2016 Semi-Annual Report of Midea Group Co., Ltd.
Midea Group Co., Ltd.
Semi-Annual Report 2016
August 2016
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior
management of Midea Group Co., Ltd. (hereinafter referred to as the “Company”)
hereby guarantee that the information presented in this Report is truthful, accurate
and complete, and shall together be jointly and severally liable for any false records,
misleading statements or material omissions in this Report.
All directors of the Company attended the Board meeting for reviewing this Report.
The Company plans not to distribute cash dividends or bonus shares or turn capital
reserves into share capital for the first half of 2016.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Mr. Xiao
Mingguang, responsible person for the Company’s financial affairs have represented
and warranted that the financial statements carried in this Report are truthful,
accurate and complete.
This Report has not been audited by a CPAs firm.
The future plans and some other forward-looking statements mentioned in this
Report shall not be regarded as virtual promises of the Company to investors.
Therefore, investors are kindly reminded to pay attention to possible investment
risks.
This Report has been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese version
shall prevail.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Contents
Section I Important Notes, Contents and Definitions ...................................................... 2
Section II Corporate Profile .................................................................................................... 5
Section III Summary of Accounting Data and Financial Indicators ............................. 7
Section IV Report of the Board of Directors .................................................................... 10
Section V Significant Events ................................................................................................ 41
Section VI Changes in Shares and Particulars about Shareholders ........................ 66
Section VII Preference Shares ............................................................................................. 72
Section VIII Information about Directors, Supervisors and Senior Management .. 73
Section IX Financial Report .................................................................................................. 74
Section X Documents Available for Reference ............................................................. 153
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Definitions
Term Definition
Company, the Company, Midea Group or the Group Midea Group Co., Ltd.
Midea Holding Midea Holding Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
Midea Group Finance Midea Group Finance Co., Ltd.
Toshiba Toshiba Corporation
Toshiba Lifestyle Toshiba Lifestyle Products & Services Corporation
KUKA KUKA Aktiengesellschaft
MECCA MECCA International (BVI) Limited
The Reporting Period The period from 1 January 2016 to 30 June 2016
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section II Corporate Profile
I Corporate information
Stock name Midea Group Stock code 000333
Stock exchange The Shenzhen Stock Exchange
Company name in Chinese 美的集团股份有限公司
Abbr. (if any) 美的集团
Company name in English
MIDEA GROUP CO., LTD.
(if any)
Legal representative Mr. Fang Hongbo
II Contact information
Company Secretary Representative for Securities Affairs
Name Jiang Peng Ou Yunbin
Midea Headquarters Building, 6 Midea Avenue, Beijiao Town, Shunde District,
Address
Foshan City, Guangdong Province, China
Tel. 0757-22607708 0757-23274957
Fax 0757-26605456
E-mail IR@midea.com
III Other information
1. Ways to contact the Company
Changes in the Reporting Period to the registered address, office address and their zip codes, website
address and email address of the Company:
□ Applicable √ N/A
No such changes in the Reporting Period. The said information can be found in the 2015 Annual Report.
2. About the media for information disclosure and the place where materials carrying disclosed
information such as this Report are kept
Changes in the Reporting Period to the media for information disclosure and the place where materials
carrying disclosed information such as this Report were kept:
□ Applicable √ N/A
The newspapers designated by the Company for information disclosure, the website designated by the
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2016 Semi-Annual Report of Midea Group Co., Ltd.
CSRC for disclosing this Report and the place where materials carrying disclosed information such as
this Report were kept did not change in the Reporting Period. The said information can be found in the
2015 Annual Report.
3. Changes in the registered information
Changes in the Reporting Period to the registered information:
□ Applicable √ N/A
The registration date and place of the Company, its business license number, taxation registration
number and organizational code did not change in the Reporting Period. The said information can be
found in the 2015 Annual Report.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section III Summary of Accounting Data and Financial
Indicators
I Key accounting data and financial indicators
Retroactive adjustments to or restatements of accounting data due to changes in the accounting policies
or corrections of accounting errors:
□ Yes √ No
2016H1 2015H1 YoY Change (%)
Operating revenues (RMB'000) 77,522,287 82,509,144 -6.04%
Net profits attributable to the
shareholders of the Company 9,496,493 8,324,123 14.08%
(RMB'000)
Net profits attributable to the
shareholders of the Company
9,100,244 7,433,037 22.43%
excluding non-recurring gains and
losses (RMB'000)
Net cash flows from operating activities
8,129,163 8,815,673 -7.79%
(RMB'000)
Basic earnings per share (RMB/share) 1.48 1.32 12.12%
Diluted earnings per share
1.48 1.31 12.98%
(RMB/share)
Weighted average ROE (%) 17.64% 19.62% -1.98%
As at the end of 2016H1 As at the end of 2015H1 YoY Change (%)
Total assets (RMB'000) 167,502,747 128,841,935 30.01%
Net assets attributable to the
shareholders of the Company 55,333,098 49,201,852 12.46%
(RMB'000)
Total share capital of the Company on the last trading session before the disclosure of this Report:
Total share capital of the Company on the last trading
6,446,691,854
session before the disclosure of this Report (share)
Fully diluted earnings per share based on the latest
1.47
share capital above (RMB/share)
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Note: The total share capital of the Company on the last trading session before the disclosure of this Report increased by
21,757,595 shares from the end of the Reporting Period because the Company carried out a stock option incentive
scheme and grantees exercised their stock options.
II Differences in accounting data under the domestic and overseas accounting
standards
1. Differences in the net profits and net assets disclosed in the financial reports prepared under
the international and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
2. Differences in the net profits and net assets disclosed in the financial reports prepared under
the overseas and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
III Items and amounts of non-recurring gains and losses
√ Applicable □ N/A
Unit: RMB'000
Item Amount Note
Gains or losses on disposal of non-current assets (including
6,042
the offset asset impairment provisions)
Government grants charged to the gains/losses for the
Reporting Period (except for the government grants closely
related to the business of the Company and given at a fixed 762,724
quota or amount in accordance with nationally uniform
standards)
Gains or losses on the changes in the fair value of
held-for-trading financial assets and liabilities, as well as
investment gains or losses on the disposal of held-for-trading
-539,590
financial assets and liabilities and available-for-sale financial
assets, except for the effectively hedging business related to
normal business operations of the Company
Non-operating incomes and expense other than the above 67,147
Less: Income tax effects 30,545
Minority interests effects (after tax) -130,471
Total 396,249 --
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the
definition in the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering
Their Securities to the Public—Non-recurring Gains and Losses, or classifies any non-recurring
gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item:
□ Applicable √ N/A
No such cases in the Reporting Period.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section IV Report of the Board of Directors
I Industry Overview
In the first half year of 2016, the macro-economic growth slowed down in China, housing market
further polarized, raw material price went up and down, foreign exchange rate continued to be fluctuated,
and the home appliance market entered into a stage of focusing on de-stocking, structural change, and
product & consumption upgrading. According to China IOL data, the total sales volume of residential
Air-conditioner for 2016H1 was just 58million units for the whole China market, which saw 15% decline
year-on-year; the total sales volume of refrigerator for 2016H1 was 28.94million units, which saw 1.4%
decline year-on-year; and the total sales volume of wash machine for 2016H1 was 27.50million units,
which saw 3.82% increase year-on-year. Nevertheless, kitchen appliances and small appliances
witnessed fast growth with 16.72million units sold at retail market for 2016H1, which has 4.7% increase
year-on-year, according to All View Cloud data.
Under the new economic environment, consumers showed much more participation in the process
of buying home appliances and using appliances. Home appliances manufacturers become more
product & consumer-oriented. Improving operational efficiency, developing smart appliances, leveraging
online sales, and encouraging technological, sales channel and service model innovation, have been the
core growth momentum for home appliances manufacturers.
2016 has seen consumption being further upgraded, people’s average income being constantly
increased, new consuming group represented by youth born after 1985 being more and more active. All
these contributed to the diversification of consuming demands and expansion of consuming area which
pushed home appliance manufacturers to actively improve product mix, innovation technologies, as well
as structural adjustment. According to All View Cloud data, premium smart home appliances have shown
rapid growth trend. Sales of smart air conditioners account for 15.3% of total air conditioner sales in the
offline channel and achieved 183.8% increase year-on-year, Smart refrigerators account for 10.5% of
total refrigerator sales in the offline channel and achieved 438.2% growth year-on-year. Smart wash
machines account for 5.8% of total wash machine sales in the offline channel and achieved 251%
growth year-on-year.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
2016 also witnessed further channel restructuring in the home appliance industry. O2O business
model, application of big data and widespread use of mobile payment have largely promoted channel
upgrading in the home appliance industry as well as cooperation between home appliance and internet
companies. E-commerce has entered into rapid growth period. In the first half of 2016, online sales of
home appliances have reached historic high. The B2C online sales market for home appliances for
2016H1 has reached RMB184.8bn, and achieved 35% growth year-on-year. After five years’ rapid
growth, online shopping has become a significant distribution channel for home appliances.
From mid to long term perspective, the growth momentum of home appliance industry in China
hasn’t had any change. The major reasons are as follows:
1) With constant increase of people’s income and accelerated urbanization in China, the penetration
rate of home appliance market is still expected to be improved. According to the data from the National
Bureau of Statistics of China, the nominal per capita disposable personal income (DPI) for 2016H1 is
RMB 11,886, which has 8.7% increase year-on-year. Meanwhile, urbanization has been accelerated in
China. A number of key projects have entered into implementation stage, which created new growth
opportunities. All these can effectively pull consumption and release potential of domestic demands.
2) Continuous consumption upgrade, combining with the existing 1.6bn units home appliances sold
in the Chinese market, has become a driving force to grow the home appliance sales in China. Notable
progress has been made on improving technologies such as energy-saving, environmental friendly,
smart appliances, industrial design as well as other features and quality of home appliances products.
New generation of consumers has higher demand for life quality which also urged home appliance
manufactures to improve their product offering. All these can help improve the product mix and
profitability of home appliance manufacturers.
3) In an era of internet+, technology & innovation will further push China to become a Manufacturing
Power. Improvement on relevant technologies such as smart control technology, information technology,
IOT, big data, cloud computing etc. as well as the widespread use of mobile devices will effectively drive
the rapid development of smart home which has been widely recognized as the future trend for the
development of home appliances. According to the prediction of China Market Monitor, by 2020 the
penetration rate of smart appliances will be further improved in China with smart appliances account for
45%, 25%, and 28% respectively of white goods, kitchen appliances and small domestic appliances
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2016 Semi-Annual Report of Midea Group Co., Ltd.
sales. In the future five years, the demand for smart appliances will reach RMB1500bn in China.
4) Under the new competition environment, the ecology of home appliance industry will be further
improved, and home appliance market will be further consolidated. Leading home appliance
manufacturers, with their competitive advantages in brands, technologies, industrial chain, services, and
channels, are expected to further improve their market share and profitability.
5) Based on the huge domestic market with a big population of 1.4bn in China, the home appliance
manufacturers in China have formed their competitive advantages in respect of scale, product cluster,
industrial chain support and capital, and will still maintain their competitiveness globally. Developing
markets have large population and growing economy, and are now entering into fast-developing period
for home appliances. Chinese companies are expected to play a significant role in these markets which
will provide a solid foundation for the export growth of Chinese companies. Meanwhile, Chinese
companies are very active in the global M&A fields. Acquisitions of brands, channels, technologies will
provide Chinese companies with new competitive advantages worldwide.
II Analysis of Main Businesses
1. Overview
Midea is a leading global player in consumer appliances and heating, ventilation and
air-conditioning (HVAC) systems. In the first half of 2016, the Company continues to adhere to the three
corporate strategic focuses: “Leading Products, Operational Efficiency, and Global Operations”.
Organizational restructuring has centered on products and users. As a result, R&D capability, reputation
of product quality, operational efficiency and business profitability of the Company have been largely
improved. Margins of a number of product categories have reached historic high level, risk factors have
been generally lowered, overseas sales have achieved substantial growth, globalization has made
milestone progress, and the competitive advantage of the Company, having wide range of product
categories and worldwide market synergies, has been further strengthened. In 2016H1, the total
revenue of the Company is RMB 78Bn with 5.87% decline year-on-year, net income is RMB 10.2Bn, net
income attributable to the shareholders is RMB 9.5Bn with 14.08% growth, gross margin reached
29.33% which has 1.97 percent increase compared to 2015H1, ROE is 17.64%.
In 2016, Midea successfully entered into the Fortune Global 500 list, becoming the first Chinese
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2016 Semi-Annual Report of Midea Group Co., Ltd.
home appliance manufacture listed on the Fortune Global 500. Midea has been continuously three years
ranked highest among home appliance manufacturers on the list of Fortune China 500. According to the
2016 State of Innovation published by Thomson Reuters, Midea Group is ranked highest among Top 10
Global Innovators–Home Appliances (2015) and Top 10 Kitchen Innovators–Asia (2011-2015).
According to Euromonitor’s Consumer Appliance Global Ranking, Midea Group, with a global market
share of 4.6%, is ranked the second after Philips among global home appliance companies.
In the first half of 2016, the key tasks of the Company are the following:
1) Focusing on users and technological innovation, continuously optimizing product mix and
steadily improving product competitive advantages
Adhere to the principle of making good products, strengthening on consumer research, developing
innovative products, improving product mix and the share of premium products, which result in the better
reputation of our products
In the field of residential air conditioning, Midea focuses on the unique features and differentiation of
products. Midea YB300 “Cooling King” floor-standing inverter air conditioners adopted a self-developed
innovative refrigerant technology which enables the air conditioner to cool down air rapidly even at 60℃
high temperature. It can meanwhile keep noise level at 18DB, has 100 shifts wind speed alternatives,
and Wi-Fi remote control function, etc. Midea ALL EASY split air conditioners adopted an innovative
design with panel and frame in one piece and chassis being removable, which make installation,
maintenance and cleaning air conditioners much more convenient. Midea residential air conditioner,
thanks to its technological innovations in all these years, has been granted various honors and awards
inside and outside of China. This year there are products being granted 2016 Red Dot product design
awards from Germany, the Most Efficient Mini Split Certificate by the Air Conditioning, Heating, and
Refrigeration Institute (AHRI), being tested by the Intertek Group from the United States, and
Outstanding Design Grand Gold Award and Outstanding Design Gold Award from China Light Industry
Outstanding Design Awards.
In the field of commercial air conditioning, as a leading Chinese brand in the commercial air
conditioning industry, Midea holds over 1000 patents in this field and won a lot of important projects
worldwide including the largest shopping mall in Dubai, Dalma Mall, Foro Central commercial real estate
project in Brazil, Changi Airport from Singapore, Jakarta International Airport from Indonesia, as well as
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2016 Semi-Annual Report of Midea Group Co., Ltd.
sports game stadiums such as the World Cup in Brazil, the European Youth Olympic Festival and the
African Games. 2016 also saw Midea won 100% of public biddings hold by Olympic Committee for the
air conditioning of all newly built Rio Olympic Games indoor stadiums. According to China IOL, the
growth of Midea commercial air conditioners has been in the last years continuously higher than the
growth of industry. Midea commercial air conditioners were granted by the Air Conditioning, Heating, and
Refrigeration Institute (AHRI) from the United States the first Modular Air Conditioning Unit Performance
Certificate in the world, the first Heat Pump Performance Certificate in Asia, and by Eurovent Certita
Certification from the Europe the first VRF Performance Certificate in China. Major testing criteria such
as cooling/heating capacity, power consumption, energy efficiency and noise level, are all rated as
international leading level.
In the field of laundry, Midea continues to invest heavily in R&D and product innovation by building a
globally competitive R&D platform, investing in advanced technologies, smart technologies and core
technologies, as well as continuously launching new products. For instance, this year the Company
launched its premium series Beverly and differentiation series Disney. The Beverly series design is an
outcome from working with Italian craft research institute and represents our premium products. Disney
series design is tailor made for children wash machines, wall-hung wash machines as well as portable
mini-wash machines, which focuses on combination of arts and practical use and represents our
differentiation products. In 2016, Little Swan, the Company’s subsidiary, was granted Certificates for its
Water Cubic High Efficiency & Energy Saving Technology and for BLDC Motor 20-Year Operating Life
Quality by VDE, the world leading Association for Electrical, Electronic & Information Technologies.
Beverly front-loading wash machine was granted 2016 Appliance Product Award by China Household
Electrical Appliance Association. Beverly top-loading wash machine was granted 2016 Ret Dot product
design awards from Germany.
In the field of refrigerator, Midea focused on the development of energy-saving technologies and
smart appliances. A number of Midea refrigerator product series were included in the Energy Efficiency
Top-Runner List. Midea double-screen smart refrigerator received broad attention at the Appliance &
Electronics World Expo in Shanghai due to its special features such as intelligent food management,
double screen interactive representation, mobile control, etc. Midea refrigerator 401WGPZV was
granted 2016 Appliance Product Award by China Household Electrical Appliance Association due to its
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unique selling features such as two separate keeping fresh systems technology, two cabinets separate
temperature control technology, auto-control atomization and moisture reservation technology. In the last
years, Midea refrigerators have been granted various international and domestic certifications such as
UL safety certification from the United States, Energy Star certification from Europe, TUV quality
certification, Greenhouse Gas Emission Certification (first one received in the industry), CSC
Energy-saving technology certification, CQC quality certification, etc.
In the field of small appliances, Midea has been constantly launching new products in order to
address consumers’ improving life quality needs. Midea microwave oven M1-L201B adopted the fourth
generation of inverter technology which can auto control the temperature, retain freshness and nutrition
of food, and meet level 1 energy efficiency standard. Midea “Tianmu” series hoods can reach 400Pa
wind pressure for exhaustion and conduct intelligent auto steaming cleaning. Midea “Dinghuo” gas stove
adopted three-level combustion technology and its burning capacity can reach 5.0KW. Midea “Menxiang
Dingfu” IH rice cooker adopted the world leading multi-frequency IH technology which can cause rice to
turn 720° in two directions and achieve the effect of having strong fire but fine heating. Midea “Qingyu”
smart electric fan adopted feather-imitation blade design, which can produce soft winds and address the
concerns of elders and children. It can connect with air condition and provide an auto control air
treatment solution. Midea MUSE water heater is embedded with JBL Bluetooth loud speaker which
enable people to listen to music and receive phone calls during showering. A number of Midea small
appliance categories have been granted international and domestic awards such as IF Design Awards,
Red Dot Awards, and Appliance Awards for consecutive years, which effectively demonstrated the
competitiveness of Midea products.
2) Completely strengthening positions in channels, rapidly developing e-commerce, and effectively
improving logistics capability
Thanks to its wide product categories advantage, Midea is able to strengthen its positions in 6 major
channels, i.e., flagship store, Suning, Gome, regional chain stores (TOP Club), smaller regional chain
stores (VIP 200) as well as specialty stores in towns and counties, which covers channels from
metropolis, tier one cities to towns and villages. 2016H1 has witnessed steady and fast development of
V200 and specialty stores, and scale effect shall be shown in the 2nd half of this year. Other channels,
particularly flagship stores and TOP club, have grown over 10%, which largely contribute to the stable
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2016 Semi-Annual Report of Midea Group Co., Ltd.
development of domestic market.
Centered on users and products, Midea built its online big data platform and started full strategic
cooperation with JD, Tmall, Suning online platforms. Midea online flagship stores on these platforms
experienced fast growth. In 2016H1, online sales of Midea products in total exceeded RMB 10bn with
57% growth year-on-year, and Midea is ranked the top among all home appliance companies in terms of
online sales value.
By way of developing its own logistics platform, Midea has completed consolidating its logistics
business in 1/3 provinces in China so far, with an aim of completing nationwide consolidation by the end
of this year. Facing the industry development trend from “Logistics Internet” to “Internet Logistics”,
Midea’s logistics platform is experiencing a proactive transformation with an aim to achieve its business
covering all different channels and combining delivery and installation business together. Through
intelligent cloud warehouse, Truckload / Less Truckload, urban distribution, and delivery combining with
installation, Midea logistics is able to offer exceptional experience for its customers.
3) Adhere to R&D cooperation, strengthening positions in smart home, and maintaining leading
position in the industry
Based on its wide product category and large amount of users, Midea has been actively pushing
forward its M-Smart strategy. Internally, Midea developed a smart home service application (SaaS),
committed to promote the upgrading and optimization of smart appliances, launched Midea Smart Life
Plan, and executed the smart life operation and service platform. Externally, Midea strengthened its
cooperation with nearly 50 partners on the ecological chain. It entered into strategic relationship with
Huawei, IFLYTEK, State Grid, Dooya to develop smart home together. It worked with OnStar to
seamlessly connect the Internet of Vehicles with smart home in order to provide smart home users
broader experiences. It also cooperated with well-known universities and institutes worldwide on the
core technologies of IoT and achieved breakthrough in key areas such as the development of core SIP
communication module, combination of three networks module, audio + communication module, security
strengthening, smart cloud 2.0 upgrading, etc. which have leading positions in the industry.
4) Making further investment in developing overseas market, improving the development of
overseas sales platform, and increasing OBM sales
Making further investment in developing overseas market, transforming the business model from
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“exporting from China” to “local operations overseas”, expanding the product categories for overseas
manufacturing, promoting localization of manufacturing and supply chain, and improving the product
qualities of overseas factories; enhancing the consumer research in various countires, strengthening
overseas channels, improving the band image of Midea-owned brands, and improve the product
competitiveness at local markets; enhancing the risk control and after-sales service support for overseas
sales, unifying the standard for overseas logistics and services, and setting up overseas logistics
platform. In the first half year of 2016, Midea’s export business grew approximately 14% year-on-year,
inventory has been significantly lowered down, margins and operation efficiency have been largely
improved.
5) With a global view, strengthening positions in the industry and exploring new industries
In the first half of 2016, Midea has launched three international M&A deals and strategic cooperation
with total value exceeding RMB30bn.
The strategic cooperation with Toshiba home appliance business has been completed. Through this
transaction, Midea acquired 80.1% stake in Toshiba Lifestyle Products & Services Corporation (“TLSC”),
the home appliance arm of Toshiba Corporation. Midea obtained 5,000 IP assets and is licensed to use
the Toshiba brand worldwide for 40 years. This transaction will improve Midea’s capability in branding,
technology, channel and manufacturing so as to strengthen Midea’s global influence and
competitiveness.
As part of the “Smart Home + Intelligent Manufacturing” strategy, Midea launched a voluntary public
tender offer for all shares in KUKA AG (KUKA), a leading global supplier of intelligent automation
solutions. By the end of the tender offer acceptance period, 81.04% of all existing shares of KUKA were
tendered into the offer. The total number of KUKA shares tendered during the regular and additional
tender period, in conjunction with the 13.51% KUKA shares indirectly held by Midea prior to the takeover
offer, results in a total of 94.55% of the issued share capital in KUKA.
In 2016H1, Midea has entered into a Definitive Agreement with the shareholder of Clivet S.p.A for
the acquisition of 80% stake in Clivet. Benefited from Clivet’s position in commercial air conditioner
industry in Europe, Midea will further improve its market share of large-capacity commercial air
conditioner in Europe as well as worldwide.
6) Building a highly efficient operation scheme, strengthening lean management through the
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complete value chain
Midea 632 IT project, which covers 6 operation systems, 3 management platforms and 2 technical
platforms, has been fully launched, which further enhanced the Company’s management principle of
“One Midea, One System, One Standard” and helped the overall improvement in every business fields of
Midea.
Midea has been pushing forward lean management through the whole value chain. T+3 order based
production planning scheme changes production planning from base on manufacturer self-evaluation to
base on customer ordering, which reduces lead time and accelerated turnover. From distribution side,
Midea tries to persuade its customers to change their mindset and to improvement ordering and
inventory management. From supply chain side, Midea enhanced its management of exclusive suppliers
and introduced good quality suppliers. From R&D side, Midea continues to reduce SKUs, reduce the
number of materials and improve standardization. From manufacturing side, Midea upgraded
manufacturing through implementing flexible production, automation, and lean management. The T+3
scheme has effectively improved inventory turnover and reduced warehouse area which leads to
improvement of operational efficiency.
7) Continuously launching long-term incentive plans, improving corporate governance
This year Midea launched the third term of share option plan for mid to high level management
employees, and the second term of Partnership Program (ESOP) for core senior management people
which aims to change professional managers to partners and link the interests of management with the
long term value of the Company. Partnership Program and share option plan aligned the interests of
senior management, key employees and shareholders together and largely improved the corporate
governance of the Company.
The main tasks for the second half of 2016 are as follows:
a. Focusing on the home appliance and HAVC industry, to continuously push forward the
transformation and upgrade of existing business; focusing on R&D, to ensure the steady improvement of
product competitiveness; focusing on users, to further develop differentiation products and product
innovation, and to ensure the unique technology capability and product competitive advantages of Midea
products.
b. Continue to apply the lean management philosophy and methods through the whole value chain,
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2016 Semi-Annual Report of Midea Group Co., Ltd.
extending the T+3 scheme with an aim to further lower down inventory level, optimize inventory structure,
shorten cash conversation cycle, and improve efficiency criteria.
c. Adhere to the Smart Home and Intelligent Manufacturing Strategy, embracing the opening,
cooperative, mutual benefiting and win-win philosophy, and providing better quality and more convenient
smart home user experience
d. exploring the international strategic markets, further driving the globalization of Midea, improving
the global competitiveness of Midea, ensuring the post-acquisition integration of Toshiba transaction as
well as other M&A projects, and ensuring a good entry and positioning in new industries such as robotics
industry.
e. continuously improving corporate structure and systems, paying attention to the training of talents
and recruitment of professionals, improving the corporate atmosphere and innovating long term
inventive plans.
YoY changes in key financial data
Unit: RMB’000
2016H1 2015H1 YoY Change (%) Main reasons for change
Operating revenues 77,522,287 82,509,144 -6.04%
Operating costs 54,866,160 59,878,906 -8.37%
Selling expenses 8,185,178 8,986,099 -8.91%
Administrative expenses 3,690,059 3,604,757 2.37%
Mainly due to the interests’ income and
Financial expenses -905,261 -778 -116,257.46%
foreign exchange gains.
Income tax expenses 1,946,671 1,808,007 7.67%
Mainly due to the loan providing
business of Midea financing company.
Net cash flows from
8,129,163 8,815,673 -7.79% Net cash flow from operating activities
operating activities
excluding the loan business has
actually increased 9%.
Net cash flows from investing Mainly due to the increased investment
-16,336,731 -8,825,101 85.12%
activities activities.
Net cash flows from financing Mainly due to borrowing loans and
13,246,447 272,708 4,757.37%
activities issuing bonds.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Net increase in cash and
5,109,499 234,907 2,075.12% Reasons mentioned above.
cash equivalents
Major changes to the profit structure or sources of the Company in the Report Period:
□ Applicable √ Inapplicable
No such cases in the Report Period.
Report Period progress of any development planning in the disclosed documents of the Company
such as share-soliciting prospectuses, offering prospectuses, asset reorganization reports, etc.:
□ Applicable √ Inapplicable
No such cases in the Report Period.
Report Period progress of any operating plans previously disclosed by the Company:
In the Report Period, we moved forward with all of our tasks according to our schedules of the
beginning of the year and progress has been made. For details, see “I Overview” in this section.
III Main business breakdown
Unit: RMB'000
Gross YoY change in YoY change in YoY change in
Operating revenue Operating cost margin operating operating cost gross margin
(%) revenue (%) (%) (%)
By business segment
Manufacturing 70,661,932 48,885,454 30.82% -6.86% -10.24% 2.61%
Logistics
905,094 836,276 7.60% 7.95% 14.68% -5.42%
transportation
By product
Large home
48,282,097 33,090,488 31.46% -11.41% -13.83% 1.92%
appliances
Air conditioners and
34,199,997 22,894,273 33.06% -20.12% -23.35% 2.82%
components
Refrigerators and
6,701,367 4,955,414 26.05% 11.18% 9.99% 0.79%
components
Washing machines
7,380,733 5,240,801 28.99% 30.52% 30.06% 0.25%
and components
20
2016 Semi-Annual Report of Midea Group Co., Ltd.
Small household
20,368,484 14,182,924 30.37% 5.38% -1.12% 4.59%
appliances
Motors 3,610,901 3,091,178 14.39% -4.83% -5.86% 0.94%
Logistics 2,182,447 1,986,472 8.98% 5.75% 3.74% 1.76%
By geographical segment
PRC 40,240,886 26,163,392 34.98% -18.56% -22.24% 3.08%
Other countries and
31,326,140 23,558,338 24.80% 14.77% 9.34% 3.74%
regions
Note: In order to help investors learn about the actual scale of operation and operational capability of
motors and logistics, the above mentioned data include the intercompany sales of motors and logistics
within the Company. Please refer to the notes to the financial statements in this Annual Report for the
data excluding the intercompany sales amount.
IV Core competitiveness analysis
1. Midea is a world leading consumer appliance and HVAC industrial conglomerate and its major
product categories have a leading position in the industry, which enables the Company to provide
one-stop full service high quality home appliance solutions to users.
Midea is the only home appliance and HAVC manufacturer in China with fully integrated value chain
and widest product categories. With its industry-leading technologies and manufacturing capabilities in
key components of home appliances such as compressors, motors, magnetrons, and its strong logistics
and service capabilities, Midea has obtained fully integrated value chain including R&D of key
components and finished goods, as well as in-house manufacturing and sales. Midea brand is a very
well-known brand in China for home appliances and HVAC products. A wide range of product categories
have leading positions in the industry which enable the Company to provide systematic and competitive
home appliances solutions to the consumers as well provide synergies in banding, bargaining with
supplier, consumer research and R&D cross all categories. Facing the development trend of smart
appliances in the future, the compatibility, collaboration and interaction between home appliances
become increasingly important. With such wide range of product categories, Midea has competitive
advantages in building smart home platform and providing systematic solutions to consumers.
2. Midea is able to integrate worldwide R&D resources and has world leading R&D and technology
21
2016 Semi-Annual Report of Midea Group Co., Ltd.
innovation capabilities
Midea is committed to building a globally competitive and multi-tier R&D scheme and acquiring
world leading R&D technologies and capabilities. According to the 2016 State of Innovation published by
Thomson Reuters, Midea Group is ranked highest among Top 10 Global Innovators–Home Appliances
(2015) and Top 10 Kitchen Innovators–Asia (2011-2015). The Company has invested in setting up a
global innovation center, recruiting high-end talents, as well as R&D centers in the USA, Germany,
Singapore, South Korea, Japan, Italy, Shanghai, and Shenzhen. The Company keeps close cooperation
relationship with over 30 universities or research institutes inside and outside of China such as Tsinghua
University, Zhejiang University, MIT, UCB, Stanford, etc. Meanwhile, the Company also pays attention to
commercialize the R&D achievements. Based on user-centered design, the Company launched
high-efficient cooling, heating, as well as Child Star air-conditioners, smart detergent auto-dispense
washer/dryer combination, “Steaming Cubic” micro-wave oven, IH smart rice cooker, steaming
auto-cleaning hoods, smart water heater and smart water purifier, etc. which are highly recognized by
the consumers.
3. Midea has achieved its overseas OBM business positioning, replying on its world-leading
manufacturing capability, scale advantages, diversified product mix as well as worldwide production
facilities
With its world-leading production scale and experiences, diversified product mix, and worldwide
manufacture facilities, Midea has built its rapid expansion capability in emerging markets which
meanwhile strengthened its capabilities for competing in developed markets. In many product categories,
Midea is one of the largest manufactures or branding sales worldwide. With such large scale production,
the Company has its competitive advantages in high efficiency and cost saving which makes very hard
for other manufacturers to compete. Overseas sales have accounted for over 40% of the total revenue of
the Company, and various products have been exported to over 200 countries and regions. Through
long-term cooperation with international companies, Midea has gained deep understanding of product
features and requirements for overseas markets. By way of setting up joint ventures, Midea has
effectively enlarged its sales channels and improved its experiences in overseas markets and
transformed its business mode from “exporting from China” to “local productions overseas”.
4. Midea has extensive and solid channels which secured stable growth for both online and offline
business development
22
2016 Semi-Annual Report of Midea Group Co., Ltd.
After years of effort and development, Midea has shaped broad and deep channels nationwide. In
the mature tier one and two markets, Midea has kept close cooperation with national large chain stores
like Suning and Gome. In the large tier three and four markets, Midea mainly depends on flagship stores,
specialty store, traditional channels as well as modern channels as enhancement. Channel retailing
stores have covered tier one and two markets completely and 95% of tier three and four markets.
Midea’s competitive advantages in brands, products, offline channels and logistics capabilities have
effectively strengthened its competitiveness in online sales. Midea has already become the largest home
appliances manufacture for online sales.
5. Modern corporate governance and incentive schemes have formed solid foundation for the
sustainable development of Midea
Midea pays high attention to its governance structure, risk control, as well as centralization and
decentralization of powers. The Company has built an established professional manager system.
Multidivisional structure has been in operation for many years, which adopts decentralization and
performance-oriented incentive scheme, and has become the training and development platform for
professional managers. The senior management of Midea are all professional managers and on average
have worked at the Company for 15-20 years. They all have extensive industry and management
experiences, deep understanding of global and Chinese home appliance industry and are able to guide
the development of the Company to the right direction. Such governance structure secures the
sustainable development of the Company.
Currently, senior management and core management personnel, via directly or indirectly holding
Midea shares and participating in the share option plans or “Partnership Program”, have aligned their
interests with shareholders, with incentive schemes combining both long-term and short-term interests.
V Analysis of investments
1. External equity investments
(1) External investments
√ Applicable □ N/A
External investments
Investment in the Reporting Period Investment in the same period of last
Change (%)
(RMB) year (RMB)
23
2016 Semi-Annual Report of Midea Group Co., Ltd.
4,767,935,220 965,815,780 393.67%
Investees’ profile
The Company’s investment as a
Name of investee Main business percentage of the investee’s total
equity interests (%)
Toshiba Lifestyle Products & Services Production and sale of home
80.10%
Corporation appliances
(2) The Company's shareholdings in financial corporations
√ Applicable □ N/A
Shareh
olding Shareh
Gain or
Initial percent olding
Number of Carrying loss for
investme age at Number of percent
shares held value as at the Source
Company Type of nt the shares held age at Account
at the the end of Reporting of
name company amount beginni at the end of the end ing title
beginning of the period Period shares
(RMB'000 ng of the period of the
the period (RMB'000) (RMB'000
) the period
)
period (%)
(%)
Promo
Golden
Long-te ter
Eagle
rm shares
Asset Fund
50,000 50,000,000 20.00% 50,000,000 20.00% 38,377 3,932 equity in
Managem company
investm establi
ent Co.,
ent shmen
Ltd.
t
Long-te
Bank of rm Non-p
Commer
Jiangsu 13,220 5,232,676 0.05% 5,232,676 0.05% 13,330 equity ublic
cial bank
Co., Ltd. investm issue
ent
Hubei Long-te
Bank rm Non-p
Commer
Corporati 5,000 5,870,266 0.17% 5,870,266 0.17% 5,000 equity ublic
cial bank
on investm issue
Limited ent
Foshan Long-te Non-p
Commer 1,318,54
Shunde 328,874,160 9.69% 373,085,433 9.69% 1,530,330 134,315 rm ublic
cial bank 0
Rural equity issue
24
2016 Semi-Annual Report of Midea Group Co., Ltd.
Commerc investm
ial Bank ent
Company
Limited
Zhangshu
Long-te
Shunyin
rm Non-p
County Commer
6,000 6,000,000 6.00% 6,000,000 6.00% 6,000 equity ublic
Bank cial bank -
investm issue
Company
ent
Limited
Fengchen
Long-te
g Shunyin
rm Non-p
County Commer
6,000 6,000,000 6.00% 6,000,000 6.00% 6,000 equity ublic
Bank cial bank -
investm issue
Company
ent
Limited
1,398,76
Total 401,977,102 -- 446,188,375 -- 1,599,037 138,247 -- --
0
Note: Bank of Jiangsu Co., Ltd. went public via the Shanghai Stock Exchange on 2 August 2016.
(3) Securities investments
□ Applicable √ N/A
No such cases in the Reporting Period.
(4) Shareholdings in other listed companies
□ Applicable √ N/A
No such cases in the Reporting Period.
