Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Midea Group Co., Ltd. Interim Report for the First Quarter 2017 April 2017 1 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Section I Important Reminders 1. The Board of Directors, the Supervisory Committee as well as all the directors, supervisors and senior management staff of Midea Group Co., Ltd. (hereinafter referred to as the “Company”) have warranted that this Report contains no false records, misleading statements or material omissions. And they shall be jointly and severally liable for the factuality, accuracy and completeness of the information given in this Report. 2. All the directors have attended the Q1 report review board meeting. 3. The financial statements contained in this Report have not been audited by a certified public auditors (CPAs) firm. 4. 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 in this Report are factual, accurate and complete. 5. This Report has been prepared in both Chinese and English. Should there be any discrepancy between the two versions, the Chinese version shall prevail. 2 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Section II Company Profile 1. Major Accounting Data and Financial Indicators Does the Company adjust retrospectively or restate accounting data of previous years due to changes in accounting policy or correction of any accounting error? □ Yes √ No Jan.-Mar. 2017 Jan.-Mar. 2016 YoY Change (%) Sales revenues (RMB’000) 59,755,914 38,341,624 55.85% Net profit attributable to shareholders of 4,352,587 3,907,252 11.40% the Company (RMB’000) Net profit attributable to shareholders of the Company before non-recurring 4,263,125 3,745,392 13.82% gains and losses (RMB’000) Net cash flows from operating activities 7,008,571 6,595,024 6.27% (RMB’000) Basic EPS (RMB / share) 0.67 0.61 9.84% Diluted EPS (RMB / share) 0.67 0.61 9.84% Weighted average ROE (%) 6.87% 7.58% -0.71% 31 Mar. 2017 31 Dec. 2016 Change (%) Total assets (RMB’000) 225,914,387 170,600,711 32.42% Net assets attributable to shareholders 65,533,771 61,126,923 7.21% of the Company (RMB’000) Note: KUKA Aktiengesellschaft (KUKA), Toshiba Lifestyle Products & Services Corporation (TLSC) and other acquired entities were included in the Company’s consolidated financial statements for the first quarter of 2017. Upon the evaluation of these acquired assets by a professional international evaluation agency, the asset premium was amortized as per the accounting standards, and a amortized cost of RMB600,145,400 was recognized for the first quarter of 2017. Excluding the said amortized cost, the consolidated net profit for this quarter increased 22% compared with a year earlier. KUKA and TLSC both delivered an excellent performance for the first three months of 2017. To be specific, KUKA achieved sales revenue of RMB5,807,296,560, up 26% year on year, and net profit of RMB195,588,490, 27% higher than the same period of last year, indicating effective growth in business; while TLSC realized sales revenue of RMB3,777,047,000 and net profit of RMB-187,988,610, better than the first quarter of 2016. Excluding the acquired entities, the consolidated sales revenue of the first quarter of 2017 grew 31% year on year and the 3 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. consolidated net profit went up 22%. Non-recurring gains and losses √ Applicable □ N/A Unit: RMB’000 Item Jan.-Mar. 2017 Note Gains/losses from the disposal of non-current assets -7,145 (including the offset part of asset impairment provisions) Government grants recognized in the current period, other than those closely related to business of the Company and 246,686 granted at a fixed amount or quantity in accordance with certain national standards Gains/losses arising from changes in fair value of financial assets and liabilities held for trading, (other than effective hedging instruments related to the Company’s normal -260,859 operations), as well as investment gains from disposal of financial assets and liabilities held for trading and financial assets available for sale Other non-operating income and expenses except the 75,150 above items Less: Income tax effects -11,482 Minority interests effects (after tax) -24,148 Total 89,462 - Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in the, or classifies any non-recurring gain/loss item mentioned in the said explanatory announcement as a recurring gain/loss item □ Applicable √ N/A No such cases in the Report Period. 