,769,865,4

distribution 10.16 16 .77 95.93

1.

Withdrawal

of surplus

reserves

2. Withdr

awal of

provisions

for general

risks

86 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

3.

Distribution

to owners -2,235,331,4 -2,235,331,410. -534,534,085 -2,769,865,4

(or 10.16 16 .77 95.93

shareholders

)

4. Others

(IV) Internal

transfer of

owner's

equity

1. Transfer

of capital

reserves into

capital (or

share

capital)

2. Transfer

of surplus

reserves into

capital (or

share

capital)

3. Surplus

reserves

used for

remedying

loss

4. Changes

in defined

benefit

plans

carried

forward to

retained

earnings

5. Other

comprehensi

ve income

carried

forward to

87 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

retained

earnings

6. Others

(V) Special

reserve

1 . Withdra

wal for the

period

2.

Utilization

for the

period

(VI) Others -55,596,586. -55,596,586 -13,983,152. -69,579,738.

26 .26 64 90

Ⅳ. Closing 6,368,465,556 904,373,795. 1,893,257,8 1,006,256,614.5 2,288,301,3 29,719,682,7 42,180,337,843 15,882,678,4 58,063,016,2

balance for .00 11 35.04 3 17.10 25.55 .33 53.89 97.22

the period

2018 Interim

Equity attributable to owners of the Parent Company

Items Paid-in Other equity Capital Less: Other Spec Gener Minority Total

capital (or instruments reserve treas comprehe ial Surplus al Undistribu Oth equity owners'

Prefere Perpet risk ted ers Sub-total equity

share nce ual Others ury nsive reser reserve provis profits

capital) shares bonds stock income ve ion

I. Closing

balance for 6,097,402,72 431,424,52 826,883,093. -36,363,809. 2,103,057,78 22,793,110,8 32,215,515,2 14,534,490,9 46,750,006,13

the previous 7.00 4.07 84 96 2.41 84.09 01.45 35.91 7.36

year

Add:

changes in

accounting

policies

Error

correction

for prior

period

Busine 1,485,439,17 40,787,834.8 -442,158,653. 1,084,068,35 15,129,617.7 1,099,197,971

88 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

ss 3.24 6 92 4.18 5 .93

combination

under

common

control

Others

II. Opening

balance for 6,097,402,72 431,424,52 2,312,322,26 4,424,024.90 2,103,057,78 22,350,952,2 33,299,583,5 14,549,620,5 47,849,204,10

the current 7.00 4.07 7.08 2.41 30.17 55.63 53.66 9.29

year

III.

Increase/dec

rease for the

current 47,000,347.5 343,712,723. 2,627,214,21 3,017,927,28 805,541,960. 3,823,469,24

period 9 18 7.63 8.40 07 8.47

(decrease is

represented

by '-')

(I) Total 303,484,612. 4,787,943,82 5,091,428,43 1,203,826,91 6,295,255,35

comprehens 59 5.16 7.75 6.74 4.49

ive income

(II) Capital

contribution 47,000,347.5 46,995,957.6 50,277,418.4

and 9 -4,389.96 3 3,281,460.84 7

withdrawal

by owners

1. Ordinary

shares 3,281,460.84 3,281,460.84

invested by

owners

2. Capital

contribution

by holders

of other

equity

instruments

3.

Share-based

payment

included in

owners'

89 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

equity

4. Others 47,000,347.5 -4,389.96 46,995,957.6 46,995,957.6

9 3 3

(III) Profit -2,085,311,73 -2,085,311,73 -401,292,446. -2,486,604,1

distribution 2.63 2.63 68 79.31

1.

Withdrawal

of surplus

reserves

2. Withdr

awal of

provisions

for general

risks

3.

Distribution

to owners -2,085,311,73 -2,085,311,73 -401,292,446. -2,486,604,1

(or 2.63 2.63 68 79.31

shareholder

s)

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

90 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

remedying

loss

4. Changes

in defined

benefit

plans

carried

forward to

retained

earnings

5.Other

comprehens

ive income

carried

forward to

retained

earnings

6. Others

(V) Special

reserve

1 . Withdra

wal for the

period

2.

Utilization

for the

period

(VI) Others 40,232,500.5 -75,417,874.9 -35,185,374.3 -273,970.83 -35,459,345.

5 0 5 18

Ⅳ. Closing 6,097,402,72 431,424,52 2,359,322,61 348,136,748. 2,103,057,78 24,978,166,4 36,317,510,8 15,355,162,5 51,672,673,35

balance for 7.00 4.07 4.67 08 2.41 47.80 44.03 13.73 7.76

the period

Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke

91 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Statement of Changes in Owners' Equity of the Parent Company

January-June 2019

Unit and Currency: RMB

2019 Interim

Paid-in capital Other equity Capital Less: Other Specia Total

Items (or share instruments reserve treasur comprehensiv l Surplus Undistributed owners'

capital) Preferenc Perpetua Others y e reserv reserve profits equity

e shares l bonds stock income e

Ⅰ . Closing 6,368,416,700.0 473,061,264.6 4,182,825,672.9 1,683,155,091.6

balance for the 0 4 8 7,791,344.47 5 2,239,335,007.65 14,954,585,081.39

previous year

Add: changes

in accounting

policies

Error

correction for

prior

period

Others

Ⅱ . Opening 6,368,416,700.0 473,061,264.6 4,182,825,672.9 1,683,155,091.6

balance for the 0 4 8 7,791,344.47 5 2,239,335,007.65 14,954,585,081.39

current year

III.

Increase/decreas

e for the current 48,856.00 -111,993.60 -10,644,884.53 -751,246.37 -2,009,240,064.1 -2,020,699,332.63

period (decrease 3

is represented

by '-')

(I) Total

comprehensive -751,246.37 226,091,346.03 225,340,099.66

income

(II) Capital

injection and 48,856.00 -111,993.60 22,728,113.53 22,664,975.93

reduction by

owners

1. Ordinary

shares invested 48,856.00 -111,993.60 669,546.35 606,408.75

by owners

2. Capital

92 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

contribution by

holders of other

equity

instruments

3. Share-based

payment

included in

owners' equity

4. Others 22,058,567.18 22,058,567.18

(III) Profit -2,235,331,410.1 -2,235,331,410.1

distribution 6 6

1. Withdrawal

of surplus

reserves

2 . Distribution -2,235,331,410.1 -2,235,331,410.1

to owners (or 6 6

shareholders)

3.Others

(IV) Internal

transfer of

owner's equity

1. Transfer of

capital reserves

into capital (or

share capital)

2. Transfer of

surplus reserves

into capital (or

share capital)

3. Surplus

reserves used

for remedying

loss

4. Changes in

defined benefit

plans carried

forward to

retained

earnings

5. Other

comprehensive

93 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

income carried

forward to

retained

earnings

6. Others

(V) Special

reserve

1 . Withdrawal

for the period

2. Utilization for

the period

(VI) Others -33,372,998.06 -33,372,998.06

Ⅳ . Closing 6,368,465,556.0 472,949,271.0 4,172,180,788.4 1,683,155,091.6 230,094,943.5

balance for the 0 4 5 7,040,098.10 5 2 12,933,885,748.76

period

2018 Interim

Other equity Capital Less: Other Total

Items Paid-in capital instruments reserve treasury comprehensive Special Surplus Undistributed owners'

(or share capital) Preference Perpetual Others reserve reserve profits equity

shares bonds stock income

Ⅰ . Closing

balance for the 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

previous year

Add: changes

in accounting

policies

Error

correction for

prior

period

Others

Ⅱ . Opening

balance for the 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

current year

III.

Increase/decrease 253,883.52 29,755,847.62 -1,930,274,897.33 -1,900,265,166.19

for the

94 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

current period

(decrease is

represented by

'-')

(I) Total

comprehensive 14,666,831.86 183,354,864.09 198,021,695.95

income

(II) Capital

injection and 253,883.52 253,883.52

reduction by

owners

1. Ordinary

shares invested

by owners

2. Capital

contribution by

holders of other

equity

instruments

3. Share-based

payment

included in

owners' equity

4. Others 253,883.52 253,883.52

(III) Profit -2,085,311,732.63 -2,085,311,732.63

distribution

1. Withdrawal of

surplus reserves

2.Distribution to

owners (or -2,085,311,732.63 -2,085,311,732.63

shareholders)

3.Others

(IV) Internal

transfer of

owner's equity

1. Transfer of

capital reserves

into capital (or

share capital)

2. Transfer of

95 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

surplus reserves

into capital (or

share capital)

3. Surplus

reserves used for

remedying loss

4. Changes in

defined benefit

plans carried

forward to

retained earnings

5. Other

comprehensive

income carried

forward to

retained earnings

6. Others

(V) Special

reserve

1 . Withdrawal

for the period

2. Utilization for

the period

(VI) Others 15,089,015.76 -28,318,028.79 -13,229,013.03

Ⅳ . Closing

balance for the 6,097,402,727.00 2,318,161,831.23 -13,478,890.15 1,437,313,649.93 198,227,431.43 10,037,626,749.44

period

Legal representative: Liang Haishan Person in charge of accounting function: Gong Wei Person in charge of accounting department: Ying Ke

96 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

III. General Information of the Company

1. Overview of the Company

√Applicable □Not Applicable

The predecessor of Haier Smart Home Co., Ltd. (herein after referred to as the Company) wasQingdao Refrigerator Factory, which was established in 1984. As permitted to offering by People's Bankof China, Qingdao Branch on 16 December 1989, and 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, asapproved by the document of Qing Gu Ling Zi [1993] No. 2 and No. 9 issued by the pilot leading teamof Qingdao joint stock company, the Company was converted from a directional offering company to apublic subscription company and issued additional 50 million shares to the public and listed with tradingon 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 headquarter is located at the Haier Industrial Park of LaoshanDistrict, Qingdao, Shandong Province.

The Company is mainly engaged in manufacturing and trading as well as R&D of refrigerator,air-conditioner, freezer, washing machine, water heater, dishwashers, gas stove and relevant productsand commercial circulation business.

The ultimate holding company of the Company is Haier Group Corporation ('Haier Corp').These financial statements have been approved for publication by the Board of the Company on 29August 2019.

2. Scope of consolidated financial statements

√Applicable □Not Applicable

For details of changes in the scope of consolidated financial statements for the current period,please refer to 'VIII. Changes in Consolidation Scope' and 'IX. Interest in Other Entities' of this note.IV. Basis of Preparation of the Financial Statements

1. Basis of Preparation

The financial statements of the Company were prepared on the going concern basis according to thetransactions 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 provisionsof the Rules for the Information Disclosure and Compilation of Companies Publicly Issuing SecuritiesNo.15: General Provisions for Financial Report (Revised in 2014) of CSRC as well as the followingsignificant accounting policies and accounting estimation.

97 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2. Continuous operation

√Applicable □Not Applicable

The Company has ability to continue its operation for at least 12 months since the end of thereporting period and there are no significant events affecting its ability to continue as a going concern.V. Significant accounting policies and accounting estimatesTips of specific accounting policies and accounting estimation:

√Applicable □Not Applicable

According to the characteristics of its production and operation, the Company formulated a seriesof specific accounting policies and accounting estimates, including the provisions for impairment foraccounts receivable (Note V.10); the measurement of inventories (Note V.11); the depreciation andamortization of the investment properties (Note V.13); the depreciation of fixed assets (Note V.14); the

amortization of intangible assets (Note V.17); the criterion for determining of long-term assets

impairment (Note V.18); and the date of revenue recognition (Note V.23), etc.

1. Statement of compliance with enterprise accounting standards

The financial statements prepared by the Company meet the requirements of the enterpriseaccounting standards, which accurately and completely reflected information relating to the financialcondition as at 30 June 2019, the operation results and cash flow from January to June 2019 of theCompany.

2. Accounting period

The accounting year of the Company is from 1 January each year to 31 December of the same yearin solar calendar.

3. Operating cycle

√Applicable □Not Applicable

The Company takes 12 months as an operating cycle, which is also the classification basis for theliquidity of its assets and liabilities.

4. Recording currency

Renminbi is the recording currency of the Company.

5. Accounting methods of business combinations under common control and not under

common control

√Applicable □Not Applicable

98 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

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 thecombining entities are ultimately controlled by the same party or parties both before and after thecombination, and that control is not transitory. For business combination under common control, theparty that obtains the control over the other parties on the combination date is the acquirer, and otherparties involving in the business combination are the transferors. The combination date is the date onwhich 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 undercommon control is paid by ways of cash, transfer of non-cash assets or assumption of debts, theCompany will regard the share of carrying amounts of the net assets of the transferor in the ultimatecontroller's consolidated financial statements obtained as the initial investment cost of long-term equityinvestments as at the date of combination. For carrying value of net assets of the transferor is negative asat the date of combination, investment cost of long-term equity investment is calculated as zero. In casethe transferor is controlled by the ultimate controller by the business combination not under commoncontrol before combination, the initial investment cost of the long-term equity investment of the acquirerincludes relevant goodwill. The Company should adjust the capital reserve (capital premium or sharepremium) in accordance with the differences between initial investment cost of the long-term equityinvestment 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 theelimination, 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 aggregatenominal value of shares issued will be deemed as the share capital. The difference between the initialinvestment cost of long-term equity investments and aggregate nominal value of shares issued shall beadjusted to capital reserve (capital premium or share premium), in case the capital reserve (capital

99 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

premium or share premium) is insufficient for the elimination, the surplus reserves and undistributedprofits shall be used to dilute such expenses in order.Intermediary fees (such as audit, legal services and valuation consultancy) and other relevantmanagement fees incurred in the business combination by the acquirer are credited in profit or loss in theperiod when they occurred. Trading expenses in direct relation to the issuance of equity instrument asthe consideration for the combination is written down to the capital reserve (share premium), where thecapital 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 thecombination 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 acquiredthe control; in case of not a package transaction, in the financial statement of parent company the capitalreserve ( share premium) is adjusted by the difference between the initial investment cost and the sum ofthe carrying value of the original long-term equity investment and the book value of the new paymentconsideration for further acquisition of shares with the share of acquirer's owner's equity on the date ofcombination in case calculated on the proportion of shareholding on the date of combination as its initialinvestment cost; where the capital reserve is insufficient, the retained earnings will be used to offset suchexpenses.

In the consolidated financial statements, the long-term equity investment held by the combiningparty before the date of acquiring control of the combined parties, and the profit and loss, the othercomprehensive income and changes in the other owners' equity recognized during the period betweenthe later of the date of acquisition and the date when the combining and the combined parties are underthe common control of the same party and the date of combination, are written down to the retainedearnings or profit or loss at the beginning of the comparative reporting period, respectively.(2) Business combinations not under common control

A business combination not under common control is a business combination in which all of thecombining entities are not ultimately controlled by the same party or parties both before and after thecombination. For business combination not under common control, the party that obtains the control of

100 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

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 effectivelyobtains control of the transferors.

In business combination not under common control, the cost of combination shall be the sum of theassets paid, obligations incurred or assumed and the fair value of the equity securities issued by theacquirer 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 acquirerfor 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 combinationconsideration 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 onthe acquisition date. Should any new or further evidence arise within 12 months after the acquisitiondate and makes it necessary to adjust the contingent consideration on the acquisition date, the goodwillarising from the business combination shall be amended accordingly.