2. Entrusted asset management, derivatives investments and entrusted loans
(1) Entrusted asset management
√ Applicable □ N/A
Unit: RMB'0,000
Name Related Whethe Value of Commen Method Actual Amount Actual
Product Terminati Projecte
of party or r it is a entrusted cement of principal provided gain or
type on date d income
trustee not related- assets date remune amount for loss
25
2016 Semi-Annual Report of Midea Group Co., Ltd.
party ration recovere impairme amount
transact d for the nt (if any) for the
ion period period
Bank
2016.01. 2016.12.3 As
Bank No No financial 2,217,890 963,252 - 49,320 49,320
01 1 agreed
product
Total 2,217,890 -- -- -- 963,252 - 49,320 49,320
Source of entrusted assets All from the Company's own funds
Cumulative amount of principals and
0
profits overdue
Litigations involved (if applicable) N/A
Disclosure date of the
announcement about the board’s
2016.03.26
consent for the asset management
entrustment (if any)
Disclosure date of the
announcement about the general
2016.04.27
meeting’s consent for the asset
management entrustment (if any)
(2) Investments in derivative financial instruments
√ Applicable □ N/A
Unit: RMB'0,000
Ratio of
investm
ent
amount
Wh
at the
ethe Sold
Investme Purcha end of
r it amou Amount Investme
Rel nt sed the Actual
is a Type Initial nt in provide nt
Opera ated Comme Termina amount amount period gain or
relat of investme the d for amount
ting part ncemen tion at the in the to the loss
ed-p deriva nt Repor impairm at the end
party y or t date date beginning Reporti Compa amount for
arty tive amount ting ent (if of the
not of the ng ny's net the period
tran Perio any) period
period Period assets
sact d
at the
ion
end of
the
period
(%)
26
2016 Semi-Annual Report of Midea Group Co., Ltd.
Futur Futur
es es 2016.01 2016.12
No No 748.20 - - - 23.90 0.01% 895.70
comp contra .01 .31 748.20
any cts
Forwa
rd
2016.01 2016.12 -27.55
Bank No No forex -8,414.40 - - - -50,875.4 -47,438.60
.01 .31 -8,414.40 %
contra
cts
-27.54
Total -7,666.20 -- -- -7,666.20 - - - -50,851.5 -46,542.90
%
Source of derivatives
All from the Company's own funds
investment funds
Litigation involved (if
N/A
applicable)
Disclosure date of the
announcement about
the board’s consent for 2016.03.26
the derivative
investment (if any)
Disclosure date of the
announcement about
the general meeting’s
2016.04.27
consent for the
derivative investment (if
any)
For the sake of eliminating the cost 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
Risk analysis of promoted forex funds business, with the purpose of avoiding the risks of exchange and interest
positions held in rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex
derivatives during the liabilities, as well as achieving locked-in costs. The Company has performed sufficient
Reporting Period and evaluation and control against derivatives investment and position risks, details of which are
explanation of control described as follows:
measures (including but 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted
not limited to market in compliance with laws and regulations, with clearly covenanted responsibility and obligation
risk, liquidity risk, credit relationship between the Company and the agencies.
risk, operational risk Control measures: The Company has designated relevant responsible departments to enhance
and legal risk) learning of laws and regulations and market rules, conducted strict examination and verification
of contracts, defined responsibility and obligation well, and strengthened compliance check, 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.
27
2016 Semi-Annual Report of Midea Group Co., Ltd.
2. Operational risk: Imperfect internal process, staff, systems and external issues may cause
the Company to suffer from loss during the course of its futures business and forex funds
business.
Control measures: The Company has not only developed relevant management systems that
clearly defined the assignment of responsibility and approval process for the futures business
and forex funds business, but also established a comparatively well-developed monitoring
mechanism, aiming to effectively reduce operational risk by strengthening risk control over the
business, decision-making and trading processes.
3. Market risk Uncertainties caused by changes in the prices of bulk commodity and exchange
rate fluctuations in foreign exchange market could lead to greater market risk in the futures
business and forex funds business. Meanwhile, inability to timely raise sufficient funds to
establish and maintain hedging positions in futures operations, or the forex funds required for
performance in forex funds operations being 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 shall always
be conducted by adhering to prudent operation principles. For futures business, the futures
transaction volume and application have been determined strictly according to the
requirements of production & operations, and the stop-loss mechanism has been implemented.
Besides, to determine the prepared margin amount which may be required to be
supplemented, the futures risk measuring system has been established to measure and
calculate the margin amount occupied, 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 application for funds business should conduct risk analysis on the conditions and
environment affecting 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 operating status of the funds business on a timely basis to ensure proper
funds arrangement before the expiry dates.
Changes in market
price or fair value of
derivatives product
invested during the 1. Gain/loss from futures hedging contracts incurred during the Reporting Period was
Reporting Period: RMB8,957,000;
specific methods used 2. Gain/loss from forward forex contracts incurred during the Reporting Period was
and relevant RMB-474,386,000;
assumption and 3. Public quotations in futures market or forward forex quotations announced by the Bank of
parameter settings shall China are used in the analysis of derivatives fair value.
be disclosed for
analysis of fair value of
derivatives
Explanation of
significant changes in N/A
accounting policies and
28
2016 Semi-Annual Report of Midea Group Co., Ltd.
specific financial
accounting principles in
respect of the
Company's derivatives
for the Reporting Period
as compared to the
previous Reporting
Period
The Company's independent directors are of the view that the futures hedging business is an
Special opinions
effective instrument for the Company to eliminate price volatility and implement risk prevention
expressed by
measures through enhanced internal control, thereby improving the operation and
independent directors
management of the Company; the Company's foreign exchange risk management capability
concerning the
can be further improved through the forex funds business, so as to maintain and increase the
Company's derivatives
value of foreign exchange assets and the abovementioned investment in derivatives can help
investment and risk
the Company to fully bring out its competitive advantages. Therefore, it is practicable for the
control
Company to carry out derivatives investment business, and the risks are controllable.
(3) Entrusted loans
□ Applicable √ N/A
No such cases in the Reporting Period.
3. Use of raised funds
□ Applicable √ N/A
No such cases in the Reporting Period.
4. Analysis to major subsidiaries and investees
√ Applicable □ N/A
Particulars about major subsidiaries and investees:
Principal Registered Total Operating Operating Net
Compa Net assets
products capital assets revenues profits profits
Company name ny Industry (RMB
or (RMB'0,00 (RMB (RMB (RMB (RMB
type million)
services 0) million) million) million) million)
Manufact
Guangdong Midea
uring of Home
Kitchen Appliances Subsidi USD7,200.
home appliance 12,402 2,598 5,932 683 592
Manufacturing Co., ary 00
appliance s
Ltd.
s
29
2016 Semi-Annual Report of Midea Group Co., Ltd.
Manufact
Guangdong Midea uring of Air
Subsidi RMB85,40
Refrigeration home condition 29,875 3,561 15,100 935 818
ary 0.00
Equipment Co., Ltd. appliance ers
s
Manufact
Foshan Shunde Midea
uring of Home
Electric Appliance Subsidi USD4,200.
home appliance 6,934 1,839 3,461 713 617
Manufacturing Co., ary 00
appliance s
Ltd.
s
Wuhu Midea Kitchen & Manufact
Bathroom Electric uring of
Subsidi Water RMB6,000.
Appliances home 4,087 587 3,151 436 463
ary heaters 00
Manufacturing Co., appliance
Ltd. s
Manufact
Guangdong Midea uring of Air
Subsidi RMB30,00
Heating & Ventilation home condition 6,141 1,140 5,047 663 594
ary 0.00
Equipment Co., Ltd. appliance ers
s
5. Major investments not financed by raised funds
□ Applicable √ N/A
No such cases in the Reporting Period.
VI Forecast of business performance from January to September in 2016
Warning about an estimated major change in the aggregate net profit from the beginning of the year to
the end of the next Reporting Period compared with the same period in the previous year and
explanation for the change:
□ Applicable √ N/A
VII Explanations by the Board of Directors and the Supervisory Committee regarding
the "non-standard auditor’s report" issued by the CPAs firm for the Reporting Period
□ Applicable √ N/A
30
2016 Semi-Annual Report of Midea Group Co., Ltd.
VIII Explanations by the Board of Directors regarding the "non-standard auditor’s
report" issued by the CPAs firm for last year
□ Applicable √ N/A
IX Profit distribution plan carried out during the Reporting Period
Profit distribution plan carried out during the Reporting Period, especially the execution of or the
adjustments to the parts in the plan about cash dividends and turning capital reserves into share capital:
√ Applicable □ N/A
The 2015 Annual Plan for Profit Distribution & Conversion of Capital Reserves into Share Capital was
carried out during the Reporting Period, which is detailed as follows: Based on its total of 4,267,391,228
shares, the Company would distribute a cash dividend of RMB12.00 (tax inclusive) per 10 shares to all
shareholders, resulting in a total cash dividend payment of RMB5,120,869,473.60. The remaining
undistributed profit would be carried forward for future distribution. And the Company would also
increase shares of all shareholders by converting capital reserves into share capital on the basis of 5
additional shares for every 10 shares, representing a total increment of 2,133,695,614 shares.
The said plan was reviewed and approved at the Sixth Meeting of the Second Board of Directors on 24
March 2016 and later at the 2015 Annual General Meeting on 26 April 2016. And the Announcement on
Implementation of the 2015 Annual Plan for Profit Distribution & Conversion of Capital Reserves into
Share Capital was disclosed on 29 April 2016. The book closure date for this profit distribution &
conversion of capital reserves into share capital was 5 May 2016, and the ex-right and ex-dividend date
was 6 May 2016. The implementation of the said plan has been finished in the Reporting Period.
Special statement about the cash dividend policy
In compliance with the Company’s Articles of Association and the resolution of
Yes
the general meeting:
Specific and clear dividend standard and ratio: Yes
Complete decision-making procedure and mechanism: Yes
Independent directors fulfilled their responsibilities and played their due role: Yes
Minority shareholders have the chance to fully express their opinion and desire
Yes
and their legal rights and interests were fully protected:
In adjustment or alteration of the cash dividend policy, the conditions and
N/A
procedure were in compliance with regulations and transparent:
31
2016 Semi-Annual Report of Midea Group Co., Ltd.
X Pre-plan for profit distribution and turning capital reserves into share capital for
the Reporting Period
□ Applicable √ N/A
The Company plans not to distribute cash dividends or bonus shares or turn capital reserves into share
capital for the first half of 2016.
XI Visitors in the Reporting Period
√ Applicable □ N/A
The Company attaches great importance to communication with investors. In the first half of 2016, it
directly communicated with more than 700-person-time investors in various ways.
Main talking
points with
Type of investors and
Date Place Occasion Visitor
visitor materials
provided by the
Company
Farallon, Acru Asset Management, BosValen Asset
Main talking
Management, CICC AMD, CITIC Securities
points with
International, China Huarong International, China
investors
Innovation Capital, China International Fund, First
included: (1)
Beijing, Fundatech Capital, Greenwoods Asset
industry and
Management Hk, Ing&Share Investment, Pacific
development
Eagle, Pictet, Rays Capital Partners, Shenwan
status; (2)
Hongyuan Asset Management, Shinhan Bnp, Sichuan
condition of
Strategy Instituti Golden Nest Capital Management, Sinochem HK
2016-1-6 Hong Kong business and
meeting on Group, Summitview Capital, Telligent, Trivest
development
Advisors, Ward Ferry, Winnington Capital, Yuanta
strategies; (3)
Funds, LBN Advisers, Zeal Asset Management,
periodic report
Trilogy, Springs Capital, JP Morgan Asset
released by other
Management, FIL, Value Partners, Balyasny, Bocom
companies and
International Asset Management, CI Investments,
other contents
CQS, Harvest Global, JK Capital, Lizard Investors,
involved.
Modus, Neuberger Berman, Pinebridge, Samsung AM,
Materials:
Standard Pacific Capital, Och-Ziff
periodical report,
Wellington Management, New Silk Road, Lone Pine
announcement
Capital, Khazanah Nasional, J.W.Childs, Invesco,
Strategy Instituti and other
2016-1-12 Beijing Sirios Capital, Ariose Capital Management, CPPIB,
meeting on information
QVT Financial, Landmark Group, Tairen Capital,
disclosure.
Bayerninvest, Teng Yue Partners, Brilliance CM,
32
2016 Semi-Annual Report of Midea Group Co., Ltd.
Impax AM, Baring AM, Wealth Oasis, Asiya Except
Investments, Flowering Tree IM, Discovery Bay institutional
Capital, Exabyte CM, China Investment Corporation, investors, the
Hillhouse CM, Harvest FM, Manulife AM, GMT Capital, Company pays
Prudence IM, Xingtai CM, Eastspring, Aberdeen AM great attention to
JP Morgan Asset Management, Wellington communications
Management, FIL Investment Management, Goldman with individuals
Sachs Investment Partners, Indus Capital, Matthews and other minority
Asia, Morgan Stanley Investment Management, investors by
Alliance Bernstein, Deprince Race & Zollo, Yiheng phone, email and
Capital, Capital World Investors, AR Capital, interactive
Strategy Instituti BlueCrest Capital, Carrhae, Columbia Threadneedle, platform in
2016-1-13 Shanghai
meeting on Farallon Capital Asia Pte Ltd, Fidelity Management & replying to all
Research, Marshall Wace Asia Limited, Prime Capital questions and
Management, Schroders, Barrow Hanley Mewhinnery suggestions that
& Srauss, Invesco, Kingsmesd Asset Management, need special
Neuberger Berman, Oaktree Capital Management, attention.
Oxbow Capital Management, Pleiad Investment,
Seatown, Zaaba Capital
The On-Site Instituti
2016-1-15 DBS Vickers
Company survey on
The Instituti
2016-1-15 Phone talk Fidelity Fund
Company on
The Instituti
2016-1-20 Phone talk Southeastern Asset Management
Company on
The Instituti
2016-1-21 Phone talk Nan Shan Life Insurance
Company on
The On-Site Instituti
2016-1-21 Hanlun Investment
Company survey on
The On-Site Instituti
2016-1-26 Mingda Capital
Company survey on
The On-Site Instituti
2016-1-27 Mitsubishi UFJ International Investment Trust
Company survey on
The Instituti
2016-1-29 Phone talk Fubon Securities
Company on
Gold State Securities, Ginkgo Winfine Investment,
Results Shangcheng Asset, Tebon Securities, Guohe Fund,
The Instituti
2016-3-28 presentatio ICBC, Industrial Securities, Banyan Partners,
Company on
n Shanghai Honghu Investment, CITIC Wings Asset,
Capital International
Guotai Investment, Fuh Hwa Securities Investment
The Instituti
2016-3-29 Phone talk Fund, MassMutual Mercuries Life, United Investment
Company on
Trust, Franklin Huamei Investment Trust
2016-4-5 Hong Kong Roadshow Instituti HSBC Global Asset Management, Value Partners
33
2016 Semi-Annual Report of Midea Group Co., Ltd.
on Limited, Zeal Asset Management, China Alpha Fund,
UBS Global Asset Management, Point 72, Blue Ocean
Asset Management, CCB International Asset
Management, Q Fund Management, Winnington
Capital Limited, Zaaba Capital, China International
Fund Management, Godman Sachs, Telligent, Light &
Salt, Atlantis Investment Management Ltd
Fidelity International, JP Morgan Asset Management,
Eton Park Capital, Acru Asset Management, BOCI
Prudential, Goldman Sachs Asset Management, LBN
Instituti
2016-4-6 Hong Kong Roadshow Advisers, Light & Salt Capital Management, Overlook
on
Investments, Springs Capital, Trilogy Partners,
Neuberger Berman Asia, Summitview Capital
Management, Fundatech Capital
The On-Site Instituti
2016-4-7 RBC Global
Company survey on
Laxey Partners Limited (LPL), Somerset Capital
Management LLP, Seafire Capital, Santa Lucia Asset
Management, Samoa Capital, Rays Capital, Prusik
Investment Management LLP, Threadneedle Asset
Management Ltd, M&G Investment Management
The Instituti Limited, JP Morgan Asset Mgmt UK Ltd (GEM Team),
2016-4-7 Phone talk
Company on J O Hambro Capital Management Ltd, Ivaldi Capital,
Investec Asset Management Ltd, HSBC Global Asset
Management (UK) Ltd, Bank Vontobel AG, Delta Lloyd
Asset Management NV, Cederberg Capital UK LLP,
Citic Securities, Carrhae Capital LLP, azValor Asset
Mangement
The On-Site Instituti
2016-4-8 Baillie Gifford
Company survey on
The Instituti
2016-4-8 Phone talk Fidelity Fund
Company on
The Instituti
2016-4-11 Phone talk American Century
Company on
The On-Site Instituti
2016-4-11 Stewart, Odey, Millennium, Shengshu Investment
Company survey on
The Instituti
2016-4-12 Phone talk Indus Capital
Company on
The On-Site Instituti
2016-4-12 Fidelity Fund
Company survey on
The Instituti
2016-4-13 Phone talk Fidelity Fund (London)
Company on
2016-4-14 The On-Site Instituti Aberdeen
34
2016 Semi-Annual Report of Midea Group Co., Ltd.
Company survey on
The On-Site Instituti
2016-4-21 Somerset Capital
Company survey on
The On-Site Instituti
2016-4-22 Canada Pension Fund Investment Company
Company survey on
The Instituti
2016-4-25 Phone talk Broad Peak
Company on
Capital, CLSA, DB, F&H Fund Management,
Greenwood, GTM, HSBC, Modus Asset Management,
Morgan Stanley, Neuberger Berman, Oberweis Asset,
OTPP, Overlook Investments, PPLC, Robeco
Investment, UBS Asset Management, UG Investment,
Ward Ferry, Essence Securities, Bisheng Investment,
Deepwater Capital, Bosera Asset Management,
Caihua Capital, Da Cheng Fund, Temasek, Oriental
Marathon Investment, ESAM Asset, Fosun Group,
Fidelity Fund, Fullgoal Ansheng, Hill House Capital,
Guanjun Asset, Everbright Prudential, GF Securities,
Guangzheng Hang Seng, Sinolink Securities, Guotai
The On-Site Instituti Junan Securities, Haitong Securities Assets, Xingzhi
2016-4-27
Company survey on Venture Capital, Citibank, Harvest Fund, Gold State
Securities, Neo-Criterion Capital, Macquarie
Securities, Mingda Asset Management, JP Morgan,
Qianfang Fund, Rayfund, Cephei Capital, Qianxin
Investment, Wanfeng Youfang Investment, Shenwan
Hongyuan, Shenwan Hongyuan Securities (Hong
Kong), Schroeder, Taiping Asset Management(Hong
Kong), Taikang Asset Management, Golden Nest
Capital, Industrial Securities, Yiheng Capital, Yongan
Gainful Asset, Yongjin Investment, Yuanwang Asset,
Changjiang Securities, Long-term Investment,
Zheshang Securities, Galaxy Securities, CITIC
Securities, Zhuhai Common Growth Fund
Strategy Instituti Shin Kong Life, Hua Nan Investment Trust, China Life
2016-4-28 Shenzhen
meeting on Insurance
Putnam, Baring Asset, Brilliance, Deepwater Capital,
Fuh Hwa, Modus Asset, Robeco, Springboard, Trivest,
Allianz Global, Bosvalen Asset, Central Asset, China
Asset, Edmond De Rothschild, OTPP, Oberweis
Strategy Instituti
2016-5-4 Hong Kong Asset, Rays Capital, Viking, Zeal Asset, Trilogy,
meeting on
HSBC, Och-Ziff, Acru Asset, Alphalex Capital, Asiya,
BEA Union, CICC HKAM, Capital Group, Daiwa SB
investments, Eastspring Investments, Franklin
Templeton, Hedgestone Capital, JT Capital, Kontiki
35
2016 Semi-Annual Report of Midea Group Co., Ltd.
Capital, Lockheed Martin, Marco Polo Pure AM,
Minmetals Capital, Mirae Asset, Nexus IM, Nezu Asia,
Oxbow Capital, Q Fund, RHB Asset, Senrigan Capital,
Yiheng Capital, iVenture Investment
Doric Capital, Gemway Assets, Gsam gems team,
Indus Capital, Pacific Alliance Im, Prudential Financial
Securities, Newport Asia, Allianz Global Investors,
Strategy Instituti Atlantis Im, BNP Paribas AM, Comgest, Macquarie
2016-5-6 Shenzhen
meeting on Private Wealth, Amundi Asset Management, China
Asset Management, Mirae AM, Point72 Asset
Management, UBP Asset Aanagement, J.P.Morgan
AM PRG
Columbia Mgt Inv Advisers, Harvest Global
Investments, Invesco Advisors, Atlantic Investment
Management, Axa Investment Managers Asia,
Strategy Instituti
2016-5-9 Chengdu Henderson Global Investors, Wells Capital
meeting on
Management, Ruffer LLP, CIM Investment
Management, Allianz Global Investors Asia Pacific,
Fidelity
The On-Site Instituti
2016-5-11 New Idea Investment
Company survey on
GIC, Capital World, Gavekal Asia, Morgan Stanley
AM, Nezu Capital, JPMorgan AM, Capital Research
Global, Baring AM, BEA Union IM, BlackRock IM, BNP
Paribas AM, China Investment, Comgest Far East,
Fullerton Fund, Marshall Wace AM, Marshall Wace
Strategy Instituti North America, Newton Inv Mgmt, Rochkhampton
2016-5-12 Hong Kong
meeting on Management HK, Samsung Investment, Trivest
Advisors, Acion Partners, Allianz RCM, BOCI
Prudential AM, Everpoint AM, Indus Capital Mgmt,
Janchor Partners, Pinebridge Investments Asia,
Point72 AM, Rays Capital Partners, Schroder Inv
Management HK, UBS wealth Management
Wellington Management, Oaktree Capital
Management, Thornburg Investment, Harvard
Management Co., Neon Liberty Capital Management,
Tiger Pacific Capital, Caxton Associates LP, Sanoor
Capital, Indus Capital Partners, Ashmore Equities
Instituti
2016-5-13 The U.S. Roadshow Invesment Management, Harding Loevner LP, RS
on
Investments, Arrowgrass, Moore Capital Management,
Visium Asset Management, JPMorgan Asset
Management, Lazard Asset Management, Advent
Capital Management LLC, Greyson Capital
Management, Joho Capital LLC, GLG Partners,
36
2016 Semi-Annual Report of Midea Group Co., Ltd.
Truck Capital, Marvin & Palmer, Expedition Investment
Partners, Global Thematic Partners, Kingdon Capital
Management LLC, Teng Yue Partners,
Oppenheimerfunds Inc, Kylin Management LLC,
Lone Pine Capital, Franklin Mutual Advisors LLC,
Fidelity Management and Research, Granite Point,
Evergreen Investment Management Company LLC
Schroders, Wellington, Manulife Asset Management,
Myriad Asset Management, J.P. Morgan Asset
Management, Columbia Threadneedle, Navigator
Strategy Instituti
2016-5-16 Shenzhen Asset Manegement, Thornburg Investment
meeting on
Management, TPG-Axon, Allianz Global Investors,
Matthews International Capital Management, Prince
Street Capital Management, Value Partners
The On-Site Instituti
2016-5-16 E Fund Management
Company survey on
The On-Site Instituti
2016-5-18 Genesis
Company survey on
The On-Site Instituti
2016-5-19 Morvern Investments, WaveStone
Company survey on
Bosera Asset Management, Penghua Fund, Essence
Securities, Invesco Great Wall, Great Wall Fund,
Homeocapital, First Capital Securities, Yimin Fund,
Strategy Instituti
2016-5-19 Shenzhen China-Europe Rabbit Fund Management, Qianhai
meeting on
Ankang Investment, Hengda Finance, Flying Financial,
Jin Zhen Investment, Etock Capital, GR Asset,
Foresea Life Insurance, Gold State Securities
Eastbay Asset Management, Henderson Global
Investors, Lone Pine Capital, Miura Global Partners,
Turiya Capital Management, Keywise Capital, QVT
Financial, Goldman Sachs Investment Partners,
Janchor Partners, Pleiad Investment Advisors, Saga
Tree Capital Advisors, State Street Global Advisors,
Quest Management Inc, State Street Global Advisors,
GIC, All-Stars Investment, Moore Capital, UBS Asset
Strategy Instituti
2016-5-25 Beijing Management, All-Stars Investment, Neuberger
meeting on
Berman Asia, Zaaba Capital, Cevian Capital, Ariose
Capital, Boyu Capital, Nomura Asset Management,
Norges Bank Investment Management, Ivaldi Capital,
T Rowe Price, Ariose Capital, Janus Capital Group,
Prime Capital Management, Coatue Management,
China Asset Management, Robeco Groep, SPQ Asia
Capital, UG Investment Advisors, Ward Ferry
Management, Oberweis Asset Management,
37
2016 Semi-Annual Report of Midea Group Co., Ltd.
Composite Capital, JP Morgan Asset Management,
Fidelity Worldwide Investment
Janus Capital, Putnam Investments, Point72 Asia,
Goldman Sachs, Credit Suisse, CIMB Principal,
Kingsmead, Millennium, Ellis Munro, Nomura, MFS
Investment, Old Mutual, Goldman Sachs, Broad Peak,
Eastspring Investment, Bank Negara Malaysia,
Strategy Instituti Southeastern Asset Management, Flowering Tree
2016-5-25 Singapore
meeting on Investment Management, Citic Securities
International, Prince Street, CPP Investment Board,
Lion Global, Amundi, GIC, Fidelity, Wellington
Management, Aberdeen, Seatown Holdings, Shaw
Spring, Truston, Fullerton Fund Management,
Somerset Capital Management
Yinhua Fund, Chang Xin Assets Management,
Fortune SG Fund,JIC Group, Tianhong Asset
Management, CUAM, Harvest Fund,
Strategy Instituti
2016-5-27 Hangzhou Neuberger-Berman, Runhui Investment, New
meeting on
Thought, ABC-AC Fund, Pinpoint Investment,
Khazanah Nasional Berhad,Temasek Holdings, First
State Cinda Fund
Point72 AM, AP AM, China AM, DIAM, Comgest,
Julius Baer Group Ltd, Modus AM, Prime CM, Q Fund
Management, Marshall Wace, Capital Research And
Management, Acion Partners, Broad Peak, Keywise
Strategy Instituti
2016-5-31 Shenzhen CM, Mirae Asset, Sumitomo Mitsui AM, Turiya
meeting on
Advisors, HSBC Global AM, Value Partners, Latimer
Light Capital, Magnolia CM, Modus AM, Seatown
Holdings, Serenity CM, Greenwoods AM, Investec
AM, Pinpoint AM
The Instituti
2016-6-1 Phone talk Yulan Capital
Company on
The Instituti
2016-6-1 Phone talk Davidson Kempner European Partners
Company on
SAIF Partners, Deutsche Bank, RHB AM, Fair China
Strategy Instituti
2016-6-3 Shenzhen Focus Fund, Farallon Capital, Taiping AM, Overlook
meeting on
Investments
The On-Site Instituti
2016-6-6 Ellerston Capital
Company survey on
Atlantis Investment, Fullgoal Asset Management,
Strategy Instituti Indus Capital, Lombard Odier, Blue Pool Capital,
2016-6-7 Shenzhen
meeting on Elevation Capital Management, Gemboom
Investment, Q Fund Management, Allianz Global
38
2016 Semi-Annual Report of Midea Group Co., Ltd.
Investors, Balyasny (BAM) Asset Management, Gloug
Capital, Morgan Stanley, First State Stewart, Fidelity
The Instituti Yuanta Funds, China Life Insurance, Franklin
2016-6-8 Phone talk
Company on Investment Trust,KGI Research Department
NBIM, Fidelity Management&Research, C I Funds,
CIC, GIC, Investec AM, JP.Morgan AM, Black Creek
Strategy Instituti IM, GLG Partners(UK), Nezu Asia CM, TPG Capital,
2016-6-14 Beijing
meeting on Fidelity International(UK), Bank Negara Malaysia,
Mirae Asset Global, Public Mutual Bhd, York Capital
Management, Mondrian Investment Partners
CouplandCardiff Management, Morgan Stanley,
Keywise Capital Management, APG Asset
Management, Ellis Brandy Management, Apollo
Investment Management, Power Pacific Corporation,
Deutsche Asset Management, GAM, Bosheng Capital
Strategy Instituti
2016-6-15 Hong Kong Management, GMT Capital, Sumeru Capital, Bank
meeting on
Julius Bar, Mirae Asset Global Investment, TT
International, Black Creek Investment Management,
GaveKal Capital, ClearBridge Investments, Q Fund
Management, Millennium Capital Management, China
Asset Management
Instituti
2016-6-15 Guangzhou Roadshow City National Rochdale
on
Instituti
2016-6-15 Guangzhou Roadshow Wary Ferry
on
The Instituti
2016-6-16 Phone talk Port Meadow Fund
Company on
Strategy Instituti Hongde Fund, CICC Fund, Yinhua Fund, ICBC, CIFM,
2016-6-17 Chengdu
meeting on COAMC,Dacheng Fund
Eastspring Investment, Cathay Insurance, Mercuries
Life Insurance, Cathay United Bank, SinoPac
Securities, Development international,Venture Capital,
Strategy Instituti
2016-6-22 Taiwan Hequn Investment, China Trustee, Franklin Huamei
meeting on
Investment Trust, Nomura Trust and Banking, Yuanda
Securities, KCI Investment Consultant, FH Investment,
Pramerica Investment Trust
Neuberger Berman、Schroders、KB Asset
Management、Khazanah Nasional、Value Partners、
Trivest, Spring River Capital,Perseverance Asset,
Strategy Instituti Cathay Life Insurance, Yinhua Funds, Uprignt
2016-6-23 Shanghai
meeting on Finance, Granford Capital, Yongling Tonghui
Finance,tral Asset Investments,Chongyang
Investment, Fuhua Securities Investment
Trust,Brilliance Capital,Starrock,Orchid Asia, Hongxi
39
2016 Semi-Annual Report of Midea Group Co., Ltd.
Assets,Xinyuan Assets, Western Securities,
ICBC-AXA Life, Taiping Fund Management,Bin Yuan
Capital, Point Assets, Fosun Group, Leadbank,
Qianhai Highrun M&A Fund,Shanghai Xingzhi Venture
Capital, Yuanshi Assets Management, Fenghe Asia,
Asia Value Capital, Nomura Investment, Fubon Life
Insurance, Xingju Capital, Yong Peng Investment
Sunshine Assets, China Asset Management,ICBC
Strategy Instituti Credit Suisse, Harvest Fund, Yinhua Fund, NCAM,
2016-6-23 Beijing
meeting on Huashang Fund, Zhongyou Fund, China Life
Insurance, Taikang AMC
The Fubon Life Insurance, Nan Shan Life Insurance,
Instituti
2016-6-27 Company Phone talk Cathay Investment Trust, Cathay Life, Yuanta Baolai
on
Investment Trust,Pramerica Investment Trust
The On-Site Instituti
2016-6-27 Cathay United Bank in Taiwan
Company survey on
The Instituti
2016-6-28 Phone talk Sumitomo Trust & Banking
Company on
Bosera Funds, Yinhua Fund, Changjin Investment,
The On-Site Instituti
2016-6-28 Elitimes, Huashang Investment, Guangdong Jingyang
Company survey on
Investment
The On-Site Instituti
2016-6-28 Nomura Asset Management
Company survey on
Ruiquan Capital, Zhongrong International Investment
Trust, Yimin Fund, Hongyi Assets, Qianhai Life
Insurance, Zhexin Yide, Jingtai Lifeng, Qianhai
Housheng Assets, BNP PARIBAS, Guangcai Capital,
Great Wall Securities, Baohong Assets Management,
Strategy Instituti
2016-6-29 Shenzhen Qianhai Tianzu Capital, Shanghai Jinzhen Investment,
meeting on
Southern Ruitai, Huaxia Rongyi Shenzhen Investment
Development, Xinding Fund, Zhongtie Baoying
Assets,ABC, Shenzhen Warburg Investment, Youngy
Investment, Yixing Investment,Chuang Shijie Capital,
Caitong Fund
40
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section V Significant Events
I Corporate governance
The Company has been improving its corporate governance, building a modern corporate system and
standardizing its operations in strict accordance with the Company Law, the Securities Law, the Code of
Corporate Governance for Listed Companies of the China Securities Regulatory Commission and other
applicable laws and regulations. The governance of the Company in the Reporting Period complied with
the Company Law and the CSRC requirements.
II Lawsuits
Material lawsuits and arbitrations
□ Applicable √ N/A
No such cases in the Reporting Period.
Other lawsuits
□ Applicable √ N/A
III Media criticism
□ Applicable √ N/A
No such cases in the Reporting Period.
IV Bankruptcy and reorganization
□ Applicable √ N/A
No such cases in the Reporting Period.
V Asset transactions
1. Acquisition of assets
√ Applicable □ N/A
41
2016 Semi-Annual Report of Midea Group Co., Ltd.
Net profit
Relations
contribute
hip with
d by the
Influenc the
asset to Index to
Transacti e on the transactio
Transacti Effects on the the Related-p Disclos the
on party Compa n party
Acquired on price Progress Company’s Company arty ure disclose
or its ny’s (applicabl
asset (RMB’0,0 (note 2) operation (note as a transactio date d
ultimate profit/lo e for a
00) 3) percenta n or not (note 5) informati
controller ss (note related-p
ge of the on
4) arty
Company
transactio
’s net
n)
profit (%)
Increasing
Midea’s global
influence and
A 80.1%
overall
stake of
Formalitie competitivenes
Toshiba
s for the s by
Toshiba Lifestyle www.cni
331,470.8 equity improvement in 2016-0
Corporati Products 0 0 No N/A nfo.com.
4 transfer brand, 7-01
on & cn
complete technology,
Services
d channel,
Corporati
manufacturing
on
capability, etc.
through this
acquisition
Note: The consolidated financial statements for the Reporting Period include the balance sheet of Toshiba Lifestyle
Products & Services Corporation for Toshiba Lifestyle and the Company have completed the formalities for the said equity
transfer on 30 June 2016.
2. Sale of assets
□ Applicable √ N/A
No such cases in the Reporting Period.
3. Business combination
□ Applicable √ N/A
No such cases in the Reporting Period.
42
2016 Semi-Annual Report of Midea Group Co., Ltd.
VI Implementation of any equity incentive plan and its effects
√ Applicable □ N/A
A. Overview of the First Stock Option Incentive Plan
a. The Company convened the Sixth Meeting of the Second Board of Directors on 24 March 2016, at
which the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options
of the First Stock Option Incentive Plan was reviewed and approved. As such, it was agreed to adjust the
incentive receivers and their exercisable stock options for the First Stock Option Incentive Plan due to
the leave, position changes and failure in the performance appraisal of some incentive receivers. Upon
the adjustments, the incentive receivers decreased from 626 to 562, and their unexercised stock options
were adjusted to 58,155,600 (including the unexercised stock options from the first exercise period).
The Proposal for Matters Related to the Stock Option Exercise for the Second Exercise Period of the
First Stock Option Incentive Plan was also considered and approved. Due to the fact that the exercise
conditions have grown mature for the second exercise period, a total of 559 qualified incentive receivers
have been allowed to exercise 27,185,000 stock options in the second exercise period.
b. On 29 April 2016, the Announcement on Implementation of the 2015 Annual Plan for Profit Distribution
& Conversion of Capital Reserves into Share Capital was disclosed by the Company, with a decision to
distribute a cash dividend of RMB12.00 for every 10 shares to all the shareholders and increase shares
of all shareholders by converting capital reserves into share capital on the basis of 5 additional shares
for every 10 shares based on the total of 4,267,391,228 shares of the Company. The book closure date
was 5 May 2016, and the ex-right and ex-dividend date was 6 May 2016.
The Company convened the Tenth Meeting of the Second Board of Directors on 9 May 2016, at which
the Proposal for the Adjustments to the Number of Stock Options and the Exercise Price for the First
Stock Option Incentive Plan was reviewed and approved. As the 2015 Annual Plan for Profit Distribution
& Conversion of Capital Reserves into Share Capital had been carried out, the number of unexercised
stock options for the First Stock Option Incentive Plan was changed from 58,155,600 to 87,233,400, the
exercisable stock options for the second exercise period were revised from 27,185,000 to 40,777,500,
and the exercise price was reduced from RMB17.72 per share to RMB11.01 per share.
c. Upon examination by the Shenzhen Stock Exchange and the Shenzhen branch of China Securities
43
2016 Semi-Annual Report of Midea Group Co., Ltd.
Depository and Clearing Co., Ltd., the chosen and qualified incentive receivers for the First Stock Option
Incentive Plan may choose to exercise their exercisable stock options in the second exercise period,
which is from 7 June 2016 to 17 February 2018.
