Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Midea Group Co., Ltd. Report for the Third Quarter of 2014 October 2014 1 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Section I. Important Reminders 1.1 The Board of Directors, the Supervisory Committee as well as all directors, supervisors and senior management staff of Midea Group Co., Ltd. (hereinafter referred to as ―the Company‖) warrant that this report is factual, accurate and complete without any false records, misleading statements or material omission. The Company shall be jointly and severally liable for this. 1.2 All directors have attended the Q3 report review board session 1.3 This report has not been audited by a Certified Public Auditor (CPA) firm. 1.4 Mr. Fang Hongbo, Chairman of the Board and President of the Company, and Ms. Yuan Liqun, (Chief Financial Officer) responsible person for the Company’s financial affairs, have represented and warranted that the financial statements in this report are factual, accurate and complete. This report has been prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail. 2 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Section II. Financial Highlights & Change of Shareholders I. Major accounting data and financial indexes Does the Company adjust retrospectively or restate accounting data of previous years due to changes in accounting policy or correction of any accounting error? □ Yes √ No 30 Sept. 2014 31 Dec. 2013 Increase/decrease (%) Total assets (RMB’000) 115,822,866.87 96,946,024.77 19.47% Net assets attributable to shareholders 38,088,008.32 32,847,431.04 15.95% of the Company (RMB’000) YoY YoY increase/decrease Jul.-Sept. 2014 increase/decrease Jan.-Sept. 2014 (%) (%) Sales revenues (RMB’000) 31,753,306.09 14.19% 109,084,157.93 16.36% Net profit attributable to shareholders of 2,342,823.51 70.86% 8,952,956.27 122.82% the Company (RMB’000) Net profit attributable to shareholders of the Company after extraordinary gains 1,960,777.55 93.17% 8,628,423.12 174.52% and losses (RMB’000) Net cash flows from operating activities -- -- 13,853,704.08 155.29% (RMB’000) Basic EPS (RMB Yuan/share) 0.56 24.44% 2.12 42.28% Diluted EPS (RMB Yuan/share) 0.56 24.44% 2.12 42.28% Weighted average ROE (%) 6.35% 0.16% 25.35% 2.81% Notes: 1. Midea Group granted 15 additional shares for every 10 shares using the capital reserve on 30 Apr. 2014. As required, the EPS for the corresponding period of last year is measured on the basis of the share capital after the increment, which was calculated according to 4.216 billion shares after the increment. 2. Midea Group merged with GD Midea Holding through share issuance and share exchange in Sept. 2013. Pursuant to the accounting standards for income statement preparation, net profit for the current period is shown on a post-merger basis whilst the comparable figure for last year, which is used to calculate the YoY increase/decrease, is on pre-merger basis. In order to help investors compare and analyze the overall business performance of Midea Group on a comparable basis, the following pro-forma income statement shows the relevant items adjusted as if the merger of Midea Group and GD Midea Holding had taken place on 1 Jan. 2013: 3 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Jan.-Sept. 2014 Jul.-Sept. 2014 YoY YoY Jan. –Sept. 2014 Jan. –Sept. 2013 increase/decreas Jul. - Sept. 2014 Jul. - Sept. 2013 increase/decreas e (%) e (%) Net profit attributable to shareholders of the 8,952,956.27 6,000,088.32 49.21% 2,342,823.51 1,821,136.55 28.65% Company (RMB’000) Minority interest 886,514.94 754,658.98 17.47% 279,019.63 191,769.80 45.50% income (RMB'000) EPS (RMB Yuan/share) 2.12 1.42 49.30% 0.56 0.43 30.23% Items and amounts of extraordinary gains and losses √Applicable □Inapplicable Unit: RMB Ten Thousand Yuan Item Amount as of Jan.-Sept. 2014 Note Gains/losses on the disposal of non-current assets (including the offset part of asset impairment provisions) -129,824.96 Government grants recognized in the current period, except for those acquired in the ordinary course of business or granted at certain quotas or amounts according to the country’s unified standards 532,787.73 Gain/loss on entrusting others with investments or asset management 519,020.14 Gain/loss on debt restructuring 1,688.20 Gains and losses on change in fair value from tradable financial assets and tradable financial liabilities, as well as investment income from disposal of tradable financial assets and tradable financial liabilities and financial assets -405,864.35 available for sale, except for effective hedging related to the normal businesses of the Company Reversal of impairment provisions for the accounts receivable on which impairment tests were carried out separately 5,548.24 Non-operating income and expenses other than the above 52,992.03 Other gain/loss items that meet the definition of an extraordinary gain/loss -150,549.03 Less: Income tax effects 89,861.92 Minority interests effects (after tax) 11,402.93 Total 324,533.15 Explain the reasons if the Company classifies an item as an extraordinary gain/loss according to the definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public—Extraordinary Gains and Losses, or classifies any extraordinary gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item 4 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. □ Applicable √ Inapplicable II. Total number of shareholders and shareholdings of the top ten shareholders at the period-end 1. Total number of common shareholders and shareholdings of the top ten common shareholders at the period-end Unit: share Total number of common shareholders at the 114,907 period-end Shareholdings of the top ten common shareholders Pledged or frozen Shareholdin Number of Nature of Number of the shares Name of shareholder g percentage restricted shares shareholder shares held Status of Number (%) held shares of shares Domestic Midea Holding Co., Ltd. non-state-owned 35.49% 1,496,250,000 1,496,250,000 corporation Rongrui Equity Investment (Zhuhai) Domestic Partnership (limited partnership) non-state-owned 7.22% 304,500,000 0 corporation Fang Hongbo Domestic 2.17% 91,326,995 90,995,247 individual Tianjin CDH Jiatai Equity Investment Domestic Partnership (limited partnership) non-state-owned 1.85% 78,000,000 0 corporation Huang Jian Domestic 1.80% 75,700,000 75,000,000 individual Ningbo Meisheng Equity Investment Domestic Partnership (limited partnership) non-state-owned 1.78% 75,000,000 75,000,000 corporation Yuan Liqun Domestic 1.44% 60,500,000 60,375,000 5 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. individual CDH M-Tech (HK) Co., Ltd. Overseas 1.42% 60,000,000 0 corporation CDH Spark (HK) Co., Ltd. Overseas 1.36% 57,500,000 0 corporation Domestic Huang Xiaoming 1.24% 52,213,366 52,213,366 individual Shareholdings of the top ten non-restricted common shareholders Number of non-restricted Type of shares Name of shareholder common shares held at the Type Number period-end Rongrui Equity Investment (Zhuhai) Partnership (limited RMB ordinary 304,500,000 304,500,000 partnership) shares Tianjin CDH Jiatai Equity Investment Partnership (limited RMB ordinary 78,000,000 78,000,000 partnership) shares RMB ordinary CDH M-Tech (HK) Co., Ltd. 60,000,000 60,000,000 shares RMB ordinary CDH Spark (HK) Co., Ltd. 57,500,000 57,500,000 shares RMB ordinary National Social Security Fund 104 Portfolio 50,988,858 50,988,858 shares RMB ordinary Ningbo Kailian Industrial Development Co., Ltd. 48,451,743 48,451,743 shares RMB ordinary MERRILL LYNCH INTERNATIONAL 41,045,576 41,045,576 shares RMB ordinary National Social Security Fund 103 Portfolio 37,531,918 37,531,918 shares China Construction Bank- Bosera Thematic Sectors securities RMB ordinary 31,064,455 31,064,455 investment funds shares China Construction Bank- Penghua Value Advantage Stock-based 30,481,463 RMB ordinary 30,481,463 6 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Securities Investment Fund shares Two natural person shareholders, Mr. Fang Hongbo and Ms. Yuan Liqun, serve as director and senior executive. CDH Jiatai, CDH M-Tech and CDH Spark hold 4.63% shares of Midea Group have an associated relationship and are shareholders acting-in-concert. Ningbo Explanation of the associated relationship or/and persons Kailian Industrial Development Co., Ltd. acts-in-concert with Midea acting-in-concert among the above-mentioned shareholders Holding Co., Ltd. The company has not confirmed if any associated relationship exists among other shareholders of tradable shares and whether other shareholders of tradable shares belong to persons acting-in-concert specified in the "Management of Information Disclosure for Shareholding Alteration in a Listed Company". Top ten non-restricted common shareholders taking part in margin Inapplicable financing and securities lending (if any) Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company carry out any agreed buy-back in the reporting period? □ Yes √ No No shareholder of the Company carried out any agreed buy-back in the reporting period. 