Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Midea Group Co., Ltd.
Interim Report for the First Quarter 2016
April 2016
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Section I Important Reminders
1.1 The Board of Directors, the Supervisory Committee as well as all the
directors, supervisors and senior management staff of Midea Group Co., Ltd.
(hereinafter referred to as the “Company”) have warranted that this Report
contains no false records, misleading statements or material omissions. And
they shall be jointly and severally liable for the factuality, accuracy and
completeness of the information given in this Report.
1.2 All the directors have attended the Q1 report review board meeting.
1.3 The financial statements contained in this Report have not been audited
by a certified public auditors (CPAs) firm.
1.4 Mr. Fang Hongbo, Chairman of the Board and President of the Company,
and Ms. Yuan Liqun, responsible person for the Company’s financial affairs,
have represented and warranted that the financial statements in this Report
are factual, accurate and complete.
1.5 This Report has been prepared in both Chinese and English. Should there
be any discrepancy between the two versions, the Chinese version shall
prevail.
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Section II Financial Highlights & Changes in Shareholders
I Major Accounting Data and Financial Indicators
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
Jan.-Mar. 2016 Jan.-Mar. 2015 YoY Change (%)
Sales revenues (RMB’000) 38,341,624 42,426,714 -9.63%
Net profit attributable to shareholders of
3,907,252 3,342,135 16.91%
the Company (RMB’000)
Net profit attributable to shareholders of
the Company after non-recurring gains 3,745,392 3,019,956 24.02%
and losses (RMB’000)
Net cash flows from operating activities
6,595,024 2,498,717 163.94%
(RMB’000)
Basic EPS (RMB / share) 0.92 0.79 16.46%
Diluted EPS (RMB / share) 0.91 0.79 15.19%
Weighted average ROE (%) 7.58% 8.11% -0.53%
31 Mar. 2016 31 Dec. 2015 YoY Change (%)
Total assets (RMB’000) 147,922,589 128,841,935 14.81%
Net assets attributable to shareholders
53,857,579 49,201,852 9.46%
of the Company (RMB’000)
Total number of shares of the Company on the last trading session before disclosure:
Total number of shares of the Company on the last
4,267,391,228
trading session before disclosure (share)
EPS calculated by using the latest number of shares
0.92
(RMB / share)
Items and amounts of non-recurring gains and losses
√ Applicable □ N/A
Unit: RMB’000
Item Jan.-Mar. 2016 Note
Gains/losses from the disposal of non-current assets
-11,114
(including the offset part of asset impairment provisions)
Government grants recognized in the current period, other 209,245
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
than those closely related to business of the Company and
granted at a fixed amount or quantity in accordance with
certain national standards
Gains/losses arising from changes in fair value of financial
assets and liabilities held for trading, (other than effective
hedging instruments related to the Company’s normal
-174,678
operations), as well as investment gains from disposal of
financial assets and liabilities held for trading and financial
assets available for sale
Other non-operating income and expenses except the
75,333
above items
Less: Income tax 21,115
Minority interests (after tax) -84,189
Total 161,860
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the
definition in the , or classifies any non-recurring
gain/loss item mentioned in the said explanatory announcement as a recurring gain/loss item
□ Applicable √ N/A
No such cases in the Report Period.
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
83,706
the period-end
Shareholdings of the top ten common shareholders
Number of Pledged or frozen shares
Nature of Shareholding Number of
Name of shareholder restricted Status of Number of
shareholder percentage (%) shares held
shares held shares shares
Domestic
Midea Holding Co., Ltd. non-state-owned 35.06 1,496,250,000 1,496,250,000 Pledged 425,970,000
corporation
Rongrui Equity Investment Domestic 7.14 304,500,000 0
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
(Zhuhai) Partnership (limited non-state-owned
partnership) corporation
China Securities Finance State-owned
2.95 125,794,924 0
Co., Ltd. corporation
Domestic
Fang Hongbo 2.14 91,326,995 90,000,000
individual
Tianjin CDH Jiatai Equity Domestic
Investment Partnership non-state-owned 1.83 78,000,000 0
(limited partnership) corporation
Domestic
Huang Jian 1.76 75,000,000 75,000,000
individual
Ningbo Maysun Equity Domestic
Investment Partnership non-state-owned 1.76 75,000,000 75,000,000
(limited partnership) corporation
Domestic
Yuan Liqun 1.42 60,500,000 60,000,000
individual
Overseas
CDH M-Tech (HK) Co., Ltd. 1.41 60,000,000 0
corporation
Overseas
CDH Spark (HK) Co., Ltd. 1.35 57,500,000 0
corporation
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
304,500,000 RMB ordinary shares 304,500,000
(limited partnership)
China Securities Finance Co., Ltd. 125,794,924 RMB ordinary shares 125,794,924
Tianjin CDH Jiatai Equity Investment
78,000,000 RMB ordinary shares 78,000,000
Partnership (limited partnership)
CDH M-Tech (HK) Co., Ltd. 60,000,000 RMB ordinary shares 60,000,000
CDH Spark (HK) Co., Ltd. 57,500,000 RMB ordinary shares 57,500,000
Central Huijin Asset Management Ltd. 52,316,600 RMB ordinary shares 52,316,600
Fidelity Investments Management (HK) Ltd.－
32,724,509 RMB ordinary shares 32,724,509
Clients’ Funds
Merrill Lynch International 31,982,064 RMB ordinary shares 31,982,064
Hillhouse Capital Management Limited－HCM
30,115,775 RMB ordinary shares 30,115,775
China Fund
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
UBS AG 28,877,444 RMB ordinary shares 28,877,444
Mr. Fang Hongbo and Ms. Yuan Liqun, individual shareholders, both serve as
board members and senior executives in Midea Group. CDH Jiatai, CDH
M-Tech and CDH Spark are related parties to each other, with a combined stake
Explanation of connected relationship or/and of 4.59% in Midea Group.