B. Overview of the Second Stock Option Incentive Plan
a. The Company convened the Tenth Meeting of the Second Board of Directors on 9 May 2016, at which
the Proposal for the Adjustments to the Number of Stock Options and the Exercise Price for the Second
Stock Option Incentive Plan was reviewed and approved. As the 2015 Annual Plan for Profit Distribution
& Conversion of Capital Reserves into Share Capital had been carried out, the number of stock options
for the Second Stock Option Incentive Plan was changed from 83,790,000 to 125,685,000, and the
exercise price was reduced from RMB30.54 per share to RMB19.56 per share.
b. The Company convened the 13th Meeting of the Second Board of Directors on 1 June 2016, at which
the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the
Second Stock Option Incentive Plan was reviewed and approved. As such, it was agreed to adjust the
incentive receivers and their exercisable stock options for the Second Stock Option Incentive Plan due to
the leave, position changes and failure in the performance appraisal of some incentive receivers. Upon
the adjustments, the incentive receivers for the Second Stock Option Incentive Plan decreased from 733
to 639, and the exercisable stock options for the revised incentive receivers were also reduced from
125,685,000 to 108,705,000.
The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of the
Second Stock Option Incentive Plan was also considered and approved. Due to the fact that the exercise
conditions have grown mature for the first exercise period, a total of 629 qualified incentive receivers
have been allowed to exercise 35,895,000 stock options in the first exercise period.
c. Upon examination by the Shenzhen Stock Exchange and the Shenzhen branch of China Securities
Depository and Clearing Co., Ltd., the chosen and qualified incentive receivers for the Second Stock
Option Incentive Plan may choose to exercise their exercisable stock options in the first exercise period,
which is from 28 June 2016 to 27 May 2018.
C. Overview of the Third Stock Option Incentive Plan
a. On 25 May 2016, the Third Stock Option Incentive Plan (Draft) and its Abstract of Midea Group Co.,
Ltd. was reviewed and approved at the 12th Meeting of the Second Board of Directors, and the incentive
44
2016 Semi-Annual Report of Midea Group Co., Ltd.
receiver list for the Third Stock Option Incentive Plan (Draft) was examined at the Ninth Meeting of the
Second Supervisory Committee.
b. On 6 June 2016, the Company convened the Third Special General Meeting for 2016, at which the
Third Stock Option Incentive Plan (Draft) and its Abstract, the Implementation and Appraisal Measures
for the Third Stock Option Incentive Plan of Midea Group Co., Ltd., the Proposal for Asking the General
Meeting to Authorize the Board to Handle Mattes Related to the Third Stock Option Incentive Plan and
other relevant proposals were reviewed and approved.
c. In light of the authorization given at the Third Special General Meeting for 2016, the Company
convened the 15th Meeting of the Second Board of Directors on 28 June 2016, at which the Proposal for
the Adjustments to the Incentive Receiver List and the Number of Granted Stock Options for the Third
Stock Option Incentive Plan, the Proposal for the Determination of the Grant Date for the Third Stock
Option Incentive Plan and the Proposal for the Grant-Related Matters for the Third Stock Option
Incentive Plan were reviewed and approved. As such, the Company agreed to grant 127,290,000 stock
options to 929 receivers on 28 June 2016.
VII Significant related-party transactions
1. Related-party transactions arising from routine operation
√ Applicable □ N/A
Proporti
Obtaina
on in
ble
the total
market Index
Tran amount Approved Over
Related Type of Content Transaction price to the
Pricing sact of transactio the Way of Disclos
transac Relation the s of the amount for a disclo
principl ion transac n line appro settlem ure
tion ship transac transac (RMB’0,000 transac sed
e pric tions of (RMB’0,0 ved ent date
party tion tion ) tion of inform
e the 00) line
the ation
same
same
kind
kind
(%)
Infore Controll
www.
Environ Procure Payme
ed by Procur Market 2016-0 cninfo
ment ment of - 118,461.20 2.45% 125,500 No nt after -
ement price 3-26 .com.
Technol family goods delivery
cn
ogy
45
2016 Semi-Annual Report of Midea Group Co., Ltd.
Group member
Co.,
Ltd. of the
Compa
ny’s
actual
controll
er
Controll
ed by
family
Hefei member
Huitong www.
of the Procure Payme
New Procur Market 2016-0 cninfo
ment of - 10,402.40 0.22% 40,000 No nt after -
Materia Compa ement price 3-26 .com.
goods delivery
ls Co., cn
Ltd. ny’s
actual
controll
er
Total -- -- 128,863.60 -- 165,500 -- -- -- -- --
Details of any sales return of a
N/A
large amount
Give the actual situation in the
Reporting Period (if any) where a
The associated amount limit between the Company and the related parties and the
forecast had been made for the
subsidiaries did not exceed the estimated total amounts of routine related-party
total amounts of routine
transactions by type.
related-party transactions by type
to occur in the current period
Reason for any significant
difference between the
N/A
transaction price and the market
reference price (if applicable)
2. Related-party transactions regarding purchase and sales of assets
□ Applicable √ N/A
46
2016 Semi-Annual Report of Midea Group Co., Ltd.
No such cases in the Reporting Period.
3. Related-party transitions arising from joint investments in external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
4. Credits and liabilities with related parties
□ Applicable √ N/A
No such cases in the Reporting Period.
5. Other related-party transactions
√ Applicable □ N/A
The Proposal for the Related-Party Transaction Regarding Note Discounting for Infore Environment in
2016 and the Proposal for Related-party Transactions Regarding Making Deposits in and Securing
Loans from Shunde Rural Commercial Bank in 2016 were reviewed and approved at the Sixth Meeting
of the Second Board of Directors on 24 March 2016 and later at the 2015 Annual General Meeting on 26
April 2016.
In 2016, Midea Group Finance, a subsidiary of the Company, intends to provide note discounting
services for Infore Environment and its subsidiaries, with the total amount of discounted notes expected
not to exceed RMB1 billion and the interest charged not exceeding RMB20 million.
In 2016, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceed RMB5
billion and neither shall the credit balance provided by the bank to the Company exceed RMB3 billion
Index to the announcements about the said related-party transactions disclosed
Announcement title Disclosure date Disclosure website
Announcement on the Related-Party Transaction Regarding
2016-03-26 www.cninfo.com.cn
Note Discounting for Infore Environment in 2016
Announcement on Related-party Transactions Regarding
Making Deposits in and Securing Loans from Shunde Rural 2016-03-26 www.cninfo.com.cn
Commercial Bank
47
2016 Semi-Annual Report of Midea Group Co., Ltd.
VIII Occupation of the Company’s funds for non-operating purposes by the
controlling shareholder and its related parties
□ Applicable √ N/A
IX Significant contracts and their execution
1. Trusteeship, contracting and leasing
(1) Trusteeship
□ Applicable √ N/A
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √ N/A
No such cases in the Reporting Period.
(3) Leasing
□ Applicable √ N/A
No such cases in the Reporting Period.
2. Guarantees provided by the Company
√ Applicable □ N/A
Unit: RMB'0,000
Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries)
Disclosure Actual Guara
date of the occurrence Actual ntee
Line of Term of
guarantee date (date guarant Type of Due for a
Guaranteed party guarante guarant
line of ee guarantee or not related
e ee
announce agreement amount party
ment signing) or not
Joint and One
Shanxi Huaxiang Group Co., Ltd. 2016-3-26 20,400 2016-1-28 18,300 several liability year No No
Total actual external
Total external guarantee line
guarantee amount
approved during the Reporting 20,400 6,800
during the Reporting
Period (A1)
Period (A2)
48
2016 Semi-Annual Report of Midea Group Co., Ltd.
Total actual external
Total approved external
guarantee balance at
guarantee line at the end of the 20,400 18,300
the end of the Reporting
Reporting Period (A3)
Period (A4)
Guarantees between the Company and its subsidiaries
Disclosure Actual Guara
date of the occurrence Actual ntee
Term of
guarantee Line of date (date guarant Type of Due for a
Guaranteed party guarant
line guarantee of ee guarantee or not related
ee
announce agreement amount party
ment signing) or not
Joint and One
Midea Group Finance Co., Ltd. 2016-3-26 1,095,800 2016-1-1 252,000 No No
several liability year
Midea Microcredit Co., Ltd. 2016-3-26 60,000 - 0 Ditto Ditto Ditto Ditto
Foshan Shunde Midea
2016-3-26 30,000 - 0 Ditto Ditto Ditto Ditto
Microcredit Co., Ltd.
Guangdong Midea Refrigeration
2016-3-26 1,095,100 2016-1-11 514,969 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Guangdong Midea Kitchen
Appliances Manufacturing Co., 2016-3-26 718,500 2016-1-12 401,085 Ditto Ditto Ditto Ditto
Ltd.
Guangdong Witt Vacuum
Electronics Manufacturing Co., 2016-3-26 43,600 2016-1-1 1,372 Ditto Ditto Ditto Ditto
Ltd.
Guangdong Midea Heating &
2016-3-26 293,700 2016-4-28 34,371 Ditto Ditto Ditto Ditto
Ventilation Equipment Co., Ltd.
Midea Commercial Air
Conditioning Equipment Co., 2016-3-26 14,400 - 0 Ditto Ditto Ditto Ditto
Ltd., Guangdong Province
Guangdong Midea-SIIX
2016-3-26 12,000 - 0 Ditto Ditto Ditto Ditto
Electronics Co., Ltd.
Guangdong Midea Consumer
2016-3-26 105,500 2016-6-28 2,389 Ditto Ditto Ditto Ditto
Electric Manufacturing Co., Ltd.
Foshan Shunde Midea Electric
Appliance Manufacturing Co., 2016-3-26 181,100 2016-1-12 66,631 Ditto Ditto Ditto Ditto
Ltd.
Guangdong Midea Kitchen &
Bathroom Appliances 2016-3-26 10,000 - 0 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Foshan Shunde Midea Drinking 2016-3-26 19,300 2016-5-11 10,000 Ditto Ditto Ditto Ditto
49
2016 Semi-Annual Report of Midea Group Co., Ltd.
Manufacturing Co., Ltd.
Foshan Midea Clear Lake Water
Purification Equipment 2016-3-26 9,800 - 0 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Guangdong Midea Environment
Appliances Manufacturing Co., 2016-3-26 223,000 2016-1-12 103,809 Ditto Ditto Ditto Ditto
Ltd.
Foshan Shunde Midea Washing
Appliance Manufacturing Co., 2016-3-26 448,200 2016-3-29 194,604 Ditto Ditto Ditto Ditto
Ltd.
Guangdong GMCC Refrigeration
2016-3-26 67,800 2016-4-27 24,990 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Guangdong GMCC Precise
2016-3-26 34,000 2016-1-1 462 Ditto Ditto Ditto Ditto
Manufacture Co., Ltd.
Guangdong Welling Motor Co.,
2016-3-26 65,700 2016-1-1 397 Ditto Ditto Ditto Ditto
Ltd.
Foshan Welling Electronic and
2016-3-26 10,000 2016-1-1 59 Ditto Ditto Ditto Ditto
Electric Appliances Co., Ltd.
Foshan Welling Washer Motor
2016-3-26 118,000 2016-1-1 3,915 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Ningbo Midea Joint Materials
2016-3-26 66,000 2016-1-1 5,398 Ditto Ditto Ditto Ditto
Supply Co. Ltd.
Foshan Welling Material Co., Ltd. 2016-3-26 21,000 2016-1-1 1,528 Ditto Ditto Ditto Ditto
Guangzhou Kaizhao Trading
Co., Ltd. 2016-3-26 18,000 - 0 Ditto Ditto Ditto Ditto
Foshan Midea Carrier
Refrigeration Equipment Co., 2016-3-26 52,400 - 0 Ditto Ditto Ditto Ditto
Ltd.
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., 2016-3-26 36,000 - 0 Ditto Ditto Ditto Ditto
Ltd.
Wuhu GMCC Air Conditioning
2016-3-26 151,600 2016-1-1 1,645 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Hefei Midea Refrigerator Co.,
2016-3-26 43,600 2016-6-21 14,687 Ditto Ditto Ditto Ditto
Ltd.
Hubei Midea Refrigerator Co.,
2016-3-26 10,000 2016-1-1 358 Ditto Ditto Ditto Ditto
Ltd.
Hefei Hualing Co., Ltd. 2016-3-26 52,000 2016-1-1 280 Ditto Ditto Ditto Ditto
Guangzhou Midea Hualing 2016-3-26 20,000 2016-1-1 507 Ditto Ditto Ditto Ditto
50
2016 Semi-Annual Report of Midea Group Co., Ltd.
Refrigerator Equipment Co., Ltd.
Hefei Midea Heating &
2016-3-26 7,000 - 0 Ditto Ditto Ditto Ditto
Ventilation Equipment Co., Ltd.
Hefei Midea-Bosch Air
2016-3-26 10,000 - 0 Ditto Ditto Ditto Ditto
Conditioning Equipment Co., Ltd.
Wuhu Midea Kitchen &
Bathroom Electric Manufacturing 2016-3-26 6,000 2016-1-1 1,008 Ditto Ditto Ditto Ditto
Co., Ltd.
Wuhu Midea Washing Appliance
2016-3-26 12,000 - 0 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Anhui GMCC Refrigeration
2016-3-26 10,000 2016-1-1 371 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Anhui GMCC Precise
2016-3-26 24,000 2016-6-23 13,086 Ditto Ditto Ditto Ditto
Manufacture Co., Ltd.
Welling (Wuhu) Motor
2016-3-26 12,000 - 0 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Annto Logistics Co., Ltd. 2016-3-26 32,000 2016-1-1 10,168 Ditto Ditto Ditto Ditto
Hefei Midea Washing Machine
2016-3-26 40,000 2016-6-28 0 Ditto Ditto Ditto Ditto
Co., Ltd.
Jiangsu Midea Cleaning
2016-3-26 26,800 2016-6-20 762 Ditto Ditto Ditto Ditto
Appliances Co., Ltd.
Jiangxi Midea Guiya Lighting
2016-3-26 5,500 - 0 Ditto Ditto Ditto Ditto
Co., Ltd.
Changzhou Welling Motor
2016-3-26 12,000 - 0 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Midea International Holdings Ltd. 2016-3-26 2,436,256 2016-2-1 646,233 Ditto Ditto Ditto Ditto
Midea International Trading Co.,
2016-3-26 70,000 2016-1-4 29,323 Ditto Ditto Ditto Ditto
Ltd
Midea Electric Investment (BVI)
2016-3-26 27,000 - 0 Ditto Ditto Ditto Ditto
Limited
Calpore Macao Commercial
2016-3-26 21,300 2016-1-4 1,944 Ditto Ditto Ditto Ditto
Offshore Ltd.
Welling International Hong Kong
2016-3-26 24,000 - 0 Ditto Ditto Ditto Ditto
Limited
Main Power Electrical Factory
2016-3-26 46,400 2016-1-6 16,592 Ditto Ditto Ditto Ditto
Limited
Midea Electric Trading
2016-3-26 986,000 2016-1-1 115,432 Ditto Ditto Ditto Ditto
(Singapore) Co. Pte. Ltd.
51
2016 Semi-Annual Report of Midea Group Co., Ltd.
Midea Consumer Electric
2016-3-26 21,000 - 0 Ditto Ditto Ditto Ditto
(Vietnam) Co., Ltd.
Springer Carrier Ltda. 2016-3-26 - 0 Ditto Ditto Ditto Ditto
130,000
Climazon Industrial Ltda. 2016-3-26 - 0 Ditto Ditto Ditto Ditto
Carrier S.A 2016-3-26 - 0 Ditto Ditto Ditto Ditto
12,000
Carrier Fueguina S.A. 2016-3-26 - 0 Ditto Ditto Ditto Ditto
Carrier(Chile) S.A. 2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
Midea Electrics Netherlands B.V. 2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
Midea America Corp. 2016-3-26 35,000 - 0 Ditto Ditto Ditto Ditto
PT.Midea Planet Indonesia Co.,
2016-3-26 35,000 - 0 Ditto Ditto Ditto Ditto
Ltd
MIDEA Scott & English Electroni
2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
cs Sdn Bhd
Midea America(Cananda) Corp. 2016-3-26 7,000 - 0 Ditto Ditto Ditto Ditto
Midea Middle East 2016-3-26 36,000 - 0 Ditto Ditto Ditto Ditto
Midea Europe GmbH 2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
Midea Italia S.R.L. 2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
Midea México, S. DE R.L. DE
2016-3-26 21,000 - 0 Ditto Ditto Ditto Ditto
C.V.
Orient Household Appliances
2016-3-26 14,000 - 0 Ditto Ditto Ditto Ditto
Ltd.
Toshiba Lifestyle Products &
2016-6-30 1,040,512 - 0 Ditto Ditto Ditto Ditto
Services Corporation
Total actual guarantee
Total guarantee line for subsidiaries approved amount for subsidiaries
10,355,868 3,356,973
during the Reporting Period (B1) during the Reporting
Period (B2)
Total actual guarantee
Total approved guarantee line for subsidiaries balance for subsidiaries
10,355,868 2,470,373
at the end of the Reporting Period (B3) at the end of the
Reporting Period (B4)
Guarantees between subsidiaries
Disclosure
Actual Guarant
date of the
occurrence Actual ee for a
guarantee Line of Type of Term of Due or
Guaranteed party date (date of guarantee related
line guarantee guarantee guarantee not
agreement amount party or
announce
signing) not
ment
52
2016 Semi-Annual Report of Midea Group Co., Ltd.
N/A
Total guarantee amount (total of the above-mentioned three kinds of guarantees)
Total actual guarantee
Total guarantee line approved
amount during the
during the Reporting Period 10,376,268 3,363,773
Reporting Period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total approved guarantee line at
balance at the end of the
the end of the Reporting Period 10,376,268 2,488,673
Reporting Period
(A3+B3+C3)
(A4+B4+C4)
Proportion of the total actual guarantee amount (A4+B4+C4)
44.98%
in net assets of the Company
Of which:
Amount of guarantees provided for shareholders, the actual
0
controller and their related parties (D)
Amount of debt guarantees provided directly or indirectly for
2,388,736
entities with a liability-to-asset ratio over 70% (E)
Portion of the total guarantee amount in excess of 50% of
0
net assets (F)
Total amount of the three kinds of guarantees above
2,388,736
(D+E+F)
Joint responsibilities possibly borne or already borne in the
N/A
Reporting Period for undue guarantees (if any)
Provision of external guarantees in breach of the prescribed
N/A
procedures (if any)
(1) Illegal provision of guarantees for external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
3. Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
4. Other significant transactions
□ Applicable √ N/A
No such cases in the Reporting Period.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
X Undertakings made by the Company and its shareholders interested in 5% or more of the shares of the Company made in
the Reporting Period or subsisting to the Reporting Period
√ Applicable □ N/A
Underta Type of
Undertaki Undertakin
king undertaki Details of undertaking Term Particulars on the performance
ng g date
giver ng
Controll 1. Midea Holding and He Xiangjian have undertaken as follows:
ing Within 36 months from the listing date of Midea Group's stocks, 36 months from
shareho they will neither transfer or entrust others to manage their the day of Midea
Share 1. There has been no violation of this
lder, directly and indirectly held shares of Midea Group issued prior 2013.03.28 Group’s listing
lock-up undertaking.
actual to this issuance, nor sell them to Midea Group. If they break the (2013.09.18-201
Undertaki controll above undertaking, they will assume all liabilities arising 6.09.18)
ng made er therefrom.
in offering
2. Midea Holding and He Xiangjian have undertaken as follows:
document
He Xiangjian, Midea Holding and their controlled enterprises
s or Controll
will remain independent from Midea Group in respect of
sharehold ing
Maintena personnel, finance, assets, business and institutions, in
ing shareho
nce of accordance with relevant laws and regulations and regulatory 2. There has been no violation of this
alternatio lder, 2013.03.28 Long-standing
independ documents. They will faithfully fulfill the above undertaking, and undertaking.
n actual
ence assume the corresponding legal liability. If they fail to fulfill their
document controll
obligations and responsibilities conferred by the undertaking,
s er
they will bear the corresponding legal liabilities according to
relevant laws, rules, regulations and regulatory documents.
Controll Avoiding 3. In order to avoid possible competition within the industry
3. There has been no violation of this
ing competiti between Midea Group and Midea Holding and its controlled 2013.03.28 Long-standing
undertaking.
shareho on within enterprises as well as He Xiangjian, his immediate family and
54
2016 Semi-Annual Report of Midea Group Co., Ltd.
lder, the his controlled companies, Midea Holding and He Xiangjian
actual industry have undertaken as follows:
controll (1) None of the entities or individuals mentioned above is or will
er 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 be engaged 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 or individuals are already
performing such production and operations, 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 competitive business to 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
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian the actual controller, they will
55
2016 Semi-Annual Report of Midea Group Co., Ltd.
not change or terminate this undertaking.
(5) Midea Holding and He Xiangjian 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. 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, Midea Holding
and He Xiangjian 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
Controll
Group and its controlled companies, including but not limited to
ing Regulatio
commodity trading, providing services to each other or as
shareho n of
agent, they will sign legal normative agreements with Midea 4. There has been no violation of this
lder, related 2013.03.28 Long-standing
Group, and go through approval procedures in accordance with undertaking.
actual transactio
related laws, regulations, rules, other regulatory documents,
controll ns
and relevant provisions of the Articles of Association of Midea
er
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 the funds or profits from
Midea Group, or damage the interests of its shareholders at
their advantages during the related transactions.
56
2016 Semi-Annual Report of Midea Group Co., Ltd.
(2) They shall fulfill the obligation of withdrawing from voting
that involves the 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
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian the actual controller, they shall
not change or terminate this undertaking.
(5) Midea Holding and He Xiangjian 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. On 4 January 2001, the Midea Trade Union Committee
On Midea
signed the "Equity Transfer Contract" with five people, namely
Trade
He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and
Controll Union
Liang Jieyin, where it transferred all its limited equity of Midea
ing Committe
Group (22. 85%) respectively to those five people. According to 5. So far, this shareholding transfer has not
shareho e
the confirmation letter issued by members of the Midea Trade brought about any loss caused by any dispute
lder, transferri 2013.03.28 Long-standing
Union Committee at that time, the equity transfer price was or potential disputes. There has been no
actual ng its
determined after mutual discussion on the basis of their true violation of this undertaking.
controll limited
opinions, therefore there was no dispute or potential dispute.
er equity of
On 28 June, 2013, Foshan Shunde Beijiao General Union,
Midea
superior department of Midea Trade Union Committee, issued a
Group
confirmation letter to the fact that the Midea Trade Union
57
2016 Semi-Annual Report of Midea Group Co., Ltd.
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 any
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 to 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.
Issues
about
Payment
6. Midea Holding and He Xiangjian have undertaken to be liable
of the
for (1) paying such expenses and related expenses on time
Staff
Controll based on the requirements of relevant state departments if
Social
ing Midea Group is required to be liable for the payment of staff 6. So far, the payment of the staff social
Insurance
shareho social insurance, housing provident fund and the payment insurance and the housing provident fund has
and the
lder, required by relevant state authorities prior to this merger, (2) 2013.03.28 Long-standing not brought about any controversy or potential
Housing
actual paying corresponding compensation for all direct and indirect disputes. There has been no violation of this
Provident
controll losses incurred by Midea Group and its subsidiaries due to this undertaking.
Fund
er merger, (3) indemnifying and holding harmless Midea Group
involved
and its subsidiaries in time from such expenses when Midea
in Midea
Group and its subsidiaries are required to pay them in advance.
Group's
Overall
Listing
Controll Issues 7. Undertakings on issues about asset alteration, asset flaw and 7.1 The Process of Property Ownership
2013.03.28 Long-standing
ing about house leasing of Midea Group and its subsidiaries Certificate:
58
2016 Semi-Annual Report of Midea Group Co., Ltd.
shareho asset Midea Holding and He Xiangjian have undertaken as follows: The Report discloses that the Company is trying to
lder, alteration, (1) Midea Holding will do its utmost to assist and urge Midea get the Property Ownership Certificate for 177 of its
actual asset Group (including its subsidiaries) to complete renaming properties, which cover an area of 2,148,485.65
controll flaw and procedures of related assets, such as land, housing, square meters. So far, 62 applications have been
er house trademarks, patents and stock rights, declared in the related approved, the total area covers 2,086,357.42
leasing of files of this merger. Midea Holding will be liable for all square meters, which accounts for 97.11% of total
Midea compensations of losses caused by issues about renaming area. Another property with an area of 1,966.69
Group procedures of related assets mentioned above to Midea Group. square meters (0.09% of the total area) has been
and its (2) Midea Holding shall do its utmost to assist Midea Group disposed. The remaining 114 properties, spanning
subsidiari (including its subsidiaries) to apply for ownership certificates of an area of 60,161.54 square meters account for
es land and housing or property declared in related files of this 2.8% of the total area. These properties are all
merger. small unit size auxiliary facilities such as security
booth, transformer room, power room, pump room,
(3) Midea Holding shall assist Midea Group (including its
gas station and so on, for which property
subsidiaries) to re-apply for corresponding construction
ownership certificates cannot be granted or applied
procedures and apply for their ownership certificates for houses
for. So far these 114 properties have not been
without complete procedures, as happened in the past, to apply
required to be dismantled by competent
for the ownership certificate. If the competent authorities
departments so that these buildings are still in
requires Midea Group to dismantle buildings that cannot
regular use, which has not brought about any
acquire the re-application for real estate registration
controversy or any company loss caused by
procedures, Midea Holding shall do its utmost to provide
disputes. There has been no violation of this
assistance and be liable for any related expenses used in
undertaking.
dismantling such buildings by Midea Group (including its
subsidiaries). 7.2 The Use of Rental Houses of This Company
(4) Under any circumstances that Midea Group suffers from The Report discloses that as of 31 December
losses incurred from no longer using these properties or 2012, our company used 113 leasing houses in
presently using the land or house above due to failing to obtain total, of which our company cannot get the property
or collect in time the ownership certificates of the land or house certificate of 100 leasing houses from the leasing
above or any losses caused by any other reasons, Midea party. So far the contracts of 90 out of the 113
Holding shall compensate any loss for these reasons in time rental houses have not been signed to extend the
59
2016 Semi-Annual Report of Midea Group Co., Ltd.
and in full. Midea Holding shall compensate the actual loss leasehold. The property certificate of 1 of the
Midea Group suffers from any circumstances above resulting in remaining 23 houses has been obtained while the
penalties subjected to from competent authorities or through other 22 certificates have not been obtained yet.
claims from any other third party. These 22 rental houses have not rendered our
(5) Based on issues of defective house leasing declared in company any economic loss or penalty caused by
related files of this merger, Midea Holding shall provide defective property rights, which result in removing
sufficient compensations for all economic losses incurred by to other rental houses. There has been no violation
Midea Group (including its subsidiaries) where the leasehold of this undertaking.
relations above become invalid or other disputes occur, which 7.3 Land Use Rights of Leasing Use
are caused by rights claims from a third party or by means of an
The "Report" discloses that as of 31 December,
administrative authority exercising a right and therefore results
2012, our company has had one case of using
in any economic losses due to eviction from rental houses, or
rental houses, covering a total area of 57,506.95
any penalties subjected to by competent government
square meters for which the lessor of the rental
departments or any recourse from related parties.
land mentioned above did not provide any legal
(6) Based on the issues of defective land leasing declared in
ownership files showing or detailing ownership of
related files of this merger, when leasehold relations become
this land. So far this rental land has not rendered
invalid caused by defects of land leasing or when other disputes
our company any controversy or any loss caused
occur, resulting in any economic losses to Midea Group
by disputes. There has been no violation of this
(including its subsidiaries) or through any penalties
undertaking.
administered by competent government departments. Likewise
if the lessor cannot compensate for losses caused by such 7.4 The Procedures of Renaming Land Owner
defective leasing, Midea Holding shall compensate Midea
Under Process Caused by the Alteration of the
Group for losses caused by such defective land leasing.
Midea Holding and He Xiangjian will compensate any losses of Company's Name
Midea Group where a violation of guarantees and undertakings The Report discloses that there are still 10 cases in
referred to previously occurs or such guarantees and the process of registering a new land owner
undertakings are not consistent with the reality. caused by changing the company's name and its
subsidiaries. So far, five cases have been
approved and the other five cases are still under
60
2016 Semi-Annual Report of Midea Group Co., Ltd.
review, which have not rendered any loss to the
company. There has been no violation of this
undertaking.
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
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.
Shareholders of Midea Group Ningbo Meicheng, Fang Hongbo,
Huang Jian, Cai Qiwu, Yuan Liqun, Huang Xiaoming, Li
36 months from
Jianwei, Zheng Weikang promise that since Midea Group was
Other the day of Midea
Share listed on the Shenzhen Stock Exchange, transferring shares or There has been no violation of this
shareho 2013.03.28 Group’s listing
lock-up delegating others to manage their shares with either direct or undertaking.
lders (2013.09.18-201
indirect ownership of Midea Group, issued before this time, has
6.09.18)
been forbidden for 36 months. Midea Group is not allowed to
buy back those shares either.
Undertaki 1. In strict accordance with the rules of the CSRC, the The
ngs given The Shenzhen Stock Exchange and the Company regarding the use undertakings
Private
in time of Compa of raised funds, the Company shall have a special account for 2015.06.15 shall expire This undertaking has expired.
issue
IPO or ny its raised funds and use the funds only for the previously set when the raised
refinancin purposes. funds have been
61
2016 Semi-Annual Report of Midea Group Co., Ltd.
g 2. The funds raised in this private issue (after the issue used up.
expenses) shall all be used as working capital.
3. The Company shall not use the funds raised in this private
issue to make 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
Xiaomi Technology has given an undertaking that it shall not
the listing date of
Xiaomi transfer the shares that it had subscribed for in this private There has been no violation of this
Private
Technol offering with Midea Group within 36 months from the completion 2015.06.26 this private undertaking.
issue
ogy date of this offering (26 June 2015, the listing date for this
offering, i.e. to
offering).
26 June 2018
Whether
the
undertaki
Yes
ng is
fulfilled
on time
Specific
reasons
for failing N/A
to fulfill
any
62
2016 Semi-Annual Report of Midea Group Co., Ltd.
undertaki
ng and
plan for
the next
step
63
2016 Semi-Annual Report of Midea Group Co., Ltd.
XI Engagement and disengagement of the CPAs firm
Has the semi-annual financial report been audited by a CPAs firm?
□ Yes √ No
This semi-annual report has not been audited by a CPAs firm.
XII Punishments and rectifications
□ Applicable √ N/A
XIII Delisting risk due to violation of laws or regulations
□ Applicable √ N/A
XIV Other significant events
√ Applicable □ N/A
The proposals for the tender offer to acquire shares of KUKA Aktiengesellschaft have been considered
and approved at the 11th and 12th meetings of the Second Board as well as the Third Special General
Meeting in 2016. The Company intends to make a cash tender offer of 115 euro/share to acquire KUKA
shares via its wholly-owned foreign subsidiary MECCA, with the funds needed sourced from syndicated
loans and the Company’s own funds.
On 15 June 2016, the Federal Financial Supervisory Authority of Germany reviewed and approved the
tender offer documents (in German), which were issued by the Company on the following day.
Regarding the opinions of KUKA’s board of supervisors and executive board as to the tender offer, as
well as the Investment Agreement signed between the Company and KUKA, the Company disclosed the
Indicative Announcement of Midea Group Co., Ltd. on Progress on the Tender Offer to Acquire KUKA
Aktiengesellschaft Shares on www.cninfo.com.cn dated 29 June 2016.
As the tender offer period ended on 4 August 2016, holders of 81.04% of KUKA’s outstanding shares
had decided to accept the tender offer. Adding the 13.51% stake that the Company had held in KUKA
before the tender offer, the Company would hold 94.55% in total of KUKA’s outstanding shares provided
the acquisition is successfully completed.
On 10 August 2016, the Company received the Notice of No Further Examination (SFLCSH [2016]
Document No. 224) from the Anti-monopoly Bureau under the Ministry of Commerce, which gave a
64
2016 Semi-Annual Report of Midea Group Co., Ltd.
green light to the acquisition as the Bureau reviewed the concentration of undertakings involved.
On 20 August 2016 (19 August 2016 in Frankfurt time), one of the conditions for the acquisition—“The
Federal Ministry for Economic Affairs and Energy of Germany raises no objection against the
acquisition”—was satisfied.
On 27 August 2016, the condition regarding the U.S. antitrust scrutiny has also been met.
The acquisition is still subject to the antitrust review by the E.U., Russia, Brazil and Mexico, as well as
the approval of the Committee on Foreign Investment in the United States and the Directorate of
Defense Trade Controls of the U.S.. The long stop date of the transaction is 31 March 2017.
XV Corporate bonds
□ Applicable √ N/A
No such corporate bonds that are publicly offered and listed on the stock exchange, and were undue
before the approval date of this Report or were due but could not be redeemed in full.
65
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section VI Changes in Shares and Particulars about
Shareholders
I Changes in shares
Unit: share
Before Increase/decrease (+, -) After
Bonus Capitalization
Proportion Proportion
Number New issue share of capital Other Subtotal Number
(%) (%)
s reserves
I Restricted
2,026,343,750 47.49% 0 0 1,013,371,875 401,725 1,013,773,600 3,040,117,350 47.32%
shares
1. Shares held
by the 0 0.00% 0 0 0 0 0 0 0.00%
government
2. Shares held
by state-owned 0 0.00% 0 0 0 0 0 0 0.00%
corporations
3. Shares held
by other
2,026,343,750 47.49% 0 0 1,013,371,875 401,725 1,013,773,600 3,040,117,350 47.32%
domestic
investors
Among which:
Shares held by
1,626,250,000 38.11% 0 0 813,125,000 0 813,125,000 2,439,375,000 37.97%
domestic
corporations
Shares
held by
400,093,750 9.38% 0 0 200,246,875 401,725 200,648,600 600,742,350 9.35%
domestic
individuals
4. Shares held
by foreign 0 0.00% 0 0 0 0 0 0 0.00%
investors
Among which:
Shares held by
0 0.00% 0 0 0 0 0 0 0.00%
foreign
corporations
Shares 0 0.00% 0 0 0 0 0 0 0.00%
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2016 Semi-Annual Report of Midea Group Co., Ltd.
held by foreign
individuals
II
Non-restricted 2,240,495,699 52.51% 24,399,196 0 1,120,323,739 -401,725 1,144,321,210 3,384,816,909 52.68%
shares
1. RMB
2,240,495,699 52.51% 24,399,196 0 1,120,323,739 -401,725 1,144,321,210 3,384,816,909 52.68%
ordinary shares
2. Domestically
listed foreign 0 0.00% 0 0 0 0 0 0 0.00%
shares
3. Overseas
listed foreign 0 0.00% 0 0 0 0 0 0 0.00%
shares
4. Other 0 0.00% 0 0 0 0 0 0 0.00%
III Total shares 4,266,839,449 100.00% 24,399,196 0 2,133,695,614 0 2,158,094,810 6,424,934,259 100.00%
Reasons for the changes in the shares:
√ Applicable □ N/A
1. Supervisor Ms. Mai Yufen increased her shareholding by 2,300 shares on 17 May 2016.
2. As the 2015 Annual Plan for Profit Distribution & Converting Capital Reserves into Share Capital has
been carried out, and stock option exercise is allowed for the First and Second Stock Option Incentive
Plans, the total shares of the Company have increased from 4,266,839,449 to 6,424,934,259.