2. Total number of preferred share holders and shareholdings of the top ten preferred share holders at the period-end □ Applicable √ Inapplicable 7 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Section III. Significant Events I. Major changes in main accounting statement items and financial indicators within the reporting period, as well as reasons for the changes √ Applicable □ Inapplicable Unit: RMB’000 Increase/ 30 Sept. 31 Dec. Main reason for the Balance Sheet items decrease 2014 2013 change (%) Operational changes of the Due from the Central Bank 1,337,565.99 923,632.22 44.82% finance subsidiary Due from banks and other financial Operational changes of the 372,984.83 1,746,284.24 -78.64% institutions finance subsidiary Financial assets measured at fair value and Fair value changes of derivative of which the changes are recorded into 226,091.63 759,565.22 -70.23% financial instruments current gains and losses Accounts receivable 10,471,852.19 7,928,438.25 32.08% Sales increased Dividends receivable 51,018.44 25,863.84 97.26% Dividends from associates Bank wealth management Other current assets 22,802,244.49 463,107.71 4823.75% products increased The deductible temporary Deferred income tax assets 3,533,606.95 2,567,204.45 37.64% difference increased Financial liabilities measured at fair value Fair value changes of derivative and of which the changes are recorded into 73,347.19 11,260.18 551.39% financial instruments current gains and losses Sales increased and income tax Taxes payable 2,387,089.94 1,028,015.10 132.20% and VAT increased accordingly Profit allocation in the current Dividends payable 256,657.70 94,046.21 172.91% period Non-current liabilities due Non-current liabilities due within 1 year 698,552.22 1,617,370.17 -56.81% within 1 year were repaid Sales increased and rebate and Other current liabilities 21,804,593.33 12,608,380.03 72.94% installation expenditure increased accordingly Long-term borrowings became Long-term borrowings 22,913.44 711,464.64 -96.78% due within 1 year Specific payables An alteration and relocation 856,341.10 52,073.96 1544.47% amount was received in the 8 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. current period Increase/ Jan.-Sept. Jan.-Sept. Main reason for the Income statement items (Jan.-Sept.) Decrease 2014 2013 change (%) The business of the finance Interest income 503,212.87 173,853.18 189.45% subsidiary expanded The business of the finance Interest expenses 243,027.70 140,859.52 72.53% subsidiary expanded Interest expenses and exchange Financial expenses -11,698.64 631,080.06 -101.85% losses decreased Fair value changes of the Gains on fair value changes -598,637.76 397,072.61 -250.76% derivative financial instruments Wealth management gains Investment gains 839,388.23 635,272.83 32.13% increased Income tax expenses 2,035,610.94 1,417,018.12 43.65% Profits increased Increase/ Cash flow statement item Jan.-Sept. Jan.-Sept. Main reason for the decrease (Jan.-Sept.) 2014 2013 change (%) Operating profits increased and Net cash flows from operating activities 13,853,704.08 5,426,595.05 155.29% capital management was enhanced Wealth management investment Net cash flows from investing activities -24,179,641.66 -453,029.52 5237.32% increased Net cash flows from financing activities -1,314,530.93 -1,079,902.44 21.73% Changes in borrowings According to the, we restated the long-term equity investments formerly measured at the cost method as available-for-sale financial assets, and adjusted the year-beginning data accordingly. II. Progress and influence of significant events, as well as the analysis and explanation on solutions √ Applicable □ Inapplicable On 7 Jun. 2014, we released the . As mentioned in the announcement, we intended to, with TITONI (a wholly-funded overseas subsidiary) as the acting-in-concert party, make a partial tender offer to Little Swan shareholders for 126,497,553 shares, which accounted for 20% of the total shares of Little Swan. The tender offer 9 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. was approved by CSRC with no dissent on the 27th of the same month. The tender offer would last for 30 natural days from 3 Jul. 2014 to 1 Aug. 2014. The final tender offer price was RMB 10.45/share for Little Swan A-shares and HKD 10.05 for Little Swan B-shares. As of 1 Aug. 2014 when the tender offer expired, we had accepted 16,286,546 Little Swan A-shares and 63,353,228 Little Swan B-shares, with the combined number accounting for 12.59% of the total shares of Little Swan. The ownership transfer formalities were completed, marking the completion of the tender offer. After the transfer, we directly and indirectly held 333,153,059 shares of Little Swan, representing a stake of 52.67% in it. This would further promote business collaboration between us and Little Swan, and enhance the core competitiveness of our washing machine business. Index to the relevant Overview of the significant event Date of disclosure announcement disclosed on the website Suggestive Announcement on Making a Partial Tender 7 Jun. 2014 www.cninfo.com.cn Offer to All Shareholders of Wuxi Little Swan Co., Ltd. Suggestive Announcement on CSRC Approving and 30 Jun. 2014 www.cninfo.com.cn Unveiling the Tender Offer Report 10 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. III. Commitments made by the Company or any shareholder holding over 5% of the Company’s shares in the reporting period or such commitments carried down into the reporting period √ Applicable □ Inapplicable Party/Parties Date of Undertaking involved in the Details of undertaking Term Particulars on the performance Undertaking undertaking 1.Undertaking of Midea Holding Ltd. (hereinafter referred to as "Midea Apart from the 1. There has been no violation of Holding"), and He Xiangjian, respectively the controlling shareholder and actual first item of commitments. controller of Midea Group Co., Ltd., in relation to a Lock-Up Share Agreement. commitments Undertaking He Xiangjian and Midea Holding have given an undertaken as follows: Neither party whose legal made in the will transfer or entrust others to manage their directly and indirectly held Midea duration covers Controlling offering Group shares issued prior to this issuance, nor sell them to Midea Group within 36 36 months from shareholders documents or months of the listing date of Midea Group's stocks,. If they break the above 28 March. 2013 the date of Midea Actual shareholding undertaking, they will assume all liabilities arising therefrom. Group’s listing controller alteration 2. Undertaking of Midea Holding and the actual controller He Xiangjian towards (18 Sept. 2013 to 2. There has been no violation of these documents the maintenance of the independence of Midea Group. 18 September, commitments. He Xiangjian and Midea Holding have undertaken as follows: He Xiangjian, Midea 2016 inclusive), Holding and their controlled enterprises will remain independent from Midea Group all other items are in respect of personnel, finance, assets, business and institutions, etc. in accordance indefinite 11 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. with relevant laws and regulations and regulatory documents. They will faithfully fulfill the above undertaking, and assume the corresponding legal liability. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal liabilities according to relevant laws, rules, regulations and regulatory documents. 