acting-in-concert parties among the The Company has no information on whether there is any connected
above-mentioned shareholders relationship among other holders of tradable shares or whether other holders of
tradable shares belong to acting-in-concert parties specified in the
Administrative Measures for Information Disclosure Regarding Changes of
Shareholdings in Listed Companies.
Top ten non-restricted common shareholders
N/A
taking part in securities margin trading (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 Report Period?
□ Yes √ No
No such cases in the Report Period.
2. Total number of preference shareholders and shareholdings of the top ten preference
shareholders at the period-end
□ Applicable √ N/A
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Section III Significant Events
I Major changes of main items in financial statements and financial indicators within
the Report Period, as well as the reasons for the changes
√ Applicable □ N/A
Unit: RMB’000
31 March 31 March YoY Change Main reasons for the
Balance sheet items
2016 2015 (%) changes
Mainly due to changes in business
Deposits in other banks 1,784,166 4,062,807 -56.09%
operations of finance subsidiary
Mainly due to changes in the fair
Derivative financial assets 8,525 158,822 -94.63%
value of derivative financial assets
Mainly due to increase of sales
Notes receivable 16,899,707 12,889,151 31.12% revenue in 2016Q1 compared to
2015Q4.
Mainly due to advance payment of
Accounts paid in advance 1,463,917 988,625 48.08%
materials
Available-for-sale financial Mainly due to increase of equity
5,046,663 3,289,954 53.40%
assets investment
Mainly due to increase of external
Short-term borrowings 9,180,001 3,920,933 134.13%
short-term borrowings
Customer bank deposits and
Mainly due to changes in business
Mainly due to banks and other 32,748 52,000 -37.02%
operations of finance subsidiary
financial institutions
Mainly due to changes in the fair
Derivative financial liabilities 126,952 33,377 280.36% value of derivative financial
liabilities
Financial assets sold and Mainly due to changes in business
1,132,410 651,784 73.74%
repurchased operations of finance subsidiary
Mainly due to the inclusion of bonus
Payroll payable 1,327,734 2,229,332 -40.44%
in the payable at 2015 year end
Mainly due to increase of profit
Tax payable 3,409,062 1,607,181 112.11% which results in increase of CIT and
VAT
Mainly due to increase of short-term
Interest payable 12,359 9,343 32.28%
borrowings
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Mainly due to increase of payment
Dividend payable 12,308 118,851 -89.64%
of dividend of subsidiaries
Mainly due to increase of advance
Other accounts payable 1,489,249 1,139,306 30.72%
received
Mainly due to temporary decrease
Deferred income tax liabilities 23,937 40,464 -40.84%
of tax payable
Mainly due to changes in profit /loss
Other comprehensive income -441,113 -1,071,151 -58.82%
of available-for-sale financial assets
Jan.-March Jan.-March YoY Change Main reasons for the
Income statement items
2016 2015 (%) changes
Mainly due to business expansion
Interest income 255,072 146,676 73.90%
of the finance subsidiary
Mainly due to business expansion
Interest expenses 132,167 98,854 33.70%
of the finance subsidiary
Mainly due to increase of interest
Financial expenses -282,083 195,783 -244.08%
income
Mainly due to changes in the fair
Gains on fair value changes -239,146 153,581 -255.71% value of derivative financial
instruments
Mainly due to decrease in the gains
Investment gains 253,713 527,790 -51.93%
from wealth management products
Mainly due to increase in
Non-operating income 292,676 94,169 210.80%
government subsidies
Mainly due to decrease in losses on
Non-operating expenses 21,506 43,518 -50.58%
disposal of non-current assets
Cash flow statement Jan.-March Jan.-March YoY Change Main reasons for the
items 2016 2015 (%) changes
Net cash flows from operating Mainly due to increase in payment
6,595,024 2,498,717 163.94%
activities of receivables
Mainly due to increase of wealth
Net cash flows from investing
-9,560,260 -1,175,369 713.38% management and structured
activities
deposit
Net cash flows from financing Mainly due to increase of
4,802,468 1,325,027 262.44%
activities borrowings
II Progress, influence and solutions of significant events
√ Applicable □ N/A
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
1. The Proposal Regarding Registering and Issuing Super Short-term Commercial Paper was reviewed
and approved at the 5th Meeting of the Second Board of Directors on 15 January 2016 and later at
the First Extraordinary General Meeting of Shareholders for 2016 on 1 February 2016. With the
purpose of diversifying financing channels, optimizing capital structure and improving its liquidity
management capability, the Company plans to apply for registering and issuing super short-term
commercial papers with an amount not more than RMB 20bn and expiration period not over 270
days, in accordance with the Administrative Measures of the People's Bank of China for Debt
Financing Instruments of Non-Financial Enterprises in the Inter-bank Bond Market. On 29 March
2016, National Association of Financial Market Institutional Investors issued the Registration
Acceptance Notice, in which it agreed to accept the registration from the Company of an amount of
RMB 20bn of super short-term commercial papers (validity of two years starting from the date of the
Acceptance Notice.