2. Total number of shareholders and shareholdings of the top ten shareholders at the period-end 2.1 Total number of common shareholders and shareholdings of the top ten common shareholders at the period-end Unit: share 4 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Total number of preference Total number of common shareholders shareholders with resumed 118,808 0 at the period-end voting rights at the period-end (if any) Top ten shareholders Pledged or frozen shares Shareholding Number of Nature of Number of Status Name of shareholder percentage restricted shareholder shares held of Number of (%) shares held share shares s Domestic 2,244,375,00 Pledg Midea Holding Co., Ltd. non-state-owned 34.71 854,955,000 0 ed corporation State-owned China Securities Finance Co., Ltd. 2.18 140,695,026 corporation Hong Kong Exchanges and Clearing Foreign 2.12 136,994,785 Limited corporation Domestic 102,742,86 Fang Hongbo 2.12 136,990,492 individual 9 Hillhouse Capital Management Limited Foreign 1.76 113,891,138 -HCM China Fund corporation Domestic Pledg Huang Jian 1.36 88,000,000 22,999,900 individual ed Domestic Xiaomi Technology Co., Ltd non-state-owned 1.28 82,500,000 82,500,000 corporation Domestic Pledg Yuan Liqun 1.24 79,915,900 9,304,000 individual ed Central Huijin Asset Management Co., State-owned 1.21 78,474,900 Ltd. corporation Domestic He Xiangjian 1.20 77,334,548 individual Top ten non-restricted common shareholders Number of non-restricted Type of shares Name of shareholder common shares held at the Type Number period-end Midea Holding Co., Ltd. 2,244,375,000 RMB ordinary shares 2,244,375,000 5 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. China Securities Finance Co., Ltd. 140,695,026 RMB ordinary shares 140,695,026 Hong Kong Exchanges and Clearing Limited 136,994,785 RMB ordinary shares 136,994,785 Hillhouse Capital Management Limited- 113,891,138 RMB ordinary shares 113,891,138 HCM China Fund Huang Jian 88,000,000 RMB ordinary shares 88,000,000 Yuan Liqun 79,915,900 RMB ordinary shares 79,915,900 Central Huijin Asset Management Co., Ltd. 78,474,900 RMB ordinary shares 78,474,900 He Xiangjian 77,334,548 RMB ordinary shares 77,334,548 Li Jianwei 73,977,047 RMB ordinary shares 73,977,047 Guotai Junan – Construction Bank - 69,426,617 RMB ordinary shares 69,426,617 Shanghai HSBC Explanation of connected relationship or/and The controlling shareholder of Midea Holding Co., Ltd is Mr. He Xiangjian, acting-in-concert parties among the which makes them acting-in-concert parties. above-mentioned shareholders Top ten non-restricted common shareholders N/A taking part in securities margin trading (if any) Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company carry out any agreed buy-back in the Report Period? □ Yes √ No No such cases in the Report Period. 2.2 Total number of preference shareholders and shareholdings of the top ten preference shareholders at the period-end □ Applicable √ N/A 6 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Section III Significant Events 1. Major changes of main items in financial statements and financial indicators within the Report Period, as well as the reasons for the changes √ Applicable □ N/A Unit: RMB’000 Balance sheet 31 March 31 December items Change (%) Main reasons for the changes 2017 2016 (consolidated) Derivative financial Mainly due to changes in the fair value of 280,926 412,813 -31.95% assets derivative financial assets Mainly due to the increased sales and the Accounts receivable 18,026,613 13,454,511 33.98% consolidation of KUKA and TLSC Inventories 21,977,297 15,626,897 40.64% Mainly due to the consolidation of KUKA Available-for-sale 1,773,706 5,187,732 -65.81% Mainly due to the consolidation of KUKA financial assets Long-term accounts 459,520 33,868 1,256.80% Mainly due to the consolidation of KUKA receivable Construction in Mainly due to the increased inputs to 809,709 580,729 39.43% progress construction Intangible assets 16,655,839 6,868,538 142.49% Mainly due to the consolidation of KUKA Goodwill 27,314,731 5,730,995 376.61% Mainly due to the consolidation of KUKA Short-term 32,139,135 3,024,426 962.65% Mainly due to the increased borrowings borrowings Customer deposits and deposits from Mainly due to the changes in the operation of 70,836 36,708 92.97% banks and other Midea Group Finance financial institutions Derivative financial Mainly due to changes in the fair value of 156,403 89,838 74.09% liabilities derivative financial assets Mainly due to the increased profit, the Taxes payable 3,571,091 2,364,446 51.03% increased income tax and the consolidation of KUKA Interest payable 97,110 21,343 355.00% Mainly due to the increased borrowings Dividends payable Mainly due to the payout of last year’s 14,443 105,641 -86.33% dividends in the current year 7 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Long-term