The 2015 Annual Report of Midea Group Co., Ltd. Midea Group Co., Ltd.
The 2015 Annual Report
26 March 2016
The 2015 Annual Report of Midea Group Co., Ltd. A Letter to Shareholders
In 2015, withChina’s economy in a “New Normal” state, the downturn in the household appliance market has not only led to increased competition, but has also acted as a driver to the restructuring of this industry. In the face of tremendous pressure from a volatile market, Midea Group, a team with the courage to transform, together with its shared values, goals and working practices, faithfully followed our strategic focuses of “Leading Products, Operational Efficiency& Global Operations” and therefore has continued to strengthen its reform.
Throughout 2015, our product competitiveness and operating efficiency rapidly increased, our operational quality thoroughly improved, our overseas business network was further optimized, our own brands were effectively developed and new progress was made in our corporate governance. Meanwhile, we established our “Global Innovation Center”, trying to build a globally competitive and multi-layeredR&D system, continued with our strategy of “Smart Home& Intelligent Manufacturing”, and actively entered into new businesses areas. In 2015, while maintaining stable revenues, we achieved a year-on-year growth of17% net profit, a remarkable result amid the downturn in the household appliance industry.
Also during the year, Midea Group was included onForbes’ List of Top 500 Global Enterprises. In addition, Midea Group ranked
32nd
on FortuneMagazine’s List ofChina’s Top 500 Enterprises 2015, making it the leader inChina’s household appliance sector. Also Midea Group was placed
13th
inChina’s Top 500 Private Enterprises and
38th
inChina’s Top 500 Manufacturers, continuing its performance as a leading manufacturer of household appliances. In 2015, Midea Group became the first household appliance manufacturer in China to be rated by the three major international ratingagencies—Standard&Poor’s, Fitch andMoody’s, with its rating results outstanding among both the global household appliance makers and the domestic private enterprises. On the Ruifu Global List 2015 ofChina’s Top 100 Brands in Value, our “Midea” brand was ranked
6th
with a value of RMB71.611 billion. Up to the end of 2015, we had a total of 21,581 granted patents.
2015 has been a wonderful year for us due to our hard work. In 2016, we will strive forward to realize our dreams without fear!
The 2015 Annual Report of Midea Group Co., Ltd. History tells us that dreams and ideals are indispensable to success. Dreams help to succeed. How successful and big a business becomes is dependant on how many dreams it carries. As such, the future of Midea Group lies within the dreams of all its employees. With the world now changing much faster than one might have imagined, our different lifestyles have been or are being changed. The traditional business model that relies on large-scale effects and low costs can no longer work in the current household appliance industry, leading to the boundaries of the industry becoming more vague. However, despite all these changes, it is always the right choice to design and offer products and services with value for consumers. In the evolution of commerce, it can be seen that all great enterprises grew and thrived in the bleak periods of an economic cycle. In times of change, the question of whether we will thrive or wane, unite as one man or fight eachother’s own battles, be confident and tolerant or unwisely arrogant, is all up to our courage to change and accept change. We change, therefore we survive. The more adverse the circumstances are, the tougher and more composed we are. We will also change at a faster rate, our business strategies, management style and business models, towards achieving our strategic directions, while trying to strengthen our reform and stand out as a great example of success.
Whatever the household appliance industry will become, we have the courage to challenge and the ambition to win. We hope that one day Midea will become a truly multinational company, a global operation and a respectable hi-tech enterprise. And we understand it is definitely not easy to achieve this. In the face of uncertainties, and fiercer competition and obstacles in the future, we must have the big picture in mind, pushing forward with every campaign for reform, arousing the enthusiasm of every employee, encouraging entrepreneurship and creativity in them and bringing their personal objectives in line with that of Midea, for the purpose of maximizing the investment returns (ROI) for you, the shareholders, and sharing with you the fruits of our development.
We will adhere to our guideline of “Leading Products”. Our company will increase ourR&D investments with the goal to build up a globalR&D system and enrich ourR&D talent pool. We will continue to develop differentiated products for our customers, adopting a strict quality policy, launching campaigns for competitive products as well as encouraging
The 2015 Annual Report of Midea Group Co., Ltd. product innovation and upgrading our product mix. In this way, we will be able to increase our products competitiveness.
We will follow our path of “Operational Efficiency”. In order to be more competitive in cost, we will try to increase the efficiency of our employees, capital and properties, further improve lean management in our product design, supply chain and production, and push forward with improving our channel efficiency, the development of our e-commerce capabilities and the reform of our marketing system.
We will also adhere to our roadmap of “Global Operations” to grow our overseas revenue. We will further upgrade our product mix for the overseas markets, keep expanding our own brand globally , pursue further business collaborations orM&A opportunities with strong global competitors, and push forward our global operations by breaking into more markets while at the same time launching more products and projects.
With an open mind, we will embrace thegovernment’s guideline of “Internet+” by promoting a win-win partnership with Internet enterprises in creating a better eco-chain in the Internet industry. Our continuous increased investments in IT will support our IT system throughout the whole process of our operations and upgrade the internet usage across the complete value chain covering our organization, marketing, products, and business models.
We will carry on with our strategy of “Smart Home& Intelligent Manufacturing”. We will plan for our future with the entire industry and even the whole world in our mind. Our investments in both fundamental and cutting-edge technologies will be increased, providing a larger growth space for our new businesses. With the courage to change, we will be able to keep up with the times and create new competitive edges for ourselves.
We will continue to give play to our strongpoints in modern corporate governance and mechanisms so as to further reform our organization and corporate culture towards a lively and creativity- nurturing environment. We will continue to improve our Employee Stock Ownership Plan (Partner Program), further reform our incentive schemes, strengthen our power decentralization principles, and focus on our customers and products.
The 2015 Annual Report of Midea Group Co., Ltd. To have abeginner’s mind helps you to succeed in the end.
It means to learn everything with a humble heart. It also means to think, to listen, to challenge, to accept, and more importantly, to change! A true golden age awaits Midea in the near future. In 2016, we will reform Midea in a more determined and effective way, trying to make our dreams come true.
We are grateful for your companionship, support and trust, and we hereby send our best wishes to you!
With dreams, ANYTHING is possible for Midea!
The Board of Directors of Midea Group Co., Ltd. March 2016
The 2015 Annual Report of Midea Group Co., Ltd. Section I Important Statements, 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 free of any false records, misleading statements or material omissions, and shall together be wholly liable for the truthfulness, accuracy and completeness of its contents.
All directors of the Company attended the Board meeting to review this Annual Report. There are no directors, supervisors, or senior management who do not warrant or who dispute the truthfulness, accuracy and completeness of the contents of this Annual Report. The financial statements of the Company for 2015 have been audited by PricewaterhouseCoopers China (LLP) and have obtained a standard unqualified audit report.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Ms. Yuan Liqun, responsible person for theCompany’s financial affairs have represented and warranted that the financial statements in this report are true and complete.
The Board has considered and approved the following profit distribution plan for the year 2015: Based on the Company's total existing shares of 4,267,391,228, it is proposed that the Company will distribute cash dividends of RMB12 per 10 shares (tax inclusive) to all shareholders and grant them 5 additional shares per 10 shares with its capital reserves. The future plans and some other forward-looking statements mentioned in this report shall not be considered 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.
The 2015 Annual Report of Midea Group Co., Ltd. Contents
Section I Important Statements, Contents and Definitions .............................. 6 Section II Company Profile and Key Financial Results ................................... 9 Section III Business Profile .......................................................................... 14 Section IV Management Discussion and Analysis ........................................ 22 Section V Significant Events ........................................................................ 50 Section VI Changes in Shares and Information about Shareholders ............ 81 Section VII Preference Shares ..................................................................... 89 Section VIII Information about Directors, Supervisors, Senior Management and Employees ............................................................................................ 90 Section IX Corporate Governance ............................................................... 99 Section X Financial Report ........................................................................ 105 Section XI Documents Available for Reference .......................................... 204
The 2015 Annual Report of Midea Group Co., Ltd. Definitions
|||
|-|-|
|Term|Definition|
|Company, the Company, or Midea Group|Midea Group Co., Ltd.|
|Midea Holding|Midea Holding Co., Ltd.|
|Little Swan|Wuxi Little Swan Company Limited|
|SDE Bank|Guangdong Shunde Rural Commercial Bank Co., Ltd.|
|Midea Group Finance|Midea Group Finance Co., Ltd.|
|PwC China|PricewaterhouseCoopers China (LLP)|
|Reporting Period|1 Jan. 2015 to 31 Dec. 2015|

The 2015 Annual Report of Midea Group Co., Ltd. Section II Company Profile and Key Financial Results
1. Corporate Information
|||||
|-|-|-|-|
|Stock abbreviation|Midea Group|Stock code|000333|
|Stock exchange where the||||
|shares of the Company are|Shenzhen Stock Exchange|||
|listed||||
|Name of the Company in|美的集团股份有限公司|||
|Chinese||||
|Abbr. of the Company name||||
||美的集团|||
|in Chinese||||
|Name of the Company in||||
||MIDEA GROUP CO., LTD.|||
|English (if any)||||
|Legal representative|Fang Hongbo|||
||Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan|||
|Registered address||||
||City, Guangdong Province, China|||
|Postal code|528311|||
||Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan|||
|Business address||||
||City, Guangdong Province, China|||
|Postal code|528311|||
|Company website|http://www.midea.com|||
|E-mail|IR@midea.com|||

2. Contact us
||||
|-|-|-|
||Company Secretary|Representative for Securities Affairs|
|Name|Jiang Peng|Ou Yunbin|
||Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde||
|Address|||
||District, Foshan City, Guangdong Province, China||
|Tel.|0757-22607708|0757-22390156|
|Fax|0757-26651991||
|E-mail|IR@midea.com||

3. Information Disclosure and Place Where the Annual Report Is Kept
|||
|-|-|
|Newspaper designated by the Company for|China Securities Journal, Securities Times and Shanghai Securities|

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|information disclosure|News|
|Website designated by the China Securities||
|Regulatory Commission (CSRC) for the|http: //www. cninfo.com.cn|
|publication of the Annual Report||
|Place where the Annual Report of the Company||
||Office of the Board of Directors of the Company|
|is kept||

4. Company Registration and Alteration
|||
|-|-|
|Organization code|91440606722473344C|
|Changes in main business activities since||
||None|
|the Company was listed (if any)||
|Changes of controlling shareholders of||
||None|
|the Company (if any)||

5. Other Relevant Information
Accounting firm engaged by the Company
|||
|-|-|
|Name of the accounting firm|PricewaterhouseCoopers China (LLP)|
|Business address of the|11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road,|
||11|
|accounting firm|Huangpu District, Shanghai 200021, PRC|
|Name of accountants for writing||
||Yao Wenping, Huang Meimei|
|signature||

Sponsors engaged by the Company to continuously perform its supervisory function during the
Reporting Period
√ Applicable□ N/A
|||||
|-|-|-|-|
|||Representative of|Supervisory period|
|Name of the sponsor|Business office of the sponsor|||
|||the sponsor||
|||Zeng Jinsong,|2015.6.26-2016.12.31|
||CITIC Securities Tower, No. 8 Zhong Xin San|||
|||Wu Hongri||
|CITIC Securities Co., Ltd.|Road, Futian District, Shenzhen City,|||
|||Wu Hongri,|2013.9.18-2015.12.31|
||Guangdong Province 518040|||
|||Qin Chengdong||
|China International Capital|27 and 28F, International Trade Building 2,|Zhao Liang,|2013.9.18-2015.12.31|
|Corporation Limited|No. 1 Jianguomenwai Avenue, Beijing, China|Long Liang||

Note: Upon the receipt of a personnel change notice from China International Capital Corporation Limited (CICC) on 21
July 2015, the Company issued an announcement stating that Mr. Li Xiaodai of the CICC was no longer responsible for
relevant work during the supervisory period due to his job change. Mr. Long Liang would replace him to work with Mr.
The 2015 Annual Report of Midea Group Co., Ltd. Zhao Liang as a representative of the listing sponsor and to work with Ms. Gao Shu as a financial advisor respectively during the supervisory period.
Financial advisor engaged by the Company to continuously perform its supervisory function during the Reporting Period
√ Applicable□ N/A
|||||
|-|-|-|-|
|||Representative||
|Name of the financial||||
||Business office of the financial advisor|of the financial|Supervisory period|
|advisor||||
|||advisor||
|China International Capital|27 and 28F, International Trade Building 2, 1|Gao Shu,||
||||2013.9.18-2015.12.31|
|Corporation Limited|Jianguomenwai Avenue, Beijing, China|Long Liang||

6. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data due to changes of accounting policies and correction of accounting errors
□ Yes√ No
||||||
|-|-|-|-|-|
||2015|2014|YoY Change (%)|2013|
|Operating revenues (RMB'000)|138,441,226|141,668,175|-2.28%|120,975,003|
|Net profits attributable to|12,706,725|10,502,220|||
|shareholders of the Company|||20.99%|5,317,458|
|(RMB'000)|||||
|Net profits attributable to|||||
|shareholders of the Company after|||||
||10,911,341|9,476,849|15.14%|3,903,376|
|non-recurring gains and losses|||||
|(RMB'000)|||||
|Net cash flows from operating|26,764,254|24,788,512|||
||||7.97%|10,054,196|
|activities (RMB'000)|||||
|Basic earnings per share|2.99|2.49|||
||||20.08%|1.73|
|(RMB/share)|||||
|Diluted earnings per share|2.99|2.49|||
||||20.08%|1.73|
|(RMB/share)|||||
|Weighted average ROE (%)|29.06%|29.49%|-0.43%|24.87%|
||At the end of 2015|At the end of 2014|YoY Change (%)|At the end of 2013|
|Total assets (RMB'000)|128,841,935|120,292,086|7.11%|96,946,025|
|Net assets attributable to|49,201,852|39,470,499|||
|shareholders of the Company|||24.65%|32,847,431|
|(RMB'000)|||||

The 2015 Annual Report of Midea Group Co., Ltd. Total share capital of the Company on the last trading session before disclosure:
|||
|-|-|
|Total share capital of the Company on the last trading||
||4,267,391,228|
|session before disclosure (share)||
|Fully diluted earnings per share based on the latest||
||2.98|
|share capital above (RMB/share)||

Whether there are any corporate bonds
□ Yes√ No
7. Differences in Accounting Data under Domestic and Overseas Accounting Standards
□ Applicable√ N/A
8. Key Financial Results by Quarter
RMB'000
||||||
|-|-|-|-|-|
||Q1|Q2|Q3|Q4|
|Operating revenues|42,426,714|40,082,430|28,865,272|27,066,810|
|Net profits attributable to|||||
||3,342,135|4,981,988|2,687,980|1,694,622|
|shareholders of the Company|||||
|Net profits attributable to|||||
|shareholders of the Company|||||
||3,019,956|4,413,081|1,942,548|1,535,756|
|after non-recurring gains and|||||
|losses|||||
|Net cash flows from operating|||||
||2,498,715|6,316,957|9,154,812|8,793,770|
|activities|||||

9. Items and Amounts of Non-recurring Profits and Losses
√ Applicable□ N/A
RMB'000
||||||
|-|-|-|-|-|
|Item|2015|2014|2013|Note|
|Profit or loss from disposal of non-current|-242,814||||
|||-223,943|-215,390||
|assets|||||
|Government grants accounted for, in the profit|1,348,652||||
|or loss for the current period (except for the|||||
|government grants closely related to the|||||
|||790,501|656,458||
|business of the Company and given at a fixed|||||
|amount or quantity in accordance with the|||||
|State's uniform standards)|||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||
|-|-|-|-|-|
|Profit generated for the costs of the Company|19,513||||
|in the acquisition of subsidiaries, associates or|||||
|joint ventures are lower than the fair value of|||||
|the Company’s share in the identifiable net|||||
|assets of the investees|||||
|Profit or loss from entrusted investments or|1,008,770||||
|||953,661|250,372||
|entrusted asset management|||||
|Corporate restructuring costs (e.g. staff|||||
|replacement costs and expenses for||-17,259|-9,634||
|consolidation)|||||
|Except for effectively hedging business related|369,806||||
|to normal business operations of the company,|||||
|profit or loss arising from the change in the fair|||||
|value of held-for-trading financial assets and|||||
|||-268,422|1,502,895||
|liabilities, as well as investment profit or loss|||||
|produced from the disposal of held-for-trading|||||
|financial assets and liabilities and|||||
|available-for-sale financial assets|||||
|Impairment provision reversal of the accounts|45,752||||
|receivable on which the impairment test is|||||
|carried out separately|||||
|Other non-operating income and expenditure|-16,398||||
|||-62,072|143,869||
|except above-mentioned items|||||
|Less: Corporate income tax|505,642|204,646|419,965||
|Minority interests (after tax)|232,255|-57,551|494,522||
|Total|1,795,384|1,025,371|1,414,082|--|

 Explain the reasons if the Company classifies an item as a non-recurring profit/loss according to the definition in the<Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to thePublic—Non-Recurring Profits andLosses>, or classifies any non-recurring profit/loss item mentioned in the said explanatory announcement as a recurring profit/loss item
√ Applicable□ N/A
||||
|-|-|-|
||Amount involved||
|Item||Reason|
||(RMB’000)||
|Profit on|300,863|In the Reporting Period, the Company added “financial investment” into its businessscope. The profit on financial investment item thus became a recurring item.|
|financial|||
|investment|||

The 2015 Annual Report of Midea Group Co., Ltd. Section III Business Profile
1. Business Scope in the Reporting Period
1.1 Business scope and position in the household appliance industry
Being globally influential, Midea Group is one ofChina’s top household appliance manufacturers, with the widest product range and the most complete industrial chain. We have extensive industrial chains for air-conditioners, refrigerators and washing machines as well as for a complete group of small household appliances. Our 14 production bases in China cover the southern, eastern, central, southwestern and northern regions of the country. We also have production bases in Vietnam, the Republic of Belarus, Egypt, Brazil, Argentina and India. The production capacity, output and sales volumes of our large and small household appliances are among the best-performing not only in China but even in the rest of the world.
In 2015, Midea Group was ranked
32nd
on FortuneMagazine’s List ofChina’s Top 500 Enterprises, making it the leader in thecountry’s household appliance sector. In addition, we made our way onto the Top 500 ofForbes’ list of Top 2000 Global Enterprises taking
436th
position. In addition, according to the All-China Federation of Industry and Commerce, Midea was ranked
13th
on the List of China's Top 500 Private Companies. Furthermore, we placed
38th
onChina’s EnterpriseConfederation’s List ofChina’s Top 500 Manufacturers. Also during the year, Midea Group became the first household appliance manufacturer in China to be rated by the three major international ratingagencies—Standard&Poor’s, Fitch andMoody’s, with their outlooks for theCompany’s credit rating all being “stable”, which stood out among the global household appliance makers and the domestic non-state-owned enterprises.
Retail market share of the Company's major products sourced from China Market Monitor
||||||||||
|-|-|-|-|-|-|-|-|-|
|Product category||2015||||2014|||
||Market share|Market share|Market ranking|Market ranking|Market share|Market share|Market ranking|Market ranking|
|Air-conditioners|25.2%||2||24.7%||2||
|Washingmachines|21.3%||2||18.4%||2||
|Electric ricecookers|42.3%||1||42.2%||1||

The 2015 Annual Report of Midea Group Co., Ltd. Induction
48.6% 1 47.5% 1
cookers
||||||
|-|-|-|-|-|
|Electric pressurecookers|42.7%|1|42.1%|1|
|Electric kettles|32.2%|1|31.7%|1|
|Water purifiers|27.9%|1|33.6%|1|
|Microwaveovens|44.6%|2|45.1%|2|
|Range hoods|8.8%|3|7.8%|4|
|Vacuumcleaners|11.3%|3|12.5%|3|
|Water heaters|12.2%|3|10.8%|3|
|Refrigerators|9.6%|4|8.2%|4|
|Stoves|7.2%|4|6.7%|4|

1.2 Industrial development and prospect
In 2015, affected by such factors as the fluctuating global economy, the “new normal” state ofChina’s domestic macro-economy and the declining real estate industry, the household appliances industry experienced even greater challenges, with falling growth on the whole and even negative growth in some categories. The data from the Ministry of Industry and Information Technology of thePeople’s Republic of China (MIIT) shows that from January to December 2015, the revenue from household appliances industry reached RMB 14 trillion, an year-on-year0.4% decline. According to data from the China Market Monitor, in 2015, the retail sales of air-conditioners for the year declined by5% year-on-year, and2.2% for refrigerator in the same period. Among the three white goods products, namely air conditioners, refrigerators, and washing machines, with the latter seeing a slow growth rate with retail sales up about1.8%. Though kitchen appliances boasted faster growth than the overall householdappliances’ growth rate, its growth rate saw a slow down as well.
A new wave of industrial restructuring has helped accelerate both product and consumption upgrading in the household appliance field. Digital and intelligent technologies are exerting significant influences on household appliances reform. For household appliance manufacturers to maintain sustainable growth in
the future we need to gravitate towards becoming both user and product oriented, improving efficiency,
promoting product upgrade, increasing intelligent product development, expanding our e-commerce
The 2015 Annual Report of Midea Group Co., Ltd. channels, and driving innovation in technology, sales channel and service.
For the medium-and-long term future, the following factors will help contribute to the unchanging growth in the household appliances industry within China:
a. Under the recently launched government framework, the “Income Doubling Plan” and “New Urbanization” initiatives, the possession ratio of appliances per household is expected to keep growing continuously. In 2015, the per capita income of urban residents nationwide was close to USD 5,000, and that in Shanghai, Beijing, Zhejiang and Shenzhen even reached or approached USD 8,000. The increase in per capita disposable income has supported the structural upgrading of household appliances, making those appliances becoming more of a daily consumer product. In 2015, the urbanization ratio of China was about56%. However there is greater growth potential for China to become more urbanized, be it in quantity or quality. The implementation of “people-centered urbanization construction” has played a positive role in driving consumption and releasing domestic demand potential, while also injecting new development opportunities for the long-term stable growth of the household appliances sector.
b. China has witnessed an apparent consumption upgrading trend in the household appliances industry. With over 1.6 billion units of households appliances owned by Chinese families so far, the continuous and stable upgrading demand from consumers will be a main driver for further growth in household appliances sales. Furthermore, improvements in performance and quality in regards to energy-saving, environmentally friendly, smart innovation, online platforms and industrial design will further promote the consumption upgrade, and and improve the product mix and profitability of home appliance manufactuers. According to data from the China Market Monitor, inverter products have become more and more popular. The share of retail sales from inverter air-conditioners rose from54% in 2013 to62% in 2015, and from20% in 2013 to37% in 2015 and12% in 2013 to20% in 2015 for washing machines and refrigerators respectively. Meanwhile, the share of retail sales from multi-door and side-by-side refrigerators increased from14% in 2013 to26% in 2015, with sales for automatic washing machines rising from73% in 2013 to92% in 2015, and sales of its 7kg washing machines growing from42% in 2013 to65% in 2015. The shares of various high-end kitchen products and health appliances maintained its growing trend, which came in faster than the whole industry as a whole.
The 2015 Annual Report of Midea Group Co., Ltd. c. In this era ofInternet+, technological innovation will certainly move China from a manufacturing base towards an actual manufacturing power for household appliances. Moreover, with continuously developed supporting application technologies such as smart control technology, electronic information technology, Internet-of-Things technology, big data and cloud computing, and the popularity of various mobile intelligent devices will effectively promote the fast development of intelligent household appliances. Thus, the Smart Home is widely considered as the future of home appliances. From the accomplishment of a single intelligent product in providing a smart home solution to customers, and the configuration of a harmonious, cooperative and sharing smart home platform chain, those household appliances giants that own the core resources will enjoy greater competitive advantages. According to data sourced from AVC (All View Cloud), a Chinese Big Data Organization, by 2020, the overall output of intelligent household appliances will break the RMB 1 trillion mark. The years 2015 to 2020 will see an explosive growth in smart washing machines, air-conditioners and refrigerators, with penetration rates growing from15% to45%,10% to55%, and6% to38% respectively, of which the output of intelligent hardware will exceed RMB 600 billion.
d. During this Internet generation, the O2O model with online-offline integration and big data, will continuously foster the upgrade of channel transformation in household appliances manufacturers. The e-commerce market is growing rapidly, the information platform for household appliances manufacturers is gradually maturing, and the partnerships between household appliances manufacturers and Internet industries are setting a new trend. In 2015, as the data from the Ministry of Commerce indicates, online retail sales nationwide reached RMB 3.88 trillion, an increase of33.3% year-on-year, ranking it first place in the world.
e. Relying on this giant domestic market in China, with a population of 1.4 billion, together with its large-scale advantages, product cluster advantages, industrial support advantages and capital advantages,China’s household appliances industry will continue to keep its global competitive position.China’s position as a global household appliances manufacturer and exporter will be further stabilized. Furthermore, Chinese home appliances manufacturers are also changing their role internationally. They have begun to positively engage in global industrial resources integration, and are pushing forward with their global strategy and positioning, improving its international competitiveness while creating new chances for global operations.
The 2015 Annual Report of Midea Group Co., Ltd. f. With new competitive conditions, the household appliance industrial environment will further improve and the markets will become more increasingly centralized. Relying on their strengths in brand, technology, capital, distribution channels and marketing skills, the leading household appliance manufacturers are expected to further increase their market shares and profitability, and as a result promote orderly competition and sound progress in the industry.
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
|||
|-|-|
|Main assets|Reasons for any significant change|
|Monetary assets|Up 91% YoY, mainly due to the increase in operating cash flows|
|Fixed assets|Down 4% YoY|
|Intangible assets|Down 1% YoY|
|Inventories|Down 30% YoY, mainly due to de-stocking measures|
|Construction in progress|Up 44% YoY, mainly due to the investment in the Global Innovation Center and R&D|