2. The Company has signed a Memorandum of Understanding with Toshiba Corporation (“Toshiba”) for
Strategic Cooperation, in which both companies agree to strengthen their strategic partnership and
to jointly explore new growth opportunities. As a result, the two companies signed a Definitive
Agreement under which Midea will acquire an 80.1% stake in Toshiba Lifestyle Products & Services
Corporation (“TLSC”), the home appliances arm of Toshiba (the “Business” or “Toshiba Home
Appliances”), while Toshiba will retain a 19.9% shareholding. The transaction price for the 80.1%
stake is approximately JPY53.7 billion (US$473 million). Meanwhile Midea will be licensed to use the
Toshiba brand worldwide in relation to the Business for 40 years, and will receive more than 5,000
home appliance related intellectual property assets.
The closing of the transaction is subject to customary regulatory filings in China and customary
anti-trust clearances in relevant jurisdictions.
Overview of the significant event Date of disclosure Website for disclosure
Announcement on the Proposed Registering and Issuing
16 January 2016 www.cninfo.com.cn
Super Short-term Commercial Paper
Announcement Regarding Acquiring The Home Appliance
17 March 2016 www.cninfo.com.cn
Business of Toshiba Corporation
Announcement on Strengthening Strategic Cooperation with
31 March 2016 www.cninfo.com.cn
Toshiba Corporation
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
III Undertakings made by the Company and its shareholders interested in 5% or more of the shares of the Company made
in the Report Period or subsisting to the Report Period
√ Applicable □ N/A
Undertaking Undertaking
Undertaking Details of undertaking Term Particulars on the performance
giver date
1. Undertaking of Midea Holding Ltd. (hereinafter referred to as "Midea Apart from the 1. There has been no violation of this
Holding"), and He Xiangjian, respectively the controlling shareholder first item of undertaking.
and actual controller of Midea Group Co., Ltd., towards the lock-up undertakings,
period of shares. its duration
Undertakings
He Xiangjian and Midea Holding have undertaken as follows: Within 36 validity spans
given in
Controlling months from the listing date of Midea Group's stocks, they will neither transfer 36 months
offering
shareholder, or entrust others to manage their directly and indirectly held shares of Midea from the day of
documents or 2013-3-28
actual Group issued prior to this issuance, nor sell them to Midea Group. If they Midea Group’s
shareholding
controller break the above undertaking, they will assume all liabilities arising therefrom. listing which is
alternation
2. Undertaking of Midea Holding and the actual controller He Xiangjian 18 September 2. There is no violation of this undertaking.
documents
towards the maintenance of the independence of Midea Group. 2013 to
He Xiangjian and Midea Holding have undertaken as follows: He Xiangjian, 18 September
Midea Holding and their controlled enterprises will remain independent from 2016, all other
Midea Group in respect of personnel, finance, assets, business and items are
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
institutions, etc. in accordance with relevant laws and regulations and indefinite.
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. Undertaking of Midea Holding and the actual controller He Xiangjian 3. There has been no violation of this
towards avoiding competition within the industry. undertaking.
In order to avoid possible competition within the industry between Midea
Group and 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
the same or similar business as the existing main business of Midea Group
and its controlled companies. They are not or will not engage or participate in
such business that is competitive to the existing main business 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 on the
basis of the existing ones to those where the above mentioned related entities
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
or individuals are already performing production and operation, as long as He
Xiangjian is still the 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
on the basis of the existing ones to those where the above mentioned related
subjects have not gone into 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 business
competing with the new ones 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 the 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 4. There has been no violation of this
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
towards the regulation of related transactions. undertaking.
In order to regulate matters of related 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 any related transactions with Midea Group and its
controlled companies using their utmost efforts to reduce them. For
unavoidable related transactions with Midea Group and its controlled
companies, including but not limited to commodity trading, providing services
to each other or as 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 transactions, and fulfill the information disclosure obligations
in respect of the related 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
at their advantages during the related transactions.
(2) They shall fulfill the obligation of withdrawing from voting that involves the
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
above mentioned related transactions at the general meeting of Midea Group;
(3) The related subject mentioned above shall not require Midea Group to
offer more favorable conditions than those 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
5. So far, this shareholding transfer has not
Group, on Midea Trade Union Committee transferring its limited equity
brought about any loss caused by any dispute
of Midea Group.
or potential disputes. There has been no
On 4 January , 2001, the Midea Trade Union Committee signed the "Equity
violation of this undertaking.