borrowings 4,040,286 2,254,348 79.22% Mainly due to the consolidation of KUKA Long-term employee 2,426,373 1,449,954 67.34% Mainly due to the consolidation of KUKA benefits payable Deferred income tax Mainly due to the asset revaluation gains 4,608,469 1,831,973 151.56% liabilities resulted from the consolidation of KUKA Other comprehensive -177,571 13,125 -1,452.92% Mainly due to the consolidation of KUKA income Income statement January-March January-March YoY items Main reasons for the changes 2017 2016 Change (%) (consolidated) Mainly due to the increased sales and the Sales revenue 59,755,914 38,341,624 55.85% consolidation of KUKA and TLSC Fee and commission Mainly due to the changes in the operation of 1 2,805 -99.96% income Midea Group Finance Mainly due to the increased sales and the Cost of sales 44,782,859 26,906,188 66.44% consolidation of KUKA and TLSC Mainly due to the changes in the operation of Interest expenses 93,334 132,167 -29.38% Midea Group Finance Mainly due to the reclassification of the Taxes and surtaxes 361,767 276,519 30.83% stamp tax and the property tax Selling and Mainly due to the increased sales and the 6,820,223 4,977,071 37.03% distribution expenses consolidation of KUKA and TLSC General and Mainly due to the increased sales and the administrative 3,178,001 1,662,776 91.13% consolidation of KUKA and TLSC expenses Finance cost Mainly due to the increased interest -183,364 -282,083 -35.00% expenses Mainly due to the consolidation of KUKA and Investment income 726,487 253,713 186.34% the increased gains on bank’s wealth management products Non-operating Mainly due to the increased government 387,856 292,676 32.52% income subsidies Non-operating 63,474 21,506 195.15% Mainly due to the increased donations expenses Cash flow January-March January-March YoY statement items Main reasons for the changes 2017 2016 Change (%) (consolidated) Net cash flows from -26,909,489 -9,560,260 181.47% Mainly due to the acquisition of KUKA investing activities 8 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Net cash flows from 28,551,856 4,802,468 494.52% Mainly due to the increased borrowings financing activities 2. Progress, influence and solutions of significant events √ Applicable □ N/A The acquisition of KUKA through tender offer has been formally completed on 6 January 2017 following the execution of all required decision-making and approval procedures. The 32,233,536 shares of KUKA have been all transferred to MECCA International (BVI) Limited (MECCA), for which MECCA has paid EUR3,706,856,640. As such, Midea Group holds, via its wholly-owned foreign subsidiary MECCA, altogether 37,605,732 shares in KUKA, accounting for approximately 94.55% of KUKA’s outstanding shares. Overview of the significant event Date of disclosure Website for disclosure Announcement on Consummation of Acquisition of KUKA 7 January 2017 www.cninfo.com.cn Aktiengesellschaft through Tender Offer Report of Midea Group Co., Ltd. on Acquisition of KUKA 12 January 2017 www.cninfo.com.cn Aktiengesellschaft through Tender Offer 3. Overdue commitments of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers in the Report Period or ongoing at the period-end □ Applicable √ N/A 4. Operating result forecast for January-June 2017 Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-start until the end of the next Report Period according to predictions as well as any explanations for these reasons: □ Applicable √ N/A 5. Securities investment □ Applicable √ N/A No such cases in the Report Period. 9 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. No such cases in the Report Period. 6. Investments in financial derivatives √ Applicable □ N/A Unit: RMB’0,000 Proporti on of Rel the ated Purch closing Sold -par ased investm Rel Type Initial Opening in Impair Closing Actual ty in ent Opera atio of investme investme Repor ment investme gain/loss tran Start date End date Repor amount tor nshi deriva nt nt t provis nt in Report sact t in the p tive amount amount Perio ion amount Period ion Perio Compa d or d ny’s not closing net assets Futur Futur 31 es es 1 January N/A No -11.50 Decembe -11.50 - - - 723.76 0.01% 1,240.31 comp contra 2017 r 2017 any cts Forwa rd 31 excha 32,817.6 1 January 32,817.6 22,329.6 Bank N/A No Decembe - - - 0.34% -10,604.61 nge 0 2017 0 5 r 2017 contra cts 32,806.1 32,806.1 23,053.4 Total -- -- - - - 0.35% -9,364.30 0 0 1 Capital source for All the Company’s own funds derivative investment Lawsuits involved (if N/A applicable) Disclosure date of the board announcement 31 March 2017 approving the derivative investment (if any) Disclosure date of the 22 April 2017 general meeting 10 