Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 MIDEA GROUP CO., LTD. INTERIM REPORT FOR THE THIRD QUARTER 2017 October 2017 1 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Section I Important Statements 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, and Ms. Chen Lihong, responsible person for the Company’s accounting department 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 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Section II Company Profile 1. Key Accounting Data and Financial Indicators Indicate by tick mark whether the Company needs to retrospectively restate any of its accounting data. □ Yes √ No Sep. 30, 2017 Dec. 31, 2016 Change Total assets (RMB’000) 242,183,276 170,600,711 41.96% Net assets attributable to shareholders of the Company 71,217,588 61,126,923 16.51% (RMB’000) July-September January-Septemb YoY change YoY change 2017 er 2017 Operating revenues (RMB’000) 62,498,801 60.85% 186,948,866 60.64% Net profits attributable to shareholders of the Company 4,186,853 26.43% 14,998,175 17.10% (RMB’000) Net profits attributable to shareholders of the Company before 4,078,172 30.22% 13,969,938 14.21% non-recurringprofits and losses (RMB’000) Net cash flows from operating -- -- 20,067,642 5.41% activities (RMB’000) Basic earnings per share 0.64 25.49% 2.31 15.50% (RMB/share) Diluted earnings per share 0.64 25.49% 2.30 15.58% (RMB/share) Weighted average return on equity 6.09% 0.27% 22.61% -1.15% (%) Notes: During the period from January to September 2017, Midea Group, exclusive of its recently acquired subsidiaries, achieved operating revenues of RMB156,389,246,000, up 39% compared to the same period of last year; and achieved consolidated net profitsattributable to shareholders of the Company of RMB15,725,201,000, representing a 23% year-on-year increase. According to a professional international evaluation agency and China’s accounting standards for business enterprises, the amortization of the M&A expenses for the period from January to September 2017 was recognized at RMB1,851,780,000. 3 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 During the period from January to September 2017, the newly acquired KUKA achieved operating revenue of RMB19,837,513,000, representing a 27% YoY increase. And the net profit has a 26% YoY increase, indicating continued business growth. Total shares outstanding of the Company as of the last trading session before the disclosure of this Report: Number of total shares outstanding of the Company as of last 6,548,526,448 trading session before disclosure of this Report (share) Fully diluted earnings per share based on latest number of 2.29 total shares outstanding above (RMB/share) Non-recurringprofits and losses: √ Applicable □ Not applicable Unit: RMB’000 Item January-September 2017 Note Gains or losses on disposal of non-current assets (including 775,994 offset asset impairment provisions) Government grants accounted for, in the profit or loss for the current period (except for the government grants closely related to the business of the Company and given at a fixed 1,070,631 amount or quantity in accordance with the State's uniform standards) Gains or losses on debt restructuring 2,573 Gains/Losses on fair value changes of financial assets and liabilities held for trading & investment income from disposal of financial assets and liabilities held for trading as well as -7,206 financial assets available for sale (exclusive of effective hedges related to normal business operations of the Company) Other non-operating income and expenditure except -167,908 above-mentioned items Less: Corporate income tax 545,990 Minority interests (after tax) 99,857 Total 1,028,237 - 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: 4 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 □ Applicable √ N/A No such cases for the Reporting Period. 