Transfer Contract" with five people, i.e. He Xiangjian, Chen Dajiang, Feng
Jingmei, Chen Kangning and Liang Jieyin, where it transfered all limited equity
of Midea Group (22. 85%) respectively to those five people. According to the
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
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 opinions, therefore there was no dispute or potential
dispute.
On 28 June, 2013, Foshan Shunde Beijiao General Union, superior
department of Midea Trade Union Committee, issued a confirmation letter to
the fact that Midea Trade Union Committee funded the establishment of
Midea Group Co., Ltd. In addition, the letter also confirmed that the council of
Midea Trade Union Committee is entitled to dispose any property of the
committee, and such property disposal does not need agreement from all staff
committee members.
Midea Holding and He Xiangjian, respectively the controlling shareholder and
actual controller of Midea Group Co., Ltd. have undertaken as follows: For any
loss of Midea Group caused by any dispute or potential dispute arising from
the matters of equity transfer mentioned above, they are willing to assume full
liability for such loss.
6. Undertakings on Issues about Payment of the Staff Social Insurance 6. So far, the payment of the staff social
and the Housing Provident Fund involved in Midea Group's Overall insurance and the housing provident fund has
Listing not brought about any controversy or potential
Midea Holding and He Xiangjian: Midea Holding have undertaken to be liable disputes. There has been no violation of this
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
for (1) paying such expenses and related expenses on time based on the undertaking.
requirements of relevant state departments, if Midea Group is required to be
liable for the payment of staff social insurance and the housing provident fund
and the payment required by relevant state authorities prior to this merger, (2)
paying corresponding compensation for all direct and indirect losses incurred
by Midea Group and its subsidiaries due to this merger, (3) indemnifying and
holding harmless Midea Group and its subsidiaries in time from such
expenses where Midea Group and its subsidiaries are required to pay them in
advance.
7. Undertakings on issues about asset alteration, asset flaw and house
leasing of Midea Group and its subsidiaries 7.1 The Process of Property Ownership
Midea Holding and He Xiangjian have undertaken as follows: Certificate:
(1) Midea Holding will do its utmost to assist and urge Midea Group (including The Report discloses that the Company is trying to
its subsidiaries) to complete renaming procedures of related assets, such as get the Property Ownership Certificate for 177 of its
land, houses, trademarks, patents and stock rights, declared in the related properties, which cover an area of 2,148,485.65
files of this merger. Midea Holding will be liable for all compensations of square meters. So far, 51 applications have been
losses caused by issues about renaming procedures of related assets approved, the total area covers 1,638,892.27
mentioned above to Midea Group. square meters, which accounts for 76.28% of total
(2) Midea Holding shall do its utmost to assist Midea Group (including its area; 11 applications are under process, covering
subsidiaries) to apply for ownership certificates of land and property declared an area of 447,465.15 square meters, accounting
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
in related files of this merger. for 20.83% of the total area. These 11 properties
(3) For those houses without ownership certificates due to incomplete are in possession of ownership certificates have
formalities in the past, Midea Holding shall assist Midea Group (including its not brought about any controversy or dispute.
controlled subsidiaries) in going through relevant construction-related Another property with an area of 1,966.69 square
formalities again and obtaining the corresponding house ownership meters (0.09% of the total area) has been
certificates. If the competent authorities require Midea Group to dismantle disposed. The remaining 114 properties, spanning
buildings that can not acquire the real estate registration procedures an area of 60,161.54 square meters account for
re-application, Midea Holding shall do its utmost to provide assistance and be 2.8% of the total area. These properties are all
liable for any related expenses used in dismantling such buildings by Midea small unit size auxiliary facilities such as security
Group (including its subsidiaries). booth, transformer room, power room, pump room,
(4) Under any circumstances that Midea Group suffers from losses incurred gas station and so on, for which property
through no longer using those properties or failing to obtain or collect in time, ownership certificates cannot be granted or applied
the ownership certificates of those properties currently being used or any for. So far these 114 properties have not been
losses caused by other reasons, Midea Holding shall compensate any loss for required to be dismantled by competent
these reasons in time and in full. Midea Holding shall compensate the actual departments so that these buildings are still in
loss Midea Group suffers, from any circumstances above resulting from regular use, which has not brought about any
penalties subjected to by competent authorities or through claims by any third controversy or any company loss caused by
party. disputes. There is no violation of undertakings.