The cost of combination and identifiable net assets obtained by the acquirer in a businesscombination are measured at fair value on the acquisition date. Where the cost of the combinationexceeds the acquirer's interest in the fair value of the transferor's identifiable net assets, the difference isrecognized as goodwill; where the cost of combination is lower than the acquirer's interest in the fairvalue of the transferor's identifiable net assets, the difference is initially recognized in profit or loss forthe current year after a review of computation for the identifiable assets, liabilities or fair value ofcontingent liabilities and combination cost, and where the combination cost is still lower than the fairvalue of the identifiable net assets of the transferor obtained during the course of combination, then thedifference is recorded in the profit and loss.

In business combination not under common control that is realized in phases through multipleexchange transactions, in the Company individual financial statements, the sum of the book value of theequity investment of the transferor held before the date of acquisition and the cost of new investment onthe date of acquisition are recognized as the initial investment cost of such investment.

101 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

In the consolidated financial statement, the equity of the transferor held before the date ofacquisition is re-measured at the fair value on the date of acquisition, and the difference between the fairvalue and book value is included in current investment income; where the equity of the transferor heldbefore the date of acquisition involves the other comprehensive income, such equity and relevant othercomprehensive income are transferred to current investment income on the date of acquisition, otherthan 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 dateand the fair value of the considerations paid for the acquisition of the new equity on the acquisition dateare regarded as the combination costs of the Company, comparing with acquirer's share of the fair valueon the acquisition date of the transferor's net identifiable assets on the proportion of the shareholding onthe acquisition date to confirm the goodwill that required to be recognized on the acquisition date or theamount 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 theCompany) into the scope of consolidation financial statements, including the enterprises under theCompany's control, divisible part in the investees and structured entities.

(2) To unify the accounting policies, balance sheets date and accounting periods of the Companyand subsidiaries

When preparing consolidated financial statements, adjustments are made if subsidiaries' accountingpolicies or accounting periods are different from that of the Company, in accordance with the Company'saccounting 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 theCompany and subsidiaries, which offset the internal transactions incurred between the Company andsubsidiaries and among subsidiaries. The owner's equity of the subsidiaries not attributable to the

102 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Company shall be presented as 'minority equity' under the owner's equity item in the consolidatedbalance sheet.

The long-term equity investment of the Company held by the subsidiaries, deemed as treasury stockof the corporate group as well as the reduction of owners' equity, shall be presented as 'Less: Treasurystock' under the owner's equity item in the consolidated balance sheet.

(4) Accounting treatment of subsidiaries acquired from combination

For subsidiaries acquired from business combination under common control, the assets, liabilities,operating results and cash flow of the subsidiaries are included in the consolidated financial statementsfrom the beginning of the period in which the combination took place, as if the combination has takensince the ultimate controller began its control. When preparing the consolidated financial statements, forthe subsidiaries acquired from business combination not under common control, separate financialstatement will be adjusted on the basis of their fair values of the identifiable net assets on the date ofacquisition.

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. Inaccordance with the Company's rights and obligations under a joint arrangement, the Company classifiesjoint arrangements into joint operations and joint ventures.

Joint operations refer to a joint arrangement in which the Company is a party and is entitled torelevant assets and obligations of this arrangement. The Company recognizes the following items inrelation to its interest in a joint operation, and accounts the same in accordance with relevant accountingstandards for business enterprises:

(1) recognize the assets held solely by the Company, and recognize assets held jointly by theCompany in appropriation to the share of the Company; (2) recognize the obligations assumed solely bythe Company, and recognize obligations assumed jointly by the Company in appropriation to the shareof the Company; (3) recognize revenue from disposal of joint operations in appropriation to the share ofthe Company; (4) recognize revenue from disposal of joint operations in appropriation to the share of theCompany; (5) recognize fees solely occurred by the Company and recognize fees from joint operationsin appropriation to the share of the Company.

103 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

When the Company, as a joint venture, invests or sells assets to or purchase assets (the assets do notconstitute a business, the same below) from joint operations, the Company shall only recognize the partof profit or lost from this transaction attributable to other parties of joint operations before these assetsare sold to a third party. In case of an impairment loss incurred on these assets which meets therequirements as set out in 'Accounting Standards for Business Enterprises No. 8 – Asset Impairment', theCompany shall full recognize the amount of this loss in relation to its investment in or sale of assets tojoint operations or recognize the loss according to the Company's share of commitment in relation to theits purchase of assets from joint operations.

Joint ventures refer to a joint arrangement during which the Company only is entitled to net assetsof this arrangement. Investment in joint venture is accounted for using the equity method according tothe accounting policies referred to under '13 Long-term equity investment' of Note V.

8. Recognition standard for cash and cash equivalents

Cash recognized in the cash flow statements represents the cash on hand and deposits available forpayment of the Company at any time.

Cash equivalents recognized in the cash flow statements refer to short-term, highly liquidinvestments held by the Company that are readily convertible to known amounts of cash and which aresubject 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 byapplying the spot exchange rate at the transaction date.

Monetary items denominated in foreign currencies are translated into functional currencies at therates 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; ②those arising from the other changes in the balance other thanamortized cost of available-for-sale monetary items denominated in foreign currency are recognized inthe other comprehensive income.

104 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Non-monetary items in foreign currency measured at historical cost are translated using the spotexchange rate prevailing on the date when transaction occurred and its functional currency shall remainunchanged. 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 thestatement of profit or loss or other comprehensive income as changes in fair value (including changes inexchange rate).

(2) Translation of foreign currency financial statements

If the functional currencies used as the bookkeeping base currency by the subsidiaries, jointventures and associates under the control of the Company are different from that of the Company, theirfinancial statements denominated in foreign currencies shall be translated to perform accounting andprepare the consolidated financial statements.

The assets and liabilities of the balance sheet are translated using the spot exchange rate at thebalance sheet date; all items except for 'undistributed profits' of the owner's equity are translated at thespot exchange rate on the transaction date. The revenue and expenses in the income statement aretranslated using the approximate rate of the spot exchange rate on the transaction date. Differences

arising from the translation of foreign currency financial statements are presented as the 'other

comprehensive income' in the owner's equity of the balance sheet.

Foreign currency cash flow is translated using the approximate rate of the spot exchange rate on thetransaction date. The impact of exchange rate changes on cash amount is reflected separately in the cashflow.

When disposing overseas operations, converted difference in foreign currency statements related tothe overseas operation shall be transferred together or as the percentage of disposing the overseasoperation to profit or loss in the current period of disposal.

10. Financial instruments

√Applicable □Not Applicable

A financial instrument refers to any contract that gives rise to a financial asset of one entity and a

financial liability or equity instrument of another entity. A financial asset or financial liability is

recognized when the Company becomes a party to the contract of a financial instrument.

105 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(1)Financial assets

① Classification and measurement

According to the business model for managing financial assets and the contractual cash flowcharacteristics of financial assets, the Company classifies financial assets into: (1) Financial assetsmeasured at amortized cost; (2) financial assets measured at fair value through other comprehensiveincome; (3) financial assets measured at fair value through profit or loss of the current period.Financial assets are measured at fair value upon initial recognition. For financial assets measured atfair value through profit and loss of the current period, related transaction costs are directly included inprofit and loss of the current period; for other types of financial assets, related transaction costs areincluded in their initial recognized amounts. For the accounts receivable or bills receivable arising fromthe sale of products or the provision of labor services that do not contain or consider the significantfinancing components, the Company shall take the consideration amount entitled to be received as theinitial recognized amount.

a. Debt instrument

The debt instruments held by the Company refer to the tools that are in conformity with thedefinition of financial liability from the perspective of the issuing party, which are measured in thefollowing three ways, respectively:

(a) Measured at amortized cost:

The Company's business model for managing such financial assets is: With the aim of obtaining

contractual cash flow, the contractual cash flow characteristics of such financial assets shall be

consistent with the basic lending arrangements, that is, the cash flow generated on a specific date is onlythe payment for the principal and the interest based on the outstanding principal amount. For suchfinancial assets, the Company recognizes the interest income in accordance with the effective interestmethod. Such financial assets mainly include cash and cash equivalents, bills receivable and accountsreceivable, other receivables, creditor's right investment and long-term receivables. The Company liststhe creditor's rights investments and long-term receivables matured within one year (including one year)

from the balance sheet date as non-current assets matured within one year; the creditor's rights

106 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

investments matured within one year (including one year) when being obtained are listed as othercurrent assets.

(b) Measured at fair value through other comprehensive income:The Company's business mode for managing such financial assets is: With the aim of obtainingcontractual cash flow and selling the financial assets, the contractual cash flow characteristics of such

financial assets shall be consistent with the basic lending arrangements. Such financial assets are

measured at fair value through other comprehensive income, but impairment gains and losses, exchangegains and losses, and interest income calculated by the effective interest method are included in profitand loss of the current period. Such financial assets are listed as other creditor's rights investments. Othercreditor's rights investments matured within one year (including one year) from the balance sheet dateare listed as non-current assets matured within one year; other creditor's rights investments maturedwithin one year (including one year) when being obtained are listed as other current assets.(c) Measured at fair value through profit or loss of the current period:The Company lists its held debt instruments that are neither measured at amortized cost nor at fairvalue through other comprehensive income as financial assets held for trading measured at fair valuethrough profit or loss of the current period. At the time of initial recognition, in order to eliminate orsignificantly reduce accounting mismatch, the Company designated some financial assets as financialassets measured at fair value through profit or loss of the current period. Investments that are maturedmore than one year and are expected to be held for more than one year from the balance sheet date arelisted as other non-current financial assets.

b. Equity instruments

The Company lists equity instrument investments that have no control, joint control and significantinfluence on itself as financial assets held for trading measured at fair value through profit or loss of thecurrent period; investments that are expected to be held for more than one year from the balance sheetdate are listed as other non-current financial assets.In addition, the Company designated some non-trading equity instrument investments as financialassets measured at fair value through other comprehensive income, which are listed as other equityinstrument investments. The relevant dividends and interest income of such financial assets are includedin profit and loss of the current period.

②Impairment

107 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

For financial assets measured at amortized cost and debt instrument investments measured at fair

value through other comprehensive income, contract assets and financial guarantee contracts, the

Company recognizes the loss provision based on the expected credit losses.The Company considers reasonable and reliable information about past events, current conditionsand forecasts of future economic conditions, and takes the risk of default as a weight, and calculates theprobability-weighted amount of the present value of the difference between the cash flow receivable andthe cash flow expected to be received of the contract to confirm the expected credit losses.

On each balance sheet date, the Company measures the expected credit losses of financial

instruments in different phases. If the credit risk has not increased significantly since the initial

recognition, the financial instruments are in the first phase. The Company measures the loss provisionaccording to the expected credit losses in the next 12 months; if credit risk has increased significantlybut credit impairment has not yet occurred since the initial recognition, the financial instruments are inthe second phase. The Company measures the loss provision according to the expected credit losses ofthe instruments during the entire duration; if credit impairment has occurred since the initial recognition,the financial instruments are in the third phase. The Company measures the loss provision according tothe expected credit losses of the instruments during the entire duration.For financial instruments with lower credit risk on the balance sheet date, the Company measuresthe loss provision according to the expected credit losses in the next 12 months, assuming that its creditrisk has not increased significantly since the initial recognition.

For financial instruments in the first phase and second phase and financial instruments with

relatively lower credit risk, the Company calculates interest income based on their book balance beforethe deduction of provisions and effective interest rate. For financial instruments in the third phase, theCompany calculates interest income based on their amortized cost after the impairment provision hasbeen deducted from the book balance and effective interest rate.For bills receivable, accounts receivable and contractual assets, whether there exist significantfinancing components, the Company measures loss provision based on expected credit loss over theentire duration.

The Company classifies accounts receivable into groups on the basis of shared credit risk

characteristics, and calculates the expected credit losses on groups, the bases of group determination areas follows:

108 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

For each group of bills receivable, the Company applies exposure at default and expected creditlosses rate over the entire duration to calculate the expected credit losses by considering the historicalcredit losses experience, the existing conditions and forecast of future economic conditions.For each group of accounts receivable, the Company makes the comparison of expected creditlosses rates of accounts receivable in overdue days and over the entire duration to calculate the expectedcredit losses by taking into account the historical credit losses experience, the existing conditions andforecast of future economic conditions.

For each group of other accounts receivable, the Company applies exposure at default and expectedcredit losses rate within the next 12 months or over the entire duration to calculate the expected creditlosses by taking into account the historical credit losses experience, the existing conditions and forecastof future economic conditions.

The Company recognizes the loss impairment provision or reversed in profit or loss of the currentperiod. For held debt instruments at fair value through other comprehensive income, the Company

recognizes loss/gain on impairment in profit or loss of the current period, and adjusts other

comprehensive income at the same time.

③Derecognition

A financial asset is derecognized when any of the below criteria is met: a. the contractual rights toreceive the cash flow from the financial asset have been transferred; b. the financial asset has beentransferred and the Company transfers substantially all the risks and rewards of ownership of thefinancial asset to the transferee; c. the financial asset has been transferred and the Company has notretained control of the financial asset, although the Company neither transfers nor retains substantiallyall the risks and rewards of ownership of the financial asset.On de-recognition of other equity instruments investment, the difference between the book balanceand the sum of the consideration received and any cumulative profit or loss of fair value that had beenrecognized in other comprehensive income is recognized in the retained earnings. On de-recognition ofother financial assets, the difference between the book balance and the sum of the consideration receivedand any cumulative profit or loss of fair value that had been recognized in other comprehensive incomeis recognized in the profit and loss of the current period.

(2)Financial liabilities

Financial liabilities are classified as financial liabilities measured at amortized cost and financial

109 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

liabilities at fair value through profit and loss of the current period at initial recognition.

The financial liabilities of the Company are financial liabilities measured at amortized cost,

including bills payable, accounts payable, other payables, borrowings, bonds payable, etc. Such financialliabilities are recognized initially at fair value less transaction costs and subsequently measured using theeffective interest method. Financial liabilities with a maturity of less than one year (including one year)are listed as current liabilities: those with maturity of more than one year but are mature within one yearfrom the balance sheet date (including one year) are listed as non-current liabilities due within one year;the rest are presented as non-current liabilities.

When all or partial current obligations of financial liabilities have been discharged, such financialliabilities or the part with obligations discharged are derecognized by the Company. The difference

between the carrying amount of a financial liability de-recognized and the consideration paid is

recognized in the profit and loss of the current period.

(3)Determination of fair value of financial instrumentsThe fair value of a financial instrument that is traded in an active market is determined at the quotedprice in the active market. The fair value of a financial instrument that is not traded in an active market isdetermined by using a valuation technique. During the valuation, the Company adopts an applicablevaluation technique under current conditions and there are enough available data and other informationto support. Those inputs should be consistent with the inputs a market participant would use whenpricing the asset or liability, and the Company should maximize the use of relevant observable inputs.

When related observable inputs can't be acquired or are not feasible to be acquired, then use

unobservable inputs.

(4) Significant accounting estimates and judgments

①Significant accounting estimates and key assumptions

Measurement of expected credit loss

The Company applies exposure at default and expected credit loss rate to calculate expected creditloss, and determines expected credit loss rate based on probability of default and loss given default. Forthe determination of expected credit loss rate, the Company applies data including internal historical

credit losses experience, and adjusts historical data taking account current conditions and

forward-looking information. Regarding forward-looking information, indicators used by the Companyinclude economic downturn risk, growth in expected unemployment rate, changes in external market

110 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

environment, technology environment and customer status. The Company monitors and reviews

assumptions related to the calculation of expected credit loss on a regular basis. No major changeoccurred in the above-mentioned estimate techniques and key assumptions in 2018.