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. announcement approving the derivative investment (if any) In order to reduce the price risk of the Company's bulk purchases of raw materials as a result of significant fluctuations in raw material prices, the Company not only carried out futures business for some of the materials, but also made use of bank financial instruments and promoted forex funds business, with the purpose of reducing the risks associated with exchange and interest rate fluctuations, realizing the preservation and appreciation of forex assets, reducing forex liabilities, and achieving locked-in costs. The Company has undertaken extensive evaluation and risk control with regard to derivative investment positions, details of which are as follows: 1. Legal risk: The Company's futures business and forex funds businesses are conducted in compliance with laws and regulations, with clearly defined responsibilities and obligations between the Company and agencies. Control measures: The Company has designated relevant departments with the responsibility for enhancing expertise in laws, regulations and market rules, conducting strict examination and verification of contracts, defining responsibility and obligations, and strengthening compliance checks, so as to ensure that the Company's derivatives investment and position operations meet the requirements of the laws and regulations and internal management Analysis of risks and system of the Company. control measures of 2. Operational risk: Risks caused by imperfect internal processes, staff, systems and external derivative products held issues may cause the Company to incur losses during the course of its futures business and in the Report Period forex funds business. (including but not limited Control measures: The Company has not only developed relevant management systems that to market risk, liquidity clearly define the assignment of responsibility and approval process for the futures business risk, credit risk, and forex funds businesses, but has also established a well-developed monitoring mechanism, operational risk, legal aimed at effectively reducing operational risk by strengthening its risk control over the business, risk, etc.) decision-making and trading processes. 3. Market risk: Uncertainties caused by changes in the prices of bulk commodities and exchange rate fluctuations in foreign exchange markets could lead to greater market risk in the futures business and forex funds business. Meanwhile, the inability to raise sufficient funds in a timely manner in order to establish and maintain hedging positions in futures operations, or forex funds required for performance in forex funds operations that are unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company are always conducted by adhering to prudent operation principles. For futures business, futures transaction volumes and applications have been strictly determined according to the requirements for production and operations, and a stop-loss mechanism has been implemented. Furthermore, to determine the prepared margin amount which may be required to be supplemented, a futures risk measuring system has been established to measure and calculate the margin amount already in use, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has 11 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. submitted applications for funds business should conduct a risk analysis on the conditions and environment that could affect the operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update the operating status of the funds business on a timely basis thus ensuring the arrangement of proper funds before expiry dates. Changes in market prices or fair values of the invested derivatives 1. Profit/loss from futures hedging contracts incurred during the Report Period was during the Report RMB12.4031 million; Period. Analysis of the 2. Profit/loss from forward forex contracts incurred during the Report Period was derivative’s fair value RMB-106.0461 million; should include the 3. Public quotations in futures market or forward forex quotations announced by Bank of China specific methods of use are used in the analysis of the derivatives fair value. and the relevant assumptions and parameters. Whether significant changes occurred to the Company’s accounting policy and specific No change accounting principles of derivatives in the Report Period compared to the previous Report Period The Company's independent directors are of the view that: the futures hedging business is an effective instrument for the Company to eliminate price volatility and implement risk prevention Specific opinion from measures through enhanced internal controls, thereby improving the operation and independent directors management of the Company; the Company's foreign exchange risk management capability on the Company’s can be further improved through the forex funds business, so as to maintain and increase the derivatives investment value of foreign exchange assets; the abovementioned investment in derivatives can help the and risk control Company to fully realize its competitive advantages. Therefore, it is practical for the Company to carry out derivatives investment business when the risks are controllable. 