(5) Based on issues of defective house leasing declared in related files of this 7.2 The Use of Rental Houses of This Company
merger, Midea Holding shall provide sufficient compensations for all economic The Report discloses that as of 31 December
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
losses incurred by Midea Group (including its subsidiaries) where the 2012, our company used 113 leasing houses in
leasehold relations above become invalid or other disputes occur, which are total, of which our company can't get the property
caused by rights claims from a third party or by means of an administrative certificate of 100 leasing houses from the leasing
authority exercising a right and therefore results in any economic losses due party. So far the contracts of 92 out of the 113
to eviction from rental houses, or any penalties subjected to by competent rental houses haven't been signed to extend the
government departments or any recourse from related parties. leasehold. The property certificates of 1 of the
(6) Based on the issues of defective land leasing declared in related files of remaining 21 houses have been obtained while the
this merger, when leasehold relations become invalid caused by defects of other 20 certificates haven't been obtained. These
land leasing or when other disputes occur, resulting in any economic losses to 20 rental houses haven't rendered our company
Midea Group (including its subsidiaries) or through any penalties administered any economic loss or penalty caused by defective
by competent government departments. Likewise if the lessor can't property rights, which result in removing to other
compensate for losses caused by such defective leasing, Midea Holding shall rental houses.
compensate Midea Group for losses caused by such defective land leasing 7.3 Land Use Rights of Leasing Use
Midea Holding will compensate any losses of Midea Group where a violation The "Report" discloses that as of 31 December,
of guarantees and undertakings referred to previously occurs or such 2012, our company has had one case of using
guarantees and undertakings are not consistent with the reality. rental houses, covering a total area of 57,506.95
square meters for which the lessor of the rental
land mentioned above did not provide any legal
ownership files showing or detailing ownership of
this land. So far this rental land has not rendered
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
our company any controversy or any loss caused
by disputes. There has been no violation of
undertakings.
7.4 The Procedures of Renaming Land Owner
Under Process Caused by the Alteration of the
Company's Name
The Report discloses that there are still 10 cases in
the process of registering a new land owner
caused by changing the company's name of our
company and its subsidiaries. So far, five cases
have been approved and the other five cases are
still under review, which have not rendered any
loss to the company. There has been no violation
of undertakings.
7.5 Processing the Renaming Procedures of
Some Trademarks
So far, 8 of the 62 trademarks cases involved in the
Report have applied for cancellation of the subjects
through their owners and these trademarks shall
no longer be in use. The company will not apply for
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
the renaming procedures for those trademarks.
The renaming procedures of the remaining 54
cases have been processed and this undertaking
has been fulfilled. There has been no violation of
this undertaking.
36 months
from 18
Shareholders of Midea Group, Ningbo Maysun, Fang Hongbo, Huang Jian, September
Cai Qiwu, Yuan Liqun, Huang Xiaoming, Li Jianwei, Zheng Weikang, promise 2013, the date
Other that since Midea Group is listed on the Shenzhen Stock Exchange Center, the 2013-3-28 of Midea There has been no violation of this
shareholders transferal or delegation of others to manage these issued shares who have Group’s listing, undertaking.
direct or indirect ownership of Midea Group, has been forbidden for a period of to 18
36 months. Midea Group is not allowed to buy back those shares either. September
2016
1. In strict accordance with the rules of the CSRC, the Shenzhen Stock The
Exchange and the Company regarding the use of raised funds, the Company undertakings
Undertakings
shall have a special account for its raised funds and use the funds only for the shall expire
given in time The
previously set purposes. 2015-6-15 when the This undertaking has expired.
of IPO or Company
2. The funds raised in this private issue (after the issue expenses) shall all be raised funds
refinancing
used as working capital. have been
3. The Company shall not use the funds raised in this private issue to make used up.
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Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
any financial investment such as purchasing held-for-trading financial assets
and available-for-sale financial assets, lending the funds to others and
entrusted investments or to directly or indirectly invest in marketable
securities.
36 months
from the listing
Xiaomi Technology has given an undertaking that it shall not transfer the
There has been no violation of this
Xiaomi shares that it had subscribed for in this private offering of Midea Group within date of this
2015-6-26 undertaking.
Technology 36 months from the completion date of this offering (26 June 2015, the listing private
date for this offering).
offering, i.e. to
26 June 2018
Whether the
undertaking
Yes
is fulfilled in
time
Specific
reasons for
failing to fulfill
any
N/A
undertaking
and plan for
the next step
(if any)
21
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
IV Operating result forecast for the year of 2016
Warning of possible loss or considerable YoY change of the accumulated net profit made during the
period-start until the end of the next Report Period according to predictions as well as any explanations
for these reasons:
□ Applicable √ N/A
V Securities investment
□ Applicable √ N/A
No such cases in the Report Period.
No such cases in the Report Period.
VI Investments in financial derivatives
√ Applicable □ N/A
Unit: RMB’0,000
Proportion of
the closing
Related-pa Actual
Initial Opening Impairm Closing investment
Relation rty Type of gain/loss in
Operator investment Start date End date investment ent investment amount in the
ship transaction derivative Report
amount amount provision amount Company’s
or not Period
closing net
assets
Futures Futures
No No 748.2 2016-01-01 2016-12-31 748.2 - 555.4 0.01% 635.5
company contracts
Forward
Bank No No exchange -8,414.4 2016-01-01 2016-12-31 -8,414.4 - -11,961.3 -0.22% -11,142.9
contracts
Total -7,666.2 -7,666.2 - -11,405.9 -0.21% -10,507.4
Capital source for derivative investment All the Company’s own funds
Disclosure date of the board
announcement approving the derivative 2016-03-26
investment (if any)
Disclosure date of the general meeting
announcement approving the derivative 2016-04-27
investment (if any)
22
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
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
business, with the purpose of reducing the risks associated with exchange and interest rate
fluctuations, realizing the preservation and appreciation of forex assets, reducing forex liabilities,
and achieving locked-in costs. The Company has undertaken extensive evaluation and risk control
with regard to derivative investment positions, details of which are as follows:
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
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
Analysis of risks and control measures of
define the assignment of responsibility and approval process for the futures business and forex
derivative products held in the Report
funds businesses, but has also established a well-developed monitoring mechanism, aimed at
Period (including but not limited to market
effectively reducing operational risk by strengthening its risk control over the business,
risk, liquidity risk, credit risk, operational
decision-making and trading processes.