② Critical judgments on application of accounting policies

a. Classification of financial assets

On classification of financial assets, critical judgments considered by the Company include thebusiness mode, an analysis of contractual cash flow characteristics and others.From the dimension of financial asset portfolio, the Company determines the business mode offinancial asset management. Considerations cover assessments, reporting methods of financial assetperformance to key management personnel, risks impacting financial asset performance and relevant

management methods, as well as methods of relevant business management personnel receiving

remuneration.

In assessing the consistency between contractual cash flow of financial assets and the basic lendingarrangements, the Company makes the following major judgments: Whether the time distribution oramount of the principal changes during the duration of the financial assets due to prepayment, etc.; andwhether the interest includes considerations for the currency time value, credit risk, as well as otherbasic borrowing risks, costs and profits. For example, whether the prepayment amount merely reflectsthe principal unpaid and interest incurred by the principal unpaid, as well as reasonable compensationpaid due to premature termination of contracts.

b. Judgment that credit risk increases significantly

The main standards for the Company to judge significant increase in credit risk are that overduedays are more than 30 days, or that significant changes occur in one or more of the following indicators:

Business environment of debtors, internal and external credit rating, actual or expected business

performance, value of collaterals or significant drop in credit rating of guarantors.The main standards for the Company to judge incurred credit impairment are that overdue days aremore than 90 days (i.e. default occurred), or that one or more of the following conditions are met: adebtor is under significant financial difficulty; other ongoing debt restructuring or high possibility ofbankruptcy.

11. Inventories

111 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

√Applicable □Not Applicable

(1)Classification of inventories

Inventories refer to the finished goods or commodities held for sale in daily activities, goods inprogress in the production process, consumed materials and supplies in the production process orproviding services of the Company, which mainly include raw materials, revolving materials, entrustedprocessed materials, wrap page, low-cost consumables, goods in progress, self-made semi-finishedgoods, finished goods (merchandise inventory) and engineering construction, etc.(2)Measurement of inventories transferred out

At delivery, inventories are accounted using the weighted average method.(3)Provision for inventory impairment

At balance sheet date, inventories are stated at the lower of cost or net realizable value.The net realizable value of inventories (including finished products, merchandize and materials forsale) that can be sold directly is determined using the estimated saleable price of such inventorydeducted by the cost of sales and relevant taxation. The net realizable value of materials in inventory thatare held for production is determined using the estimated saleable price of the finished product deductedby the cost to completion, estimated cost of sales and relevant taxation. The net realizable value ofinventory held for performance of sales contract or labor service contract is determined based on thecontractual 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 thesame 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 quantityand low value items of inventories, cost and net realizable value of inventories may be determined ontypes of inventories.

Provision for impairment of inventories is made and recognized as profit or loss when the cost ishigher than the net realizable value on the balance sheet date. If the factors that give rise to the provisionin prior years are not in effect in current year, provision would be reversed within the impaired cost, andrecognized in the profit or loss.

112 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(4)Inventory system

The Company adopts perpetual inventory system.

(5)Amortization of low-value consumables and packagingLow-value consumables and packages of the Company are amortized by one-time write-off.

12. Long-term equity investments

√Applicable □Not Applicable

Long-term equity investments in this section refer to equity investments held by the Company thatgive it control, joint control or significant influence over the investee. Long-term equity investmentswhere the Company does not exercise control, joint control or significant influence over the investee areaccounted for as available-for-sale financial assets.

(1)Recognition of initial cost of investment

①For long-term equity investment obtained from business consolidation under common control, theinitial cost is measured at the combining party's share of the carrying amount of the equity of thecombined party; for a long-term equity investment obtained from business consolidation not undercommon control, the initial cost is the consolidation cost at the date of acquisition;②For the long-term equity investment acquired in a manner other than business combination: theinitial investment cost of the long-term equity investment acquired by payment in cash shall be the totalpurchase price; the initial investment cost of the long-term equity investment acquired by issuing equitysecurities shall be the fair value of the equity securities issued;For long-term equity investment acquiredby 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

①Cost method

Where the investor has a control over the investee, long-term equity investments are measuredusing cost method. For long-term equity investments using cost method, unless increasing or reducingthe investment, the carrying value is unchanged. The Company's share of the profit distributions or cashdividends declared by the investee are recognized as investment income.

113 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

②Equity method

Investor's long-term equity investments in associates and joint ventures are measured using equitymethod. 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 shallbe measured at fair value through profit or loss according to relevant requirements of AccountingStandards for Business Enterprises No.22—Recognition and measurement of Financial Instrumentsregardless 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 investmentexceeds the Company's share of the fair value of the investee's identifiable net assets at the time ofacquisition, no adjustment is made to the initial investment cost. Where the initial investment cost is lessthan the Company's share of the fair value of the investee's identifiable net assets at the time ofacquisition, the difference is recognized in profit or loss for the period, and the cost of the long-termequity investment is adjusted accordingly.

For long-term equity investments accounted for using the equity method, the Company recognizesthe investment income and other comprehensive income according to its share of net profit or loss and

other comprehensive income 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 theCompany's share of the profit distribution or cash dividends declared by an investee; for changes inowner's equity of the investee other than those arising from its net profit or loss, other comprehensiveincome and profit distribution, the carrying amount of the long-term equity investment shall be adjustedand recognized to capital reserve. When recognizing attributable share of the net profit and losses of theinvestee, the net profit of the investee shall be recognized after adjustment on the ground of the fairvalue of all identifiable assets of the investee when it obtains the investment. If the accounting policiesand accounting periods adopted by the investee are different from those adopted by the Company, anadjustment shall be made to the financial statements of the investee in accordance with the accountingpolicies and accounting periods of the Company and recognize the investment incomes and othercomprehensive income.

The Company's share of net losses of the investee shall be recognized to the extent that the carrying

114 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

amount of the long-term equity investment together with any long-term interests that in substance formpart of the investor's net investment in the investee are reduced to zero. If the Company has to assumeadditional obligations, the estimated obligation assumed shall be provided for and charged to the profitor 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

①Change 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 outcommon control or place significant impact due to addition of investment which resulted in the increaseof shareholding, the investee shall plus the fair value of the equity investment originally held determinedin accordance with the Standards for Recognition and Measurement of Financial Instruments and the fairvalue of the consideration payable for new investment as the initial investment cost accounted underequity method when changing the equity method.

②Change of measurement at fair value or accounting under equity method to cost method: theequity 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 investeedue to addition of investment, shall be accounted in accordance with the long-term equity investmentformed by combination of enterprises.

③Change of accounting under equity method to measurement at fair value: the long-term equityinvestment originally held with common control or significant impact on the investee that cannotconduct 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 thedate when the common control or significant impact is lost and the book value is included in profit orloss in the relevant year.

④Change 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

115 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

long-term equity investment cost that ceased to be recognized shall first be carried forward on theproportion of the investment disposed. Then comparing the cost of the remaining long-term equityinvestment with the attributable fair value of the identifiable net assets of the investee at the originalinvestment calculated on proportion of the remaining shareholding, where the former larger than thelater, it belongs to the goodwill as showed in deciding the investment price and will not adjust thecarrying amount of the long-term equity investment; where the former less than the later, the retainedearnings 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 investee①Joint control over an investee refers to activities which have a significant influence on return ofan 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, acquisitionand disposal of assets, research and development activities and financing activities, etc.②Significant influence on the investee refers to significant influence over the investee exists whenholding more than 20% but less than 50% of the shares with voting rights or even if the holding is below20%, 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 thelong-term equity investments. When there is impairment indicator, the recoverable amount is determinedthrough impairment test and impairment is provided based on the difference between the recoverableamount 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 disposaland the present value of estimated future cash flow.

(6)Disposal of long-term equity investments

For disposal of long-term equity investment, the difference between the considerations received andthe carrying amount of the disposed investment is recognized in profit or loss. For long-term equity

116 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

investment accounted for using the equity method, the part recognized in other comprehensive income is

accounted on pro rata basis upon disposal in the same way as the relevant assets or liabilities are

disposed of directly by the investee.

13. Investment properties

Depreciation or amortization method

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 subsequentmeasurement.

The buildings leased out of investment properties of the Company are depreciated over their usefullives using the straight-line method. The specific measurement policy is the same as fixed assets. Forland use rights leased out or held for resale after appreciation in value, they are amortized over theiruseful lives using the straight-line method. The specific measurement policy is the same as that ofintangible 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 carryingvalue and the recoverable amount. Impairment is not reversed in subsequent periods.

14. Fixed assets

(1). Recognition criteria

√Applicable □Not Applicable

Fixed assets are tangible assets that are held for production of goods, provision of labor services,leasing or administrative purposes, and have useful life more than one fiscal year, which are recognizedwhen the following conditions are met:

①economic benefits in relation to the fixed assets are very likely to flow into the enterprise;②the cost of the fixed assets can be measured reliably.

(2). Depreciation method

√Applicable □Not Applicable

117 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

The fixed assets of the Company can be divided into: buildings and constructions, productionequipment, transportation equipment and office equipment, etc. The straight-line method over usefullives is used to measure depreciation. The useful lives and the expected net residual value of fixed assetsare determined according to the nature and usage of various fixed assets. At the end of each year, theuseful lives, expected net residual value and depreciation method of fixed assets are reviewed, andadjusted if there is variance with original policies; The Company has made provisions for all the fixedassets except for the fixed assets that have been fully depreciated and still in use.

Type Depreciation lives (year) Net residual

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 fixedassets. When there is an impairment indicator, the recoverable amount is estimated and impairment isprovided based on the difference between the carrying value and the recoverable amount once theimpairment of an asset is recognized, it will not be reversed in the subsequent accounting period.

(4). Basis for recognition, measurement and depreciation method 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 andrewards related to the ownership of the relevant assets. The asset is recognized if one or more of the

following criteria is met: ①upon expiry of the lease term, the ownership of the leased asset is

transferred to the lessee; ②the lessee has the option to purchase the leased asset at a price expected tobe sufficiently lower than the fair value of the leased asset when the option is exercised and at theinception of the lease, it is reasonably certain that the lessee will exercise the option; ③the lease termapproximates the useful life of the leased asset even if the ownership is not transferred; ④at theinception of the lease, the present value of the minimum lease payments is substantially equivalent to the

118 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

fair value of the leased asset; ⑤the leased assets are of such a specialized nature that only the lessee canuse them without major modification.

Measurement of fixed assets held under finance lease: fixed assets held under finance lease areinitially recognized at the lower of fair value of the leased assets at the inception of lease and the presentvalue of minimum lease payments.

Subsequent measurement of fixed assets held under finance lease is accounted for using the

depreciation and impairment policies of owned fixed assets.

15. Construction in progress

√Applicable □Not Applicable

(1)Types of construction in progress

Construction in progress for the Company is self-operated construction.(2)Standard and date of transfer from construction in progress to fixed assetsThe construction in progress of the Company is transferred to fixed assets when the project iscompleted and ready for its intended use, which shall satisfy one of the following conditions:①The construction of the fixed assets (including installation) has been completed or substantiallycompleted;

②The fixed asset has been used for trial operation and it is evidenced that the asset can operateordinarily or produce steadily qualified products; or the result of trial operation proves that it can operatenormally;

③Further expenditure incurred for construction is very minimal or remote;④The 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 progressAt the balance sheet date, the Company reviews the construction in progress to check whether thereis any sign of impairment and an impairment test is needed to recognize the recoverable amount whenthere 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.

119 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

The recoverable amount of construction in progress should base on the higher value between fairvalue of asset less disposal expense and present value of estimated cash flow in the future.16. Borrowing costs

√Applicable □Not Applicable

(1)Recognition principles for borrowing cost capitalizationThe Company's borrowing costs that are directly attributable to the acquisition or production of aqualifying asset are capitalized into the cost of relevant assets. Other borrowing costs are recognized asexpenses in the current profit and loss when incurred. Qualifying assets for capitalization include fixedassets, investment properties and inventories that necessarily take a substantial period of time foracquisition, construction or production to get ready for their intended use or sale.(2)Computation of capitalized amount of borrowing costsCapitalization period refers to the period from the commencement to the cessation of capitalizationof borrowing costs, excluding the periods in which capitalization of borrowing costs is suspended.Capitalization interruption period: Capitalization of borrowing costs is suspended during periods inwhich the acquisition or construction of a qualifying asset is interrupted abnormally and the interruptionlasts for more than 3 months.

Computation of capitalized amount of borrowing costs: ①Specific borrowings will be recorded

based on the actual interest expense incurred in the period of special borrowings less the interest incomefrom unutilized borrowings placed at banks or investment gain from temporary investment; ②Normalborrowings utilized are calculated based on the weighted average of expenses of the aggregate assetexceeding the asset expenses of the portion of special borrowings multiplied by the capitalization ratioof the normal borrowings utilized. Capitalization ratio is calculated based on weighted average interestrate of normal borrowings; ③For borrowings with discount or premium, the discount or premium wasamortized over the accounting periods borrowings to adjust the interest in every period using theeffective interest rates.

17. Intangible assets

Intangible assets are the identifiable non-monetary assets which have no physical shape and arepossessed or controlled by the Company.

(1)Valuation method of intangible assets

120 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Intangible assets are initially recognized at costs. The actual costs of purchased intangible assetsinclude the consideration and relevant expenses paid. For intangible asset contributed by investors, thevalue agreed in the investment contract or agreement is the actual cost of the intangible asset. But if thevalue agreed in the investment contract or agreement is not a fair value, the fair value of the intangibleasset is regarded as the actual cost. The cost of a self-developed intangible asset is the total expenditureincurred in bringing the asset to its intended use.

Subsequent measurement of intangible assets of the Company: ①Intangible assets with finite

useful lives are amortized on a straight-line basis; at the end of each year, the useful lives and

amortization policy are reviewed, and adjusted if there is any variance with original policies; ②

Intangible assets with indefinite useful lives are not amortized and the useful lives are reviewed at eachyear end date. If there is objective evidence that the useful life of an intangible asset is finite, theintangible asset is amortized using the straight-line method according to the estimated useful life.(2)Criterion of determining indefinite useful lifeThe useful life of an intangible asset is indefinite if the period in which the future economicbenefits generated by the intangible asset could not be determined, or the useful life could not beascertained.

Criterion of determining intangible assets with indefinite useful lives: ①For intangible assets

derived from contractual rights or other legal rights and there are no explicit years of use stipulated inthe contract or laws and regulations; ②the period in which generating benefits for the Company stillcould 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 arereviewed. The assessment is performed by the departments that use the intangible assets, using thedown-to-top approach, to determine if there are changes to the determining basis of indefinite usefullives.

(3)Methods for impairment test and provision for impairment of intangible assetsAs at the balance sheet date, the Company reviews the intangible assets to check whether there is anindication of impairment and an impairment test is needed to recognize the recoverable amount whenthere are signs that intangible assets may impair. The impairment provision should be the lower of therecoverable amount and carrying value and provision for impairment loss cannot be reversed in thefollowing accounting periods once it has been provided.