3. There has been no violation of these 3. Undertaking of Midea Holding and the actual controller He Xiangjian towards commitments. avoiding competition within the industry. In order to avoid possible competition within the industry between Midea Group, Midea Holding and its controlled enterprises as well as He Xiangjian, his immediate family and his controlled companies, He Xiangjian and Midea Holding have undertaken as follows: (1). None of the entities or individuals mentioned above, is or will be engaged in identical or similar business areas as the existing main business of Midea Group and its controlled companies. They are not or will not be engaged or are not currently participating in any such business areas that is competitive to the existing main business area of Midea Group and its controlled companies, by controlling other economic entities, institutions or economic organizations; (2). If Midea Group and its controlled companies expand their business scope within existing areas to those where the above mentioned related entities or individuals have already commenced production and operation, as long as He Xiangjian is still the 12 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. actual controller of Midea Group, and Midea Holding the controlling shareholder, they will agree on solving the problem of competition within the industry arising therefrom, within a reasonable period; (3). If Midea Group and its controlled companies expand their business scope within existing areas to those where the above mentioned related parties have not yet commenced production or operation, as long as He Xiangjian is still the actual controller of Midea Group, and Midea Holding the controlling shareholder, they would undertake as not to engage in any competitive business contrary to the any new business area of Midea Group and its controlled companies; (4). In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as He Xiangjian is identified as the actual controller of Midea Group, and Midea Holding the controlling shareholder, they will not change or terminate this undertaking. (5). He Xiangjian and Midea Holding shall faithfully fulfill the above undertaking, and assume any corresponding legal responsibilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they would bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. 4. Undertaking of Midea Holding and the actual controller He Xiangjian towards 4. There has been no violation of these the regulation of related-party transactions. commitments. 13 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. In order to regulate matters of related-party transactions that may occur in the future between Midea Group and Midea Holding and its controlled companies as well as He Xiangjian, his immediate family and his controlled companies, He Xiangjian and Midea Holding have undertaken as follows: (1) They will regulate related-party transactions with Midea Group and its controlled companies using their utmost efforts to minimize them. For unavoidable related-party transactions with Midea Group and its controlled companies, including but not limited to commodity trading, providing services to each other or as an agent, they will sign legal normative agreements with Midea Group, and go through approval procedures in accordance with related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They guarantee to offer fair prices for related-party transactions, and fulfill all information disclosure obligations in respect of the related-party transactions according to related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They also guarantee not to illegally transfer funds or profits from Midea Group, or damage the interests of its shareholders for their own advantage during these related-party transactions. (2) They shall fulfill the obligation of withdrawing from all voting that involves the above mentioned related-party transactions at general meetings of Midea Group; (3) The related parties mentioned above shall not require Midea Group to offer more 14 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. favorable conditions than those offered to any independent third party in any fair market transactions. (4) In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as He Xiangjian is identified as the actual controller of Midea Group, and Midea Holding the controlling shareholder, they shall not change or terminate this undertaking. (5) He Xiangjian and Midea Holding will faithfully fulfill the above undertaking and assume the corresponding legal liabilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. 5. Related undertaking by He Xiangjian, the actual controller of Midea Group, 5. So far, this shareholding transfer has not on Midea Trade Union Committee transferring its limited equity of Midea brought about any loss caused by any Group. dispute or potential disputes. There has been On 4 January 2001, Midea Trade Union Committee signed the "Equity Transfer no violation of commitments. Contract" with five people, namely He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and Liang Jieyin, where it would transfer all of its limited equity of Midea Group (22.85%) respectively to those five people. According to the confirmation letter issued by members of the Midea Trade Union Committee at that time, the equity transfer price was determined after mutual discussion on the basis of their true 15 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. opinions, therefore there was no dispute or any potential future dispute. On 28 June. 2013, Foshan Shunde Beijiao General Union, superior department of Midea Trade Union Committee, issued a confirmation letter supporting the fact that the Midea Trade Union Committee funded the establishment of Midea Group Co., Ltd. Furthermore, this letter also confirmed that the council of Midea Trade Union Committee is entitled to dispose of all the property of the committee, and that this property disposal does not need agreement from all staff committee members. (1). Midea Holding and He Xiangjian, the controlling shareholder and actual controller of Midea Group Co., Ltd., respectively have undertaken as follows: For any loss incurred by Midea Group, caused by any dispute or potential dispute arising from any matters of equity transfer mentioned above, they are willing to assume full liability for such loss. 6. Commitments on Issues about Payment of Staff Social Insurance and Housing 6. So far, the payment of Staff Social Provident Fund involved in Midea Group's Overall Listing Insurance and Housing Provident Fund has Midea Holding and He Xiangjian have both undertaken to be liable for not brought about any controversy or (1) paying such expenses and related expenses on time based on the requirements of potential disputes. There has been no relevant state departments. However Midea Group is liable for the payment of staff violation of commitments. social insurance and the housing provident fund and the payment required by relevant state authorities before this merger, (2) paying corresponding compensation for all direct and indirect losses of Midea Group and its subsidiaries due to this merger, (3) 16 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. indemnifying and including a holding-harmless clause absolving Midea Group and its subsidiaries from any such expenses where Midea Group and its subsidiaries are required to pay them in advance. 