risk, legal risk, etc.)
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 Report Period was RMB 6.36mn;
23
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
the invested derivatives during the Report 2. Profit/loss from forward forex contracts incurred during the Report Period was RMB -111.43mn;
Period. Analysis of the derivative’s fair 3. Public quotations in futures market or forward forex quotations announced by Bank of China are
value should include the specific methods used in the analysis of the derivatives fair value.
of use and the relevant assumptions and
parameters.
Whether significant changes occurred to
the Company’s accounting policy and
specific accounting principles of derivatives No change
in the Report Period compared to the
previous Report Period
The Company's independent directors are of the view that: the futures hedging business is an
effective instrument for the Company to eliminate price volatility and implement risk prevention
measures through enhanced internal controls, thereby improving the operation and management of
Specific opinion from independent directors
the Company; the Company's foreign exchange risk management capability can be further
on the Company’s derivatives investment
improved through the forex funds business, so as to maintain and increase the value of foreign
and risk control
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.
VIII Visits received during the Report Period
√ Applicable □ N/A
Date Type of visit Type of visitor Discussions
2016-1-6 A-Share Conference Institution
2016-1-12 A-Share Conference Institution
2016-1-13 A-Share Conference Institution
2016-1-15 Field research Institution
2016-1-15 Teleconference Institution
Please refer to Investor Relations Activities from 5
2016-1-20 Teleconference Institution January 2016 to 29 January 2016 on the website of
www.cninfo.com.cn
2016-1-21 Teleconference Institution
2016-1-21 Field research Institution
2016-1-26 Field research Institution
2016-1-27 Field research Institution
2016-1-29 Teleconference Institution
24
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
2016-3-28 Teleconference Institution
2016-1-29 Teleconference Institution
IX Irregular provision of guarantees
□ Applicable √ N/A
No such cases in the Report Period.
X Occupation of the Company’s funds by the controlling shareholder or its related
parties for non-operating purposes
□ Applicable √ N/A
No such cases in the Report Period.
25
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Section IV Financial Statements
I Financial statements
Balance Sheet
Prepared by: Midea Group Co., Ltd. Unit:RMB’000
31-Mar-16 31-Dec-15
Assets
Consolidated The Company Consolidated The Company
Current assets
Cash at bank and on hand 14,147,558 14,394,168 11,861,977 14,213,747
Deposits with central bank 833,379 1,048,045
- -
Deposits with banks and
1,784,166 4,062,807
other financial institutions - -
Derivative financial assets 8,525 158,822
- -
Notes receivable 16,899,707 2,060,037 12,889,151 727,218
Accounts receivable 12,033,730 10,371,718
- -
Advances to suppliers 1,463,917 7,626 988,625 8,915
Loans and advances 8,328,088 6,608,705
- -
Dividends receivable 17,759 290,245
- -
Other receivables 905,834 11,040,251 1,101,339 7,461,039
Inventories 9,931,003 10,448,937
- -
Other current assets 43,870,173 26,594,706 33,827,580 21,059,789
Total current assets 110,223,839 54,096,788 93,367,706 43,760,953
Non-current assets
Available-for-sale financial
5,046,663 9,000 3,289,954 9,000
assets
Long-term equity
2,910,362 23,284,963 2,888,274 23,126,546
investments
26
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Investment properties 138,894 283,395 150,803 286,272
Fixed assets 18,578,653 1,090,726 18,729,881 1,107,082
Construction in progress 918,436 679,649 954,761 543,588
Intangible assets 3,371,694 245,223 3,392,402 248,482
Goodwill 2,393,066 2,393,066
- -
Long-term prepaid
722,748 50,846 781,359 57,393
expenses
Deferred income tax assets 2,780,472 1,860 2,223,999 7,961
Other non-current assets 837,762 669,730
- -
Total non-current
37,698,750 25,645,662 35,474,229 25,386,324
assets
TOTAL ASSETS 147,922,589 79,742,450 128,841,935 69,147,277
Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun
Chief of the accounting division: Chen Lihong
27
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Balance Sheet (Continued)
Prepared by: Midea Group Co., Ltd. Unit:RMB’000
Liabilities and Shareholders' 31-Mar-16 31-Dec-15
Equity
Consolidated Company Consolidated Company
Current liabilities
Short-term borrowings 9,180,001 500,000 3,920,933 1,290,000
Borrowings from the Central - - - -
Bank
Customer deposits and deposits
from banks and other financial 32,748 - 52,000 -
institutions
Derivative financial liabilities 126,952 - 33,377 22,671