121 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

The recoverable amount of intangible assets should be based on the higher value between the net offair 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 andbasis for capitalization of expenditure incurred in development stageAs for an internal research and development project, expenditure incurred in the research stage isrecognized in profit or loss in the period as incurred. Expenses incurred in the development stage arerecognized as intangible assets if all of the following conditions are met: ①the technical feasibility ofcompleting the intangible asset so that it will be available for use or for sale; ②the intention to completethe intangible asset for use or for sale; ③how the intangible asset will generate economic benefits,including there is evidence that the products produced by the intangible asset has a market or theintangible asset itself has a market; if the intangible asset is for internal use, there is evidence that there

exists usage for the intangible asset; ④the availability of adequate technical, financial and other

resources to complete the development and the ability to use or sell the intangible asset; ⑤the

expenditures attributable to the development of the intangible asset could be reliably measured.

Basis for distinguishing research stage and development stage of an internal research and

development project: research stage refers to the activities carried out for the planned investigation andsearch for obtaining new technology and knowledge, which has the characteristics of planning andexploration; before commercial production or other uses, the application of achievements and other

knowledge obtained from the research stage in a plan or design to produce new or substantially

improved materials, equipment and products is regarded as development stage, which has the

characteristics of pinpointing and is very likely to form results. All the expenditures on research and

development which cannot be distinguished between research stage and development stage are

recognized in the profit or loss when incurred.

18. Impairment of long-term assets

√Applicable □Not Applicable

Long-term equity investment, investment properties measured based on cost model, fixed assets,construction in progress, intangible assets and other long-term assets are tested for impairment if there isany indication that an asset may be impaired at the balance date. If the result of the impairment testindicates that the recoverable amount of the asset is less than its carrying amount, a provision for

122 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

impairment will be made for the difference will be recorded in impairment loss. The recoverable amountis the higher of the net of the asset's fair value less disposal costs and the present value of the future cashflow expected to be derived from the asset. Provision for asset impairment is determined and recognizedon the individual asset basis. If it is not possible to estimate the recoverable amount of an individualasset, the recoverable amount of a group of assets to which the asset belongs is determined. A group ofassets is the smallest group of assets that can generate independent cash inflows.Goodwill is tested for impairment at least at each year end.In terms of impairment test of the goodwill, the carrying amount of the goodwill, arising frombusiness combination, shall be allocated to the related asset groups on reasonable basis since theacquisition date, or to the related asset group portfolios if it is difficult to be allocated to the related assetgroups. When the carrying amount of the goodwill is allocated to the related asset groups or asset groupportfolios, it shall be allocated in the proportion of the fair value of each asset group or asset groupportfolio against the total fair value of related asset groups or asset group portfolios. If it is difficult tomeasure the fair value reliably, it shall be allocated in the proportion of the carrying amount of eachasset group or asset group portfolio against the total carrying amount of related asset groups or assetgroup portfolios.

When impairment test is made to the related asset groups or asset group portfolios includinggoodwill, if there is an indication that the related asset groups or asset group portfolios are prone toimpair, the Company shall firstly test for impairment for the asset groups or asset group portfoliosexcluding goodwill and calculate the recoverable amount and recognize the impairment loss accordinglyby comparing with its carrying amount. The Company shall then test for impairment for the asset groupsor asset group portfolios including goodwill and compare the carrying amount (including the carryingamount of allocated goodwill) with its recoverable amount of related asset groups or asset groupportfolios. Provision for impairment loss shall be recognized when the recoverable amount of the relatedasset 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 subsequentaccounting period.

19. Long-term prepaid expense

√Applicable □Not Applicable

123 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Long-term prepaid expenses are expenditures which have incurred but the benefit period is morethan one year (excluding one year). They are amortized evenly over the benefit period of each item ofexpenses. 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.20. Staff's remuneration

Payables for staff's remuneration are all forms of compensation and other relevant expenditure givenby the Company in exchange for services rendered by employees, including short-term Payables forstaff's remuneration, post-employment benefits, termination benefits and other long-term benefits.Short-term Payables for staff's remuneration include short-term salaries, bonus, allowance, subsidies,staff's welfare, housing provident fund, union funds and employee education funds, medical insurancefees, injury insurance fees, maternity insurance fees, short-term paid absence, short-term profit-sharingplans, etc. During the accounting period when employees render services, short-term benefits payablethat actually incurred shall be recognized as liabilities and credited into profit and loss or relevant assetscost on an accrual basis for the benefit objects.

Post-employment benefits mainly include the basic pension insurance, supplementary pension, etc.,In accordance with the risks and obligations undertaken by the Company, the post-employment benefitsare 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 aliability in exchange of services from the employee in accounting period, and credited into profits orlosses or related assets costs in accordance with the benefit objects. Defined benefit plans: the cost ofproviding benefits is determined using the projected unit credit method, with actuarial valuations beingcarried out by independent actuary at the interim and the annual balance sheet date. Staffs' benefit costsincurred by the defined benefit plan of the Group are categorized as follows: (1) service cost, includecurrent period service cost, past-service cost and settlement profit or loss. Current period service costmeans the increase of the present value of defined benefit obligation resulted from the current periodservice offered by employee. Past-service cost means the increase or decrease of the present value ofdefined benefit obligation resulted from the revision of the defined benefit plans related to the priorperiod service offered by employee; (2) interest costs of defined benefit plans; (3) changes related to the

124 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

remeasurement of defined benefit plans liabilities. Unless other accounting standards require or permit tocharge the Payables for staff's remuneration into assets cost, the Company charges (1) and (2) above intoprofit or loss; and recognized (3) above as other comprehensive income without transferring to profit orloss in subsequent accounting periods.

Termination benefits: the indemnity proposal provided by the Company for employees for thepurpose 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 theindemnity as a result of terminating labor relation with the employees: the Company has made a formalplan 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 thetermination benefit. The Company will credit the salaries and social benefits intend to pay for these earlyretirees during the periods from the date of early retirement to the normal retirement date to profit or losswhen recognition conditions for accrued liabilities are met.

21. Estimated liability

√Applicable □Not Applicable

(1)Criterion for determining of estimated liability

If an obligation in relation to contingencies such as external guarantees, discounting ofcommercial acceptance bills, pending litigation or arbitration and product quality assurance is thepresent obligation of the Company and the performance of such obligation is likely to lead to anoutflow of economic interests and its amount can be reliably measured, such obligation shall berecognized as an estimated liability.

(2)Measurement of estimated liability

The best estimate of the expenditure from the performance of the current obligation is initially

recorded as accrued liability. When the necessary expenditures fall within a range and the

probability of each result in the range are identical, the best estimate is the median of the range; ifthere are severable items involved, every possible result and relevant probability are considered forthe best estimation.

125 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

At the balance sheet date, the carrying value of estimated liabilities is reviewed. If there isobjective evidence that the carrying value could not reflect the current best estimate, the carryingvalue is adjusted to the best estimated value.

22. Share-based payments

√Applicable □Not Applicable

For equity-settled share-based payment transaction in return for services from employees, itshall be measured at the fair value of equity instruments granted to the employees. For the paymentof such fair value that may only be exercised if services are fulfilled during the vesting period or thespecified performance is achieved, the fair value shall, based on the best estimate of the number ofexercisable instruments during the vesting period, be recognized in relevant costs or expenses instraight-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 thegrant, the fair value of the liability assumed by the Company shall, on the date of the grant, berecognized in relevant costs or expenses and the liabilities shall be increased accordingly. Forcash-settled share-based payment that may be exercised if services are fulfilled during the vestingperiod or the specified performance is achieved, on each balance sheet date within the vestingperiod, the services acquired in the current period shall, based on the best estimate of exercise, berecognized 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 fairvalue 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 modificationincreases 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 theequity instruments is recognized as a corresponding increase in service achieved. Increase in the fairvalue of equity instruments refer to the difference between the fair values of the equity instrumenton the modified date before or after the modification. If the Company modifies the exercisable

126 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

conditions in such manner conductive to the employees, including the shortening of the vestingperiod, 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 othermethods not conductive to employees to modify the terms and conditions of share-based paymentplans, it will continue to be accounted for the services obtained in the accounting treatment, as if thechange had not occurred, unless the Company cancelled some or all of the equity instrumentsgranted.

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 orother parties can choose to meet non-vesting conditions, but for those that are not met in the vestingperiod, the Company will treat it as cancellation of equity instruments granted.23. Revenue

√Applicable□ Not Applicable

Revenue is the total inflow of economic benefits formed by the Company and its subsidiaries duringday-to-day operations which might lead to increase of shareholders' equity and be irrelevant to capitalinvested by shareholders.

The Company and its subsidiaries performed performance obligations stated in the contract, i.e,recognized revenue when the client obtains the control right of relevant goods or services.

Where the contract includes two or several performance obligations, during the starting date of thecontract, the Company and its subsidiaries allocate transaction price to various single performanceobligation in accordance with the relevant proportion of separate selling price of goods or servicespromised by various single performance obligation, and measure revenue in accordance with transactionprice allocated to various single performance obligation.

Transaction price is the amount of consideration that the Company and its subsidiaries are expectedto be entitled to collect due to transfer of goods and services transferred to the client, excluding the

amount collected for any third party. The transaction price recognized by the Company and its

subsidiaries does not exceed the amount of recognized revenue when relevant uncertainties are

127 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

eliminated and might not incur material carrying back. The amount that is expected to be returned to theclient is taken as liability of returned goods and is not recorded in transaction price.

When one of the following conditions is met, the Company and its subsidiaries perform

performance obligations during a certain time horizon, otherwise, it belongs to fulfilling performanceobligations at a certain time point:

① The client obtains and consumes economic benefits brought by performance of the Company

and its subsidiaries when the Company and its subsidiaries perform the contract;

② The client is able to control goods under construction during the process of performance of the

Company and its subsidiaries;

③ Goods produced by the Company and its subsidiaries during the process of performance have

the non-replaceable usages, and the Company and its subsidiaries are entitled to collect the

amount for the cumulative completed and performed portion till now during the entire

contractual period.

For the performance obligations performed during a certain time horizon, the Company and itssubsidiaries recognize revenue in accordance with the schedule of performance during such time horizon.When the schedule of performance can't be reasonably recognized, where the costs that have been

incurred by the Company and its subsidiaries are estimated to be compensated, revenue shall be

recognized in accordance with the amount of costs that has been incurred until the schedule of

performance can be reasonably confirmed.

For performance obligations performed during a certain time point, the Company and its

subsidiaries recognize revenue at the time point when the client obtains the control right of relevantgoods or services. When judging whether the client has obtained control right over goods or services, theCompany and its subsidiaries will consider the following signs:①The Company and its subsidiaries enjoy the right of instant collection over such goods andservices;

②The Company and its subsidiaries have transferred the material objects of such goods to theclient;

128 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

③The Company and its subsidiaries have transferred statutory ownership right of the goods ormajor risks and remuneration of the ownership right to the client;

④ The client has accepted such goods or service.

The right that the Company and its subsidiaries are entitled to collect the consideration for havingtransferred goods or services to the client (and such right depends on other factors other than time lapse)

is presented as contractual asset, and contractual asset is provisioned impairment on the basis of

expected credit losses. The right owned by and unconditionally collected from the client by the

Company and its subsidiaries (only depend on time lapse) shall be presented as accounts receivable.Obligations that the Company and its subsidiaries have collected or shall collect consideration from theclient and shall transfer goods or services to the client are presented as contractual obligations.

Specific accounting policies relating to major activities that the Company and its subsidiaries obtainrevenue are described as follows:

(1) Sale of goods

Generally, contracts for sale of goods between the Company and its clients only includeperformance obligation of transferring the whole machine of home appliance. Generally, on the basis oftaking into account the following factors comprehensively, the Company recognizes the revenue at thetime point of transfer of control right of goods: the right of instant collection for obtaining goods,transfer of major risks and remuneration on ownership right of goods, transfer of statutory ownershipright of goods, transfer of assets of material objects of goods, the client's acceptance of such goods.

(2) Construction contract income

Construction contract between the Company and the client generally includes performanceobligations of construction and installation of commercial air-conditioner and smart home, because the

client is able to control goods under construction during the Company's performance process, the

Company takes them as performance obligations performed during a certain time horizon, and

recognizes revenue in accordance with the schedule of performance, and it is an exemption when the

schedule of performance can't be reasonably confirmed. The Company confirms the schedule of

performance of services provided in accordance with the investment approach. When the schedule ofperformance can't be reasonably confirmed, where the costs of the Company that have been incurred can

129 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

be compensated, the revenue will be recognized in accordance with the amount of costs that has beenincurred until the schedule of performance can be reasonably confirmed.

(3) Warranty obligations

According to contractual rules and regulations of laws, the Company provides quality assurance forgoods sold and project constructed. For assurance class of quality assurance in order to ensure the client

that goods sold comply with existing standards, the Company conducts accounting treatment in

accordance with estimated liabilities. For service class of quality assurance in order to ensure the clientto provide a separate service other than that the goods sold comply with existing standards, the Companytakes it as a separate performance obligation, and allocates partial transaction price to service class ofquality assurance in accordance with the relevant proportion of separate selling price of goods andservices class of quality assurance, and recognizes revenue when the client obtains control right overservices. When assessing whether quality assurance provides a separate service other than ensuring theclient that the goods sold comply with existing standards, the company shall consider factors such as

whether such quality assurance is statutory requirements or industrial practices, term of quality

assurance and the nature of the company's promise for performing tasks.

24. Government grant

√Applicable□ Not Applicable

(1) Types of government grants

Government grants refer to the monetary assets or non-monetary assets obtained by the Companyfrom the government for free, not including the capital invested 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 current profit or loss onan even basis over the useful life of the asset; government grants measured at nominal amount shall berecorded directly in current profit or loss. Revenue-related government grants shall be treated as follows:①those used to compensate relevant expenses or losses to be incurred by the enterprise in subsequentperiods are recognized as deferred income and recorded in current profit or loss when such expenses are

130 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

recognized; ②those used to compensate relevant expenses or losses that have been incurred by theenterprise are recorded directly in current profit or loss.

(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 formsa long-term asset, it is recognized as asset-related government grant.

If the government grant received by the Company is not asset-related, it is recognized asrevenue-related government grant.

Government grant received without clear objective shall be classified as asset-related governmentgrant or revenue-related government grant by:

①Government grant subject to a certain project shall be separated according to the proportion ofexpenditure budget and capitalization budget, and the proportion shall be reviewed and modified ifnecessary on the balance sheet date;

②Government grant shall be categorized as revenue-related if its usage is just subject to generalstatement and no specific project in relevant government 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 isevenly amortized to the profit or loss in the current period over the estimated useful life of the relevantasset 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 thereis clear evidence that the conditions set out in the financial subsidy policies and regulation are fulfilledand the receipt of such financial subsidy is assured.

Other government grants other than those measured at the accounts receivable is recognized uponactual receipt of such subsidies.

25. Deferred income tax assets/deferred income tax liabilities

√Applicable□ Not Applicable

Deferred income tax assets and deferred income tax liabilities of the Company are recognized:

131 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(1) Based on the difference between the carrying amount and the tax base amount of an asset or aliability (items not recognized as assets and liabilities but their tax base is ascertained by the current taxlaws and regulation, the tax base is the difference), deferred income tax asset or deferred incometax-liability is calculated using the applicable tax rate prevailing at the expected time of recovering therelevant asset or discharging the relevant liability.

(2) Deferred income tax asset is recognized to the extent that there is enough taxable income for the

deduction of the deductible temporary difference. At the balance sheet date, if there is sufficient

evidence that there would be enough taxable benefit for the deduction of the deductible temporarydifference, the deferred income tax asset not recognizedin previous accounting period is recognized. Ifthere is no sufficient evidence that there would be enough future taxable income for the deduction of thedeferred income tax asset, the carrying value of the deferred income tax asset is reduced.