2. Total Number of Shareholders and Shareholdings of Top 10 Shareholders at Period-End 2.1 Numbers of Common Shareholders and Preference Shareholders with Resumed Voting Rights, and Shareholdings of Top 10 Shareholders Unit: share Total number of preference Total number of common shareholders at shareholders with resumed 106,209 0 period-end voting rights at period-end (if any) Top 10 shareholders Share Pledged or frozen holdin Total shares Restricted shares Nature of Name of shareholder g held at shares held at shareholder perce period-end period-end Status Number ntage Domestic Pledg Midea Holding Co., Ltd. non-state-owned 33.78 2,212,046,613 0 854,955,000 ed corporation Hong Kong Exchanges and Clearing Foreign corporat 8.82 577,323,779 0 - - Limited ion State-owned China Securities Finance Co., Ltd. 3.05 199,439,709 0 - - corporation Domestic Fang Hongbo 2.09 136,990,492 102,742,869 - - individual Hillhouse Capital Management Limited Foreign corporat 1.74 113,891,138 0 - - -HCM China Fund ion Domestic Pledg Huang Jian 1.34 87,980,000 0 22,999,900 individual ed Domestic Xiaomi Technology Co., Ltd. non-state-owned 1.26 82,500,000 82,500,000 - - corporation Central Huijin Asset Management Ltd. State-owned 1.20 78,474,900 0 - - corporation Domestic Pledg Yuan Liqun 1.14 74,365,200 0 20,908,300 individual ed 5 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Foreign corporat UBS AG 1.11 72,468,364 0 - - ion Top 10 non-restricted shareholders Non-restricted shares held Type of stock Name of shareholder at period-end Type Number RMB-denominated Midea Holding Co., Ltd. 2,212,046,613 2,212,046,613 common stock Hong Kong Exchanges and Clearing Limited 577,323,779 Ditto 577,323,779 China Securities Finance Co., Ltd. 199,439,709 Ditto 199,439,709 Hillhouse Capital Management Limited-HCM China 113,891,138 Ditto 113,891,138 Fund Huang Jian 87,980,000 Ditto 87,980,000 Central Huijin Asset Management Ltd. 78,474,900 Ditto 78,474,900 Yuan Liqun 74,365,200 Ditto 74,365,200 UBS AG 72,468,364 Ditto 72,468,364 Fu Xuan 68,005,680 Ditto 68,005,680 Li Jianwei 64,144,834 Ditto 64,144,834 Related or acting-in-concert parties among N/A shareholders above Top 10 common shareholders conducting securities N/A margin trading (if any) Indicate by tick mark whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company conducted any agreed buy-back during the Reporting Period. □ Yea √ No No such cases in the Reporting Period. 2.2 Total Number of Preference Shareholders and Shareholdings of Top 10 of Preference Shareholdersat Period-End □ Applicable √ Not applicable 6 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Section III Significant Events I Major Changes of Main Items in Financial Statements and Financial Indicators within the Reporting Period, as well as the Reasons for the Changes √ Applicable □ Not applicable Unit: RMB’000 Main reasons for the Item Sep. 30, 2017 or 9M 2017 Dec. 31, 2016 or 9M 2016 Change changes Cash at bank 41,657,437 27,169,118 53.33% Growth in sales and on hand Notes receivable 15,518,453 7,427,488 108.93% Growth in sales Advances to Growth in sales and 2,105,052 1,587,366 32.61% suppliers consolidation of KUKA Other 2,099,815 1,140,133 84.17% Consolidation of KUKA receivables Inventories 23,752,878 15,626,897 52.00% Consolidation of KUKA Available-for-sal 1,846,009 5,187,732 -64.42% Consolidation of KUKA e financial assets Long-term 377,473 33,868 1,014.54% Consolidation of KUKA receivables Construction in Higher investment in 1,020,704 580,729 75.76% progress ongoing construction Intangible assets 16,010,089 6,868,538 133.09% Consolidation of KUKA Goodwill 28,620,233 5,730,995 399.39% Consolidation of KUKA Other Reduced investment in non-current 798,322 4,158,530 -80.80% long-term wealth assets management products Short-term 4,472,839 3,024,426 47.89% Increase of loans obtained borrowings Customer deposits and Changes in business deposits from 158,141 36,708 330.81% operations of Midea Group banks and other Finance financial institutions Derivative 146,771 89,838 63.37% Changes in fair value of 7 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 financial liabilities derivative financial instruments Advances from Growth in sales and 17,782,778 10,252,375 73.45% customers consolidation of KUKA Payroll payable 4,181,519 3,154,387 32.56% Consolidation of KUKA Interest payable 66,170 21,343 210.03% Increase of loans obtained Dividends Increase of dividends 176,000 105,641 66.60% payable declared by subsidiary Other payables 2,668,054 