Financial assets sold under 1,132,410
repurchase agreements - 651,784 -
Notes payable 21,632,455 - 17,078,520 -
Accounts payable 19,484,179 7,400 17,448,684 9,403
Advances from customers 4,501,243 - 5,616,361 -
Employee benefits payable 1,327,734 12,654 2,229,332 13,411
Taxes payable 3,409,062 101,895 1,607,181 52,656
Interest payable 12,359 294,127 9,343 200,090
Dividends payable 12,308 - 118,851 -
Other payables 1,489,249 56,067,554 1,139,306 45,166,453
Current portion of non-current - - - -
liabilities
Other current liabilities 23,816,443 3,350 22,098,177 5,106
Total current liabilities 86,157,143 56,986,980 72,003,849 46,759,790
Non-current liabilities
Long-term borrowings 86,862 - 90,061 -
Debentures payable - - - -
Payables for specific projects 500 - 500 -
Provisions 38,347 3,800 38,893 3,800
Deferred revenue 476,181 - 479,352 -
Deferred income tax liabilities 23,937 - 40,464 -
28
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Other non-current liabilities 157,194 - 157,194 -
Total non-current liabilities 783,021 3,800 806,464 3,800
Total liabilities 86,940,164 56,990,780 72,810,313 46,763,590
Shareholders' equity
Share capital 4,267,391 4,267,391 4,266,839 4,266,839
Capital surplus 14,629,075 6,484,921 14,511,190 6,370,934
Less: treasury stock - - - -
Other comprehensive income - 441,113 20,906 - 1,071,151 21,006
Surplus reserve 1,846,523 1,846,523 1,846,523 1,846,523
General reserve 118,624 - 118,624 -
Undistributed profits 33,437,079 10,131,929 29,529,827 9,878,385
Total equity attributable to 53,857,579 22,751,670 49,201,852 22,383,687
shareholders of the parent
company
Minority interests 7,124,846 - 6,829,770 -
Total shareholders' equity 60,982,425 22,751,670 56,031,622 22,383,687
TOTAL LIABILITIES AND 147,922,589 79,742,450 128,841,935 69,147,277
SHAREHOLDERS' EQUITY
Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun
Chief of the accounting division: Chen Lihong
29
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Income Statement
Prepared by: Midea Group Co., Ltd. Unit: RMB’000
January-March 2016 January-March 2015
Consolidated Company Consolidated Company
1. Total revenue 38,599,501 295,466 42,574,426 126,938
Including: Operating revenue 38,341,624 295,466 42,426,714 126,938
Interest income 255,072 - 146,676 -
Fee and commission income 2,805 - 1,036 -
2. Total Cost (33,884,840) (131,125) (38,878,821) (321,308)
Less: Cost of sales (26,906,188) (4,792) (31,041,581) (5,132)
Interest expenses (132,167) - (98,854) -
Fee and commission expenses (666) - (389) -
Taxes and surcharges (276,519) (956) (329,870) (441)
Selling and distribution expenses (4,977,071) - (5,363,077) -
General and administrative expenses (1,662,776) (87,582) (1,607,662) (80,776)
Financial expenses – net 282,083 (37,770) (195,783) (235,497)
Asset impairment (loss)/reversal (211,536) (25) (241,605) 538
Add: Gains/(losses) on changes in fair value (239,146) 22,673 153,581 (2,885)
Investment income 253,713 134,422 527,790 390,493
Including: Share of profit of associates and a joint 81,800 55,455 15,209 1,216
venture
3. Operating profit 4,729,228 321,436 4,376,976 193,238
Add: Non-operating income 292,676 695 94,169 22,027
Including: Gains on disposal of non-current assets 1,423 - 8,650 354
Less: Non-operating expenses (21,506) (2,076) (43,518) (4,334)
Including: Losses on disposal of non-current (12,537) - (26,312) (3,734)
assets
4. Total profit 5,000,398 320,055 4,427,627 210,931
Less: Income tax expenses (833,631) (66,511) (776,837) (29,961)
5. Net profit 4,166,767 253,544 3,650,790 180,970
Attributable to shareholders of the parent 3,907,252 253,544 3,342,135 180,970
company
30
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Minority interests 259,515 - 308,655 -
6. Other comprehensive income net of tax 648,965 (100) (2,510) -
Attributable to shareholders of the parent 630,038 (100) 93,074 -
company
(1) Other comprehensive income items which will - - - -
not be reclassified subsequently to profit or loss
1)Changes in net liabilities or assets with a - - - -
defined benefit plan upon re-measurement
2)Shares in other comprehensive incomes in - - - -
investees that cannot be reclassified into gains
and losses under the equity method
(2) Other comprehensive income items which will 630,038 (100) 93,074 -
be reclassified subsequently to profit or loss
1)Share of the other comprehensive income of the (52,591) (100) (5,514) -
investee accounted for using equity method which
will be reclassified subsequently to profit and loss
2)Changes in fair value of available-for-sale 549,616 (820)
financial assets - -
3)Effective portion of cash flow hedging gains or - - - -
losses
4)Translation of foreign currency financial 147,624 - 231,232 -
statements