Approval of changes in the shares:
□ Applicable √ N/A
Transfer of share ownership:
□ Applicable √ N/A
Effects of the changes in shares on the basic earnings per share, diluted earnings per share, net assets
per share attributable to the ordinary shareholders of the Company and other financial indexes for the
last year and the last reporting period:
√ Applicable □ N/A
In the Reporting Period, the total shares of the Company increased from 4,266,839,449 to
6,424,934,259 as stock option exercise was allowed for the First and Second Stock Option Incentive
Plans and the 2015 Annual Plan for Profit Distribution & Converting Capital Reserves into Share Capital
67
2016 Semi-Annual Report of Midea Group Co., Ltd.
was carried out. And the effects of these changes in the shares on the basic earnings per share, diluted
earnings per share, net assets per share attributable to the ordinary shareholders of the Company and
other financial indexes for the last year and the last reporting period are as follows:
Unit: RMB/share
2015 First half of 2016
Calculated on the previous Calculated on the new total
Index Calculated on the new total shares
total shares shares
Basic earnings per
2.99 1.98 1.48
share
Diluted earnings per
2.99 1.98 1.48
share
Net assets per share 11.53 7.66 8.61
Other information that the Company considers necessary or is required by the securities regulatory
authorities to disclose:
□ Applicable √ N/A
Changes in the total shares, the shareholder structure and the asset and liability structure:
√ Applicable □ N/A
The total shares of the Company were 4,266,839,449 at the beginning of the Reporting Period. Due to
the profit distribution and conversion of capital reserves into share capital for 2015 as well as the
551,779 exercised incentive stock options before that, the total shares increased to 6,401,086,842. After
that, another 23,847,417 incentive stock options were exercised before the end of the Reporting Period.
As such, the total shares rose to 6,424,934,259 at the end of the Reporting Period.
II Total number of shareholders and their shareholdings
Unit: share
Total number of ordinary
Total number of preference shareholders with resumed
shareholders at the end of the 91,660 0
voting rights at the period-end (if any) (see note 8)
Reporting Period
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Shareholdings of the ordinary shareholders with a stake of over 5% or the top 10 ordinary shareholders
Increas Pledged or frozen
e/decre shares
Shareh ase Number of Number of
Total ordinary
Name of Nature of olding during restricted non-restricte
shares held at
shareholder shareholder percent the ordinary d ordinary Status of Number of
the period-end
age (%) Reporti shares held shares held shares shares
ng
Period
Midea Holding Co., Domestic
34.93% 2,244,375,000 2,244,375,000 Pledged 854,955,000
Ltd. corporation
China Securities
Domestic
Finance Corporation 2.87% 184,076,580 184,076,580
corporation
Limited
Rongrui Equity
Investment (Zhuhai) Domestic
2.63% 168,900,000 168,900,000
Partnership (limited corporation
partnership)
Domestic
Fang Hongbo 2.13% 136,990,492 135,000,000 1,990,492
individual
Tianjin CDH Jiatai
Equity Investment Domestic
1.82% 117,000,000 117,000,000
Partnership (limited corporation
partnership)
Domestic
Huang Jian 1.75% 112,500,000 112,500,000
individual
Ningbo Maysun
Equity Investment Domestic
1.75% 112,500,000 112,500,000
Partnership (limited corporation
partnership)
Domestic
Yuan Liqun 1.41% 90,750,000 90,000,000 750,000
individual
CDH M-Tech (HK) Foreign
1.40% 90,000,000 90,000,000
Co., Ltd. corporation
CDH Spark (HK) Foreign
1.34% 86,250,000 86,250,000
Co., Ltd. corporation
Strategic investors or ordinary
corporations becoming top-10
N/A
ordinary shareholders due to
placing of new shares (if any) (see
69
2016 Semi-Annual Report of Midea Group Co., Ltd.
note 3)
Related-parties or
CDH Jiatai, CDH M-Tech and CDH Spark, which hold a total of 4.56% shares in Midea
acting-in-concert parties among
Group, are related parties.
the shareholders above
Shareholdings of the top 10 non-restricted ordinary shareholders
Number of non-restricted Type of shares
Name of shareholder ordinary shares held at the
Type Number
period-end
China Securities Finance Corporation Limited 184,076,580 RMB ordinary share 184,076,580
Rongrui Equity Investment (Zhuhai) Partnership
168,900,000 Ditto 168,900,000
(limited partnership)
Tianjin CDH Jiatai Equity Investment Partnership
117,000,000 Ditto 117,000,000
(limited partnership)
CDH M-Tech (HK) Co., Ltd. 90,000,000 Ditto 90,000,000
CDH Spark (HK) Co., Ltd. 86,250,000 Ditto 86,250,000
Central Huijin Asset Management Co., Ltd. 78,474,900 Ditto 78,474,900
He Xiangjian 77,334,548 Ditto 77,334,548
Hillhouse Capital Management Limited 69,891,138 Ditto 69,891,138
Merrill Lynch International 58,604,495 Ditto 58,604,495
UBS AG 52,663,841 Ditto 52,663,841
CDH Jiatai, CDH M-Tech and CDH Spark are related parties. Meanwhile,
Mr. He Xiangjian and Midea Holding Co., Ltd. are acting-in-concert parties
Related-parties or acting-in-concert parties
as Mr. He is the controlling shareholder of the latter. Apart from that, the
among the top ten non-restricted ordinary
Company does not know whether there are other related parties among
shareholders and between the top ten
other shareholders of tradable shares and whether other shareholders of
non-restricted ordinary shareholders and the top
tradable shares belong to parties acting in concert as prescribed in the
ten ordinary shareholders
Administrative Measures for Information Disclosure for Shareholding
Alteration in a Listed Company.
Explanation on the top 10 ordinary shareholders
participating in securities margin trading (if any) N/A
(see note 4)
Whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of
the Company conducted any promissory repo during the Reporting Period:
□ Yes √ No
No such cases in the Reporting Period.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
III Change of the controlling shareholder and the actual controller
Change of the controlling shareholder in the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
Change of the actual controller in the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
IV Shareholding increase schemes proposed or implemented by the shareholders
and their acting-in-concert parties during the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period to the best knowledge of the Company.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section VII Preference Shares
□ Applicable √ N/A
No preference shares in the Reporting Period.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section VIII Information about Directors, Supervisors and
Senior Management
I Changes in the shareholdings of the directors, supervisors and senior management
√ Applicable □ N/A
Restricted
Shares Shares Shares
Restricted shares
held at increased decrease Shares Restricted
Incumb shares held granted in
the in the d in the held at the shares held at
Name Office title ent/ at the the
period-b Reporting Reporting period-en the period-end
Former period-begin Reporting
eginning Period Period d (share) (share)
ning (share) Period
(share) (share) (share)
(share)
Jiang Company Incumb
125,000 0 31,250 140,625 0 0 0
Peng Secretary ent
Incumb
Mai Yufen Director 0 2,300 0 2,300 0 0 0
ent
Note: Company Secretary Mr. Jiang Peng held 125,000 shares in the Company at the beginning of the Reporting Period,
which were later reduced by 31,250 shares on 3 May 2016. As the ex-dividend and ex-right date for the 2015 Annual Plan
for Profit Distribution & Conversion of Capital Reserves into Share Capital was 6 May 2016, the shares that Mr. Jiang held
at the end of the Reporting Period were 140,625.
II Changes in the directors, supervisors and senior management
√ Applicable □ N/A
Type of
Name Office title Date Reason
change
Xu Hai Director Left 2016-04-26 Personal reason
Director, Vice President
Yuan Liqun Left 2016-07-15 Personal reason
and CFO
Xiao
CFO Elected 2016-07-15 Hired as a senior executive
Mingguang
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Section IX Financial Report
I Audit report
Has the semi-annual report 2016 been audited by a CPAs firm?
□ Yes √ No
The 2016 Semi-annual Financial Report of the Company has not been audited by a CPAs firm.
II Financial Report
74
2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
30 June 2016 31 December 2015 30 June 2016 31 December 2015
ASSETS Note Consolidated Consolidated Company Company
Current assets:
Cash at bank and on hand 4(1) 15,053,792 11,861,977 28,646,017 14,213,747
Deposits with central bank 4(2) 1,645,422 1,048,045 - -
Deposits with banks and other
financial institutions 4(3) 10,088,472 4,062,807 - -
Derivative financial assets 7,366 158,822 - -
Notes receivable 4(4) 14,987,218 12,889,151 1,952,867 727,218
Accounts receivable 4(5) 13,293,123 10,371,718 - -
Advances to suppliers 4(6) 1,610,332 988,625 14,670 8,915
Loans and advances 4(7) 11,106,777 6,608,705 - -
Dividends receivable 4,993 - 1,469,769 290,245
Other receivables 4(5), 18(1) 971,743 1,101,339 12,168,410 7,461,039
Inventories 4(8) 9,559,232 10,448,937 - -
Other current assets 4(9) 38,505,777 33,827,580 22,440,285 21,059,789
Total current assets 116,834,247 93,367,706 66,692,018 43,760,953
Non-current assets：
Available-for-sale financial
assets 4(10) 5,761,718 3,289,954 18,118 9,000
Long-term receivables 38,307 - - -
Long-term equity investments 4(11), 18(2) 3,108,646 2,888,274 23,188,174 23,126,546
Investment properties 146,657 150,803 278,603 286,272
Fixed assets 4(12) 21,000,004 18,729,881 1,069,814 1,107,082
Construction in progress 4(13) 1,041,482 954,761 741,595 543,588
Intangible assets 4(14) 6,071,589 3,392,402 243,590 248,482
Goodwill 4(15) 4,862,150 2,393,066 - -
Long-term prepaid expenses 673,381 781,359 49,030 57,393
Deferred income tax assets 4(16) 2,723,079 2,223,999 74 7,961
Other non-current assets 4(9) 5,241,487 669,730 4,382,900 -
Total non-current assets 50,668,500 35,474,229 29,971,898 25,386,324
TOTAL ASSETS 167,502,747 128,841,935 96,663,916 69,147,277
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)
AS AT 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
30 June 2016 31 December 2015 30 June 2016 31 December 2015
LIABILITIES AND SHAREHOLDERS'
EQUITY Note Consolidated Consolidated Company Company
Current liabilities:
Short-term borrowings 4(19) 14,445,419 3,920,933 1,800,000 1,290,000
Borrowings from central bank 45,740 - - -
Customer deposits and deposits from
banks and other financial institutions 72,521 52,000 - -
Derivative financial liabilities 463,180 33,377 - 22,671
Financial assets sold under repurchase
agreements 662,915 651,784 - -
Notes payable 4(20) 19,451,346 17,078,520 - -
Accounts payable 4(21) 21,679,892 17,448,684 9,163 9,403
Advances from customers 4(22) 4,089,800 5,616,361 - -
Employee benefits payable 4(23) 1,903,728 2,229,332 1,924 13,411
Taxes payable 4(24) 2,710,469 1,607,181 39,758 52,656
Interest payable 54,969 9,343 168,706 200,090
Dividends payable 316,140 118,851 - -
Other payables 4(25) 1,638,785 1,139,306 67,414,909 45,166,453
Current portion of non-current liabilities 103,594 - - -
Other non-current liabilities 4(26) 25,328,073 22,098,177 2,128,726 5,106
Total current liabilities 92,966,571 72,003,849 71,563,186 46,759,790
Non-current liabilities:
Long-term borrowings 4(27) 2,084,043 90,061 - -
Debentures payable 4(28) 4,599,303 - - -
Long-term payables 531,882 - - -
Payables for specific projects 500 500 - -
Provisions 219,222 38,893 - 3,800
Deferred revenue 440,253 479,352 - -
Long-term employee benefits payable 4(29) 1,491,094 - - -
Deferred income tax liabilities 4(16) 1,687,545 40,464 - -
Other non-current liabilities 823,206 157,194 - -
Total non-current liabilities 11,877,048 806,464 - 3,800
Total liabilities 104,843,619 72,810,313 71,563,186 46,763,590
Shareholders' equity:
Share capital 4(30) 6,424,934 4,266,839 6,424,934 4,266,839
Capital surplus 4(31) 12,832,003 14,511,190 4,685,903 6,370,934
Other comprehensive income 4(32) 205,563 (1,071,151) 10,429 21,006
General reserve 118,624 118,624 - -
Surplus reserve 4(33) 1,846,523 1,846,523 1,846,523 1,846,523
Undistributed profits 4(34) 33,905,451 29,529,827 12,132,941 9,878,385
Total equity attributable to shareholders
of the parent company 55,333,098 49,201,852 25,100,730 22,383,687
Minority interests 7,326,030 6,829,770 - -
Total shareholders' equity 62,659,128 56,031,622 25,100,730 22,383,687
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 167,502,747 128,841,935 96,663,916 69,147,277
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
For the six months ended 30 June
2016 2015 2016 2015
Item Note Consolidated Consolidated Company Company
1. Total revenue 78,007,516 82,875,070 588,251 469,983
Including: Operating revenue 4(35), 18(3) 77,522,287 82,509,144 588,251 469,983
Interest income 4(36) 479,576 363,832 - -
Fee and commission
income 5,653 2,094 - -
2.Total cost of sales (66,818,413) (73,632,411) (759,589) (669,306)
Including: Cost of sales 4(35) (54,866,160) (59,878,906) (13,648) (14,341)
Interest expenses 4(36) (261,318) (317,071) - -
Fee and commission
expenses (1,387) (888) - -
Taxes and surcharges 4(37) (467,762) (568,636) (3,335) (938)
Selling and distribution
expenses 4(38) (8,185,178) (8,986,099) - -
General and administrative
expenses 4(39) (3,690,059) (3,604,757) (338,538) (265,620)
Financial expenses 4(40) 905,261 778 (404,035) (388,213)
Asset impairment loss 4(41) (251,810) (276,832) (33) (194)
Add: (Losses)/gains on changes in
fair value 4(42) (525,089) (217,464) 22,673 6,626
Investment income 4(43), 18(4) 714,082 1,181,205 7,558,711 4,808,389
Including: Share of profit of associates and
joint ventures 200,742 43,127 131,111 6,062
3. Operating profit 11,378,096 10,206,400 7,410,046 4,615,692
Add: Non-operating income 4(44) 903,272 650,591 1,837 50,144
Including: Gains on disposal of non-current assets 3,548 38,173 - 18,814
Less: Non-operating expenses 4(45) (103,799) (100,416) (1,557) (4,459)
Including: Losses on disposal of non-current assets (32,149) (77,445) (1,547) (3,734)
4. Total profit 12,177,569 10,756,575 7,410,326 4,661,377
Less: Income tax expenses 4(46) (1,946,671) (1,808,007) (34,901) (117,035)
5. Net profit 10,230,898 8,948,568 7,375,425 4,544,342
Including: Net profit of the investee before the combination
date - - - -
Attributable to shareholders of the
parent company 9,496,493 8,324,123 7,375,425 4,544,342
Minority interests 734,405 624,445 - -
6. Other comprehensive income net of tax 1,347,262 123,525 (10,577) -
Attributable to shareholders of the parent
company 1,276,714 214,758 (10,577) -
(1) Other comprehensive income items which will not be
reclassified subsequently to profit or loss - - - -
(2) Other comprehensive income items which will be
reclassified subsequently to profit or loss 1,276,714 214,758 (10,577) -
1) Share of the other comprehensive income of the
investee accounted for using equity method which will
be reclassified subsequently to profit and loss (65,706) (5,421) (10,577) -
2) Changes in fair value of available-for-sale financial
assets 1,082,507 10,918 - -
3) Losses or profits arising from the reclassification of
held-to-maturity investments into available-for-sale
financial assets - - - -
4) Effective portion of cash flow hedging gains or losses 145,603 360,415 - -
5) Translation of foreign currency financial statements 114,310 (151,154) - -
Attributable to minority shareholders 70,548 (91,233) - -
7. Total comprehensive income 11,578,160 9,072,093 7,364,848 4,544,342
Attributable to shareholders of the parent company 10,773,207 8,538,881 7,364,848 4,544,342
Attributable to minority shareholders 804,953 533,212 - -
8. Earnings per share: (Restated)
(1) Basic earnings per share 4(47) 1.48 1.32 NA NA
(2) Diluted earnings per share 4(47) 1.48 1.31 NA NA
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
77
2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
For the six months ended 30 June
2016 2015 2016 2015
Item Note Consolidated Consolidated Company Company
1. Cash flows from operating activities:
Cash received from sales of goods or rendering of
services 67,859,148 60,039,035 - -
Net increase in customer deposits and deposits from
banks and other financial institutions - - -
Net increase in deposits with central bank and
deposits with banks and other financial institutions 20,521 13,707 - -
Net increase in borrowings from central bank 45,740 - - -
Cash received from interest, fee and commission 493,143 365,927 - -
Refund of taxes and surcharges 2,797,186 2,127,730 - -
Cash received relating to other operating activities 4(48)(a) 1,537,990 1,746,301 21,775,704 14,694,988
Sub-total of cash inflows 72,753,728 64,292,700 21,775,704 14,694,988
Cash paid for goods and services (39,448,768) (32,721,673) - -
Net decrease in customer deposits and deposits from
banks and other financial institutions - - - -
Net decrease in loans and advances (4,588,457) (2,923,618) - -
Net decrease in deposits with central bank and
deposits with banks and other financial institutions (454,933) (349,941) - -
Cash paid for interest, fee and commission (262,705) (317,960) - -
Cash paid to and on behalf of employees (5,660,543) (6,130,766) (97,184) (145,199)
Payments of taxes and surcharges (4,743,106) (5,135,146) (42,490) (12,465)
Cash paid relating to other operating activities 4(48)(b) (9,466,053) (7,897,923) (4,533,614) (1,786,333)
Sub-total of cash outflows (64,624,565) (55,477,027) (4,673,288) (1,943,997)
Net cash flows from operating activities 4(48)(c) 8,129,163 8,815,673 17,102,416 12,750,991
2. Cash flows from investing activities:
Cash received from disposal of investments 28,775,253 6,737 17,722,372 12,000
Cash received from returns on investments 824,805 1,042,100 6,531,603 4,004,819
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 16,919 205,285 110 354
Net cash received from disposal of subsidiaries and
other business units 272,899 - - -
Cash received relating to other investing activities - - - -
Sub-total of cash inflows 29,889,876 1,254,122 24,254,085 4,017,173
Cash paid to acquire fixed assets, intangible assets
and other long-term assets (1,076,411) (1,166,631) (217,976) (239,059)
Cash paid to acquire investments (43,293,409) (8,915,487) (21,275,146) (6,049,973)
Net cash paid to acquire subsidiaries and other
business units (1,856,787) 2,895 - -
Cash paid relating to other investing activities - - - -
Sub-total of cash outflows (46,226,607) (10,079,223) (21,493,122) (6,289,032)
Net cash flows from investing activities (16,336,731) (8,825,101) 2,760,963 (2,271,859)
3. Cash flows from financing activities:
Cash received from capital contributions 45,552 1,493,431 29,742 1,479,971
Including: Cash received from capital
contributions by minority
shareholders of subsidiaries 15,810 13,460 - -
Cash received from borrowings 27,806,076 12,782,285 1,800,000 -
Cash received from issuance of short-term financing
bonds 1,999,500 - 1,999,500 -
Cash received relating to other financing activities - - - -
Sub-total of cash inflows 29,851,128 14,275,716 3,829,242 1,479,971
Cash repayments of borrowings (11,044,612) (9,388,064) (1,290,000) (500,000)
Cash repayments of short-term financing bonds - - - -
Cash payments for interest expenses and distribution
of dividends or profits (5,560,069) (4,614,944) (5,782,143) (4,965,193)
Including: Cash payments for dividends or
profits to minority shareholders of
subsidiaries (297,841) (378,347) - -
Cash payments relating to other financing activities - - - -
Sub-total of cash outflows (16,604,681) (14,003,008) (7,072,143) (5,465,193)
Net cash flows from financing activities 13,246,447 272,708 (3,242,901) (3,985,222)
4. Effect of foreign exchange rate changes on cash
and cash equivalents 70,620 (28,373) - -
5. Net increase in cash and cash equivalents 5,109,499 234,907 16,620,478 6,493,910
Add: Cash and cash equivalents at beginning of
period 5,187,317 5,272,238 6,245,008 6,879,717
6. Cash and cash equivalents at end of period 10,296,816 5,507,145 22,865,486 13,373,627
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Current figure
Attributable to shareholders of the parent company
Other Total
comprehensive Undistributed Minority shareholders'
Item Share capital Capital surplus income Surplus reserve General reserve profits interests equity
1. Balance at end of last year 4,266,839 14,511,190 (1,071,151) 1,846,523 118,624 29,529,827 6,829,770 56,031,622
Add: Changes in accounting policies - - - - - - - -
2. Balance at beginning of current year 4,266,839 14,511,190 (1,071,151) 1,846,523 118,624 29,529,827 6,829,770 56,031,622
3. Movements for current year 2,158,095 (1,679,187) 1,276,714 - - 4,375,624 496,260 6,627,506
(1) Total comprehensive income - - 1,276,714 - - 9,496,493 804,953 11,578,160
(2) Capital contribution and withdrawal
by shareholders 24,399 455,587 - - - - 238,620 718,606
1) Capital contribution by shareholders 24,399 330,897 - - - - 15,810 371,106
2) Business combinations - - - - - - 192,263 192,263
3) Share-based payment included in
shareholders' equity - 124,690 - - - - 30,547 155,237
4) Others - - - - - - - -
(3) Profit distribution - - - - - (5,120,869) (548,703) (5,669,572)
1) Appropriation to surplus reserve - - - - - - - -
2) Appropriation to general reserve - - - - - - - -
3) Profit distribution to shareholders - - - - - (5,120,869) (548,703) (5,669,572)
4) Others - - - - - - - -
(4) Transfer within shareholders' equity 2,133,696 (2,133,696) - - - - - -
1) Transfer from capital surplus to share
capital 2,133,696 (2,133,696) - - - - - -
2) Transfer from surplus reserves to
paid-in capital - - - - - - - -
3) Surplus reserves used to offset
accumulated losses - - - - - - - -
4) Others - - - - - - - -
(5) Special reserve - - - - - - - -
1) Increase in current period - - - - - - - -
2) Usage in current period - - - - - - - -
(6) Others - (1,078) - - - - 1,390 312
4. Balance at end of current period 6,424,934 12,832,003 205,563 1,846,523 118,624 33,905,451 7,326,030 62,659,128
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Comparative figure
Attributable to shareholders of the parent company
Other Total
Capital comprehensive Undistributed Minority shareholders'
Item Share capital surplus income Surplus reserve General reserve profits interests equity
1. Balance at end of last year 4,215,808 13,024,883 (774,299) 1,189,791 - 21,814,316 6,260,955 45,731,454
Add: Changes in accounting policies - - - - - - - -
2. Balance at beginning of current year 4,215,808 13,024,883 (774,299) 1,189,791 - 21,814,316 6,260,955 45,731,454
3. Movements for current year 51,031 1,486,307 (296,852) 656,732 118,624 7,715,511 568,815 10,300,168
(1) Total comprehensive income (296,852) - - 12,706,725 745,319 13,155,192
(2) Capital contribution and withdrawal by
shareholders 51,031 934,455 - - - - 400,768 1,386,254
1) Capital contribution by shareholders 80,623 1,667,248 - - - - 244,910 1,992,781
2) Business combinations - - - - - - 106,106 106,106
3) Share-based payment included in
shareholders' equity - 237,613 - - - - 49,752 287,365
4) Others (29,592) (970,406) - - - - - (999,998)
(3) Profit distribution - - - 656,732 118,624 (4,991,164) (577,272) (4,793,080)
1) Appropriation to surplus reserve - - - 656,732 - (656,732) - -
2) Appropriation to general reserve - - - - 118,624 (118,624) - -
3) Profit distribution to shareholders - - - - - (4,215,808) (577,272) (4,793,080)
4) Others - - - - - - - -
(4) Transfer within shareholders' equity - - - - - - - -
1) Transfer from capital surplus to share
capital - - - - - - - -
2) Transfer from surplus reserves to
paid-in capital - - - - - - - -
3) Surplus reserves used to offset
accumulated losses - - - - - - - -
4) Others - - - - - - - -
(5) Special reserve - - - - - - - -
1) Increase in current period - - - - - - - -
2) Usage in current period - - - - - - - -
(6) Others - 551,852 - - - (50) - 551,802
4. Balance at end of current period 4,266,839 14,511,190 (1,071,151) 1,846,523 118,624 29,529,827 6,829,770 56,031,622
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Current figure
Other
comprehensive Total shareholders'
Item Share capital Capital surplus income Special reserve Surplus reserve Undistributed profits equity
1. Balance at end of last year 4,266,839 6,370,934 21,006 - 1,846,523 9,878,385 22,383,687
Add: Changes in accounting policies - - - - - - -
2. Balance at beginning of current year 4,266,839 6,370,934 21,006 - 1,846,523 9,878,385 22,383,687
3. Movements for current year 2,158,095 (1,685,031) (10,577) - - 2,254,556 2,717,043
(1) Total comprehensive income - - (10,577) - - 7,375,425 7,364,848
(2) Capital contribution and withdrawal by
shareholders 24,399 259,248 - - - - 283,647
1) Capital contribution by shareholders 24,399 330,897 - - - - 355,296
2) Capital contribution by holders of other
equity instruments - - - - - - -
3) Share-based payment included in
shareholders' equity - (71,649) - - - - (71,649)
4) Others - - - - - - -
(3) Profit distribution - - - - - (5,120,869) (5,120,869)
1) Appropriation to surplus reserve - - - - - - -
2) Profit distribution to shareholders - - - - - (5,120,869) (5,120,869)
3) Others - - - - - - -
(4) Transfer within shareholders' equity 2,133,696 (2,133,696) - - - - -
1) Transfer from capital surplus to share
capital 2,133,696 (2,133,696) - - - - -
2) Transfer from surplus reserves to
paid-in capital - - - - - - -
3) Surplus reserves used to offset
accumulated losses - - - - - - -
4) Others - - - - - - -
(5) Special reserve - - - - - - -
1) Increase in current year - - - - - - -
2) Utilisation in current year - - - - - - -
(6) Others - 189,417 - - - - 189,417
4. Balance at end of current year 6,424,934 4,685,903 10,429 - 1,846,523 12,132,941 25,100,730
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Comparative figure
Other
comprehensive Total shareholders'
Item Share capital Capital surplus income Special reserve Surplus reserve Undistributed profits equity
1. Balance at end of last year 4,215,808 5,356,080 - - 1,189,791 7,282,924 18,044,603
Add: Changes in accounting policies - - - - - - -
2. Balance at beginning of current year 4,215,808 5,356,080 - - 1,189,791 7,282,924 18,044,603
3. Movements for current year 51,031 1,014,854 21,006 - 656,732 2,595,461 4,339,084
(1) Total comprehensive income - - 21,006 - - 6,567,314 6,588,320
(2) Capital contribution and withdrawal by
shareholders 51,031 1,017,698 - - - - 1,068,729
1) Capital contribution by shareholders 80,623 1,667,248 - - - - 1,747,871
2) Capital contribution by holders of other
equity instruments - - - - - - -
3) Share-based payment included in
shareholders' equity - 320,856 - - - - 320,856
4) Others (29,592) (970,406) - - - - (999,998)
(3) Profit distribution - - - - 656,732 (4,872,540) (4,215,808)
1) Appropriation to surplus reserve - - - - 656,732 (656,732) -
2) Profit distribution to shareholders - - - - - (4,215,808) (4,215,808)
3) Others - - - - - - -
(4) Transfer within shareholders' equity - - - - - - -
1) Transfer from capital surplus to share
capital - - - - - - -
2) Transfer from surplus reserves to
paid-in capital - - - - - - -
3) Surplus reserves used to offset
accumulated losses - - - - - - -
4) Others - - - - - - -
(5) Special reserve - - - - - - -
1) Increase in current year - - - - - - -
2) Utilisation in current year - - - - - - -
(6) Others - (2,844) - - - 900,687 897,843
4. Balance at end of current year 4,266,839 6,370,934 21,006 - 1,846,523 9,878,385 22,383,687
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
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2016 Semi-Annual Report of Midea Group Co., Ltd.
1 General information
The operational activities of Midea Group Co. Ltd. (hereinafter referred to as "the Company") and its
subsidiaries (collectively referred to as the “Group”) are principally engaged in the manufacturing and
sale of household electrical appliances, motors and related components and rendering of logistics
services. Other operations includes sale, wholesale and processing of raw materials of household
electrical appliances and financial business, which includes customer deposits, interbank lending,
consumption credit , buyer’s credit and finance lease.
The Company was promoted and set up by the Council of Trade Unions of GD Midea Group Co. Ltd.,
and was registered in Market Safety Supervision Bureau of Shunde District, Foshanon 7 April 2000,
with its headquarters located in Shunde District, Foshan. On 31 December 2011, the Company was
transformed into a limited liability company. On 29 July 2013, the Company was approved to acquire
additional interests in Guangdong Midea Electric Co., Ltd. (广东美的电器股份有限公司), a subsidiary
listed on Shenzhen Stock Exchange. On 18 September 2013, the Company’s shares became listed on
Shenzhen Stock Exchange through share issuance and share exchange.
As at 30 June 2016, the Company's registered capital is RMB6,424,934,259 and the total number of
shares in issue is 6,424,934,259, of which 3,040,117,350 shares are restricted tradable shares and
3,384,816,909 shares are unrestricted tradable shares.
The detailed information of major subsidiaries included in the consolidation scope in current year is set
out in Note 5 and 6. Entities newly included in the consolidation scope in current year include
Guangdong Midea Kucheng Electric Appliance Manufacturing Co., Ltd., Guangdong Midea
Commercial Factoring Co., Ltd., Toshiba Lifestyle Products & Services Corporation(hereinafter
referred to as "TLSC") (please refer to Note 5(1) and (2)(a) for details). The detailed information of
subsidiaries no longer included in the consolidation scope in current year is set out in Note 5(2) (b).
These financial statements were authorised for issue by the Company’s Board of Directors on 29
August 2016.
2 Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on the features of
production and operation, mainly including the recognition method of provision for bad debts of
accounts receivable (Note 2(10)), valuation method of inventory (Note 2(12)), depreciation of fixed
assets and amortisation of intangible assets (Note 2(15) and (18)), and recognition time of revenue
(Note 2(27)).
Critical judgements applied by the Group in determining significant accounting policies are set out in
Note 2(32).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard for Business
Enterprises - Basic Standard, and the specific accounting standards and other relevant regulations
issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter
collectively referred to as “the Accounting Standards for Business Enterprises” or “CAS”). The
financial statements have been prepared in accordance with the Accounting Standards for Business
Enterprises No.32 - Interim financial standards issued by the Ministry of Finance, and should be read
in conjunction with the Group’s annual financial statements for the year ended 31 December 2015.
The financial statements are prepared on a going concern basis.
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the six months ended 30 June 2016 are in compliance
with the Accounting Standards for Business Enterprises, and truly and completely present the
Consolidated and the Company's financial position as at 30 June 2016 and their financial performance,
cash flows and other information for the period then ended.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Recording currency
The recording currency of the Company is the Renminbi (“RMB”) and the financial statements are
presented in RMB. The Company and its subsidiaries determine their recording currency based on the
valuation and settlement currency of their main operating revenues and expenses. As the recording
currency of some of the Company's subsidiaries is not RMB, the Company translates the foreign
currency financial statements of such subsidiaries in the preparation of financial statements (Note 2(8)
(b)).
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the absorbing party in a business combination are
measured at the carrying amount. The difference between the carrying amount of the net assets
obtained from the combination and the carrying amount of the consideration paid for the combination
is treated as an adjustment to capital surplus (share premium). If the capital surplus (share premium)
is not sufficient to absorb the difference, the remaining balance is adjusted against retained earnings.
Costs directly attributable to the combination are included in profit or loss in the period in which they
are incurred. Transaction costs associated with the issue of equity or debt securities for the business
combination are included in the initially recognised amounts of the equity or debt securities.
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the acquirer in a business combination
are measured at fair value at the acquisition dates. Where the cost of the combination exceeds the
acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the difference is recognised
as goodwill; where the cost of combination is lower than the acquirer’s interest in the fair value of the
acquiree’s identifiable net assets, the difference is recognised in profit or loss for the current period.
Costs directly attributable to the combination are included in profit or loss in the period in which they
are incurred. Transaction costs associated with the issue of equity or debt securities for the business
combination are included in the initially recognised amounts of the equity or debt securities.
For business combinations achieved by stages involving enterprises not under common control,
previously-held equity in the acquiree is remeasured at its fair value at the acquisition dates, and the
difference between its fair value and carrying amount is included in investment income for the current
period in consolidated financial statements. Where the previously-held equity in the acquiree involves
other comprehensive income under equity method and shareholders’ equity changes other than those
arising from the net profit or loss, other comprehensive income and profit distribution, the related other
comprehensive income and other shareholders' equity changes are transferred into income for the
current period to which the acquisition dates belongs, excluding those arising from changes in the
investee's remeasurement of net liability or net asset related to the defined benefit plan. The excess of
the sum of fair value of the previously-held equity and fair value of the consideration paid at the
acquisition dates over share of fair value of identifiable net assets acquired from the subsidiary is
recognised as goodwill.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company and all of its
subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are
de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a business
combination involving enterprises under common control, it is included in the consolidated financial
statements from the date when it, together with the Company, comes under common control of the
ultimate controlling party. The portion of the net profits realised before the combination date is
presented separately in the consolidated income statement.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
In preparing the consolidated financial statements, where the accounting policies and the accounting
periods of the Company and subsidiaries are inconsistent, the financial statements of the subsidiaries
are adjusted in accordance with the accounting policies and the accounting period of the Company.
For subsidiaries acquired from business combinations involving enterprises not under common control,
the individual financial statements of the subsidiaries are adjusted based on the fair value of the
identifiable net assets at the acquisition dates.
All significant intra-group balances, transactions and unrealised profits are eliminated in the
consolidated financial statements. The portion of subsidiaries’ equity and the portion of a subsidiaries’
net profits and losses and comprehensive incomes for the period not attributable to Company are
recognised as minority interests and presented separately in the consolidated financial statements
under equity, net profits and total comprehensive income respectively. Unrealised profits and losses
resulting from the sale of assets by the Company to its subsidiaries are fully eliminated against net
profit attributable to shareholders of the parent company. Unrealised profits and losses resulting from
the sale of assets by a subsidiary to the Company are eliminated and allocated between net profit
attributable to shareholders of the parent and minority interests in accordance with the allocation
proportion of the parent in the subsidiary. Unrealised profits and losses resulting from the sale of
assets by one subsidiary to another are eliminated and allocated between net profit attributable to
shareholders of the parent and minority interests in accordance with the allocation proportion of the
parent in the subsidiary. If the accounting treatment of a transaction which considers the Group as an
accounting entity is different from that considers the Company or its subsidiaries as an accounting
entity, it is adjusted from the perspective of the Group.
(7) Recognition criteria of cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand,
and short-term and highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
(8) Foreign currency translation
(a) Foreign currency transaction
Foreign currency transactions are translated into RMB using the exchange rates prevailing at the
dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translated into RMB
using the spot exchange rates on the balance sheet date. Exchange differences arising from these
translations are recognised in profit or loss for the current period, except for those attributable to
foreign currency borrowings that have been taken out specifically for the acquisition or construction of
qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items
denominated in foreign currencies that are measured at historical costs are translated at the balance
sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate
changes on cash is presented separately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated at the spot
exchange rates on the balance sheet date. Among the shareholders’ equity items, the items other
than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The
income and expense items in the income statements of overseas operations are translated at the spot
exchange rates of the transaction dates. The differences arising from the above translation are
presented in other comprehensive income. The cash flows of overseas operations are translated at
the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash
is presented separately in the cash flow statement.
(9) Financial instrument
(a) Financial assets
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(i) Classification of financial assets
Financial assets are classified into the following categories at initial recognition: financial assets at fair
value through profit or loss, loans and receivables and available-for-sale financial assets. The
classification of financial assets depends on the Group’s intention and ability to hold the financial
assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for the purpose of
selling in the short term.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, including cash at bank and on hand, deposits with central bank,
deposits with banks and other financial institutions, loans and advances, interest receivable, dividends
receivable, accounts receivable and structural deposits with banks
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in this
category or not classified in any of the other categories at initial recognition. Available-for-sale financial
assets are included in other current assets on the balance sheet if management intends to dispose of
them within 12 months after the balance sheet date.
(ii) Derivative financial instruments
The derivative financial instruments held or issued by the Group are mainly used in controlling risk
exposures. Derivative financial instruments are initially recognised at fair value on the day when
derivatives transaction contract was signed, and subsequently measured at fair value. The derivative
financial instruments are recorded as assets when they have a positive fair value and as liabilities
when they have a negative fair value.