7. Visits received during the Report Period √ Applicable □ N/A Date Type of visit Type of visitor Discussions Please refer to Investor Relations Activities from 4-21 January 2017 Field research Institution 4 January 2017 to 21 January 2017 on the website of www.cninfo.com.cn Please refer to Investor Relations Activities on 20 February 2017 Field research Institution 20 February 2017 on the website of www.cninfo.com.cn 12 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Please refer to Investor Relations Activities from 22-24 February 2017 Field research Institution 22 February 2017 to 24 February 2017 on the website of www.cninfo.com.cn Please refer to Investor Relations Activities on 31 March 2017 Field research Institution 31 March 2017 on the website of www.cninfo.com.cn 8. Irregular provision of guarantees □ Applicable √ N/A No such cases in the Report Period. 9. Occupation of the Company’s funds by the controlling shareholder or its related parties for non-operating purposes □ Applicable √ N/A No such cases in the Report Period. 13 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Section IV Financial Statements 1. Financial statements Balance Sheet Prepared by Midea Group Co., Ltd. Unit:RMB’000 31-Mar-17 31-Dec-16 31-Mar-17 31-Dec-16 Assets Consolidated Consolidated The Company The Company Current assets Cash at bank and 35,292,098 27,169,118 21,079,937 17,135,480 on hand Derivative financial 280,926 412,813 assets - - Notes receivable 8,747,847 7,427,488 - - Accounts 18,026,613 13,454,511 receivable - - Advances to 2,037,448 1,587,366 26,202 8,252 suppliers Loans and 10,599,809 10,273,397 advances - - Dividends 285,916 receivable - - - Other receivables 1,392,703 1,140,133 14,907,159 12,644,592 Inventories 21,977,297 15,626,897 - - Other current 47,683,258 43,529,597 26,884,842 24,165,141 assets Total current 146,037,999 120,621,320 62,898,140 54,239,381 assets Non-current assets Available-for-sale 1,773,706 5,187,732 36,868 28,931 financial assets Long-term accounts 459,520 33,868 receivable - - Long-term equity 2,266,419 2,211,732 23,572,452 23,058,980 investments Investment 487,468 494,122 597,821 604,881 14 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. properties Fixed assets 22,904,995 21,056,791 946,198 984,666 Construction in 809,709 580,729 501,679 467,053 progress Intangible assets 16,655,839 6,868,538 235,968 236,083 Goodwill 27,314,731 5,730,995 - - Long-term prepaid 640,024 625,971 39,579 46,090 expenses Deferred income 3,639,034 3,030,383 54,655 62,711 tax assets Other non-current 2,924,943 4,158,530 2,477,000 3,342,000 assets Total 79,876,388 49,979,391 28,462,220 28,831,395 non-current assets TOTAL 225,914,387 170,600,711 91,360,360 83,070,776 ASSETS Legal representative: Fang Hongbo Accounting head for this Report: Xiao Mingguang Head of the accounting division: Chen Lihong 15 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Balance Sheet (Continued) Prepared by Midea Group Co., Ltd. Unit:RMB’000 Liabilities and Shareholders' 31-Mar-17 31-Dec-16 31-Mar-17 31-Dec-16 Equity Consolidated Consolidated The Company The Company Current liabilities Short-term borrowings 32,139,135 3,024,426 1,600,000 - Customer deposits and deposits from banks and other financial 70,836 36,708 - - institutions Derivative financial liabilities 156,403 89,838 - - Notes payable 20,284,017 18,484,939 - - Accounts payable 32,390,349 25,356,960 - - Advances from customers 11,831,751 10,252,375 - - Employee benefits payable 3,351,787 3,154,387 189,115 199,842 Taxes payable 3,571,091 2,364,446 129,327 103,848 Interest payable 97,110 21,343 106,940 76,776 Dividends payable 14,443 105,641 - - Other payables 1,965,146 1,571,422 60,589,822 54,461,578 Current portion of non-current 162,893 158,545 liabilities - - Other current liabilities 27,379,037 24,562,970 48,210 140,264 Total current liabilities 133,413,998 89,184,000 62,663,414 54,982,308 Non-current liabilities Long-term borrowings 4,040,286 2,254,348 - - Debentures payable 4,796,167 4,818,769 - - Long-term payables 468,993 366,881 - - Payables for specific