 2.2 Main assets overseas
□ Applicable√ N/A
3. Core Competitiveness Analysis
3.1 As one of the leaders among the global household appliance makers and a dominator in the major appliance sectors, Midea Group provides high-quality, one-stop home solutions through its wide product range, complete with full specifications.
As the only white goods enterprise with a whole industrial chain and full product line in China, Midea Group has developed a complete industrial chain combiningR&D, manufacturing and sales of key components and finished products, supported by an industry-leadingR&D centre and the manufacturing technology of homeappliance’s core components (such as compressors, electrical controls and magnetrons), and ultimately based on its powerful capabilities in production and logistics services of upstream parts and components, for example, motors. Midea is widely known as a top appliance brand
in China, ranking
6th
on the Ruifu Global List 2015 ofChina’s Top 100 Brands in Value with a value of
RMB71.611 billion. Its dominance in the major appliance markets means that it can provide a wider
The 2015 Annual Report of Midea Group Co., Ltd. range of competitive product sets than its competitors. It also means internal synergies in brand effect (awareness), price negotiation with distribution channels,customers’ needs research andR&D investments. Compatibility, coordination and interaction among household appliances have become increasingly important since smart home is gaining popularity. With a full product line, Midea has had a head start in providing a combined and compatible e-home platform with integrated home solutions for customers.
3.2 GlobalR&D resource integration capabilities, continuing lead inR&D and technical innovation The Group is focused on building a competitive, multi-layered globalR&D system centering on user experience and product functions, which represents world-classR&D input and strength. Up to end of 2015, the Group has had 21,581 patents granted. In the past three years, it participated in the formulation of 5 international standards, and 112 national / industry standards. Meanwhile, the Group has set up its Global Innovation Center to bring in more hi-tech talent and integrate its globalR&D resources. It has also set upR&D hubs in the US, Germany, Singapore, South Korea, Japan and Italy to research our international needs. The Group has been in close cooperation with over 30 scientific research institutions at home and abroad such as Tsingua University, Zhejiang University, MIT, UCB and Stanford, improving ourR&D strength and facilitating our business relationships with their assistance. While developing our new core technology, the Group has also placed great importance to the commercial application of itsR&D achievements. Meanwhile, we became the main industry players in developing and launching a series of innovative products based oncustomers’ needs, such as the air conditioner that consumes "1 kWh per night", the air conditioner with high-efficient cooling/heating system, the air conditioner tailor-made for children, the "intelligent precision-dispensing" washer-dryer, the "Steam Cube" (Zhenglifang) Series microwave oven, the IH smart electric rice cooker, the high-temperature steam cleaning range hood, the running water heater and the smart water purifier, which have been highly recognized within the market.
3.3 A strong network of global operations and self-owned brands developed and designed withMidea’s globally-advanced manufacturing capabilities, enormous business size, wide product range and global production bases
With theworld’s leading production capacity and experience, and a wide variety of products as well as its production bases all over the world, the Group has been able to expand rapidly into the emerging
The 2015 Annual Report of Midea Group Co., Ltd. overseas markets and is becoming a stronger competitor in those mature markets. The Group is one of the biggest manufacturers in the world for many product categories, which gives it its competitive edges in efficiency and cost, that its overseas competitors are unable to compete with or replicate. Overseas sales have accounted for nearly40% of theGroup’s total sales. Its products are exported to over 200 countries. In addition, through its long history of ODM and OEM services for foreign brands, the Group has obtained a deeper knowledge and understanding about the characteristics and needs of those markets. It is expanding its overseas marketing channels and accumulating operational experience in overseas markets through overseas joint ventures set up by seizing opportunities. In this way, it is trying to promote overseas branding, and shifting its focus from OEM to OBM and giving direct supervision to local operations.
3.4 Broad and stable channel networks ensuring the steady growth ofMidea’s online and off-line sales By virtue of years of development and investments, Midea Group has formed an all-dimensional market coverage. In the mature first and second-tier markets, the Company has developed and maintained good partnerships with large home appliance retail chains such as Gome and Suning. While in the broad third and fourth-tier markets, the Company uses flagship stores, exclusive shops, traditional channels and new channels as effective supplements. Already, the Company has achieved its full coverage in first and second-tier markets with over95% coverage in the third and fourth-tier markets. Additionally, the Company's dominance in branding, products, offline channels and logistics distribution have also created powerful guarantees for the Company's rapid expansion of its e-commerce business and channels. Achieving the highest online sales amongChina’s household appliance manufacturers,Midea’s online retail sales approached RMB16 billion in 2015.
3.5 Sound corporate governance mechanism and effective incentive mechanism to provide a solid foundation forMidea’s sustained and steady development
Paying close attention to the construction of a governance framework, regarding its corporate control, separation of powers, centralization and decentralization systems, the Group formed a mature management system for professional managers. The divisional system has been in operation for many years, and its performance-oriented evaluation and incentive mechanism featuring full decentralization has become a training and growth platform for the Group's professional managers. The Group's senior management team consists of professional managers who have been trained and forged in the
The 2015 Annual Report of Midea Group Co., Ltd. operational practices of Midea Group. They have been working for Midea on avaerage for more than 15 years, so they all have rich industry and professional experience, a deep understanding of the home appliance industry throughout both China and the world, and an accurate understanding of theindustry’s functioning environment and corporate operations management. The Company's advantages in systems and mechanisms have laid a solid foundation for the promising, stable and sustainable future development of the Company.
Currently, the senior core management team and the key managerial staff hold a total stake of approximately10% in the Company through direct or indirect stock ownership, multiple stock option incentive plans and employee stock ownership plans, marking the establishment of a governance structure aligning the interests of management and shareholders, as well as the formulation of an incentive scheme comprising long and short-term incentives and restrains.
The 2015 Annual Report of Midea Group Co., Ltd. Section IV Management Discussion and Analysis
1. Overview
In 2015, guided by the three main strategies of “Leading Products, Operational Efficiency and Global Operations”, we strengthened our transformation by focusing on improving products, investigatingcustomers’ needs, clarifying our business structure, streamlining our organization at all levels, building a synergy platform and improving our innovation mechanism andR&D capabilities. As a result, our product quality and reputation have kept improving. Our profitability and operating quality have continued to increase and our competitive edge with multiple products have been further solidified. Compared with 2014, the Company recorded a slight drop of2% in its operating revenues for 2015 amid the slower growth of the entire household appliance industry. However, due to an upgrade of our product mix, our cost controls and the stable costs of raw materials, 2015 saw an impressive year-on-year growth of21% in net profits attributable to the Company, one of the best performers among the appliance makers. The gross profit rate of the Company reached25.92%, up by 0.46 percentage points from 2014. Furthermore, the net cash flows arising from the operating activities of the Company reached RMB26.76 billion, up8% from the year earlier.
In 2015, Midea Group was ranked
32nd
on FortuneMagazine’s list ofChina’s Top 500 Enterprises, the best in thecountry’s household appliance sector. In addition,we broke into the Top 500 on the prestigious ForbesMagazine’s List of the Top 2000 Global Enterprises taking 436th place. According to the All-China Federation of Industry and Commerce, Midea was ranked
13th
on the list of China's Top 500 Private Companies, and according to the China Enterprise Confederation, we came in at No. 38 on the list ofChina’s Top 500 Manufacturers. On the Ruifu Global List 2015 ofChina’s Top 100 Brands in Value, the “Midea” brand was ranked
6th
with a value of RMB71.611 billion. Also, this year, Midea Group became the first household appliance manufacturer in China to be rated by the three major international ratingagencies—Standard&Poor’s, Fitch andMoody’s, with their outlooks for theCompany’s credit rating all being “stable”, which stood out among the global household appliance makers and the domestic private enterprises.
The 2015 Annual Report of Midea Group Co., Ltd. In 2015, the Company carried out the following taks:
a. Focused on products and users, continuously optimized product mix and improved the stability of ourproduct’s competitive advantages
—Household Air-conditioners: Midea values consumer research and user experience. It has, based on the core values for air-conditioners– cooling, heating and energy-saving, innovated its product development, continuously optimizing our product mix, earning praise throughout the industry, advancing our new innovation excellence and breakthroughs in several technological areas including intelligent control, core parts, alternative refrigerant application and efficient energy saving to develop a series of products with greater differentiation.Midea’s “Cooling King” air-conditioners have adopted alternative refrigerant ring technology, which helps maintain cooling even under60℃. Our “Heating King” series uses innovative air spraying enthalpy compressor technology to greatly improve its heating capacity, even when operating at less than-32℃. The “Mute King” series has introduced a special air system to shorten the air stroke, and strengthen air capacity, with its noise level running at only 17 DB at low speed level. The “Comfortable Star” series utilizes the principle of “lowering speed to increase pressure” to provide a “no-wind” air-conditioning experience. The “I-Young” series of intelligent cloud air-conditioners realized its interaction withXiaomi’s intelligent wristband, which makes it possible for automatic power-on/off and temperature control during sleep. Midea air-conditioners for children have been equipped with “intelligent temperature control” and “intelligent quilt-kicking prevention” functions which can automatically adjust temperature, wind speed and direction based on thechild’s sleep features.
— The Midea Residential Air-conditioner, thanks to its strong creativity, won the National Technology Advance Award
2nd
prize for its project on “Research and Industrialization of key energy-saving technology in room air regulators”, the China Household Appliances Technology Advance Award 1st prize for its project on “Research and Application of key air-conditioning intelligent technology”, the third prize from the China Household Appliances Technology Advance Awards for its project on “Research and Application of key cooling technology under super-high temperature in inverter air-conditioners” and was included on the 2015 National Torch Plan of the Year. Other awards included first prize in the China Light Industry Council Science Technology Advance Awards for its project on “Research and Application of efficient energy control technology of European A+++ household air-conditioners”, second prize from
The 2015 Annual Report of Midea Group Co., Ltd. the 6th Chinese Association of Refrigeration Science Technology Advance Awards for its project on “Research and Application of key technology in double-tubular flow cabinet air-conditioners”. For the year 2015-2016 Central Government Air-conditioner Supply Scheme, Midea products have won the most tender bids, accounting for nearly half of the total number of air-conditioners acquired. This presents as further evidence thatMidea’s outstanding technology and brand advantages in both household and commercial air-conditioning leads the field.
—Commercial Air-conditioners: As a leading brand for Commercial Air-Conditioning in China, Midea currently possesses more than 1,000 patented technologies.Technologies such as our highly efficient double-level-compression falling-film centrifugal unit, the highly efficient flotation DC frequency conversion centrifuge, the highly efficient falling-film spiral air heat pump, and our MDVS series DC frequency conversion VRV are top in this industry. Moreover, many globally leading technologies have also originated from Midea commercial air-conditioners. Relying on its internationally advanced technologies, rich product lines, excellent quality and local services,Midea’s commerical air-conditioners have frequently won the bid for global projects. In 2015, domestically, Midea made a name for itself winning national key projects including Tianjin National Sports Games and supporting real estate projects, the Guangzhou metro, Shenzhen metro, and Putian Wenxian Pedestrian Street project. Internationally, it successfully won the tender for nearly all air-conditioning installation projects for the 2016 Rio Olympic Games venues, European Youth Olympic Games venues, African National Sports Games, the terminal building of Benin international airport in West Africa, Banco de Portugal, and the government information building in Cambodia, clearly enhancing the reputation ofMidea’s commercial air-conditioning products.
The coil tube heat exchanger and MKZ series combined air handler, conceived byMidea’s Commercial Air-conditioners Division have gained the authorized certification from AHRI. Benefitting from its long-term investment and its accumulation knowledge and experience in intelligent household industry, Midea commercial air-conditioners have passed the KNX global residential and building control standards certification originating from Europe, and have achieved the LonMark quality mark that represents using top technologies in the automatic intelligent field, making itChina’s first air-conditioning brand to obtain both the KNX and LonMark certifications simultaneously. In the field of VRF,Midea’s CAC were the first to pass strict global building BTL testing in China, making it clearly comparable with
The 2015 Annual Report of Midea Group Co., Ltd. other products in the same global intelligent buildings category. In 2015,Midea’s CAC MDVXi DC intelligent inverter VRF won the China Appliance Environmental Friendliness Award at the China Appliance& Electronics World Expo due to its outstanding performance.
—Washing machines:Midea’s front load inverter intelligent washing machines “i-Bigger” features such functions as mobile remote control, intelligent reminding and failure diagnosis, effectively motivatingusers’ demands for intelligent washing machine market. LittleSwan’s “Beverly” front load washing machine and top load washing machine both won the international industrial design awards, the Red Dot Award, and the China Red Star Award for there automatic washing detergent dispenser, unique water flowing technology and brand-new interactive experience. Little Swan also joined forces with Disney to launch achild’s customized washing machines. The “Big White” and “Mickey Mouse” provide more personalized and gentle washing functions based onchildren’s clothes fabrics.
At the 2015 China Household Electrical Appliances Technical Conference Awards, our “Innovation and Application of washingmachine’s hydrodynamic platform design optimization technology” was awarded first prize, and for its “Innovation and Application of smart washing machine sensor technology” it received third prize. At the 12th China (Wuxi) International Industrial Design Expo, LittleSwan’s i-Intelligent “Watercube” front load washing machine won the 4th China “Taihu Award”, whileMidea’s “fast cleaning” front load washing machine, was awarded second prize.
—Refrigerators: Concentrating onusers’ demands, and focusing on intelligent and high-end products, Midea launched a series of star products that aimed to satisfy different consumer demands. The Midea“i+(plus)” smart refrigerators are linked to the smart mobile APP, which enables users to know what foods are currently in the refrigerator, learn popular recipes, report automatic failures and engage community interaction. The Midea BCD-436WGPZM refrigerator consumes no more than 1 KW.h every day, keeping noise levels at 39 DB, and protects delicate foods effectively through a multi-contact temperature sensor.Midea’s BCD-303WTZMA(E) intelligent refrigerator allows convenient operations through Aliyun intelligent WIFI, keeping food fresh via a platinum odor cleaning system, and cooling dimensionally in a360° revolution, making food storage more safe. The Midea 620WKGDZV and BCD-330WGZM intelligent refrigerators triumphed at the CHEAA Awards Ceremony winning the 2014-2015 Intelligent Refrigerator Innovation Technology Leading Award and the 2012-2015 Star of Intelligent Food Refrigerators respectively.
The 2015 Annual Report of Midea Group Co., Ltd.—Small household appliances: The Midea “Tianmu” series hood has replaced manual cleaning with an intelligent vapor cleaning technology, improving the cleaning rate up to98.5%, and has achieved the collection, absorption and exhaustion of smoke effects through excellent structural and functional design, truly overcoming usage disadvantages of traditional hoods.Midea’s smart “Steamcube” microwave oven adopts intelligent vapor sensing technology to control heat intelligently, while maintaining more nutrition and tastes. The “Research and Application of smart sensing control technology use on highly efficient energy-saving gas cookers” project won the 2015 China Household Appliances Technology Advance Award
2nd
prize, while its “Research and Application of kitchen appliances intelligent sensing and control system”, was awarded third prize. Our “Research and Industrialization of key technology in household inverter micro-wave ovens” project and “Research and Industrialization of high-effcient Magnetron key technologies” project were successfully included into the 2015 National Torch Program of China.Midea’s “Dingfu” series rice cooker effectively addressesconsumers’ concerns of rice being stuck to the bottom of the cooker, being tasteless, and not being totally cooked as well as concerns over water overflowing. Its multi-section IH heating technology produces powerful heat, boiling water more thoroughly, effectively retaining nutrition, and achieving a better taste. For this, it won the 2015 China Appliance Award and 2015 German IF industrial design award. The induction cooker exclusively for the Chinese “hot pot” dish has a unique structure and heat control mode designed specifically for hot pot usage, enabling users to enjoy a professional and pleasant hot pot experience. The Midea Safe series water heater perfectly protectusers’ health and safety through automatic gas detecting valves, and the double inverter constant temperature system can help achieve 7-second speedy water heating as well as heat preservation, greatly reducing cool water consumption.Midea’s “Purifying Cube” air purifier successfully obtained the new national standard certification due to its outstanding bacteria removal and purifying functions.Midea’s water dispenser and purifier products use unique nano-filter technology and impulse washing technology to effectively filter heavy metal ions while achieving the lowest level of waste water in the industry. As a star product generated under the “Making a fresh start” project mechanism,Midea’s “Silent& Clean” M2 intelligent water purifier overcomes the usage disadvantages of traditional machines, and earning it high praise from consumers because of its free from installation,RO+ filter, convenient filter replacement and intelligent/smart control.
The 2015 Annual Report of Midea Group Co., Ltd. b. Pushing “double-smart” (smart home+ intelligent manufacturing) strategy and positioning it in new business areas
Relying on its wide range of product categories and customer base globally, Midea is transitioning from a single product manufacture to a product supplier that provides systematical service solutions and systems, actively and pragmatically promotingMidea’s M-SMART smart home strategy, and constructing the intelligent household application and demand design under“Internet+” mode. Currently, Midea has become the Corporate Chair of the China Smart Home Industry Alliance. In 2015, the Company internally made active movements towards the support of intelligent product launches in the market. In terms of the smart home system structure and platform capacity improvement, it has developed the WIFI modular, a Midea intelligent cloud and system core SDK (software package), continuously optimizing our Meiju APP and facilitating it with fast connection and voice control functions. In addition, it has established a user community platform to achieve direct consumer interaction and has started a housekeeping management system. Externally, the Company opened itself up to other various fields, and completed its connection with many cloud system platforms and protocols including Jingdong, Alibaba, Xiaomi and Wechat, maintainingMeiju’s compatibility with other platforms. It has also established a connection and technology follow-up with international mainstream IOTs (Interoperability Tests) including Apple Homekit, Allseen, Tread, WIFI, and ZIGBEE alliances. Furthermore, the Company promoted its partnerships with household interior designcompanies (Turningcat/Home Cloud Intelligent), routers (Huawei/Xiaomi/Tenda), mobile Internet platforms (Wechat/Baidu/Umeng), intelligent hardware (ROKID robot/Dingdong loudspeaker box), and other third-party applications (IFLYTEK/MoWeather). Through the impact of SDK on external platforms, Midea has realizedM-Smart’s connection with several external platforms.
In 2015, Midea expanded its business into robotics, and established an industrial and service robot company with the globally reknowned robot giant, YASKAWA, from Japan. It aims to completely improve its intelligent manufacturing level by way of “intelligent manufacturing+ industrial robots”, and to push the development of core parts such as serve motors and system integration along with the development of industrial robots. The “smart home+ service robots” have assisted in the promotion ofMidea’s smart home development and ecological construction. Moreover, the service robots have helped the development of sensors, artificial intelligence and the smart home business, contributing to the
The 2015 Annual Report of Midea Group Co., Ltd. development ofMidea’s capacity in making its smart home project systematic and forming an ecological chain. Furthermore, the Company holds17.8% shares in Anhui EFORT and increased its number of shares inGermany’s KUKA, actively marching into the robot industry to create a “Second Track” development route. Ever since 2012, Midea has in total invested in about a thousand production line robots, and is expected to further invest about RMB 5 billion in factory automation.Midea’s air-conditioner intelligent factories in Guangzhou and Wuhan have achieved real-time monitoring in ordering, supply,R&D, production and distribution through their automative equipment, transparent production, intelligent logistics, mobile management and data-based decision-making, greatly improving the production automatization.
c. Strengthening the expansion of core channels, with fast growth in e-commerce and upgraded logistics coordination
In terms of offline channels, Midea flagship stores total more than 2,200, covering over90% of markets in the third and fourth tier cities. It has gradually implemented its e-commerce O2O integration business largely supported by these flagship stores, and wholly improved its after-sales service level. The Company continued to strengthen its strategic cooperation with Suning and Gome, the two largest KA channels, and with more than 80 “TOP club” customers, with whom it carried out joint promotional activities exclusively for our Midea brand in order to strengthen its postion in the end market. In 2015, Midea realized over RMB 40 billion of sales revenue in these 4 main channels.
In terms of online channels, the Company continued to further strengthen its strategic cooperation with platforms such as Taobao and Jingdong, and the Midea online flagship stores has operated successfully within this platforms. 2015 saw a total of RMB 16 billion in retail sales for all online channels, ranking it first place in the household appliances industry, and in which 11 of our products achieved first places in its own category. During this year the official site forMidea’s online shopping set up its formal operations, and initially established a user-oriented interactive O2O platform. In 2015, there were nearly one hundred offline distributors and dealers and over 100,000 online sales promotors connected to this platform, with daily orders exceeding 600, and member numbers exceeding 10 million. With regard to channel cooperation,Midea’s e-commerce platform reinforced its strategic cooperation with various platforms including Jingdong, Tmall and Suning.com, enjoying a stable development via direct sales and
The 2015 Annual Report of Midea Group Co., Ltd. the rapid improvement in business efficiency.
The Company continued to promote the consolidation of its internal and external social logistics resources, improving its overall capability to provide logistical solutions. It has launched an integrated logistics system covering 17 provinces and cities nationwide, initially completing the construction of a highly efficient end-to-end logistics system from storage, trunk routes and branch transport to the last kilometer delivery.
d. Consolidating our overseas business platforms, strengthening cooperation with joint ventures and promoting OBM sales and overseas business growth
Midea international HQ was set up to coordinate our overseas OBM business, to transition the overseas sales business mode from “OEM” to “OBM”, and to transform the organizational function from supporting “export from China” to “local operation”. Midea continues to invest heavily in overseas markets, to improve the risk control system and after-sales service platforms for overseas businesses, settingup a special team for our OBM products and markets to ensure the stable growth of OBM business. Furthermore, it has expanded our product categories in our overseas manufacturing bases, encouraged the localization of factory supply chain, and connected the business evaluation mechanism between product divisions and overseas subsidiaries, further empowering theGroup’s support for overseas subsidiaries and accelerating our cost competitiveness. Though 2015 witnessed a downturn in the global economy and a great decline in demand in many countries,Midea’s exports in such product categories as refrigerators, washing machines, water heaters and vacuum cleaners are still toppingChina’s household appliances enterprises. Particularly sales in the main targeted markets such as the Middle East and Central Africa, the Association of Southeast Asian Nations and India all boasted a growth rate of over20%. The Brazilian market retained its leading position with the OBM business share among overseas sales increasing to over5%.
It has continued its joint venture and cooperative partnerships with global leading giants in the fields of HVAC (heating, ventilation, and air-conditioner) as well as with other household appliance manufacturers, thus expanding its business growth space. In March of 2015, Carrier acquired35% shares inMidea’s Commercial Air-Conditioning Chongqing factory, intending to expand its market sector in water chiller products and increase its global market shares and product competitiveness. In the same month, the
The 2015 Annual Report of Midea Group Co., Ltd. Company established a joint-venture company with BOSCH, with an aim to jointly expand the market of VRF products by consolidating and utilizing the professional knowledge, technology and market channels of both companies. In April 2015, Midea announced a joint venture with SIIX, to implement its product excellence strategy, expand intelligent industry, and carry out further cooperation in such fields as household appliances control, smart sensor, energy management, intelligent security and healthcare electronic system.
e. IncreaseR&D investment, innovate creation mechanism and activate global innovation center Centering on our consumers, the Company continued to increase its investment in productR&D, set up a globally competitiveR&D organizational structure and improving its innovation capacity. By the end of 2015, the Company had been granted 21,581 patents in total. In 2015, the Company applied for a total of 10,523 patents consisting of 4,205 invention patents. At the 17th China Patent Awards, in their appraisals Midea Group was granted 12 China Patent Outstanding Awards. It reformed its innovation structure while integrating and establishingMidea’s new global innovation center, which not only looks forward to the future but also focuses on sharing of fundamental technologies, research innovation in common and core technologies, and also research into artificial intelligence including image and voice identification.Additionally, focusing on the market and users, it promoted its development of top products with brand-new ideas and operating modes. The “making a fresh start” project which focuses on developing new platforms, as well as with “the second track” plan aimed atdeveloping innovative products in the new fields of health, smart intelligence, beauty, nutrition and environment protection broke through the traditional organizational system and development approaches, iproviding greater incentives toR&D personneland ensuring the sufficient resource support for an innovative projects. f. Strengthening industrial chain coordination and support, and creating a platform for “industry+ finance” Midea has set up a global capital financial platform, in order to improve its global capital management capabilities and whole-value chain operations efficieny, which has helped to achieve the visualization, verification and utilization of its capital. Meanwhile, it has introduced a new development policy integrating industry with finance by centering onMidea’s industry ecology circle, and focusing on industry and finance development and “fintech” platform creation. This has provided a more diversified
The 2015 Annual Report of Midea Group Co., Ltd. financial services area embracing our supply chain finance, consumer finance, Midea wallet, and third-party payment and asset management for users, thus creating drivers for both industry and finance. In 2015, Midea strenghtened its position in the financial field covering financing, small-amount loan and commercial factoring businesses, by acquiring small loan companies,by establishing an online financial services and commercial factoring companies so becoming part of the new “fintech” sector. Dependent on our Midea logistics, e-commerce, after-sales and venture capital platforms, we have utilized big data and Internet tools to provide financial service solutions in the industrial chain including loan settlements and discounting Meiedai, fast loan provisions Meisudai and and employee financing services Meirendai in this industrial ecological circle.
Financial institutions, including Shunde Rural Commercial Bank, Fengcheng Shunyin County Bank, Zhangshu Shunyin County Bank and Wanjiang Financial Leasing Co., Ltd., in which the Company has shares witnessed sound development. During the reporting period, the financial operations contributed more than RMB2.2 billion to the Company.
g. Launching organizational and procedural reform, establishing efficient operational systems and popularizing ourT+3 production strategy
Midea has connected both its external and internal value chains, gradually establishing a market-oriented efficient operating system. As an important supporter of “One Midea, One System and One Standard”, Midea has targeted “consistent procedures, consistent main data and consistent IT systems”, launching its “632” project spread over 6 operating systems (PLM/ERP/APS/MES/SRM/CRM), 3 management platforms (BI/FMS/HRMS) and 2 technological platforms (MIP/MDP). These projects were all put into operation, laying a solid foundation for Midea management and its business base, and providing overall optimization and improvement in various aspects, such as customer experience, management standardization, operation transparency and coordination.
Focused on users and products, Midea restructured its organizational structures operational systems and procedures based on internet+, and has established a sharing and open business and functional platform for e-commerce, logistics, services, innovation, finance, purchasing and internationalization, creating a cultural atmosphere featuring “equality, trust, boundless and partnership”.
With an emphasis on markets and consumer needs, Midea actively popularized itsT+3 production and
The 2015 Annual Report of Midea Group Co., Ltd. sales approach, changing its original self-estimated production planning to that based on customer orders and needs, which has reduced intermediary links, improved manufacturing productivity through dual production and marketing, accelerated inventory turnover and rejuvenated its market competitiveness. In order to help the implementation ofT+3 production and sales system, the Company took the following measures: from the marketing and sales end we are guiding customers towards changing their way of thinking putting an emphasis on order and inventory management. Meanwhile, we have strengthened our supply chain management, introducing high-quality resource suppliers and eliminating low-quality suppliers thus improving our supply strategy. With ourR&D position, we have continuously tried to simplify product models and materials, enhance the overall modular design, reduce product material quantities and improve standardization levels. While from our manufacturing viewpoint, Midea has also encouraged improving manufacturing flexiblity, automation and lean manufacturing upgrading, and actively engaging in the product design phase to ensure better quality and more efficient production.
h. Continuously implementing long-term incentive plans, and improving corporate governance: After two stock option incentive plans for our medium and high-level management as well as for key-business employees, the Company continued to carry out two “partner” stock ownership plans for its core management personnel that have played a significant role in theCompany’s medium and long-term development business performance, therefore trying to change them from “managers” to “partners”. Through allocating share purchase quotas according to their performances, executing stock options in three stages and extending their share lock-up periods, management are empowered with the responsibility to create long-term value for the Company. The “partner” stock ownership plans and the stock option incentive plans have helped to build up a stock ownership structure in line with the long-term interests of all shareholders. In this way, the governance mechanism of the Company was further improved.
2. Analysis of Main Business
2.1 Overview
Same with the contents presented in “1. Overview” of this section
The 2015 Annual Report of Midea Group Co., Ltd.√ Yes□ No
See “1. Overview” of this section.
2.2 Revenues and Costs
2.2.1 Breakdown of operating revenues
Unit:RMB’000
|||||||
|-|-|-|-|-|-|
||2015||2014|||
|||As a percentage of||As a percentage of||
||||||YoY Change (%)|
||Amount|operating revenues|Amount|operating revenues||
|||(%)||(%)||
|Total|138,441,226|100%|141,668,175|100%|-2.28%|
|By business segment||||||
|Manufacturing|126,911,843|91.67%|129,095,704|91.13%|-1.69%|
|Logistics||||||
||1,652,757|1.19%|1,966,345|1.39%|-15.95%|
|transportation||||||
|By product||||||
|Large home||||||
||87,932,142|63.52%|92,402,440|65.22%|-4.84%|
|appliances||||||
|Air conditioners||||||
||64,491,950|46.58%|72,704,843|51.32%|-11.30%|
|and components||||||
|Refrigerators||||||
||11,422,676|8.25%|9,723,781|6.86%|17.47%|
|and components||||||
|Washing||||||
|machines and|12,017,516|8.68%|9,973,816|7.04%|20.49%|
|components||||||
|Small household||||||
||35,445,859|25.60%|32,709,715|23.09%|8.36%|
|appliances||||||
|Motors|6,471,372|4.67%|7,219,614|5.10%|-10.36%|
|Logistics|4,008,479|2.90%|3,564,559|2.52%|12.45%|
|By geographical segment||||||
|PRC|79,147,263|57.17%|81,277,239|57.37%|-2.62%|
|Other countries||||||
||49,417,336|35.70%|49,784,809|35.14%|-0.74%|
|and 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 intracompany 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 intracompany sales amount.
The 2015 Annual Report of Midea Group Co., Ltd. 2.2.2 Business segments, products or geographical segments contributing over10% of the operating revenues or profits
√ Applicable□ N/A
Unit:RMB’000
||||||||
|-|-|-|-|-|-|-|
|||||YoY change of|YoY change of|YoY change|
||Operating||Gross profit||||
|||Operating costs||operating|operating costs|of gross profit|
||Revenue||margin||||
|||||revenue (%)|(%)|margin (%)|
|By business segment|||||||
|Manufacturing|126,911,843|93,226,876|26.54%|-1.69%|-2.46%|0.58%|
|By product|||||||
|Large home|||||||
||87,932,142|63,685,678|27.57%|-4.84%|-5.82%|0.76%|
|appliances|||||||
|Air conditioners|||||||
||64,491,950|46,270,517|28.25%|-11.30%|-12.88%|1.30%|
|and components|||||||
|Small household|||||||
||35,445,859|26,574,533|25.03%|8.36%|7.95%|0.29%|
|appliances|||||||
|By geographical segment|||||||
|PRC|79,147,263|55,265,927|30.17%|-2.62%|-5.71%|2.28%|
|Regions outside of|||||||
||49,417,336|39,415,872|20.24%|-0.74%|1.89%|-2.06%|
|PRC|||||||

Under the circumstances that the statistical standards for the Company's main business data adjusted in the Reporting Period, the Company's main business data in the recent year is calculated based on adjusted statistical standards at the end of the Reporting Period
□ Applicable√ N/A
2.2.3 Whether revenue from physical sales is higher than service revenue
√ Yes□ No
|||||||
|-|-|-|-|-|-|
|Business segment|Item|Unit|2015|2014|YoY Change (%)|
||Sales volume|0,000 units/sets|27,945.50|26,498.79|5%|
|Home appliances|Output volume|0,000 units/sets|26,691.48|27,198.96|-2%|
||Inventory|0,000 units/sets|2,524.80|3,829.78|-34%|

 Note: The aforementioned statistics about output volume, sales volume and inventory were calculated based on internal standards. Lighting products are excluded because they are difficult to count.
2.2.4 Execution of significant sales contracts in the Reporting Period
□ Applicable√ N/A
The 2015 Annual Report of Midea Group Co., Ltd. 2.2.5 Breakdown of operating costs
By product
Unit:RMB’000
||||||||
|-|-|-|-|-|-|-|
|||2015||2014|||
||||As a percentage||As a percentage|YoY Change|
|Product|Item||||||
|||Amount|of operating|Amount|of operating|(%)|
||||costs (%)||costs (%)||
||Raw materials|78,714,556|84.43%|82,547,228|84.84%|-4.64%|
|Home|Labor costs|5,602,646|6.01%|5,369,794|5.52%|4.34%|
|appliances|Depreciation|2,135,140|2.29%|2,085,768|2.14%|2.37%|
||Energy|1,417,455|1.52%|1,451,043|1.49%|-2.31%|