1,571,422 69.79% Consolidation of KUKA Long-term 33,075,133 2,254,348 1,367.17% Increase of loans obtained borrowings Provisions for possible Provisions 645,287 325,217 98.42% losses on pending legal matters Long-term 2,325,670 1,449,954 60.40% Consolidation of KUKA payroll payable Rise in assessed asset Deferred income 4,381,425 1,831,973 139.16% value due to consolidation tax liabilities of KUKA Other comprehensive 19,749 13,125 50.47% Consolidation of KUKA income Operating Growth in sales and 186,948,866 116,378,417 60.64% revenue consolidation of KUKA Fee and Changes in business commission 4 7,773 -99.95% operations of Midea Group income Finance Growth in sales and Cost of sales 139,559,489 83,828,027 66.48% consolidation of KUKA Changes in business Interest 215,904 384,002 -43.78% operations of Midea Group expenses Finance Taxes and Reclassification of stamp 1,076,026 662,794 62.35% surtaxes duty and property tax Selling and Growth in sales and distribution 19,954,150 12,341,424 61.68% consolidation of KUKA expenses General and Growth in sales and 10,430,157 5,981,080 74.39% administrative consolidation of KUKA 8 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 expenses Finance Changes in foreign 852,759 -913,165 193.38% expenses exchange gains/losses Gains/losses on Changes in fair value of changes in fair -44,156 -488,089 90.95% derivative financial value instruments Investment 1,792,009 1,183,473 51.42% Consolidation of KUKA income Provisions for possible Non-operating 492,928 193,914 154.20% losses on pending legal expenses matters Net cash flows from financing 21,987,048 1,992,708 1,003.38% Increase of loans obtained activities 2. Progress, Influence and Solutions Associated with Significant Events □ Applicable √ Not applicable 3. Commitments that the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well as the Company and Other Commitment Makers, Failed to Fulfill on Time during Reporting Period □ Applicable √ Not applicable No such cases in the Reporting Period. 4. Forecast of 2017 Annual Operating Results Warning of possible loss or considerable YoY change of the accumulated net profit made during the period-start until the end of the next Reporting Period according to predictions as well as any explanations for these reasons: □ Applicable √ Not applicable 5. Securities Investments □ Applicable √ Not applicable No such cases in the Reporting Period. 9 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 6. Investments in Derivative Financial Instruments √ Applicable □ Not applicable Unit: RMB’000 Ratio of investm ent Amou amount Rel Investme nt to the Investme Actual Rel ated nt provid Compa Initial Purch nt gain or Opera ated tran Invest Commen amount Sold ed for ny’s investme Terminati ased amount loss ting part sact ment cement at in the impair consoli nt on date in the at end of amount party y or ion type date beginning period ment dated amount period the during the not or of the (if net period period not period applic assets able) at end of the period (%) Futur Futur es es 01/01/20 12/31/20 Not Not -120 -120 - - - 8,960 0.01% 16,380 comp contra 17 17 any cts Forwa rd 01/01/20 12/31/20 Bank Not Not forex 328,180 328,180 - - - 392,180 0.55% 540,760 17 17 contra cts Total 328,060 -- -- 328,060 - - - 401,140 0.56% 557,140 Source of derivatives All from the Company's own funds investment funds Legal matters involved N/A (if applicable) Disclosure date of board announcement 03/31/2017 approving derivative investment (if any) Disclosure date of shareholders’ meeting 04/22/2017 announcement approving derivative 10 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 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 promoted forex funds business, with the purpose of avoiding the risks of exchange and interest rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities, as well as achieving locked-in costs. The Company has performed sufficient evaluation and control against derivatives investment and position risks, details of which are described as follows: 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in compliance with laws and regulations, with clearly covenanted responsibility and obligation relationship