projects 2,500 2,405 - - Provisions 341,296 325,217 - - 16 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Deferred revenue 500,877 502,316 - - Long-term employee benefits 2,426,373 1,449,954 payable - - Deferred income tax liabilities 4,608,469 1,831,973 - - Other non-current liabilities 885,168 888,152 - - Total non-current liabilities 18,070,129 12,440,015 - - Total liabilities 151,484,127 101,624,015 62,663,414 54,982,308 Shareholders' equity Share capital 6,465,677 6,458,767 6,465,677 6,458,767 Capital surplus 13,834,616 13,596,569 5,688,522 5,455,268 Less: treasury stock - - - - Other comprehensive income (177,571) 13,125 (22,054) (9,069) Surplus reserve 2,804,469 2,804,469 2,804,469 2,804,469 General reserve 148,602 148,602 - - Undistributed profits 42,457,978 38,105,391 13,760,332 13,379,033 Total equity attributable to shareholders of the parent 65,533,771 61,126,923 28,696,946 28,088,468 company Minority interests 8,896,489 7,849,773 - - Total shareholders' equity 74,430,260 68,976,696 28,696,946 28,088,468 TOTAL LIABILITIES AND 225,914,387 170,600,711 91,360,360 83,070,776 SHAREHOLDERS' EQUITY Legal representative: Fang Hongbo Accounting head for this Report: Xiao Mingguang Head of the accounting division: Chen Lihong 17 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Income Statement Prepared by Midea Group Co., Ltd. Unit: RMB’000 January-March January-March January-March January-March Item 2017 2016 2017 2016 Consolidated Consolidated The Company The Company 1. Total revenue 59,988,619 38,599,501 334,192 295,466 Including: Sales revenue 59,755,914 38,341,624 334,192 295,466 Interest income 232,704 255,072 - - Fee and commission income 1 2,805 - - 2. Total Cost (55,281,140) (33,884,840) (161,996) (131,125) Including: Cost of sales (44,782,859) (26,906,188) (9,683) (4,792) Interest expenses (93,334) (132,167) - - Fee and commission expenses (756) (666) - - Taxes and surtaxes (361,767) (276,519) (1,854) (956) Selling and distribution expenses (6,820,223) (4,977,071) - - General and administrative expenses (3,178,001) (1,662,776) (79,016) (87,582) Financial expenses – net 183,364 282,083 (70,893) (37,770) Asset impairment (loss)/reversal (227,564) (211,536) (550) (25) Add: Gains/(losses) on changes in fair (168,515) (239,146) 22,673 value - Investment income 726,487 253,713 289,640 134,422 Including: Share of profit of associates 87,936 81,800 42,380 55,455 and a joint venture 3. Operating profit 5,265,451 4,729,228 461,836 321,436 Add: Non-operating income 387,856 292,676 337 695 Including: Gains on disposal of 8,743 1,423 non-current assets - - Less: Non-operating expenses (63,474) (21,506) (1,008) (2,076) Including: Losses on disposal of (15,889) (12,537) (88) non-current assets - 4. Total profit 5,589,833 5,000,398 461,165 320,055 18 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Less: Income tax expenses (903,968) (833,631) (79,866) (66,511) 5. Net profit 4,685,865 4,166,767 381,299 253,544 Including: Net profit achieved by consolidated entities before - - - - consolidation Attributable to shareholders of the 4,352,587 3,907,252 381,299 253,544 parent company Minority interests 333,278 259,515 - - 6. Other comprehensive income net (179,644) 648,965 (12,985) (100) of tax Attributable to shareholders of the (190,696) 630,038 (12,985) (100) parent company (1) Other comprehensive income items which will not be reclassified 6,365 - - - subsequently to profit or loss 1) Changes in net liabilities or assets with a defined benefit plan upon 6,365 - - - re-measurement 2) Shares in other comprehensive incomes in investees that cannot be reclassified into gains and losses under - - - - the equity method (2) Other comprehensive income items which will be reclassified subsequently (197,061) 630,038 (12,985) (100) to profit or loss 1) Share of the other comprehensive income of the investee accounted for using equity method which will be (18,790) (52,591) (12,985) (100) reclassified subsequently to profit and loss 2) Changes in fair value of (309,321) 549,616 available-for-sale financial assets - - 3) Effective portion of cash flow hedging gains or losses - - - - 4) Translation of foreign currency 97,869 147,624 financial statements - - 5) Foreign-currency financial statement 33,181 (14,611) translation difference - - Attributable to minority shareholders 11,052 18,927 19 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. - - 7. Total comprehensive income 4,506,221 4,815,732 368,314 253,444 Attributable to shareholders of the 4,161,891 4,537,290 368,314 253,444 parent company Attributable to minority shareholders 344,330 278,442 - - 8. Earnings per share (Restated) Basic earnings