 Note: Home appliances include large home appliances, small home appliances, compressors and motors.
2.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period√ Yes□ No
For the main subsidiaries included the scope of the consolidated financial statements for the current year, please refer to Note 5 and Note 6 to the Financial Statements. And the main companies newly consolidated in the current year are Main Power Electrical Factory Limited, Midea Microcredit Co., Ltd., Foshan Shunde Midea Microcredit Co., Ltd. and PT Midea Planet Indonesia (for details, please see “5.1” and “a”, “5.2” under Note 5 to the Financial Statements). For the companies deconsolidated in the current year, please refer to “b”, “5.2” under Note 5 to the Financial Statements.
2.2.7 Major changes in the business, products or services in the Reporting Period
□ Applicable√ N/A
2.2.8 Main customers and suppliers
Sales to major customers of the Company
|||
|-|-|
|Total sales to top five customers (RMB'000)|11,145,302.31|
|Total sales to top five customers as a percentage of||
||8.05%|
|the total sales for the year (%)||

Information on top five customers
|||||
|-|-|-|-|
|No.|Customer|Sales amount (RMB'000)|As a percentage of the total|

The 2015 Annual Report of Midea Group Co., Ltd.
|||||
|-|-|-|-|
||||sales for the year (%)|
|1|Customer A|3,468,261.93|2.51%|
|2|Customer B|2,685,044.61|1.94%|
|3|Customer C|2,291,935.44|1.66%|
|4|Customer D|1,386,432.73|1.00%|
|5|Customer E|1,313,627.59|0.95%|
|Total|--|11,145,302.31|8.05%|

Major suppliers of the Company
|||
|-|-|
|Total purchases from top five suppliers (RMB'000)|5,692,494.14|
|Total purchases from top five suppliers as a||
||6.27%|
|percentage of the total purchases for the year (%)||

Information on top five suppliers of the Company
|||||
|-|-|-|-|
||||As a percentage of the total purchases|
|No.|Supplier|Purchases (RMB'000)||
||||for the year (%)|
|1|Supplier A|1,776,348.47|1.96%|
|2|Supplier B|1,170,353.30|1.29%|
|3|Supplier C|1,104,901.54|1.22%|
|4|Supplier D|839,827.14|0.92%|
|5|Supplier E|801,063.68|0.88%|
|Total|--|5,692,494.14|6.27%|

2.3 Expense
Unit: RMB'000
||||||
|-|-|-|-|-|
||||YoY Change||
||2015|2014||Reason for any significant change|
||||(%)||
|Selling and distribution|14,799,769|14,733,917|||
||||0.45%|N/A|
|expenses|||||
|General and|7,441,755|7,498,256|||
|Administrative|||-0.75%|N/A|
|expenses|||||
||138,932|251,327||Increased interest income due to increased|
|Financialexpenses|||-44.72%||
|||||Time deposits|

2.4R&D input
√ Applicable□ N/A
The 2015 Annual Report of Midea Group Co., Ltd. In the Reporting Period, we enhanced our product competitiveness in a consumer-oriented way, ensuring continuousR&D input and encouraging technical innovation, for the purpose of establishing a long-lasting, stable superiority in our products. OurR&D input was mainly used to: A). strengthen consumer research and find out their needs to help create unique selling points for our products, resulting in a point of competitive differentiation for us; B). improve core technology and develop new technology for a better technology system; and C). open up to future cooperations and integrate global innovation resources to improve ourR&D system, as well as build up an innovation incubation platform and an open, self-driven and hard-working technical team. For more details about ourR&D input and product competitiveness improvements, please refer to the relevant contents presented in “Core Competitiveness Analysis” under Section III and “Overview” under Section IV.
|||||
|-|-|-|-|
||2015|2014|YoY Change (%)|
||8,672|9,002|-3.67%|
|Number of R&D personnel||||
|R&D personnel as a percentage in|9.30%|8.32%|0.98%|
|total employees||||
||5,262,600|4,530,000|16.17%|
|R&D input (RMB’000)||||
|R&D input as a percentage in|3.80%|3.20%|0.60%|
|operating revenues||||
||0|0|0|
|Capitalized R&D input (RMB Yuan)||||
|Capitalized R&D input as a|0|0|0|
|percentage in total R&D input||||

Information aboutR&D input
Reason for any significant YoY change in the percentage of theR&D input in the operating revenues□ Applicable√ N/A
Reason for any sharp variation in the percentage of the capitalizedR&D input and rationale
□ Applicable√ N/A
Number of patents for the recent two years
√ Applicable□ N/A
|||||
|-|-|-|-|
||Applied for|Obtained|Closing total number|
||6,899|770|1,452|
|Invention patent||||
||9,535|9,252|14,560|
|Utility model patent||||
||2,340|2,282|5,137|
|Design patent||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
||No changes in our core technical personnel, who have a significant influence on|
|Changes in core technical personnel in|our core competitiveness, in the Reporting Period, and thus no impact on our|
|Reporting Period||
||production and operation.|
|“Hi-tech Enterprise” certified by Ministry||
||Yes|
|of Science and Technology||

2.5 Cash flows
Unit: RMB'000
|||||
|-|-|-|-|
|Item|2015|2014|YoY Change (%)|
|Subtotal of cash inflows from|134,278,290|112,305,174||
||||19.57%|
|operating activities||||
|Subtotal of cash outflows from|107,514,036|87,516,662||
||||22.85%|
|operating activities||||
|Net cash flows from operating|26,764,254|24,788,512||
||||7.97%|
|activities||||
|Subtotal of cash inflows from|44,741,136|2,618,925||
||||1608.38%|
|investing activities||||
|Subtotal of cash outflows from|62,730,329|31,481,322||
||||99.26%|
|investing activities||||
|Net cash flows from investing|-17,989,193|-28,862,397||
||||-37.67%|
|activities||||
|Subtotal of cash inflows from|26,383,619|37,296,774||
||||-29.26%|
|financing activities||||
|Subtotal of cash outflows from|35,260,272|44,706,904||
||||-21.13%|
|financing activities||||
|Net cash flows from financing|-8,876,653|-7,410,130||
||||19.79%|
|activities||||
|Net increase in cash and cash|-84,923|-11,491,634||
||||-99.26%|
|equivalents||||

Explanation of why the data above varied significantly
√ Applicable□ N/A
Mainly due to a larger cash outflow for wealth management products in the prior year, net cash flows from investing activities decreased37.67%.
Explanation of main reasons leading to the material difference between net cash flows from operating
activities during the Reporting Period and net profit for the year
√ Applicable□ N/A
The 2015 Annual Report of Midea Group Co., Ltd. A higher percentage of cash payments received in operating activities.
3. Analysis of Non-Core Business
□ Applicable√ N/A
4. Assets and Liabilities
4.1 Material changes of asset items
Unit: RMB'000
||||||||
|-|-|-|-|-|-|-|
||As at the end of 2015||As at the end of 2014||||
|||As a||As a|Change in||
|||||||Explanation about|
|||percentage of||percentage of|percentage||
||Amount||Amount|||any material change|
|||total assets||total assets|(%)||
|||(%)||(%)|||
|Cash at bank|11,861,977||6,203,283||||
|||9.21%||5.16%|4.05%||
|and on hand|||||||
|Accounts|10,371,718||9,362,103||||
|||8.05%||7.78%|0.27%||
|receivable|||||||
||10,448,937||15,020,030||||
|Inventories||8.11%||12.49%|-4.38%||
|Investment|150,803||171,635||||
|||0.12%||0.14%|-0.02%||
|properties|||||||
|Long-term|2,888,274||951,874||||
|equity||2.24%||0.79%|1.45%||
|investments|||||||
||18,729,881||19,521,814||||
|Fixed assets||14.54%||16.23%|-1.69%||
|Construction in|954,761||661,882||||
|||0.74%||0.55%|0.19%||
|progress|||||||
|Short-term|3,920,933||6,070,879||||
|||3.04%||5.05%|-2.00%||
|borrowings|||||||
|Long-term|90,061||19,205||||
|||0.07%||0.02%|0.05%||
|borrowings|||||||

4.2 Assets and liabilities measured at fair value
√ Applicable□ N/A
Unit: RMB'000
The 2015 Annual Report of Midea Group Co., Ltd.
|||||||||
|-|-|-|-|-|-|-|-|
|||Profit or loss||||||
||||Cumulative fair|Impairment||||
|||from change|||Purchased|||
||Opening||value change|provided||Sold in the|Closing|
|Item||in fair value|||in the|||
||balance||charged to|during the||period|balance|
|||during the|||period|||
||||equity|period||||
|||period||||||
|Financial assets||||||||
|1.Financial assets||||||||
|measured at fair value||||||||
|with fair value changes||||||||
|included in profit and loss||||||||
|for the year (excluding||||||||
|derivative financial||||||||
|assets)||||||||
|2.Derivative financial||||||||
||162,514|-3,692|7,599||||166,421|
|assets||||||||
|3.Financial assets||||||||
||24,789,271|1,306,890|202,757||25,757,914|32,057,556|19,999,275|
|available for sale||||||||
|Sub-total of financial||||||||
||24,951,785|1,303,198|210,356||25,757,914|32,057,556|20,165,696|
|assets||||||||
|Investment properties||||||||
|Productive living assets||||||||
|Others||||||||
|Sub-total of the above|24,951,785|1,303,198|210,356||25,757,914|32,057,556|20,165,696|
|Financial liabilities|360,694|-41,582|-76,028||||243,083|

 Whether there were any material changes on the measurement attributes of major assets of the Company during the Reporting Period
□ Yes√ No
5. Investments Made
5.1 Total investments made
√ Applicable□ N/A
||||
|-|-|-|
|Investments made in the Reporting|Investments made in the prior year||
|||YoY Change|
|Period (RMB’000)|(RMB’000)||
|62,730,329|31,481,322|99.26%|

The 2015 Annual Report of Midea Group Co., Ltd. 5.2 Significant equity investments made in the Reporting Period
□ Applicable√ N/A
5.3 Significant non-equity investments ongoing in the Reporting Period
□ Applicable√ N/A
5.4 Financial investments
5.4.1 Securities investments
□ Applicable√ N/A
No such cases in the Reporting Period.
5.4.2 Derivatives investments
√ Applicable□ N/A
Unit: RMB'0,000
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||Amount||Ratio of||
||||||||Investment|||||||
|||||||||||provided|Investment|investment|Actual|
|||Related -|||||amount at|||||||
||Related|||Initial||||Purchase|Sold in|for|amount|amount to|profit and|
|Operating||party|Investment||Commence|Termination|the|||||||
||party or|||investment||||d in the|the|impair-|at the end|net asset at|loss|
|Parties||transactio|type||ment date|date|beginning|||||||
||not|||amount||||period|period|ment (if|of the|the end of|amount for|
|||n or not|||||of the|||||||
|||||||||||applicabl|period|the period|the period|
||||||||period|||||||
|||||||||||e)||(%)||
|Futures|||Futures|||||||||||
||No|No||-327.94|2015.01.01|2015.12.31|-327.94|||-|748.16|0.02%|1,759.01|
|company|||contracts|||||||||||
||||Forward|||||||||||
|Bank|No|No|forex|-19,490.04|2015.01.01|2015.12.31|-19,490.04|||-|-8,414.41|-0.17%|26,528.85|
||||contracts|||||||||||
|Total||||-19,817.98|--|--|-19,817.98|||-|-7,666.25|-0.15%|28,287.86|
|Source of derivatives investment funds||||All from the Company's own funds||||||||||
|Litigation involved (if applicable)||||N/A||||||||||
|Disclosure date of the announcement||||||||||||||
|about the board’s consent for the||||2015.03.31||||||||||
|derivative investment (if any)||||||||||||||
|Disclosure date of the announcement||||||||||||||
|about the general meeting’s consent||||2015.04.22||||||||||
|for the derivative investment (if any)||||||||||||||
|Risk analysis of positions held in||||For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a||||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|derivatives during the Reporting Period|result of significant fluctuations in raw material prices, the Company not only carried out futures|
|and explanation of control measures|business for some of the materials, but also made use of bank financial instruments and promoted|
|(including but not limited to market risk,|forex funds business, with the purpose of avoiding the risks of exchange and interest rate|
|liquidity risk, credit risk, operational risk|fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities, as|
|and legal risk)|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.|
||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|1. Profit/loss from futures hedging contracts incurred during the Reporting Period was|
|derivatives product invested during the|RMB17,590,100;|
|Reporting Period: specific methods|2. Profit/loss from forward forex contracts incurred during the Reporting Period was|

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|used and relevant assumption and|RMB265,288,500;|
|parameter settings shall be disclosed|3. Public quotations in futures market or forward forex quotations announced by Bank of China are|
|for analysis of fair value of derivatives|used in the analysis of derivatives fair value.|
|Explanation of significant changes in||
|accounting policies and specific||
|financial accounting principles in||
||No change|
|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|
||effective instrument for the Company to eliminate price volatility and implement risk prevention|
|Special opinions expressed by|measures through enhanced internal control, thereby improving the operation and management of|
|independent directors concerning the|the Company; the Company's foreign exchange risk management capability can be further|
|Company's derivatives investment and|improved through the forex funds business, so as to maintain and increase the value of foreign|
|risk control|exchange assets and the abovementioned investment in derivatives can help the Company to fully|
||bring out its competitive advantages. Therefore, it is practicable for the Company to carry out|
||derivatives investment business, and the risks are controllable.|

5.5 Use of funds raised
√ Applicable□ N/A
In the Reporting Period, the Company issued 55,000,000 shares through a private placement to Xiaomi Technology, which was completed on 26 June 2015. With RMB22.01 per share, this private placement has raised a total capital of RMB1,210,550,000 (all paid in cash). The net amount of the raised capital stands at RMB1,203,543,228.39 after deducting the share issuing expense of RMB7,006,771.61 (including sponsoring and underwriting fees, accountant and law firms costs and other advisors, as well as other direct expenses).
The funds raised under this private placement have been deposited in theCompany’s special account for raised funds. In compliance with the applicable laws and regulations and theCompany’s Regulations for Raised Funds Management, the Company will use all the said raised funds for liquidity management use or for other uses as detailed in its usage plan. In addition, as per the applicable rules of the Shenzhen Stock Exchange, the sponsors, the raised funds deposit bank and the Company will sign a three-party supervision agreement to supervise the use of the raised funds together.
In the Reporting Period, the funds raised under this private palcemnent generated an interest income of
RMB819,272.63. Meanwhile, RMB1,204,362,478.91 in the account was used, leaving a balance of
RMB22.11. The use of the funds was in compliance with theCompany’s commitment on the use of the
The 2015 Annual Report of Midea Group Co., Ltd. raised funds.
Up to the disclosure date of this Report, the balance in the special account for raised funds stands at nil. 6. Sale of Major Assets and Equity Interests
6.1 Sale of major assets
□ Applicable√ N/A
No such cases in the Reporting Period.
6.2 Sale of major equity interests
□ Applicable√ N/A
7. Analysis of Major Subsidiaries
√ Applicable□ N/A
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||Total||Operating|Operating|Net|
||||||Net assets||||
||Company|Business|Registered capital|assets||Revenue|profit|profit|
|Company name|||||(RMB||||
||type|scope|(RMB'0,000)|(RMB||(RMB|(RMB|(RMB|
||||||million)||||
|||||million)||million)|million)|million)|
|Guangdong Midea||Manufacturing|||||||
|Kitchen Appliances|Subsidiary|of home|USD7,200.00|8,145|1,992|11,358|1,366|1,175|
|Manufacturing Co., Ltd.||appliances|||||||
|Guangdong Midea||Manufacturing|||||||
|Refrigeration|Subsidiary|of air|RMB85,400.00|28,785|3,395|28,039|1,020|955|
|Equipment Co., Ltd.||conditioners|||||||
|Foshan Shunde Midea||Manufacturing|||||||
|Electric Appliance|Subsidiary|of home|USD4,200.00|4,833|1,217|6,422|950|800|
|Manufacturing Co., Ltd.||appliances|||||||
|Wuhu Midea Kitchen &|||||||||
|||Manufacturing|||||||
|Bathroom Electric|||||||||
||Subsidiary|of water|RMB6,000.00|3,777|716|5,091|571|599|
|Appliances|||||||||
|||heaters|||||||
|Manufacturing Co., Ltd.|||||||||
|||Manufacturing|||||||
|Anhui GMCC Precise|||||||||
||Subsidiary|of|RMB84,210.5263|2,168|1,507|3,994|563|560|
|Manufacture Co., Ltd.|||||||||
|||compressors|||||||

Acquisition and disposal of subsidiaries during the Reporting Period
√ Applicable□ N/A
The 2015 Annual Report of Midea Group Co., Ltd.
||||
|-|-|-|
||How subsidiary was acquired or|Impact on overall operation and|
|Subsidiary name|||
||disposed during the Reporting Period|results|
|||Net profit decrease of RMB38,90|
|Main Power Electrical Factory Limited|Acquired in cash||
|||4,000 for the Reporting Period.|
|||Net profit increase of RMB13,65|
|Midea Microcredit Co., Ltd.|Ditto||
|||2,000 for the Reporting Period.|
|||Net profit increase of RMB10,43|
|Foshan Shunde Midea Microcredit Co., Ltd.|Ditto||
|||8,000 for the Reporting Period.|
|||Net profit decrease of RMB6,718,|
|PT Midea Planet Indonesia|Ditto||
|||000 for the Reporting Period.|

 8. Structured Bodies Controlled by the Company
□ Applicable√ N/A
9. Outlook for the Future Development of the Company
9.1 Development strategies of the Company
Setting the strategic vision of “becoming the leader in the Chinese household appliance industry, and ranking among the top three global white goods corporations”, the Company will escalate transformation, drive sustainable improvement of operational quality, achieve leading products through technology innovation, quality improvement and engineering excellence, and create new cost competitive edges driven by efficiency through advancing management, manufacturing, and asset management competencies. The Company will focus on consumers, further promote its industrial cooperations, optimize our channel strategy in the domestic market, and consolidate our global operations footprint by further improving our management and control systems, boosting joint ventures and growing new market expansion, as well as seeking newM&A opportunities in overseas markets. In face of new economic growth models in this internet era, the Company will further innovate and reform, pragmatically driving the strategy of “Smart Home+ Intelligent Manufacturing”, enhancing strategy research an positioning us in new industries, and generating new growth points and industry platforms.
9.2 Key operation points in Y2016
a. Push forward with the transformation and upgrade of existing businesses, adopt a strict policy for
product quality, launch campaigns for competitive products, encourage product innovation and product
mix optimization, continue to invest inR&D and bring in hi-tech talent, for the purpose of increasing
The 2015 Annual Report of Midea Group Co., Ltd. product competitiveness.
b. Further promote theCompany’s organizational, procedural, personnel, performance and cultural reconstructing by means of“Internet+” thinking, build up a governance structure with customers and products at its core, create beneficial synergies, and enhance the operational development of eight major platforms.
c. Continue to apply lean management to design, supply chain, production, understandcustomers’ needs and improve their experience in using our products, and push forward our“T+3” production approach based on customer orders, so as to improve manufacturing efficiency and product quality and make us more competitive in cost.
d. Continuously promote our marketing transformation, enhance the construction of our national large-scale logistics platform, concentrate on core channels, improve weaker markets, guarantee rapid development in our e-commerce businesses, and establish the Midea End-to-End logistics platform. e. Focus on international strategic markets to ensure overseas revenue, push forward with our global OBM business, promoteMidea’s global businesses in stages, guide and propel various business departments to establish a professional management and operations system for our end-to-end product line covering the headquarters and overseas companies, and continue to seekM&A opportunities that can strengthenMidea’s global influence.
f. Follow our “Smart Home+ Intelligent Manufacturing” strategy, reform existing commercial and operating models, promote product development and try to develop new businesses so as to explore new growth points for Midea in the next five to ten years.
9.3 Future key capital expenditure plan
To adapt to changes in this industry environment, the Company will emphasize our 2016 investment on aspects including technology innovation, quality improvement, IT information process excellence, channel expansion and capability improvement for e-business, the execution of the overall M-SMART smart home strategy, as well as automation investment. We will also seek globalM&A opportunities, trying to solidify and increase our global competitiveness. Meanwhile, the Company will strictly control investment in infrastructure and capacity expansion, and non-production operation projects. The investment fund will mainly derive from self-owned funds of the Company.
The 2015 Annual Report of Midea Group Co., Ltd. 9.4 Main risks against future development
a. Risk of macro economy fluctuation
Products sold by the Company include air conditioners, refrigerators, washing machines, and small household appliances, which belong to the consumer appliance products category. The market demand can be largely affected by the economic situation and macro control. If the economy growth or consumer demand slows down, the growth of the household appliance industry, to which the Company belongs, will slow down accordingly, and as a result, will affect the product sales of Midea Group.
b. Risk of market competitions
The household appliance industry in China is fully subject to maket competition. The quantity of household appliances manufacturers is significant. Fierce competition exists among foreign and local enterprises, foreign and Chinese brands, and within different product categories. Although the Company has obtained certain competitive advantages in the household appliance industry, it is still faced with market risks from intense industry competition, which might influence the business performance and financial situation of the Company.
c. Risks in the fluctuation of production factors
The raw materials required by Midea Group to manufacture household appliances and motors primarily include different grades of copper, steel, aluminum, and plastics. At present, the household appliance manufacturing sector belongs to a labor intensive industry. If the price of raw materials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water, electricity, and land) caused by a change to the macroeconomic environment and policy change, or the sale prices of end products cannot support the cost fluctuation, theCompany’s business will certainly be influenced.
d. Risk in expanding the overseas market
Internationalization and global operations is a long-term strategic goal of the Company. The Company has built joint-venture manufacturing bases in many countries around the world. However, there are still unpredictable risks associated such as local political and economic situations, significant changes in law and regulation systems, and sharp increases in production costs.
e. Risk in product export and foreign exchange losses caused by exchange rate fluctuation
The export sales of the Company has accounted for over40% of the overall sales. Exchange rate
The 2015 Annual Report of Midea Group Co., Ltd. fluctuation might not only bring negative effects on product export for the Company, but could also lead to exchange losses and increase the financial costs of the Company.
f. Market risks brought by trade barriers
While tariff barriers decrease, the non-tariff barriers among countries have become increasingly distinctive. These can mainly be seen on compulsory security certificates, international standards and requirements, and product quality and management systems certification, energy-saving requirements, the call for increasingly strict environmental protection requirements, as well as with rigorous requirements for recycling household appliances waste. The non-tariff barriers, and trade frictions caused by anti-dumping measures implemented by some countries and regions aggravate the burden in costs and expenses for household appliance enterprises, and have brought about new challenges to market expansion for enterprises.
10. Visits Paid to the Company for Purposes of Research, Communication, Interview, etc.
10.1 In the Reporting Period
√ Applicable□ N/A
|||||
|-|-|-|-|
|Date of visit|Way of visit|Type of visitor|Index to main inquiry information|
||One-on-one||Log Sheet of Investor Relations Activities for|
|2015.03.10-31||Institution||
||meeting||10-31 March 2015 on www.cninfo.com.cn|
||One-on-one||Log Sheet of Investor Relations Activities for 21|
|2015.04.21-05.22||Institution||
||meeting||April-22 May 2015 on www.cninfo.com.cn|
||One-on-one||Log Sheet of Investor Relations Activities for 5-17|
|2015.06.05-17||Institution||
||meeting||June 2015 on www.cninfo.com.cn|
||One-on-one||Log Sheet of Investor Relations Activities for|
|2015.07.14-24||Institution||
||meeting||14-24 July 2015 on www.cninfo.com.cn|
||||Log Sheet of Investor Relations Activities for 31|
||One-on-one|||
|2015.08.31-09.22||Institution|August-22 September 2015 on|
||meeting|||
||||www.cninfo.com.cn|
||||Log Sheet of Investor Relations Activities for 29|
||One-on-one|||
|2015.10.29-11.12||Institution|October-12 November 2015 on|
||meeting|||
||||www.cninfo.com.cn|
||||Log Sheet of Investor Relations Activities for 30|
||One-on-one|||
|2015.11.30-12.15||Institution|November-15 December 2015 on|
||meeting|||
||||www.cninfo.com.cn|

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|Times of visit|98|
|Number of visiting institutions|941|
|Number of visiting individuals|64|
|Number of other visitors|0|
|Significant undisclosed information disclosed,||
||No|
|revealed or leaked||

10.2 From the end of the Reporting Period to the disclosure date of this Report
√ Applicable□ N/A
|||||
|-|-|-|-|
|Date of visit|Way of visit|Type of visitor|Index to main inquiry information|
||||Log Sheet of Investor Relations Activities for|
|2015.01.05-29|One-on-one meeting|Institution||
||||5-29 January 2016 on www.cninfo.com.cn|

|||
|-|-|
|Times of visit|11|
|Number of visiting institutions|114|
|Number of visiting individuals|12|
|Number of other visitors|0|
|Significant undisclosed information disclosed,||
||No|
|revealed or leaked||

The 2015 Annual Report of Midea Group Co., Ltd. Section V Significant Events
1. Profit Distribution and Converting Capital Reserves into Share Capital for Common Shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, for common shareholders in the Reporting Period
□ Applicable√ N/A
Plans (or preliminary plans) for profit distribution and converting capital reserves into share capital for common shareholders for the recent three years (including the Reporting Period)
Plan for profit distribution and converting capital reserves into share capital for 2013: Based on its total of 1,686,323,389 shares as at 31 December 2013, the Company distributed a cash dividend of RMB20.00 (tax inclusive) per 10 shares to all shareholders, and at the same time increased shares of all shareholders by converting capital reserves into share capital on the basis of 15 additional shares for every 10 shares. The book closure day was 29 April 2014 and the ex-right& ex-dividend day 30 April 2014.
Plan for profit distribution for 2014: Based on its total of 4,215,808,472 shares as at 31 December 2014, the Company distributed a cash dividend of RMB10 (tax inclusive) per 10 shares to all shareholders. The book closure day was 29 April 2015 and the ex-right& ex-dividend day 30 April 2015.
Preliminary plan for profit distribution and converting capital reserves into share capital for 2015: Based on its total of 4,267,391,228 existing shares, the Company is to distribute a cash dividend of RMB12 (tax inclusive) per 10 shares to all shareholders, and at the same time increase shares of all shareholders by converting capital reserves into share capital on the basis of 5 additional shares for every 10 shares. The said preliminary plan has been considered and approved by the
6th
Meeting of the
2nd
Board of the Company and will later be submitted to the General Meeting for further consideration.
Cash dividend distribution of the Company to common shareholders over the recent three years (including the Reporting Period)
Unit: RMB
|||||||
|-|-|-|-|-|-|
|||Net profit attributable|Ratio to net profit|||
|||to common|attributable to common|||
||Cash dividends|||||
||||||Ratio of cash|
|Year||shareholders in the|shareholders in the|Cash dividends in|dividends in other|
||(tax included)|||other forms||
|||consolidated|consolidated statement||forms|
|||statement in the year|in the year|||

The 2015 Annual Report of Midea Group Co., Ltd.
|||||||
|-|-|-|-|-|-|
|2015|5,120,869,473.60|12,706,725,000.00|40.30%|0.00|0.00|
|2014|4,215,808,472.00|10,502,220,260.00|40.14%|0.00|0.00|
|2013|3,372,646,778.00|5,317,458,060.00|63.43%|0.00|0.00|

 The Company made a profit in the Reporting Period and the profit distributable to common shareholders of the Company (without subsidiaries) was positive, but it did not put forward a preliminary plan for cash dividend distribution to its common shareholders
□ Applicable√ N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Reserves into Share Capital for the Reporting Period
√ Applicable□ N/A
|||
|-|-|
|Bonus shares for every 10 shares (share)|0|
|Dividend for every 10 shares (RMB) (tax included)|12.00|
|Additional shares converted from capital reserves for||
||5|
|every 10 shares (share)||
|Total shares as the basis for the preliminary plan for||
||4,267,391,228|
|profit distribution (share)||
|Total cash dividends (RMB) (tax included)|5,120,869,473.60|
|Distributable profit (RMB)|9,878,385,000|
|Percentage of cash dividends in the total distributed||
||100%|
|profit (%)||
|Cash dividend policy||
|Other||
|Details about the preliminary plan for profit distribution and converting capital reserves into share capital||
|As audited by PricewaterhouseCoopers China (LLP), the Company realized a net profit of RMB6,567,314,000 for 2015.Pursuant to the relevant provisions under the Articles of Association, it provided 10% as statutory surplus reserves,namely RMB656,732,000. Plus undistributed profit at the beginning of the year of RMB7,282,924,000 as well as theundistributed profit from the subsidiaries merged into the Company of RMB900,687,000 and minus the distributed profitof RMB4,215,808,000, the actual distributable profit would be RMB9,878,385,000.Preliminary plan for profit distribution and converting capital reserves into share capital for 2015: Based on its total of4,267,391,228 existing shares, the Company is to distribute a cash dividend of RMB12.00 (tax inclusive) per 10 sharesto all shareholders, resulting in a total cash dividend payment of RMB5,120,869,473.60. The remaining undistributedprofit shall be carried forward for future distribution. And the Company also intends to increase shares of all shareholdersby converting capital reserves into share capital on the basis of 5 additional shares for every 10 shares, representing atotal increment of 2,133,695,614 shares.The preliminary plan shall be submitted to the Company’s 2015 Annual General Meeting for further consideration.||