(3) Deferred income tax liability is recognized for taxable temporary difference arising frominvestments in subsidiaries and associated companies, unless the Company could control the time ofreversal of the temporary differences and the temporary differences would not be probably reversed inthe foreseeable future. For deductible temporary differences arising from investments in subsidiaries andassociated companies, deferred income tax asset is recognized if the temporary difference will be veryprobably reversed in foreseeable future and there will be sufficient future taxable profit to deduct thedeductible temporary difference.

(4) No deferred income tax liability is recognized for a temporary difference arising from the initialrecognition of goodwill. No deferred income tax asset or deferred income tax liability is recognized forthe 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 liabilitiesare measured at the tax rates that are estimated to apply to the period when the asset is realized or theliability is settled.

26. Lease

(1) Accounting method for operating lease

132 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

√Applicable □ Not Applicable

On the commencement date of the lease term, the lessee shall recognize the right-of-use assets andleased liabilities for the lease, except for short-term leases and low value assets leases which are treatedwith practical expedient.

①Use-of-rights assets shall be initially measured at the costs. The costs include:

(I) initial amount of the lease liability;

(II) for lease payment on or before the date of commencement of the lease period, where there waslease incentive, such incentives shall be deducted;

(III) initial direct costs incurred by the lessee;

(IV) costs expected to be incurred by the lessee for demolition and removal of leased assets,

restoration of the premises where the leased assets are located, or restoration of the leased assets to

the conditions of the lease terms.

②The lease liability is initially measured at the present value of the lease payments that are not paidat the commencement date.

After the commencement date of the lease term, the lessee shall adopt the cost model to conductsubsequent calculation on right-of-use assets, and calculate interest expenses in each period during thelease term based on a constant periodic rate of interest, and the assets shall be accounted in profit or lossin the current period.

(2) Accounting method for 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

commencement date of the lease and the long-term payables is recorded at the amounts of the minimumlease payments. The difference between the recorded amount of the leased asset and the minimum leasepayments is accounted for as unrecognized finance expenses.

The unrecognized finance charge is amortized using the effective interest method over the period ofthe lease and accounted in finance expenses. Initial direct costs incurred by the Company are credited invalue of leased assets.

133 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

②When the Company is a lessor, the difference between sum of the lease receivables andunguaranteed residual value and its present value is accounted for as unrealized finance income on thecommencement date of the lease 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 theinitial measurement of finance lease receivables and reduced the amount of revenue recognized duringperiod of the lease.

27. Other significant accounting policies and accounting estimations

√Applicable □ Not Applicable

(1) Asset securitization business

Some of the Company's receivables are securitized. The Company's underlying assets are trusted toa special purpose entity which issues securities to investors. The Company serves as the asset servicesupplier, providing services including asset maintenance and its daily management, formulation of theannual asset disposal plan, formulation and implementation of the asset disposal plan, signing relevantasset disposal agreements and periodic preparation of asset service report.

The Company evaluates the extent to which it transfers the risks and rewards of ownership of theassets to the other entities and determines whether it retains control while applying the accounting policyin respect of asset securitization.

①The financial asset is derecognized when the Company transfers substantially all the risks andrewards of ownership of the financial asset;

②The financial asset is continued to recognize when the Company retains substantially all the risksand rewards of ownership of the financial asset;

③When the Company neither transfers nor retains substantially all the risks and rewards ofownership 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 theCompany retains control, it continues to recognize the financial asset to the extent of its continuinginvolvement in the financial asset.

(2) Hedge accounting

134 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Hedge refers to risk management activities that enterprises designate financial instruments as hedgeinstruments in order to manage risk exposure caused by specific risks such as foreign exchange risk,interest rate risk and credit risk, allow to expect changes in fair value or cash flow of hedge instrumentsto offset all or partial changes in fair value or cash flow of hedged items.Hedged items refer to projects which make enterprises face risks of changes in fair value or cashflow and are designated as hedge objects and can be reliably measured.A hedging instrument is a financial instrument designated by an enterprise for the purpose ofhedging, whose fair value or cash flow changes are expected to offset the change in the fair value or cashflow of the hedged items.

The company continuously conducts assessment over whether hedge relationship complies with

requirements of hedge effectiveness on the starting date of hedge and follow-on period. Hedge

effectiveness refers to the extent that changes in fair value or cash flow of hedge instruments can offsetthat of hedged items caused by the risks of being hedged. The portion that the changes in fair value orcash flow of hedge instruments is greater or less than that of hedged items is the ineffective portion ofhedge.

(3) Explanations on significant accounting estimates

Judgments, estimates and assumptions shall be made to book value of the financial statements items,which could not be measured accurately, due to the inherent uncertainties of operating activities, while

applying accounting policy. Such judgments, estimates and assumptions were based on the

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 thecurrent estimates of the management, and thus cause a material adjustment to the carrying amounts ofassets and liabilities affected in the future. The judgments, estimates and assumptions mentioned aboveshall be reviewed on a going concern basis. If the revisions to accounting estimates only affected thecurrent period, relevant adjustment because shall be recognized in the current period; if the revisionaffects both the current and future period, the effect shall be recognized in the current and future period.

135 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

On the balance sheet date, the significant fields involving judgments, estimates and assumptionsabout financial report items are listed as follows:

①Estimated liabilities

Provision for product quality guarantee, estimated onerous contracts, and other estimates shall berecognized in accordance with the terms of contract, current knowledge and historical experience. If thecontingent event has formed a practical obligation which probably results in outflow of economicbenefits from the Company, an estimated liability shall be recognized on the basis of the best estimate ofthe expenditures to settle relevant practical obligation. Recognition and measurement of the estimatedliability significantly rely on the management's judgments. In the process of judgment, the Companytakes into consideration the assessment of relevant risks, uncertainties, time value of money and otherfactors related to the contingent events. Among them, the Company will undertake estimated liabilitieswith respect to the after-sales services provided for the return, maintenance and installation of goods.When estimating liabilities, the Company has considered the maintenance information in recent years,but the previous maintenance experiences may fail to reflect the future circumstances. Any increase ordecrease in this provision is likely to affect the profits and losses of the next year.②Provision of expected credit losses

The company calculates the expected credit losses in accordance with breach risk exposure andexpected credit loss rate, and confirms credit loss rate on the basis of breach possibilities and breach lossrate. When confirming expected credit loss rate, the company uses data such as internal historical creditloss experiences, and conducts adjustments over historical data in combination with current status and

forward-looking information. When considering forward-looking information, indexes used by the

company include risks such as economic downturn, growth of expected unemployment rate, external

market environment, technological environment and changes in client conditions. The company

regularly monitors and reviews relevant assumptions relating to calculation of expected credit losses.The aforesaid techniques and key assumptions have not changed substantially in 2018.③Provision for decline in value of inventories

136 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Inventories are measured by lower of cost and net realizable value according to the accountingpolicies of inventories; for obsolete and unsalable inventories or whose costs are higher than the netrealizable value, and the provision for decline in value of inventories shall be incurred. The carryingvalue of inventory shall be written down to the net realizable value on the basis of the evaluation of thesalability of inventories and the net realizable value. Authenticating inventory impairment requires themanagement's obtaining of solid evidence, and their judgments and estimations made after consideringthe purpose of holding inventories and the effect of events after the balanced sheet date and etc. Thedifference between the actual outcome and the previously estimated outcome will influence the carryingvalue of inventories and the provision or reversal of provision for decline in value of inventories duringthe period accounting estimates are changed.

④Fair value of financial instruments

For financial instruments where there is no active market, the Company will determine the fair valuethrough a variety of valuation methods. Such valuation methods include discounted cash flow analysis.In the valuation, the Company shall estimate the future cash flow, credit risk, market volatility andcorrelation, and select the appropriate discount rate. Such related assumptions are uncertain, and theirchanges may affect the fair value of financial instruments.

⑤Impairment of investment in other equity instrumentsThe company largely relies on judgments and assumptions of the management when determiningwhether investments of other equity instruments are impaired to determine whether it is needed toconfirm impairment. During the process of conducting judgments or making assumptions, the companyshall assess the extent and duration period that the fair value of such investments is below the cost, aswell as financial conditions and short-term business prospects of the invested objects, including industryconditions, technological reform, credit rating, breach rate and risks of counterparties.⑥Provision of long-term assets impairment

On the balance sheet date, the Company shall judge whether there is any possible indication ofimpairment against non-current assets other than financial assets. The intangible assets with indefiniteuseful life must be tested for impairment on an annual basis as well as when there is any indication ofimpairment. Other non-current assets other than financial assets shall be tested for impairment when

137 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

there is an indication showing that the carrying value is not recoverable. Impairment occurs while thecarrying value of an asset or asset group is higher than the recoverable value, which is the higher of thenet of fair value deducted disposal expenses and the present value of expected future cash flow. The netof fair value deducted by disposal expenditure is determined with reference to the price in the saleagreement regarding analogous asset, and observable market price less the increase of cost that directlyattributable to the disposal of assets. Significant judgments regarding the production amount, sales price,relevant operating costs of the assets (or assets group) and the discount rate used to calculate the presentvalue shall be made when determining the present value of future cash flow. Recoverable amount shallbe estimated by using all accessible relevant information, including production amount, sales price, and

relevant operating costs predictions made based on reasonable and supportive assumptions. The

Company shall test for goodwill impairment at least every year. This requires the Company to estimatethe present value of future cash flow for such assets groups or asset group portfolios allocated withgoodwill. When estimating the present value of future cash flow, the Company shall not only estimatethe future cash flow generated by such asset groups or asset group portfolios, and select the appropriatediscount rate to determine the present value of such future cash flow.⑦Depreciation and amortization

Investment properties, fixed assets and intangible assets are depreciated and amortized by a

straight-line approach over their estimated useful life by taking into consideration the residual value.Useful life shall be periodically reviewed to determine the depreciation and amortization expenses foreach reporting period and be determined on the basis of historical experience regarding analogous assetsand the expected technological innovation. Significant changes to previous accounting estimates willresult in adjustments against depreciation and amortization expenses in the future periods.⑧Deferred income tax assets

Deferred income tax asset is recognized for all the uncompensated tax losses to the extent that thereis sufficient taxable income for the deduction of loss. In order to determine the amount of deferredincome tax assets, the management of the Company needs to predict the timing and the amount oftaxable profits in the future by taking into account a large amount of judgment, as well as the strategy oftax planning.

138 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

⑨Income tax

There are certain transactions the tax treatment and calculations undertaken during the ordinarycourse of business for which the ultimate tax determination is uncertain. Whether some items could bepresented before taxation shall be approved by relevant tax authorities. Where the final tax outcome ofthese matters is different from the initial estimated amount, such differences will impact the current anddeferred tax in the period of confirmation.

⑩Provisions for sales rebates

The Company and its subsidiaries adopt the policy of sales rebates for all consumers. According tothe relevant conventions in the sales agreement, the review of specific transactions, the market situation,the pipeline inventory levels and the historical experiences, the Company and its subsidiaries estimateand accrue rebate on a regular basis with reference to the completion of agreed assessment indexes.Rebate accrual involve the judgment and estimates of the management. In case of any significantchanges in the previous estimates, the difference above will have an impact on the rebate during theperiod when significant changes occur.

28. Significant changes on accounting policies and accounting estimates

(1). Significant changes on accounting policies

√Applicable □ Not Applicable

Ministry of Finance promulgated Accounting Standard for Business Enterprises No. 21 —Leases inDecember 2018, and promulgated the Notice of the Ministry of Finance on Revising and Issuing theFormat of Financial Statements of General Enterprises for 2019 (《财政部关于修订印发 2019 年度一般企业财务报表格式的通知》) (Cai Kuai (2019) No.6) in May 2019. The Company and its subsidiarieshave started to implement the above amendments to the Accounting Standards for Business Enterprisesand the Notice, and adjusted the relevant contents of accounting policies and financial statementsaccordingly since 1 January 2019.

The Company and its subsidiaries prepared the 2019 financial statements in accordance with thefinancial statements format specified in Cai Kuai (2019) No. 6, and changed the presentation of relevantfinancial statements using the retrospective adjustment method.

139 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

The impact of the related presentation adjustment on the consolidated balance sheet at the beginningof the period is as follows:

Book value on Presentation Book value

Items 31 December impact of Items on 1 January

2018 (Before financial 2019(After

adjustment) statement adjustmen)

Bills receivable and accounts receivable 24,652,130,810.52 -24,652,130,810.52 Not Applicable -

Not Applicable 14,220,937,323.02 Bills receivable 14,220,937,323.02

Not Applicable 10,431,193,487.50 Accounts 10,431,193,487.50

receivable

Bills payable and accounts payable 47,385,218,141.38 -47,385,218,141.38 Not Applicable -

Not Applicable 19,626,099,061.60 Bills payable 19,626,099,061.60

Not Applicable 27,759,119,079.78 Accounts 27,759,119,079.78

payable

The impact of the related presentation adjustment on the parent company's opening balance sheet isas follows:

Book value on Presentation Book value

Items 31 December impact of Items on 1 January

2018 (Before financial 2019 (After

adjustment) statement adjustment)

Bills receivable and accounts receivable 222,622,017.43 -222,622,017.43 Not Applicable -

Not Applicable 222,622,017.43 Accounts 222,622,017.43

receivable

Bills payable and accounts payable 334,747,358.40 -334,747,358.40 Not Applicable -

Not Applicable 334,747,358.40 Accounts 334,747,358.40

payable

(2). Significant changes on accounting estimates

□Applicable √Not Applicable

(3). Adjustment to relevant items in the financial statements at the beginning of the year inwhich the new Financial Instrument Standard, New Revenue Standards and New Standards onLeases are initially implemented

□Applicable √Not Applicable

(4). Explanation on retroactive adjustments to comparative data in the previous periodsupon initial adoption of New Financial Instrument Standard and New Lease Standard□Applicable √Not Applicable

29. Others

□Applicable √Not Applicable

VI. Taxation

1. Main tax categories and rates

Main tax categories and rates

√Applicable □Not Applicable

Tax categories Basis of taxation Tax rate

Value-added tax Taxable revenue from sales of goods or 6%, 9%, 13%

rendering services

City maintenance Circulation Taxes payable 7%

and construction tax

EIT Taxable income Statutory tax rate or preferential rates

as follows

140 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(Local) Education Circulation Taxes payable 1%, 2%, 3%

surcharge

Disclosure of tax entities with different EIT rates

□Applicable √Not Applicable

2. Preferential tax

√Applicable □Not Applicable

Companies subjected to preferential tax:

Name of company Tax rate Preferential tax

Haier Smart Home Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Refrigerator Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Intelligent Electronics Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Special Refrigerator Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Dishwasher Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Special Freezer Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Intelligent Home Appliance Technology 15% entitled to the preferential taxation policies as

Co., Ltd. a hi-tech enterprise

Wuhan Haier Electronics Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Wuhan Haier Freezer Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Hefei Haier Refrigerator Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Hefei Haier Air-conditioning Co., Limited 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Zhengzhou Haier Air-conditioning Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Shenyang Haier Refrigerator Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Air-Conditioner Electronics Co.,Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Moulds Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Meier Plastic Powder Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Hai Gao Design and Manufacture Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Hairi Hi-Tech Model Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier (Jiaozhou) Air-conditioning Co.,Limited 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Beijing Haier Guangke Digital Technology Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Intelligent Technology Development Co., 15% entitled to the preferential taxation policies as