per share (RMB Yuan) 0.67 0.61 N/A N/A Diluted earnings per share (RMB Yuan) 0.67 0.61 N/A N/A Legal representative: Fang Hongbo Accounting head for this Report: Xiao Mingguang Head of the accounting division: Chen Lihong 20 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Cash Flow Statement Prepared by Midea Group Co., Ltd. Unit: RMB’000 January-March January-March January-March January-March Item 2017 2016 2017 2016 Consolidated Consolidated The Company The Company 1. Cash flows from operating activities Cash received from sales of goods or 47,125,873 32,056,847 rendering of services - - Net increase in customer deposits and deposits from banks and other 34,128 - - - financial institutions Net decrease in deposits with central 270,547 bank - - - Cash received from interest, fee and 246,210 257,877 commission - - Refund of taxes and surtaxes 1,384,056 1,588,785 - - Cash received relating to other 1,160,334 1,564,570 6,368,959 9,967,594 operating activities Sub-total of cash inflows 49,950,601 35,738,626 6,368,959 9,967,594 Cash paid for goods and services (26,421,269) (17,512,729) - - Net decrease in customer deposits and deposits from banks and other (19,252) - - - financial institutions Net increase in loans and advances (349,405) (1,779,265) - - Net increase in deposits with central (317,043) bank - - - Cash paid for interest, fee and (94,090) (132,833) commission - - Cash paid to and on behalf of (6,338,017) (3,254,369) (12,672) (17,997) employees Payments of taxes and surtaxes (2,729,906) (2,003,485) (35,399) (26,836) Cash paid relating to other operating (6,692,300) (4,441,669) (2,466,800) (3,830,862) activities Sub-total of cash outflows (42,942,030) (29,143,602) (2,514,871) (3,875,695) 21 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. Net cash flows from operating 7,008,571 6,595,024 3,854,088 6,091,899 activities 2. Cash flows from investing activities Cash received from withdrawal of 26,720,523 16,846,496 17,024,406 9,282,040 investments Cash received from returns on 490,466 406,105 654,204 556,038 investments Net cash received from disposal of fixed assets, intangible assets and 13,902 2,987 12,049 - other long-term assets Net cash received from disposal of subsidiaries and other business units - - - - Cash received relating to other investing activities - - - - Sub-total of cash inflows 27,224,891 17,255,588 17,690,659 9,838,078 Cash paid to acquire fixed assets, intangible assets and other long-term (510,405) (484,331) (36,702) (148,301) assets Cash paid to acquire investments (28,410,748) (26,331,517) (22,291,936) (14,046,586) Net cash paid to acquire subsidiaries (25,213,227) and other business units - - - Cash paid to other investment activities - - - - Sub-total of cash outflows (54,134,380) (26,815,848) (22,328,638) (14,194,887) Net cash flows from investing (26,909,489) (9,560,260) (4,637,979) (4,356,809) activities 3. Cash flows from financing activities Cash received from capital 161,107 161,107 contributions 19,234 19,234 Including: Cash received from capital contributions by minority shareholders - - - - of subsidiaries Cash received from borrowings 29,829,202 7,773,335 1,600,000 500,000 Cash received from commercial paper issued - - - - Cash received relating to other 22 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. financing activities - - - - Sub-total of cash inflows 29,990,309 7,792,569 1,761,107 519,234 Cash repayments of borrowings (1,153,671) (2,847,658) (1,290,000) - Cash repayments of commercial paper - - - - Cash payments for interest expenses (189,407) (142,443) (125,351) (261,178) and distribution of dividends or profits Including: Cash payments for dividends or profit to minority (91,200) (106,543) - - shareholders of subsidiaries Cash payments to other financing (95,375) activities - - - Sub-total of cash outflows (1,438,453) (2,990,101) (125,351) (1,551,178) Net cash flows from financing 28,551,856 4,802,468 1,635,756 (1,031,944) activities 4. Effect of foreign exchange rate changes on cash and cash 48,314 (2,347) - - equivalents 5. Net decrease in cash and cash 8,699,252 1,834,885 851,865 703,146 equivalents Add: Opening cash and cash 12,513,730 5,187,317 8,174,915 6,245,008 equivalents 6. Closing cash and cash 21,212,982 7,022,202 9,026,780 6,948,154 equivalents Legal representative: Fang Hongbo Accounting head for this Report: Xiao Mingguang Head of the accounting division: Chen Lihong 23 Interim Report for the First Quarter 2017 of Midea Group Co., Ltd. 2. Auditor’s report Is this Report audited by a CPAs firm? □ Yes √ No This Report is un-audited by a CPAs firm. Midea Group Co., Ltd. Legal Representative: Fang Hongbo 29 April 2017 24