between the Company and the agencies. Control measures: The Company has designated relevant responsible departments to enhance 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. Risk analysis of 2. Operational risk: Imperfect internal process, staff, systems and external issues may cause positions held in the Company to suffer from loss during the course of its futures business and forex funds derivatives during business. Reporting Period and Control measures: The Company has not only developed relevant management systems that explanation of control clearly defined the assignment of responsibility and approval process for the futures business measures (including but and forex funds business, but also established a comparatively well-developed monitoring not limited to market mechanism, aiming to effectively reduce operational risk by strengthening risk control over the risk, liquidity risk, credit business, decision-making and trading processes. risk, operational risk 3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange and legal risk) 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 11 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 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 1. Gains/losses on futures hedging contracts incurred during the Reporting Period were Reporting Period: RMB16.38 million. specific methods used 2. Gains/losses on forward forex contracts incurred during the Reporting Period were and relevant RMB540.76 million. 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 accounting policies and specific financial accounting principles in No change respect of the Company's derivatives for Reporting Period compared to last 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. 7. Visits Paid to the Company for Purposes of Research, Communication, Interview, etc. during Reporting Period √ Applicable □ Not applicable Date of visit Way of visit Type of visitor About See Investor Relations Activities Log Sheet 08/31/2017-09/01/2017 Field research Institution during Period 31 August through 1 September 2017 on the website of www.cninfo.com.cn 09/08/2017 Field research Institution See Investor Relations Activities Log Sheet 12 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 during 8 September 2017 on the website of www.cninfo.com.cn 8. Irregularities Arising from Provision of Guarantees for Third Parties □ Applicable √ Not applicable No such cases in the Reporting Period. 9. Occupation of the Company’s Funds by Its Controlling Shareholder or Related Parties for Non-Operating Purposes □ Applicable √ Not applicable No such cases in the Reporting Period. 10. Targeted Measures Taken to Help People Lift Themselves out of Poverty 10.1 Overview of Targeted Poverty Alleviation Actions Taken in Q3 2017 Midea has faithfully followed TheDecision of the State Council and the CPC Central Committee on Winning the Fight against Poverty by attaching great importance to helping those in need as a way to fulfill their social responsibilities and reward the society. In the first three quarters of 2017, Midea Group donated a total of RMB20 million, of which RMB10 million was earmarked for poverty alleviation. The Guangdong Poverty Alleviation and Development Office co-ordinated the project to help alleviate poverty in more than 2,000 relatively poor villages in Guangdong Province, and the other half was given toBeijiao Charity Foundation to support the education, pension, medical treatment, infrastructure construction and housing in the town. At the same time, the government of Foshan actively supported Liangshan poverty alleviation work in Sichuan, and donated 1,100 sets of small household appliances worth 500,000 yuan to people in Liangshan in Sichuan in July this year. 10.2 Poverty Alleviation Plans for Coming Future Midea will continue to follow the Guangdong government’s guidance and make plans to help reduce poverty as a way to meet its social responsibility as a private company. Midea will work closely with the Guangdong government’s office for poverty alleviation and development to help those most in need with what they really need by targeted identification and planning. The 13 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 poverty alleviation will focus on development or improvement of the poor’s abilities to increase their income on their own, building of a longlasting poverty alleviation mechanism and optimization of donation projects. In the meantime, it will be fair, transparent and open for public supervision. 