The recognition of changes in fair value of derivative financial instruments depends on whether such
derivative financial instruments are designated as hedging instruments and meet requirements for
hedging instruments, and depends on the nature of hedged items in this case. For derivative financial
instruments that are not designated as hedging instruments and fail to meet requirements on hedging
instruments, including those held for the purpose of providing hedging against specific risks in interest
rate and foreign exchange but not conforming with requirements of hedge accounting, the changes in
fair value are recorded in gains or losses arising from changes in fair value in the consolidated income
statement.
At the inception of the transaction, the Group officially designates the hedging relations between
hedging instruments and hedged items and documents the hedging relations, risk management
objectives and hedging strategies. The Group also makes written assessment of the effectiveness of
hedging instruments in offsetting changes in the fair value or cash flow of hedged items. These criteria
should be met before hedging accounting is determined as applicable to such hedges.
Cash flow hedge
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a
particular risk associated with a recognised asset or liability (such as all or some future interest
payments on variable rate debt) or a highly probable forecast transaction that could ultimately affect
the profit or loss.
The effective portion of changes in the fair value of hedging instruments that are designated and
qualify as cash flow hedges is recognised in other comprehensive income and accumulated in equity
in the “capital reserve”. The ineffective portion is recognised immediately in the profit or loss.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Amounts accumulated in equity are reclassified to the profit or loss in the same periods when the
hedged item affects the profit or loss.
When a hedging instrument expires or is sold, or the hedge designation is revoked or when a hedge
no longer meets the criteria for hedge accounting, any cumulative gain or loss on the hedging
instrument existing in equity at that time remains in equity and is reclassified to the profit or loss when
the forecast transaction ultimately occurs. When a forecast transaction is no longer expected to occur,
the cumulative gain or loss existing in equity is immediately transferred to the profit or loss.
(iii) Recognition and measurement
Financial assets are recognised at fair value on the balance sheet when the Group becomes a party to
the contractual provisions of the financial instrument. In the case of financial assets at fair value
through profit or loss, the related transaction costs incurred at the time of acquisition are recognised in
profit or loss for the current period. For other financial assets, transaction costs that are attributable to
the acquisition of the financial assets are included in their initially recognised amounts.
Financial assets at fair value through profit or loss and available-for-sale financial assets are
subsequently measured at fair value. Investments in equity instruments are measured at cost when
they do not have a quoted market price in an active market and whose fair value cannot be reliably
measured. Receivables and held-to-maturity investments are measured at amortised cost using the
effective interest method.
Gains or losses arising from change in the fair value of financial assets at fair value through profit or
loss are recognised in profit or loss. Interests and cash dividends received during the period in which
such financial assets are held, as well as the gains or losses arising from disposal of these assets are
recognised in profit or loss for the current period.
Gains or losses arising from change in fair value of available-for-sale financial assets are recognised
directly in equity, except for impairment losses and foreign exchange gains and losses arising from
translation of monetary financial assets. When such financial assets are derecognised, the cumulative
gains or losses previously recognised directly into equity are recycled into profit or loss for the current
period. Interests on available-for-sale investments in debt instruments calculated using the effective
interest method during the period in which such investments are held and cash dividends declared by
the investee on available-for-sale investments in equity instruments are recognised as investment
income, which is recognised in profit or loss for the period.
(iv) Impairment of financial assets
The Group assesses the carrying amounts of financial assets other than those at fair value through
profit or loss at each balance sheet date. If there is objective evidence that a financial asset is
impaired, an impairment loss is provided for...
Objective evidence indicating impairment of financial assets refers to the matter that actually occurs
after the initial recognition of financial assets, it will affect estimated future cash flows of financial
assets, and its impact can be reliably measured.
Objective evidence indicating impairment of available-for-sale investments in equity instruments
includes a significant or prolonged decline in the fair value of an investment in an equity instrument.
The Group reviews available-for-sale investments in equity instruments on an individual basis at the
balance sheet date. If the fair value of an equity instrument investment at the balance sheet date is
lower than 50% (inclusive) of its initial cost for more than 12 months (inclusive), it indicates that the
impairment has occurred. If the fair value at the balance sheet date is lower than 20% (inclusive) but
no more than 50%, the Group considers other relevant factors, such as price fluctuation rate, to
determine whether an impairment of equity instrument investment occurs. The Group calculates the
initial investment cost of available-for-sale equity instruments by using weighted average method.
When an impairment loss on a financial asset carried at amortised cost has occurred, the amount of
loss is provided for at the difference between the asset’s carrying amount and the present value of its
estimated future cash flows (excluding future credit losses that have not been incurred). If there is
objective evidence that the value of the financial asset recovered and the recovery is related
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2016 Semi-Annual Report of Midea Group Co., Ltd.
objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed and the amount of reversal is recognised in profit or loss.
If an impairment loss on available-for-sale financial assets measured at fair value incurs, the
cumulative losses arising from the decline in fair value that had been recognised directly in
shareholders' equity are transferred out from equity and into impairment loss. For an investment in
debt instrument classified as available-for-sale on which impairment losses have been recognised, if,
in a subsequent period, its fair value increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in profit or loss, the previously recognised
impairment loss is reversed into profit or loss for the current period. For an investment in an equity
instrument classified as available-for-sale on which impairment losses have been recognised, the
increase in its fair value in a subsequent period is recognised directly in equity.
If an impairment loss on an available-for-sale financial asset measured at cost incurs, the amount of
loss is measured at the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial asset.
The previously recognised impairment loss will not be reversed in subsequent periods. The previously
recognised impairment loss will not be reversed in subsequent periods.
Please refer to Note 2(10) for accounting policies related to impairment of receivables.
(v) Derecognition of financial assets
A financial asset is derecognised when any of the below criteria is met: (1) the contractual rights to
receive the cash flows from the financial asset expire; (2) the financial asset has been transferred and
the Group transfers substantially all the risks and rewards of ownership of the financial asset to the
transferee; or (3) the financial asset has been transferred and the Group has not retained control of
the financial asset, although the Group neither transfers nor retains substantially all the risks and
rewards of ownership of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount and the sum of the
consideration received and the cumulative changes in fair value that had been recognised directly in
equity, is recognised in profit or loss.
(b) Financial liabilities
Financial liabilities are classified into two categories at initial recognition: financial liabilities at fair
value through profit or loss and other financial liabilities. The Group's financial liabilities include
derivative financial liabilities, accounts payable, notes payable, borrowings, customer deposits and
deposits from banks and other financial institutions, financial assets sold under repurchase
agreements and interest payable.
Payables comprise accounts payable, other payables and other current liabilities, and are recognised
at fair value at initial recognition. Payables are subsequently measured at amortised cost using the
effective interest method.
Borrowings and debentures payable are recognised initially at fair value, net of transaction costs
incurred, and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities with maturities no more than one year (inclusive) are classified as current
liabilities. Other financial liabilities with maturities over one year but are due within one year (inclusive)
since the balance sheet date are classified as the current portion of non-current liabilities. Others are
classified as non-current liabilities.
A financial liability (or a part of a financial liability) is derecognised when all or part of the obligation is
extinguished. The difference between the carrying amount of the financial liability or the derecognised
part of the financial liability and the consideration paid is recognised in profit or loss.
(c) Determination of fair value of financial instruments
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The fair value of a financial instrument that is traded in an active market is determined at the quoted
price in the active market. The fair value of a financial instrument that is not traded in an active market
is determined by using a valuation technique. In valuation, the Group uses a valuation technique that
is applicable in the current situation and supported by adequate available data and other information,
selects inputs with the same characteristics as those of assets or liabilities considered in relevant
trade of assets or liabilities by market participants, and maximises the use of relevant observable
inputs. The Group uses unobservable inputs when relevant observable inputs are not available or
feasible.
(10) Provision for bad debts of receivables
Receivables comprise accounts receivable and other receivables. Accounts receivable arising from
sales of goods or rendering of services are initially recognised at fair value of the contractual
payments from the buyers or service recipients.
(a) Receivables with amounts that are individually significant and subject to separate assessment for
provision for bad debts
Receivables with amounts that are individually significant are subject to separate assessment for
impairment. If there exists objective evidence that the Group will not be able to collect the amount
under the original terms, a provision for impairment of that receivable is made.
The judgement standard for individually significant amount is an individual amount exceeding
RMB5,000,000 for accounts receivable and RMB500,000 for other receivables.
The Group makes provision for bad debts for those individually significant amounts based on the
amount by which the present value of the future cash flows expected to be derived from the receivable
is below its carrying amount
(b) Accounts receivable and other receivables that are subject to provision for bad debts on the grouping
basis
Receivables with amounts that are not individually significant and those receivables that have been
individually assessed for impairment and have not been found impaired are classified into certain
groupings based on their credit risk characteristics. The provision for bad debts is determined based
on the historical loss experience for the groupings of receivables with similar credit risk characteristics,
taking into consideration of the current circumstances.
The Group assesses the recovery risk of receivables based on the characteristics of different regions.
The Company's subsidiaries in Mainland China classify the credit risk groupings by taking the ageing
of receivables as the risk characteristics and determine different provision ratios based on business
features.
Within 6 6 months to
months 1 year 1 to 2 years 2 to 3 years 3 to 5 years Over 5 years
Air-conditioner motors
and related components 5% 5% 10% 30% 50% 100%
Refrigerator motors and
related components 5% 5% 10% 30% 50% 100%
Washing machine motors
and related components 5% 5% 10% 30% 50% 100%
Small household
appliances 5% 5% 10% 30% 50% 100%
Logistics and transport 0% 5% 10% 30% 50% 100%
Motor 0% 5% 10% 30% 50% 100%
Others 5% 5% 10% 30% 50% 100%
The Company's subsidiaries in Hong Kong, Macau, Singapore and Japan make bad debts provision
for receivables on an individual basis.
The Company's subsidiaries in Brazil make no bad debts provision for receivables with the ageing
within 1 year and adopt 100% provision ratio for those with the ageing over 1 year.
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(c) Accounts receivable and other receivables with amounts that are not individually significant but
subject to separate assessment for provision for bad debts
The reason for making separate assessment for provision for bad debts is that there exists objective
evidence that the Group will not be able to collect the amount under the original terms of the
receivable.
The provision for bad debts is determined based on the amount by which the present value of the
future cash flows expected to be derived from the receivable is below its carrying amount.
(d) When the Group transfers the accounts receivable to the financial institutions without recourse, the
difference between the proceeds received from the transaction and their carrying amounts and the
related taxes is recognised in profit or loss for the current period.
(11) Provision for bad debts of loans and advances
The provision for bad debts of loans and advances is provided by five classes of ending balances of
loans and advances
(12) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low value consumables, work in
progress, finished goods, etc., are measured at the lower of cost and net realisable value.
(b) Costing of inventories
Cost is determined using the first-in first-out method when issued. The cost of finished goods and
work in progress comprises raw materials, direct labour and systematically allocated production
overhead based on the normal production capacity.
(c) Basis for determining net realisable values of inventories and method for making provision for decline
in the value of inventories
Inventories are initially measured at cost. The cost of inventories comprises purchase cost, processing
cost and other expenditures to bring the inventories to current site and condition.
On the balance sheet date, inventories are measured at the lower of cost and net realisable value.
Net realisable value is determined based on the estimated selling price in the ordinary course of
business, less the estimated costs to completion and estimated costs necessary to make the sale and
related taxes.
Provision for decline in the value of inventories is determined at the excess amount of the cost as
calculated based on the classification of inventories over their net realisable value, and are recognised
in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of related assets or
in profit or loss for the current period.
(13) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in its
subsidiaries, and the Group’s long-term equity investments in its associates and joint venture.
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Subsidiaries are the investees over which the Company is able to exercise control. A joint venture is a
joint arrangement which is structured through a separate vehicle over which the Group has joint
control together with other parties and only has rights to the net assets of the arrangement based on
legal forms, contractual terms and other facts and circumstances. Associates are the investees that
the Group has significant influence on their financial and operating policies.
Investments in subsidiaries are presented in the Company’s financial statements using the cost
method, and are adjusted to the equity method when preparing the consolidated financial statements.
Investments in a joint venture and associates are accounted for using the equity method.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-term equity
investments acquired through a business combination involving enterprises under common control,
the investment cost shall be the absorbing party’s share of the carrying amount of shareholders’ equity
of the party being absorbed at the combination date; for long-term equity investment acquired through
a business combination involving enterprises not under common control, the investment cost shall be
the combination cost. For business combinations achieved by stages involving enterprises not under
common control, the initial investment cost accounted for using the cost method is the sum of carrying
amount of previously-held equity investment and additional investment cost. Including:
For previously-held equity accounted for using the equity method, the accounting treatment of related
other comprehensive income from disposal of the equity is carried out on a same basis with the
investee's direct disposal of related assets or liabilities. Shareholders' equity, which is recognised due
to changes in investee’s shareholders’ equity other than those arising from the net profit or loss, other
comprehensive income and profit distribution, is accordingly transferred into profit or loss in the period
in which the investment is disposed.
For investment in previously-held equity accounted for using the recognition and measurement
standards of financial instruments, the initial investment cost accounted for using the cost method is
the sum of carrying amount of previously-held equity investment and additional investment cost. The
difference between the fair value and carrying amount of investment in previously-held equity and
accumulated fair value changes previously recognised into other comprehensive income are all
transferred into current investment income when accounted for using the cost method.
For long-term equity investments acquired not through a business combination: for long-term equity
investment acquired by payment in cash, the initial investment cost shall be the purchase price
actually paid; for long-term equity investments acquired by issuing equity securities, the initial
investment cost shall be the fair value of the equity securities issued.
(b) Subsequent measurement and recognition of related profit and loss
For long-term equity investments accounted for using the cost method, they are measured at the initial
investment costs, and cash dividends or profit distribution declared by the investees are recognised as
investment income in profit or loss.
For long-term equity investments accounted for using the equity method, where the initial investment
cost of a long-term equity investment exceeds the Group’s share of the fair value of the investee’s
identifiable net assets at the acquisition date, the long-term equity investment is measured at the initial
investment cost; where the initial investment cost is less than the Group’s share of the fair value of the
investee’s identifiable net assets at the acquisition date, the difference is included in profit or loss and
the cost of the long-term equity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Group recognises the
investment income according to its share of net profit or loss of the investee. The Group discontinues
recognising its share of net losses of an investee after the carrying amount of the long-term equity
investment together with any long-term interests that, in substance, form part of the investor’s net
investment in the investee are reduced to zero. However, if the Group has obligations for additional
losses and the criteria with respect to recognition of provisions under the accounting standards on
contingencies are satisfied, the Group continues recognising the investment losses and the provisions.
The changes in the shareholders’ equity of the investee other than those arising from the net profit or
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loss, other comprehensive income and profit distribution, are recognised in the Group’s equity and the
carrying amounts of the long-term equity investment are adjusted accordingly. The carrying amount of
the investment is reduced by the Group’s share of the profit distribution or cash dividends declared by
an investee. The unrealised profits or losses arising from the intra-group transactions amongst the
Group and its investees are eliminated in proportion to the Group’s equity interest in the investees,
and then based on which the investment gains or losses are recognised. For the loss on the
intra-group transaction amongst the Group and its investees attributable to asset impairment, any
unrealised loss is not eliminated.
(c) Basis for determining existence of control, jointly control or significant influence over investees
Control is the power to govern an investee and obtain variable returns from participating the investee's
activities, and the ability to utilise the power of an investee to affect its returns.
Joint control is the contractually agreed sharing of control over an arrangement, and relevant
economic activity can be arranged upon the unanimous approval of the Group and other participants
sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisions of the
investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint venture and associates are
reduced to the recoverable amounts when the recoverable amounts are below their carrying amounts
(Note 2(20)).
(14) Investment properties
Investment properties, including land use rights that have already been leased out, buildings that are
held for the purpose of leasing and buildings that are being constructed or developed for future use for
leasing, are measured initially at cost. Subsequent expenditures incurred in relation to an investment
property are included in the cost of the investment property when it is probable that the associated
economic benefits will flow to the Group and their costs can be reliably measured; otherwise, the
expenditures are recognised in profit or loss in the period in which they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties. Buildings
and land use rights are depreciated or amortised to their estimated net residual values over their
estimated useful lives. The estimated useful lives, the estimated net residual values that are
expressed as a percentage of cost and the annual depreciation (amortisation) rates of investment
properties are as follows:
Estimated useful Estimated net Annual
lives residual value depreciation (amortisation) rates
Buildings 20 to 40 years 5% 2.38% to 4.75%
Land use rights 40 to 50 years - 2% to 2.5%
When an investment property is transferred to owner-occupied properties, it is reclassified as fixed
asset or intangible asset at the date of the transfer. When an owner-occupied property is transferred
out for earning rentals or for capital appreciation, the fixed asset or intangible asset is reclassified as
investment properties at its carrying amount at the date of the transfer. At the time of transfer, the
property is recognised based on the carrying amount before transfer.
The investment properties' estimated useful lives, the estimated net residual values and the
depreciation (amortisation) methods applied are reviewed and adjusted as appropriate at each
year-end.
An investment property is derecognised on disposal or when the investment property is permanently
withdrawn from use and no future economic benefits are expected from its disposal. The net amount
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of proceeds from sale, transfer, retirement or damage of an investment property after deducting its
carrying amount and related taxes and expenses is recognised in profit or loss for the current period.
(15) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, lands with permanent ownership, machinery and equipment, motor
vehicles, computers and electronic equipment and office equipment.
Fixed assets are recognised when it is probable that the related economic benefits will flow to the
Group and the costs can be reliably measured. The initial cost of purchased fixed assets include
purchase price, related taxes and expenditures that are attributable to the assets incurred before the
assets are ready for their intended use. The initial cost of self-constructed fixed assets is determined
based on Note 2(15).
Subsequent expenditures incurred for fixed assets are included in the cost of fixed assets when it is
probable that the associated economic benefits will flow to the Group and the related cost can be
reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent
expenditures are recognised in profit or loss in the period in which they are incurred.
(b) Depreciation methods of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their
estimated residual values over their estimated useful lives. For the fixed assets that have been
provided for impairment loss, the related depreciation charge is prospectively determined based upon
the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated residual values expressed as a percentage of cost and the
annual depreciation rates of the Group's fixed assets are as follows:
Estimated useful Estimated net Annual depreciation
Classes lives residual value rates
Buildings 20 to 40 years 0% or 5% 5% to 2.38%
Machinery and equipment 8 to 18 years 0% or 5% 12.5% to 5.28%
Motor vehicles 2 to 20 years 0% or 10% 50% to 5%
Electronic equipment and other
equipment 2 to 13 years 0% or 10% 50% to 7.69%
The estimated useful lives and the estimated net residual values of the Group's fixed assets and the
depreciation methods applied to the assets are reviewed, and adjusted as appropriate at each
year-end.
(c) Basis for identification and measurement of fixed assets held under finance leases
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a
finance lease. Fixed asset under finance leases is recorded at an amount equal to the lower of the fair
value of the leased asset and the present value of the minimum lease payments. The difference
between the recorded amount of the leased asset and the minimum lease payments is accounted for
as unrecognised finance charge.
Fixed assets under finance leases are subject to the same depreciation policy as for fixed assets that
are self-owned. If it can be reasonably assured that the ownership of the leased asset will be
transferred to the Group when the lease expires, the asset is depreciated over its estimated useful life.
Otherwise, the asset is depreciated over the shorter of the lease period and the expected useful life.
(d) The carrying amount of a fixed asset is reduced to the recoverable amount when the recoverable
amount is below the carrying amount (Note 2(20)).
(d) Disposal of fixed assets
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A fixed asset is derecognised on disposal or when no future economic benefits are expected from its
use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage of a
fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or loss for
the current period.
(16) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction costs,
installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to bring
the fixed assets ready for their intended use. Construction in progress is transferred to fixed assets
when the assets are ready for their intended use, and depreciation begins from the following month.
The carrying amount of construction in progress is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(20)).
(17) Borrowing costs
The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset
that needs a substantially long period of time for its intended use commence to be capitalised and
recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have
been incurred, and the activities relating to the acquisition and construction that are necessary to
prepare the asset for its intended use have commenced. The capitalisation of borrowing costs ceases
when the asset under acquisition or construction becomes ready for its intended use and the
borrowing costs incurred thereafter are recognised in profit or loss for the current period. Capitalisation
of borrowing costs is suspended during periods in which the acquisition or construction of a fixed asset
is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or
construction is resumed.
For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifying for
capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting any
interest income earned from depositing the unused specific borrowings in the banks or any investment
income arising on the temporary investment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed asset qualifying for
capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the
weighted average effective interest rate of general borrowings, to the weighted average of the excess
amount of cumulative expenditures on the asset over the amount of specific borrowings. The effective
interest rate is the rate at which the estimated future cash flows during the period of expected duration
of the borrowings or applicable shorter period are discounted to the initial amount of the borrowings.
(18) Intangible assets
Intangible assets include land use rights, patents and others, and are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period of 40 to 50
years. If the acquisition costs of the land use rights and the buildings located thereon cannot be
reasonably allocated between the land use rights and the buildings, all of the acquisition costs are
recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the period as
stipulated by contracts or the beneficial period.
(c) Trademarks
Purchased trademarks are measured at cost upon acquisition. Trademarks obtained from business
combinations involving enterprises not under common control are recognised at fair value upon
evaluation. Trademarks are amortised on the straight-line basis over the expected useful life of 40
years.
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(d) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisation method is
performed at each year-end, with adjustment made as appropriate.
(e) Research and development (“R&D”)
The expenditure on an internal research and development project is classified into expenditure on the
research phase and expenditure on the development phase based on its nature and whether there is
material uncertainty that the research and development activities can form an intangible asset at end
of the project.
Expenditure on the planned investigation, evaluation and selection for the R&D of production
processes or products is expenditure on the research phase, which is recognised in profit or loss in the
period in which it is incurred. Expenditure on design and test for the final application of the R&D of
production processes or products before mass production is expenditure on the development phase,
which is capitalised only if all of the following conditions are satisfied:
The R&D of production processes or products has been fully justified by technical team;
The budget on the R&D of production processes or products has been approved by the
management;
It's been proved by previous market research analysis that the products produced by the
production processes have marketing capabilities;
There are sufficient technical and financial resources to support the R&D of production
processes or products and subsequent mass production; and
Expenditure attributable to the R&D of production processes or products can be reliably
measured.
Other development expenditures that do not meet the conditions above are recognised in profit or loss
in the period in which they are incurred. Development costs previously recognised as expenses are
not recognised as an asset in a subsequent period. Capitalised expenditure on the development phase
is presented as development costs in the balance sheet and transferred to intangible assets at the
date that the asset is ready for its intended use.
(f) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when the recoverable
amount is below the carrying amount (Note 2(20)).
(19) Long-term deferred expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets held under
operating leases, and other expenditures that have been incurred but should be recognised as
expenses over more than one year in the current and subsequent periods. Long-term prepaid
expenses are amortised on the straight-line basis over the expected beneficial period and are
presented at actual expenditure net of accumulated amortisation.
(20) Impairment of long-term assets
Fixed assets, construction in progress, intangible assets with finite useful lives, investment properties
measured using the cost model and long-term equity investments in subsidiaries, joint ventures and
associates are tested for impairment if there is any indication that the assets may be impaired at the
balance sheet date. Intangible assets not ready for their intended use are tested at least annually for
impairment, irrespective of whether there is any indication that it may be impaired. If the result of the
impairment test indicates that the recoverable amount of an asset is less than its carrying amount, a
provision for impairment and an impairment loss are recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and the present value of the future cash flows expected to be derived from
the asset. Provision for asset impairment is determined and recognised on the individual asset basis.
If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount
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of a group of assets to which the asset belongs is determined. A group of assets is the smallest group
of assets that is able to generate independent cash inflows.
Goodwill that is separately presented in the financial statements is tested at least annually for
impairment, irrespective of whether there is any indication that it may be impaired. In conducting the
test, the carrying value of goodwill is allocated to the related asset groups or groups of asset groups
which are expected to benefit from the synergies of the business combination. If the result of the test
indicates that the recoverable amount of an asset group or group of asset groups, including the
allocated goodwill, is lower than its carrying amount, the corresponding impairment loss is recognised.
The impairment loss is first deducted from the carrying amount of goodwill that is allocated to the
asset group or group of asset groups, and then deducted from the carrying amounts of other assets
within the asset groups or groups of asset groups in proportion to the carrying amounts of assets
other than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the value recovered in
the subsequent periods.
(21) Employee benefits
Employee benefits include short-term employee benefits, post-employment benefits, termination
benefits and other long-term employee benefits provided in various forms of consideration in exchange
for service rendered by employees or compensations for the termination of employment relationship.
(a) Short-term employee benefits
Short-term employee benefits include employee wages or salaries, bonus, allowances and subsidies,
staff welfare, premiums or contributions on medical insurance, work injury insurance and maternity
insurance, housing funds, union running costs and employee education costs, and short-term paid
absences. The employee benefit liabilities are recognised in the accounting period in which the
service is rendered by the employees, with a corresponding charge to the profit or loss for the current
period or the cost of relevant assets. Non-monetary benefits are measured at their fair value.
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans or defined
benefit plans. Defined contribution plans are post-employment benefit plans under which the Group
pays fixed contributions into a separate fund and will have no obligation to pay further contributions;
and defined benefit plans are post-employment benefit plans other than defined contribution plans.
During the reporting period, the Group's post-employment benefits mainly include basic pensions and
unemployment insurance, both of which belong to the defined contribution plans.
Basic pensions
Employees of the Group participate in the defined basic pension insurance plan set up and
administered by local labour and social protection authorities. Basic pensions are provided for monthly
according to stipulated bases and proportions to local labour and social security institutions. When
employees retire, the relevant local authorities are obliged to pay the basic pensions to them. The
amounts based on the above calculations are recognised as liabilities in the accounting period in
which the service has been rendered by the employees, with a corresponding charge to the profit or
loss for the current period or the cost of relevant assets.
(c) Termination benefits
The Group provides compensation for terminating the employment relationship with employees before
the end of the employment contracts or as an offer to encourage employees to accept voluntary
redundancy before the end of the employment contracts. The Group recognises a liability arising from
compensation for termination of the employment relationship with employees, with a corresponding
charge to profit or loss at the earlier of the following dates: 1) when the Group cannot unilaterally
withdraw the offer of termination benefits because of an employment termination plan or a curtailment
proposal; 2) when the Group recognises costs or expenses related to the restructuring that involves
the payment of termination benefits
Early retirement benefits
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The Group offers early retirement benefits to those employees who accept early retirement
arrangements. The early retirement benefits refer to the salaries and social security contributions to
be paid to and for the employees who accept voluntary retirement before the normal retirement date
prescribed by the State, as approved by the management. The Group pays early retirement benefits
to those early retired employees from the early retirement date until normal retirement date. The
Group accounts for the early retirement benefits in accordance with the treatment of termination
benefits, in which the salaries and social security contributions to be paid to and for the early retired
employees from the off-duty date to the normal retirement date are recognised as liabilities with a
corresponding charge to the profit or loss for the current period. The differences arising from the
changes in the respective actuarial assumptions of the early retirement benefits and the adjustments
of benefit standards are recognised in profit or loss in the period in which they occur.
The termination benefits expected to be paid within one year since the balance sheet date are
classified as current liabilities.
(d) Defined benefit plans
TLSC, a subsidiary of the Group, provides supplementary retirement benefit to the staff in addition to
the insurance system required by the countries it operatesSuch benefit belongs to defined benefit
plans. The defined benefit liability recognised in the balance sheet is the present value of the defined
benefit obligation less the fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method at the similar interest rates of
state bonds with similar obligation term and currency. Service cost relating to supplementary
retirement benefit (including current service costs, past service costs and gains or losses upon
settlement) and net interest are recognised in profit or loss in the current period or related asset cost,
and the changes arising from the recalculation of net liability or net assets of the defined benefit plan
are recognised in other comprehensive income.
(22) Financial assets sold under repurchase agreements
Assets sold under agreements to repurchase at a specific future date are not derecognised from the
balance sheet. The corresponding proceeds are recognised on the balance sheet under “Repurchase
agreements”. The difference between the sale price and the repurchase price is treated as interest
expense and is accrued over the life of the agreement using the effective interest method.
(23) General reserve
General reserve is the reserve appropriated from net profits to cover part of unidentified potential
losses, on the basis of the estimated potential risk value of risk assets assessed by the standardised
approach, which is deducted from recognised provision for impairment losses on loans. Risk assets
include loans and advances, available-for-sale financial assets, long-term equity investments,
deposits with banks and other financial institutions and other receivables of subsidiary engaged in
financial business.
(24) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved by the
shareholders’ meeting.
(25) Provisions
Provisions for product warranties, onerous contracts etc. are recognised when the Group has a
present obligation, it is probable that an outflow of economic benefits will be required to settle the
obligation, and the amount of the obligation can be measured reliably.
A provision is initially measured at the best estimate of the expenditure required to settle the related
present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time
value of money, are taken into account as a whole in reaching the best estimate of a provision. Where
the effect of the time value of money is material, the best estimate is determined by discounting the
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related future cash outflows. The increase in the discounted amount of the provision arising from
passage of time is recognised as interest expense.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the
current best estimate.
(26) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employees as
consideration for equity instruments of the entity or by incurring liabilities for amounts based on the
equity instruments. Equity instruments include equity instruments of the Company, its parent company
or other accounting entities of the Group. Share-based payments are divided into equity-settled and
cash-settled payments. The Group’s share-based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s share option plan is the equity-settled share-based payment in exchange of employees'
services and is measured at the fair value of the equity instruments at grant date. The equity
instruments are exercisable after services in vesting period are completed or specified performance
conditions are met. In the vesting period, the services obtained in current period are included in
relevant cost and expenses at the fair value of the equity instruments at grant date based on the best
estimate of the number of exercisable equity instruments, and capital surplus is increased accordingly.
If the subsequent information indicates the number of exercisable equity instruments differs from the
previous estimate, an adjustment is made and, on the exercise date, the estimate is revised to equal
the number of actual vested equity instruments. On the exercise date, the recognised amount
calculated based on the number of exercised equity instruments is transferred into share capital.
(b) Determination of the fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which is Black -
Scholes option pricing model.
(c) Basis for determining best estimate of exercisable equity instruments
At the end of each balance sheet date in the vesting period, the Group revises its estimates of the
number of options that are expected to vest based on the best estimate taking into consideration of
subsequent information newly acquired, such as change in number of exercisable employees. On the
exercise date, the final number of estimated exercisable equity instruments is consistent with the
number of exercised equity instruments.
(d) Accounting treatment related to the exercise of share options
On the exercise date, the Group recognises share capital and share premium based on the actual
exercise. At the same time, capital surplus recognised in the vesting period are carried forward.
(27) Revenue
The amount of revenue is determined in accordance with the fair value of the consideration received
or receivable for the sales of goods and services in the ordinary course of the Group’s activities.
Revenue is shown net of discounts, rebates and returns.
Revenue is recognised when the economic benefits associated with the transaction will flow to the
Group, the related revenue can be reliably measured, and the specific revenue recognition criteria
have been met for each type of the Group’s activities as described below:
(a) Sales of goods
The Group are principally engaged in the manufacturing and sales of home appliances and
mechanical and electrical products (namely large household appliances, small household appliances
and motors).
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Revenue from domestic sales is recognised when 1) the goods are delivered to buyers by the Group
pursuant to contracts; 2) the amount of revenue is confirmed; 3) payments for goods are collected or
receipts are acquired; and 4) the related economic benefits will flow to the Group; and the related
costs can be measured reliably. Upon confirming the acceptance, the buyer has the right to sell the
products at its discretion and takes the risks of any price fluctuations and obsolescence and loss of the
products.
Revenue from overseas sales is recognised when 1) the goods have left the port and obtain the bill of
lading pursuant to contracts; 2) the amount of revenue is confirmed; 3) payments for goods are
collected or obtain related receipts; and 4) the related economic benefits will flow to the Group and the
related costs can be measured reliably.
(b) Rendering of services
Revenue from transportation service, storage service and distribution service as provided by the
Group is recognised when the services are completed.
(c) Interest income
Interest income from financial instruments is calculated by effective interest method and recognised in
profit or loss for the current period. Interest income comprises premiums or discounts, or the
amortisation based on effective rates of other difference between the initial carrying amount and the
due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financial asset or
liability and the interest income or expense based on effective rates. Actual interest rate is the rate at
which the estimated future cash flows during the period of expected duration of the financial
instruments or applicable shorter period are discounted to the current carrying amount of the financial
instruments. When calculating the effective interest rate, the Group estimates cash flows by
considering all contractual terms of the financial instrument (e.g. early repayment options, similar
options, etc.), but without considering future credit losses. The calculation includes all fees and
interest paid or received that are an integral part of the effective interest rate, transaction costs, and all
other premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is used for
discounting estimated future cash flow when measuring the impairment loss.
(d) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e) Rental income
Rental income from investment prosperities is recognised in the income statement on a straight-line
basis over the lease period.
(f) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when the service is
provided. The Group defers the initial charge income or commitment fee income arising from the
forming or acquisition of financial assets as the adjustment to effective interest rate. If the loans are not
lent when the loan commitment period is expired, related charges are recognised as fee and
commission income.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(28) Government grants
Government grants are transfers of monetary or non-monetary assets from the government to the
Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied with and the
government grant can be received. For a government grant in the form of transfer of monetary assets,
the grant is measured at the amount received or receivable. For a government grant in the form of
transfer of non-monetary assets, it is measured at fair value; if the fair value is not reliably
determinable, the grant is measured at nominal amount.
Government grants related to assets are grants that are acquired by an enterprise and used for
acquisition, construction or forming long-term assets in other ways. Government grants related to
income are government grants other than government grants related to assets.
A government grant related to an asset is recognised as deferred income, and evenly amortised to
profit or loss over the useful life of the related asset. Government grants measured at nominal amounts
are recognised immediately in profit or loss for the current period.
For government grants related to income, where the grant is a compensation for related expenses or
losses to be incurred by the Group in the subsequent periods, the grant is recognised as deferred
income, and included in profit or loss over the periods in which the related costs are recognised; where
the grant is a compensation for related expenses or losses already incurred by the Group, the grant is
recognised immediately in profit or loss for the current period.
(29) Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities are calculated and recognised based
on the differences arising between the tax bases of assets and liabilities and their carrying amounts
(temporary differences). Deferred income tax asset is recognised for the tax losses that can be carried
forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No
deferred t income tax liability is recognised for a temporary difference arising from the initial
recognition of goodwill. No deferred income tax asset or deferred income tax liability is recognised for
the temporary differences resulting from the initial recognition of assets or liabilities due to a
transaction other than a business combination, which affects neither accounting profit nor taxable
profit (or deductible tax loss). At the balance sheet date, deferred income tax assets and deferred
income tax liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled.
Deferred income tax assets are only recognised for deductible temporary differences, deductible tax
losses and tax credits to the extent that it is probable that taxable profit will be available in the future
against which the deductible temporary differences, tax losses and tax credits can be utilised.
Deferred income tax liabilities are recognised for temporary differences arising from investments in
subsidiaries, associates and a joint venture, except where the Group is able to control the timing of
reversal of the temporary difference, and it is probable that the temporary difference will not reverse in
the foreseeable future. When it is probable that the temporary differences arising from investments in
subsidiaries, associates and a joint venture will be reversed in the foreseeable future and that the
taxable profit will be available in the future against which the temporary differences can be utilised, the
corresponding deferred income tax assets are recognised.
Deferred income tax assets and liabilities are offset when:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
The deferred income taxes are related to the same tax payer within the Group and the same taxation
authority; and,
That tax payer within the Group has a legally enforceable right to offset current tax assets against
current tax liabilities.
(30) Leases
(a) Operating leases
Rental expenses for assets held under operating leases are recognised as the cost of relevant assets
or expenses on a straight-line basis over the lease period. Contingent rentals are recognised as profit
and loss for the current period when incurred.
Fixed assets leased out under operating leases, other than investment prosperities (Note 2(14)), are
depreciated in accordance with the depreciation policy stated in Note 2(15)(b) and provided for
impairment loss in accordance with the policy stated in Note 2(20). Rental income from operating
leases is recognised as revenue on a straight-line basis over the lease period. Initial direct costs in
large amount arising from assets leased out under operating leases are capitalised when incurred and
recognised as profit and loss for the current period over the lease period on a same basis with
revenue recognition; initial direct costs in small amount are directly recognised as profit and loss for
the current period. Contingent rentals are recognised as profit and loss for the current period when
incurred.