The 2015 Annual Report of Midea Group Co., Ltd. 3. Performance of Undertakings
3.1 Undertakings of the Company, its shareholders, actual controller, acquirer, directors, supervisors, senior management staff or other related parties fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable□ N/A
||||||||
|-|-|-|-|-|-|-|
||Undertaking|Type of||Undertaking|||
|Undertaking|||Details of undertaking||Term|Particulars on the performance|
||giver|undertaking||date|||
||||1. Midea Holding and He Xiangjian have undertaken as follows:||||
||||Within 36 months from the listing date of Midea Group's stocks,||36 months from||
||Controlling||||||
||||they will neither transfer or entrust others to manage their||the day of Midea||
||shareholder,|||||1. There has been no violation|
|||Share lock-up|directly and indirectly held shares of Midea Group issued prior|2013.03.28|Group’s listing||
||actual|||||of this undertaking.|
||||to this issuance, nor sell them to Midea Group. If they break the||(2013.09.18-201||
||controller||||||
||||above undertaking, they will assume all liabilities arising||6.09.18)||
||||therefrom.||||
|Undertaking|||||||
||||2. Midea Holding and He Xiangjian have undertaken as follows:||||
|made in|||||||
||||He Xiangjian, Midea Holding and their controlled enterprises||||
|offering|||||||
||||will remain independent from Midea Group in respect of||||
|documents or|||||||
||Controlling||personnel, finance, assets, business and institutions, in||||
|shareholding||Maintenance|||||
||shareholder,||accordance with relevant laws and regulations and regulatory|||2. There has been no violation|
|alternation||of||2013.03.28|Long-standing||
||actual||documents. They will faithfully fulfill the above undertaking, and|||of this undertaking.|
|documents||independence|||||
||controller||assume the corresponding legal liability. If they fail to fulfill their||||
||||obligations and responsibilities conferred by the undertaking,||||
||||they will bear the corresponding legal liabilities according to||||
||||relevant laws, rules, regulations and regulatory documents.||||
||Controlling|Avoiding|3. In order to avoid possible competition within the industry||||
|||||||3. There has been no violation|
||shareholder,|competition|between Midea Group and Midea Holding and its controlled|2013.03.28|Long-standing||
|||||||of this undertaking.|
||actual|within the|enterprises as well as He Xiangjian, his immediate family and||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||
|-|-|-|
|controller|industry|his controlled companies, Midea Holding and He Xiangjian|
|||have undertaken as follows:|
|||(1) None of the entities or individuals mentioned above is or will|
|||be engaged in the same or similar business as the existing|
|||main business of Midea Group and its controlled companies.|
|||They are not or will not 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|

The 2015 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||||
|||Group and its controlled companies, including but not limited to||||
|Controlling||commodity trading, providing services to each other or as||||
||Regulation of|||||
|shareholder,||agent, they will sign legal normative agreements with Midea|||4. There has been no violation|
||related||2013.03.28|Long-standing||
|actual||Group, and go through approval procedures in accordance with|||of this undertaking.|
||transactions|||||
|controller||related laws, regulations, rules, other regulatory documents,||||
|||and relevant provisions of the Articles of Association of Midea||||
|||Group. They guarantee to offer fair prices for related||||
|||transactions, and fulfill the information disclosure obligations in||||
|||respect of the related transactions according to related laws,||||
|||regulations, rules, other regulatory documents, and relevant||||
|||provisions of the Articles of Association of Midea Group. They||||
|||also guarantee not to illegally transfer the funds or profits from||||
|||Midea Group, or damage the interests of its shareholders at||||
|||their advantages during the related transactions.||||

The 2015 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||||
|||signed the "Equity Transfer Contract" with five people, namely||||
|||He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and||||
||On Midea|||||
|||Liang Jieyin, where it transferred all its limited equity of Midea|||5. So far, this shareholding|
||Trade Union|||||
|Controlling||Group (22. 85%) respectively to those five people. According to|||transfer has not brought about|
||Committee|||||
|shareholder,||the confirmation letter issued by members of the Midea Trade|||any loss caused by any dispute|
||transferring its||2013.03.28|Long-standing||
|actual||Union Committee at that time, the equity transfer price was|||or potential disputes. There has|
||limited equity|||||
|controller||determined after mutual discussion on the basis of their true|||been no violation of this|
||of Midea|||||
|||opinions, therefore there was no dispute or potential dispute.|||undertaking.|
||Group|||||
|||On 28 June, 2013, Foshan Shunde Beijiao General Union,||||
|||superior department of Midea Trade Union Committee, issued a||||
|||confirmation letter to the fact that the Midea Trade Union||||

The 2015 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|6. Midea Holding and He Xiangjian have undertaken to be liable||||
||Payment of|for (1) paying such expenses and related expenses on time||||
||the Staff|based on the requirements of relevant state departments if|||6. So far, the payment of the|
||Social|Midea Group is required to be liable for the payment of staff|||staff social insurance and the|
|Controlling||||||
||Insurance and|social insurance, housing provident fund and the payment|||housing provident fund has not|
|shareholder,||||||
||the Housing|required by relevant state authorities prior to this merger, (2)|2013.03.28|Long-standing|brought about any controversy|
|actual||||||
||Provident|paying corresponding compensation for all direct and indirect|||or potential disputes. There has|
|controller||||||
||Fund involved|losses incurred by Midea Group and its subsidiaries due to this|||been no violation of this|
||in Midea|merger, (3) indemnifying and holding harmless Midea Group|||undertaking.|
||Group's|and its subsidiaries in time from such expenses when Midea||||
||Overall Listing|Group and its subsidiaries are required to pay them in advance.||||
||Issues about|7. Undertakings on issues about asset alteration, asset flaw and|||7.1 The Process of Property|
||asset|house leasing of Midea Group and its subsidiaries|||Ownership Certificate:|
|Controlling||||||
||alteration,|Midea Holding and He Xiangjian have undertaken as follows:|||The Report discloses that the|
|shareholder,||||||
||asset flaw and|(1) Midea Holding will do its utmost to assist and urge Midea|2013.03.28|Long-standing|Company is trying to get the|
|actual||||||
||house leasing|Group (including its subsidiaries) to complete renaming|||Property Ownership Certificate for|
|controller||||||
||of Midea|procedures of related assets, such as land, housing,|||177 of its properties, which cover|
||Group and its|trademarks, patents and stock rights, declared in the related|||an area of 2,148,485.65 square|

The 2015 Annual Report of Midea Group Co., Ltd.
||||
|-|-|-|
|subsidiaries|files of this merger. Midea Holding will be liable for all|meters. So far, 62 applications|
||compensations of losses caused by issues about renaming|have been approved, the total|
||procedures of related assets mentioned above to Midea Group.|area covers 2,086,357.42 square|
||(2) Midea Holding shall do its utmost to assist Midea Group|meters, which accounts for|
||(including its subsidiaries) to apply for ownership certificates of|97.11% of total area. Another|
||land and housing or property declared in related files of this|property with an area of 1,966.69|
||merger.|square meters (0.09% of the total|
|||area) has been disposed. The|
||(3) Midea Holding shall assist Midea Group (including its||
|||remaining 114 properties,|
||subsidiaries) to re-apply for corresponding construction||
|||spanning an area of 60,161.54|
||procedures and apply for their ownership certificates for houses||
|||square meters account for 2.8% of|
||without complete procedures, as happened in the past, to apply||
|||the total area. These properties|
||for the ownership certificate. If the competent authorities||
|||are all small unit size auxiliary|
||requires Midea Group to dismantle buildings that cannot||
|||facilities such as security booth,|
||acquire the re-application for real estate registration||
|||transformer room, power room,|
||procedures, Midea Holding shall do its utmost to provide||
|||pump room, gas station and so on,|
||assistance and be liable for any related expenses used in||
|||for which property ownership|
||dismantling such buildings by Midea Group (including its||
|||certificates cannot be granted or|
||subsidiaries).||
|||applied for. So far these 114|
||(4) Under any circumstances that Midea Group suffers from||
|||properties have not been required|
||losses incurred from no longer using these properties or||
|||to be dismantled by competent|
||presently using the land or house above due to failing to obtain||
|||departments so that these|
||or collect in time the ownership certificates of the land or house||
|||buildings are still in regular use,|
||above or any losses caused by any other reasons, Midea||
|||which has not brought about any|
||Holding shall compensate any loss for these reasons in time||
|||controversy or any company loss|
||and in full. Midea Holding shall compensate the actual loss||
|||caused by disputes. There has|
||Midea Group suffers from any circumstances above resulting in||
|||been no violation of this|
||penalties subjected to from competent authorities or through||
|||undertaking.|
||claims from any other third party.||
|||7.2 The Use of Rental Houses of|
||(5) Based on issues of defective house leasing declared in||
||related files of this merger, Midea Holding shall provide||

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|sufficient compensations for all economic losses incurred by|This Company|
|Midea Group (including its subsidiaries) where the leasehold||
||The Report discloses that as of 31|
|relations above become invalid or other disputes occur, which||
||December 2012, our company|
|are caused by rights claims from a third party or by means of an||
||used 113 leasing houses in total,|
|administrative authority exercising a right and therefore results||
||of which our company cannot get|
|in any economic losses due to eviction from rental houses, or||
||the property certificate of 100|
|any penalties subjected to by competent government||
||leasing houses from the leasing|
|departments or any recourse from related parties.||
||party. So far the contracts of 81|
|(6) Based on the issues of defective land leasing declared in||
||out of the 113 rental houses have|
|related files of this merger, when leasehold relations become||
||not been signed to extend the|
|invalid caused by defects of land leasing or when other disputes||
||leasehold. The property|
|occur, resulting in any economic losses to Midea Group||
||certificates of 2 of the remaining|
|(including its subsidiaries) or through any penalties||
||32 houses have been obtained|
|administered by competent government departments. Likewise||
||while the other 30 certificates have|
|if the lessor cannot compensate for losses caused by such||
||not been obtained yet. These 30|
|defective leasing, Midea Holding shall compensate Midea||
||rental houses have not rendered|
|Group for losses caused by such defective land leasing.||
||our company any economic loss|
|Midea Holding and He Xiangjian will compensate any losses of||
||or penalty caused by defective|
|Midea Group where a violation of guarantees and undertakings||
||property rights, which result in|
|referred to previously occurs or such guarantees and||
||removing to other rental houses.|
|undertakings are not consistent with the reality.||
||There has been no violation of this|
||undertaking.|
||7.3 Land Use Rights of Leasing|
||Use|
||The "Report" discloses that as of|
||31 December, 2012, our company|
||has had one case of using rental|
||houses, covering a total area of|

The 2015 Annual Report of Midea Group Co., Ltd.
||
|-|
|57,506.95 square meters for|
|which the lessor of the rental land|
|mentioned above did not provide|
|any legal ownership files showing|
|or detailing ownership of this land.|
|So far this rental land has not|
|rendered our company any|
|controversy or any loss caused by|
|disputes. There has been no|
|violation of this undertaking.|
|7.4 The Procedures of|
|Renaming Land Owner Under|
|Process Caused by the|
|Alteration of the Company's|
|Name|
|The Report discloses that there|
|are still 10 cases in the process of|
|registering a new land owner|
|caused by changing the|
|company's name and its|
|subsidiaries. So far, five cases|
|have been approved and the other|
|five cases are still under review,|
|which have not rendered any loss|
|to the company. There has been|
|no violation of this undertaking.|
|7.5 Processing the Renaming|

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||
|-|-|-|-|-|-|-|
|||||||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||||
||||||the day of Midea||
||Other||listed on the Shenzhen Stock Exchange Center, transferring|||There has been no violation of|
|||Share lock-up||2013.03.28|Group’s listing||
||shareholders||shares or delegating others to manage their shares with either|||this undertaking.|
||||||(2013.09.18-201||
||||direct or indirect ownership of Midea Group, issued before this||||
||||||6.09.18)||
||||time, has been forbidden for 36 months. Midea Group is not||||
||||allowed to buy back those shares either.||||
||||1. In strict accordance with the rules of the CSRC, the||The||
|Undertakings|||||||
||||Shenzhen Stock Exchange and the Company regarding the use||undertakings||
|given in time|The|||||There has been no violation of|
|||Private issue|of raised funds, the Company shall have a special account for|2015.06.15|shall expire||
|of IPO or|Company|||||this undertaking.|
||||its raised funds and use the funds only for the previously set||when the raised||
|refinancing|||||||
||||purposes.||funds have been||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||
|-|-|-|-|-|-|-|
||||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||
||||transfer the shares that it had subscribed for in this private|||There has been no violation of|
||Xiaomi||||||
|||Private issue|placement with Midea Group within 36 months from the|2015.06.26|this private|this undertaking.|
||Technology||||||
||||completion date of this offering (26 June 2015, the listing date||placement, i.e. to||
||||for this offering).||||
||||||26 June 2018||
|Whether the|||||||
|undertaking|||||||
||Yes||||||
|is fulfilled on|||||||
|time|||||||
|Specific|||||||
|reasons for|||||||
|failing to fulfill|||||||
|any|N/A||||||
|undertaking|||||||
|and plan for|||||||
|the next step|||||||

The 2015 Annual Report of Midea Group Co., Ltd. 3.2 Where any earnings forecast was made for any of theCompany’s assets or projects and the Reporting Period is still within the forecast period, the Company shall explain whether the performance of the asset or project reaches the earnings forecast and why
□ Applicable√ N/A
4. Occupation of theCompany’s Capital by the Controlling Shareholder or Its Related Parties for Non-Operating Purposes
□ Applicable√ N/A
No such cases in the Reporting Period.
5. Explanation of the Board of Directors, the Supervisory Committee and Independent Directors (If Any) Regarding the "Non-standard Audit Opinion" for the Reporting Period
□ Applicable√ N/A
6. Reason for Changes in Accounting Policies, Accounting Estimates and Accounting Methods as Compared to the Financial Report for the Prior Year
□ Applicable√ N/A
No such cases in the Reporting Period.
7. Reason for Retrospective Restatement of Major Accounting Errors during the Reporting Period
□ Applicable√ N/A
No such cases in the Reporting Period.
8. Reason for Changes in Scope of the Consolidated Financial Statements as Compared to the Financial Report for the Prior Year
√ Applicable□ N/A
For the main subsidiaries within the scope of the consolidated financial statements for the current year, please refer to Note 5 and Note 6 to the Financial Statements. And the main companies newly consolidated in the current year are Main Power Electrical Factory Limited, Midea Microcredit Co., Ltd., Foshan Shunde Midea Microcredit Co., Ltd. and PT Midea Planet Indonesia (for details, please see “5.1”
and “a”, “5.2” under Note 5 to the Financial Statements). For the companies deconsolidated in the
The 2015 Annual Report of Midea Group Co., Ltd. current year, please refer to “b”, “5.2” under Note 5 to the Financial Statements.
9. Engagement and Disengagement of CPAs Firm
CPAs firm at present
|||
|-|-|
|Name of the domestic CPAs firm|PricewaterhouseCoopers China (LLP)|
|The Company’s payment for the domestic CPAs||
||600|
|firm (RMB’0,000)||
|Consecutive years of the audit service provided||
||One year|
|by the domestic CPAs firm||
|Names of the certified public accountants from||
||Yao Wenping, Huang Meimei|
|the domestic CPAs firm||

Whether the CPAs firm was changed in the current period
√ Yes□ No
Whether the CPAs firm was changed during the audit
√ Yes□ No
Whether the approval procedure was executed for change of the CPAs firm
√ Yes□ No
Detailed explanation of the change of the CPAs firm
The Tianjian Accounting Firm (special general partnership) (hereinafter referred to as “Tianjian”) was both the financial report and internal control auditor for the Company in 2015. With an aim to choose a single auditor for all of our operations around the world, to better facilitate our business development globally, and ensure the independence and objectivity of the audit service, even though Tianjian has acted as the auditor for us for a number of years, we have deliberated and changed our financial report and internal control auditor to PricewaterhouseCoopers China (LLP) for 2015. The said change of the CPAs firm was considered and approved at the
3rd
Meeting of the
2nd
Board of Directors dated 17 November 2015 as well as at the
4th
Special General Meeting 2015 dated 4 December 2015.
Engagement of any CPAs firm for internal control audit, financial advisor or sponsor
√ Applicable□ N/A
The Company appointed PricewaterhouseCoopers China as the internal control auditor for this year. The
remuneration in total paid by the Company to PricewaterhouseCoopers China for its audit of the
The 2015 Annual Report of Midea Group Co., Ltd.Company’s financial report and internal control conditions for 2015 was RMB6 million.
During this reporting period, CITIC Securities Co., Ltd. was hired, with a payment of RMB5 million, as the listing sponsor for the private issue of A-shares by the Company to Xiaomi Technology.
10. Possibility of Listing Suspension and Termination after Disclosure of this Annual Report
□ Applicable√ N/A
11. Bankruptcy and Reorganization
□ Applicable√ N/A
No such cases in the Reporting Period.
12. Material Litigation and Arbitration
□ Applicable√ N/A
No such cases in the Reporting Period.
13. Punishments and Rectifications
□ Applicable√ N/A
No such cases in the Reporting Period.
14. Credit Conditions of the Company as well as Its Controlling Shareholder and Actual Controller
√ Applicable□ N/A
In the Reporting Period, the Company as well as its controlling shareholder and actual controller were in a good credit position, without unsatisfied court judgments, or large-amount overdue liabilities.
15. Implementation of any Equity Incentive Plan, Employee Stock Ownership Plan or Other Incentive Measures for Employees
√ Applicable□ N/A
A. Overview of the First Stock Option Incentive Plan
a. The Company convened the
26th
Meeting of the First Board of Directors on 27 March 2015, at which
The 2015 Annual Report of Midea Group Co., Ltd. the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the 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 departure, positional changes or low performance appraisals of some incentive receivers. Upon the adjustments, the number of incentive receivers decreased from 681 to 626, and their exercisable stock options (entitled but not yet exercised) were also reduced from 99,862,500 to 90,660,000.
The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of the First Stock Option Incentive Plan was also considered and approved. For the exercise conditions that have grown mature for the first exercise period, a total of 613 incentive receivers who have ascertained and verified the First Stock Option Incentive Plan have been allowed to exercise 29,840,000 stock options in the first exercise period, leaving 60,820,000 stock options with unsatisfied exercise conditions.
b. On 24 April 2015, the Announcement on the 2014 Annual Profit Distribution was disclosed by the Company, with a decision to distribute a cash dividend of RMB10.00 for every 10 shares to all the shareholders based on the total of 4,215,808,472 shares of the Company. The book closure date was 29 April and the ex-right and ex-dividend date was 30 April 2015.
The Company convened the
27th
Meeting of the First Board of Directors on 27 April 2015, at which the Proposal for the Adjustment to the Exercise Price for the First Stock Option Incentive Plan was reviewed and approved. As the said profit distribution pre-plan had been carried out, the exercise price for the First Stock Option Incentive Plan was revised from RMB18.72 to RMB17.72 per share.
c. On 31 March 2015, the exercise conditions grew mature for the first exercise period of the First Stock Option Incentive Plan. Upon examination by the Shenzhen Stock Exchange and the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., the incentive receivers for the First Stock Option Incentive Plan have started to exercise their stock options since 18 May 2015. Up to the end of the Reporting Period, 25,622,621 stock options have been exercised.
B. Overview of the Second Stock Option Incentive Plan
a. On 27 March 2015, the Second Stock Option Incentive Plan (Draft) and its Abstract of Midea Group Co., Ltd. was reviewed and approved at the
26th
Meeting of the First Board of Directors, and the incentive receiver list for the Second Stock Option Incentive Plan (Draft) was examined at the 18th Meeting of the First Supervisory Committee.
The 2015 Annual Report of Midea Group Co., Ltd. b. The Company filed the materials of the Second Stock Option Incentive Plan to the CSRC and the CSRC raised no objection against the materials. On 27 April 2015, the Second Stock Option Incentive Plan (Draft) and its Abstract (Revised) and the Proposal for the Formulation of the Implementation and Appraisal Measures for the Second Stock Option Incentive Plan (Revised) were reviewed and approved at the
27th
Meeting of the First Board of Directors.
c. On 25 May 2015, the Company convened the First Special General Meeting for 2015, at which the Second Stock Option Incentive Plan (Draft) and its Abstract (Revised) of Midea Group Co., Ltd. (the “Second Stock Option Incentive Plan”), the Implementation and Appraisal Measures for the Second Stock Option Incentive Plan (Revised) of Midea Group Co., Ltd., the Proposal for Asking the General Meeting to Authorize the Board to Handle Mattes Related to the Second Stock Option Incentive Plan and other relevant proposals were reviewed and approved.
d. In light of the authorization given at the First Special General Meeting for 2015 and the completion of the aforesaid 2014 Annual Profit Distribution Plan, the Company convened the
28th
Meeting of the First Board of Directors on 27 May 2015, at which the Proposal for the Adjustments to the Exercise Price, the Incentive Receiver List and the Number of Granted Stock Options for the Second Stock Option Incentive Plan, the Proposal for the Determination of the Grant Date for the Second Stock Option Incentive Plan and the Proposal for the Grant-Related Matters for the Second Stock Option Incentive Plan were reviewed and approved. As such, the Company agreed to grant 83,790,000 stock options to 733 receivers on 27 May 2015 with the exercise price being adjusted from RMB31.54 to RMB30.54 per share.
C. Overview of the First Employee Stock Ownership Plan
a. The Proposal for the Core Management and “Midea Group Partner” Stock Ownership Plan (Draft) of Midea Group Co., Ltd.& Its Abstract as well as the Proposal for Asking the General Meeting to Authorize the Board to Handle Mattes Related to the Stock Ownership Plan were considered and approved at the 26th
Meeting of the
1st
Board of Directors on 27 March 2015 and later at the 2014 Annual General Meeting on 21 April 2015.
b. As resolved by theHolders’ Meeting for the First Employee Stock Ownership Plan, China International Capital Corporation Limited (CICC) was entrusted to conduct the “CICC Directional Asset Management Plan for the First Midea Group Partner Stock Ownership Plan” with Midea Group shares purchased from
The 2015 Annual Report of Midea Group Co., Ltd. the secondary market.
From 7 May 2015 to 18 May 2015, CICC, the stock ownership plan administrator, purchased a total of 6,483,759 Midea Group shares at an average price of RMB34.85/share from the secondary market. The funds used for the share purchase were sourced from MideaGroup’s special fund for the stock ownership plan of RMB115 million as well as another RMB115 million as a self-financing. As such, the shares needed by the First Employee Stock Ownership Plan have been purchased, with a statutory lock-up period from 19 May 2015 to 18 May 2016.
16. Significant Related-Party Transactions
16.1 Related-party transactions arising from routine operation
√ Applicable□ N/A
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Proportion|||||||
||||||||||||Obtainable|||
|||||||Trans-|in the total||||||Index to|
|||Type of|Contents|||||Approved|||market|||
|Related|||||Trans-|action|amounts of||Over||||the|
|||the|of the|Pricing||||transaction||Mode of|price for the|Disclosure||
|transaction|Relation||||action|amount|transaction||approved||||disclosed|
|||trans-|trans-|principle||||line (RMB||settlement|transaction|date||
|party|||||price|(RMB|of the||line||||infor-|
|||action|action|||||’0,000)|||of the same|||
|||||||’0,000)|same kind||||||mation|
||||||||||||kind|||
||||||||(%)|||||||
|Infore|Controlled|||||||||||||
|Environ-|by family|||||||||||||
||||Procure-|||||||Payment|||www.cnin|
|ment|member of|Procure||Market||||||||||
||||ment of||-|92,039|1.01%|200,000|No|after|-|2015.03.31|fo.com.c|
|Technology|Company’s|- ment||price||||||||||
||||goods|||||||delivery|||n|
|Group Co.,|actual|||||||||||||
|Ltd.|controller|||||||||||||
|Total||||--|--|92,039||200,000|--|--|--|--|--|
|Details of any sales return of a large||||||||||||||
|||||Zero||||||||||
|amount||||||||||||||
|Give the actual situation in the||||||||||||||
|Reporting Period (if any) where a||||||||||||||
|forecast had been made for the total||||The associated amount limit between the Company and the related parties and the subsidiaries||||||||||
|amounts of routine related-party||||did not exceed the estimated total amounts of routine related-party transactions by type.||||||||||
|transactions by type to occur in the||||||||||||||
|current period||||||||||||||
|Reason for any significant difference||||||||||||||
|between the transaction price and the||||N/A||||||||||
|market reference price (if applicable)||||||||||||||

Note: Zhejiang Shangfeng Industrial Holdings Co., Ltd. (Shangfeng Industrial) has changed its name to “Infore
The 2015 Annual Report of Midea Group Co., Ltd. Environment Technology Group Co., Ltd.” (Infore Environment), with its new business license obtained in February 2016. 16.2 Related-party transactions regarding purchase or sales of assets or equity interests
√ Applicable□ N/A
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||Book value|Assessed||||||
||||||||Price of||Profit /||Index to|
|Related|||Contents||of the|value of the||||||
|||Type of the||Pricing|||transfer|Mode of|loss|Disclosure|the|
|transaction|Relation||of the||transferred|transferred||||||
|||transaction||principle|||(RMB|settlement|(RMB|date|disclosed|
|party|||transaction||asset (RMB|asset||||||
||||||||’0,000)||’0,000)||information|
||||||’0,000)|(RMB’0,000)||||||
||||Transfer|||||||||
||||of the|Based||||||||
||Controlling|||||||||||
||||100%|on the||||||||
|Midea|share-|||||||||||
|||Equity|stake of|net|||||||www.cninf|
|Holding|holder of||||27,290|27,290|27,290|-|-|2015.08.31||
|||transfer|Foshan|assets of|||||||o.com.cn|
|Co., Ltd.|the|||||||||||
||||Meihui to|Foshan||||||||
||Company|||||||||||
||||Midea|Meihui||||||||
||||Holding|||||||||
|Reason for any large difference between the||||||||||||
|transfer price and the book value or||||N/A||||||||
|assessed value||||||||||||
|||||The transaction further improved the asset structure and quality of the Company||||||||
|Effect on the Company’s business results||||||||||||
|||||and helped it focus on its main business with more resources for more concentrated||||||||
|and financial position||||||||||||
|||||business development.||||||||
|Performance of the asset in the Reporting||||||||||||
|Period when a performance-related||||N/A||||||||
|undertaking is involved in the transaction||||||||||||

16.3 Related-party transitions arising from joint investments in external parties
□ Applicable√ N/A
No such cases in the Reporting Period.
16.4 Credits and liabilities with related parties
√ Applicable□ N/A
Credits and liabilities with related parties for non-operating purposes
□ Yes √ No
The 2015 Annual Report of Midea Group Co., Ltd. 16.5 Other significant related-party transactions
√ Applicable□ N/A
a. The Proposal for Related-party Transactions Regarding Making Deposits in and Securing Loans from Shunde Rural Commercial Bank and the Proposal for the Related-Party Transaction Regarding Note Discounting for Shangfeng Industrial were reviewed and approved at the
26th
Meeting of the
1st
Board of Directors held on 27 March 2015 and later at the 2014 Annual General Meeting held on 21 April 2015. In 2015, the deposit balance of the Company in Shunde Rural Commercial Bank did not exceed RMB3 billion and neither did the credit balance provided by the bank to the Company exceed RMB3 billion. In 2015, Midea Group Finance Co., Ltd., a subsidiary of the Company, provided note discounting services for Shangfeng Industrial and its subsidiaries, with the total amount of discounted notes not exceeding RMB1.4 billion and the interest charged not exceeding RMB30 million.
b. The Proposal for the Trial Implementation of a Diversified Employee Stock Ownership Plan& a Related-Party Transaction Regarding Transferring the Equity Interests in a Subsidiary was considered and approved at the
32nd
Meeting of the
1st
Board of Directors dated 28 August 2015.
In order to boost the development of Annto Logistics Co., Ltd. (Annto), a directly and indirectly wholly-owned subsidiary of Midea Group, a diversified, long-term employee stock ownership plan was carried out forAnnto’s core management and logistics division heads, as well as some senior executives of Midea Group working concurrently with Annto (the “Incentive Receivers”). Based onAnnto’s net assets as at 30 June 2015, and taking into account the dividend payout and other equity adjustments before the transfer, Midea Group transferred the20% equity interests that it held in Annto to a limited partnership enterprise jointly incorporated by the Incentive Receivers.
Index to the Announcements about the said related-party transactions disclosed
||||
|-|-|-|
|Title of Announcement|Disclosure date|Disclosure website|
|Announcement on Related-party Transactions RegardingMaking Deposits in and Securing Loans from Shunde RuralCommercial Bank|||
||2015.03.31|www.cninfo.com.cn|
|Announcement on the Related-party Transaction RegardingNote Discounting for Shangfeng Industrial|||
||2015.03.31|www.cninfo.com.cn|
|Announcement on the Trial Implementation of a DiversifiedEmployee Stock Ownership Plan & a Related-Party TransactionRegarding Transferring the Equity Interests in a Subsidiary|||
||2015.08.31|www.cninfo.com.cn|