5)Foreign-currency financial statement translation (14,611) - (131,824) -
difference
Attributable to minority shareholders 18,927 - (95,584) -
7. Total comprehensive income 4,815,732 253,444 3,648,280 180,970
Attributable to shareholders of the parent 4,537,290 253,444 3,435,209 180,970
company
Attributable to minority shareholders 278,442 - 213,071 -
8. Earnings per share
Basic earnings per share (RMB Yuan) 0.92 N/A 0.79 N/A
Diluted earnings per share (RMB Yuan) 0.91 N/A 0.79 N/A
Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun
Chief of the accounting division: Chen Lihong
31
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Cash Flow Statement
Prepared by: Midea Group Co., Ltd. Unit: RMB’000
January-September 2015 January-September 2014
Consolidated Company Consolidated Company
1. Cash flows from operating activities
Cash received from sales of goods or rendering of 32,056,847 - 25,578,063 -
services
Net increase in customer deposits and deposits - - (7,280) -
from banks and other financial institutions
Net increase in deposits with central bank 270,547 - - -
Net increase in borrowing from central bank - - - -
Cash received from interest, fee and commission 257,877 - 147,711 -
Refund of taxes and surcharges 1,588,785 - 1,121,282 -
Cash received relating to other operating activities 1,564,570 9,967,594 1,207,298 6,000,634
Sub-total of cash inflows 35,738,626 9,967,594 28,047,074 6,000,634
Cash paid for goods and services (17,512,729) - (16,100,503) -
Net decrease in loans and advances (19,252) - - -
Decrease in borrowings from central bank (1,779,265) - (1,115,648) -
Net decrease in deposits with central bank - - (151,065) -
Cash paid for interest, fee and commission (132,833) - (99,243) -
Cash paid to and on behalf of employees (3,254,369) (17,997) (3,472,711) (28,227)
Payments of taxes and surcharges (2,003,485) (26,836) (2,000,946) (12,422)
Cash paid relating to other operating activities (4,441,669) (3,830,862) (2,608,241) (432,826)
Sub-total of cash outflows (29,143,602) (3,875,695) (25,548,357) (473,475)
Net cash flows from operating activities 6,595,024 6,091,899 2,498,717 5,527,159
2. Cash flows from investing activities
Cash received from disposal of investments 16,846,496 9,282,040 2,380 13,860
Cash received from returns on investments 406,105 556,038 492,989 596,898
32
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
Net cash received from disposal of fixed assets, 2,987 - 8,810 354
intangible assets and other long-term assets
- - - -
Cash received relating to other investing activities - - - -
Sub-total of cash inflows 17,255,588 9,838,078 504,179 611,112
Cash paid to acquire fixed assets, intangible assets (484,331) (148,301) (523,829) (183,971)
and other long-term assets
Cash paid to acquire investments (26,331,517) (14,046,586) (1,155,719) (475,953)
Net cash paid to acquire subsidiaries and other - - - -
business units
Cash paid to other investment activities - - - -
Sub-total of cash outflows (26,815,848) (14,194,887) (1,679,548) (659,924)
Net cash flows from investing activities (9,560,260) (4,356,809) (1,175,369) (48,812)
3. Cash flows from financing activities
Cash received from capital contributions 19,234 19,234 - -
Including: Cash received from capital contributions - - - -
by minority shareholders of subsidiaries
Cash received from borrowings 7,773,335 500,000 5,883,038 -
Cash received relating to other financing activities - - - -
Sub-total of cash inflows 7,792,569 519,234 5,883,038 -
Cash repayments of borrowings (2,847,658) (1,290,000) (4,433,877) (500,000)
Cash payments for interest expenses and (142,443) (261,178) (124,134) (405,234)
distribution of dividends or profits
Including: Cash payments for dividends or profit to (106,543) - (119,432) -
minority shareholders of subsidiaries
Cash payments to other financing activities - - - -
Sub-total of cash outflows (2,990,101) (1,551,178) (4,558,011) (905,234)
Net cash flows from financing activities 4,802,468 (1,031,944) 1,325,027 (905,234)
4. Effect of foreign exchange rate changes on (2,347) - (80,699) -
cash and cash equivalents
5. Net decrease in cash and cash equivalents 1,834,885 703,146 2,567,676 4,573,113
Add: Cash and cash equivalents at beginning of 5,187,317 6,245,008 5,272,238 6,879,717
33
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
year
6. Cash and cash equivalents at end of year 7,022,202 6,948,154 7,839,914 11,452,830
Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun
Chief of the accounting division: Chen Lihong
34
Interim Report for the First Quarter 2016 of Midea Group Co., Ltd.
II Auditor’s report
Is this Report audited by a CPAs firm?
□ Yes √ No
This Report is un-audited by a CPAs firm.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
30 April 2016
35