(b) Finance leases
The leased asset is recognised at the lower of the fair value of the leased asset and the present value
of the minimum lease payments. The difference between the recognised amount of the leased asset
and the minimum lease payments is accounted for as unrecognised finance charge and is amortised
using effective interest method over the period of the lease. A long-term payable is recorded at the
amount equal to the minimum lease payments less the unrecognised finance charge.
(31) Segment information
The Group identifies operating segments based on the internal organisation structure, management
requirements and internal reporting system, and discloses segment information of reportable
segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the following conditions: (1) the
component is able to earn revenue and incur expenses from its ordinary activities; (2) whose
operating results are regularly reviewed by the Group’s management to make decisions about
resources to be allocated to the segment and to assess its performance, and (3) for which the
information on financial position, operating results and cash flows is available to the Group. If two or
more operating segments have similar economic characteristics and satisfy certain conditions, they
are aggregated into one single operating segment.
(32) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgements applied based
on historical experience and other factors, including expectations of future events that are believed to
be reasonable.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(a) Critical accounting estimates and key assumptions
The critical accounting estimates and key assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next accounting year
are outlined below:
(i) Income taxes
The Group is subject to income taxes in numerous jurisdictions. There are many transactions and
events for which the ultimate tax determination is uncertain during the ordinary course of business.
Significant judgement is required from the Group in determining the provision for income taxes in each
of these jurisdictions. Where the final tax outcome of these matters is different from the amounts that
were initially recorded, such differences will impact the income tax and deferred income tax provisions
in the period in which such determination is made.
(ii) Provision for impairment of goodwill
The Group tests annually goodwill for impairment. The recoverable amount of asset groups inclusive
of goodwill is the present value of the future cash flows expected to be derived from them. These
calculations require use of estimates.
If management revises the gross margin that is used in the calculation of the future cash flows of asset
groups, and the revised gross margin is lower than the one currently used, the Group would need to
recognise further impairment against goodwill.
If management revises the pre-tax discount rate applied to the discounted cash flows, and the revised
pre-tax discount rate is higher than the one currently applied, the Group would need to recognise
further impairment against goodwill.
If the actual gross margin/pre-tax discount rate is higher/lower than management’s estimates, the
impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.
(iii) Provisions for sales rebates, installation expenses and maintenance expenses.
The relevant expenditures, including sales rebates to the buyers, product installation expenses and
maintenance expenses during the warranty period, are accrued when the Group recognises revenue
from sales of products. The provisions for such expenditures involve management's judgements and
estimates, the key factors mainly include the buyers' completion of agreed performance indicators, the
unit historical and expected installation costs of products, the expected claim rate for maintenance,
market conditions and the stock level kept in sale channel. The estimation basis is reviewed on an
on-going basis and revised where appropriate. When the actual outcome or expectation in the future
is different from the original estimate, such differences will impact the carrying amount of the
provisions and the provision amount charged/reversed in the period in which such estimate has been
changed.
(iv) Fair value of financial instruments
The fair value of a financial instrument that is not traded in an active market is determined by using a
valuation technique. Valuation techniques include discounted cash flow model analysis, etc. The
Group makes estimates in terms of future cash flow, credit risk, market volatility and correlation for
valuation. These estimates are uncertain and changes in them will impact the fair value of financial
instruments.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(v) Supplementary retirement benefit for retired staff
The Group assumes supplementary retirement benefit for retired staff, i.e. the liability of defined
benefit plans, the present value of which is depended on multiple actuarial assumptions, including
discount rate. Any changes in such assumptions will affect the carrying amount of liability of defined
benefit plans.
The Group will re-evaluate the discount rate adopt for calculating the present value of liability of
defined benefit plans each year. When re-evaluating, the Group refers to interest rates of state bonds
with similar currency and payment term used for the payment of supplementary benefit for retired staff
in the future.
3 Taxation
(1) Main tax category and rate
Category Tax base Tax rate
5%, 12.5%, 15%,
Corporate income tax 16.5%, 17%, 20%,
(a) Levied based on taxable income 25%, 31.5% or 34%
Taxable value-added amount (Tax payable is
calculated using the taxable sales amount
Value-added tax multiplied by the applicable tax rate less 3%, 5%, 6%, 11% or
(VAT) deductible VAT input of the current period) 17%
City maintenance and
construction tax The amount of VAT paid 5% or 7%
Educational
surcharge The amount of VAT paid 3% or 5%
Local education
surcharge The amount of VAT paid 2%
Price-based property is subject to a 1.2% tax rate
after a 30% cut in the original price of property.
Rental-based is subject to 12% tax rate for the
Property tax rental income. 1.2% or 12%
(a) Notes to the corporate income tax rate of the principal tax payers with different tax rates
(a-1) The following subsidiaries of the Company are subject to a corporate income tax rate of 15% in 2016
as they have qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate.
No. of the Certificate of the Effective
Name of tax payer
High-tech Enterprise Dates of issuance period
Guangdong GMCC Refrigeration Equipment
Co., Ltd. GR201444000397 10 October 2014 3 years
Guangdong Midea Heating & Ventilation
Equipment Co., Ltd. GF201544000292 20 October 2015 3 years
Foshan Shunde Midea Electric Appliance
Manufacturing Co., Ltd. GR201544001470 10 October 2015 3 years
Guangdong Midea Kitchen Appliances
Manufacturing Co., Ltd. GR201544000202 30 September 2015 3 years
Guangdong Midea Refrigeration Equipment Co.,
Ltd. GR201444000965 10 October 2014 3 years
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Hefei Midea Refrigerator Co., Ltd. GR201434001001 21 October 2014 3 years
Chongqing Midea General Refrigeration
Equipment Co., Ltd. GF201451100044 14 October 2014 3 years
Hefei Hualing Co., Ltd. GR201434000715 21 October 2014 3 years
Hubei Midea Refrigerator Co., Ltd. GF201442000015 14 October 2014 3 years
Wuxi Little Swan Company Limited GR201532000606 6 July 2015 3 years
Foshan Shunde Midea Washing Appliance
Manufacturing Co., Ltd. GR201444001324 10 October 2014 3 years
Guangdong Witt Vacuum Electronics
Manufacturing Co., Ltd. GR201444000159 10 October 2014 3 years
Jiangxi Midea Guiya lighting Co., Ltd. GR201436000009 9 April 2014 3 years
Wuhu Midea Kitchen & Bathroom Electric
Manufacturing Co., Ltd. GF201434000129 2 July 2014 3 years
Annto Logistics Company Limited GF201534000356 19 June 2015 3 years
Foshan Welling Washer Motor Manufacturing
Co., Ltd. GR201444000608 10 October 2014 3 years
Guangdong Welling Motor Manufacturing Co.,
Ltd. GR201444000268 10 October 2014 3 years
Welling (Wuhu) Motor Manufacturing Co., Ltd. GR201434000371 2 July 2014 3 years
Jiangsu Midea Cleaning Appliance Company
Limited GF201432000806 5 August 2014 3 years
Hefei Midea Washing Machine Co., Ltd. GR201434000147 2 July 2014 3 years
Wuxi Filin Electronics Co., Ltd. GR201532000917 6 July 2015 3 years
Wuxi Little Swan General Appliance Co., Ltd. GR201532000557 6 July 2015 3 years
Guangzhou Hualing Refrigeration Equipment
Co., Ltd. GR201444000463 10 October 2014 3 years
Handan Midea Refrigeration Equipment Co.,
Ltd. GR201413000242 19 September 2014 3 years
Midea Group Wuhan Refrigeration Equipment
Co., Ltd. GR201442000091 14 October 2014 3 years
Wuhu Meizhi Air-Conditioning Equipment Co.,
Ltd. GR201434001064 21 October 2014 3 years
The Certificate of the High-tech Enterprise of following are due in 2016: Anhui GMCC Refrigeration
Equipment Co., Ltd., Anhui GMCC Precision Manufacturing Co., Ltd., Huaian Weiling Motor
Manufacturing Co., Ltd. and Hefei Midea Heating & Ventilation Equipment Co., Ltd. These
subsidiaries are still in the progress of extending the certificates and are expected to be entitled to
preferential tax treatment for High-tech Enterprise.
(a-2) The application for corporate income tax preferential treatment of Chongqing Midea Refrigeration
Equipment Co., Ltd., the Company's subsidiary, was approved by the State Administration of Taxation
of Chongqing Economical and Technological Development Zone on 3 June 2014. The subsidiary is
subject to corporate income tax at the rate of 15% in 2016.
(a-3) The Company's subsidiaries in Mainland China other than those mentioned in (a-1), (a-2) and (a-3)
are subject to corporate income tax rate of 25%.
(a-4) Calpore Macao Commercial Offshore Limited, the Company's subsidiary in Macau, is exempted from
income supplement tax for profits gained from its offshore business pursuant to Article 12 in Chapter 2
of Decree-Law No. 58/99/M issued by Macao Special Administrative Region on 13 October 1999.
(a-5) In August 2008, Midea Electric Appliance (Singapore) Co., Ltd., the Company's subsidiary, was
awarded with the Certificate of Honor for Development and Expansion (NO.587) by the Singapore
Economic Development Board, which approves that qualified income exceeding a certain amount is
subject to corporate income tax of 5% while the unqualified income is subject to the corporate income
tax rate of 17%. Midea Electric Appliance (Singapore) Co., Ltd., the Company's subsidiary, is subject
to corporate income of 17%.
(a-6) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax of 16.5%. Such
subsidiaries include Midea International Trade Co., Ltd., Midea International Corporation Limited,
Midea Appliance Investment (Hong Kong) Ltd., Gold Emperor Enterprises Ltd., Chairing Holding Ltd.,
Shi Ji Kaili household air-conditioning Co., Ltd., Midea Refrigeration (Hong Kong) Ltd., Welling
Holding Limited (Hong Kong) and Welling International Hong Kong Ltd (HK).
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(a-7) The Company's subsidiaries in BVI and Cayman Islands are exempted from corporate income tax.
Such subsidiaries include Mecca International (BVI) Limited, Titoni Investments Development Ltd.,
Midea Holdings (BVI) Ltd., Midea Electric Investment (BVI) Limited, Welling Holding (BVI) Ltd. and
Midea Holding (Cayman Islands) Ltd.
(a-8) Springer Carrier Ltda., the Company's subsidiaries in Brazil, is subject to Brazil corporate income tax
of 34%.
(a-9) TLSC, a Japan-located subsidiary of the Company, is subject to Japan corporate income tax of 31.5%.
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
Item Ending balance Opening balance
Cash on hand 2,930 2,915
Cash at bank (a) 14,575,149 11,437,417
Other cash balances (b) 475,713 421,645
Total 15,053,792 11,861,977
Including: Cash abroad (including Hong Kong,
Macau, Singapore, Japan, Brazil,
etc.) 6,832,506 2,204,425
(a) As at 30 June 2016, cash at bank includes fixed deposits with the term of over three months,
amounting to RMB9,405,237,000 (31 December 2015: RMB9,001,934,000).
(b) Other cash balances mainly include deposits for bank acceptance note and letter of credit
(2) Cash due from central bank
Item Ending balance Opening balance
Statutory reserve with central bank (a) 1,418,859 963,926
Surplus reserve with central bank 226,563 84,119
Total 1,645,422 1,048,045
(a) Statutory reserve with central bank represents the statutory reserve deposited in People’s Bank of
China by the financial enterprise in accordance with relevant regulations, which are calculated at
7.5% and 5% for eligible RMB deposits and foreign currency deposits, receptively, and are not
available for use in the Group’s daily operations.
(3) Deposits with banks and other financial institutions
Item Ending balance Opening balance
Financial enterprises' deposits with domestic
banks 10,088,472 4,062,807
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2016 Semi-Annual Report of Midea Group Co., Ltd.
As at 30 June 2016, deposits with banks and other financial institutions include time deposits with the term
of over three months, amounting to RMB5,330,000,000 (31 December 2015: RMB1,400,000,000).
(4) Notes receivable
Item Ending balance Opening balance
Bank acceptance notes 14,987,218 12,889,151
(a) As at 30 June 2016, the Group's pledged notes receivable are as follows:
Notes receivable
Item pledged
Bank acceptance notes 2,401,373
(b) As at 30 June 2016, the Group's notes receivable that are not mature but have been endorsed to other
parties, or that have been discounted are as follows:
Item Derecognised Recognised
Bank acceptance notes 29,337,720 -
(5) Receivables
(a) Accounts receivable
Item Ending balance Opening balance
Accounts receivable 14,074,911 10,978,218
Less: Provision for bad debts (781,788) (606,500)
Total 13,293,123 10,371,718
The ageing analysis of accounts receivable is as follows:
Ageing Ending balance Opening balance
Within 1 year 13,787,321 10,728,566
1 to 2 years 188,256 104,495
2 to 3 years 47,395 88,558
3 to 5 years 32,032 49,487
Over 5 years 19,907 7,112
Subtotal 14,074,911 10,978,218
As at 30 June 2016, the Group has no overdue accounts receivable with significant amount.
Accounts receivable are analysed by categories as follows:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Ending balance Opening balance
Provision for bad Provision for bad
Book balance debts Book balance debts
% of
total % of total
Category Amount balance Amount Ratio Amount balance Amount Ratio
With amounts that are
individually significant and
that the related provision
for bad debts is provided
on the individual basis 7,170 0.05% 7,170 100.00% - - - -
That the related provision
for bad debts is provided
on the age grouping basis 14,059,301 99.89% 766,226 5.45% 10,961,426 99.85% 593,762 5.42%
With amounts that are not
individually significant but
the related provision for
bad debts is provided on
the individual basis 8,440 0.06% 8,392 99.43% 16,792 0.15% 12,738 75.86%
Total 14,074,911 100.00% 781,788 5.55% 10,978,218 100.00% 606,500 5.52%
Accounts receivable that the related provision for bad debts is provided on grouping basis using the ageing
analysis method are analysed as follows:
Ending balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Ageing Amount Amount Ratio Amount Amount Ratio
Within 1 year 13,785,660 570,984 4.14% 10,718,211 403,660 3.77%
1 to 2 years 174,375 113,183 64.91% 102,186 76,371 74.74%
2 to 3 years 47,378 35,256 74.41% 84,473 63,191 74.81%
3 to 5 years 31,981 26,896 84.10% 49,444 43,428 87.83%
Over 5 years 19,907 19,907 100.00% 7,112 7,112 100.00%
Total 14,059,301 766,226 5.45% 10,961,426 593,762 5.42%
The provision for bad debts reversed for the first-half year is RMB35,423,000.
The accounts receivable as written off by the Group for the first-half year are arising from transactions with
third parties and there's no written-off accounts receivable with amounts that are individually significant.
As at 30 June 2016, the top 5 accounts receivable assembled by debtors are analysed as follows:
Item Amount % of total balance
Total balance of top 5 accounts
receivable 2,198,262 15.62%
The Group has no accounts receivable derecognised due to transfer of financial assets in current year.
(b) Other receivables
Item Ending balance Opening balance
Other receivables 996,032 1,161,880
Less: Provision for bad debts (24,289) (60,541)
Total 971,743 1,101,339
Other receivables mainly include current accounts, petty cash to staff and deposits.
The ageing of other receivables is analysed as follows:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Ageing Ending balance Opening balance
Within 1 year 969,391 1,123,870
1 to 2 years 15,181 7,723
2 to 3 years 3,362 8,912
3 to 5 years 8,098 21,375
Subtotal 996,032 1,161,880
Other receivables are analysed by category as follows:
Ending balance Opening balance
Provision for bad
Book balance Provision for bad debts Book balance debts
% of total % of total
Category Amount balance Amount Ratio Amount balance Amount Ratio
With amounts that are individually
significant and that the related
provision for bad debts is
provided on the individual basis 261,646 26.27% 950 0.36% 13,486 1.16% 1,329 9.85%
That the related provision for bad
debts is provided on the age
grouping basis 733,564 73.65% 22,517 3.07% 1,148,394 98.84% 59,212 5.16%
With amounts that are not
individually significant but the
related provision for bad debts is
provided on the individual basis 822 0.08% 822 100.00% - - - -
Total 996,032 100.00% 24,289 2.44% 1,161,880 100.00% 60,541 5.21%
As at 30 June 2016, other receivables with amounts that are individually significant and that the related
provision for bad debts is provided on the individual basis are analysed as follows:
Provision for bad
Name of unit Ending balance debts Ratio Reason
Receivables related to share
China Securities Depository and Clearing options collected by the Company
Corporation Limited Shenzhen Branch 260,696 - 0% without bad debt risks
Bureau of Finance of Hefei High-Tech
Industrial Development Zone 950 950 100%
Subtotal 261,646 950
The provision for bad debts reversed in current year is RMB40,544,000.
Other receivables as written off by the Group in current year are arising from transactions with third
parties and there's no written-off other receivables with amounts that are individually significant.
As at 30 June 2016, the top 5 other receivables assembled by debtors are analysed as follows:
Name of unit Amount % of total balance
Total balance of top 5 other
receivables 520,503 52.26%
As at 30 June 2016, the Group' has no significant government grants recognised at amounts
receivable.
(6) Advances to suppliers
Item Ending balance Opening balance
Advances paid for raw materials and
others 1,610,332 988,625
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(a) The ageing of advances to suppliers is analysed below:
Ending balance Opening balance
% of total
Ageing Amount % of total balance Amount balance
Within 1 year 1,572,833 97.67% 937,986 94.88%
1 to 2 years 31,855 1.98% 29,852 3.02%
2 to 3 years 2,901 0.18% 7,739 0.78%
Over 3 years 2,743 0.17% 13,048 1.32%
Total 1,610,332 100.00% 988,625 100.00%
As at 30 June 2016, advances to suppliers over 1 year with a carrying amount of RMB37,499,000 (31
December 2015: RMB50,639,000) are mainly unsettled advances paid for raw materials.
As at 30 June 2016, the top five balances of advances to suppliers assembled by debtors are
summarised as follows:
Item Amount % of total balance
Total balance of top 5 advances
to suppliers 524,472 32.57%
(7) Loans and advances
(a) Financial enterprises' loans and advances analysed to individual and corporation are as follows:
Item Ending balance Opening balance
Loans and advances to
individuals 400,819 304,230
Loans and advances to
corporations 10,863,098 6,323,429
Including: Loans 4,429,753 3,689,104
Discounted bills 6,433,345 2,634,325
Total loans and advances 11,263,917 6,627,659
Less: Loan impairment provision (157,140) (18,954)
Total 11,106,777 6,608,705
(b) Financial enterprises' loans and advances analysed by type of collateral held or other credit
enhancements are as follows:
Item Ending balance Opening balance
Unsecured loans 1,365,126 134,280
Guaranteed loans 1,388,573 2,306,902
Secured loans by monetary
assets 8,510,218 4,186,477
Subtotal 11,263,917 6,627,659
Less: Loan impairment provision (157,140) (18,954)
Total 11,106,777 6,608,705
(8) Inventories
(a) Inventories are classified as follows:
Ending balance Opening balance
Provision for Provision for
decline in the decline in the
value of Carrying value of
Item Book balance inventories amount Book balance inventories Carrying amount
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Finished
goods 6,921,589 (143,588) 6,778,001 8,233,608 (116,047) 8,117,561
Raw materials 2,217,677 (14,003) 2,203,674 1,648,630 (15,030) 1,633,600
Work in
progress 390,523 - 390,523 504,454 (742) 503,712
Consigned
processing
materials 155,345 - 155,345 194,009 (149) 193,860
Low value
consumables 31,689 - 31,689 204 - 204
Total 9,716,823 (157,591) 9,559,232 10,580,905 (131,968) 10,448,937
(b) Provision for decline in the value of inventories is analysed as follows:
Opening Decrease, reversal or write-off in
Item balance Increase in current period current period Ending balance
Finished goods 116,047 87,426 (59,885) 143,588
Raw materials 15,030 6,336 (7,363) 14,003
Consigned
processing
materials 149 - (149) -
Work in progress 742 - (742) -
Total 131,968 93,762 (68,139) 157,591
(c) Provision for decline in the value of inventories are as follows:
Basis for provision for decline in the Reason for the write-off of provision for decline in
Item value of inventories the value of inventories in current period
Finished Stated at the lower of cost and net
goods realisable value Sales
Raw Stated at the lower of cost and net
materials realisable value Requisition for production
(9) Other current assets
Item Ending balance Opening balance
Prepaid expenses 504,714 740,354
Deductible input VAT 2,185,779 1,818,591
Structural deposits purchased from banks 8,408,212 12,436,000
Wealth management products purchased
from financial institutions(a) 26,786,165 18,236,831
Others 620,907 595,804
Total 38,505,777 33,827,580
(a) As at 30 June 2016, all wealth management products listed under other current assets are due within
one year, mainly including principal non-guaranteed products of RMB26,786,165,000 (31 December
2015: principal non-guaranteed products of RMB18,136,831,000 and principal guaranteed products of
RMB100,000,000) (Note 15(1)).
(b) Wealth management products due over one year purchased by the Company is listed under other
non-current assets, with ending balance of RMB4,432,900,000 (31 December 2015: Nil).
(10) Available-for-sale financial assets
Item Ending balance Opening balance
Measured at fair value
- Available-for-sale equity
instruments (a) 4,254,812 1,862,444
Measured at cost
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2016 Semi-Annual Report of Midea Group Co., Ltd.
- Available-for-sale equity
instruments (b) 1,506,906 1,427,510
Total 5,761,718 3,289,954
(a) As at 30 June 2016, the cost of available-for-sale financial assets measured at fair value is
RMB2,992,837,000 and the accumulative amount recorded in other comprehensive income is
RMB1,261,975,000.
(b) The available-for-sale financial assets measured at cost mainly include the unlisted equity investments
held by the Group which are not quoted in an active market and whose fair value cannot be reliably
measured as the range of the reasonable estimated fair value is wide and probabilities ofthese
estimates cannot be reasonably determined. The Group has no plan to dispose these investments.
As at 30 June 2016, the available-for-sale financial assets measured at cost are mainly the investments
in Xiaomi Corporation with the amount of RMB1,325,080,000.
(c) The increase in available-for-sale financial assets measured at fair value in current period mainly refers
to the purchasing of shares of KUKA Aktiengesellschaft (hereinafter referred to as "KUKA") and floating
profits of shares of KUKA on the market.
(11) Long-term equity investments
Long-term equity investments are classified as follows:
Item Ending balance Opening balance
Investment in associates 2,734,672 2,510,138
Investments in a joint venture 373,974 378,136
Less: Provision for impairment of
long-term equity investments - -
Total 3,108,646 2,888,274
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(Continued table)
Movements for current period
Share of net Adjustment Other Cash Ending
profit using in other change dividends or Provision balance of
Opening Increase in Decrease in the equity comprehens s in profits for Ending provision for
Name of investee balance Investment investment method ive income equity declared impairment Others balance impairment
Associates -
Foshan Shunde Rural Commercial
Bank Co., Ltd. 1,515,228 - - 134,315 (14,749) - (104,464) - - 1,530,330 -
Misr Refrigeration And Air
Conditioning Manufacturing Co. 316,506 - - 18,248 (51,274) - (15,837) - 12,481 280,124 -
Shanxi Huaxiang Group Co., Ltd 280,274 - - 16,250 - - - - - 296,524 -
Shenzhou Tongfu Technology Co.,
Ltd. - 158,325 - - - - - - - 158,325 -
Others 398,130 2,700 - 3,691 317 40 (2,000) - 66,491 469,369 -
Joint venture -
Wanjiang Financial Leasing Co.,
Ltd. 378,136 - - 28,238 - - (32,400) - - 373,974 -
Total 2,888,274 161,025 - 200,742 (65,706) 40 (154,701) - 78,972 3,108,646 -
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(12) Fixed assets
Electronic
Machinery and Motor equipment and
Item Buildings Land equipment vehicles other equipment Total
Cost
Opening balance 14,807,945 - 13,987,827 461,966 2,355,860 31,613,598
Increase in current period 635,839 748,540 2,138,342 17,449 194,703 3,734,873
1) Purchase 80,492 - 450,364 13,131 158,288 702,275
2) Transfers from
construction in progress 70,576 - 156,113 1,106 6,272 234,067
3) Increase in business
combinations 471,083 748,540 1,531,865 1,170 12,529 2,765,187
4) Transfer from investment
prosperities and others 13,688 - - 2,042 17,614 33,344
Decrease in current period (239,307) - (162,139) (24,806) (71,213) (497,465)
1) Disposal or retirement (233,553) - (143,115) (24,806) (71,213) (472,687)
2) Transfer to investment
properties (300) - - - - (300)
3) Others (5,454) - (19,024) - - (24,478)
Differences on translation of
foreign currency financial
statements 29,412 - 56,121 576 8,697 94,806
Ending balance 15,233,889 748,540 16,020,151 455,185 2,488,047 34,945,812
Accumulated depreciation
Opening balance 4,150,347 - 6,691,015 324,228 1,702,719 12,868,309
Increase in current period 361,216 - 682,042 28,696 200,282 1,272,236
1) Provision 347,529 - 682,042 28,423 190,910 1,248,904
2) Transfer from investment
prosperities and others 13,687 - - 273 9,372 23,332
Decrease in current period (16,830) - (149,572) (22,200) (75,838) (264,440)
1) Disposal or retirement (14,946) - (138,272) (22,200) (75,838) (251,256)
2) Others (1,884) - (11,300) - - (13,184)
Differences on translation of
foreign currency financial
statements 13,674 - 32,799 425 5,201 52,099
Ending balance 4,508,407 - 7,256,284 331,149 1,832,364 13,928,204
Provision for impairment loss
Opening balance 3,918 - 11,165 65 260 15,408
Increase in current period - - 2,338 11 - 2,349
1) Provision - - 2,338 11 - 2,349
Decrease in current period - - (108) (9) (36) (153)
1) Disposal or retirement - - (108) (9) (36) (153)
Ending balance 3,918 - 13,395 67 224 17,604
Carrying amount at end of
period 10,721,564 748,540 8,750,472 123,969 655,459 21,000,004
Carrying amount at
beginning of period 10,653,680 - 7,285,647 137,673 652,881 18,729,881
(a) For the half year of 2016, the depreciation of fixed assets amounts to RMB1,248,904,000 (for the half
year of 2015: RMB1,110,996,000) and is fully included in income statement.
(b) As at 30 June 2016, the Company is still in the course of obtaining the ownership certificate for the fixed
asset with a carrying amount of RMB482,182,000.
(c) The increase in the ending balance of fixed assets compared with the opening balance is mainly due to the
Company's consolidation of TLSC, which includes fixed assets rented by TLSC under finance leases
arrangement.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(13) Construction in progress
(a) Movement of significant projects of construction in progress
Accumulative Including:
amount of Borrowing
Increase in capitalised costs
Opening current Transfer to Other Ending borrowing capitalised in Capitalisation Source of
Name of project balance period fixed assets decrease balance costs current year rate funds
Meizhi Compressor Internal
Project 100,377 9,790 (106,030) - 4,137 - - resource
Compressor (Anhui) Internal
Project 32,811 562 (5,892) - 27,481 - - resource
Guiyang Meian
Project 37,689 21,758 (59,447) - 0 3,859 618 6% Loans
Guangdong Welling
construction in Internal
progress 18,708 12,512 (24) (33) 31,163 - - resource
Midea 5th Industrial
Zone Dormitory Internal
Project 120,276 25,569 - - 145,845 - - resource
Internal
Innovation project 311,160 54,349 - - 365,509 - - resource
Loans/Internal
Other projects 333,740 199,356 (62,674) (3,075) 467,347 1,799 - 6% resource
Total 954,761 323,896 (234,067) (3,108) 1,041,482 5,658.00 618.00
As at 30 June 2016, there's no provision for impairment of construction in progress with the ending balance consistent with the carrying amount; and the cost of
construction in progress matches the budget amount. The projects are carried out on schedule.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(14) Intangible assets
Land use
Item rights Non-patents Patents Trademarks Others Total
Cost
Opening balance 3,845,232 169,867 - - 60,086 4,075,185
Increase in current period 3,846 48,792 159,725 2,560,385 4,944 2,777,692
1) Purchase - 1,314 - - - 1,314
2) Increase in business
combinations 2,590 29,553 159,725 2,560,385 - 2,752,253
3) Transfer from investment
prosperities and others 1,256 17,925 - - 4,944 24,125
Decrease in current period (30,656) (5,251) - - (20,280) (56,187)
1) Disposal (30,055) (1,076) - - - (31,131)
2) Others (601) (4,175) - - (20,280) (25,056)
Differences on translation of
foreign currency financial
statements 990 12,101 - - 2 13,093
Ending balance 3,819,412 225,509 159,725 2,560,385 44,752 6,809,783
Accumulated amortisation
Opening balance 544,852 115,412 - - 22,519 682,783
Increase in current period 39,785 6,912 - - 1,633 48,330
1) Provision 39,425 5,567 - - 1,163 46,155
2) Transfer from investment
prosperities and others 360 1,345 - - 470 2,175
Decrease in current period (465) - - - (1,344) (1,809)
1) Disposal (465) - - - - (465)
2) Others - - - - (1,344) (1,344)
Differences on translation of
foreign currency financial
statements - 8,889 - - 1 8,890
Ending balance 584,172 131,213 - - 22,809 738,194
Provision for impairment loss
Opening balance - - - - - -
Increase in current period - - - - - -
1) Provision - - - - - -
Decrease in current period - - - - - -
1) Disposal - - - - - -
Ending balance - - - - - -
Carrying amount at end of
period 3,235,240 94,296 159,725 2,560,385 21,943 6,071,589
Carrying amount at beginning of
period 3,300,380 54,455 - - 37,567 3,392,402
(a) For the half year of 2016, the amortisation of intangible assets amounts to RMB46,155,000 (for
the half year of 2015: RMB45,663,000).
(b) As at 30 June 2016, the Company is still in course of obtaining the title certificates for land use
rights with a carrying amount of about RMB20,478,000.
(c) The increase in the ending balance of intangible assets compared with the opening balance is
mainly due to the consolidation of TLSC.
(d) As at 30 June 2016, there's no provision for impairment of intangible assets.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(15) Goodwill
Difference on
translation of
foreign
currency
Opening financial Ending
Name of investee balance Increase statements Others balance
Wuhu Lok Cheung Electric Co., Ltd. 4,817 - - - 4,817
Guangdong GMCC Refrigeration
Equipment Co., Ltd. 13,732 - - - 13,732
Guangdong Midea Wuhu Refrigeration
Equipment Co., Ltd. 46,788 - - - 46,788
Guangdong Midea Refrigeration
Equipment Co., Ltd. 11,436 - - - 11,436
Midea Group Wuhan Refrigeration
Equipment Co., Ltd. 10,161 - - - 10,161
Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd. 4,107 - - - 4,107
Chongqing Midea General Refrigeration
Equipment Co., Ltd. 8,210 - - - 8,210
Midea Carrier Corporation 472,813 - - - 472,813
PT Midea Planet Indonesia 25,828 - - - 25,828
Midea Electric Trading Thailand Co Ltd 788 - - - 788
Hefei Midea Royalstar Refrigerator Co.,
Ltd. 14,269 - - - 14,269
Hefei Midea Washing Machine Co., Ltd. 34,374 - - - 34,374
Wuxi Little Swan Company Limited 1,326,932 - - - 1,326,932
Jiangxi Midea Guiya lighting Co., Ltd. 54,427 - - - 54,427
Changzhou Honglu Huate Electric Co.,
Ltd. 4,639 - - - 4,639
Calpore Macao Commercial Offshore
Limited 329,957 - - - 329,957
Gold Emperor Enterprises Ltd. 29,467 - - - 29,467
Ningbo Meimei Jiayuan Electric Service
Co., Ltd. 321 - - - 321
TLSC - 2,469,084 - - 2,469,084
Total 2,393,066 2,469,084 - - 4,862,150
The increase in the ending balance compared with the opening balance is mainly due to the Company's
consolidation of TLSC.
(16) Deferred income tax assets and deferred income tax liabilities
(a) Deferred income tax assets without taking into consideration the offsetting of balances
Ending balance Opening balance
Deductible temporary Deferred income tax Deductible temporary Deferred income
Item differences assets differences tax assets
Deductible losses 765,332 218,324 632,957 173,145
Provision for asset
impairments 921,504 184,013 637,300 107,608
Employee benefits
payable 191,733 33,876 177,487 30,015
Other non-current
liabilities 11,310,697 2,029,406 9,996,930 1,711,198
Others 1,203,316 257,460 1,194,030 202,033
Total 14,392,582 2,723,079 12,638,704 2,223,999
(b) Deferred income tax liabilities without taking into consideration the offsetting of balances
Deferred income tax Ending balance Opening balance
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2016 Semi-Annual Report of Midea Group Co., Ltd.
liabilities Deferred Taxable
Taxable temporary income tax temporary Deferred income
differences liabilities differences tax liabilities
Changes in fair value 4,850,702 1,547,652 221,255 33,329
Others 441,203 139,893 44,102 7,135
Total 5,291,905 1,687,545 265,357 40,464
The increase in the ending balance of deferred income liabilities compared with the opening
balance is mainly due to the evaluation appreciation in the consolidation of TLSC.
(c) As at 30 June 2016, there's no significant offset item in deferred income tax assets and
liabilities.
(17) Details of provision for asset impairments
Increase
Decrease in current period
Opening in current
Item balance period Reversal Write-off Ending balance
Provision for bad debts 685,995 405,596 (76,533) (51,841) 963,217
Including: Provision for bad
debts of
accounts
receivable 606,500 261,170 (35,423) (50,459) 781,788
Loan impairment
provision 18,954 138,752 (566) - 157,140
Provision for bad
debts of other
receivables 60,541 5,674 (40,544) (1,382) 24,289
Provision for decline in the
value of inventories 131,968 93,762 (51,096) (17,043) 157,591
Provision for impairment of
available-for-sale financial
assets 100 - - - 100
Provision for impairment of
fixed assets 15,408 2,349 - (153) 17,604
Provision for impairment of
investment properties 12,576 - - - 12,576
Total 846,047 501,707 (127,629) (69,037) 1,151,088
(18) Assets with ownership or use right restricted
As at 30 June 2016, details of assets with restricted ownership are as follows:
Item Ending balance Opening balance
Cash at bank and on hand 9,742,011 9,421,586
Deposits with central bank 1,418,859 963,926
Deposits with banks and other financial
institutions 5,330,000 1,400,000
Notes receivable 2,401,373 4,889,884
Total 18,892,243 16,675,396
(19) Short-term borrowings
Item Ending balance Opening balance
Unsecured borrowings 889,454 977,793
Trade financing 11,242,463 1,818,174
Pledged borrowings - -
Guaranteed borrowings 2,313,502 1,124,966
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Total 14,445,419 3,920,933
(a) As at 30 June 2016, the annual interest rate range of short-term borrowings is from 1% to 8%
(31 December 2015: from 1% to 8%).
(20) Notes payable
Item Ending balance Opening balance
Bank acceptance notes 19,451,346 17,078,520
(21) Accounts payable
Item Ending balance Opening balance
Accounts payable for materials 18,748,749 15,521,933
Others 2,931,143 1,926,751
Total 21,679,892 17,448,684
(a) As at 30 June 2016, accounts payable with ageing over 1 year with a carrying amount of
RMB480,373,000 (31 December 2015: RMB821,705,000) are mainly unsettled accounts
payable for materials.
(22) Advances from customers
Item Ending balance Opening balance
Advances on sales 4,089,800 5,616,361
(a) As at 30 June 2016, accounts payable with ageing over 1 year with a carrying amount of
RMB49,969,000 (31 December 2015: RMB64,267,000) are mainly unsettled advances on
sales.