The 2015 Annual Report of Midea Group Co., Ltd. 17. Significant Contracts and Their Execution
17.1 Trusteeship, contracting and leasing
17.1.1 Trusteeship
□ Applicable√ N/A
No such cases in the Reporting Period.
17.1.2 Contracting
□ Applicable√ N/A
No such cases in the Reporting Period.
17.1.3 Leasing
□ Applicable√ N/A
No such cases in the Reporting Period.
17.2 Major Guarantees
√ Applicable□ N/A
17.2.1 Guarantees provided by the Company
Unit: RMB'0,000
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries)||||||||||
|||||Actual||||||
|||||occurrence|||||Guarantee|
||Disclosure date of the||||Actual|||Due||
|Guaranteed|||Line of|date||Type of|Term of||for a|
||guarantee line||||guarantee|||or||
|party|||guarantee|(date of||guarantee|guarantee||related|
||announcement||||amount|||not||
|||||agreement|||||party or not|
|||||signing)||||||
|Shanxi||||||Joint and||||
|Huaxiang|2015-3-31||38,200|2015-1-1|15,000|several|One year|No|No|
|Group Co., Ltd.||||||liability||||
||||||Total actual external|||||
|Total external guarantee||||||||||
||||||guarantee amount|||||
|line approved during the||31,800|||||31,800|||
||||||during the Reporting|||||
|Reporting Period (A1)||||||||||
||||||Period (A2)|||||
|Total approved external||15,000|||Total actual external||15,000|||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|guarantee line at the end||||guarantee balance at|||||
|of the Reporting Period||||the end of the|||||
|(A3)||||Reporting Period (A4)|||||
|Guarantees between the Company and its subsidiaries|||||||||
||||Actual||||||
|||||||||Guarantee|
||Disclosure date of the||occurrence|Actual|||Due||
|Guaranteed||Line of|||Type of|Term of||for a|
||guarantee line||date (date of|guarantee|||or||
|party||guarantee|||guarantee|guarantee||related|
||announcement||agreement|amount|||not||
|||||||||party or not|
||||signing)||||||
|Midea Group|||||Joint and||||
|Finance Co.,|2015-3-31|950,000|2015-1-1|0|several|One year|No|No|
|Ltd.|||||liability||||
|Guangdong|||||||||
|Midea|||||||||
|Refrigeration|2015-3-31|770,000|2015-1-1|39,798|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Midea Kitchen|||||||||
|Appliances|2015-3-31|500,000|2015-1-1|13,434|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Witt Vacuum|||||||||
|Electronics|2015-3-31|43,600|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Midea Heating|||||||||
|& Ventilation|2015-3-31|65,000|2015-1-1|33,000|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Midea|||||||||
|Commercial Air|||||||||
|Conditioning|||||||||
|Equipment|2015-3-31|14,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.,|||||||||
|Guangdong|||||||||
|Province|||||||||
|Guangdong|||||||||
|Midea|||||||||
||2015-3-31|27,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Consumer|||||||||
|Electric|||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Foshan|||||||||
|Shunde Midea|||||||||
|Electric|||||||||
||2015-3-31|109,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Appliance|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Midea Kitchen|||||||||
|& Bathroom|||||||||
||2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Appliances|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Foshan|||||||||
|Shunde Midea|||||||||
|Drinking|2015-3-31|19,300|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Foshan Midea|||||||||
|Clear Lake|||||||||
|Water|||||||||
|Purification|2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Midea|||||||||
|Environment|||||||||
||2015-3-31|176,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Appliances|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Foshan|||||||||
|Shunde Midea|||||||||
|Washing|||||||||
||2015-3-31|274,800|2015-1-1|2,419|Ditto|Ditto|Ditto|Ditto|
|Appliance|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|GMCC|||||||||
||2015-3-31|67,800|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Refrigeration|||||||||
|Equipment|||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Co., Ltd.|||||||||
|Guangdong|||||||||
|GMCC Precise|||||||||
||2015-3-31|34,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacture|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Welling Motor|2015-3-31|65,700|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Foshan|||||||||
|Welling|||||||||
|Electronic and|||||||||
||2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Electric|||||||||
|Appliances|||||||||
|Co., Ltd.|||||||||
|Foshan|||||||||
|Welling|||||||||
|Washer Motor|2015-3-31|92,400|2015-1-1|6,490|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Ningbo Midea|||||||||
|Joint Materials|2015-3-31|66,000|2015-1-1|10,000|Ditto|Ditto|Ditto|Ditto|
|Supply Co. Ltd.|||||||||
|Foshan|||||||||
|Welling|||||||||
||2015-3-31|21,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Material Co.,|||||||||
|Ltd.|||||||||
|Guangzhou|||||||||
|Kaizhao|||||||||
||2015-3-31|18,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Trading Co.,|||||||||
|Ltd.|||||||||
|Foshan Midea|||||||||
|Carrier|||||||||
|Refrigeration|2015-3-31|46,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Guangdong|||||||||
|Midea Group|||||||||
|Wuhu|||||||||
||2015-3-31|30,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Refrigeration|||||||||
|Equipment|||||||||
|Co., Ltd.|||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Wuhu GMCC|||||||||
|Air|||||||||
|Conditioning|2015-3-31|123,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Hefei Midea|||||||||
|Refrigerator|2015-3-31|38,000|2015-1-1|2,500|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Hubei Midea|||||||||
|Refrigerator|2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Hefei Hualing|||||||||
||2015-3-31|63,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Guangzhou|||||||||
|Midea Hualing|||||||||
|Refrigerator|2015-3-31|20,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Hefei Midea|||||||||
|Heating &|||||||||
|Ventilation|2015-3-31|7,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Wuhu Midea|||||||||
|Kitchen &|||||||||
|Bathroom|||||||||
||2015-3-31|5,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Electric|||||||||
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Wuhu Midea|||||||||
|Washing|||||||||
|Appliance|2015-3-31|12,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Anhui GMCC|||||||||
|Refrigeration|||||||||
||2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Anhui GMCC|||||||||
|Precise|||||||||
||2015-3-31|20,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacture|||||||||
|Co., Ltd.|||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Welling (Wuhu)|||||||||
|Motor|||||||||
||2015-3-31|10,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Hefei Midea|||||||||
|Washing|||||||||
||2015-3-31|40,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Machine Co.,|||||||||
|Ltd.|||||||||
|Annto Logistics|||||||||
||2015-3-31|20,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Jiangsu Midea|||||||||
|Chunhua|||||||||
||2015-3-31|14,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Electric Co.,|||||||||
|Ltd.|||||||||
|Jiangxi Midea|||||||||
|Guiya Lighting|2015-3-31|5,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|||||||||
|Chongqing|||||||||
|Midea General|||||||||
|Refrigeration|2015-3-31|12,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Equipment|||||||||
|Co., Ltd.|||||||||
|Zhejiang|||||||||
|GMCC|||||||||
||2015-3-31|50,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Compressor|||||||||
|Co., Ltd.|||||||||
|Changzhou|||||||||
|Welling Motor|||||||||
||2015-3-31|12,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing|||||||||
|Co., Ltd.|||||||||
|Midea|||||||||
|International|2015-3-31|750,000|2015-1-1|87,200|Ditto|Ditto|Ditto|Ditto|
|Holdings Ltd.|||||||||
|Midea Internati|||||||||
|onal Trading C|2015-3-31|70,000|2015-1-1|26,476|Ditto|Ditto|Ditto|Ditto|
|o., Ltd|||||||||
|Midea Electric|||||||||
|Investment|2015-3-31|50,000|2015-1-1|26,880|Ditto|Ditto|Ditto|Ditto|
|(BVI) Limited|||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||
|-|-|-|-|-|-|-|-|-|
|Calpore Macao|||||||||
|Commercial|2015-3-31|30,000|2015-1-1|3,814|Ditto|Ditto|Ditto|Ditto|
|Offshore Ltd.|||||||||
|Century|||||||||
|Carrier|||||||||
|Residential|||||||||
||2015-3-31|6,300|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Air-Conditionin|||||||||
|g Equipment|||||||||
|Co., Ltd.|||||||||
|Welling|||||||||
|International|||||||||
||2015-3-31|30,500|2015-1-1|3,648|Ditto|Ditto|Ditto|Ditto|
|Hong Kong|||||||||
|Limited|||||||||
|Welling Macao|||||||||
|Commercial|2015-3-31|7,000|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Offshore Ltd.|||||||||
|Midea Electric|||||||||
|Trading|||||||||
||2015-3-31|300,000|2015-1-1|64,947|Ditto|Ditto|Ditto|Ditto|
|(Singapore)|||||||||
|Co. Pte. Ltd.|||||||||
|Midea|||||||||
|Consumer|||||||||
|Electric|2015-3-31|30,500|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|(Vietnam) Co.,|||||||||
|Ltd.|||||||||
|Midea Electrics|||||||||
|Netherlands|2015-3-31|6,300|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|B.V.|||||||||
|Midea America|||||||||
||2015-3-31|6,300|2015-1-1|0|Ditto|Ditto|Ditto|Ditto|
|Corp.|||||||||
|PT Midea|||||||||
|Heating and|||||||||
|Ventilating Air|2015-3-31|12,600|2015-1-1|704|Ditto|Ditto|Ditto|Ditto|
|Conditioner|||||||||
|Indonesia|||||||||
|Midea|||||||||
|Malaysia Joint|2015-3-31|3,150|2015-1-1|1,507|Ditto|Ditto|Ditto|Ditto|
|Venture|||||||||
|Total guarantee line for subsidiaries||1,674,920||Total actual guarantee||1,674,920|||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|approved during the Reporting Period|||||amount for subsidiaries||||||
|(B1)|||||during the Reporting||||||
||||||Period (B2)||||||
||||||Total actual guarantee||||||
|Total approved guarantee line for|||||||||||
||||||balance for subsidiaries||||||
|subsidiaries at the end of the|||322,816|||||322,816|||
||||||at the end of the||||||
|Reporting Period (B3)|||||||||||
||||||Reporting Period (B4)||||||
|Guarantees between subsidiaries|||||||||||
||Disclosure||Actual||||||||
||date of the||occurrence||||||||
|||||Actual||||||Guarantee for a|
|Guaranteed|guarantee|Line of|date|||Type of|Term of||Due or||
|||||guarantee||||||related party or|
|party|line|guarantee|(date of|||guarantee|guarantee||not||
|||||amount||||||not|
||announce||agreement||||||||
||ment||signing)||||||||
|No such cases|||||||||||
|Total guarantee line for||||Total actual guarantee|||||||
|subsidiaries approved||||amount for subsidiaries|||||||
|||0|||||0||||
|during the Reporting||||during the Reporting Period|||||||
|Period (C1)||||(C2)|||||||
|Total approved guarantee||||Total actual guarantee|||||||
|line for subsidiaries at the||||balance for subsidiaries at|||||||
|||0|||||0||||
|end of the Reporting||||the end of the Reporting|||||||
|Period (C3)||||Period (C4)|||||||
|Total guarantee amount (total of the above-mentioned three kinds of guarantees)|||||||||||
|Total guarantee line|||||||||||
|||||Total actual guarantee|||||||
|approved during the|||||||||||
|||1,706,720||amount during the Reporting|||1,706,720||||
|Reporting Period|||||||||||
|||||Period (A2+B2+C2)|||||||
|(A1+B1+C1)|||||||||||
|Total approved guarantee||||Total actual guarantee|||||||
|line at the end of the||||balance at the end of the|||||||
|||337,816|||||337,816||||
|Reporting Period||||Reporting Period|||||||
|(A3+B3+C3)||||(A4+B4+C4)|||||||
|Proportion of the total actual guarantee amount|||||||||||
|||||6.03%|||||||
|(A4+B4+C4) in net assets of the Company|||||||||||
|Of which:|||||||||||
|Amount of guarantees provided for shareholders,|||||||||||
|||||0|||||||
|the actual controller and their related parties (D)|||||||||||
|Amount of debt guarantees provided directly or|||||||||||
|indirectly for entities with a liability-to-asset ratio||||181,662|||||||
|over 70% (E)|||||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|Portion of the total guarantee amount in excess of||
||0|
|50% of net assets (F)||
|Total amount of the three kinds of guarantees||
||181,662|
|above (D+E+F)||
|Joint responsibilities possibly borne or already||
|borne in the Reporting Period for undue|N/A|
|guarantees (if any)||
|Provision of external guarantees in breach of the||
||N/A|
|prescribed procedures (if any)||

17.2.2 Illegal provision of guarantees for external parties
□ Applicable√ N/A
No such cases in the Reporting Period.
17.3 Entrusted cash management
17.3.1 Entrusted asset management
√ Applicable□ N/A
Unit: RMB'0,000
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Actual||||Actually|
||Whether it|||||||Amount||Actual||
|||||||Method|principal||||received/|
||is a||Value of|||||provided for||profit &||
|Name of||Product||Commence-|Termina- tion|of|amount||Projected||paid|
||related-||entrusted|||||impairment||loss for||
|trustee||type||ment date|date|remune-|recovered||income||profit/loss|
||party||assets|||||(if||the||
|||||||ration|for the||||for the|
||transaction|||||||applicable)||period||
||||||||period||||period|
|||Bank||||||||||
|||||||Agree-||||||
|Bank|No|financial|2,404,136|2015.01.01|2015.12.31||3,205,518|-|130,963|130,963|130,963|
|||||||ment||||||
|||product||||||||||
|Total|||2,404,136|--|--|--|3,205,518|-|130,963|130,963|--|
|Source of entrusted assets|||All from the Company's own funds|||||||||
|Cumulative amount of||||||||||||
|principal and revenue|||0|||||||||
|overdue||||||||||||
|Litigation involved (if||||||||||||
||||N/A|||||||||
|applicable)||||||||||||
|Disclosure date of the||||||||||||
|announcement about the|||2015.03.31|||||||||
|board’s consent for the asset||||||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|management entrustment (if||
|any)||
|Disclosure date of the||
|announcement about the||
|general meeting’s consent for|2015.04.22|
|the asset management||
|entrustment (if any)||
||The Proposal for the Entrustment of the Company’s Own Idle Funds for Management in 2016|
||was considered and approved at the 6th Meeting of the 2nd Board of Directors on 24 March 2016.|
|Any plan for asset||
||As such, in order to increase the service efficiency of and the returns on its cash assets under the|
|management entrustment in||
||condition that investment risks are under control, the Company has agreed to entrust its own idle|
|the future||
||funds not exceeding RMB35 billion in total to low-risk investment on a rolling basis. The Proposal|
||awaits further consideration at the 2015 Annual General Meeting of the Company.|

 17.3.2 Entrusted loans
□ Applicable√ N/A
No such cases in the Reporting Period.
17.4 Other significant contracts
□ Applicable√ N/A
No such cases in the Reporting Period.
18. Other Significant Events
□ Applicable√ N/A
No such cases in the Reporting Period.
19. Significant Events of Subsidiaries
□ Applicable√ N/A
20. Social Responsibilities
√ Applicable□ N/A
The Company has shouldered its social responsibility. It has put much emphasis on preserving the legal
interests of stakeholders, including shareholders, staff, consumers, partners, the government and
community. It has reinforced its communication and coordination with these interested parties, insisting
The 2015 Annual Report of Midea Group Co., Ltd. on a harmonious relationship and coexistence with all parties, adhering to the principles of good faith and commitment, complying with laws and moral standards and striving to achieve the sustainable development of the society and environment (details of which can be found in the 2015 Social Responsibility Report disclosed on www.cninfo.com.cn).
Whether the listed company and its subsidiaries belong to heavy polluting industries prescribed by the environmental protection departments of China
□ Yes√ No□ N/A
21. Corporate Bonds
Corporate bonds publicly offered and listed on the stock exchange, which were undue before the approval date of this Report or were due but could not be redeemed in full
No
The 2015 Annual Report of Midea Group Co., Ltd. Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before||+/-|||||After||
||||||Capitali-|||||
|||Propor-|Issuance of|Bonus|zation of||||Propor-|
||Number|||||Other|Subtotal|Number||
|||tion (%)|new shares|shares|capital||||tion (%)|
||||||reserves|||||
|1. Restricted shares|1,973,072,529|46.80|55,093,750|0|0|-1,822,529|53,271,221|2,026,343,750|47.49|
|1.1 Shares held by||||||||||
||0|0|0|0|0|0|0|||
|the state||||||||||
|1.2 Shares held by||||||||||
|state-owned|0|0|0|0|0|0|0|||
|corporations||||||||||
|1.3 Shares held by||||||||||
|other domestic|1,973,072,529|46.80|55,093,750|0|0|-1,822,529|53,271,221|2,026,343,750|47.49|
|investors||||||||||
|Among which:||||||||||
|Shares held by||||||||||
||1,571,250,000|37.27|55,000,000|0|0|0|55,000,000|1,626,250,000|38.11|
|domestic||||||||||
|corporations||||||||||
|Shares held by||||||||||
|domestic|401,822,529|9.53|93,750|0|0|-1,822,529|-1,728,779|400,093,750|9.38|
|individuals||||||||||
|1.4 Shares held by||||||||||
||0|0|0|0|0|0|0|0|0|
|foreign investors||||||||||
|Among which:||||||||||
|Shares held by||||||||||
||0|0|0|0|0|0|0|0|0|
|foreign||||||||||
|corporations||||||||||
|Shares held by||||||||||
|foreign|0|0|0|0|0|0|0|0|0|
|individuals||||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|2. Non-restricted||||||||||
||2,242,735,943|53.20|25,528,871|0|0|-27,769,115|-2,240,244|2,240,495,699|52.51|
|shares||||||||||
|2.1 RMB common||||||||||
||2,242,735,943|53.20|25,528,871|0|0|-27,769,115|-2,240,244|2,240,495,699|52.51|
|shares||||||||||
|2.2 Domestically||||||||||
||0|0|0|0|0|0|0|0|0|
|listed foreign shares||||||||||
|2.3 Overseas listed||||||||||
||0|0|0|0|0|0|0|0|0|
|foreign shares||||||||||
|2.4 Other|0|0|0|0|0|0|0|0|0|
|3. Total shares|4,215,808,472|100.00|80,622,621|0|0|-29,591,644|51,030,977|4,266,839,449|100|

 Reasons for the changes in shares
√ Applicable□ N/A
a. In the Reporting Period, the Company made a private placement of 55,000,000 restricted tradable shares to Xiaomi Technology, which were listed on the Shenzhen Stock Exchange on 26 June 2015 and not allowed to be transferred within 36 months from the listing.
b. On 15 May 2015, the Company disclosed the Indicative Announcement on the Commencement of the Self-Decided Exercise by the Eligible Incentive Receivers for the First Exercise Period of the First Stock Option Incentive Plan. The stockoptions’ exercise started on 18 May 2015. Up to the end of the Reporting Period, the incentive receivers had exercised 25,622,621 stock options for the First Stock Option Incentive Plan, of which 125,000 stock options had been exercised by the Company Secretary Jiang Peng on his own decision (93,750 shares locked up due to the75% lock-up ratio requirement for the senior executives).
c. In June 2014, with confidence in theCompany’s long-term solid growth, Fang Hongbo, Yuan Liqun and Li Jianwei from the top management of the Company increased their shareholdings in the Company by approximately 2,430,037 shares in total through the secondary market (1,822,529 shares locked up due to the75% lock-up ratio requirement for the senior executives). According to the applicable rules, the annual transferable shares for the senior executives shall be calculated[the transferable shares= (restricted tradable shares+ non-restricted tradable shares)×25%] at the first trading day of every year. As such, the aforesaid locked-up shares were unlocked for trading at the beginning of 2015. d. The Preliminary Plan for the First Repurchase of Some Public Shares was reviewed and approved at
the
30th
Meeting of the First Board of Directors on 26 June 2015 and later at the Second Special General
The 2015 Annual Report of Midea Group Co., Ltd. Meeting for 2015 on 13 July 2015. According to the Preliminary Plan, the Company would repurchase some of its shares under the price of RMB48.54/share and the total price for the repurchase should not exceed RMB1 billion. 29,591,644 shares were bought back during the period from 21 July 2015 to 31 July 2015. With the highest price at RMB35.74/share and the lowest at RMB30.69/share, the total repurchase price stood at RMB999,997,670.86, reaching its limit. As such, this repurchase plan has been carried out. The Company cancelled the repurchase shares of 29,591,644 with the Shenzhen branch of China Securities Depository and Clearing Co., Ltd. on 6 August 2015.
Approval of share changes
√ Applicable□ N/A
a. On 20 May 2015, the Issue Review Committee of the CSRC reviewed and approved theCompany’s application for a private placement to Xiaomi Technology.
b. On 11 June 2015, the Company received from the CSRC the Reply Regarding the Approval for the Private Placement of Midea Group Co., Ltd. (CSRC Permit[2015] No. 1169), approving a private placement of no more than 55,000,000 new shares by the Company to Xiaomi Technology.
Transfer of share ownership
□ Applicable√ N/A
Effects of changes in shares on the basic EPS, diluted EPS, net assets per share attributable to common shareholders of the Company and other financial indexes over the last year and the last Reporting Period
□ Applicable√ N/A
Other contents that the Company considers necessary or is required by the securities regulatory authorities to disclose
□ Applicable√ N/A
1.2 Changes in restricted shares
√ Applicable□ N/A
Unit: share
||||||||
|-|-|-|-|-|-|-|
||Opening|Unlocked in|Increased in|Closing|||
|||||||Date of|
|Name of shareholder|restricted|current|current|restricted|Reason for unlocking||
|||||||unlocking|
||shares|period|period|shares|||
||||||Quotas for transferable||
|Fang Hongbo, Yuan|||||||
||201,822,529|1,822,529|0|200,000,000|shares released at the|2015-01-04|
|Liqun and Li Jianwei|||||||
||||||beginning of the year||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||
|-|-|-|-|-|-|-|
||||||Lock-up of the shares||
||||||obtained by the senior||
|Jiang Peng|0|0|93,750|93,750|executive by exercising|-|
||||||stock options in an||
||||||equity incentive plan||
|Xiaomi Technology Co.,|||||Lock-up of privately||
||0|0|55,000,000|55,000,000||2018-6-26|
|Ltd.|||||offered shares||
|Total|201,822,529|1,822,529|55,093,750|255,093,750|--|--|

 2. Issuance and Listing of Securities
2.1 Securities (excluding preference shares) issued in the Reporting Period
√ Applicable□ N/A
||||||||
|-|-|-|-|-|-|-|
|Names of the|||Number of||||
|||Issuing price|||Number||
|stock and||||||Ending date of|
||Issuing date|(or interest|shares|Listing date|approved for||
|derivative||||||trade|
|||rate)|issued||listing||
|securities|||||||
|Stocks|||||||
|A-share|2015.06.26|22.01|55,000,000|2015.06.26|55,000,000|-|

 2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset and liability structures
√ Applicable□ N/A
In the Reporting Period, the total number of the Company shares increased from 4,215,808,472 to 4,266,839,449 due to 25,622,621 stock options being exercised by incentive receivers at their own decision during the first exercise period of the First Stock Option Incentive Plan, 55,000,000 new shares from the private placement to Xiaomi Technology and the 29,591,644 shares bought back that were cancelled in the first repurchase.
2.3 Existing staff-held shares
□ Applicable√ N/A
3. Shareholders and Actual Controller
3.1 Total number of shareholders and their shareholdings
Unit: share
The 2015 Annual Report of Midea Group Co., Ltd.
|||||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||Total number of|||||||||||||
|Total number|||||||||||Total number of preference|||||
||||common|||||||||||||
|of common|||||||Total number of||||shareholders with resumed|||||
||||shareholders at the|||||||||||||
|shareholders|||||||preference shareholders||||voting rights at the prior|||||
||75,479||prior month-end||78,543|||||0|||||0|
|at the end of|||||||with resumed voting rights||||month-end before the|||||
||||before the|||||||||||||
|the Reporting|||||||at the period-end (if any)||||disclosure date of the annual|||||
||||disclosure date of|||||||||||||
|Period|||||||||||report (if any)|||||
||||the annual report|||||||||||||
|Shareholdings of shareholders with a shareholding percentage over 5% or the top 10 shareholders||||||||||||||||
|||||Sharehold-||||Increase/decr|||||Pledged or frozen|||
|||||||Total shares|||Number of|||Number of||||
|Name of||Nature of||ing||||ease during|||||shares|||
|||||||held at the|||restricted|||non-restricte||||
|shareholder||shareholder||percentage||||the Reporting|||||Status of|Number of||
|||||||period-end|||shares held|||d shares held||||
|||||(%)||||Period|||||shares|shares||
|Midea Holding Co.,Ltd.||Domesticnon-state-ownedcorporation||35.07||1,496,250,000||0|1,496,250,000|||0||||
||||||||||||||Pledged|309,260,000||
|Rongrui EquityInvestment (Zhuhai)Partnership (limitedpartnership)||Domesticnon-state-ownedcorporation||7.14||304,500,000||0|0|||304,500,000||||
||||||||||||||-|-||
|China SecuritiesFinance Co., Ltd.||State-ownedcorporation||2.99||127,545,960||127,545,960|0|||127,545,960||||
||||||||||||||-|-||
|Fang Hongbo||Domesticindividual||2.14||91,326,995||0|90,000,000|||1,326,995||||
||||||||||||||-|-||
|Tianjin CDH JiataiEquity InvestmentPartnership (limitedpartnership)||Domesticnon-state-ownedcorporation||1.83||78,000,000||0|0|||78,000,000||||
||||||||||||||-|-||
|Huang Jian||Domesticindividual||1.76||75,000,000||0|75,000,000|||0||||
||||||||||||||-|-||
|Ningbo MaysunEquity InvestmentPartnership (limitedpartnership)||Domesticnon-state-ownedcorporation||1.76||75,000,000||0|75,000,000|||0||||
||||||||||||||-|-||
|Yuan Liqun||Domesticindividual||1.42||60,500,000||0|60,000,000|||500,000||||
||||||||||||||-|-||
|CDH M-Tech (HK)Co., Ltd.||Overseascorporation||1.41||60,000,000||0|0|||60,000,000||||
||||||||||||||-|-||
|CDH Spark (HK)Co., Ltd.||Overseascorporation||1.35||57,500,000||0|0|||57,500,000||||
||||||||||||||-|-||

The 2015 Annual Report of Midea Group Co., Ltd.
||||||
|-|-|-|-|-|
|Strategic investors|||||
|or general|||||
|corporations|||||
|becoming top-ten|N/A||||
|shareholders due to|||||
|placing of new|||||
|shares (if any)|||||
|Related-parties or|||||
|acting-in-concert|Two individual shareholders Mr. Fang Hongbo and Ms. Yuan Liqun, serve as director and senior executive. CDH||||
|parties among the|Jiatai, CDH M-Tech and CDH Spark holding 4.59% shares of Midea Group are related parties.||||
|shareholders above|||||
|Shareholdings of the top 10 non-restricted shareholders|||||
|||Number of non-restricted|Type of shares||
|Name of shareholder||shares held at the|||
||||Type|Number|
|||period-end|||
|Rongrui Equity Investment (Zhuhai) Partnership (limitedpartnership)||304,500,000|||
||||RMB common share|304,500,000|
|China Securities Finance Co., Ltd.||127,545,960|Ditto|127,545,960|
|Tianjin CDH Jiatai Equity Investment Partnership (limitedpartnership)||78,000,000|||
||||Ditto|78,000,000|
|CDH M-Tech (HK) Co., Ltd.||60,000,000|Ditto|60,000,000|
|CDH Spark (HK) Co., Ltd.||57,500,000|Ditto|57,500,000|
|Central Huijin Asset Management Ltd.||52,316,600|Ditto|52,316,600|
|Fidelity Investments Management (HK) Ltd.－Clients’ Funds||37,302,429|Ditto|37,302,429|
|Deutsche Bank Aktiengesellschaft||36,196,687|Ditto|36,196,687|
|Merrill Lynch International||33,385,844|Ditto|33,385,844|
|Hillhouse Capital Management Limited－HCM China Fund||31,263,565|Ditto|31,263,565|
|||CDH Jiatai, CDH M-Tech and CDH Spark are related parties. Other|||
|||than that, the Company does not know whether there are related|||
|Related-parties or acting-in-concert parties among the top ten||parties among other shareholders of tradable shares and whether|||
|non-restricted shareholders and between the top ten non-restricted||other shareholders of tradable shares belong to parties acting in|||
|shareholders and the top ten shareholders||concert as prescribed in the <Administrative Measures for|||
|||Information Disclosure for Shareholding Alteration in a Listed|||
|||Company>.|||
|Explanation on the top 10 common shareholders participating in|||||
|||N/A|||
|securities margin trading (if any)|||||

Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the
Company conduct any promissory repurchase during the Reporting Period
The 2015 Annual Report of Midea Group Co., Ltd.□ Yes√ No
No such cases in the Reporting Period.
3.2 Particulars about the controlling shareholder
||||||
|-|-|-|-|-|
||Legal||||
|Name of controlling|representative|Date of|||
||||Credibility code|Main business scope|
|shareholder|/ company|establishment|||
||principal||||
|||||Manufacture and commerce investment;|
|||||domestic commerce and materials supply|
|||||and marketing industry (excluding|
|||||state-designated monopoly); CP software and|
|||||hardware development; industrial product|
|Midea Holding Co.,|||||
||He Xiangjian|2002-08-05|914406067429989733|design; information technology consulting|
|Ltd.|||||
|||||services, providing investment consultant and|
|||||consulting services; installation, maintenance|
|||||and after-sales service of electric appliances;|
|||||real estate intermediary service and|
|||||forwarding agent service.|
|Shareholdings of the|||||
|controlling|||||
|shareholder in other|||||
|controlled or|Apart from a direct control over the Company, Midea Holding does not directly control or have shares in||||
|non-controlled listed|other listed companies at home or abroad.||||
|companies at home or|||||
|abroad during the|||||
|Reporting Period|||||