7. Commitments on issues about asset modifications, asset damages and property 7.1 The Process of Property Ownership leasing of Midea Group and its subsidiaries Certificate: Midea Holding and He Xiangjian have undertaken as follows: The "Report" discloses that our company owns (1) Midea Holding will do its utmost to assist and urge Midea Group (including its 177 properties, which cover an area of subsidiaries) to complete renaming procedures of related assets, such as land, house, 2,148,485.65 square meters (m2). Property trademark, patent and stock rights declared in the related files of this merger. Midea Ownership Certificates are being processed for Holding will also be liable for all compensation for losses to Midea Group caused by properties 65 (m2) in size. So far, 46 any issues regarding the renaming procedures of related assets set out above. applications have been approved covering an (2) Midea Holding shall do its utmost to assist Midea Group (including its area of 1,531, 504.83 (m2), which accounts for subsidiaries) in applying for ownership certificates of land and buildings declared in 71.28% of the total area; 17 applications are any related files of this merger. under process, which covers an area of (3) Midea Holding shall assist Midea Group (including its subsidiaries) in re-applying 556,819.28 (m2) accounting for 25.92% of the for corresponding construction procedures and uncompleted property ownership total area. Those properties under process of certificates due to historical reasons. If the competent authorities require Midea Group ownership certificates have not brought about to dismantle any properties that are not successful in their re-application for real estate any controversy or dispute. The remaining 115 registration procedures, Midea Holding shall do its utmost to provide assistance and properties, an area of which covers 60161.54 will also be liable for any related expenses used in the dismantling of such buildings (m2), accounts for 2.8% of the total area. These 17 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. by Midea Group (including its subsidiaries). properties are all small auxiliary facilities such (4) If under any circumstances Midea Group suffers any loss through no longer using as: security booths, transformer rooms, power or in the present way using the land or property above caused by failing to obtain or rooms, pump rooms, gas stations for which collect in time the ownership certificates of the land or property above or loss caused property ownership certificates cannot be by other reasons, Midea Holding shall compensate any loss for these reasons in time applied for. As yet these 115 properties have and fully. Midea Holding shall compensate any actual loss Midea Group suffers from not been required to be dismantled by where the circumstances above result in punishments by competent authorities or competent departments so these buildings are claims by any third party. still in regular use. No controversies or any (5) Based on issues of defective property leasing declared in the related files of this company losses caused by disputes have been merger, Midea Holding shall provide sufficient compensation for all economic losses incurred. There has been no violation of to Midea Group (including its subsidiaries) where the leasehold relations above have commitments. either become invalid or where other disputes occur, (a 3rd party rights claim or an 7.2 The Use of Rental Houses of This administrative department exercises a right or option) and therefore results in any Company economic loss caused by the necessary rental of other property through penalties The "Report" discloses that as of 31 December subjected to by competent government departments or through recourse of related 2012, our company had 113 leasing houses in parties. use, of which 100 were unable to get the (6) Based on issues of defective land leasing declared in the related files of this property certificate from the leasing party. So merger where leasehold relations become invalid due to defective land leasing or far, the contracts of 60 of the 113 rental houses other disputes occur resulting in economic losses to Midea Group (including its have not signed an extension to the leasehold. subsidiaries) or through penalties subjected to by competent government departments. Of the remaining 53 properties 6 have received 18 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Additionally if the lessor cannot compensate any losses caused by defective leasing, the property certificate while the other 47 Midea Holding shall compensate Midea Group any for losses caused by such certificates have yet to be obtained. These 53 defective land leasing rental properties have not rendered any Midea Holding will compensate Midea Group where any losses are incurred due to a economic loss or penalty caused by defective violation of guarantees and commitments as noted above or such guarantees and property rights to the company, which results in commitments are inconsistent in reality. the relocation to other rental properties. 7.3 Land Use Rights of Leasing Use The "Report" discloses that as of 31 December, 2012, our company has had one rental property issue (Total Area 57,506.95 m2).The lessor of the rental land mentioned above has not provided any ownership files pertaining to the ownership of this land. So far this rental land has not rendered any controversies to our company or these disputes caused any losses. There has been no violation of commitments. 7.4 The Procedures for Renaming Land Ownership Under Process Caused by the Alteration of the Company's Name The "Report" discloses that there are still 10 19 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. renaming land ownership cases under process caused by changing the company name of our company and its subsidiaries. So far, five cases have been approved and the other five cases are still under process, which have not rendered any loss to our company. There has been no violation of commitments. 7.5 Processing the Renaming Procedures of Some Trademarks So far, of the 62 trademarks involved in the "Report" 8 cases are currently in the process of being cancelled by their owners and will no longer be in use. The company will not apply for the renaming procedures for those trademarks. The renaming procedures of the remaining 54 cases have been processed and this commitment has been fulfilled. There has been no violation of commitments. Other 1. Shareholders of Midea Group, Ningbo Meisheng, Fang Hongbo, Huang Jian, Cai 28 Mar. 2013 Apart from the 1. There has been no violation of shareholders Qiwu, Yuan Liqun, Huang Xiaoming, Li Jianwei, Zheng Weikang, promise that since first item of commitments. 20 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Midea Group has been listed on the Shenzhen Stock Exchange Center, the transferal commitments 2-4. The execution of these commitments has or delegation of others to manage these shares issued before this time to members that whose legal been completed and there have been no have either direct or indirect ownership of Midea Group is prohibited for a period of duration covers violation of commitments. 36 months. Midea Group is also not allowed to buy back those shares. 36 months from 2. Zhuhai Rongrui and Jiazhao Holding are in a relation of persons acting-in-concert. the date of Midea They jointly hold 7.9% shares of Midea Group and have made commitments to Group’s listing lock-up these shares. CDH Jiatai, CDH M-Tech and CDH Spark are in a relation of (18 Sept. 2013 to persons acting-in-concert. They jointly hold 4.63% shares of Midea Group and have 18 September, made commitments on these locked-up shares. Since Midea Group was listed on the 2016 inclusive), Shenzhen Stock Exchange Center, the transfer of shares issued before this time to all other items are members with direct or indirect ownership of Midea Group is forbidden for a period indefinite of 12 months. In addition the delegation and management of said shares issued before this time to members with direct or indirect ownership of Midea Group is also forbidden for a period of 12 months. Midea Group is also not allowed to buy back those shares. 3. A former Midea Group Supervisor, Liao Wenjian, holds 7,000 shares of Midea Electrical Appliances (6,033 after a stock-for-stock swop and transfers) and promises that since Midea Group was listed on the Shenzhen Stock Exchange Center, the transfer of shares issued before this time to members with direct or indirect ownership of Midea Group is forbidden for a period of 12 months. In addition the delegation and 21 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. management of said shares issued before this time to members with direct or indirect ownership of Midea Group is also forbidden for a period of 12 months. Midea Group is also not allowed to buy back those shares. 