(23) Employee benefits payable
Item Ending balance Opening balance
Short-term employee benefits (a) 1,799,715 2,114,196
Others 104,013 115,136
Total 1,903,728 2,229,332
(a) Short-term employee benefits
Increase in Decrease in current
Item Opening balance current period period Ending balance
Wages and salaries, bonus,
allowances and subsidies 1,951,015 4,077,982 (4,604,310) 1,424,687
Staff welfare 87,873 393,052 (252,963) 227,962
Social security contributions 13,989 168,580 (167,403) 15,166
Including: Medical insurance 12,725 138,173 (142,533) 8,365
Work injury insurance 1,039 20,536 (15,145) 6,430
Maternity insurance 225 9,871 (9,725) 371
Housing funds 15,284 104,537 (103,459) 16,362
Labour union funds and
employee education funds 17,918 29,955 (28,976) 18,897
Other employee expenses 28,117 298,617 (230,093) 96,641
Subtotal 2,114,196 5,072,723 (5,387,204) 1,799,715
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(24) Taxes payable
Item Ending balance Opening balance
VAT payable 674,541 140,083
Corporate income tax payable 1,746,749 1,188,759
Others 289,179 278,339
Total 2,710,469 1,607,181
(25) Other payables
Item Ending balance Opening balance
Deposit and security deposit 705,871 521,495
Payables and temporary receipts 297,745 215,747
Refund for energy-saving and
beneficial to people 163,240 138,160
Others 471,929 263,904
Total 1,638,785 1,139,306
(a) As at 30 June 2016, other payables with ageing over 1 year with a carrying amount of
RMB70,536,000 (31 December 2015: RMB244,788,000) are mainly deposit and security
deposit payable, which are unsettled for related projects that are uncompleted.
(b) The increase in the ending balance of other payables compared with the opening balance
is mainly due to the consolidation of TLSC.
(26) Other current liabilities
Item Ending balance Opening balance
Accrued sales promotion expenses 1,355,981 828,535
Accrued sales rebate 14,532,683 13,765,370
Accrued installation and maintenance
expenses 4,500,368 4,587,651
Accrued transportation expenses 562,784 487,859
Short-term commercial paper (a) 1,999,500 -
American commercial paper - 355,460
Others 2,376,757 2,073,302
Total 25,328,073 22,098,177
(a) On 16 June 2016, the Company issued super & short-term commercial paper, with annual
interest of 2.92%.
(27) Long-term borrowings
Item Ending balance Opening balance
Guaranteed borrowings 81,194 83,778
Unsecured borrowings 2,002,849 6,283
Total 2,084,043 90,061
(a) As at 30 June 2016, the annual interest rate range of long-term borrowings is from 0.4% to
4.5% (31 December 2015: from 2.09% to 4.5%).
(28) Debentures Payable
Repayment
Issuance Amortisation during
Name of Opening during current Interest accrued of premium current Ending
debentures balance period at par value and discount period balance
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Debentures
payable - 4,641,840 9,187 42,537 - 4,599,303
Total - 4,641,840 9,187 42,537 - 4,599,303
The related information of debentures is outlined as follows:
Name of
debentures Par value Issuing date Maturity date Issuing amount
Debentures
payable 4,641,840 03 June 2016 03 June 2019 4,641,840
Total 4,641,840 4,641,840
(a) Midea Investment and Development Co., Ltd., a wholly-owned subsidiary of the Company,
issued there-year corporate debentures amounting to USD700 million on 3 June 2016,
which was calculated at a yearly simple interest with a fixed yearly rate of 2.375. Interest
was payable every half year, and was guaranteed by Midea Group Co., Ltd.
(29) Long-term employee benefits payable
Item Ending balance Opening balance
Defined benefit plans 1,491,094 -
(a) Defined benefit plans arise from the TLSC, and refer to the staffs in TLSC appointed by
Toshiba Group.
(30) Share capital
Movements for the year ended 31 December 2014
Transfer from
Opening capital surplus to Exercise of Ending
Item balance paid-in capital share options Desterilisation Subtotal balance
RMB-denominated
ordinary shares - (a) (b)
RMB-denominated
ordinary shares subject
to trading restriction (a) 2,026,343 1,013,172 602 1,013,774 3,040,117
RMB-denominated
ordinary shares not
subject to trading
restriction (b) 2,240,496 1,120,524 24,399 (602) 1,144,321 3,384,817
4,266,839 2,133,696 24,399 - 2,158,095 6,424,934
(a) Pursuant to the Plan for Profit Distribution and Transfer from Capital Surplus to Share Capital for 2015
approved by the general meeting for 2015 dated 26 April 2016, capital surplus of RMB2,133,695,614
is transferred to share capital.
(b) Pursuant to the first share option incentive plan as approved at the first extraordinary general meeting
for 2014 dated 17 February 2014 (the "First Options Incentive Programme"), the Company grants
99,863,000 share options with an exercise price of RMB17.72 to 691 employees. Under the
circumstance that specified performance conditions are met, one third of the total share options
granted will become effective after 1 year, 2 years and 3 years, respectively, since 18 February 2014.
For the half year of 2016, the total number of shares exercised by the granted employees is
23,388,146 and RMB23,388,146 is recognised as share capital, RMB305,526,000 is recognised as
capital surplus (share premium) and RMB67,708,000 is transferred from capital surplus (others) to
capital surplus (share premium).
Pursuant to the second share option incentive plan as approved at the first extraordinary general
meeting for 2015 dated 25 May 2015 (the "Second Options Incentive Programme"), the Company
grants 83,790,000 share options with an exercise price of RMB30.54 to 733 employees. Under the
circumstance that specified performance conditions are met, one third of the total share options
granted will become effective after 1 year, 2 years and 3 years, respectively, since 27 May 2015. For
the half year of 2016, the total number of shares exercised by the granted employees is 1,011,050 and
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2016 Semi-Annual Report of Midea Group Co., Ltd.
RMB1,011,050 is recognised as share capital, RMB25,371,000 is recognised as capital surplus (share
premium) and RMB6,606,000 is transferred from capital surplus (others) to capital surplus (share
premium).
(31) Capital surplus
Increase in Decrease in
Item Opening balance current period current period Ending balance
Share premium (a) 11,088,036 330,897 2,133,696 9,285,237
Share option
incentive plan (b) 388,604 199,004 74,314 513,294
Others 3,034,550 308 1,386 3,033,472
Total 14,511,190 530,209 2,209,396 12,832,003
(a) The increase in share premium arises from the exercise of share options with the amount of
RMB330,897,000. The decrease in share premium arises from the share capital transferred from
capital surplus with the amount of RMB2,133,696,000.
(b) The increase in share option incentive plan arises from the share option expenses attributable to
shareholders' equity of the parent company with the amount of RMB199,004,000. The decrease in
share option incentive programme arises from the transfer of RMB74,314,000 share options to
share premium due to exercise of share option.
(32) Other comprehensive income
Other comprehensive income in the balance
Other comprehensive income in the income statement
sheet
Less:
Reclassificatio
Amount ns of previous
Attributable to before other Less: Attributable Attributable
the parent income tax comprehensiv Income to the parent to minority
Opening company after Ending for current e income to tax company shareholder
Item balance tax balance period profit or loss expenses after tax s after tax
Other comprehensive
income which will be
reclassified
subsequently to profit
or loss
Share of the other
comprehensive
income of the
investee accounted
for using equity
method which will
be reclassified
subsequently to
profit and loss (1,242) (65,706) (66,948) (65,706) - - (65,706) -
Gains or losses
arising from
changes in fair value
of available-for-sale
financial assets 160,706 1,082,507 1,243,213 1,133,617 28,819 6,399 1,082,507 15,892
Effective portion of
cash flow hedging
gains or losses (194,762) 145,603 (49,159) (52,701) (202,106) 5,803 145,603 (2,001)
Exchange differences
arising from
translating foreign
operations (1,035,853) 114,310 (921,543) 170,967 - - 114,310 56,657
Total (1,071,151) 1,276,714 205,563 1,186,177 (173,287) 12,202 1,276,714 70,548
(33) Surplus reserve
Increase in Decrease in
Item Opening balance current period current period Ending balance
Statutory surplus
reserve 1,846,523 - - 1,846,523
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(34) Undistributed profits
Item Current figure Comparative figure
Undistributed profits at beginning of year 29,529,827 21,814,316
Add: Net profit attributable to the parent
company for current period 9,496,493 8,324,123
Less: Ordinary share dividends payable 5,120,869 4,215,808
Appropriation to general reserve - 40,517
Undistributed profits at end of year 33,905,451 25,882,114
(a) Ordinary share dividends distributed in current year
Pursuant to the Plan for Profit Distribution and Transfer from Capital Surplus to Share Capital
for 2015 approved by the general meeting for 2015 dated 26 April 2016, the Company
distributes a cash dividend to the shareholders at RMB1.2 per share, amounting to
RMB5,120,869,000 calculated by 4,267,391,228 issued shares (2015: RMB1.00 per share,
amounting to RMB4,215,808,000).
(35) Operating revenue and cost of sales
Item Current figure Comparative figure
Revenue from main operations 71,567,026 76,704,912
Revenue from other operations 5,955,261 5,804,232
Subtotal 77,522,287 82,509,144
Item Current figure Comparative figure
Cost of sales from main operations 49,721,730 55,194,611
Cost of sales from other operations 5,144,430 4,684,295
Subtotal 54,866,160 59,878,906
(a) Revenue and cost of sales from main operations
Current figure Comparative figure
Products or business
category Revenue Cost of sales Revenue Cost of sales
Large household
appliances 48,282,097 33,090,488 54,499,204 38,401,894
Air-conditioner motors
and related
components 34,199,997 22,894,273 42,816,687 29,866,999
Refrigerator motors and
related components 6,701,367 4,955,414 6,027,599 4,505,284
Washing machine
motors and related
components 7,380,733 5,240,801 5,654,918 4,029,611
Small household
appliances 20,368,484 14,182,924 19,327,756 14,344,267
Motor 2,011,351 1,612,042 2,039,514 1,719,216
Logistics 905,094 836,276 838,438 729,234
Subtotal 71,567,026 49,721,730 76,704,912 55,194,611
For the half year of 2016, cost of sales is mainly material costs and labour costs, which
accounts for over 80% of total cost of sales from main operations (for the half year of 2015:
over 80%).
(b) Revenue and cost of sales from other operations
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Current figure Comparative figure
Item Revenue Cost of sales Revenue Cost of sales
Revenue from sales
of materials 5,506,428 5,024,891 5,287,407 4,560,257
Others 448,833 119,539 516,825 124,038
Subtotal 5,955,261 5,144,430 5,804,232 4,684,295
For the half year of 2016, cost of sales from other operations is mainly material costs, which
accounts for over 80% of total cost of sales from other operations (for the half year of 2015:
over 80%).
(36) Interest income/(expenses)
Interest income and expenses arising from daily financial business of financial enterprises are
presented as follows；
Item Current figure Comparative figure
Loans and advances 458,674 339,295
Including: Interest income from
loans and advances 210,644 66,327
Interest income from
note discounting 248,030 272,968
Interest income from deposits
with banks and other financial
institutions 20,902 24,537
Interest income 479,576 363,832
Interest expenses (261,318) (317,071)
(37) Business tax and surcharges
Item Current figure Comparative figure
City maintenance and
construction tax 258,806 314,765
Educational surcharge 190,093 229,189
Others 18,863 24,682
Total 467,762 568,636
(38) Selling and distribution expenses
Item Current figure Comparative figure
Selling and distribution expenses 8,185,178 8,986,099
For the half year of 2016, selling and distribution expenses are mainly maintenance and
installation expenses, advertisement and promotion fee, transportation and storage fee,
employee benefits and rental expenses, which account for over 80% of total selling and
distribution expenses (for the half year of 2015: over 80%).
(39) General and administrative expenses
Item Current figure Comparative figure
General and administrative
expenses 3,690,059 3,604,757
For the half year of 2016, general and administrative expenses are mainly employee
benefits, R&D expenditures, expenses of depreciation and amortisation, technical
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2016 Semi-Annual Report of Midea Group Co., Ltd.
maintenance expenses and administrative office expenses, which account for over 80% of
total general and administrative expenses (for the half year of 2015: over 80%).
(40) Financial expenses
The Group's financial expenses, other than those arising from financial business (Note 4(35)),
are presented as follows:
Item Current figure Comparative figure
Interest expenses 264,840 64,637
Less: Interest income (570,745) (133,341)
Add: Exchange losses (692,672) 5,890
Add: Others 93,316 62,036
Total (905,261) (778)
(41) Asset impairment loss
Item Current figure Comparative figure
(Reversal)/loss of bad debts (Note 4(5)) 130,371 280,419
Loss on decline in the value of inventories
(Note 4(8)) 25,210 (3,837)
Impairment loss on available-for-sale
financial assets (Note 4(10)) - -
Impairment loss on fixed assets (Note 4(12)) 2,349 -
(Reversal)/loss of impairment of loans (Note
4(7)) 93,880 250
Total 251,810 276,832
(42) Gains/(losses) on changes in fair value
Item Current figure Comparative figure
Financial instruments at fair value through
profit or loss - derivative financial
instruments (525,089) (217,464)
(43) Investment income
Source of investment income Current figure Comparative figure
Investment income from wealth management
products purchased from financial institutions 493,198 682,954
Investment income from disposal of financial
assets at fair value through profit or loss (14,501) 313,321
Income from long-term equity investment under
equity method 200,742 43,127
Others 34,643 141,803
Total 714,082 1,181,205
There is no restriction on recovery of investment income in the Group.
(44) Non-operating income
Amount recognised in current
Item Current figure Comparative figure non-recurring profit or loss
Total gains on disposal of
non-current assets 3,548 38,173 3,548
Including: Gains on disposal of
fixed assets 3,548 29,166 3,548
Gains on disposal of
intangible assets - 9,007 -
Government grants 762,724 509,576 762,724
Other income 137,000 102,842 137,000
Total 903,272 650,591 903,272
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(45) Non-operating expenses
Amount recognised in current
Item Current figure Comparative figure non-recurring profit or loss
Losses on disposal of non-current
assets 32,149 77,445 32,149
Including: Losses on disposal of fixed
assets 32,123 77,151 32,123
Losses on disposal of
intangible assets 26 294 26
Donations 10,264 10,078 10,264
Other expenses 61,386 12,893 59,589
Total 103,799 100,416 102,002
(46) Income tax expenses
Item Current figure Comparative figure
Current income tax expenses 2,233,781 2,262,868
Deferred income tax expenses (287,110) (454,861)
Total 1,946,671 1,808,007
The reconciliation from income tax calculated based on the applicable tax rates and total profit
presented in the consolidated financial statements to the income tax expenses is listed below:
Item Current figure Comparative figure
Total profit 12,177,569 10,756,575
Income tax calculated at tax rate of 25% 3,044,392 2,689,144
Effect of different tax rates applicable to subsidiaries (1,029,606) (835,448)
Adjustment of effect of income tax annual filing for prior periods (55,800) (47,084)
Income not subject to tax (53,257) (64,693)
Costs, expenses and losses not deductible for tax purposes 60,369 49,080
Utilisation of deductible losses for which no deferred income tax
asset was recognised in prior period (6,571) (46)
Effect of temporary differences or deductible losses for which no
deferred income tax asset is recognised in current period 5,894 17,054
Others (18,750) -
Income tax expenses 1,946,671 1,808,007
(47) Calculation of basic and diluted earnings per share
(a) Basic earnings per share
Basic earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the weighted average number of outstanding
ordinary shares
Item Unit Current figure Comparative figure
Consolidated net profit attributable to
ordinary shareholders of the parent
company RMB'000 9,496,493 8,324,123
Weighted average number of outstanding Thousand
ordinary shares shares 6,400,970 6,327,186
RMB per
Basic earnings per share share 1.48 1.32
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the diluted weighted average number of
outstanding ordinary shares:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Comparative
Item Unit Current figure figure
Consolidated net profit attributable to
ordinary shareholders of the Company RMB'000 9,496,493 8,324,123
Weighted average number of
outstanding ordinary shares of the Thousand
Company shares 6,400,970 6,327,186
Weighted average number of ordinary Thousand
shares increased due to share options shares 18,074 30,946
Weighted average number of diluted Thousand
outstanding ordinary shares shares 6,419,044 6,358,132
RMB per
Diluted earnings per share share 1.48 1.31
As the Company's capital surplus in transferred into share capital in current year, the amount
of basic and diluted earnings per share over the same period of last year has been reinstated.
(48) Notes to the consolidated cash flow statement
(a) Cash received relating to other operating activities
Item Current figure Comparative figure
Non-operating income 879,790 631,899
Other operating income - others 423,739 574,744
Financial expenses - interest income 116,164 133,682
Others 118,297 405,976
Total 1,537,990 1,746,301
(b) Cash paid relating to other operating activities
Item Current figure Comparative figure
General and administrative expenses
(excluding employee benefits and
taxes and surcharges) 1,872,868 1,552,194
Selling and distribution expenses
(excluding employee benefits and
taxes and surcharges) 6,707,172 6,263,503
Others 886,013 82,226
Total 9,466,053 7,897,923
(c) Supplementary information to the consolidated cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
Supplementary information Current figure Comparative figure
1) Reconciliation of net profit to cash flow
from operating activities is as follows:
Net profit 10,230,898 8,948,568
Add: Provision for assets impairment 251,810 276,832
Depreciation and amortisation 1,572,255 1,443,934
Net loss on disposal of non-current
assets 28,601 39,272
Losses on changes in fair value 525,089 217,464
Financial expenses (273,692) 43,255
Investment income (714,082) (1,181,205)
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Share option expenses 229,551 113,453
Decrease in deferred income tax
assets (356,685) (406,064)
Increase in deferred income tax
liabilities (1,391) (514)
Decrease in inventories 2,264,446 4,849,751
Decrease in operating receivables (10,458,499) (18,439,255)
Increase in operating payables 4,830,862 12,910,182
Net cash flows from operating activities 8,129,163 8,815,673
2) Movements in cash and cash
equivalents:
Cash at end of period 10,296,816 5,507,145
Less: Cash at beginning of period 5,187,317 5,272,238
Add : Cash equivalents at end of period - -
Less: Cash equivalents at beginning of
period - -
Net increase in cash and cash
equivalents 5,109,499 234,907
(d) Acquisition of subsidiaries
Item Current figure
Cash and cash equivalents paid in current year for business
combinations occurred in current period 3,314,708
Including: TLSC 3,314,708
Less: Cash and cash equivalents held by the subsidiaries at the
acquisition dates 1,457,921
Including: TLSC 1,457,921
Net cash paid for acquisition of the subsidiaries 1,856,787
Net assets of the subsidiaries acquired
As at the acquisition
Item dates in 2016
Current assets 4,744,752
Non-current assets 5,824,985
Current liabilities (3,710,935)
Non-current liabilities (5,154,901)
(e) Composition of cash and cash equivalents
Item Current figure Comparative figure
Cash on hand 2,930 934
Cash at bank that can be readily drawn on
demand 5,169,912 3,193,003
Other cash balances that can be readily
drawn on demand 138,939 89,242
Deposits with central bank that can be drawn
on demand 226,563 199,535
Deposits with banks and other financial
institutions 4,758,472 2,024,431
Cash and cash equivalents at end of period 10,296,816 5,507,145
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(49) Monetary items denominated in foreign currencies
Foreign currency RMB balance at end
Item balance at end of period Exchange rates of period
Cash at bank and on
hand
USD 401,534 6.6312 2,662,653
HKD 223,320 0.8547 190,865
EUR 35,824 7.3750 264,202
JPY 22,840,960 0.0645 1,473,036
BRL 45,932 2.0641 94,809
Other currencies NA NA 191,077
Deposits with
central bank
USD 7,884 6.6312 52,280
Deposits with banks
and other financial
institutions
USD 123,203 6.6312 816,984
EUR 7,429 7.3750 54,789
Accounts receivable
USD 890,877 6.6312 5,907,586
HKD 56,621 0.8547 48,392
EUR 107,931 7.3750 795,991
JPY 16,646,519 0.0645 1,073,551
BRL 329,388 2.0641 679,897
Other currencies NA NA 790,959
Other receivables
USD 7,770 6.6312 51,527
HKD 111,379 0.8547 95,192
EUR 6,246 7.3750 46,064
JPY 1,068,082 0.0645 68,882
BRL 65,560 2.0641 135,324
Other currencies NA NA 52,363
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(Continued table)
Foreign currency
Item balance at end of period Exchange rates RMB balance at end of period
Short-term borrowings
USD 266,788 6.6312 1,769,125
HKD 86,000 0.8547 73,502
Other currencies NA NA 123,338
Accounts payable
USD 242,399 6.6312 1,607,393
HKD 46,380 0.8547 39,640
EUR 2,004 7.3750 14,780
JPY 25,288,240 0.0645 1,630,864
BRL 36,167 2.0641 74,653
Other currencies NA NA 70,557
Other payables
USD 20,591 6.6312 136,544
HKD 26,178 0.8547 22,374
EUR 899 7.3750 6,630
JPY 5,313,010 0.0645 342,641
BRL 780 2.0641 1,610
Other currencies NA NA 60,876
Long-term borrowings
HKD 95,000 0.8547 81,194
EUR 271,111 7.3750 1,999,444
BRL 1,354 2.0641 2,795
Other currencies NA NA 340
5 Changes in consolidation scope
(1) Business combinations involving enterprises not under common control
(a) Business combinations involving enterprises not under common control incurred in current year.
% interest Acquisition
Acquirees Nature of business Time of acquisition Acquisition cost acquired method
Production and sale of Cash
TLSC household appliances 30 June 2016 RMB3,314,708,418 80.10% consideration
Cash flows Net cash
from operating flows of
activities of acquirees
Revenues of Net profit of acquirees from from the
acquirees from the acquirees from the the acquisition acquisition
Recognition basis of acquisition dates to acquisition dates to dates to the dates to the
Acquisition dates acquisition dates the period-end the period-end period-end period-end
Effective acquisition of
30 June 2016 control right - - - -
Pursuant to the agreement between the Company and Toshiba Corporation, after 8 years since the
transaction date, both parties will have call option and put option at the pre-determined price for the
remaining shares(19.9%) respectively. In accordance with this agreement, it is likely that the Company
will obtain the remaining 19.9% of shares, so the Company considers that calculation of the goodwill
arising from acquisition and corresponding accounting treatment should be at the basis of 100% shares
acquisition.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(b) Details of costs of combination and good will are as follows:
Item TLSC
Costs of combination -
Cash consideration 3,314,708
Future consideration 666,012
Total cost of combination 3,980,720
Less: Share of fair value of the
identifiable net assets obtained 1,511,636
Goodwill 2,469,084
(c) Assets and liabilities of acquirees at acquisition dates are as follows:
Carrying amount at
Fair value at acquisition acquisition dates and
TLSC dates end of period
Current assets 4,744,752 4,744,752
Non-current assets 5,824,985 1,131,515
Current liabilities (3,710,935) (5,114,647)
Non-current liabilities (5,154,901) (2,237,180)
Net assets obtained 1,703,901 (1,475,560)
The negative net assets of TLSC mainly arises from provision for impairment of long-term
assets in prior years.
The fair value of the assets and liabilities of TLSC at the acquisition date are determined
by the Group using valuation techniques. The valuation method and critical assumptions
applied are as follows:
Land is mainly appraised with market approach, which adjusts the difference between the
evaluated assets and similar assets by comparing the current trading price or selling
price of similar assets in the open market, to determine the value of evaluated assets.
Buildings and machinery and equipment are mainly appraised with cost approach, which
uses the current replacement cost excluding wastage to determine the value of evaluated
assets, with basic calculation formula of evaluated equipment value equalling the total
price times comprehensive newness rate. Part of calculation results should be reviewed
in conjunction with market approach.
Intangible assets (trademarks and patents) are mainly evaluated with license fee saving
approach, which uses the appropriate discount rate to discount the saved license fee
arising from the right to use related assets each year over the remaining using period of
trademarks/patents, to arrive at the present value on base date of assets evaluation.
The main assumptions applied in calculation of discounted future cash flows of trademarks
and patents are as follows:
Item 2017 2018 2019 to 2025
Growth rate 10% 16% 1% to 5%
Gross margin 22% 24% 24%
Discount rate 8.5% 8.5% 8.5%
(2) Changes in consolidation scope due to other reasons
(a) Increase of consolidation scope
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Acquisition Acquisition
method of the time-point of the Contributed Shareholding
Name of entity equity equity amount ratio
Guangdong Midea Kucheng Electric
Appliance Manufacturing Co., Ltd. Establishment June 2016 23,622 60.00%
Guangdong Midea Commercial
Factoring Co., Ltd. Establishment January 2016 100,000 100.00%
(b) Decrease of consolidation scope
Decrease of consolidation scope mainly includes deregistration and sales of subsidiaries. Details
are as follows:
Net profit earned
Disposal Disposal from the beginning
method of the time-point of Net assets on of period to the
Name of entity equity the equity disposal date disposal date
Guangdong Midea lighting
electric manufacturing Co.,
Ltd. Deregistration April 2016 4,132 (20)
Foshan Shunde Meihui
management service Co., Ltd. Sales April 2016 261,514 (4,134)
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2016 Semi-Annual Report of Midea Group Co., Ltd.
6 Interest in other entities
(1) Interests in subsidiaries
(a) Information of significant subsidiaries
Major business Place of Shareholding (%)
Name of Subsidiaries location registration Nature of business Direct Indirect Acquisition method
Business combinations involving
Hefei Midea Refrigerator Co., Ltd. Hefei, PRC Hefei, PRC Manufacture of refrigerator 75% 25% enterprises not under common control
Business combinations involving
Guangdong GMCC Refrigeration Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 60% - enterprises not under common control
Business combinations involving
Guangdong Midea Refrigeration Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 73% 7% enterprises not under common control
Business combinations involving
Midea Group Wuhan Refrigeration Equipment Co., Ltd. Wuhan, PRC Wuhan, PRC Manufacture of air conditioner 73% 7% enterprises not under common control
Guangdong Midea Group Wuhu Refrigeration Equipment Business combinations involving
Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 73% 7% enterprises not under common control
Guangdong Midea Heating & Ventilation Equipment Co.,
Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 90% 10% Establishment
Business combination involving
Ningbo Midea United Material Supply Co., Ltd. Ningbo, PRC Ningbo, PRC Manufacture of air conditioner 100% - enterprises under common control
Midea Electric Appliance (Singapore) Trade Co., Ltd. Singapore Singapore Export trading - 100% Establishment
Wuhu Midea Kitchen & Bathroom Electric Manufacturing Manufacture of small household
Co., Ltd. Wuhu, PRC Wuhu, PRC appliances - 100% Establishment
Business combinations involving
Wuxi Little Swan Company Limited Wuxi, PRC Wuxi, PRC Manufacture of washing machine 38% 15% enterprises not under common control
Business combinations involving
Welling Holding Limited Foshan, PRC Foshan, PRC Manufacture of motors - 69% enterprises not under common control
Guangdong Midea Kitchen Appliances Manufacturing Co., Manufacture of small household
Ltd. Foshan, PRC Foshan, PRC appliances - 100% Establishment
Foshan Shunde Midea Electric Appliance Manufacturing Manufacture of small household
Co., Ltd. Foshan, PRC Foshan, PRC appliances - 100% Establishment
Business combination involving
Annto Logistics Company Limited Wuhu, PRC Wuhu, PRC Cargo storage and transportation 55% 25% enterprises under common control
Midea Group Finance Co., Ltd. Foshan, PRC Foshan, PRC Financial industry 95% 5% Establishment
Wuhu Meizhi Air-Conditioning Equipment Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 88% 12% Establishment
Zhejiang GMCC Compressor Co., Ltd Ningbo, PRC Ningbo, PRC Manufacture of air conditioner 100% - Establishment
Wuhu Midea Kitchen & Bathroom Electric Manufacturing Manufacture of small household Business combination involving
Co., Ltd. Wuhu, PRC Wuhu, PRC appliances 90% 10% enterprises under common control
(a) Information of significant subsidiaries (Cont'd)
Shareholding (%)
Nature of
Name of Subsidiaries Major business location Place of registration business Direct Indirect Acquisition method
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Business combinations
involving enterprises not
Foshan Shunde District Midea Petty Loan Co., Ltd. Foshan, PRC Foshan, PRC Financial industry 30% 70% under common control
Business combinations
involving enterprises not
Midea Petty Loan Co., Ltd. Wuhu, PRC Wuhu, PRC Financial industry 5% 95% under common control
Business combination
Cargo storage involving enterprises under
Hefei Annto Logistics Co., Ltd. Hefei, PRC Hefei, PRC and transportation - 100% common control
The British Virgin The British Virgin
MECCA INTERNATIONAL (BVI) LIMITED Islands Islands Investment - 100% Establishment
Business combinations
Manufacture of air involving enterprises not
South American Holding Co.II B.V Brazil Netherlands conditioner - 51% under common control
Manufacture of Business combinations
household involving enterprises not
TLSC Japan Japan appliances - 80.1% under common control
(b) Subsidiaries that have significant minority interests
Total profit or loss
attributable to
Shareholding of minority Dividends distributed to
minority shareholders in minority interests in
Name of Subsidiaries shareholders current period current period Minority interests at end of period
Guangdong Midea Group Wuhu Refrigeration Equipment Co., Ltd. 20% 12,925 46,626 196,299
Midea Group Wuhan Refrigeration Equipment Co., Ltd. 20% 28,151 46,149 143,515
Guangdong Midea Refrigeration Equipment Co., Ltd. 20% 163,625 143,288 712,191
Wuxi Little Swan Company Limited 47% 276,059 179,601 2,485,083
Guangdong GMCC Refrigeration Equipment Co., Ltd. 40% 50,193 45,328 710,752
South American Holding Co.II B.V 49% (91,303) - 128,894
Foshan Midea Carrier Refrigeration Equipment Co., Ltd. 40% 63,682 - 256,034
Annto Logistics Company Limited 20% 37,415 5,438 191,571
Welling Holding Limited 31% 121,563 49,886 1,280,301
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(2) Information of enterprise group
The major financial information of the subsidiaries that have significant minority interests is listed below:
Ending balance Opening balance
Current Non-current Current Non-current Total Current Non-current Current Non-current
Name of Subsidiaries assets assets Total assets liabilities liabilities liabilities assets assets Total assets liabilities liabilities Total liabilities
Guangdong Midea Group
Wuhu Refrigeration
Equipment Co., Ltd. 10,804,195 623,683 11,427,878 10,484,339 - 10,484,339 11,985,129 642,113 12,627,242 11,548,308 - 11,548,308
Midea Group Wuhan
Refrigeration Equipment
Co., Ltd. 1,166,705 360,820 1,527,525 809,952 - 809,952 2,068,234 377,247 2,445,481 1,643,602 - 1,643,602
Guangdong Midea
Refrigeration Equipment
Co., Ltd. 27,583,555 2,291,170 29,874,725 26,283,242 30,527 26,313,769 26,446,641 2,338,070 28,784,711 25,359,562 30,460 25,390,022
Wuxi Little Swan Company
Limited 13,907,482 1,575,300 15,482,782 9,120,028 38,979 9,159,007 12,752,480 1,575,176 14,327,656 8,298,112 41,816 8,339,928
Guangdong GMCC
Refrigeration Equipment
Co., Ltd. 3,974,342 701,697 4,676,039 2,898,816 344 2,899,160 3,223,492 668,582 3,892,074 2,127,737 3,870 2,131,607
South American Holding Co.II
B.V 2,294,536 638,057 2,932,593 2,493,107 3,091 2,496,198 2,823,102 462,988 3,286,090 2,704,748 6,137 2,710,885
Foshan Midea Carrier
Refrigeration Equipment
Co., Ltd. 1,399,907 54,670 1,454,577 871,406 - 871,406 846,723 54,389 901,112 452,206 96 452,302
Annto Logistics Company
Limited 1,983,538 2,286,498 4,270,036 3,292,494 6,640 3,299,134 1,265,400 2,288,272 3,553,672 2,742,785 8,020 2,750,805
Welling Holding Limited 4,876,654 1,633,695 6,510,349 2,480,193 31,231 2,511,424 4,683,680 1,655,305 6,338,985 2,543,690 35,004 2,578,694
Current figure Comparative figure
Total comprehensive Cash flows from operating Total comprehensive Cash flows from
Name of Subsidiaries Revenue Net profit income activities Revenue Net profit income operating activities
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd. 4,744,044 94,724 94,724 853,687 11,528,484 367,049 367,049 (2,332,957)
Midea Group Wuhan Refrigeration
Equipment Co., Ltd. 2,637,359 140,753 140,753 873,994 4,497,527 133,754 133,754 2,094,866
Guangdong Midea Refrigeration Equipment
Co., Ltd. 15,100,437 818,125 818,125 (5,107,950) 18,367,648 825,684 825,078 7,713,772
Wuxi Little Swan Company Limited 7,984,787 664,923 701,188 1,607,097 6,101,904 498,509 498,482 1,365,269
Guangdong GMCC Refrigeration Equipment
Co., Ltd. 3,509,078 125,483 120,769 (72,374) 4,023,165 105,295 107,590 43,552
South American Holding Co.II B.V 1,237,026 (186,334) (151,518) (186,658) 1,979,894 (130,144) (130,144) (929,758)
Foshan Midea Carrier Refrigeration
Equipment Co., Ltd. 1,102,390 132,696 132,407 43,984 1,020,930 98,008 101,451 (33,029)
Annto Logistics Company Limited 4,107,019 219,142 219,142 200,668 2,063,887 109,538 109,538 (338,665)
Welling Holding Limited 3,943,392 386,836 386,836 (344,511) 3,992,399 321,759 321,621 635,840
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(3) Interests in associates and a joint venture
The impact of the Group’s associates and joint venture on the Group is not significant.
Summarised information is as follows:
Item Ending balance Opening balance
Aggregated carrying amount of investments 3,108,646 2,888,274
Aggregate of the following items calculated in
proportion to shareholding (i) 200,742 420,744
Other comprehensive income (i) (65,706) 39,924
Total comprehensive income 135,036 460,668
(i) The net profit and other comprehensive income have taken into account the impacts of both
the fair value of the identifiable assets and liabilities upon the acquisition of investment and
accounting policies unifying.
7 Segment information
The reportable segments of the Group are the business units that provide different products or
service, or operate in the different areas. Different businesses or areas require different
technologies and marketing strategies, the Group, therefore, separately manages the
production and operation of each reportable segment and evaluates their operating results
respectively, in order to make decisions about resources to be allocated to these segments
and to assess their performance.
The Group identified 6 reportable segments as follows:
- Air conditioning and parts segment
- Refrigerators and parts segment
- Washing machines and parts segment
- Small appliances segment
- Electric machine segment
- Logistics segment
Inter-segment transfer prices are determined by reference to selling prices to third parties.
The assets are allocated based on the operations of the segment and the physical location of
the asset. The liabilities are allocated based on the operations of the segment. Expenses
indirectly attributable to each segment are allocated to the segments based on the proportion
of each segment’s revenue.