Change of the controlling shareholder during the Reporting Period
□ Applicable√ N/A
No such cases in the Reporting Period.
3.3 Particulars about the actual controller
||||
|-|-|-|
|Name of the actual controller|Nationality|Right of residence in other countries or regions|
||The People's Republic||
|He Xiangjian||No|
||of China||
|Main occupation and duty|Incumbent board chairman of Midea Holding||
|Used-to-be-holding listed companies|Midea Group (000333.SZ ), Welling Holding (00382.HK) and Little Swan (A:||
|home and abroad in the last 10 years|000418.SZ; B:200418);||

The 2015 Annual Report of Midea Group Co., Ltd. Change of the actual controller during the Reporting Period
□ Applicable√ N/A
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company
He Xiangjian
94.55% 70%
Midea Holding Co., Ltd. Ningbo Kailian Industrial Development Co., Ltd.
30%
35.07% 1.14%
Midea Group Co., Ltd.
The actual controller controls the Company via trust or other ways of asset management
□ Applicable√ N/A
3.4 Other corporate shareholders with a shareholding percentage above10%
□ Applicable√ N/A
3.5 Limits on theCompany’s shares held by its controlling shareholder, actual controller, reorganizer and other commitment subjects
□ Applicable√ N/A
The 2015 Annual Report of Midea Group Co., Ltd. Section VII Preference Shares
□ Applicable√ N/A
No such cases in the Reporting Period.
The 2015 Annual Report of Midea Group Co., Ltd. Section VIII Information about Directors, Supervisors, Senior Management and Employees
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||Shares|Shares|||
|||||||||||Other||
||||||||Shares held|increased|decrease||Shares held|
||||||Starting|Ending||||increas||
|||Incumbent|||||at the|at the|d at the||at the|
|Name|Office title||Gender|Age|date of|date of||||e/decre||
|||/ Former|||||year-begin|Reporting|Reporting||period-end|
||||||tenure|tenure||||ase||
||||||||(share)|Period|Period||(share)|
|||||||||||(share)||
|||||||||(share)|(share)|||
||Chairman|||||||||||
|Fang||||||||||||
||and|Incumbent|Male|49|2012-8-25|2018-9-18|91,326,995|0|0|0|91,326,995|
|Hongbo||||||||||||
||President|||||||||||
||Director, Vice|||||||||||
||President|||||||||||
|Yuan|and|||||||||||
|||Incumbent|Female|47|2012-8-25|2018-9-18|60,500,000|0|0|0|60,500,000|
|Liqun|Chief|||||||||||
||Financial|||||||||||
||Officer|||||||||||
||Director and|||||||||||
|Wu||||||||||||
||Vice|Incumbent|Male|52|2014-4-21|2018-9-18|0|0|0|0|0|
|Wenxin||||||||||||
||President|||||||||||
|He||||||||||||
||Director|Incumbent|Male|49|2012-8-25|2018-9-18|0|0|0|0|0|
|Jianfeng||||||||||||
||Director and|||||||||||
|Li Feide|Vice|Incumbent|Male|39|2012-8-31|2018-9-18|0|0|0|0|0|
||President|||||||||||
|Xu Hai|Director|Incumbent|Male|40|2013-3-4|2018-9-18|0|0|0|0|0|
|Hu||||||||||||
||Director|Incumbent|Female|46|2012-8-25|2018-9-18|0|0|0|0|0|
|Xiaoling||||||||||||
|Wu|Independent|||||||||||
|||Incumbent|Male|60|2013-3-4|2018-9-18|0|0|0|0|0|
|Shinong|Director|||||||||||
||Independent|||||||||||
|Rui Meng||Incumbent|Male|49|2015-9-18|2018-9-18|0|0|0|0|0|
||Director|||||||||||
|Guo|Independent|||||||||||
|||Incumbent|Male|57|2013-3-4|2018-9-18|0|0|0|0|0|
|Xuejin|Director|||||||||||
||Independent|||||||||||
|Li Wenjing||Incumbent|Male|37|2013-3-4|2018-9-18|0|0|0|0|0|
||Director|||||||||||
||Chairman of|||||||||||
||the|||||||||||
|Liu Min||Incumbent|Female|39|2016-2-1|2018-9-18|0|0|0|0|0|
||Supervisory|||||||||||
||Committee|||||||||||
|Zhao Jun|Supervisor|Incumbent|Male|41|2014-4-21|2018-9-18|0|0|0|0|0|
||Worker-repre|||||||||||
|Mai Yufen|sentative|Incumbent|Female|32|2016-1-16|2018-9-18|0|0|0|0|0|
||Supervisor|||||||||||

The 2015 Annual Report of Midea Group Co., Ltd.
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
|Zhu|Vice|||||||||||
|||Incumbent|Male|48|2014-4-21|2018-9-18|0|0|0|0|0|
|Fengtao|President|||||||||||
|Gu|Vice|||||||||||
|||Incumbent|Male|53|2014-4-21|2018-9-18|0|0|0|0|0|
|Yanmin|President|||||||||||
|Hu|Vice|||||||||||
|||Incumbent|Male|59|2014-8-18|2018-9-18|0|0|0|0|0|
|Ziqiang|President|||||||||||
|Wang|Vice|||||||||||
|||Incumbent|Male|49|2014-8-18|2018-9-18|0|0|0|0|0|
|Jinliang|President|||||||||||
|Jiang|Company|||||||||||
|||Incumbent|Male|43|2013-10-30|2018-9-18|0|0|0|125,000|125,000|
|Peng|Secretary|||||||||||
|Li Jianwei|Director|Former|Male|50|2012-8-25|2015-8-24|50,603,042|0|-203,042|0|50,400,000|
|Fu||||||||||||
||Independent|||||||||||
|Zhengpin||Former|Male|51|2013-3-4|2015-8-24|0|0|0|0|0|
||Director|||||||||||
|g||||||||||||
||Chairman of|||||||||||
||the|||||||||||
|Zeng Qiao||Former|Female|43|2012-8-25|2016-1-31|0|0|0|0|0|
||Supervisory|||||||||||
||Committee|||||||||||
||Worker-repre|||||||||||
|Li||||||||||||
||sentative|Former|Female|35|2014-5-26|2016-1-15|0|0|0|0|0|
|Baoqiong||||||||||||
||Supervisor|||||||||||
|Total|--|--|--|--|--|--|202,430,037|0|-203,042|125,000|202,351,995|

 2. Changes in Directors, Supervisors and Senior Management
||||||
|-|-|-|-|-|
|Name|Office title|Type of change|Date|Reason|
|||Left upon the expiration|2015.08.24||
|Li Jianwei|Director|||Expiration of his office term|
|||of his office term|||
||Independent||||
|Fu Zhengping||Left|2015.08.24|Personal reason|
||Director||||
||Chairman of the||||
|Zeng Qiao|Supervisory|Left|2016.01.31|Personal reason|
||Committee||||
||Worker-represent||||
|Li Baoqiong||Left|2016.01.15|Personal reason|
||ative Supervisor||||

3. Brief Biographies
Professional backgrounds, main work experience and current responsibilities in the Company of the incumbent directors, supervisors and senior management
Mr. Fang Hongbo, holder of a Master's degree, is the Chairman and President of the Company. He joined Midea in 1992 and previously served as the General Manager of the Midea Air-Conditioning Business Department, the President of Midea Refrigeration Electric Appliances Group, the Chairman and President of GD Midea Holding Co., Ltd. Mr. Fang Hongbo is also the Chairman of the Company's subsidiary, Wuxi Little Swan Co., Ltd.
Ms. Yuan Liqun, a Master's degree graduate, is a director, senior vice president, the CFO and Party
Secretary of the Company as well as a representative of the National People's Congress. She joined
Midea in 1992 and was a director of GD Midea Holding Co., Ltd. Ms. Yuan Liqun is also an executive
The 2015 Annual Report of Midea Group Co., Ltd. director of the Hong Kong listed company, Welling Holding Co., Ltd., which is controlled by the Company and also a director in Guangdong Shunde Rural Commercial Bank Co., Ltd. in which the Company owns shares.
Mr. Wu Wenxin, a Master's graduate, joined Midea in 1993 and served as the Household Air Conditioning Vice President in Midea. He is now a director and vice president of the Company as well as the President of Household Air Conditioning Division of the Company.
Mr. He Jianfeng, holder of aBachelor’s degree, is one of theCompany’s directors. He is also the Chairman and President of Infore Investments Holding Group Co., Ltd., in addition to being the Chairman of Infore Environment Technology Group Co., Ltd.
Mr. Li Feide, holder of a Master's degree, joined Midea in 1999 and served as the Company Secretary, the Strategic Operation Head, the Operational Management Head, and thePresident’s Assistant. He is now a company director, vice president. and also an executive director of the Hong Kong listed company, Welling Holding Co., Ltd., which is controlled by the Company.
Mr. Xu Hai, a Bachelor's degree graduate, a former Executive Director of Goldman Sachs Gaohua Co., Ltd. and Managing Director of ICBC International Holdings Ltd. He is now the Managing Director of Zhuhai Rongze Tongyuan Investment Management Partnership (Limited) and a director in the Company. Ms. Hu Xiaoling, a master's degree graduate, was a Senior Auditor for Arthur Andersen Accounting Firm and Senior Manager of Direct Investment Department in China International Capital Co., Ltd before she joined the company. She is a designated representative of Tianjin CDH Equity Investment and a director of Midea Group.
Mr. Wu Shinong, holder of a doctoral degree, is Professor and Tutor for doctoral students at the Management School of Xiamen University. He is also involved as an Independent Director of Midea Group, and a member of the National Natural Science Foundation of China.
Mr. Rui Meng, holder of a doctoral degree. He is now an independent director of the Company, a professor of finance and accounting at China Europe International Business School, a chaired professor of finance in Zhong Kun Group, a doctoral advisor, and concurrently the director of a doctoral program, the head of the CEIBS Shoushan Wealth Management Research Center, a member of the Risk Management Committee of the Shanghai Clearing House.
Mr. Guo Xuejin, a master's degree graduate, is the director of Guangdong Kings Law Firm, a member of the Guangzhou 14th People's Congress, a member of Guangzhou Law Committee of the NPC, the arbitrator of Guangzhou Arbitrator Committee, an expert consultant of Guangzhou Traffic Committee and is currently an independent director of Midea Group.
Mr. Li Wenjing, holder of a doctoral degree, is the Vice Director of the Accounting Department, professor and doctoral supervisor in the Accounting Department of the School of Management at Jinan University, and at present is an independent director of Midea Group. He also holds concurrent positions including being a member of the International Exchange Committee& a director of the Branch Society of Financial Costs under the Accounting Society of China, a director of Accounting Academy of Guangdong Province,
The 2015 Annual Report of Midea Group Co., Ltd. a researcher at the Managerial Accounting Research Center of Jinan University, and a researcher in Social Responsibility and Environmental Accounting Research Center of Jinan University.
Ms. Liu Min, amaster’s degree graduate, joined Midea in 1998. She used to be the General Manager of an overseas marketing company underMidea’s Household Air-Conditioning Division. She is now the Chairman of the Supervisory Committee and the Chief Operations Officer of the Company.
Mr. Zhao Jun, a master's degree graduate, joined Midea in 2000 and has functioned as the Director and the CFO of GD Midea Holding Co., Ltd. He is now a Supervisor of the Company, thePresident’s Assistant and CFO in Midea Holding Co., Ltd.
Ms. Mai Yufen, abachelor’s degree graduate, joined Midea in 2007. She served to function as the Budget Commissioner-General of the Financial Management Department of the Company and now the Operation Control Commissioner-General and the Worker-representative Supervisor of the Company. Mr. Zhu Fengtao, holder of a doctoral degree, joined Midea in 1993 and has served as the President of Midea Microwave Appliance Manufacturing Co., Ltd. He is currently a Vice President and the General Manger of Kitchen Appliances Division in the Company.
Mr. Gu Yanmin, holder of a doctoral degree, joined Midea in 2000 and once functioned as MideaGroup’s Planning& Investment Head, Midea Air-Conditioning& RefrigerationGroup’s Overseas Strategy& Development Head, Vice President and Head of Overseas Business Expansion in the Marketing Department, and MideaGroup’s Head of Overseas Strategy. He is currently a vice president of the Company.
Mr. Hu Ziqiang, holder of a doctoral degree, joined Midea in 2012, and has formerly worked for GE and Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a Vice President and the Chief of the Central Research Institute of the Company.
Mr. Wang Jinliang, holder of amaster’s degree, joined Midea in 1995 and previously worked as the Vice President of China Marketing in the Company, and was GD MideaHolding’s Vice President and Marketing Head. He is now a Vice President and the Head of Domestic Marketing in the Company. Mr. Jiang Peng, holder of amaster’s degree, joined Midea in 2007 and used to be the Representative for Securities Affairs and Company Secretary for GD Midea Holding Co., Ltd. He is now the Secretary of the Company.
Posts held in shareholding entities
√ Applicable□ N/A
|||||||
|-|-|-|-|-|-|
||||Beginning date|Ending date of|Allowance from the|
|Name|Shareholding entity|Position||||
||||of office term|office term|shareholding entity|
||Midea Holding Co.,|||||
|Li Jianwei||President|2013-01-01|2015-12-31|Yes|
||Ltd.|||||
||Midea Holding Co.,|||||
|Zhao Jun||Vice President, CFO|2013-01-01|-|Yes|
||Ltd.|||||
||Mr. Zhao Jun has become a vice president of Midea Holding since 5 January 2016, and Mr. Li|||||
|Note||||||
||Jianwei left Midea Holding for his personal reason.|||||

The 2015 Annual Report of Midea Group Co., Ltd. Posts held in other entities
√ Applicable□ N/A
|||||||
|-|-|-|-|-|-|
||||Beginning date|Ending date of|Allowance from|
|Name|Other entity|Position||||
||||of office term|office term|the entity|
|Fang||||||
||Wuxi Little Swan Co., Ltd.|Board Chairman|2012-08|2018-08|No|
|Hongbo||||||
||Welling Holding Limited|Executive Director|2007-01|-|No|
|Yuan Liqun|Guangdong Shunde Rural|||||
|||Director|2013-03|-|No|
||Commercial Bank Co., Ltd|||||
|Li Feide|Welling Holding Limited|Executive Director|2012-12||No|
||Infore Investments Holding Group|Board Chairman,||||
||||1995|-|Yes|
|He|Co., Ltd.|President||||
|Jianfeng|Infore Environment Technology|||||
|||Board Chairman|2007-10|-|No|
||Group Co., Ltd.|||||
||Zhuhai Rongze Tongyuan|||||
||Investment Management|Managing Director|2016-01|2017-12|Yes|
|Xu Hai||||||
||Partnership (Limited)|||||
||Green Energy High-tech Co., Ltd.|Supervisor|2013-08|2016-08|No|
|||Non-executive||||
||Belle International Holdings Limited||2005-09|-|No|
|||director||||
||Anhui Yingliu Electro Mechanical|||-||
|||Director|2006-04||No|
||Co., Ltd|||||
||Beijing Xiron Book Co., Ltd|Director|2010-07|-|No|
|||Non-executive||-||
|Hu Xiaoling|Baroque Japan Ltd||2013-08||No|
|||director||||
|||Non-executive||-||
||Dali Foods Group Co., Ltd.||2015-05||No|
|||director||||
|||Representative||||
||Tianjin CDH Jiatai Equity Investment|appointed by a|2011-08|-|No|
||Partnership (limited partnership)|partner conducting||||
|||partnership affairs||||
||Fuyao Glass Industry Group Holding|||||
|||Director|2011-04|-|Yes|
||Co., Ltd.|||||
|Wu||Independent||||
||Xiamen Xiangyu Holding Co., Ltd.||2010-06|2016-06|Yes|
|Shinong||Director||||
|||Independent||||
||Xiamen ITG Group Co., Ltd.||2014-06|2017-06|Yes|
|||Director||||
||China Shipping Development Co.,|Independent||2018-06||
|Rui Meng|||2015-06||Yes|
||Ltd.|Director||||
|||Independent||2014-04||
|Guo Xuejin|Donlinks Grain & Oil Co., Ltd.||2008-04||Yes|
|||Director||||
||Guangzhou Devotion Thermal|Independent||-||
||||2014-11||Yes|
||Technology Co., Ltd.|Director||||
|Li Wenjing||||||
||Guangzhou Longse Technology Co.,|Independent||-||
||||2015-11||Yes|
||Ltd.|Director||||

Punishments imposed in the recent three years by the securities regulators on the incumbent directors, supervisors and senior management as well as those who left in the Reporting Period
□ Applicable√ N/A
4. Remuneration of Directors, Supervisors and Senior Executives
The following describes the decision-making procedures, grounds on which decisions are made and
The 2015 Annual Report of Midea Group Co., Ltd. actual remuneration payment of directors, supervisors and senior executives.
The decision-making remuneration procedure for directors, supervisors and senior executives: The remuneration is proposed by the Board Compensation Committee and approved by the Board. Decisions are made finally after the deliberation of shareholders' meeting.
The remuneration of directors, supervisors and senior executives consist of basic annual payments and performance-related annual payments according to the Salary Management System for the Directors, Supervisors and Senior Executives which has been approved by the Company. Basic payment is determined based on the responsibility, risk and pressure of directors, supervisors and senior executives. The basic annual payment remains stable. Performance-related annual payment is related to the completion rate of corporate profit, the assessment result of target responsibility system and the performance evaluation structure of their own department. The remuneration system for directors, supervisors and senior executives serves the Company's strategy, and shall be adjusted with the Company's operating conditions in order to meet theCompany’s development requirements. The basis for adjusting the remuneration of directors, supervisors and senior executives are as follows:
a. Wage growth in the industry
b. Inflation
c. Corporate earnings
d. Organizational structure adjustment
e. Individual adjustment due to a change in position
The allowance standard of independent directors is RMB150,000/year (including tax) according to Proposal on the Allowance Standard Adjustment of Independent Directors.
Remuneration of directors, supervisors and senior executives during the Reporting Period
Unit: RMB'0,000
||||||||
|-|-|-|-|-|-|-|
||||||Total before-tax|Remuneration|
|||||Incumbent/|remuneration|from related|
|Name|Position|Gender|Age||||
|||||Former|from the|parties of the|
||||||Company|Company|
||Board Chairman and||||||
|Fang Hongbo||Male|49|Incumbent|688||
||President||||||
||Director, Vice President||||||
|Yuan Liqun||Female|47|Incumbent|368||
||and CFO||||||
||Director and Vice||||||
|Wu Wenxin||Male|52|Incumbent|522||
||President||||||
|He Jianfeng|Director|Male|49|Incumbent||Yes|
||Director and Vice||||||
|Li Feide||Male|39|Incumbent|174||
||President||||||
|Xu Hai|Director|Male|40|Incumbent||No|
|Hu Xiaoling|Director|Female|46|Incumbent||No|
|Wu Shinong|Independent Director|Male|60|Incumbent|15||
|Guo Xuejin|Independent Director|Male|57|Incumbent|15||
|Li Wenjing|Independent Director|Male|37|Incumbent|15||
|Zhao Jun|Supervisor|Male|41|Incumbent||Yes|

The 2015 Annual Report of Midea Group Co., Ltd.
||||||||
|-|-|-|-|-|-|-|
|Zhu Fengtao|Vice President|Male|48|Incumbent|326||
|Gu Yanmin|Vice President|Male|53|Incumbent|243||
|Hu Ziqiang|Vice President|Male|59|Incumbent|317||
|Wang Jinliang|Vice President|Male|49|Incumbent|192||
|Jiang Peng|Company Secretary|Male|43|Incumbent|98||
|Li Jianwei|Director|Male|50|Former||Yes|
|Fu Zhengping|Independent Director|Male|51|Former|15||
||Chairman of the||||||
|Zeng Qiao||Female|43|Former|128||
||Supervisory Committee||||||
||Worker-representative||||||
|Li Baoqiong||Female|35|Former|47||
||Supervisor||||||
|Total|--|--|--|--|3,163|--|

 Share incentives for directors, supervisors and senior executives in the Reporting Period
√ Applicable□ N/A
Unit: share
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|||||Exercise|||||||
|||||price for|Market|Restricted|||||
|||Exercisable|Exercised|exercised|price at|shares|Unlocked|Restrictedshares|Grant price|Restricted|
|||share|share|share|the end of|||||shares held|
|||||||held at the|shares in||of the||
|Name|Office title|options for|options in|options in|the|beginning|the|granted inthe|restricted|at the end|
|||the|the|the|Reporting|||||of the|
|||Reporting|Reporting|Reporting|Period|of the|Reporting|ReportingPeriod|shares|Reporting|
|||||||Reporting|Period||(RMB/share)||
|||Period|Period|Period|(RMB /|||||Period|
|||||(RMB /|share)|Period|||||
|||||share)|||||||
||Director, Vice||||||||||
|Li Feide||250,000|0|17.72|32.82|0|0|0|-|0|
||President||||||||||
|Jiang|Company||||||||||
|||125,000|125,000|17.72|32.82|0|0|0|-|0|
|Peng|Secretary||||||||||
|Total|--|375,000|125,000|--|--|0|0|0|--|0|
|||The equity incentive plans carried out in the Reporting Period are about offering of stock options to|||||||||
|Note (if any)|||||||||||
|||the incentive receivers.|||||||||

5. Staff in the Company
5.1 Number, functions and educational backgrounds of the staff
|||
|-|-|
|Number of in-service staff of the Company|1,200|
|Number of in-service staff of main subsidiaries|92,099|
|Total number of in-service staff|93,299|
|Total number of staff with remuneration in the period|93,299|
|Number of retirees to whom the Company or its main|2,181|
|subsidiaries need to pay retirement pension||
|Functions||
|Function|Number of staff|
|Production|78,731|
|Sales|3,837|
|R&D|8,672|
|Financial|1,175|
|Administrative|884|
|Total|93,299|

The 2015 Annual Report of Midea Group Co., Ltd.
|||
|-|-|
|Educational backgrounds||
|Educational background|Number of staff|
|Doctor|143|
|Master|1,740|
|Bachelor|14,164|
|College, technical secondary school|45,269|
|Others|31,983|
|Total|93,299|

5.2 Staff remuneration policy
Staff remuneration shall be paid on time according to the Salary Management System. The Company decides the regular salary of the employees according to theposition’s value and evaluation performances and decides the variable salary according to the Company's andemployee’s performance. The remuneration distribution shows more consideration for strategic talent and ensures the market competitiveness in the salary of core talent. The Company shall make dynamic adjustments to the staff remuneration policy according to regional differences, number of employees, staff turnover, environment changes in the industry and paying ability of the Company.
5.3 Staff training plans
The number of training sessions was 1,389,465 in the Reporting Period, of which 155,173 were for executives, 148,242 for technical and sales staff, and 1,086,049 for operating staff.
Main training:
a. Building a pilot Leadership Development Program and the High-Potential Leaders Training system to facilitate talent management and training. They have carried out 87 talent training programs and trained 2,620 highly skilled managerial staff.
b. The internet occupational E-learning platform, together with “Midea Learning” App (“Meike”) on the mobile platform, have become the most significant means of support for the daily training in our business divisions. The training comprises all managerial employees in Midea Group. An approximate total of 279,000 staff hours within the Company logged in to the various platforms for training throughout the year, including 178,000 staff hours throughMidea’s mobile Learning platform and 121,000 staff hours through the computer E-learning platform.
c. Facilitating organizational learning by developing 1,760 internal trainers. The annual teaching time was 10,560 hours. A total of 2,839 courses were designed in the year, including 85 training sessions conducted by top management, which consisted of 15,000 sessions with 30,000 man-hours, and 240 of those by senior staff with 240,000 man-hours.
d. Continuous training for mid-level and senior managers. 16 trips, equivalent to 227 sessions, were
undertaken by mid-level and senior managers to benchmarking companies, taking up 18,160 man-hours.
A total of 48 TCG (“Transform, Change, Grow”) lectures on leadership skills for mid-level management
were given to 1,190 persons, representing 19,040 teaching man-hours. Seven lectures on leadership
The 2015 Annual Report of Midea Group Co., Ltd. skills for senior management (11 days) were given to 193 persons, which consisted of 1,544 man-hours. Meanwhile, courses on subjects such as leadership skills, Internet thinking, Industry 4.0. for top management consisted of 4,224 man-hours in total.
e. Facilitating the training of key technical staff and working team leaders. The total training time was 2,968,572 hours.
The 2015 Annual Report of Midea Group Co., Ltd. Section IX Corporate Governance
1. Basic Situation of Corporate Governance
The Company is constantly improving its corporate governance in strict accordance with the Company Law, the Securities Law and the relevant regulations of the China Securities Regulatory Commission. There are four special committees under the Board, namely the Strategy Committee, the Auditing Committee, the Nomination Committee as well as the Remuneration and Appraisal Committee. They were designed to provide consultation and advice to the Board and validate the professionalization and efficiency of discussions and decision-making. The Company has established clear rules of procedure for its shareholders' general meeting, board of directors, supervisory committee and special committees under the board, as well as the Work Rules for Company Secretary. It has also established a set of standard documents including Information Disclosure Management System, Funds Raising Management System, Connected Transaction Management System, Wealth Management Entrustment Management System, Insider Registration System, External Guaranty Decision-making System, Foreign Investment Management System, Management System for Finance Flow with Connected Parties, Internal Auditing System. The shareholders' meeting, the Board, supervisory committee and operations management departments have clear authority and responsibility. Each performs its own functions and maintains its stability effectively. Their scientific decision-making and coordinated operations have laid a firm foundation for the sustained, healthy and steady development of the Company.
The principal high-level staff of the Company are its shareholders. The Company also launched the core management team shareholding plan and equity incentive plan for core research, quality, technical, and production and management staff, which helps to develop an outstanding shareholding structure for the future growth of the Company.
In 2015, the Company won the following honors for its corporate governance:
“The Best Board of Directors” at “The Golden Round Table Awards 2015” presented by the Directors& Boards magazine; “The Top 100 Golden Bull Listed Companies” and “The Golden Bull Company Secretary” by China Securities Journal; “China's Top 100 Listed Companies on the Main Board” and “The Top 10 Management Teams ofChina’s Main Board Listed Companies” by Securities Times; “The Excellent Board of Directors of Listed Companies” by the
21st
Century Business Herald; “The Listed Company with the Best Investment Value” by the Hexun Net; and rated by the Shenzhen Stock Exchange at “A” in information disclosure for the year among the companies listed on the main board of the exchange.
Any incompliance with the regulatory documents issued by the CSRC governing the governance of listed companies
The 2015 Annual Report of Midea Group Co., Ltd.□ Yes√ No
No such cases in the Reporting Period.
2. Independency of businesses, personnel, assets, organizations, and finance which are separate from the controlling shareholder
The Company is totally autonomous with respect to business, personnel, assets, organizations, and finance from Midea Holdings Limited, the controlling shareholder of the Company, therefore maintaining integrity and independency in both business and operations.
2.1 Business independence: The Company has a complete industrial chain for its manufacturing business, a completely distinct purchase and sales system, and an independent and comprehensive business operation capability.
2.2 Personnel independence: The Company is completely autonomous from the controlling shareholder regarding its personnel. The labor, personnel and remuneration management of the company are totally unrelated. All senior management members received remuneration from the Company except those that hold only adirector’s position in the controlling shareholder.
2.3 Asset integrity: The Company has its own independent production system as well as ancillary production systems and facilities. Intangible assets such as industrial rights, trademark ownership and non-patent technology are held by the Company.
2.4 Organization independence: The Company has set up an independent organizational structure which maintains its independent operation. The Company has the right to appoint or remove any personnel so there is no overlapping with the controlling shareholder.
2.5 Financial independence: The Company's financial management is independent from the controlling shareholder. The Company has its own accounting department, accounting system, financial management system, and bank accounts and independently makes financial decisions and pays its own taxes according to relevant laws.
3. Horizontal Competition
□ Applicable√ N/A
Midea Group is involved in four types of business. The four are large household electrical appliances, small household electrical appliances, electrical machinery and logistics. The shareholder of Midea Group, Midea Holdings is mainly engaged in investment management. Midea Holdings and other enterprises held by the actual shareholder except Midea Group are not engaged in any operational activities which are the same as or similar to the main businesses of Midea Group, and there is no horizontal competition or potential competition between these enterprises' operation activities and the business of Midea Group.
Mr. He Xiangjian, actual controller of Midea Group and Midea Holdings has previously sent commitment letters concerning the avoidance of such horizontal competition in the past and will so do in the future.
The 2015 Annual Report of Midea Group Co., Ltd. For details, refer to Performance of Undertakings described in the Company Annual Report Section V. 4. Annual General Meeting and Special General Meetings Convened during the Reporting Period
4.1 General meetings convened during the Reporting Period
|||||||
|-|-|-|-|-|-|
|||Investor||||
|Meeting|Type|participation|Convened date|Disclosure Date|Disclosure Index|
|||ratio||||
||||||Announcement No. 2015-019,|
|2014 Annual|Annual general|||||
|||45.34%|2015.04.21|2015.04.22|disclosed on|
|General Meeting|meeting|||||
||||||www.cninfo.com.cn|
||Special||||Announcement No. 2015-034,|
|2015 First Special||||||
||general|46.71%|2015.05.25|2015.05.26|disclosed on|
|General Meeting||||||
||meeting||||www.cninfo.com.cn|
|2015 Second|Special||||Announcement No. 2015-051,|
|Special General|general|48.51%|2015.07.13|2015.07.14|disclosed on|
|Meeting|meeting||||www.cninfo.com.cn|
||Special||||Announcement No. 2015-070,|
|2015 Third Special||||||
||general|48.56%|2015.09.18|2015.09.19|disclosed on|
|General Meeting||||||
||meeting||||www.cninfo.com.cn|
|2015 Fourth|Special||||Announcement No. 2015-080,|
|Special General|general|45.18%|2015.12.04|2015.12.05|disclosed on|
|Meeting|meeting||||www.cninfo.com.cn|