4. The mother of Midea Group Secretary of the Board- Jiang Peng, Huang Lazhen, holds 7,100 shares of Midea Electric Appliances (6,117 after a stock-for-stock swop and transfer) and promises that since Midea Group was listed on the Shenzhen Stock Exchange Center, the transfer of shares issued before this time to members with direct or indirect ownership of Midea Group is forbidden for a period of 12 months. In addition the delegation and management of said shares issued before this time to members with direct or indirect ownership of Midea Group is also forbidden for a period of 12 months. Midea Group is also not allowed to buy back those shares. Whether to fulfill the Yes commitment in time 22 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. IV. Predicting the operating results of 2014 Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-start until the end of the next reporting period according to predictions as well as any explanations for these reasons: √ Applicable □ Inapplicable Performance prediction: Sharp year-on-year rise Performance data type: Interval number Statement of 2014 Business Performance Forecast (based on income statement) From the beginning of the Same period in year to the end of the next Increase/decrease (%) the last year reporting period Estimated amount of aggregate net profit (RMB 100 -- 110 53.17 88% -- 107% YoY increase 100 million) Basic earnings per share 2.37 -- 2.61 1.26 88% -- 107% (RMB Yuan/share) YoY increase In Sept. 2013, Midea Group merged with GD Midea Holding through a share exchange. The income statement has been compiled based on accounting standards. The net profit for the period resulted from the data generated following the merger, while the figure in the same period of the previous Explanations for business year was calculated based on 41. 17% shares held by Midea Group in GD Midea Holding before the performance forecast merger and the figure after the merger should be calculated based on 100%. On 30 Apr. 2014, Midea Group accomplished the capitalization of capital reserve, resulting in 10 shares converted to 15 shares. According to related rules, the basic earnings per share as at the same period of last year shall be calculated by share capital after adjustment. To facilitate contrastive analysis dependent on the same statistical standards for investors,based on the pro-forma profit statement (the merger of GD Midea Holding is deemed as to have been completed on 1 Jan. 2013), the Company's business performance is expected to improve in 2014 as follows: Statement of 2014 Business Performance Forecast (based on pro-forma profit statement) From the beginning of the Same period in year to the end of the next Increase/decrease the last year reporting period Estimated amount of aggregate net profit (RMB 100 -- 110 73 YoY increase 37% -- 51% 100 million) Basic earnings per share 2.37 -- 2.61 1.73 YoY increase 37% -- 51% 23 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. (RMB Yuan/share) V. Securities investment □ Applicable √ Inapplicable The Company was not involved in any securities investment during the reporting period. VI. Investments in derivatives √ Applicable □ Inapplicable Unit: RMB Ten Thousand Yuan Proportion of the Related-party Type of Initial Opening Closing closing investment Actual gain/loss Impairment Operator Relation transaction or derivative investment Start date End date investment investment amount in the in reporting provision (if any) not investment amount amount amount Company’s closing period net assets Futures Futures No No hedging 0.00 01/01/14 31/12/14 0.00 0.00 170.19 0.00 28.37 company contracts Forward Bank No No exchange 80,370.80 01/01/14 31/12/14 80,370.80 0.00 -1,052.53 0.00 -64,904.65 contract Total 80,370.80 80,370.80 0.00 -882.34 0.00 -64,876.28 Capital source for derivative investment All self-owned funds Disclosure date of the board announcement 29 Mar 2014 approving the derivative investment (if any) Disclosure date of the general meeting announcement approving the derivative 22 Apr 2014 investment (if any) In order to reduce the price risk of the Company's bulk purchases of raw materials as a result of significant fluctuations in raw material prices, the Company not only carried out futures business for some of the materials, but also made use of bank financial instruments and promoted forex funds Analysis of risks and control measures of business, with the purpose of reducing the risks associated with exchange and interest rate derivative products held in the reporting fluctuations, realizing the preservation and appreciation of forex assets, reducing forex liabilities, period (including but not limited to market and achieving locked-in costs. The Company has undertaken extensive evaluation and risk control risk, liquidity risk, credit risk, operational with regard to derivative investment positions, details of which are as follows: risk, legal risk, etc.) 1. Legal risk: The Company's futures business and forex funds businesses are conducted in compliance with laws and regulations, with clearly defined responsibilities and obligations between the Company and agencies. Control measures: The Company has designated relevant departments with the responsibility for 24 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. enhancing expertise in laws, regulations and market rules, conducting strict examination and verification of contracts, defining responsibility and obligations, and strengthening compliance checks, so as to ensure that the Company's derivatives investment and position operations meet the requirements of the laws and regulations and internal management system of the Company. 2. Operational risk: Risks caused by imperfect internal processes, staff, systems and external issues may cause the Company to incur losses during the course of its futures business and forex funds business. Control measures: The Company has not only developed relevant management systems that clearly define the assignment of responsibility and approval process for the futures business and forex funds businesses, but has also established a well-developed monitoring mechanism, aimed at effectively reducing operational risk by strengthening its risk control over the business, decision-making and trading processes. 3. Market risk: Uncertainties caused by changes in the prices of bulk commodities and exchange rate fluctuations in foreign exchange markets could lead to greater market risk in the futures business and forex funds business. Meanwhile, the inability to raise sufficient funds in a timely manner in order to establish and maintain hedging positions in futures operations, or forex funds required for performance in forex funds operations that are unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company are always conducted by adhering to prudent operation principles. For futures business, futures transaction volumes and applications have been strictly determined according to the requirements for production and operations, and a stop-loss mechanism has been implemented. Furthermore, to determine the prepared margin amount which may be required to be supplemented, a futures risk measuring system has been established to measure and calculate the margin amount already in use, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted applications for funds business should conduct a risk analysis on the conditions and environment that could affect the operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update the operating status of the funds business on a timely basis thus ensuring the arrangement of proper funds before expiry dates. Changes in market prices or fair values of 1. Profit/loss from futures hedging contracts incurred during the Reporting Period was RMB the invested derivatives during the reporting 283,700; period. Analysis of the derivative’s fair value 2. Profit/loss from forward forex contracts incurred during the Reporting Period was RMB should include the specific methods of use -649,046,500; and the relevant assumptions and 3. Public quotations in futures market or forward forex quotations announced by Bank of China are parameters. used in the analysis of the derivatives fair value. Whether significant changes occurred to the Company’s accounting policy and specific accounting principles of derivatives in the No change reporting period compared to the previous reporting period Specific opinion from independent directors The Company's independent directors are of