14 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Section IV Financial Statements 1. Financial Statements Balance Sheet Prepared by Midea Group Co., Ltd.As of Sep. 30, 2017 Unit: RMB’000 Sep. 30, 2017 Dec. 31, 2016 Sep. 30, 2017 Dec. 31, 2016 Assets Consolidated Consolidated Company Company Current assets: Cash at bank and on hand 41,657,437 27,169,118 26,136,798 17,135,480 Derivative financial assets 392,267 412,813 - - Notes receivable 15,518,453 7,427,488 - - Accounts receivable 17,360,462 13,454,511 - - Advances to suppliers 2,105,052 1,587,366 35,167 8,252 Loans and advances to 10,918,457 10,273,397 customers - - Dividends receivable 285,916 - - 737,585 Other receivables 2,099,815 1,140,133 11,724,056 12,644,592 Inventories 23,752,878 15,626,897 - - Including: Amount due from 5,557,738 customer for finished products - - - Other current assets 49,545,111 43,529,597 29,543,341 24,165,141 Total current assets 163,349,932 120,621,320 68,176,947 54,239,381 Non-current assets: Available-for-sale financial 1,846,009 5,187,732 56,868 28,931 assets Long-term receivables 377,473 33,868 - - Long-term equity investments 2,821,345 2,211,732 24,359,050 23,058,980 Investment properties 474,159 494,122 578,450 604,881 Fixed assets 22,348,578 21,056,791 882,217 984,666 Construction in progress 1,020,704 580,729 516,948 467,053 Intangible assets 16,010,089 6,868,538 232,771 236,083 15 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Goodwill 28,620,233 5,730,995 - - Long-term prepaid expenses 702,846 625,971 39,427 46,090 Deferred income tax assets 3,813,586 3,030,383 136,769 62,711 Other non-current assets 798,322 4,158,530 12,277 3,342,000 Total non-current assets 78,833,344 49,979,391 26,814,777 28,831,395 TOTAL ASSETS 242,183,276 170,600,711 94,991,724 83,070,776 Legal representative: Fang Hongbo Person in charge of accounting function: Xiao Mingguang Person in charge of accounting department: Chen Lihong 16 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Balance Sheet (Continued) Prepared by Midea Group Co., Ltd.As of Sep. 30, 2017 Unit: RMB’000 Sep. 30, 2017 Dec. 31, 2016 Sep. 30, 2017 Dec. 31, 2016 Liabilities and Shareholders' Equity Consolidated Consolidated Company Company Current liabilities: Short-term borrowings 4,472,839 3,024,426 - - Customer deposits and deposits from 158,141 36,708 banks and other financial institutions - - Derivative financial liabilities 146,771 89,838 - - Notes payable 23,029,466 18,484,939 - - Accounts payable 32,588,743 25,356,960 - - Advances from customers 17,782,778 10,252,375 - - Including: Prepayments by 1,838,709 customers for unfinished products Payroll payable 4,181,519 3,154,387 97,092 199,842 Taxes payable 2,813,129 2,364,446 8,368 103,848 Interest payable 66,170 21,343 136,203 76,776 Dividends payable 176,000 105,641 - - Other payables 2,668,054 1,571,422 61,386,959 54,461,578 Current portion of non-current 111,062 158,545 liabilities - - Other current liabilities 26,723,821 24,562,970 7,768 140,264 Total current liabilities 114,918,493 89,184,000 61,636,390 54,982,308 Non-current liabilities: Long-term borrowings 33,075,133 2,254,348 - - Debentures payable 4,621,102 4,818,769 - - Long-term payables 456,162 366,881 - - Payables for specific projects 2,500 2,405 - - 17 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Provisions 645,287 325,217 - - Deferred revenue 647,849 502,316 - - Long-term payroll payable 2,325,670 1,449,954 - - Deferred income tax liabilities 4,381,425 1,831,973 - - Other non-current liabilities 855,926 888,152 - - Total non-current liabilities 47,011,054 12,440,015 - - Total liabilities 161,929,547 101,624,015 61,636,390 54,982,308 Shareholders' equity: Share capital 6,548,163 6,458,767 6,548,163 6,458,767 Capital surplus 15,425,561 13,596,569 7,267,676 5,455,268 Less: Treasury stock 366,842 - 366,842 - Other comprehensive