Ltd. a hi-tech enterprise

Foshan Haier Freezer Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Industry Intelligence Research Institute 15% entitled to the preferential taxation policies as

Co., Ltd. a hi-tech enterprise

Qingdao Haier Central Air Conditioning Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Air Conditioner Gen Corp., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Household Appliance Technology and 15% entitled to the preferential taxation policies as

Equipment Research Institute a hi-tech enterprise

Beijing ASU Tech Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

141 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Haier U+smart Intelligent Technology (Beijing) Co.,Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Beijing Zero Micro Technology Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Hefei Haier Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Jiaonan Haier Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Drum Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Foshan Shunde Haier Electric Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Economic and Technological Development 15% entitled to the preferential taxation policies as

Zone Haier Water Heater Co., Ltd. a hi-tech enterprise

Wuhan Haier Water Heater Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Foshan Drum Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Goodaymart Supply Chains Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier New Energy Electric Appliance Co.,Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Foshan Shunde Haier Intelligent Electronics Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Washing Appliance Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Goodaymart Lexin Cloud Technology Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Hefei Haier Drum Washing Machine Co., Ltd. 15% entitled to the preferential taxation policies as

a hi-tech enterprise

Qingdao Haier Technology Co., Ltd. 10% significant software enterprise tax

preferential

Wuhan Haier Energy and Power Co., Ltd. 10% entitled to the preferential policies as a

microenterprise

Qingdao Haier Zhiyan Investment Management Co.,Ltd. 10% entitled to the preferential policies as a

microenterprise

Chongqing Haier Electronics Sales Co., Ltd. and some entitled to the preferential taxation policies

Western companies 15% under the Western Development initiative of

the PRC

Chongqing Xin Ri Ri Shun Electric Sales Co., Ltd. And entitled to the preferential taxation policies

some Western companies 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Air-conditioning Co., Ltd. 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Refrigeration Appliance Co., Ltd. 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Guizhou Haier Electronics Co., Ltd. 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Precision Plastic Co., Ltd. 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Intelligent Electronics Co., Ltd. 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Washing Machine Co., Ltd 15% under the Western Development initiative of

the PRC

entitled to the preferential taxation policies

Chongqing Haier Water Heater Co., Ltd 15% under the Western Development initiative of

the PRC

142 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

entitled to the preferential taxation policies

Chongqing Haier Drum Washing Machine Co., Ltd 15% under the Western Development initiative of

the PRC

VII. Explanatory Notes for Items in Consolidated Financial Statements

Unless otherwise specified, the following closing balance refers to the amount as of 30 June 2019.The opening balance refers to the amount as of 31 December 2018. The amount for the current periodrefers to the amount in the period from 1 January to 30 June 2019. The amount of the previous periodrefers to the amount of the period from 1 January to 30 June 2018.

1. Monetary funds

√ Applicable □ Not Applicable Unit and Currency: RMB

Items Closing balance Opening balance

Cash on hand 1,879,695.70 1,380,614.79

Cash in bank 32,481,704,511.35 35,483,724,835.69

Other cash balances 1,251,459,451.18 1,971,249,956.80

Total 33,735,043,658.23 37,456,355,407.28

Including: total amount deposit 8,103,894,274.56 9,093,415,529.92

overseas

Other explanation:

The cash deposited in Haier Group Finance Co., Ltd. was RMB12,848,045,762.26 on 30 June 2019,the balance of which included a fixed deposit of RMB1,816,600,000.00. The investment fund in the

closing balance of other cash balances was RMB328,933,304.59, deposit in third party payment

platform was RMB134,849,080.72 and the security deposit was RMB787,677,065.87.

2. Financial assets held for trading

Items Closing balance Opening balance

Foreign exchange contracts 22,386,862.99 188,677,068.41

Short-term wealth management products 936,485,756.72 1,567,648,908.00

Investment in other equity instruments 26,966,995.96 19,322,411.35

Total 985,839,615.67 1,775,648,387.76

3. Derivative financial assets

√ Applicable □ Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

cash flow hedging-Interest rate swap 3,990,489.05 57,228,769.39

agreement

Foreign exchange contracts 66,875,017.62 39,494,394.98

Total 70,865,506.67 96,723,164.37

4. Bills receivable

(1). Classification of the bills receivable

√ Applicable □ Not Applicable

Unit and Currency: RMB

143 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Items Closing balance Opening balance

Bank acceptance bills 1,038,018,601.14 837,437,547.70

Commercially acceptance bills 13,488,953,370.80 13,383,499,775.32

Total 14,526,971,971.94 14,220,937,323.02The Bills receivable pledged by the Company at the end of the period was RMB12,497,904,298.50.

(2). Classifation and disclosure according to the method of drawing bad debts

□ Applicable √ Not Applicable

5. Accounts receivable

① Accounts receivable are disclosed by aging as follows:

Aging Closing balance Opening balance

Within one year 14,317,298,758.44 10,263,880,759.15

1-2 years 239,747,125.61 271,695,855.39

2-3 years 124,418,317.67 103,360,570.79

Over 3 years 139,586,013.49 136,030,844.12

Accounts receivable balance 14,821,050,215.21 10,774,968,029.45

Allowance for bad debts 406,590,408.47 343,774,541.95

Accounts receivable, net 14,414,459,806.74 10,431,193,487.50

② The total amount of the top 5 accounts receivable at the end of the period is

RMB3,062,968,632.66, accounting for 20.67% of the book balance of accounts receivable.

③ Changes in bad debts of accounts receivable in the current period:

Increase for the period Decrease for the period

Items Opening Write-off/ Closing

balance Provision Other Reversal other balance

movement movement

Allowanc

e 343,774,541.95 99,026,080.61 124,275,603.66 135,342,821. 25,142,996.51 406,590,408.47

for bad 24

debts

④ Actual write-off of accounts receivable in the current period

The amount of accounts receivable actually written off in the current period is RMB31,892,623.69,

and there is no important bad debt write-off of accounts receivable.

⑤ The company's accounts receivable that were terminated due to the transfer of financial assets in

the current period.

In the current period, the amount of accounts receivable that the company terminated due to the

transfer of financial assets was RMB5,615,416,345.64, and the transfer method was selling-type

factoring/asset securitization.

⑥ Current limited accounts receivable

The amount of accounts receivable pledged at the end of the period is RMB1,233,521,193.34.

6. Prepayments

(1)Prepayments are disclosed by aging as follows:

Aging Closing balance Opening balance

Within one year 500,856,261.77 519,750,663.00

1-2 years 171,483,118.38 33,047,876.47

144 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2-3 years 17,363,120.39 39,033,032.18

Over 3 years 12,452,185.89 2,723,443.35

Total 702,154,686.43 594,555,015.00

(2) The amount of the top 5 in the prepayments at the end of the period totalsRMB240,280,485.73, which accounts for 34.22% of the prepayment balance.

7. Other receivables

Presentation

√ Applicable □ Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Interest receivable 298,632,646.33 228,701,210.90

Dividend receivable 99,275,355.94 4,524,472.84

Other receivables 1,857,411,754.34 1,393,750,181.24

Total 2,255,319,756.61 1,626,975,864.98

Other explanation:

□ Applicable √ Not Applicable

(1)Interest receivable

Closing balance Opening balance

Aging

Book value balance Proportion Book value balance Proportion

Within one year 277,268,646.34 92.85% 173,671,073.91 75.94%

1-2 years 21,363,999.99 7.15% 55,030,136.99 24.06%

Total 298,632,646.33 100.00% 228,701,210.90 100.00%

(2)Dividend receivable

Closing balance Opening balance

Aging

Book value balance Proportion Book value balance Proportion

Within one year 94,750,883.10 95.44%

1-2 years

2-3 years

Over 3 years 4,524,472.84 4.56% 4,524,472.84 100.00%

Total 99,275,355.94 100.00% 4,524,472.84 100.00%Other receivables

(3)Other receivables

① Other receivables are disclosed by aging as follows:

Aging Closing balance Opening balance

Within one year 1,465,188,290.23 1,312,078,849.50

1-2 years 368,920,640.51 49,455,084.68

145 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2-3 years 45,815,367.89 31,974,245.15

Over 3 years 50,638,515.77 76,587,635.07

Other receivables balance 1,930,562,814.40 1,470,095,814.40

Allowance for bad debts 73,151,060.06 76,345,633.16

Other receivables, net 1,857,411,754.34 1,393,750,181.24

② The total amount of the top 5 other receivables at the end of the period is RMB407,279,879.25,

which accounts for 21.10% of the book balance of other receivables.

③ Changes in bad debt provision for other receivables in the current period

Opening Increase for the period Decrease for the period Closing

Items balance Other Write-off/ other balance

Provision movement Reversal movementAllowanc

e for bad 76,345,633.16 2,138,750.13 591,011.56 3,597,614.89 2,326,719.90 73,151,060.06

debts

④ Other receivables written off during the period

The amount of other receivables actually written off in the current period is RMB2,202,035.59, andno significant other receivables are written off for bad debts. Other receivables mainly include deposits,quality guarantees, employee loans, tax refunds, and advance payments, etc.

8. Inventories

(1)Details of Inventories

Closing balance Opening balance

Items Impairment Impairment

Book value balance provision Book value balance provision

Raw material 3,043,632,633.57 112,607,169.18 2,530,152,656.33 90,663,625.24

Work in progress 150,075,160.43 197,994,231.57

Finished goods 21,518,156,053.64 731,730,363.67 20,518,186,150.85 778,478,291.98

Total 24,711,863,847.64 844,337,532.85 23,246,333,038.75 869,141,917.22

(2)Provision for decline in value of inventories

Opening Increase for the period Decrease for the period

Items balance Other Write-off/ other Closing balance

Provision movement Reversal movementRaw

materi 90,663,625.24 22,910,130.98 16,557,255.28 3,352,733.66 14,171,108.66 112,607,169.18

al

Finish

ed 778,478,291.98 292,168,509.58 76,690,196.95 61,841,476.83 353,765,158.01 731,730,363.67

goods

Total 869,141,917.22 315,078,640.56 93,247,452.23 65,194,210.49 367,936,266.67 844,337,532.85

9. Contract assets

Items Closing balance Opening balance

Contract assets 489,724,604.83 456,781,406.54

Total 489,724,604.83 456,781,406.54

10. Assets held for sale

146 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Items Closing balance Opening balance

7.71% equity of Shengfeng Logistics 106,010,000.00 106,010,000.00

Group Co., Ltd

Assets in Shanghai Guangfulai Co., Ltd. 18,801,586.11 38,081,213.39

Others 1,858,138.98

Total 126,669,725.09 144,091,213.39In 2018, Haier Electronics Group Co., Ltd., a subsidiary of the Company, agreed to sell all of its58.08% shares held by Shengfeng Logistics Group Co., Ltd in RMB798,354,000, of which 50.37% wasdisposed of in 2018, and the remaining 7.71% was planned to be disposed of in 2019. The fair value ofthe remaining shares is RMB106,010,000, which will be transferred to the account for assets held forsale at the end of the period.

In 2018, Haier Electronics Group Co., Ltd., a subsidiary of the company, agreed to sell all of its67.45% shares held by Shanghai Guangfulai Co., Ltd. (indirect subsidiary) in RMB5,059,000. Thetransaction plan was completed in 2019. At the end of the period, the assets of Shanghai GuangfulaiCo., Ltd. will be transferred to the account for holding assets for sale.11. Other current assets

(1)Details

Closing balance Opening balance

Items Book value Impairment Book value Impairment

balance provision balance provision

Bank deposit for 4,961,057,059.11 2,838,231,840.90

financial products

Taxes to be deducted 1,353,318,888.11 5,489,980.82 1,658,820,457.08 5,489,980.82

Return cost receivable 325,113,583.34 170,862,153.66 322,726,264.39 162,998,678.53

Others 710,500,282.49 428,589,006.65

Total 7,349,989,813.05 176,352,134.48 5,248,367,569.02 168,488,659.35(2)Impairment provision

Increase for the period Decrease for the period

Items Opening Write-off / Closing balance

balance Provision Other Reversal other

movement movement

Deductible 5,489,980.82 5,489,980.82

input tax

Return cost 162,998,678.53 7,863,475.13 170,862,153.66

receivables

Total 168,488,659.35 7,863,475.13 176,352,134.48

12. Long-term equity investments

√ Applicable □ Not Applicable

Increase/decrease for the period

Opening Investment Adjustment Declaration

Investees Investment profit in other Other of cash

balance changes in

increase recognized comprehensive equity dividends or

under equity income profits

147 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

method

Associate:

Haier Group

Finance Co., 5,405,958,339.07 343,456,216.41 -68,157.26 -126,000,000.00

Ltd.

Bank of

Qingdao Co., 2,592,829,635.67 124,391,880.94 -2,196,826.43 -89,573,156.06 -77,995,640.00

Ltd.

Hefei Feier

Smart

Technology 4,000,000.00

Co.,

Ltd.

Wolong

Electric 123,281,802.39 4,246,034.28

(Jinan) Motor

Co., Ltd.

Qingdao

Haier

Software 18,193,519.15

Investment

Co., Ltd.

Qingdao

Haier SAIF

Smart Home

Industry 362,380,221.29 13,859,260.69

Investment

Center

(Limited

Partnership)

Mitsubishi

Heavy

Industries

Haier 622,643,614.66 41,493,411.38

(Qingdao)

Air-condition

ers Co., Ltd.

Qingdao

Haier Carrier

Refrigeration 332,723,126.50 1,330,936.46

Equipment

Co., Ltd.

Beijing Mr.

Hi Network

Technology 3,757,759.75

Company

Limited

Qingdao

Haier 555,084,616.71 -52,247,454.76

multimedia

Co., Ltd.

Beijing

Xiaobei 2,687,341.82 -

Technology

Co., Ltd.

Beijing ASU

Tech Co., 30,062,027.79 -4,991,335.21 -

Ltd.

Shenzhen

Genyuan

Environment 7,849,992.00 -

al Protection

Technology

Co., Ltd.

Qingdao

HBIS New

Material 262,284,357.65 9,015,140.24

Technology

Co., Ltd.

Qingdao

Haimu

Investment 2,078,341.37 -

Management

Co., Ltd.

Qingdao 48,001,070.25 -

Haimu Smart

148 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Home

Investment

Partnership

(Limited

Partnership)

Guangzhou

Heying

Investment 176,064,809.68 -222,969.30

Partnership

(Limited

Partnership)

Qingdao Java

Cloud

Network 1,216,581.32

Technology

Co., Ltd.

Beijing

Cangxiaowei

Supply Chain 791,316.97

Management

Co., Ltd.

Others 37,979,437.49 -4,730,841.67

Hunan

Electronic 74,799,791.29 3,412,015.18 2,438,569.52 -275,121.00

Co., Ltd.

HNR

Company 91,076,038.80 10,245,709.09 11,492,764.45

(Private)

Limited

HPZ 88,800,332.55 -673,739.21 335,704.84

LIMITED

CONTROLA

DORAMABE 3,173,153,937.00 53,100,830.79 7,639,020.96 -32,367,659.70

S.A.deC.V.