the view that: the futures hedging business is an 25 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. on the Company’s derivatives investment effective instrument for the Company to eliminate price volatility and implement risk prevention and risk control measures through enhanced internal controls, thereby improving the operation and management of the Company; the Company's foreign exchange risk management capability can be further improved through the forex funds business, so as to maintain and increase the value of foreign exchange assets; the abovementioned investment in derivatives can help the Company to fully realize its competitive advantages. Therefore, it is practical for the Company to carry out derivatives investment business when the risks are controllable. VII. Research, visits and interviews conducted during the reporting period √Applicable □Inapplicable Main discussion and Way of Visitor Time Place Visitor materials provided by the reception type Company Fidelity Investments, Allianz Dresdner Asset Management, Och-Ziff Capital Management Group , 8 Jul. 2014 Hong Kong Road Show Institution Blackrock, Keywise Capital, AMP Capital Investors, Principal Global Investors, Value Partners, Eton Park Capital, AllianceBernstein Yiheng Capital, China International Alternative 10 Jul. 2014 Hong Kong Road Show Institution Association, AP Asset 、 Doric Capital, Samsung The main contents of the Investment, Value Partners Company’s reception of investors included: The 17 Jul. 2014 Field Research Institution Han Lun Investment (1) Industry status and Company development condition; The Essence Securities, Wellington Management 18 Jul. 2014 Field Research Institution (2) The Company's Company Company business situation and The Telephone development strategy; (3) 21 Jul. 2014 Institution Kai Yu Capital Company Communication Related content in regular Greenwoods Asset Management, UBS Securities, reports, and Sinolink Securities, Changsheng fund, CICC, Guotai announcements published Junan Securities, Founder Securities, Haitong by the other companies. Securities, Bosera Fund, Upstone, Guosen Securities, (4)Information provided SCB, Eastern bay, ICBC Credit Suisse, Xinhua Asset, by the Company: regular The Second Dongguan Securities, Hongyuan Securities, CITICS, reports, announcements The Term of 30 Jul. 2014 Institution Galaxy Securities, Shenyin &Wanguo, Penghua Fund, and other public data of Company Investors Open Changjiang Securities, China Orient Asset the Company. Day Management, Essence Fund, Hua An Fund, Harvest Fund, UBS SDIC, Great Wall Fund, Anbang Asset, ChinaAMC, China Universal Asset Management, CICC Asset Management, E fund, ,Guodu Securities, Paktek Asia, BNP Paribas SA 19 Aug. 2014 Shenzhen Mid-Term Institution CICC, Changjiang Securities, Citic securities, 26 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Performance Sinolink Securities, Guotai Junan Securities, Presentation Minsheng Securities, Essence Securities, Shenyin & Wanguo, UBS Securities, Guosen Securities, Founder Securities, Industrial Securities, Bohai Securities, China Merchants Securities, Essence Securities, Dongxing Securities, Telecom Funds, Bosera Funds、 Dachang Fund, E fund, ChinaAMC, ABC-CA Fund, Fortune SG Fund, Penghua Fund, China Merchants Fund, Baoying Fund, Everbright Pramerica, Soochow Fund, QHKY Fund, Morgan Stanley Huaxin Fund, Yinhua Fund, Baishan Investment, Huashang Fund, Galaxy Fund, China Life Insurance, CPIC, Yongjin Group, Eastern Bay, Century Securities, Paktek Asia, GF Securities proprietary trading, Bosston Capital, Gaoguan Invesatment, Value Partners, Orient Securities Asset Management, Keywise Investment, Neo-Criterion, Gemboom Investment, Chinalion Securities, Guangzhou Long-term Investment, Qianhe Capital, Huatai Securities, Ping An Asset, Hillview Capital, Hua An Insurance, Ganyuan Capital, Shenzhen Co-power Venture, Pine River CICC, Asia Value Capital, Bespinver Fund、Comgest Investment、East Capital, IBN, J.P. Morgan, NCC Fund, Pramerica Fund, Pichon investment, Bisheng Investment, OFI Asset, HanHua Capital, HSBC asset, Value Partners, BOCOM International Trust, Goal Headspring Capital, Morgan Stanley Huaxin Fund, The Telephone 20 Aug. 2014 Institution Samsung Assets, Xingguang Life Insurance, Nomura Company Communication Investment, Pioneer Investments 、 Jupiter Asset Management, Sloane Robinson, Investec Asset Management, Carrhae Capital, Alandsbanken Asset Management, Nordea Investment Management, Hermes Fund, Pictet Asset Management, Robeco Fund Fortune Investment, Mirae Asset, Houde Investment, The 21 Aug. 2014 Field Research Institution Liuhe Capital, Shenzhen Economic Construction Company Investment, Essence Securities The 22 Aug. 2014 Field Research Institution E Fund, Bosera Funds Company Fuh Hwa Securities Investment Trust, Xinshou, Hua Nan Securities, China RE Insurance, Shin Kong 26 Aug. 2014 Taiwan Road Show Institution Investment Trust , Huamei, Fubon Life Insurance, Prudential Investment Trust, FSITC, SinoPac SITC、 27 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Cathay Pacific Investment Trust, Value Partners Concord Investment Trust, Fubon Securities Investment Trust, Nan Shan Life Insurance, Mercuries Life Insurance, Cathay United Bank The 28 Aug. 2014 Field Research Institution Youshan Fund Company First-trust Fund, CathayUnited, Khazanah Nasional Strategy 2 Sep. 2014 Suzhou Institution Berhad, Orient Assent Management, Sunshine Meeting Insurance, CITIC Assent Management The Telephone 3 Sep. 2014 Institution Capital World Investors Company Communication Value Partners, Nomura International, Tiger Pacific Capital, Happy Dragon Fund, UBS SDIC, Mitsubishi J-WORKS Investment Services (Hong Kong), The Strategy Government Of Singapore Investment Consulting, 3 Sep. 2014 Shanghai Institution Meeting Pine River, Schroders, Sumitomo Mitsui Trust, Daiwa Asset Management, Fullerton investment, South Korea Investment, Boc Hong Kong Asset Management, DNB Boyu Capital, Libang Investment, Credit Suisse, Taconic Capital, INDUS Capital, Manulife Asset Management, PrinceT Asset Management, Ashmore, Robert Lloyd George investment, Yongrong Asset, Aberdeen Asset, Julius Baer, Oriental capital, Pine River, China Everbright, Daiwa Investment Trust Investment, Credit Suisse, Myriad Asset, Nordea, Pangu Capital, Allianz Global Investors, QHKY Strategy 3 Sep. 2014 Hong Kong Institution Fund, JiaFu Asset, China Capital, Wellington Global Meeting Investment, Desheng Investment, Value Partners, Pei Da Investment, OOCL, Eurizon Capital, ChinaRock Capital, Tianping, Asset Management, IMPAX, Trilogy, Winnington Capital, COMGEST, Bosston Capital, Morgan Stanley (Asia), Xiang Ying Capital, CICC, ChinaAMC, Viking, Xiangjian, Wellington Global, Heqi Capital, JK Capital, Och-Ziff Capital Management, Hill House Capital, OWL CREEK The 4 Sep. 2014 Field Research Institution GF Securities Company Australia JCP Investment, National Australia Bank The 9 Sep. 2014 Field Research Institution Management, MLC, Ibbotson Associates, William Company Blair 10 Sep. 2014 The Field Research Institution Credit Suisse 28 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Company Aberdeen Asset, Changli Capital, Everest Capital, Putman, PINE BRIDGE,UBS, Polunin Capital、Moon Capital, Farallon Capital, Smith Tan asset 10 Sep. 2014 Singapore Road Show Institution management, Tahan Capital, New Ideas Investment, Broad Peak、GMO、Aberdeen、Lazard、Fidelity Investments The Merrill Lynch International, International Investment 11 Sep. 2014 Field Research Institution Company Trust, Wang San international The Telephone 12 Sep. 2014 Institution Merrill Lynch International, Company Communication The 16 Sep. 2014 Field Research Institution The National Social Security Fund, Kaiyu Investment Company AMP Capital Investors, BOSVALEN, LIGHTHOUSE, Goldhorse Capital, UBS Global, Strategy Tree Line, Macquarie Fund, BESTINVER, DNB 16 Sep. 2014 Shenzhen Institution Meeting ASSET, Morgan Stanley, Evenstar Advisors, Jianan Investment, Libang Investment, Balyasny Asset, Leiya Investment, YiHeng Capital Strategy 24 Sep. 2014 Shanghai Institution Mingyu Asset, Huashang Fund Meeting The Telephone 29 Sep. 2014 Institution Kai Yu Capital Company Communication The Telephone 30 Sep. 2014 