4.2 Special general meetings convened at the request of preference shareholders with resumed voting rights
□ Applicable√ N/A
5. Performance of Independent Directors during the Reporting Period
5.1 Attendance of independent directors in Board meetings and general meetings
||||||||
|-|-|-|-|-|-|-|
|Attendance of independent directors in Board meetings|||||||
|||||||Absence for|
||Presence due in||Presence by|Presence|||
|Independent||Presence on site|||Absence|two|
||the Reporting||telecommunicat|through a proxy|||
|director||(times)|||(times)|consecutive|
||Period (times)||ion (times)|(times)|||
|||||||times|
|Wu Shinong|11|2|9|0|0|No|
|Fu Zhengping|7|2|5|0|0|No|
|Guo Xuejin|11|2|9|0|0|No|
|Li Wenjing|11|2|9|0|0|No|
|Rui Meng|4|0|4|0|0|No|
|Presence of independent directors|||||||
|||1|||||
|in general meetings (times)|||||||

5.2 Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors
□ Yes√ No
The 2015 Annual Report of Midea Group Co., Ltd. No such cases in the Reporting Period.
5.3 Other details about the performance of duties by independent directors
Were there any suggestions from independent directors adopted by the Company
√ Yes□ No
Details about advice of independent directors accepted or not accepted by the Company
During the Reporting Period, independent directors strictly followed related rules, regulations and the Articles of Association. They focused on the Company operation, carried out their duties independently and imparted lots of professional advice on perfecting theCompany’s systems, daily operations and decisions. They provided fair advice during the Reporting Period and played an effective role in improving the Company supervisory systems and protecting the legal rights of the Company and the shareholders as a whole.
6. Performance of Duties by Special Committees under the Board during the Reporting Period
6.1 The Audit Committee under the Board convened four meetings in the Reporting Period, at which the following proposals were considered and approved: The 2014 Final Account Report, The 2014 Annual Report& Its Abstract, The Report of the Audit Committee on Concluding and Appraising the 2014 Annual Audit Work, The Proposal for Appointing an Auditor for the 2015 Annual Result, The Proposal for Appointing an Auditor for the Internal Control in 2015, The Proposal for Writing off Asset Impairment Provisions, The 2015 Semi-Annual Report, The Report on the Third Quarter of 2015 and The Proposal for the Change of the CPAs Firm.
6.2 The Strategy Committee under the Board convened one meeting in the Reporting Period, at which The Mid-Term Development Planning (2015-2017) was considered and approved.
6.3 The Remuneration and Appraisal Committee under the Board convened one meeting in the Reporting Period, at which The Proposal for the Payment of Remuneration to Senior Executives for 2014 was considered and approved.
6.4 The Nomination Committee under the Board convened three meetings in the Reporting Period, at which the following proposals were considered and approved: The Proposal for the Re-Election of the Board, The Proposal for President Appointment, The Proposal for CFO Appointment and the Proposal for Company Secretary Appointment.
7. Performance of Duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties during the Reporting Period
□ Yes√ No
The Supervisory Committee of the Company had no objection to the matters of supervision during the Reporting Period.
The 2015 Annual Report of Midea Group Co., Ltd. 8. Assessment and Incentive Mechanism for the Senior Management
The Company established an appraisal system on the basis of its target-oriented responsibility system and adopted an appraisal agreement for senior management members, which determines the appraisal criterion, appraisal method and measures taken based on the appraisal result. During the Reporting Period, the Company has carried out appraisals of senior management members on the basis of its target-oriented responsibility system and the appraisal result was reflected in the annual performance-based incentive rewards. Meanwhile, the Company promoted the unification of interests between managers and shareholders through high-level staff and core management teams' shareholding plans as well as multiple stock option incentive plans, laying a good foundation for the future growth of the Company.
9. Internal Control
9.1 Serious internal control defects found in the Reporting Period
□ Yes√ No
9.2 Self-evaluation report on internal control
||||
|-|-|-|
|Disclosure date of the internal control|||
||2016.03.26||
|self-evaluation report|||
|Index to the disclosed internal control|For details, please refer to the 2015 Self-Evaluation Report on Internal Control,||
|self-evaluation report|which has been disclosed on www.cninfo.com.cn||
|Ratio of the total assets of the|||
|appraised entities to the consolidated|60%||
|total assets|||
|Ratio of the operating revenues of the|||
|appraised entities to the consolidated|60%||
|operating revenues|||
|Defect identification standards|||
|Type|Financial-report related|Non-financial-report related|
||For details, please refer to “(c) Basis for|For details, please refer to “(c) Basis for|
||internal control evaluation and|internal control evaluation and|
||identification standards for internal|identification standards for internal|
||control defects” under Section III of The|control defects” under Section III of The|
|Nature standard|||
||2015 Self-Evaluation Report on|2015 Self-Evaluation Report on Internal|
||Internal Control disclosed on|Control disclosed on|
||www.cninfo.com.cn dated 10 March|www.cninfo.com.cn dated 10 March|
||2016.|2016.|
|Quantitative standard|Ditto|Ditto|
|Number of serious|||
||0||
|financial-report-related defects|||
|Number of serious|||
||0||
|non-financial-report-related defects|||
|Number of important|||
||0||
|financial-report-related defects|||
|Number of important|||
||0||
|non-financial-report-related defects|||

The 2015 Annual Report of Midea Group Co., Ltd. 10.Auditor’s Report on Internal Control
√ Applicable□ N/A
|||
|-|-|
|Opinion paragraph in the auditor’s report on internal control||
|The internal control auditor holds the view that on 31 December 2015, Midea Group maintained an effective internal||
|control of a financial report in all significant aspects based on the General Specifications of Company Internal Control||
|and relevant specifications.||
|Auditor’s report on internal||
||Disclosed on www.cninfo.com.cn|
|control disclosed or not||
|Date of disclosing the full text of||
|the auditor’s report on internal|2016.03.26|
|control||
|Index to the disclosed full text of||
||For details, please refer to the 2015 Auditor’s Report on Internal Control, which has|
|the auditor’s report on internal||
||been disclosed on www.cninfo.com.cn|
|control||
|Type of the auditor’s opinion|Standard unqualified opinion|
|Serious||
|non-financial-report-related|No|
|defects||

Whether any modified opinions are expressed by the accounting firm in itsauditor’s report on theCompany’s internal control
□ Yes√ No
Whether theauditor’s report on theCompany’s internal control issued by the accounting firm is consistent with the self-evaluation report of the Board
√ Yes□ No
The 2015 Annual Report of Midea Group Co., Ltd. Section X Financial Report
1.Auditor’s report
|||
|-|-|
|Type of audit report|Standard & unqualified|
|Signing date of auditor’s report|2016-03-27|
|Name of Audit|PricewaterhouseCoopers China (LLP)|
|No. of auditor’s report|PwC ZT Shen Zi (2016) No. 10093|
|Names of auditors|Yao Wenping, Huang Meimei|