income 19,749 13,125 (16,928) (9,069) Surplus reserve 2,804,469 2,804,469 2,804,469 2,804,469 General reserve 148,602 148,602 - - Undistributed profits 46,637,886 38,105,391 17,118,796 13,379,033 Total equity attributable to 71,217,588 61,126,923 33,355,334 28,088,468 shareholders of the Company Minority interests 9,036,141 7,849,773 - - Total shareholders' equity 80,253,729 68,976,696 33,355,334 28,088,468 TOTAL LIABILITIES AND 242,183,276 170,600,711 94,991,724 83,070,776 SHAREHOLDERS' EQUITY Legal representative: Fang Hongbo Person in charge of accounting function: Xiao Mingguang Person in charge of accounting department: Chen Lihong 18 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Income Statement Prepared by Midea Group Co., Ltd. January-September 2017 Unit: RMB’000 January-Septe January-Septe January-Septe January-Septe Item mber 2017 mber 2016 mber 2017 mber 2016 Consolidated Consolidated Company Company 1. Total revenue 187,764,435 117,077,949 1,116,610 851,892 Including: Operating revenue 186,948,866 116,378,417 1,116,610 851,892 Interest income 815,565 691,759 - - Fee and commission income 4 7,773 - - 2. Total Cost (172,344,718) (102,498,007) (545,033) (1,006,971) Including: Cost of sales (139,559,489) (83,828,027) (29,054) (14,829) Interest expenses (215,904) (384,002) - - Fee and commission expenses (2,140) (2,012) - - Taxes and surtaxes (1,076,026) (662,794) (11,267) (7,988) Selling and distribution expenses (19,954,150) (12,341,424) - - General and administrative expenses (10,430,157) (5,981,080) (206,857) (276,093) Finance costs (852,759) 913,165 (298,404) (708,030) Asset impairment (loss)/reversal (254,093) (211,833) 549 (31) Add: Gains/(losses) on changes in fair (44,156) (488,089) 22,673 value - Investment income 1,792,009 1,183,473 9,543,492 9,491,666 Including: Share of profit of associates 390,089 295,082 288,285 201,015 and joint ventures Other income 1,075,500 3. Operating profit 18,243,070 15,275,326 10,115,069 9,359,260 Add: Non-operating income 1,089,198 1,258,778 1,505 44,954 Including: Gains on disposal of 837,073 10,933 non-current assets 24 - Less: Non-operating expenses (492,928) (193,914) (1,468) (3,681) Including: Losses on disposal of (93,239) (73,136) (119) (1,562) non-current assets 4. Total profit 18,839,340 16,340,190 10,115,106 9,400,533 19 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Less: Income tax expenses (2,737,940) (2,588,202) 90,336 (17,685) 5. Net profit 16,101,400 13,751,988 10,205,442 9,382,848 Including: Net profit of consolidated subsidiaries before consolidation - - - - Attributable to shareholders of the 14,998,175 12,807,993 10,205,442 9,382,848 Company Attributable to minority shareholders 1,103,225 943,995 - - 6. Other comprehensive income, net of tax 13,190 538,964 (7,859) (1,902) Attributable to shareholders of the 6,624 465,254 (7,859) (1,902) Company (1) Other comprehensive income items which will not be reclassified subsequently to 37,472 - - - profit or loss (2) Other comprehensive income items which will be reclassified subsequently to (30,848) 465,254 (7,859) (1,902) profit or loss 1) Share of the other comprehensive income of the investee accounted for using (9,831) (56,537) (7,859) (1,902) equity method which will be reclassified subsequently to profit and loss 2) Changes in fair value of (288,537) 358,607 available-for-sale financial assets - - 3) Gains/Losses on reclassification of held-to-maturity investments as - - - - available-for-sale financial assets 4) Effective portion of cash flow 174,794 hedging gains or losses 140,809 - - 5) Foreign-currency financial statement 126,711 (11,610) translation differences - - Attributable to minority shareholders 6,566 73,710 - - 7. Total comprehensive income 16,114,590 14,290,952 10,197,583 9,380,946 Attributable to shareholders of the 15,004,799 13,273,247 10,197,583 9,380,946 Company Attributable to minority shareholders 1,109,791 1,017,705 - - 8. Earnings per share Basic earnings per share (RMB/share) 2.31 2.00 N/A N/A 20 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Diluted earnings per share (RMB/share) 2.30 1.99 N/A N/A Legal representative: Fang Hongbo Person in charge of accounting function: Xiao Mingguang Person in charge of accounting department: Chen Lihong 21 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Income Statement Prepared by Midea Group Co., Ltd. July-September 2017 Unit: RMB’000 July-Septemb July-Septemb July-Septemb July-Septemb Item er 2017 er 2016 er 2017 er 2016 Consolidated Consolidated Company Company 1. Total revenue 62,800,819 39,070,433 415,540 263,641 Including: Operating revenue 62,498,801 38,856,130 415,540 263,641 Interest income 302,016 212,183 - - Fee and commission income 2 2,120 - - 2. Total Cost (58,381,100) (35,679,594) (221,378) (247,382) Including: Cost of sales (46,508,408) (28,961,867) (9,725) (1,181) Interest expenses (50,238) (122,684) - - Fee and commission expenses (479) (625) - - Taxes and surtaxes (321,255) (195,032) (7,488) (4,653) Selling and distribution expenses (7,549,380) (4,156,246) - - General and administrative expenses (3,597,199) (2,291,021) (101,419) 62,445 Finance costs (506,145) 7,904 (103,441) (303,995) Asset impairment (loss)/reversal 152,004 39,977 695 2 Add: Gains/(losses) on changes in fair (34,633) 37,000 value - - Investment income 592,557 469,391 3,418,254 1,932,955 Including: Share of profit of associates 102,955 94,340 73,852 69,904 and joint ventures Other income 229,274 - - - 3. Operating profit 5,206,917 3,897,230 3,612,416 1,949,214 Add: Non-operating income 98,284 355,506 748 43,117 Including: Gains on disposal of 55,844 7,385 24 non-current assets - Less: Non-operating expenses (72,985) (90,115) (427) (2,124) Including: Losses on disposal of (56,112) (40,987) (15) non-current assets - 22 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 4. Total profit 5,232,216 4,162,621 3,612,737 1,990,207 Less: Income tax expenses (678,887) (641,531) 98,238 17,216 5. Net profit 4,553,329 3,521,090 3,710,975 2,007,423 Including: Net profit of consolidated subsidiaries before consolidation - - - - Attributable to shareholders of the Company 4,186,853 3,311,500 3,710,975 2,007,423 Attributable to minority shareholders 366,476 209,590 - - 6. Other comprehensive income, net of tax (13,132) (808,298) (4,433) 8,675 Attributable to shareholders of the Company (3,058) (811,460) (4,433) 8,675 (1) Other comprehensive income items which will not be reclassified subsequently to (2,107) - - - profit or loss (2) Other comprehensive income items which will be reclassified subsequently to (951) (811,460) (4,433) 8,675 profit or loss 1) Share of the other comprehensive income of the investee accounted for using (1,762) 9,169 (4,433) 8,675 equity method which will be reclassified subsequently to profit and loss 2) Changes in fair value of 3,938 (723,900) available-for-sale financial assets - - 3) Gains/Losses on reclassification of held-to-maturity investments as - - - - available-for-sale financial assets 4) Effective portion of cash flow (27,907) 29,191 hedging gains or losses - - 5) Foreign-currency financial statement 24,780 (125,920) translation differences - - Attributable to minority shareholders (10,074) 3,162 - - 7. Total comprehensive income 4,540,197 2,712,792 3,706,542 2,016,098 Attributable to shareholders of the Company 4,183,795 2,500,040 3,706,542 2,016,098 Attributable to minority shareholders 356,402 212,752 - - 8. Earnings per share Basic earnings per share (RMB/share) 0.64 N/A N/A 0.51 Diluted earnings per share (RMB/share) 0.64 N/A N/A 23 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 0.51 Legal representative: Fang Hongbo Person in charge of accounting function: Xiao Mingguang Person in charge of accounting department: Chen Lihong 24 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Cash Flow Statement Prepared by Midea Group Co., Ltd. January-September 2017 Unit: RMB’000 January-Septe January-Septe January-Septe January-Septe Item mber 2017 mber 2016 mber 2017 mber 2016 Consolidated Consolidated Company Company 1. Cash flows from operating activities: Cash received from sales of goods or 148,783,253 112,216,632 rendering of services - - Net increase in customer deposits and deposits from banks and other financial 121,433 3,561 - - institutions Net decrease in deposits with central bank 126,053 and other financial institutions - - - Net