Institution Fidelity Investments Company Communication 29 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Section IV. Financial Statements I. Financial statements Balance Sheet Prepared by: Midea Group Co., Ltd. Unit: RMB’000 30 Sep. 2014 31 Dec. 2013 Assets Consolidated The Company Consolidated The Company Current Assets: Monetary funds 8,470,307.05 10,995,040.04 15,573,683.04 14,309,967.73 Deposits at central bank 1,337,565.99 923,632.22 Deposits at other banks 372,984.83 1,746,284.24 Financial assets measured at fair value and for which changes are 226,091.63 759,565.22 recorded into current gains and losses Notes receivable 18,343,120.20 2,463,819.18 14,150,532.20 2,176,916.60 Accounts receivable 10,471,852.19 7,928,438.25 Accounts paid in advance 1,871,967.71 814.94 2,432,420.54 349,358.36 Loans and advances 7,433,770.01 5,100,085.71 Interest receivable Dividends receivable 51,018.44 561,542.04 25,863.84 286,507.04 Other accounts receivable 818,157.88 861,551.08 1,025,395.19 3,519,029.46 Inventories 10,970,974.88 15,197,723.84 Assets held for sale Non-current assets due within 1 year Other current assets 22,802,244.49 20,486,257.36 463,107.71 Total current assets 83,170,055.30 35,369,024.64 65,326,732.00 20,641,779.19 Non-current assets: Available-for-sale financial 844,627.29 895,725.80 844,439.05 895,725.80 30 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. assets Held-to-maturity investments Long-term accounts receivable Long-term equity investment 930,071.74 16,518,983.98 912,427.64 16,065,073.90 Investment property 196,844.56 469,489.16 205,834.70 891,732.65 Fixed assets 19,590,976.08 1,436,171.08 19,572,161.32 788,783.72 Construction in progress 528,028.24 41,336.74 612,601.28 46,985.28 Engineering materials Disposal of fixed assets Intangible assets 3,469,529.85 263,490.21 3,325,738.40 177,196.73 R&D expense Goodwill 2,931,003.59 2,931,003.59 Long-term deferred expenses 628,123.27 69,538.39 647,882.34 109,960.04 Deferred income tax assets 3,533,606.95 10,045.90 2,567,204.45 7,222.31 Other non-current assets Total of non-current assets 32,652,811.57 19,704,781.26 31,619,292.77 18,982,680.43 Total assets 115,822,866.87 55,073,805.90 96,946,024.77 39,624,459.62 Legal representative: Person-in-charge of the accounting work: Chief of the accounting division: Balance Sheet (Continued) Prepared by: Midea Group Co., Ltd. Unit: RMB’000 Liabilities and Shareholders’ 30 Sep. 2014 31 Dec. 2013 Equity Consolidated The Company Consolidated The Company Current liabilities: Short-term borrowings 10,914,688.74 8,872,173.98 140,000.00 Borrowings from the Central 29,998.40 89,708.03 Bank Customer bank deposits and due to banks and other financial 165.31 61.00 institutions Intra-group borrowings Financial liabilities measured at 73,347.19 35,657.94 11,260.18 31 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. fair value and for which changes are recorded into current gains and losses Notes payable 6,868,061.43 6,308,478.45 Accounts payable 18,330,442.21 2,331.59 17,508,099.66 7,831.48 Accounts received in advance 5,816,324.11 4,983,346.26 Employees’ compensation 1,601,517.13 3,911.39 1,968,837.73 21,717.74 payable Tax payable 2,387,089.94 59,543.99 1,028,015.10 16,856.22 Interest payable 51,788.07 127,940.18 69,823.87 144,847.77 Dividends payable 256,657.70 94,046.21 Other accounts payable 1,527,675.60 39,212,604.92 1,487,781.02 23,082,573.69 Liabilities held for sale Non-current liabilities due 698,552.22 1,617,370.17 999,942.58 within 1 year Other current liabilities 21,804,593.33 875.94 12,608,380.03 875.94 Total current liabilities 70,360,901.38 39,442,865.95 56,647,381.69 24,414,645.42 Non-current liabilities: Long-term borrowings 22,913.44 711,464.64 Bonds payable 160,929.09 152,716.59 Long-term payables Specific payables 856,341.10 52,073.96 Estimated liabilities 26,990.29 33,466.19 Deferred income tax liabilities 66,306.92 123,797.62 Other non-current liabilities 153,664.58 144,561.80 Total non-current liabilities 1,287,145.42 1,218,080.80 Total liabilities 71,648,046.80 39,442,865.95 57,865,462.49 24,414,645.42 Owners’ equity Share capital 4,215,808.47 4,215,808.47 1,686,323.39 1,686,323.39 Capital reserves 13,005,367.80 5,355,482.75 15,566,756.01 7,880,598.46 Less: Treasury stock Other comprehensive income -151,445.70 54,034.77 Surplus reserves 569,544.32 569,544.32 569,544.32 569,544.32 32 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Retained profits 20,885,298.71 5,490,104.41 15,304,989.21 5,073,348.03 Foreign exchange differences -436,565.28 -334,216.66 Total equity attributable to 38,088,008.32 15,630,939.95 32,847,431.04 15,209,814.20 owners of the Company Minority interests 6,086,811.75 6,233,131.24 Total owners’ (or 44,174,820.07 15,630,939.95 39,080,562.28 15,209,814.20 shareholders’) equity Total liabilities and owners’ 115,822,866.87 55,073,805.90 96,946,024.77 39,624,459.62 (or shareholders’) equity Legal representative: Person-in-charge of the accounting work: Chief of the accounting division: Income Statement Prepared by: Midea Group Co., Ltd. Unit: RMB’000 Jul.-Sept. 2014 Jul.-Sept. 2013 Item Consolidated The Company Consolidated The Company I. Total operating revenues 31,880,719.37 168,600.18 27,873,177.72 16,318.47 Including: Sales income 31,753,306.09 168,600.18 27,807,250.53 16,318.47 Interest income 126,354.65 65,927.19 Handling charges and commission income 1,058.63 II. Total operating costs 29,419,094.89 331,256.12 25,923,773.64 72,529.59 Including: Cost of sales 24,138,196.09 12,106.43 21,101,081.92 Interest expenses 51,474.27 60,995.29 Handling charges and commission expenses 477.12 222.43 Business taxes and surcharges 174,283.28 5,829.08 142,852.88 168.12 Selling and distribution expenses 3,138,092.30 2,930,548.95 Administrative expenses 1,734,117.98 84,042.66 1,606,731.18 25,078.13 Financial expenses 276,855.06 230,522.71 49,491.46 44,613.39 Asset impairment losses -94,401.21 -1,244.76 31,849.53 2,669.95 Add: Gain from change in fair value 189,715.92 -27,328.82 65,752.73 Income from investment 412,941.14 372,323.97 197,797.21 -87,461.03 Including: share of profits in associates and joint ventures 14,212.71 1,170.91 -18,339.96 -4,356.52 III. Business profit 3,064,281.54 182,339.21 2,212,954.02 -143,672.15 33 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Add: non-operating income 153,047.67 5,103.51 286,482.88 530.70 Including: gain from non-current asset disposal 12,000.30 14,547.96 Less: non-operating expenses 90,590.60 836.98 49,565.12 0.77 Including: loss from non-current asset disposal 75,335.81 27,559.52 0.42 IV. Total profit 3,126,738.61 186,605.74 2,449,871.78 -143,142.22 Less: Income tax expense 504,895.47 50,670.52 436,965.43 V. Net profit 2,621,843.14 135,935.22 2,012,906.35 -143,142.22 Including: Net profit achieved by combined parties before the combinations Attributable to owners of the Company 2,342,823.51 135,935.22 1,371,199.78 -143,142.22 Minority shareholders’ income 279,019.63 641,706.57 VI. The after-tax net income of other comprehensive 52,659.54 -1,436.07 income (I) Other comprehensive income items that cannot be reclassified as gains and losses 1. Changes in net liabilities or assets from re-measuring benefit plans 2. The share of other comprehensive income under the equity method, in the invested entity, that cannot be classified into profits and losses (II) Other comprehensive incomes will be reclassified into 52,659.54 -1,436.07 the profits and losses 1. The share of other comprehensive income, under the equity method, in the invested entity , that will be reclassified into profits and losses 2. Changes in fair value of available-for-sale financial 41.98 -236.67 assets 3. Held-to-maturity investments reclassified as gains and losses on available-for-sale financial assets 4. Effective part of the gains and losses of cash flows 193,800.36 21,033.18 through hedging 5. Foreign exchange differences -141,182.80 -22,232.58 VII. Total comprehensive income 2,674,502.68 135,935.22 2,011,470.28 -143,142.22 Attributable to owners of the Company 2,459,237.75 135,935.22 1,386,892.79 -143,142.22 Attributable to minority shareholders 215,264.93 624,577.49 VIII. Earnings per share (I) Basic earnings per share 0.56 0.45 (II) Diluted earnings per share 0.56 0.45 34 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Legal representative: Person-in-charge of the accounting work: Chief of the accounting division: Income Statement Prepared by: Midea Group Co., Ltd. Unit: RMB’000 Jan.