MIDDLEEAS

TAIRCONDI

TIONINGCO 18,208,123.96 923,811.80 48,422.11

MPANY,LIM

ITED

Total 13,993,926,697.64 41,979,437.49 542,608,907.11 19,689,498.19 -89,573,156.06 -236,638,420.70

(Continued)

Increase/decrease for the Impairment

period provision

Investees Other Disposal Closing balance Closing

movement of the balance

investment

Associate:

Haier Group Finance Co., Ltd. 5,623,346,398.22

Bank of Qingdao Co., Ltd. 2,547,455,894.12

Hefei Feier Smart Technology Co., Ltd. 4,000,000.00

Wolong Electric (Jinan) Motor Co., Ltd. 127,527,836.67

Qingdao Haier Software Investment Co., Ltd. 18,193,519.15

Qingdao Haier SAIF Smart Home Industry 376,239,481.98

Investment Center (Limited Partnership)

Mitsubishi Heavy Industries Haier (Qingdao) 664,137,026.04

Air-conditioners Co., Ltd.

Qingdao Haier Carrier Refrigeration Equipment 334,054,062.96 -21,000,000.00

Co., Ltd.

Beijing Mr. Hi Network Technology Company 3,757,759.75 -3,757,759.75

Limited

Qingdao Haier multimedia Co., Ltd. 502,837,161.95

Beijing Xiaobao Technology Co., Ltd. 2,687,341.82 -2,687,341.82

149 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Beijing ASU Tech Co., Ltd. 25,070,692.58

Shenzhen Genyuan Environmental Protection 7,849,992.00

Technology Co., Ltd.

Qingdao HBIS New Material Technology Co., Ltd. 271,299,497.89

Qingdao Haimu Investment Management Co., 2,078,341.37

Ltd.

Qingdao Haimu Zhijia Investment Partnership 48,001,070.25

(Limited Partnership)

Guangzhou Heying Investment Partnership 175,841,840.38

(Limited Partnership)

Qingdao Java Cloud Network Technology Co., Ltd. 1,216,581.32

Beijing Cangxiaowei Supply Chain 791,316.97

Management Co., Ltd.

Others 33,248,595.82

Konan Electronic Co., Ltd. 80,375,254.99

HNR Company (Private) Limited 112,814,512.34

HPZ LIMITED 88,462,298.18

CONTROLADORA MABE S.A.de C.V. 3,201,526,129.05

MIDDLEEAST AIRCONDITIONING COMPANY, 19,180,357.87

LIMITED

Total - - 14,271,992,963.67 -27,445,101.5713. Investment in other equity instruments

(1). Investment in other equity instruments:

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

China Petroleum & Chemical Corporation 1,237,167,273.48 1,261,564,000.00

Others 142,025,768.71 138,752,460.34

Total 1,379,193,042.19 1,400,316,460.34

(2)Dividends from investment in other equity during current period:

Items Amount for the current period

China Petroleum & Chemical Corporation 18,401,836.39

Others 20,145.67

Total 18,421,982.0614. Other non-current financial assets

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Long-term wealth management products 328,487,584.54 327,358,825.57

150 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Total 328,487,584.54 327,358,825.5715. Investment properties

(1)The changes in investment properties measured at cost this year are as follows:

Items Houses and buildings Land use rights TotalI. Original book value

1.Opening balance 45,999,732.78 2,128,550.51 48,128,283.29

2.Increase for the period

(1) Outsourced

(2) Inventories\fixed

assets\construction in progress

transferred in

(3) Increase in business combinations

3. Decrease for the period

(1)Disposal

(2)Disposal of subsidiary

(3)Other transferring out

4. Converted difference in foreign 12,793.16 12,793.16

currency statements

5. Closing balance 46,012,525.94 2,128,550.51 48,141,076.45

II. Accumulated depreciation and

accumulated amortization

1.Opening balance 16,739,224.15 509,911.72 17,249,135.87

2.Increase for the period

(1)Provision or amortization 884,079.59 20,118.11 904,197.70

3. Decrease for the period

(1)Disposal

(2)Disposal of subsidiary

(3)Other transferring out

4. Converted difference in foreign 9,094.65 9,094.65

currency statements

5. Closing balance 17,632,398.39 530,029.83 18,162,428.22

III. Impairment provision

1.Opening balance

2.Increase for the period

(1)Provision

3、Decrease for the period

(1)Disposal

(2)Disposal of subsidiary

(3)Other transferring out

4. Converted difference in foreign

151 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

currency statements

5. Closing balance

IV. Book Value

1. Closing book value 28,380,127.55 1,598,520.68 29,978,648.23

2. Opening book value 29,260,508.63 1,618,638.79 30,879,147.42

(2)The depreciation and amortization amount charge for the period is RMB904,197.70.(3)The recoverable amount of the investment real estate of the Company at the end of the period isnot less than its book value, so no provision for impairment is made.16. Fixed assets

Presentation

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Fixed assets 18,763,290,574.73 17,319,507,210.44

Disposals of fixed assets 52,324,012.62 131,670.93

Total 18,815,614,587.35 17,319,638,881.37

(1) Fixed assets:

Items Houses and buildings Production equipment Transportation

equipment

I. Original book value

1.Opening balance 9,335,094,391.54 18,902,226,400.84 233,560,448.01

2.Increase for the period

(1)Acquisition 235,311,272.15 237,218,734.48 1,555,468.04

(2)Construction in progress 233,006,941.41 1,135,345,885.15 13,283,394.77

transferred in

(3)Increase in business 1,029,171,666.47 1,131,316,810.13 21,696,615.52

combinations

3.Decrease for the period

(1)Disposal or Write-off 187,594,576.60 703,932,293.48 6,142,986.09

(2)Disposal of subsidiary 10,707,659.82

(3)Transfer to hold for sale

4. Converted difference in 45,116,100.55 96,418,737.70 -148,921.71

foreign currency statements

5.Closing balance 10,690,105,795.52 20,787,886,615.00 263,804,018.54

II. Accumulated depreciation

1.Opening balance 2,974,767,554.44 8,633,379,050.57 150,492,577.67

2.Increase for the period

(1)Provision 238,601,240.17 1,049,347,585.22 12,567,759.03

(2)Increase in business 411,084,801.78 778,451,036.23 17,166,864.92

combinations

3.Decrease for the period

152 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(1)Disposal or write-off 126,013,212.89 446,414,787.55 4,833,851.92

(2)Disposal of subsidiary 4,902,299.50

(3)Transfer to hold for sale

4. Converted difference in 15,586,936.65 43,476,236.32 33,839.20

foreign currency statements

5.Closing balance 3,514,027,320.15 10,053,336,821.29 175,427,188.90

III. Impairment provision

1.Opening balance 32,900,098.06 16,389,633.59 2,132.47

2.Increase for the period

(1)Provision

(2)Increase in business 11,173,363.21 78,041.16

combinations

3.Decrease for the period

(1)Disposal or Write-off 13,626,928.39

(2)Disposal of subsidiary

(3)Transfer to hold for sale

4. Converted difference in 1,182,964.60 368,868.62 26,578.86

foreign currency statements

5.Closing balance 34,083,062.66 14,304,937.03 106,752.49

IV. Book Value

1.Closing book value 7,141,995,412.71 10,720,244,856.68 88,270,077.15

2.Opening book value 6,327,426,739.04 10,252,457,716.68 83,065,737.87

(Continued)

Items Office furniture Others TotalI. Original book value

1.Opening balance 538,058,650.92 857,902,128.17 29,866,842,019.48

2.Increase for the period

(1)Acquisition 52,904,865.61 43,128,461.18 570,118,801.46

(2)Construction in progress 43,105,790.68 109,042,090.36 1,533,784,102.37

transferred in

(3)Increase in business 116,727,054.31 825,983,835.92 3,124,895,982.35

combinations

3.Decrease for the period

(1)Disposal or Write-off 17,008,539.82 38,532,478.11 953,210,874.10

(2)Disposal of subsidiary 97,339.00 10,804,998.82

(3)Transfer to hold for sale

4. Converted difference in 5,107,955.75 -7,717,058.13 138,776,814.16

foreign currency statements

5.Closing balance 738,798,438.45 1,789,806,979.39 34,270,401,846.90

II. Accumulated depreciation

1.Opening balance 309,994,211.94 425,494,667.04 12,494,128,061.66

153 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

2.Increase for the period

(1)Provision 48,555,251.39 79,892,689.11 1,428,964,524.92

(2)Increase in business 81,252,884.17 797,741,017.35 2,085,696,604.45

combinations

3.Decrease for the period

(1)Disposal or Write-off 11,260,132.71 21,689,983.30 610,211,968.37

(2)Disposal of subsidiary 44,427.64 4,946,727.14

(3)Transfer to hold for sale

4. Converted difference in -652,979.41 -5,422,879.95 53,021,152.81

foreign currency statements

5.Closing balance 427,844,807.74 1,276,015,510.25 15,446,651,648.33

III. Impairment provision

1.Opening balance 153,069.07 3,761,814.19 53,206,747.38

2.Increase for the period

(1)Provision

(2)Increase in business 7,836,595.33 19,087,999.70

combinations

3.Decrease for the period

(1)Disposal or Write-off 80,230.55 13,707,158.94

(2)Disposal of subsidiary

(3)Transfer to hold for sale

4. Converted difference in 5,627.64 287,995.98 1,872,035.70

foreign currency statements

5.Closing balance 78,466.16 11,886,405.50 60,459,623.84

IV. Book Value

1.Closing book value 310,875,164.55 501,905,063.64 18,763,290,574.73

2.Opening book value 227,911,369.91 428,645,646.94 17,319,507,210.44

(2)In the current period, the balance of the construction in progress transferred to the originalvalue of the fixed assets is total RMB1,533,784,102.37.(3)The amount of fixed assets mortgage at the end of the period is RMB62,265,570.11.(4)Disposals of fixed assets

Reason for

Items Closing balance Opening balance transferring to

disposal

Air conditioner Project 52,323,543.60 Demolition

Europe Trade Project 469.02 Scrap cleanup

Wuhan Energy Project 131,670.93 Scrap cleanup

Total 52,324,012.62 131,670.93

17. Construction in progress

Presentation

√Applicable □Not Applicable Unit and Currency: RMB

154 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Items Closing balance Opening balance

Construction in progress 5,195,727,696.62 3,873,492,230.24

Construction materials

Total 5,195,727,696.62 3,873,492,230.24

(1)Balance of construction in progress

Closing balance Opening balance

Items Impairment Impairment

Book balance provision Book Value Book balance provision Book ValueGoodaymart

Logistics Supply 625,066,753.12 625,066,753.12 522,865,557.84 522,865,557.84

Chain

Tianjin ririxin 594,207,744.83 594,207,744.83 386,754,022.65 386,754,022.65

Qingdao

Washing 570,339,188.79 570,339,188.79 352,667,044.20 352,667,044.20

appliance

Qingdao Special

Refrigeration 568,522,368.47 568,522,368.47 409,431,912.37 409,431,912.37

Appliances

America GEA 226,041,033.57 9,469,292.10 216,571,741.47 328,202,831.68 23,930,767.80 304,272,063.88

Russia washing 192,009,870.71 192,009,870.71 14,943,410.87 14,943,410.87

machine

Laiyang Smart

kitchen 188,564,540.99 188,564,540.99 64,617,334.97 64,617,334.97

Appliances

New Zealand 147,803,611.76 147,803,611.76 113,126,924.77 113,126,924.77

FPA

Foshan roller 131,876,890.87 131,876,890.87 36,614,210.76 36,614,210.76

Qingdao Smart

kitchen 130,106,851.63 130,106,851.63 138,005,302.27 138,005,302.27

Appliances

Chongqing roller 119,356,686.28 119,356,686.28 114,749,141.48 114,749,141.48

Qingdao Smart 106,151,742.61 106,151,742.61 51,044,968.22 51,044,968.22

appliance

Hefei drum

washing 99,521,882.89 99,521,882.89 97,615,033.96 97,615,033.96

machine

Shunde washing 82,139,236.87 82,139,236.87 12,298,279.28 12,298,279.28

machine

Qingdao Air

Conditioning 72,937,402.74 72,937,402.74 14,567,091.58 14,567,091.58

Electronics

Haier 60,055,285.36 60,055,285.36 53,552,923.14 53,552,923.14

Dishwasher

Hefei washing 58,062,625.35 58,062,625.35 36,571,889.23 36,571,889.23

machine

Vietnam 55,812,115.67 55,812,115.67 31,642,712.64 31,642,712.64

appliance

Qingdao Haier 53,527,690.74 53,527,690.74 34,451,440.98 34,451,440.98

refrigerator

Europe CANDY 52,362,018.16 52,362,018.16

Hefei air

conditioner 48,516,076.18 48,516,076.18 95,282,014.97 95,282,014.97

others 1,022,215,371.13 1,022,215,371. 988,418,950.18 988,418,950.18

13

155 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Total 5,205,196,988.72 9,469,292.10 5,195,727,696. 3,897,422,998.04 23,930,767.80 3,873,492,230.2

62 4

(2)Details of significant changes of construction in progress for the period

Project Opening Increase Transfer to Other Exchange Closing Source of

name balance for fixed decrease difference balance fund

the period assets s

Goodaymart

Logistics 522,865,557 179,085,288. 76,884,092.9 625,066,753 Self-fundi

Supply .84 22 4 .12 ng

Chain

Tianjin 386,754,022 211,283,349. 3,829,626.82 594,207,744 Self-fundi

ririxin .65 00 .83 ng

Qingdao 352,667,044 232,806,465. 15,134,321.1 570,339,188 Self-fundi

Washing .20 75 6 .79 ng

appliance

Qingdao

Special 409,431,912 162,387,398. 3,296,942.53 568,522,368 Self-funding and

Refrigeration .37 63 .47 fund-raising

Appliances

America GEA 328,202,831 527,539,419. 629,384,080. -317,137.45 226,041,033 Self-fundi

.68 57 23 .57 ng

Russia washing 14,943,410. 167,090,946. 202,912.03 10,178,424. 192,009,870 Self-funding and

machine 87 95 92 .71 fund-raising

Laiyang Smart 64,617,334. 123,947,206. 188,564,540 Self-funding and

kitchen appliances 97 02 .99 fund-raising

New Zealand FPA 113,126,924 34,049,378.3 627,308.61 147,803,611 Self-fundi

.77 8 .76 ng

Foshan roller 36,614,210. 97,870,199.8 2,607,519.69 131,876,890 Self-fundi

76 0 .87 ng

Qingdao Smart 138,005,302 48,831,888.5 56,730,339.1 130,106,851 Self-funding and

kitchen appliances .27 1 5 .63 fund-raising

Chongqing roller 114,749,141 21,998,753.9 17,391,209.1 119,356,686 Self-fundi

.48 2 2 .28 ng

Qingdao Smart 51,044,968. 58,802,336.1 3,695,561.80 106,151,742 Self-fundi

appliances 22 9 .61 ng

Hefei drum 97,615,033. 99,521,882. Self-fundi

washing 96 5,846,454.98 3,939,606.05 89 ng

machine

Shunde washing 12,298,279. 85,808,646.7 15,967,689.1 82,139,236. Self-fundi

machine 28 4 5 87 ng

Qingdao air 14,567,091. 99,753,181.0 41,382,869.9 72,937,402. Self-fundi

conditioning 58 8 2 74 ng

electronics

Haier dishwasher 53,552,923. 20,645,256.8 14,142,894.5 60,055,285. Self-fundi

14 1 9 36 ng

Hefei washing 36,571,889. 25,591,369.4 4,100,633.35 58,062,625. Self-fundi

machine 23 7 35 ng

Vietnam appliance 31,642,712. 24,817,186.2 647,783.17 55,812,115. Self-funding and

64 0 67 fund-raising

Qingdao Haier 34,451,440. 34,362,543.2 15,286,293.4 53,527,690. Self-fundi

refrigerator 98 1 5 74 ng

Europe CANDY 79,269,762.0 24,963,453.4 -1,944,290.4 52,362,018. Self-fundi

2 5 1 16 ng

Hefei air 95,282,014. 23,000,057.1 69,765,995.9 48,516,076. Self-funding and

conditioner 97 1 0 18 fund-raising

others 988,418,950 563,358,666. 534,430,277. 216,384.2 5,084,416.6 1,022,215,3 Self-fundi

.18 40 87 7 9 71.13 ng

Total 3,897,422,9 2,828,145,75 1,533,784,10 216,384.2 13,628,722. 5,205,196,9

98.04 4.96 2.37 7 36 88.72

(3)Impairment of construction in progress

Project name Opening Increase for Transfer to Other Exchange Closing

balance the period fixed assets decrease differences Balance

156 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

America GEA 23,930,767.80 14,131,636.29 -329,839.41 9,469,292.10

project

18. Right-of-use assets

Converted

Opening Increase for the Decrease for difference in Closing balance

Items balance period the period foreign

currency

statements

Original book value 3,628,717,407.88 32,953,292.10 3,661,670,699.98

Accumulated depreciation 373,529,944.12 1,676,045.37 375,205,989.49

Impairment provision

Book value 3,255,187,463.76 31,277,246.73 3,286,464,710.49

The categories of the right-of-use assets of the Company are mainly buildings used for offices andwarehouses.