Operating expenses include cost of sales, interest expenses, fee and commission expenses,
business taxes and surcharges, selling and distribution expenses, general and administrative
expenses, financial expenses and asset impairment losses.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
8 Segment reporting
(a) Information on the profit or loss, assets and liabilities of reported segment
Segment information for the half year of 2016 and as at 30 June 2016 is as follows:
Current figure
Air-conditioner Refrigerator
motors and motors and Washing machine Small
related related motors and related household
Item components components components appliances Motor Logistics Others Elimination Total
Revenue from external
customers 38,298,229 7,230,353 8,026,957 20,719,144 2,336,073 905,198 491,562 - 78,007,516
Inter-segment revenue 185,483 13,758 15,229 67,136 1,607,320 1,277,353 627,540 (3,793,819) -
Operating expenses (32,456,401) (6,492,768) (7,270,836) (17,584,482) (3,533,186) (2,090,926) (1,179,851) 3,790,037 (66,818,413)
Segment profit 6,027,311 751,343 771,350 3,201,798 410,207 91,625 (60,749) (3,782) 11,189,103
Other profit or loss 988,466
Total profit 12,177,569
Total assets 86,197,460 14,990,117 20,528,557 62,363,466 7,503,284 3,655,308 69,628,298 (97,363,743) 167,502,747
Total liabilities 65,357,748 9,525,782 11,651,355 48,681,127 2,511,424 2,595,346 68,466,067 (103,945,230) 104,843,619
Long-term equity investments in
associates and a joint venture 298,447 - - 2,700 318,922 - 2,488,577 - 3,108,646
Investment income from
investments in associates and
a joint venture 16,204 - - - 16,135 - 168,403 - 200,742
Increase in non-current assets
(excluding available-for-sale
financial assets, long-term
equity investments and
deferred income tax assets) 497,946 2,600,314 2,255,523 3,348,660 120,346 70,071 412,958 - 9,305,818
Asset impairment
losses/(reversal) 117,455 13,433 27,934 (13,757) 11,374 (3,423) 97,895 899 251,810
Depreciation and amortisation
expenses 716,766 177,538 82,637 377,191 88,910 45,805 83,408 - 1,572,255
(a) Information on the profit or loss, assets and liabilities of reported segment (Cont’d)
Segment information for the half year of 2015 and as at 30 June 2015 is as follows:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Comparative figure
Air-conditioner Refrigerator Washing
motors and motors and machine motors
related related and related Small household
Item components components components appliances Motor Logistics Others Elimination Total
Revenue from external customers 46,877,053 6,455,582 6,129,704 19,773,347 2,232,471 838,439 568,474 - 82,875,070
Inter-segment revenue 88,170 5,257 6,289 2,192 1,759,929 1,225,449 311,166 (3,398,452) -
Operating expenses (41,336,354) (5,947,896) (5,596,301) (17,577,826) (3,701,322) (2,038,908) (929,979) 3,496,175 (73,632,411)
Segment profit 5,628,869 512,943 539,692 2,197,713 291,078 24,980 (50,339) 97,723 9,242,659
Other profit or loss 1,513,916
Total profit 10,756,575
Total assets 83,840,421 8,748,702 11,288,808 33,692,911 7,464,862 3,620,941 103,220,718 (110,094,676) 141,782,687
Total liabilities 62,952,872 4,615,427 5,882,185 22,166,008 2,938,133 2,356,274 82,665,440 (94,243,077) 89,333,262
Long-term equity investments in
associates and a joint venture 274,055 - 2,727 - 296,404 - 332,970 - 906,156
Investment income from
investments in associates and a
joint venture 11,733 - (123) - 23,922 - 7,595 - 43,127
Increase in non-current assets
(excluding available-for-sale
financial assets, long-term
equity investments and deferred
income tax assets) 588,278 133,485 43,313 358,850 97,417 84,016 283,779 - 1,589,138
Asset impairment
losses/(reversal) 203,574 17,252 (1,325) 28,228 2,870 19,246 54,734 (47,747) 276,832
Depreciation and amortisation
expenses 636,499 179,699 72,632 229,650 72,950 61,858 190,646 - 1,443,934
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(b) Geographical area information
The Group’s revenue from external customers domestically and in foreign countries or
geographical areas, and the total non-current assets other than available-for-sale financial assets
and deferred income tax assets located domestically and in foreign countries or geographical
areas (including Hong Kong, Macau, Singapore, Japan, Brazil, etc.) are as follows:
Revenue from external customers Current figure Comparative figure
Domestic 46,668,922 55,556,002
Other countries/geographical areas 31,338,594 27,319,068
Total 78,007,516 82,875,070
Total non-current assets Current figure Comparative figure
Domestic 28,960,862 25,595,892
Other countries/geographical areas 8,751,634 2,137,851
Total 37,712,496 27,733,743
9 Related parties and significant related party transactions
(1) Information of the parent company
(a) General information of the parent company
Place of
Name of the parent company Relationship registration Nature of business
Controlling Shunde District,
Midea Holding Co., Ltd. shareholder Foshan Commercial
The Company’s ultimate controlling person is Mr. He Xiangjian.
(b) Registered capital and changes in registered capital of the parent company
Name of the parent company Registered capital
Midea Holding Co., Ltd. 330,000
(c) The percentages of shareholding and voting rights in the Company held by the parent company
30 June 2016 1 January 2016
Name of the Shareholding (%) Voting rights Shareholding (%) Voting rights
parent company Direct Indirect (%) Direct Indirect (%)
Midea Holding
Co., Ltd. 34.93% - 34.93% 35.07% - 35.07%
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s main subsidiaries.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(3) Information of other related parties
Name of other related parties Relationship
Under common control of the direct relatives of the
Guangzhou Wellkey Electrician Material Co., Ltd. Company's ultimate controlling shareholders
Under common control of the direct relatives of the
Anhui Wellkey Electrician Material Co., Ltd. Company's ultimate controlling shareholders
Under common control of the direct relatives of the
Infore Investment Holding Group Co., Ltd. Company's ultimate controlling shareholders
Under common control of the Company's actual
Foshan Shunde Midea Development Co., Ltd. controlling persons
Under common control of the Company's actual
Foshan Midea Real Estate Development Co., Ltd. controlling persons
Shanxi Huaxiang Group Co., Ltd Associates of subsidiaries controlled by the Company
Foshan Micro Midea Filter MFG Co., Ltd. Associates of the Company
Under common control of the Company's actual
Guangdong Midea Property Co., Ltd. controlling persons
Foshan Shunde Rural Commercial Bank Co., Ltd. Associates of the Company
(4) Information of related party transactions
The following related party transactions are conducted in accordance with normal commercial
terms or relevant agreements.
(a) Purchase of goods:
Content of Pricing policies of
related party related party Current Comparative
Related parties transactions transactions figure figure
Purchase of
Hefei Orinko Plastics Group. goods Agreed price 104,024 -
Guangzhou Wellkey Electrician Material Co., Purchase of
Ltd. goods Agreed price 476,574 394,942
Purchase of
Foshan Micro Midea Filter MFG Co., Ltd. goods Agreed price 82,158 79,649
Purchase of
Shanxi Huaxiang Group Co., Ltd goods Agreed price 468,116 80,925
Purchase of
Guangdong Infore Electronics Co., Ltd. goods Agreed price - 4,457
Purchase of
Anhui Wellkey Electrician Material Co., Ltd. goods Agreed price 708,038 163,114
Total 1,838,910 723,087
(b) Guarantee
The Group as the guarantee provider
Guaranteed Commencement
Related parties amount date Maturity date Fully performed or not
Shanxi Huaxiang Group 31 December
Co., Ltd 183,000 01 January 2016 2016 No
(c) Investment income
Related parties Content Current figure Comparative figure
Foshan Shunde Rural Commercial Bank Co., Wealth management
Ltd. product 44,400 57,175
(5) Receivables from and payables to related parties
Receivables from related parties:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Project name Related parties Ending balance Opening balance
Advances to
suppliers Guangzhou Wellkey Electrician Material Co., Ltd. - 756
Foshan Micro Midea Filter MFG Co., Ltd. - 8,000
Hefei Orinko Plastics Group. 23,811 28,756
Subtotal 23,811 37,512
Project name Related parties Ending balance Opening balance
Other current
assets Foshan Shunde Rural Commercial Bank Co., Ltd. 2,200,000 1,100,000
Project name Related parties Ending balance Opening balance
Cash at bank
and on hand Foshan Shunde Rural Commercial Bank Co., Ltd. 1,379,700 2,030,948
Payables to related parties:
Project name Related parties Ending balance Opening balance
Accounts
payable Guangzhou Wellkey Electrician Material Co., Ltd. 103,337 64,330
Foshan Micro Midea Filter MFG Co., Ltd. 14,501 32,901
Shanxi Huaxiang Group Co., Ltd 27,939 49,705
Hefei Orinko Plastics Group. - 6,153
Anhui Wellkey Electrician Material Co., Ltd. 24,994 51,755
Foshan Midea Real Estate Development Co., Ltd. - 3,677
Subtotal 170,771 208,521
10 Share-based payment
(1) Pursuant to the third share option incentive plan (the “Third Share Option Incentive Plan”) approved at
the third extraordinary general meeting for 2016 dated 6 June 2016, the Company grants
127,290,000 share options with exercise price of RMB21.35 to 929 employees. Under the
circumstance that the Company meets expected performance, 1/3 of the total share options
granted will become effective after 1 year, 2 years and 3 years respectively since 28 June 2016.
Determination method for fair value of share options at the grant date
Exercise price of options RMB21.35
Effective period of options: 5 years
Current price of underlying
shares: RMB23.35
Estimated fluctuation rate of share
price: 40.81%
Estimated dividend rate: 3.75%
Risk-free interest rate within
effective period of options: 2.37%
The fair value of the Third Share Option Incentive Plan calculated pursuant to the above
parameters is: RMB774,462,000.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(2) Movements of share options during the half year
For the half year of (share options in For the half year of 2015 (share
Item thousands) options in thousands)
Outstanding share options issued at beginning
of year 203,595 90,863
Share options granted in current period 127,290 83,790
Share options exercised in current period (24,675) (19,314)
Share options lapsed in current period - -
Outstanding share options issued at end of
period 306,210 155,339
The number of outstanding share options at beginning of year is adjusted based on the transfer of
capital surplus into share capital (10 for 5) according to the audited number of last year, and the
number after adjustment is 203,595,000.
As at 30 June 2016, the maturity date of the First Option Incentive Plan is 17 February 2019, the
maturity date of the Second Option Incentive Plan is 27 May 2020, and the maturity date of the
Third Option Incentive Plan is on 28 June 2021.
(3) Impact of share-based payment transactions on financial position and financial performance.
For the half year of 2016, the total share option expenses recognised under share option incentive
plan are RMB229,551,000. As at 30 June 2016, the balance relating to the option incentive plan
and provided for in capital surplus was RMB513,294,000.
11 Contingencies
The amount in tax disputes in a Brazilian subsidiary with 51% interests held by the Company is
about BRL584 million (approximately equivalent to RMB1,205 million) (Some cases have lasted
for more than ten years. The above amount includes the principal and related interest). As at 30
June 2016, relevant cases are still at court. With reference to judgements of third-party attorneys,
management considers that there is no need to make provisions.
12 Commitments
(1) Operating lease commitments
The Group has no significant operating lease commitments at the balance sheet date.
13 Subsequent events
(a) Acquisition of KUKA
The Company's agreements regarding tender offer of shares of KUKA were approved by the
Company's eleventh meeting of the second board of directors on 19 May 2016, twelfth meeting of
the second board of directors on 26 May 2016 and the third extraordinary general meeting on 7
June 2016. The Company proposed tender offer by MECCA, a overseas wholly-owned subsidiary
of the Company, to acquire the shares of KUKA at a cash consideration of EUR115 per share.
KUKA 's three major business segments are as follows: 1) Kuka robotics segment is mainly
engaged in the development, manufacturing and sales of core robots as well as related services
and controllers; 2) Kuka system segment is mainly engaged in the design and construction of
automated manufacturing system; 3) Swisslog segment is mainly engaged in the provision of
solutions for R&D Innovation automation in other fields.
As at 4 August 2016, this tender offer term expired, and KUKA shareholders could not continue to
sell shares regarding this tender offer. Upon completion the tender offer, as the Company has
previously held 13.51% shares of KUKA, plus the shares acquired through this tender offer, the
Group will hold 37,605,732 shares of KUKA in total, namely, 94.55% of KUKA's issued shares.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
On 10 August 2016, the Company received Notice of Not Implementing Further Examination
(SHANGFANLONGCHUSHENHAN[2016] No.224) Issued by Anti-Monopoly Bureau of Ministry of
Commerce of China, which passed the review of operators' concentration involved in this tender
offer and permitted the implementation of this tender offer.
As at 20 August 2016, Beijing time, "No objection to this acquisition from Federal Ministry for
Economic Affairs and Energy of Germany", one of the requirements of the completion of this
tender offer, has been satisfied. This tender offer still needs anti-monopoly review by EU, USA,
Russia, Brazil and Mexico, as well the review by the Committee on Foreign Investment in the
United States (“CFIUS”) and Directorate of Defense Trade Controls (DDTC), and the above
government approvals need to be completed before 31 March 2017 at the latest.
(b) Acquisition of Clivet
On 21 June 2016, the Company enter into an agreement with Bellò Family to acquire 80% shares
of Clivet, a central air-conditioning enterprise in Italy. As at the reporting date, such transaction
still needs regular anti-monopoly review, and it is estimated to be completed before end of year.
14 Leases
The Group leases in certain fixed assets under finance leases. The future minimum lease
payments of the finance leases are summarised in the following table:
Ending balance
Within 1 year 113,718
Over 1 year 583,864
697,582
At end of period, the balance of unrecognised financing charge amounts to RMB62,106,000.
15 Financial risk
The Group is exposed to various financial risks in the ordinary course of business, mainly
including
Foreign exchange risk
Interest rate risk
Credit risk
Liquidity risk
The following mainly relates to the above risk exposures and relevant causes, objectives, policies
and process of risk management and method of risk measurement, etc.
The objective of the Group's risk management is to seek balance between risk and income,
minimising the adverse impact of financial risks on the Group's financial performance. Pursuant to
the risk management objective, the Group has made risk management policies to identify and
analyse the risks it is exposed to and set appropriate risk resistant level and design relevant
internal control procedures to monitor the Group’s risk level. The Group reviews regularly these
risk management policies and relevant internal control systems to adapt to changes in market
condition or its operating activities.
(1) Market risk
(a) Foreign exchange risk
The Group’s major operational activities are carried out in Mainland China and a majority of the
transactions are denominated in RMB. The Group is exposed to foreign exchange risk arising
from the recognised assets and liabilities, and future transactions denominated in foreign
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2016 Semi-Annual Report of Midea Group Co., Ltd.
currencies, primarily with respect to US dollars. The Group’s finance department at its
headquarters is responsible for monitoring the amount of assets and liabilities, and transactions
denominated in foreign currencies to minimise the foreign exchange risk. Therefore, the Group
enters into forward exchange contracts or currency swap contracts to mitigate the foreign
exchange risk.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-term
borrowings and debentures payable. Financial liabilities issued at floating rates expose the Group
to cash flow interest rate risk. Financial liabilities issued at fixed rates expose the Group to fair
value interest rate risk. The Group determines the relative proportions of its fixed rate and floating
rate contracts depending on the prevailing market conditions.
The Group’s finance department at its headquarters continuously monitors the interest rate
position of the Group. Increases in interest rates will increase the cost of new borrowing and the
interest expenses with respect to the Group’s outstanding floating rate borrowings, and therefore
could have a material adverse effect on the Group’s financial position. The Group makes
adjustments timely with reference to the latest market conditions and may enter into interest rate
swap agreements to mitigate its exposure to interest rate risk.
As at 30 June 2016, if interest rates on the floating rate borrowings had risen or fallen by 50 basis
points while all other variables had been held constant, the Group’s net profit would have
decreased or increased by approximately RMB11,205,000.
(2) Credit risk
Credit risk is managed on the grouping basis. Credit risk mainly arise from cash at bank, deposits
with central bank, deposits with banks and other financial institutions, notes receivable, accounts
receivable, interest receivable, loans and advances, other receivables and other structural
deposits in current assets.
The Group expects that there is no significant credit risk associated with cash at bank, deposits
with central bank and deposits with banks and other financial institutions since they are deposited
at state-owned banks and other medium or large size listed banks. Management does not expect
that there will be any significant losses from non-performance by these counterparties.
In addition, the Group has policies to limit the credit exposure on notes receivable, accounts
receivable, interest receivable, loans and advances, other receivables and other structural
deposits in current assets. The Group assesses the credit quality of and sets credit limits on its
customers by taking into account their financial position, the availability of guarantee from third
parties, their credit history and other factors such as current market conditions. The credit history
of the customers is regularly monitored by the Group. In respect of customers with a poor credit
history, the Group will use written payment reminders, or shorten or cancel credit periods, to
ensure the overall credit risk of the Group is limited to a controllable extent.
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by the
Group’s finance department in its headquarters. The Group’s finance department at its
headquarters monitors rolling forecasts of the Group's short-term and long-term liquidity
requirements to ensure it has sufficient cash and securities that are readily convertible to cash to
meet operational needs, while maintaining sufficient headroom on its undrawn committed
borrowing facilities from major financial institutions so that the Group does not breach borrowing
limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity
requirements.
The financial liabilities of the Group at the balance sheet date are analysed by their maturity date
below at their undiscounted contractual cash follows:
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Ending balance Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings
(including interest) 14,603,389 - - - 14,603,389
Notes payable 19,451,346 - - - 19,451,346
Accounts payable 21,638,590 13,067 14,141 14,094 21,679,892
Interest payable 54,969 - - - 54,969
Dividends payable 316,140 - - - 316,140
Other payables 1,578,669 26,329 25,126 8,661 1,638,785
Borrowings from central
bank 45,740 - - - 45,740
Customer deposits and
deposits from banks and
other financial
institutions 72,521 - - - 72,521
Derivative financial
liabilities 463,180 - - - 463,180
Financial assets sold
under repurchase
agreements 662,915 - - - 662,915
Current portion of
non-current liabilities 103,594 - - - 103,594
Other non-current
liabilities 25,328,073 - - - 25,328,073
External guarantee 183,000 - - - 183,000
Long-term borrowings
(including interest) 71,322 40,882 2,002,814 - 2,115,018
Debentures payable 110,244 110,244 4,752,084 - 4,972,572
Subtotal 84,683,692 190,522 6,794,165 22,755 91,691,134
16 Fair value estimates
The level in which fair value measurement is categorised is determined by the level of the fair
value hierarchy of the lowest level input that is significant to the entire fair value measurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
(1) Assets and liabilities measured at fair value on a recurring basis
As at 30 June 2016, the assets and liabilities measured at fair value on a recurring basis by the
above three levels are analysed below:
Fair value at end of period
Item Level 1 Level 2 Level 3 Total
Financial assets at fair value through
profit or loss - derivative financial assets - 7,366 - 7,366
Available-for-sale financial assets - other
current assets - wealth management
products purchased from financial
institutions - - 26,786,165 26,786,165
Available-for-sale financial assets - other
non-current assets - wealth
management products purchased from
financial institutions - - 4,432,900 4,432,900
Available-for-sale financial assets 4,254,812 - - 4,254,812
Total assets 4,254,812 7,366 31,219,065 35,481,243
Financial liabilities at fair value through
profit or loss - derivative financial
liabilities - 463,180 - 463,180
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2016 Semi-Annual Report of Midea Group Co., Ltd.
The Group takes the date on which events causing the transfers between the levels take place as
the timing specific for recognising the transfers. In current year, there was no significant transfer of
fair value measurement level of the above financial instruments.
The fair value of financial instruments traded in an active market is determined at the quoted
market price; and the fair value of those not traded in an active market is determined by the Group
using valuation technique. The valuation models used mainly primarily comprise discounted cash
flow model and market comparable corporate model. Inputs of valuation technique mainly
comprise risk-free interest rate, estimated interest rate and estimated annual yield.
There is no change in the valuation technique for the fair value of the Group’s financial
instruments in current year.
Item -- Available-for-sale equity instruments
Opening balance 18,136,831
Purchases 22,178,900
Sales (9,632,520)
Total gains of current period
Investment income recognised in income statement 493,198
Gains recognised in other comprehensive income 42,656
Ending balance 31,219,065
There is no change in the valuation technique for the fair value of the Group’s financial
instruments in current year.
The changes in Level 3 financial assets are analysed below:
Inputs
Relationship
30 June 2016 Valuation with fair Observable/
Fair value technique Name Range value unobservable
Available-for-sale
financial assets -
Other current assets Estimated
and other non-current Discounted annual 3.5% to
assets 31,219,065 cash flows yield 6.8% Positive Unobservable
Assets and liabilities subject to level 2 fair value measurement are mainly forward exchange
contracts and are evaluated by market approach.
(2) Assets and liabilities not measured at fair value but disclosed
The Group's financial assets and financial liabilities measured at amortised cost mainly include:
cash at bank and on hand, deposits with central bank, deposits with banks and other financial
institutions, notes receivable, accounts receivable, loans and advances, other receivables, other
current assets (excluding those mentioned in Note 15(1)), accounts payable, notes payable,
short-term borrowings, long-term borrowings, customer deposits and deposits from banks and
other financial institutions, financial assets sold under repurchase agreements, interest payable
and other current liabilities, etc.
Carrying amounts of the Group’s financial assets and financial liabilities as at 30 June 2016 and
31 December 2015 approximate their fair value.
17 Capital management
The Group’s capital management policies aim to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders,
and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends
paid to shareholders, refund capital to shareholders, issue new shares or sell assets to reduce
debts.
The Group is not subject to external mandatory capital requirements, and monitors capital
structure on the basis of gearing ratio (total assets total liabilities).
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2016 Semi-Annual Report of Midea Group Co., Ltd.
As at 30 June 2016 and 31 December 2015, the Group's gearing ratio is as follows:
Item Ending balance Opening balance
Total liabilities 104,843,619 72,810,313
Total Assets 167,502,747 128,841,935
Gearing ratio 62.59% 56.51%
18 Notes to the parent company’s financial statements
(1) Other receivables
Item Ending balance Opening balance
Current accounts 12,167,533 7,460,438
Deposits 1,173 864
Subtotal 12,168,706 7,461,302
Less: Provision for bad debts (296) (263)
Total 12,168,410 7,461,039
(a) Other receivables are analysed by ageing as follows:
Ageing Ending balance Opening balance
Within 1 year (inclusive) 5,314,562 7,461,224
1 to 2 years (inclusive) 6,854,126 60
2 to 3 years (inclusive) - 18
3 to 5 years (inclusive) 18 -
Subtotal 12,168,706 7,461,302
Less: Provision for bad debts (296) (263)
Total 12,168,410 7,461,039
(b) Other receivables are analysed by categories as follows:
Ending balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
% of total
Category Amount balance Amount Ratio Amount Ratio Amount Ratio
Provision for bad debts
provided on the
individual basis 12,162,977 99.95% - - 7,456,182 99.93% - -
Provision for bad debts
provided on the
grouping basis 5,729 0.05% 296 5.17% 5,120 0.07% 263 5.14%
Total 12,168,706 100.00% 296 0.002% 7,461,302 100.00% 263 0.004%
(c) Other receivables that the related provision for bad debts is provided on grouping basis using the
ageing analysis method are analysed as follows:
Ending balance Opening balance
Book balance Provision for bad debts Book balance Provision for bad debts
Ageing Amount Amount Ratio Amount Amount Ratio
Within 1 year 5,680 284 5.00% 5,042 252 5.00%
1 to 2 years 31 3 10.00% 60 6 10.00%
2 to 3 years - - - 18 5 30.00%
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2016 Semi-Annual Report of Midea Group Co., Ltd.
3 to 5 years 18 9 50.00% - - -
Subtotal 5,729 296 5.17% 5,120 263 5.14%
(d) As at 30 June 2016, other receivables from the top five debtors are analysed as below:
Nature of % of total other Provision for
Name of unit receivables Book balance Ageing receivables bad debts
Temporary
payments
First receivable 6,854,095 1 to 2 years 56.33% -
Temporary
payments
Second receivable 2,200,000 Within 1 year 18.08% -
Temporary
payments
Third receivable 84,012 Within 1 year 0.69% -
Temporary
payments
Fourth receivable 67,489 Within 1 year 0.55% -
Temporary
payments
Fifth receivable 43,220 Within 1 year 0.36% -
Subtotal 9,248,816 76.00% -
(2) Long-term equity investments
Long-term equity investments are classified as follows:
Item Ending balance Opening balance
Subsidiaries (a) 21,517,042 21,466,087
Associates (b) 1,297,158 1,282,323
Joint ventures (b) 373,974 378,136
Subtotal 23,188,174 23,126,546
Less: Provision for impairment - -
Total 23,188,174 23,126,546
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2016 Semi-Annual Report of Midea Group Co., Ltd.
(2) Long-term equity investments (Cont’d))
(a) Subsidiaries
Movements for current year
Movements due to Cash dividends
Increase in share-based Decrease in Ending declared in
Name of investee Opening balance Investment payments investment Merger Others balance current year
Wuxi Little Swan Company Limited 2,668,161 - 11,855 - - - 2,680,016 143,369
Midea Group Finance Co., Ltd. 1,427,988 - 1,416 - - - 1,429,404 264,050
Hefei Midea Heating & Ventilation Equipment
Co., Ltd. 1,048,377 - 1,944 - - - 1,050,321 813,339
Hubei Midea Refrigerator Co., Ltd. 833,204 - 1,353 - - - 834,557 229,198
Anhui GMCC Precision Manufacturing Co., Ltd. 803,508 - 1,594 - - - 805,102 479,111
Foshan Shunde Midea Home Appliance Industry
Co., Ltd. 2,449,000 - - - - - 2,449,000 -
Wuhu Meizhi Air-Conditioning Equipment Co.,
Ltd. 730,244 - 3,069 - - - 733,313 798,828
Guangdong Midea Refrigeration Equipment Co.,
Ltd. 797,083 - 64,580 - - - 861,663 523,000
Annto Logistics Company Limited 466,642 - 4,120 - - - 470,762 14,955
Guangdong Midea Commercial Air Conditioning
Equipment Co., Ltd. 569,430 - - - - - 569,430 23,431
Ningbo Midea United Material Supply Co., Ltd. 481,635 - 1,269 - - - 482,904 349,352
Guangzhou Hualing Refrigeration Equipment
Co., Ltd. 487,678 - 4,537 - - - 492,215 116,058
Guangzhou Midea Hualing Refrigerator Co., Ltd. 422,082 - 893 - - - 422,975 60,220
Hefei Midea Refrigerator Co., Ltd. 436,562 - 6,681 - - - 443,243 -
Guangdong Midea Group Wuhu Refrigeration
Equipment Co., Ltd. 345,570 - 3,010 - - - 348,580 170,184
Anhui GMCC Refrigeration Equipment Co., Ltd. 312,668 - 2,002 - - - 314,670 -
Guangdong Midea Heating & Ventilation
Equipment Co., Ltd. 309,682 - 14,012 - - - 323,694 716,945
Midea Electric Investment (BVI) Limited 236,543 - - - - - 236,543 -
Midea International Corporation Company
Limited 176,974 - - - - - 176,974 -
Guangzhou Hualing Refrigeration Equipment
Co., Ltd. 136,745 - - - - - 136,745 -
Foshan Midea Carrier Refrigeration Equipment
Co., Ltd. 124,030 - 1,954 - - - 125,984 -
Hefei Midea Material Supplies Co., Ltd. 117,000 - - - - - 117,000 4,147
(2) Long-term equity investments (Cont’d))
(a) Subsidiaries (Cont'd)
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Movements for current year
Movements due to Cash dividends
Increase in share-based Decrease in Ending declared in
Name of investee Opening balance Investment payments investment Merger Others balance current year
Midea Group E-commerce Co., Ltd. 105,722 - 4,443 - - - 110,165 -
Anhui GMCC Compressor Sales Co., Ltd. 95,000 - - - - - 95,000 474,110
Guangdong GMCC Refrigeration Equipment Co.,
Ltd. 115,946 - 8,966 - - - 124,912 67,993
Hefei Hualing Co., Ltd. 96,712 - 4,454 - - - 101,166 231,608
Midea Group Wuhan Refrigeration Equipment Co.,
Ltd. 69,870 - 5,687 - - - 75,557 168,445
Foshan City Midea Material Supplies Co., Ltd. 54,000 - - - - - 54,000 15,988
Zhejiang GMCC Compressor Co., Ltd 50,817 - 635 - - - 51,452 501,624
Chongqing Midea Refrigeration Equipment Co., Ltd. 53,276 - 3,053 - - - 56,329 105,579
Wuhu Little Swan Refrigeration Equipment Co., Ltd. 47,500 - - - - - 47,500 -
Guangdong GMCC Precision Manufacturing Co.,
Ltd 38,438 - - - - - 38,438 35,606
Foshan City Midea Air-conditioners Industrial
Investment Co., Ltd. 36,062 - - - - - 36,062 -
Chongqing Midea General Refrigeration Equipment
Co., Ltd. 35,204 - 1,988 - - - 37,192 -
Ningbo Meimei Jiayuan Electric Service Co., Ltd. 38,205 - - (38,205) - - - -
Foshan City Shunde District Midea Electronic
Technology Co., Ltd. 13,736 - 514 - - - 14,250 18,254
Midea Holdings (BVI) Ltd. 82 - - - - - 82 -
Handan Midea Refrigeration Equipment Co., Ltd. 124,542 - 3,222 - - - 127,764 130,876
Midea Group Payment Technology Co., Ltd. 100,000 - - - - - 100,000 1,330
Media Innovation Investment Co., Ltd. 35,000 - - - - - 35,000 -
Guangdong Midea Microwave Electric
Manufacturing Co., Ltd. 1,880,041 - - - - - 1,880,041 -
Wuhu Midea Kitchen Appliances Manufacturing
Co., Ltd. 20,000 - - - - - 20,000 5,623
Jiangsu Midea Chunhua Electric Co., Ltd. 93,527 - 1,205 - - - 94,732 54,742
Guangdong Witt Vacuum Electronics Manufacturing
Co., Ltd. 196,196 - 137 - - - 196,333 -
(2) Long-term equity investments (Cont’d))
(a) Subsidiaries (Cont’d)
Movements for current year
Movements due to Cash dividends
Increase in share-based Decrease in declared in
Name of investee Opening balance Investment payments investment Merger Others Ending balance current year
Guangdong Midea Life Electric Appliance
Manufacturing Co., Ltd 985,464 - 7,563 - - - 993,027 -
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Wuhu Midea Electric Appliance Manufacturing Co.,
Ltd. 56,223 - - - - - 56,223 43,738
Foshan Shunde Midea Water machine manufacturing
Co., Ltd. 34,468 - 636 - - - 35,104 -
Foshan Midea Qinghu purification equipment Co., Ltd. 56,836 - 935 - - - 57,771 3,000
Guangdong Midea Boutique Electrical Appliance
Manufacturing Co., Ltd 60,015 - - - - - 60,015 -
Wuhan Midea Electric Appliance Manufacturing Co.,
Ltd. 80,000 - - - - - 80,000 -
Guangdong Midea Environmental Electric
Appliance Manufacturing Co., Ltd. 292,317 - 5,819 - - - 298,136 -
Foshan Shunde Midea Washing Appliance
Manufacturing Co., Ltd. 404,716 - 4,908 - - - 409,624 -
Guangdong Midea Kitchen & Bathroom Electric
Manufacturing Co., Ltd. 79,551 - 661 - - - 80,212 -
Wuhu Midea Kitchen & Bathroom Electric
Manufacturing Co., Ltd. 61,337 - 6,571 - - - 67,908 539,274
Guangdong Midea lighting electric manufacturing Co.,
Ltd. 100,000 - - (100,000) - - - -
Jiangxi Midea Guiya lighting Co., Ltd. 161,270 - 1,097 - - - 162,367 -
Guangdong Midea Household Appliances Import and
Export Trade Co., Ltd. 53,207 - - - - - 53,207 -
JV MIDEA–HORIZONT Co., Ltd. 41,357 - - - - - 41,357 -
Guangdong MIDEA-YASKAWA Service Robotics Ltd. 12,020 - - - - - 12,020 -
Foshan Shunde District Midea Petty Loan Co., Ltd. 67,635 - - - - - 67,635 -
Midea Petty Loan Co., Ltd. 55,031 - - - - - 55,031 1,812
Midea Robotics Industry Development Co., Ltd. 7,000 - - - - - 7,000 -
Wuhu Midea Household Consultation Service Co., Ltd. 100,759 - 465 - - - 101,224 -
Hefei Midea Washing Machine Co., Ltd. 73,769 - 1,912 - - - 75,681 -
Chinese Refrigerator Industry Co., Ltd. 2,430 - - - - - 2,430 -
Total 21,466,087 - 189,160 (138,205) - - 21,517,042 7,105,789
(2) Long-term equity investments (Cont’d))
(b) Associates and joint ventures
Movements for the current period
Adjustment in Ending
Share of net other balance of
Opening Increase in Decrease in profit using the comprehensive Other changes Cash dividends or Provision for Ending provision for
Name of investee balance Investment investment equity method income in equity profits declared impairment Others balance impairment
Associates -
Foshan Shunde Rural
Commercial Bank Co., Ltd. 926,792 - - 97,024 (10,654) - (75,461) - - 937,701 -
Hefei Royalstar Motor Co., Ltd. 100,331 - - 203 - - - - - 100,534 -
GE Fund Management Co., Ltd. 34,367 - - 3,932 77 - - - - 38,376 -
Foshan Micro Midea Filter MFG 31,672 - - 3,088 - - (2,000) - - 32,760 -
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2016 Semi-Annual Report of Midea Group Co., Ltd.
Co., Ltd.
Anhui Efort Intelligent Equipment
Co., Ltd. 179,391 - - (1,180) - - - - - 178,211 -
Guangdong YASKAWA-MIDEA
Industrial Robotics System Ltd. 9,770 - - (194) - - - - - 9,576 -
Joint venture -
Wanjiang Financial Leasing Co.,
Ltd. 378,136 - - 28,238 - - (32,400) - - 373,974 -
Total 1,660,459 - - 131,111 (10,577) - (109,861) - - 1,671,132 -
(3) Revenue
Revenue mainly comprises other operating income including the brand royalty income, rental income and management fee income, etc. obtained by the parent
company form the subsidiaries.
(4) Investment income
Item Current figure Comparative figure
Investment income from long-term equity investment under cost method 7,105,789 4,071,858
Investment income from wealth management products purchased from financial institutions 425,882 611,607
Income from long-term equity investment under equity method 131,111 6,062
Losses on disposal of long-term equity investment (104,071) -
Income earned during the holding period of available-for-sale financial assets - 118,862
Total 7,558,711 4,808,389
There is no significant restriction on repatriation of the Company's investment income.
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2016 Semi-Annual Report of Midea Group Co., Ltd.
1 Details of non-recurring profit or loss.
Current Comparative
Item figure figure
Profit or loss on disposal of non-current assets, including the portion written off in
provision for asset impairment 6,042 (45,668)
Government grants recognised in profit or loss for the current period (closely related to
the Company’s normal course of business and in line with the state's policies and
regulations, except continuous government grants based on a certain standard
quota ) 762,724 485,176
Income arising from investment cost of enterprises’ acquisition of subsidiaries,
associates and joint ventures which is less than the share of the fair value of the
investee’s identifiable net assets at the time of acquisition of investment - -
Profit or loss on entrusted investments or assets under entrusted management - 682,954
Provision for impairment of assets due to force majeure, such as natural disaster - -
Gains or losses from debt restructuring - 17
Enterprise restructuring expenses including staff resettlement expenses and
integration expenses - -
Gains or losses on changes in fair value of financial assets and liabilities held for
trading and investment income arising from disposal of financial assets and liabilities
held for trading and available-for-sale financial assets other than effective hedging
businesses relevant to normal course of business of the company. (539,590) 95,857
Reversal of impairment provision for receivables individually assessed for impairment - 341
Other operating income and expenses other than the above mentioned 67,147 82,747
Subtotal 296,323 1,301,424
Less: Income tax effect ("-" to indicate the decrease in income tax ) (30,545) (287,750)
Minority interests effect (after tax) 130,471 (122,589)
Net non-recurring profit or loss attributable to shareholders of the parent company 396,249 891,085
Basis of preparation of details of non-recurring profit or loss:
Pursuant to the requirements of the Explanatory Announcement for Information Disclosure of
Companies Offering Securities to the Public No.1 - Non-recurring Profit or Loss (2008) issued
by China Securities Regulatory Commission (“CSRC”), non-recurring profit or loss refers to
profit or loss arising from transactions and events that are not directly related to the Company’s
normal course of business and that are related to the Company’s normal course of business
but have impact on the right judgement of the Company’s operation performance and
profitability of users of the financial statements due to special nature and occasional
occurrence.
2 Return on net asset and earnings per share
The Group's return on net asset and earnings per share calculated pursuant to the Compilation
Rules for Information Disclosure of Companies Offering Securities to the Public No.9 -
Calculation and Disclosure of Return on Net Asset and Earnings per Share (revised in 2010)
issued by CSRC and relevant requirements of accounting standards are as follows:
Return on net asset Earnings per share (RMB Yuan)
(%) Basic earnings per share Diluted earnings per share
Current Comparative Current Comparative Current Comparative
Item figure figure figure figure figure figure
Net profit attributable to
shareholders of the Company 17.64% 19.62% 1.48 1.32 1.48 1.31
Net profit attributable to
shareholders of the Company
net of non-recurring profit or
loss 16.90% 17.52% 1.42 1.17 1.42 1.17
152
2016 Semi-Annual Report of Midea Group Co., Ltd.
Section X Documents Available for Reference
1. The original of the 2016 Semi-Annual Report of Midea Group Co., Ltd. signed by the
legal representative;
2. The financial statements signed and stamped by the legal representative, the financial
head and the person-in-charge of the accounting work;
3. The originals of all company documents and announcements that have been
disclosed to the public via newspaper designated for information disclosure during the
Report Period.
4. The electronic version of the 2016 Semi-Annual Report of Midea Group Co., Ltd. that
is released on http://www.cninfo.com.cn.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
31 August 2016
153