-Sept. 2014 Jan.-Sept. 2013 Item Consolidated The Company Consolidated The Company I. Total operating revenues 109,588,937.73 534,175.93 93,920,582.83 45,817.45 Including: Sales income 109,084,157.93 534,175.93 93,746,729.65 45,817.45 Interest income 503,212.87 173,853.18 Handling charges and commission income 1,566.93 II. Total operating costs 98,437,374.16 529,872.11 87,224,993.77 236,421.59 Including: Cost of sales 81,481,479.40 20,174.08 71,919,645.67 Interest expenses 243,027.70 140,859.52 Handling charges and commission expenses 1,204.73 904.70 Business taxes and surcharges 621,111.05 10,663.23 487,724.62 7,359.29 Selling and distribution expenses 10,761,772.36 9,064,801.58 Administrative expenses 5,083,442.38 257,056.21 4,764,709.77 81,599.66 Financial expenses -11,698.64 247,659.87 631,080.06 143,520.48 Asset impairment loss 257,035.18 -5,681.28 215,267.85 3,942.16 Add: Gain from change in fair value -598,637.76 -35,657.94 397,072.61 Income from investment 839,388.23 3,871,395.51 635,272.83 938,064.63 Including: share of profits in associates and joint ventures 49,190.10 1,215.68 7,327.65 559.43 III. Business profit 11,392,314.04 3,840,041.39 7,727,934.50 747,460.49 Add: non-operating income 706,470.73 13,581.02 641,158.35 35,000.21 Including: gain from non-current asset disposal 52,031.73 42.01 38,148.66 Less: non-operating expenses 223,702.62 9,707.07 197,327.43 3,500.65 Including: loss from non-current asset disposal 175,127.20 8,769.43 112,845.33 3.37 IV. Total profit 11,875,082.15 3,843,915.34 8,171,765.42 778,960.05 Less: Income tax expense 2,035,610.94 54,512.17 1,417,018.12 V. Net profit 9,839,471.21 3,789,403.17 6,754,747.30 778,960.05 Including: Net profit achieved by combined parties before the combinations Attributable to owners of the Company 8,952,956.27 3,789,403.17 4,018,034.39 778,960.05 35 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Minority shareholders’ income 886,514.94 2,736,712.91 VI. The after-tax net income of other comprehensive -338,546.68 -169,887.65 income (I) Other comprehensive income items that cannot be reclassified as gains and losses 1. Changes in net liabilities or assets from re-measuring benefit plans 2. The share of other comprehensive income under the equity method, in the invested entity, that cannot be classified into profits and losses (II) Other comprehensive income that will be reclassified -338,546.68 -169,887.65 into profits and losses 1. The share of other comprehensive income, under the equity method, in the invested entity , that will be reclassified into profits and losses 2. Changes in fair value of available-for-sale financial -10.00 -274.66 assets 3. Held-to-maturity investments reclassified as gains and losses on available-for-sale financial assets 4. Effective part of the gains and losses of cash flows -205,863.79 -22,717.72 through hedging 5. Foreign exchange differences -132,672.89 -146,895.27 VII. Total comprehensive income 9,500,924.53 3,789,403.17 6,584,859.65 778,960.05 Attributable to owners of the Company 8,645,107.20 3,789,403.17 3,984,738.14 778,960.05 Attributable to minority shareholders 855,817.33 2,600,121.51 VIII. Earnings per share (I) Basic earnings per share 2.12 1.49 (II) Diluted earnings per share 2.12 1.49 Legal representative: Person-in-charge of the accounting work: Chief of the accounting division: Cash Flow Statement Prepared by: Midea Group Co., Ltd. Unit: RMB’000 Jan.-Sept. 2014 Jan.-Sept. 2013 Item Consolidated The Company Consolidated The Company I. Cash flows from operating activities: Cash received from sale of commodities and 78,057,006.28 63,042,320.83 36 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. rendering of service Net increase of deposits from customers and dues 104.31 from banks Net increase of loans from central bank -59,709.63 299,999.68 Cash received from interest, handling charges and 504,779.80 173,853.18 commissions Tax refunds received 2,909,213.40 2,976,349.07 Other cash received relating to operating activities 1,754,268.97 19,292,418.87 2,268,416.28 6,255,985.98 Subtotal of cash inflows from operating activities 83,165,663.13 19,292,418.87 68,760,939.04 6,255,985.98 Cash paid for goods and services 38,895,396.31 35,561,619.90 Net increase of customer lendings and advances 2,362,954.65 3,579,159.30 Net increase of funds deposited at central bank and 417,840.83 308,896.35 amounts due from banks Cash for paying interest, handling charges and 245,672.29 141,188.81 commissions Cash paid to and for employees 7,876,851.14 29,958.39 6,692,571.59 48,239.38 Various taxes paid 6,913,017.12 6,722.99 5,183,832.04 9,894.04 Other cash payment relating to operating activities 12,600,226.71 1,632,429.98 11,867,076.00 730,255.64 Subtotal of cash outflows from operating activities 69,311,959.05 1,669,111.36 63,334,343.99 788,389.06 Net cash flows from operating activities 13,853,704.08 17,623,307.51 5,426,595.05 5,467,596.92 II. Cash flows from investing activities: Cash received from retraction of investments 5,440,020.00 24,901.98 1,000.00 Cash received from return on investments 682,830.12 3,492,060.54 713,005.52 1,025,474.57 Net cash received from disposal of fixed assets, 1,299,396.24 36,984.39 545,749.16 intangible assets and other long-term assets Net cash received from disposal of subsidiaries or 106,514.71 20,000.00 other business units Other cash received relating to investing activities Subtotal of cash inflows from investing activities 7,422,246.36 3,553,946.91 1,366,269.39 1,045,474.57 Cash paid to acquire fixed assets, intangible assets 1,610,167.83 179,619.71 1,798,517.26 75,716.16 and other long-term assets Cash paid for investments 29,296,675.30 22,372,749.70 20,781.65 95,781.65 Net cash paid to acquire subsidiaries and other 695,044.89 business units 37 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. Other cash payments relating to investing activities Subtotal of cash outflows from investing activities 31,601,888.02 22,552,369.41 1,819,298.91 171,497.81 Net cash flows from investing activities -24,179,641.66 -18,998,422.50 -453,029.52 873,976.76 III. Cash flows from financing activities: Cash received from capital contributions 11,596.04 Including: Cash received from minority 11,596.04 shareholder investments by subsidiaries Cash received from borrowings 36,914,176.05 2,700,000.00 28,224,100.12 4,600,000.00 Cash received from issuance of medium term notes Cash received from issuance of short-term financing bonds Other cash received relating to financing activities Subtotal of cash inflows from financing activities 36,914,176.05 2,700,000.00 28,235,696.16 4,600,000.00 Cash repayment of borrowings 33,441,969.54 2,840,000.00 23,409,485.87 3,450,000.00 Cash for repaying medium term notes 1,000,000.00 1,000,000.00 2,000,000.00 2,000,000.00 Cash for repaying short-term financing bonds 1,000,000.00 1,000,000.00 Cash paid for interest expenses and distribution of 3,786,737.44 3,950,745.81 1,904,912.73 406,409.27 dividends or profit Including: dividends or profit paid by subsidiaries 342,464.38 1,585,032.21 to minority shareholders Other cash payments relating to financing 1,001,200.00 1,001,200.00 activities Sub-total of cash outflows from financing activities 38,228,706.98 7,790,745.81 29,315,598.60 7,857,609.27 Net cash flows from financing activities -1,314,530.93 -5,090,745.81 -1,079,902.44 -3,257,609.27 IV. Effect of foreign exchange rate changes on cash -8,090.92 -14,881.40 and cash equivalents V. Net increase in cash and cash equivalents -11,648,559.43 -6,465,860.80 3,878,781.69 3,083,964.41 Add: Opening balance of cash and cash equivalents 16,763,873.80 13,809,135.41 12,544,078.77 1,483,866.89 VI. Closing balance of cash and cash equivalents 5,115,314.37 7,343,274.61 16,422,860.46 4,567,831.30 Legal representative: Person-in-charge of the accounting work: Chief of the accounting division: II. Audit report Is this report audited? □ Yes √ No 38 Report for the Third Quarter of 2014 of Midea Group Co., Ltd. The Company’s report is not audited. Midea Group Co., Ltd. Legal Representative: Fang Hongbo 24 October 2014 39