increase in borrowing from central bank 80,730 - - - Cash received from Interest, fees and 864,098 700,653 commissions - - Refund of taxes and surcharges 4,440,425 4,124,618 - - Cash received relating to other operating 3,370,638 2,201,828 8,729,382 10,532,437 activities Sub-total of cash inflows 157,579,847 119,454,075 8,729,382 10,532,437 Cash paid for goods and services (87,143,944) (63,672,706) - - Net decrease in customer deposits and deposits from banks and other financial - - - - institutions Net increase in loans and advances (658,156) (5,428,328) - - Net increase in deposits with central bank and deposits from banks and other financial (744,270) - - - institutions Cash paid for interest, fee and commission (218,046) (387,319) - - Cash paid to and on behalf of employees (17,042,705) (8,673,520) (114,654) (27,898) Payments of taxes and surcharges (9,412,941) (6,828,734) (101,815) (52,312) Cash paid relating to other operating (22,292,143) (15,425,973) (227,698) (4,590,393) activities 25 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 Sub-total of cash outflows (137,512,205) (100,416,580) (444,167) (4,670,603) Net cash flow from operating activities 20,067,642 19,037,495 8,285,215 5,861,834 2. Cash flows from investing activities: Cash received from disposal of investments 56,859,505 48,980,669 40,619,980 25,674,850 Cash received from returns on Investment 1,664,387 1,339,590 9,227,047 8,738,751 income Net cash received from disposal of fixed assets, intangible assets and other long-term 865,341 170,570 12,049 111 assets Net cash received from disposal of 2,415 272,899 subsidiaries and other business units - - Cash received relating toother investing activities - - - - Sub-total of cash inflows 59,391,648 50,763,728 49,859,076 34,413,712 Cash paid to acquire fixed assets, intangible (2,071,492) (1,605,425) (81,158) (247,748) assets and other long-term assets Cash paid to acquireinvestments (50,014,698) (65,071,957) (36,731,884) (35,644,352) Net cash paid to acquire subsidiaries and (25,633,208) (1,856,787) other business units - - Cash used in other investing activities - - - - Sub-total of cash outflows (77,719,398) (68,534,169) (36,813,042) (35,892,100) Net cash from investing activities (18,327,750) (17,770,441) 13,046,034 (1,478,388) 3. Cash flows from financing activities: Cash received from capital contributions 1,365,855 1,365,855 651,628 635,611 Including: Cash received from capital contributions by minority shareholders of - 16,017 - - subsidiaries Cash received from borrowings 32,917,986 28,817,816 1,600,000 1,800,000 Cash received fromissuing of short-term 1,999,500 financial bonds - - 1,999,500 Cash received relating to other financing activities - - - - Sub-total of cash inflows 34,283,841 31,468,944 2,965,855 4,435,111 Cash repayment of borrowings (4,718,342) (21,748,594) (1,600,000) (3,090,000) Cash repayment of short-term bonds (1,999,500) (1,999,500) - - Cash payments for interest expenses and (7,578,451) (5,728,142) (6,970,870) (6,234,046) 26 Midea Group Co., Ltd. The Interim Report for the Third Quarter of 2017 distribution of dividends or profit Including: Cash payments for dividends or profit to minority shareholders of (606,819) (417,287) - - subsidiaries Cash payments relating toother financing activities - - - - Sub-total of cash outflows (12,296,793) (29,476,236) (8,570,870) (11,323,546) Net cash flows from financing activities 21,987,048 1,992,708 (5,605,015) (6,888,435) 4. Effect of foreign exchange rate changes 121,585 101,834 on cash and cash equivalents - - 5. Net decrease in cash and cash 23,848,525 3,361,596 15,726,234 (2,504,989) equivalents Add: Cash and cash equivalents at 12,513,730 5,187,317 8,174,915 6,245,008 beginning of the period 6. Cash and cash equivalents at end of the 36,362,255 8,548,913 23,901,149 3,740,019 period Legal representative: Fang Hongbo Person in charge of accounting function: Xiao Mingguang Person in charge of accounting department: Chen Lihong 2. Auditor’s Report Are the Q3 2017 financial statements audited by a CPAs firm? □Yes √ No These financial statements are unaudited by a CPAs firm. Midea Group Co., Ltd. Legal Representative: Fang Hongbo Oct. 31, 2017 27