19. Intangible assets

(1). Intangible assets

√Applicable □Not Applicable

Items Proprietary technology Licenses use rights Land use rights

I. Original book value

1.Opening balance 1,593,770,408.63 3,919,106,283.71 2,076,393,458.34

2.Increase in the current period

(1)Purchase 17,586,343.82 23,377,366.53 222,419,495.67

(2)Internal research and 49,763,458.91

development

(3)Increase in business 261,754,149.78 84,322,584.62 314,293,405.09

combination

3.Decrease for the current period

(1)Disposal

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in 8,605,781.15 6,134,924.87 -168,811.55

foreign currency statements

5.Closing balance 1,931,480,142.29 4,032,941,159.73 2,612,937,547.55

II. Accumulated

amortization

1.Opening balance 543,957,689.12 267,233,764.32 209,708,139.26

2.Increase in the current period

(1)Provision 79,305,532.80 72,057,562.59 23,895,426.78

(2)Increase in business 13,087,711.00 73,639,382.30

combination

3.Decrease for the current period

(1)Disposal

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in 10,856,957.13 1,142,386.21 235,367.90

foreign currency statements

157 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

5.Closing balance 647,207,890.05 414,073,095.42 233,838,933.94

III. Impairment provision

1.Opening balance

2.Increase in the current period

(1)Provision

3.Decrease for the current period

(1)Disposal

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in

foreign currency statements

5.Closing balance

IV. Book Value

1.Closing balance 1,284,272,252.24 3,618,868,064.31 2,379,098,613.61

2.Opening balance 1,049,812,719.51 3,651,872,519.39 1,866,685,319.08

(Continued)

Items Trademark rights Application management Total

software and others

I. Original book value

1.Opening balance 1,253,711,579.88 2,334,774,502.05 11,177,756,232.61

2.Increase in the current period

(1)Purchase 34,583,157.93 297,966,363.95

(2)Internal research and 43,132,972.57 92,896,431.48

development

(3)Increase in business 1,426,152,500.43 130,871,096.28 2,217,393,736.20

combination

3.Decrease for the current period

(1)Disposal 12,285,769.10 12,285,769.10

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in 23,467,737.41 5,382,923.07 43,422,554.95

foreign currency statements

5.Closing balance 2,703,331,817.72 2,536,458,882.80 13,817,149,550.09

II. Accumulated

amortization

1.Opening balance 1,978.77 937,646,831.47 1,958,548,402.94

2.Increase in the current period

(1)Provision 3,957.55 191,765,000.09 367,027,479.81

(2)Increase in business 64,060,552.70 150,787,646.00

combination

3.Decrease for the current period

(1)Disposal 947,515.73 947,515.73

158 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in 2,243,124.60 14,477,835.84

foreign currency statements

5.Closing balance 5,936.32 1,194,767,993.13 2,489,893,848.86

III. Impairment provision

1.Opening balance 9,965,107.96 9,965,107.96

2.Increase in the current period

(1)Provision

3.Decrease for the current period

(1)Disposal

(2)Disposal subsidiary

(3)Transfer to hold for sale

4. Converted difference in

foreign currency statements

5.Closing balance 9,965,107.96 9,965,107.96

IV. Book Value

1.Closing balance 2,703,325,881.40 1,331,725,781.71 11,317,290,593.27

2.Opening balance 1,253,709,601.11 1,387,162,562.62 9,209,242,721.71

At the end of the period, the intangible assets developed through the Company accounted for the10.08% of the original value at the end of the period.

20. Development cost

Decrease for the period Converted

Opening Increase for Included in difference in Closing

Items Confirmed as current foreign

balance the period an intangible profit and currency balance

asset loss statements

91ABD.ERPP 508,299,234.90 104,502,503.22 20,936,855.12 1,962,177.34 593,827,060.34

ROGRAM

Others 30,083,053.43 211,320,331.13 71,959,576.36 98,737,571.83 -1,223,860.71 69,482,375.66

Total 538,382,288.33 315,822,834.35 92,896,431.48 98,737,571.83 738,316.63 663,309,436.0021. Goodwill

Impact of

Items Opening Increase for Decrease for fluctuation in Closing balance

balance the period the period exchange rate

for the period

GEA 20,390,297,236.59 35,090,966.26 20,425,388,202.85

Candy 2,014,258,269.63 -7,777,455.36 2,006,480,814.27

Others 765,255,320.57 21,085,434.41 1,330,969.11 787,671,724.09

Total 21,155,552,557.16 2,035,343,704.04 28,644,480.01 23,219,540,741.21

In the case of a goodwill impairment test, the Group compares the carrying amount of the relevant

asset group or asset group combination (including goodwill) with its recoverable amount. If the

recoverable amount is less than the book value, corresponding difference will be recognized in profit or

159 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

loss. The recoverable amount of the asset group or asset group combination is based on a

management-approved 5-10 year budget, which is then estimated based on discounted future cash flowmethod with a fixed growth rate.

Key assumptions for discounted future cash flow discount method for material goodwill at the endof the period:

Items GEA

Forecast period growth rate 4.84%-5.50%

Forecast period profit rate 5.44%-6.18%

Forecast period 10 years

Stable period growth rate 2%

Discounting rate before tax 10.84%

22. Long-term prepaid expenses

Converted

Items Opening Increase for Amortization Other difference in Closing

balance the period decrease foreign currency balance

statements

Renovation 6,887,635.08 1,304,227.98 984,987.59 7,206,875.47

Improvement

on 167,271,750.20 44,458,178.69 10,472,776.25 660,967.51 769,687.59 201,365,872.72

leased

property

Others 56,603,787.20 8,866,543.81 6,374,007.31 335.14 59,096,658.84

Total 230,763,172.48 54,628,950.48 17,831,771.15 660,967.51 770,022.73 267,669,407.0323. Deferred income tax assets and Deferred income tax liabilities

(1)Deferred income tax assets before elimination

Items Closing balance Opening balance

Provision for assets impairment 267,930,395.42 240,924,037.86

Liabilities 1,485,097,638.43 1,444,791,976.30

Internal unrealized earnings eliminated due 482,114,988.22 464,499,951.47

to combination

Others 812,123,457.39 668,254,961.84

Total 3,047,266,479.46 2,818,470,927.47

(2)Deferred income tax liabilities before elimination

Items Closing balance Opening balance

Increase in valuation of long-term assets due 640,844,817.67 151,412,213.82

to mergers and acquisitions

Disposal of subsidiaries and movement of 95,111,005.09 94,972,688.60

investments in other equity instruments

Withholding income tax of overseas 77,190,532.32 77,190,532.32

enterprises

Depreciation and amortization of assets 1,206,122,832.47 995,433,739.85

Changes of the fair value 27,829,352.84 4,416,607.36

Others 125,929,255.50 84,764,197.15

160 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Total 2,173,027,795.89 1,408,189,979.10

(3)The deferred income tax assets and the deferred income tax liabilities eliminated at the end of

this period is RMB1,248,636,664.25.

24. Other non-current assets

Items Closing balance Opening balance

Prepayments for equipment and land 1,777,731,595.26 2,118,776,080.18

Others 156,299,704.14 206,912,902.38

Total 1,934,031,299.40 2,325,688,982.5625. Short-term borrowings

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Borrowings - secured by pledge 193,371,187.70 359,230,849.08

Borrowings - secured by mortgage 39,424,722.42 46,843,046.04

Borrowings - secured by guarantor 3,406,622,840.88 3,983,541,155.25

Borrowings - unsecured 4,468,718,854.85 1,908,889,842.20

Total 8,108,137,605.85 6,298,504,892.5726. Financial liabilities held for trading

Items Closing balance Opening balance

Forward foreign exchange trading 7,055,018.07 211,934,956.99

contracts

Forward foreign exchange option 6,813,323.34

Total 7,055,018.07 218,748,280.3327. Derivative financial liabilities

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Forward foreign exchange trading 23,360,638.65 24,384,482.19

contracts

Forward commodity contracts 2,967,834.46 11,219,272.35

Cash flow hedging

instruments-Interest rate swap 7,624,052.99

agreement

Total 33,952,526.10 35,603,754.5428. Bills payable

√Applicable □Not Applicable

Unit and Currency: RMB

Categories Closing balance Opening balance

161 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Commercially acceptance bill 2,538,328,070.95 2,402,746,892.66

Bank acceptance bill 15,031,294,802.97 17,223,352,168.94

Total 17,569,622,873.92 19,626,099,061.6029. Accounts payable

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Accounts payable 30,604,644,390.27 27,759,119,079.78

Total 30,604,644,390.27 27,759,119,079.78

The book balance at the end of the period was mainly the unpaid expenditures on material,equipment and labor.

30. Receipts in advance

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Receipts in advance 14,681,466.58

Total 14,681,466.5831. Contract liabilities

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Contract liabilities 3,899,786,072.98 5,482,325,888.59

Total 3,899,786,072.98 5,482,325,888.5932. Payables for staff's remuneration

(1). Payables for staff's remuneration

√Applicable □Not Applicable

Unit and Currency: RMB

Items Opening Increase for the Decrease for the Closing

balance period period balance

I.Short-term remuneration 2,450,735,641.29 10,242,674,095.84 10,299,722,603.69 2,393,687,133.44

II.Post-employment

benefits-defined contribution 29,226,680.54 738,689,444.00 748,552,060.05 19,364,064.49

plan

III.Termination benefits 14,228,664.47 23,689,894.53 12,594,387.02 25,324,171.98

IV.Other welfare due within 157,208,431.75 38,221,361.33 118,987,070.42

one year

Total 2,651,399,418.05 11,005,053,434.37 11,099,090,412.09 2,557,362,440.33

(2). Short-term remuneration

√Applicable □Not Applicable

162 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Unit and Currency: RMB

Items Opening Increase for the Decrease for the Closing

balance period period balance

I.Salaries, bonus, allowance and 1,474,447,812.66 7,099,334,515.27 7,330,653,864.13 1,243,128,463.80

benefit

II.Employee welfare 296,427,580.74 317,017,111.85 169,192,942.42 444,251,750.17

III.Social benefit 159,316,261.40 941,114,664.06 915,784,409.27 184,646,516.19

IV.Housing fund 5,980,242.92 171,237,787.17 170,193,428.78 7,024,601.31

V.Labor union fee and 3,670,855.67 40,039,790.15 41,457,103.09 2,253,542.73

education fee

VI.Short-term compensated 233,150,647.10 116,286,340.33 163,051,274.67 186,385,712.76

leave

Others 277,742,240.80 1,557,643,887.01 1,509,389,581.33 325,996,546.48

Total 2,450,735,641.29 10,242,674,095.84 10,299,722,603.69 2,393,687,133.44

(3). Defined contribution plan

√Applicable □Not Applicable

Unit and Currency: RMB

Items Opening balance Increase for the Decrease for Closing

period the period balance

1.Basic pension insurance 28,741,410.94 708,339,434.12 718,927,481.00 18,153,364.06

2.Unemployment insurance 290,564.70 12,473,221.38 12,550,820.89 212,965.19

3.Enterprise annuity payment 194,704.90 17,876,788.50 17,073,758.16 997,735.24

Total 29,226,680.54 738,689,444.00 748,552,060.05 19,364,064.49

(4). Termination benefits

Items Closing balance Opening balance

Termination compensation 25,324,171.98 14,228,664.47

Total 25,324,171.98 14,228,664.4733. Taxes payable

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

VAT 659,742,443.85 441,010,016.22

Enterprise income tax 1,107,483,693.37 1,184,505,048.56

Individual income tax 37,031,724.98 78,544,332.63

Municipal maintenance tax 7,702,803.05 2,414,582.49

Education surcharge 3,372,871.11 3,839,538.40

The electrical and electronic products waste 64,280,469.50 67,359,180.79

treatment fund

Additional taxes 72,318,354.38 60,768,028.30

Total 1,951,932,360.24 1,838,440,727.3934. Other payables

163 / 226

2019 Interim Report

Haier Smart Home Co., Ltd

Items presented

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Interests payable 94,121,291.76 104,522,208.28

Dividends payable 2,914,608,547.77 162,205,193.05

Other payables 13,404,630,719.58 12,418,950,001.58

Total 16,413,360,559.11 12,685,677,402.91

(1)Interests payable:

Items Closing balance Opening balance

Interest of long-term borrowings 24,011,186.73 57,626,542.89

Interest of short-term borrowings 70,110,105.03 46,895,665.39

Total 94,121,291.76 104,522,208.28

(2)Dividends payable:

Name of company Closing balance Opening balance

BRAVE LION (HK) LIMITED 122,756,874.10 122,756,874.10

Haier Electric Appliances International Co., 441,798,373.22

Ltd.

Haier Group Corporation 376,486,378.16

Qingdao Haier Venture & Investment 60,460,648.56

Information Co., Ltd.

Others 1,913,106,273.73 39,448,318.95

Total 2,914,608,547.77 162,205,193.05

(3)Other payables:

Items Closing balance Opening balance

Other payables 13,404,630,719.58 12,418,950,001.58

Total 13,404,630,719.58 12,418,950,001.58

The book value balance at the end of the period mainly included the incurred but unpaid costs.35. Liabilities held for sale

√Applicable □Not Applicable

Unit and Currency: RMB

Items Closing balance Opening balance

Liabilities of Shanghai Guangfulai Co., Ltd.(上海 14,097,210.09 32,362,267.88

广富来有限公司)

Total 14,097,210.09 32,362,267.88

In 2018, Haier Electric Group Co., Ltd., a subsidiary of the Company, agreed to sell all of its 67.45%shares of Shanghai Guangfulai Co., Ltd.(上海广富来有限公司) (indirect subsidiary) at RMB 5,059,000.The transaction is expected to complete in 2019. At