Auditor's Report
To the shareholders of Midea Group Co., Ltd.,
We have audited the accompanying financial statements of Midea Group Co., Ltd. (hereinafter the “Company”), which comprise the consolidated and company balance sheets as at 31 December 2015, and the consolidated and company income statements, the consolidated and company statements of changes inshareholders’ equity and the consolidated and company cash flow statements for the year then ended, and the notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management of the Company is responsible for the preparation and fair presentation of these financial statements in accordance with the requirements of Accounting Standards for Business Enterprises, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with China Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on theauditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by management, as
well as evaluating the overall presentation of the financial statements.
The 2015 Annual Report of Midea Group Co., Ltd. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated andcompany’s financial position of the Company as at 31 December 2015, and their financial performance and cash flows for the year then ended in accordance with the requirements of Accounting Standards for Business Enterprises.
PricewaterhouseCoopers Zhong Tian LLP
Shanghai, thePeople’s Republic of China
24 March 2016
The 2015 Annual Report of Midea Group Co., Ltd. 2. Financial Statements
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
ASSETS Note 31 December 31 December 31 December 31 December 2015 2014 2015 2014 Consolidated Consolidated Company Company C urrent assets
Cash at bank and on hand 4( 1) 11,861,977 6,203,283 14,213,747 8,452,624 Deposits with central bank 4(2) 1,048,045 1,279,592 - - Deposits with banks and
other financial institutions 4(3) 4,062,807 2,126,445 - - Derivative financial assets 158,822 162,514 - - Notes receivable 4( 4) 12,889,151 17,097,233 727,218 693,829 Accounts receivable 4(5) 10,371,718 9,362,103 - - Advances to suppliers 4(6) 988,625 1,414,470 8,915 1,102 Loans and advances 4(7) 6,608,705 5,940,800 - - Dividends receivable - 45,943 290,245 280,771 Other receivables 4(5), 17(1) 1,101,339 1,180,768 7,461,039 2,418,306 Inventories 4(8) 10,448,937 15,020,030 - - Other current assets 4(9) 33,827,580 26,593,892 21,059,789 22,892,050 Total current assets 93,367,706 86,427,073 43,760,953 34,738,682 Non-current assets
Available-for-sale financial
assets 4(10) 3,289,954 1,655,495 9,000 1,230,278 Long-term equity
investments 4(11), 17(2) 2,888,274 951,874 23,126,546 16,548,883 Investment properties 150,803 171,635 286,272 323,356 Fixed assets 4(1 2) 18,729,881 19,521,814 1,107,082 1,653,024 Construction in progress 4(13) 954,761 661,882 543,588 42,386 Intangible assets 4(14) 3,392,402 3,431,958 248,482 280,656 Goodwill 4(15) 2,393,066 2,931,791 - - Long-term prepaid expenses 781,359 758,576 57,393 68,788 Deferred income tax assets 4(1 6) 2,223,999 3,779,988 7,961 4,484 Other non-current assets 669,730 - - - Total non-current assets 35,474,229 33,865,013 25,386,324 20,151,855 TOTAL ASSETS 128,841,935 120,292,086 69,147,277 54,890,537
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS(CONT’D)
AS AT 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
LIABILITIES AND
SHAREHOLDERS' EQUITY Note 31 December 31 December 31 December 31 December 2015 2014 2015 2014 Consolidated Consolidated Company Company Current liabilities
Short-term borrowings 4(1 9) 3,920,933 6,070,879 1,290,000 500,000 Customer deposits and
deposits from banks and
other financial institutions 52,000 7,494 - - Derivative financial liabilities 33,377 74,961 22,671 55 Financial assets sold under
repurchase agreements 651,784 - - - Notes payable 4(20) 17,078,520 12,648,497 - - Accounts payable 4(21) 17,448,684 20,137,454 9,403 2,671 Advances from customers 4(22) 5,616,361 3,992,540 - - Employee benefits payable 4(23) 2,229,332 2,199,777 13,411 16,865 Taxes payable 4(24) 1,607,181 3,280,151 52,656 51,951 Interest payable 9,343 22,912 200,090 217,051 Dividends payable 118,851 93,799 - - Other payables 4(25) 1,139,306 1,223,549 45,166,453 36,057,341 Current portion of non-current
liabilities - 611,900 - - Other current liabilities 4(2 6) 22,098,177 22,778,936 5,106 - Total current liabilities 72,003,849 73,142,849 46,759,790 36,845,934 Non-current liabilities
Long-term borrowings 4(27) 90,061 19,205 - - Debentures payable - 153,026 - - Payables for specific projects 500 851,825 - - Provisions 38,893 25,574 3,800 - Deferred revenue 479,352 342,236 - - Deferred income tax liabilities 4(1 6) 40,464 25,917 - - Other non-current liabilities 157,194 - - - Total non-current liabilities 806,464 1,417,783 3,800 - Total liabilities 72,810,313 74,560,632 46,763,590 36,845,934 Shareholders' equity
Share capital 4(28) 4,266,839 4,215,808 4,266,839 4,215,808 Capital surplus 4(29) 14,511,190 13,024,883 6,370,934 5,356,080 Other comprehensive income 4(30) (1,071,151) (774,299) 21,006 - General reserve 118,624 - - - Surplus reserve 4(3 1) 1,846,523 1,189,791 1,846,523 1,189,791 Undistributed profits 4(32) 29,529,827 21,814,316 9,878,385 7,282,924 Total equity attributable to
shareholders of the parent
company 49,201,852 39,470,499 22,383,687 18,044,603 Minority interests 6,829,770 6,260,955 - -
Total shareholders' equity 56,031,622 45,731,454 22,383,687 18,044,603
The 2015 Annual Report of Midea Group Co., Ltd. TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 128,841,935 120,292,086 69,147,277 54,890,537 The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Yuan Liqun Chen Jianwu
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2015 2014 2015 2014 Item Note Consolidated Consolidated Company Company 1. Total revenue 139,347,124 142,310,967 862,376 754,282 Including: Operating revenue 4(33), 1 7(3) 138,441,226 141,668,175 862,376 754,282 Interest income 4(34) 900,161 632,525 - - Fee and commission income 5,737 10,267 - - Less: Cost of sales 4(3 3) (102,662,818) (105,669,686) (24,369) (25,841) Interest expenses 4(34) (561,514) (404,527) - - Fee and commission expenses (2,247) (1,668) - - Taxes and surcharges 4(3 5) (911,330) (809,596) (16,613) (22,573) Selling and distribution expenses 4(36) (14,799,769) (14,733,917) - - General and administrative
expenses 4(37) (7,441,755) (7,498,256) (494,159) (412,071) Financial expenses– net 4(38) (138,932) (251,327) (835,211) (515,433) Asset impairment (loss)/reversal 4(39) (4,766) (349,818) 751 5,224 Add: Gains/(losses) on changes in
fair value 4(40) 81,611 (652,791) (22,618) (55) Investment income 4(41), 17(4) 2,011,269 1,511,122 7,107,452 6,517,731 Including: Share of profit of
associates and a joint
venture 420,744 94,739 273,974 31,114 2. Operating profit 14,916,873 13,450,503 6,577,609 6,301,264 Add: Non-operating income 4(42) 1,707,039 1,057,069 111,749 15,512 Including: Gains on disposal of
non-current assets 53,084 53,602 52,963 50 Less: Non-operating expenses 4(4 3) (572,558) (516,888) (87,691) (9,707) Including: Losses on disposal of
non-current assets (287,167) (270,391) (77,897) (8,769) 3 . Total profit 16,051,354 13,990,684 6,601,667 6,307,069 Less: Income tax expenses 4(4 4) (2,426,699) (2,344,356) (34,353) (104,599) 4 . Net profit 13,624,655 11,646,328 6,567,314 6,202,470 A ttributable to shareholders of the parent
company 12,706,725 10,502,220 6,567,314 6,202,470 Minority interests 917,930 1,144,108 - -
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT'D)
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2015 2014 2015 2014 Item Note Consolidated Consolidated Company Company 5. Other comprehensive income net of tax (469,463) (596,465) 21,006 - Attributable to shareholders of the parent
company (296,852) (494,569) 21,006 - (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 (296,852) (494,569) 21,006 - 1)Share of the other comprehensive
income of the investee accounted for
using equity method which will be
reclassified subsequently to profit
and loss 39,924 (5,112) 21,006 - 2)Changes in fair value of
available-for-sale financial assets 159,887 295 - - 3)Effective portion of cash flow hedging
gains or losses 74,392 (323,116) - - 4)Translation of foreign currency
financial statements (571,055) (166,636) - - Attributable to minority shareholders (172,611) (101,896) - - 6. Total comprehensive income 13,155,192 11,049,863 6,588,320 6,202,470 A ttributable to shareholders of the parent
company 12,409,873 10,007,651 6,588,320 6,202,470 Attributable to minority shareholders 745,319 1,042,212 - - 7. Earnings per share
Basic earnings per share (RMB Yuan) 4(45) 2.99 2.49 N/A N/A Diluted earnings per share (RMB Yuan) 4(45) 2.99 2.49 N/A N/A The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Yuan Liqun Chen Jianwu
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2015 2014 2015 2014 Item Note Consolidated Consolidated Company Company 1. Cash flows from operating activities
Cash received from sales of goods or rendering
of services 125,902,444 105,499,097 - - Net increase in customer deposits and deposits
from banks and other financial institutions 44,506 7,433 - - Net increase in deposits with central bank 313,636 - - - Cash received from interest, fee and commission 905,898 642,792 - - Refund of taxes and surcharges 3,900,819 3,661,667 - - Cash received relating to other operating
activities 4(46)(a) 3,210,987 2,494,185 3,683,989 16,447,074 Sub-total of cash inflows 134,278,290 112,305,174 3,683,989 16,447,074 Cash paid for goods and services (71,733,220) (51,280,772) - - Net decrease in loans and advances (63,624) (884,183) - - Decrease in borrowings from central bank - (89,708)
Net decrease in deposits with central bank - (357,838) - - Cash paid for interest, fee and commission (563,760) (406,195) - - Cash paid to and on behalf of employees (10,493,582) (10,426,381) (150,458) (33,734) Payments of taxes and surcharges (8,323,884) (8,465,413) (27,659) (33,598) Cash paid relating to other operating activities 4(46)( b) (16,335,966) (15,606,172) (248,526) (163,968) Sub-total of cash outflows (107,514,036) (87,516,662) (426,643) (231,300) Net cash flows from operating activities 4(46 )(c) 26,764,254 24,788,512 3,257,346 16,215,774 2. Cash flows from investing activities
Cash received from disposal of investments 42,061,959 - 30,722,557 24,902 Cash received from returns on investments 2,088,899 1,345,434 7,247,990 6,419,349 Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 548,009 1,273,491 107,314 36,984 Cash received relating to other investing
activities 42,269 - - - Sub-total of cash inflows 44,741,136 2,618,925 38,077,861 6,481,235 Cash paid to acquire fixed assets, intangible assets
and other long-term assets (3,130,932) (2,678,179) (623,193) (163,494) Cash paid to acquire investments (59,315,666) (28,800,775) (37,061,751) (24,737,701) Net cash paid to acquire subsidiaries and other
business units (283,731) (2,368) - - Sub-total of cash outflows (62,730,329) (31,481,322) (37,684,944) (24,901,195) Net cash flows from investing activities (17,989,193) (28,862,397) 392,917 (18,419,960) 3. Cash flows from financing activities
Cash received from capital contributions 1,701,630 7,928 1,648,190 - Including: Cash received from capital
contributions by minority
shareholders of subsidiaries 53,440 7,928 - - Cash received from borrowings 24,515,274 37,288,846 1,290,000 3,200,000 Cash received relating to other financing
activities 166,715 - - - Sub-total of cash inflows 26,383,619 37,296,774 2,938,190 3,200,000 Cash repayments of borrowings (29,352,243) (39,654,309) (500,000) (2,840,000) Cash payments for medium-term notes - (1,000,000) - (1,000,000)
Cash payments for repurchase of shares (999,998) - (999,998) -
The 2015 Annual Report of Midea Group Co., Ltd. Cash payments for interest expenses and
distribution of dividends or profits (4,908,031) (4,052,595) (5,723,163) (4,085,233) Including: Cash payments for dividends or profit
to minority shareholders of
subsidiaries (552,545) (530,052) - - Sub-total of cash outflows (35,260,272) (44,706,904) (7,223,161) (7,925,233) Net cash flows from financing activities (8,876,653) (7,410,130) (4,284,971) (4,725,233) 4. Effect of foreign exchange rate changes on
cash and cash equivalents 16,669 (7,619) - - 5. Net decrease in cash and cash equivalents (84,923) (11,491,634) (634,708) (6,929,419) Add: Cash and cash equivalents at beginning of
year 5,272,240 16,763,874 6,879,716 13,809,135 6. Cash and cash equivalents at end of year 5,187,317 5,272,240 6,245,008 6,879,716 The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Yuan Liqun Chen Jianwu
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
Attributable to shareholders of the parent company Minority shareholders Shareholders' equity Share Capital Other comprehensive Surplus Undistributed
Item capital surplus income reserve profits Equity Total Balance at 31 December 2013 1,686,323 15,620,791 (334,217) 569,544 15,304,989 6,233,131 39,080,561 Changes in accounting policies - (54,487) 54,487 - - - - Balance at 1 January 2014 1,686,323 15,566,304 (279,730) 569,544 15,304,989 6,233,131 39,080,561 Movements for the year ended 31 December
2014
Total comprehensive income
Net profit - - - - 10,502,220 1,144,108 11,646,328 Other comprehensive income net of tax - - (494,569) - - (101,896) (596,465) Total comprehensive income - - (494,569) - 10,502,220 1,042,212 11,049,863 Capital contribution and withdrawal by
shareholders
Capital contribution by shareholders - - - - - 7,928 7,928 Share-based payment included in
shareholders' equity - 150,991 - - - 25,357 176,348 Others - 1,808 - - - - 1,808 Profit distribution
Appropriation to surplus reserve - - - 620,247 (620,247) - - Profit distribution to shareholders - - - - (3,372,646) (535,379) (3,908,025) Transfer within shareholders' equity
Transfer from capital surplus to share capital 2,529,485 (2,529,485) - - - - - Acquisition of minority interests - (164,735) - - - (512,294) (677,029) Balance at 31 December 2014 4,215,808 13,024,883 (774,299) 1,189,791 21,814,316 6,260,955 45,731,454
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONT'D)
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
Attributable to shareholders of the parent company Minority shareholders Shareholders' equity Share Capital Other comprehensive General Surplus Undistributed
Item capital surplus income reserve reserve profits Equity Total Balance at 1 January 2015 4,215,808 13,024,883 (774,299) - 1,189,791 21,814,316 6,260,955 45,731,454 M ovements for the year ended
31 December 2015
Total comprehensive income
Net profit - - - - - 12,706,725 917,930 13,624,655 Other comprehensive income
net of tax - - (296,852) - - - (172,611) (469,463) Total comprehensive income - - (296,852) - - 12,706,725 745,319 13,155,192 Capital contribution and
withdrawal by shareholders
Capital contribution by
shareholders 80,623 1,667,248 - - - - 244,910 1,992,781 Business combinations - - - - - - 106,106 106,106 Share-based payment included
in shareholders' equity - 237,613 - - - - 49,752 287,365 Repurchase of shares (29,592) (970,406) - - - - - (999,998) Profit distribution
Appropriation to general
reserve - - - 118,624 - (118,624) - - Appropriation to surplus
reserve - - - - 656,732 (656,732) - - Profit distribution to
shareholders - - - - - (4,215,808) (577,272) (4,793,080) Others - 551,852 - - - (50) - 551,802 Balance at 31 December 2015 4,266,839 14,511,190 (1,071,151) 118,624 1,846,523 29,529,827 6,829,770 56,031,622
The 2015 Annual Report of Midea Group Co., Ltd. The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Yuan Liqun Chen Jianwu
The 2015 Annual Report of Midea Group Co., Ltd. MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
Capital Other comprehensive Undistributed Total shareholders' Item Note Share capital surplus income Surplus reserve profits equity Balance at 1 January 2014 1,686,323 7,880,598 - 569,544 5,073,348 15,209,813 M ovements for the year ended 31 December 2014
Total comprehensive income
Net profit - - - - 6,202,470 6,202,470 Other comprehensive income net of tax - - - - - Comprehensive income - - - - 6,202,470 6,202,470 Capital contribution and withdrawal by shareholders
Capital contribution by shareholders
Share-based payment included in shareholders' equity - 3,106 - - - 3,106 Others - 1,861 - - - 1,861 Profit distribution
Appropriation to surplus reserve - - - 620,247 (620,247) - Profit distribution to shareholders - - - - (3,372,647) (3,372,647) Transfer within shareholders' equity
Transfer from capital surplus to share capital 2,529,485 (2,529,485) - - - - Balance at 31 December 2014 4,215,808 5,356,080 - 1,189,791 7,282,924 18,044,603 B alance at 1 January 2015 4,215,808 5,356,080 - 1,189,791 7,282,924 18,044,603 M ovements for the year ended 31 December 2015
Total comprehensive income
Net profit - - - - 6,567,314 6,567,314 Other comprehensive income net of tax - - 21,006 - - 21,006 Total comprehensive income - - 21,006 - 6,567,314 6,588,320 Capital contribution and withdrawal by shareholders
Capital contribution by shareholders 80,623 1,667,248 - - - 1,747,871 Share-based payment included in shareholders' equity - 320,856 - - - 320,856
The 2015 Annual Report of Midea Group Co., Ltd. Repurchase of shares (29,592) (970,406) - - - (999,998) Profit distribution
Appropriation to surplus reserve - - - 656,732 (656,732) - Profit distribution to shareholders - - - - (4,215,808) (4,215,808) Merger of subsidiaries 17(2)(a) - - - - 900,687 900,687 Others - (2,844) - - - (2,844) Balance at 31 December 2015 4,266,839 6,370,934 21,006 1,846,523 9,878,385 22,383,687 The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Yuan Liqun Chen Jianwu
The 2015 Annual Report of Midea Group Co., Ltd. 3. Note to the Financial Statements
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, theCompany’s shares became listed on Shenzhen Stock Exchange through share issuance and share exchange.
As at 31 December 2015, the Company's registered capital is RMB4,266,839,449 and the total number of shares in issue is 4,266,839,449, of which 2,026,343,750 shares are restricted tradable shares and 2,240,495,699 shares are unrestricted tradable shares.
The detailed information of major subsidiaries included in the consolidation scope in the current year is set out in Note 5 and 6. Entities newly included in the consolidation scope in the current year include Main Power Electrical Factory Limited, Midea Petty Loan Co., Ltd., Foshan Shunde District Midea Petty Loan Co., Ltd. and PT Midea Planet Indonesia (please refer to Note 5(1) and 5(2)(a) for details). The detailed information of subsidiaries no longer included in the consolidation scope in the current year is set out in Note 5(2)(b).
These financial statements were authorised for issue by theCompany’s Board of Directors on 24 March 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 (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”) and the disclosure requirements in the Preparation Convention of Information Disclosure by Companies Offering Securities to the Public No.15– General Rules on Financial Reporting issued by the China Securities Regulatory Commission.
The financial statements are prepared on a going concern basis.
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The 2015 Annual Report of Midea Group Co., Ltd. The financial statements of the Company for the year ended 31 December 2015 are in compliance with the Accounting Standards for Business Enterprises, and truly and completely present the financial position of the consolidated and the Company as at 31 December 2015 and their financial performance, cash flows and other information for the year then ended. (3) Accounting period
TheCompany’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 respecties 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 theacquirer’s interest in the fair value of theacquiree’s identifiable net assets, the difference is recognised as goodwill; where the cost of combination is lower than theacquirer’s interest in the fair value of theacquiree’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 andshareholders’ 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
The 2015 Annual Report of Midea Group Co., Ltd. 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. 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 ofsubsidiaries’ equity and the portion of asubsidiaries’ 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. 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.
The 2015 Annual Report of Midea Group Co., Ltd. (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 theshareholders’ 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 instruments
(a) Financial assets
(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 theGroup’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
The 2015 Annual Report of Midea Group Co., Ltd. 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.
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 2015 Annual Report of Midea Group Co., Ltd. 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 than50% (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 than20% (inclusive) but no more than50%, 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 theasset’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 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 theasset’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.
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
The 2015 Annual Report of Midea Group Co., Ltd. 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 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
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
The 2015 Annual Report of Midea Group Co., Ltd. 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 months 6 months to 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 and Singapore 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 adopt100% provision ratio for those with the ageing over 1 year. (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 at1% of the ending balances of loans and advances using the percentage-of-balance method.
(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
The 2015 Annual Report of Midea Group Co., Ltd. Cost is determined using the first-in first-out method when issued. The cost of goods in stfinished 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 theCompany’s long-term equity investments in its subsidiaries, and theGroup’s long-term equity investments in its associates and joint venture. 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 theCompany’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 absorbingparty’s share of the carrying amount ofshareholders’ 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
The 2015 Annual Report of Midea Group Co., Ltd. with the investee's direct disposal of related assets or liabilities. Shareholders' equity, which is recognised due to changes ininvestee’sshareholders’ 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.
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 theGroup’s share of the fair value of theinvestee’s identifiable net assets at the acquisition dates, the long-term equity investment is measured at the initial investment cost; where the initial investment cost is less than theGroup’s share of the fair value of theinvestee’s identifiable net assets at the acquisition dates, 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 theinvestor’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 theshareholders’ equity of the investee other than those arising from the net profit or loss, other comprehensive income and profit distribution, are recognised in theGroup’s equity and the carrying amounts of the long-term equity investment are adjusted accordingly. The carrying amount of the investment is reduced by theGroup’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 theGroup’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 2015 Annual Report of Midea Group Co., Ltd. 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 net Annual depreciation Estimated useful lives residual value (amortisation) rates Buildings 20 to 40 years 5% 2.38% to4.75% Land use rights 40 to 50 years - 2% to2.5% 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 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, 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
The 2015 Annual Report of Midea Group Co., Ltd. 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% or5% 5% to2.38% Machinery and equipment 8 to 18 years 0% or5% 12.5% to5.28% Motor vehicles 3 to 12 years 0% or5% 33.33% to7.92% Electronic equipment and other
equipment 3 to 8 years 0% or5% 33.33% to11.88% 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) 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
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
The 2015 Annual Report of Midea Group Co., Ltd. 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) 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.
(d) 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 theR&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 theR&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: TheR&D of production processes or products has been fully justified by technical team; The budget on theR&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 theR&D of production processes or products and subsequent mass production; and
 Expenditure attributable to theR&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
The 2015 Annual Report of Midea Group Co., Ltd. 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.
(e) 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, a joint venture 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 theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of anasset’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 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,
The 2015 Annual Report of Midea Group Co., Ltd. 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
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.
(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.
The 2015 Annual Report of Midea Group Co., Ltd. (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 theshareholders’ 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 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. TheGroup’s share-based payments are equity-settled payments.
Equity-settled share-based payment
TheGroup’s stock optionstock 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 stock optionstock options using option pricing model, which is Black - Scholes option pricing model.
The 2015 Annual Report of Midea Group Co., Ltd. (c) Basis for determining best estimate of exercisable equity instruments
At the end of each reporting period, the group revises its estimates of the number of options that are expected to vest based on the non-marketing performance and service conditions. 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 stock optionstock options
When the options are exercised, the company issues new shares. The proceeds received net of any directly attributable transaction costs are credited to share capital (and share premium). At the same time, capital surplus recognised in the vesting periond are carried forward to share premium.
(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 theGroup’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 theGroup’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).
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
The 2015 Annual Report of Midea Group Co., Ltd. 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.
(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 ax 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
The 2015 Annual Report of Midea Group Co., Ltd. recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or 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, 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:
 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 lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. An operating lease is a lease other than a finance lease. The Group's leases are mainly 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.
(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 theGroup’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 2015 Annual Report of Midea Group Co., Ltd. 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.
(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 (Note 4(20)).
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 thanmanagement’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.
The 2015 Annual Report of Midea Group Co., Ltd. 3 Taxation
(1) Main tax category and rate
Category Tax base Tax rate Corporate income tax (a) Levied based on taxable income 5%,12.5%,15%,16.5%,17%,25% or34% Value-added tax (VAT) Taxable value-added amount (Tax payable is calculated 6%,11% or17% using the taxable sales amount multiplied by the
applicable tax rate less deductible VAT input of the
current period)
Business tax Taxable turnover amount 5% City maintenance and The amount of VAT and business tax paid 5% or7% construction tax
Educational surcharge The amount of VAT and business tax paid 5% Local education surcharge The amount of VAT and business tax paid 2% Property tax Price-based property is subject to a1.2% tax rate after a 1.2% or12%30% cut in the original price of property. Rental-based is
subject to12% tax rate for the rental income.
(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 of15% in 2015 as they 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 peirod 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 Anhui GMCC Refrigeration Equipment
Co., Ltd. GF201334000093 14 October 2013 3 years Anhui GMCC Precision Manufacturing
Co., Ltd. GR2012234000097 14 October 2013 3 years Guangdong Midea Refrigeration
Equipment Co., Ltd. GR201444000965 10 October 2014 3 years 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
The 2015 Annual Report of Midea Group Co., Ltd. Huaian Weiling Motor Manufacturing Co., 25 September
Ltd. GF201332000124 2013 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 Hefei Midea Heating& Ventilation
Equipment Co., Ltd. GR201334000033 16 July 2013 3 years Guangzhou Hualing Refrigeration
Equipment Co., Ltd. GR201444000463 10 October 2014 3 years Handan Midea Refrigeration Equipment 19 September
Co., Ltd. GR201413000242 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 (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 of15% in 2015 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate. (Cont'd)
The Certificate of the High-tech Enterprise of following are due in 2015:Wuhu Midea Washing Appliance Manufacturing Co., Ltd., Foshan Shunde Midea Electric Appliance Manufacturing Co., Ltd., Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. and Chongqing Midea Refrigeration 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 of15% in 2015.
(a-3) Foshan City Shunde District Midea Electronic Technology Co., Ltd., the Company's subsidiary, is entitled to the preferential corporate income tax preferential treatment for qualified software enterprise as identified by the State Administration of Taxation of Foshan Shunde District pursuant to File Cai Shui (2012) No. 27. From the first profitable year before 31 December 2017, the enterprise is entitled to a tax-free period for the first and second years and a50% reduction of corporate income tax at the statutory rate of25% for the third to fifth years until the expiry date. The subsidiary is subject to corporate income tax at the rate of12.5% in 2015, which is the fifth cumulative profitable year.
(a-4) 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 of25%.
(a-5) 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-6) 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 of5% while the unqualified income is subject
to the corporate income tax rate of17%. Midea Electric Appliance (Singapore) Co., Ltd., the
The 2015 Annual Report of Midea Group Co., Ltd. Company's subsidiary, is subject to corporate income of17%.
(a-7) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax of16.5%. 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). (a-8) 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-9) Springer Carrier Ltda., the Company's subsidiaries in Brazil, is subject to Brazil corporate income tax34%.
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
31 December 2015 31 December 2014 Cash on hand 2,915 1,038 Cash at bank (a) 11,437,417 5,505,460 Other cash balances (b) 421,645 696,785 11,861,977 6,203,283 In cluding: Cash abroad (including Hong
Kong, Macau, Singapore,
Brazil, etc.) 2,204,425 1,177,384 (a) As at 31 December 2015, cash at bank includes fixed deposits with the term of over three months, amounting to RMB9,001,934,000 (31 December 2014: RMB1,019,912,000).
(b) Other cash balances mainly include deposits for bank acceptance note and letter of credit.
(2) Cash due from the Central Bank
31 December 2015 31 December 2014 S tatutory reserve with the Central Bank
(a) 963,926 1,277,562 Surplus reserve with the Central Bank 84,119 2,030 1,048,045 1,279,592 (a) Statutory reserve with the Central Bank represents the statutory reserve deposited inPeople’s Bank of China by the financial enterprise in accordance with relevant regulations, which are calculated at7.5% and5% for eligible RMB depsits and foreign currency deposits, repectively, and are not available for use in the theGroup’s daily operations.
(3) Deposits with banks and other financial institutions
31 December 2015 31 December 2014 Financial enterprises' deposits with
domestic banks 4,062,807 2,126,445
The 2015 Annual Report of Midea Group Co., Ltd. As at 31 December 2015, deposits with banks and other financial institutions include time deposits with the term of over three months, amounting to RMB1,400,000,000 (31 December 2014: Nil).
(4) Notes receivable
31 December 2015 31 December 2014 Bank acceptance notes 12,889,151 17,097,233 (a) As at 31 December 2015, the Group's pledged notes receivable are as follows:
Bank acceptance notes 4,889,884 The above notes receivable are pledged bank acceptance notes with letter of loan commitment and such note pledge has been released before the approval date of the financial statements. (b) As at 31 December 2015, the Group's notes receivable that are not mature but have been endorsed to other parties, or that have been discounted are as follows:
Derecognised Recognised Bank acceptance notes 28,490,476 - (5) Receivables
(a) Accounts receivable
31 December 2015 31 December 2014 Accounts receivable 10,978,218 10,053,280 Less: Provision for bad debts (606,500) (691,177) 10,371,718 9,362,103 The ageing of other receivables is analysed as follows:
31 December 2015 31 December 2014 Within 1 year 10,728,566 9,815,311 1 to 2 years 104,495 90,779 2 to 3 years 88,558 94,450 3 to 5 years 49,487 50,915 Over 5 years 7,112 1,825 10,978,218 10,053,280 As at 31 December 2015, the Group has no overdue accounts receivable with significant amount.
Accounts receivable are analysed by categories as follows:
31 December 2015 31 December 2014
The 2015 Annual Report of Midea Group Co., Ltd. Provision for bad Provision for bad Ending balance debts Ending balance debts% of total % of total
Amount balance Amount Ratio Amount balance Amount Ratio W ith amounts
that are
individually
significant and
that the related
provision for
bad debts is
provided on the
individual basis - - - - 70,986 0.71% 45,11363.55% That the related
provision for
bad debts is
provided on the
age grouping
basis 10,961,42699.85% 593,7625.42% 9,951,63798.99% 615,407 6.18% With amounts
that are not
individually
significant but
the related
provision for
bad debts is
provided on the
individual basis 16,792 0.15% 12,73875.86% 30,657 0.30% 30,657100.00% 10,978,218100.00% 606,5005.52% 10,053,280100.00% 691,177 6.88% Accounts receivable that the related provision for bad debts is provided on grouping basis using the ageing analysis method are analysed as follows:
31 December 2015 31 December 2014
Ending
balance Provision for bad debts Ending balance Provision for bad debts Amount Amount Ratio Amount Amount Ratio Within 1 year 10,718,211 403,660 3.77% 9,713,668 414,874 4.27% 1 to 2 years 102,186 76,371 74.74% 90,779 68,375 75.32% 2 to 3 years 84,473 63,191 74.81% 94,450 80,779 85.53% 3 to 5 years 49,444 43,428 87.83% 50,915 49,554 97.33% Over 5 years 7,112 7,112100.00% 1,825 1,825 100.00% 10,961,426 593,762 5.42% 9,951,637 615,407 6.18% The provision for bad debts reversed in the current year is RMB87,005,000.
The accounts receivable as written off by the Group in the current year are arising from transactions with third parties and there's no written-off accounts receivable with amounts that are individually significant.
As at 31 December 2015, the top 5 accounts receivable assembled by debtors are analysed as follows:
Amount Provision for bad debts % of total balance Total balance of top 5 accounts receivable 1,515,087 57,956 14% The Group has no accounts receivable derecognised due to transfer of financial assets in the currentyear.
The 2015 Annual Report of Midea Group Co., Ltd. (b) Other receivables
31 December 2015 31 December 2014 Other receivables 1,161,880 1,224,463 Less: Provision for bad debts (60,541) (43,695) 1,101,339 1,180,768 Other receivables mainly include current accounts, petty cash to staff and deposits.
The ageing of other receivables is analysed as follows:
31 December 2015 31 December 2014 Within 1 year 1,123,870 1,110,586 1 to 2 years 7,723 80,188 2 to 3 years 8,912 14,472 3 to 5 years 21,375 19,217 1,161,880 1,224,463 Other receivables are analysed by categories as follows:
31 December 2015 31 December 2014
Provision for Provision for bad Ending balance bad debts Ending balance debts% of total % of total
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 13,486 1.16% 1,3299.85% 154,56312.62% - - That the related
provision for bad
debts is provided
on the age
grouping basis 1,148,395 98.84% 59,2125.16% 1,069,79987.37% 43,594 4.07% With amounts that
are not
individually
significant but
the related
provision for bad
debts is provided
on the individual
basis - - - - 101 0.01% 101100.00% 1,161,881 100.00% 60,5415.21% 1,224,463100.00% 43,695 3.57% As at 31 December 2015, 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:
Ending Provision
Ratio Reason
The 2015 Annual Report of Midea Group Co., Ltd. balance for bad
debts
China Securities Depository and Receivables related to Clearing Corporation Limited stock options without Shenzhen Branch 12,156 - 0% bad debt risks Zhongshan Municipal Bureau of Finance 1,330 1,330100%
13,486 1,330
The provision for bad debts reversed in the current year is RMB4,051,000.
Other receivables as written off by the Group in the 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 31 December 2015, the top 5 other receivables assembled by debtors are analysed as follows:
Provision for bad
Amount debts % of total balance To tal balance of top 5 other
receivables 322,472 16,124 28% As at 31 December 2015, the Group' has no significant government grants recognised at amounts receivable.
(6) Advances to suppliers
31 December 2015 31 December 2014 Advances paid for raw materials and
others 988,625 1,414,470 (a) The ageing of advances to suppliers is analysed below:
31 December 2015 31 December 2014% of total % of total Amount balance Amount balance W ithin 1 year 937,986 94.88% 1,298,444 91.79% 1 to 2 years 29,852 3.02% 93,716 6.63% 2 to 3 years 7,739 0.78% 16,962 1.20% Over 3 years 13,048 1.32% 5,348 0.38% 988,625 100.00% 1,414,470 100.00% As at 31 December 2015, advances to suppliers over 1 year with a carrying amount of RMB50,639,000 (31 December 2014: RMB116,026,000) are mainly unsettled advances paid for raw materials.
As at 31 December 2015, the top five balances of advances to suppliers assembled by debtors are summarised as follows:
The 2015 Annual Report of Midea Group Co., Ltd. Amount % of total balance To tal balance of top 5 advances to
suppliers 285,134 29% (7) Loans and advances
(a) Financial enterprises' loans and advances analysed to individual and corporation are as follows: 31 December 2015 31 December 2014 Loans and advances to individuals 304,230 - Loans and advances to corporations 6,323,429 6,030,087 Including: Loans 3,689,104 964,523 Discounted bills 2,634,325 5,065,564 6,627,659 6,030,087 L ess: Loan impairment provision (18,954) (89,287) 6,608,705 5,940,800 (b) Financial enterprises' loans and advances analysed by type of collateral held or other credit enhancements are as follows:
31 December 2015 31 December 2014 Unsecured loans 134,280 110,500 Guaranteed loans 2,306,902 770,323 Secured loans by monetary assets 4,186,477 5,149,264 6,627,659 6,030,087 Less: Loan impairment provision (Note
4(17)) (18,954) (89,287) 6,608,705 5,940,800 (8) Inventories
(a) Inventories are classified as follows:
31 December 2015 31 December 2014
Provision for Provision for
decline in decline in the
Ending the value of Carrying Ending value of Carrying balance inventories amount balance inventories amount Fi nished goods 8,233,608 (116,047) 8,117,561 11,934,496 (119,648) 11,814,848 Raw materials 1,648,630 (15,030) 1,633,600 2,453,511 (18,437) 2,435,074 Work in
progress 504,454 (742) 503,712 392,334 - 392,334 Consigned
processing
materials 194,009 (149) 193,860 376,930 - 376,930 Low value
consumables 204 - 204 844 - 844 10,580,905 (131,968) 10,448,937 15,158,115 (138,085) 15,020,030
The 2015 Annual Report of Midea Group Co., Ltd. (b) Provision for decline in the value of inventories is analysed as follows:
Increase in Decrease in
31 December current year current year 31 December Reversal or
2014 Provision write-off 2015 Finished goods 119,648 132,551 (136,152) 116,047 Raw materials 18,437 115,052 (118,459) 15,030 Consigned processing
materials - 149 - 149 Work in progress - 742 - 742 138,085 248,494 (254,611) 131,968 (c) Provision for decline in the value of inventories are as follows:
Reason for the reversal or write-off of Specific determination basis of net provision for decline in the value of realisable value inventories in current year Stated at the lower of cost and net
Finished goods realisable value Sales Stated at the lower of cost and net
Raw materials realisable value Requisition for production (9) Other current assets
31 December 2015 31 December 2014 Prepaid expenses 740,354 493,139 Deductible input VAT 1,818,591 1,303,176 Structural deposits with banks 12,436,000 - Wealth management products
purchased from financial institutions
(a) 18,236,831 24,793,080 Others 595,804 4,497 33,827,580 26,593,892 (a) As at 31 December 2015, wealth management products are due within one year, and with floating earnings mainly including principal non-guaranteed products of RMB18,136,831,000 and principal guaranteed products of RMB100,000,000 (31 December 2014: RMB24,788,080,000 and RMB5,000,000) (Note 15(1)).
(10) Available-for-sale financial assets
31 December 2015 31 December 2014 M easured at fair value
- Available-for-sale equity instruments (a) 1,862,444 1,191 Measured at cost
- Available-for-sale equity instruments (b) 1,427,510 1,654,304 3,289,954 1,655,495
The 2015 Annual Report of Midea Group Co., Ltd. (a) As at 31 December 2015, the cost of available-for-sale financial assets measured at fair value is RMB1,716,553,000 and the accumulative amount recorded in other comprehensive income is RMB145,891,000.
(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 fair value reasonable estimates is large and probabilities for determining these estimates cannot be reasonably determined. The Group has no plan to dispose these investments.
As at 31 December 2015, the available-for-sale financial assets measured at cost are mainly the investments in Millet Technology Co., Ltd. with the amount of RMB1,272,584,000.
(11) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2015 31 December 2014 In vestment in associates 2,510,138 951,874 Investments in a joint venture 378,136 - Less: Provision for impairment of
long-term equity investments - - 2,888,274 951,874
The 2015 Annual Report of Midea Group Co., Ltd. Current year movement
Share of net Adjustments of Cash Ending 31 profit using other Other dividends Provision 31 balance of December Increase in Decrease in the equity comprehensive changes or profits for December provision for 2014 Investment Investment method income in equity declared impairment Others 2015 impairment A ssociates -
Foshan Shunde
Rural Commercial
Bank Co., Ltd. - 54,766 - 286,136 28,947 - (118,395) - 1,263,774 (i) 1,515,228 - Misr Refrigeration
And Air
Conditioning
Manufacturing Co. 309,822 - - 25,182 14,067 - (17,588 ) - (14,977 ) 316,506 - Shanxi Huaxiang
Group Co., Ltd. 248,344 - - 43,000 - - (11,070) - - 280,274 - Midea Petty Loan
Co., Ltd. 109,311 - - 4,190 - - (14,445) - (99,056) (ii) - - Foshan Shunde
Midea Petty
Loan Co., Ltd. 72,298 - - 4,938 - - (9,601) - (67,635) (ii) - - Others 212,099 195,008 (12,911) 10,362 (3,090) (63) (2,000) - (1,275) 398,130 - Joint venture -
Wanjiang Financial
Leasing Co., Ltd. - - - 46,936 - - (28,800) - 360,000 (iii) 378,136 - 951,874 249,774 (12,911) 420,744 39,924 (63) (201,899) - 1,440,831 2,888,274 - (i) In 2015, as the Company believed that it has significant influence on Foshan Shunde Rural Commercial Bank Co., Ltd. based on consideration of various factors, it is accounted for using the equity method.
(ii) As at 31 December 2015, Midea Petty Loan Co., Ltd. and Foshan Shunde District Midea Petty Loan Co., Ltd., the Company's subsidiaries, are included in the consolidation scope (Note (5(1))).
(iii) In 2015, as the Company believed that it has joint control over Wanjiang Financial Leasing Co., Ltd., it is accounted for under the equity method.
The 2015 Annual Report of Midea Group Co., Ltd. (12) Fixed assets
Electronic
Machinery equipment
and Motor and other
Buildings equipment vehicles equipment Total C ost
31 December 2014 14,938,851 13,364,556 799,461 2,220,616 31,323,484 Increase in current year
Purchase 115,948 1,018,098 24,713 365,145 1,523,904 Transfers from
construction in progress 451,727 305,767 1,723 46,259 805,476 Increase in business
combinations 60,996 30,077 1,030 18,240 110,343 Transfer from investment
prosperities 21,168 - - - 21,168 Decrease in current year
Disposal and retirement (710,778) (639,851) (363,838) (272,116) (1,986,583) Transfer to investment
properties (8,473) - - - (8,473) Others (8,769) (3,073) (956) (10,084) (22,882) Differences on translation of
foreign currency financial
statements (52,725) (87,747) (167) (12,200) (152,839) 31 December 2015 14,807,945 13,987,827 461,966 2,355,860 31,613,598 A ccumulated depreciation
31 December 2014 3,700,622 6,015,651 416,330 1,650,314 11,782,917 Increase in current year
Depreciation charged 678,826 1,138,415 83,822 315,116 2,216,179 Decrease in current year
Disposal and retirement (203,874) (411,910) (175,272) (246,242) (1,037,298) Others (6,274) (2,553) (491) (9,692) (19,010) Differences on translation of
foreign currency financial
statements (18,953) (48,588) (161) (6,777) (74,479) 31 December 2015 4,150,347 6,691,015 324,228 1,702,719 12,868,309 P rovision for impairment
loss
31 December 2014 3,918 13,396 51 1,388 18,753 Increase in current year
Provision - 1,219 65 98 1,382 Decrease in current year
Disposal and retirement - (3,450) (51) (1,226) (4,727) 31 December 2015 3,918 11,165 65 260 15,408 C arrying amount
31 December 2015 10,653,680 7,285,647 137,673 652,881 18,729,881 31 December 2014 11,234,311 7,335,509 383,080 568,914 19,521,814 (a) In 2015, the depreciation of fixed assets amounted to RMB2,216,179,000 (2014: RMB2,348,286,970) and is included in income statement.
(b) As at 31 December 2015, the Company is still in the course of obtaining the ownership certificate for the fixed asset with a carrying amount of RMB519,552,000.
The 2015 Annual Report of Midea Group Co., Ltd. (13) Construction in progress
(a) Movement of significant projects of construction in progress
Transfer to Accumulative Including:
fixed amount of borrowing
Increase in assets in capitalised costs Capitali 31 December current current Other 31 December borrowing capitalised in sation Source of Name of project 2014 year year decreases 2015 costs current year rate funds Ending balance Ending balance
Meizhi Compressor Internal Project 89,067 149,737 (138,427) - 100,377 - - - resource Suzhou Xiangcheng
Caohu Lake Base Internal Project 121,599 120,429 (242,028) - - - - - resource Handan
Air-conditioner Internal Expansion Project 61,454 6,888 (68,342) - - - - - resource Compressor (Anhui) Internal Project 9,567 45,854 (22,610) - 32,811 - - - resource Guiyang Meian
Project 34,173 37,558 (34,042) - 37,689 3,241 2,283 6% Loans Guangdong Welling
construction in Internal progress 71,714 19,640 (72,252) (394) 18,708 - - - resource Midea 5th Industrial
Zone Dormitory Internal Project 83,417 38,666 - (1,807) 120,276 - - - resource Zhengzhou Annto
Project 26,361 7,165 (15,595) (17,931) - 4,612 237 6% Loans Internal Hefei Annto Project 40,340 - (40,340) - - - - - resource Internal Innovation project 992 310,168 - - 311,160 - - - resource Loans/ Internal Other projects 123,198 425,886 (171,840) (43,504) 333,740 1,799 193 6% resource 661,882 1,161,991 (805,476) (63,636) 954,761 9,652 2,713
As at 31 December 2015, 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.
The 2015 Annual Report of Midea Group Co., Ltd. (14) Intangible assets
Land use rights Non-patents Others Total C ost
31 December 2014 3,830,963 187,224 49,822 4,068,009 Increase in current year
Purchase 144,999 8,104 2,083 155,186 Increase in business combinations 69,348 12,245 124 81,717 Others 11,024 - 8,887 19,911 Decrease in current year
Disposal (208,982) (21,836) (1,430) (232,248) Transfer to investment properties (2,131) - - (2,131) Others (93) (115) - (208) Differences on translation of foreign
currency financial statements 104 (15,755) 600 (15,051) 31 December 2015 3,845,232 169,867 60,086 4,075,185 A ccumulated amortisation
31 December 2014 481,906 134,745 19,400 636,051 Increase in current year
Amortisation charged 80,061 12,717 2,717 95,495 Others 3,518 - - 3,518 Decrease in current year
Disposal (19,952) (20,438) - (40,390) Others (715) (4) - (719) Differences on translation of foreign
currency financial statements 34 (11,608) 402 (11,172) 31 December 2015 544,852 115,412 22,519 682,783 C arrying amount
31 December 2015 3,300,380 54,455 37,567 3,392,402 31 December 2014 3,349,057 52,479 30,422 3,431,958 (a) In 2015, the amortisation of intangible assets amounted to RMB95,495,000 (2014: RMB133,412,710) and is included in income statement.
(b) As at 31 December 2015, the Company is still in course of obtaining the title certificates for land use rights with a carrying amount of RMB20,694,000 (a cost of RMB21,594,000) (31 December 2014: a carrying amount of RMB4,652,556 and a cost of RMB4,699,552).
(c) As at 31 December 2015, there's no provision for impairment of intangible assets.
(15) Goodwill
The goodwill allocated to the asset groups is summarised by operating segments as follows:
Difference
on
translation of
foreign
currency
31 December Increase in financial 31 December 2014 current year statements Others 2015 Air-conditioners and components
segment 1,137,405 25,828 (564,553) - 598,680
The 2015 Annual Report of Midea Group Co., Ltd. - 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 1,037,366 - (564,553) - 472,813 -PT Midea Planet Indonesia - 25,828 - - 25,828 -Midea Electric Trading Thailand Co Ltd 788 - - - 788 Refrigerators and components segment 14,269 - - - 14,269 - Hefei Midea Royalstar Refrigerator
Co., Ltd. 5,260 - - 9,009 14,269 - Hefei Royalstar Midea Electric Marketing
Co., Ltd. 9,009 - - (9,009) - Washing machines and components
segment 1,361,306 - - - 1,361,306 - Hefei Midea Washing Machine Co., Ltd. 34,374 - - - 34,374 - Wuxi Little Swan Company Limited 1,326,932 - - - 1,326,932 Small household appliances segment 54,427 - - - 54,427 - Jiangxi Midea Guiya lighting Co., Ltd. 54,427 - - 54,427 Motors segment 4,639 - - - 4,639 - Changzhou Honglu Huate Electric Co., Ltd. 4,639 - - - 4,639 Other segments 359,745 - - - 359,745 - Calpore Macao Commercial Offshore
Limited 329,957 - - - 329,957 - Gold Emperor Enterprises Ltd. 29,467 - - - 29,467 - Ningbo Meijia Investment Management Co.,
Ltd. 321 - - - 321 2,931,791 25,828 (564,553) - 2,393,066 (a) Impairment
On 31 December 2015, the Group carried out tests for impairment of goodwill. The recoverable amount of goodwill asset groups is calculated using the estimated cash flows determined according to the five-year budget approved by management. The cash flows beyond the five-year period are calculated based on the estimated growth rates. The weighted average growth rates applied by management are consistent with the industry estimates, and do not exceed the long-term average growth rates of each product. Management determines budgeted gross margin based on past experience and forecast on future market development. The discount rates used by management are the pre-tax interest rates that are able to reflect the risks specific to the related asset groups. The management analysed the recoverable amount of each asset group based on such estimates and believed that no provision for impairment of goodwill was required.
(16) Deferred income tax assets and deferred income tax liabilities
(a) Deferred income tax assets without taking into consideration the offsetting of balances
31 December 2015 31 December 2014
The 2015 Annual Report of Midea Group Co., Ltd. Deductible Deferred Deductible Deferred temporary income tax temporary income tax differences assets differences assets T ax losses 632,957 173,145 420,647 128,425 Provision for asset
impairments 637,300 107,608 587,439 96,013 Employee benefits payable 177,487 30,015 1,679,406 290,303 Other current liabilities 9,996,930 1,711,198 19,641,042 3,143,330 Others 1,194,030 202,033 840,868 121,917 12,638,704 2,223,999 23,169,402 3,779,988 Including:
Expected to be reversed
within one year (inclusive) 1,704,162 3,618,766 Expected to be reversed after
one year 519,837 161,222 2,223,999 3,779,988 (b) Deferred income tax liabilities without taking into consideration the offsetting of balances
31 December 2015 31 December 2014 Taxable Deferred Taxable Deferred temporary income tax temporary income tax differences liabilities differences liabilities Changes in fair value 221,255 33,329 101,674 25,917 Others 44,102 7,135 - - 265,357 40,464 101,674 25,917 Including:
Expected to be reversed within
one year (inclusive) 16,192 10,772 Expected to be reversed after
one year 24,272 15,145 40,464 25,917 (c) Deductible temporary differences and tax losses that are not recognised as deferred income tax assets are analysed as follows:
31 December 2015 31 December 2014 Deductible temporary differences 97,124 24,904 Tax losses 547,021 507,397 644,145 532,301 (d) Tax losses that are not recognised as deferred t income ax assets will expire in the following years: Year 31 December 2015 31 December 2014
The 2015 Annual Report of Midea Group Co., Ltd. 2015 - 5,881 2016 13,183 55,367 2017 42,450 42,450 2018 61,360 65,426 2019 138,662 146,587 2020 and subsequent years 291,366 191,686 547,021 507,397 (e) As at 31 December 2015, there's no significant offset item in deferred income tax assets and liabilities.
(17) Details of provision for asset impairments
Decrease in current year
31 December Increase in 31 December 2014 current year Reversal Write-off 2015 Provision for bad debts 824,159 52,384 (168,542) (22,006) 685,995 Including: Provision for bad
debts of
accounts
receivable 691,177 22,485 (87,005) (20,157) 606,500 Loan
impairment
provision 89,287 7,153 (77,486) - 18,954 Provision for bad
debts of other
receivables 43,695 22,746 (4,051) (1,849) 60,541 Provision for decline in
the value of inventories 138,085 248,494 (128,952) (125,659) 131,968 Provision for impairment
of available-for-sale
financial assets 100 - - - 100 Provision for impairment
of fixed assets 18,753 1,382 - (4,727) 15,408 Provision for impairment
of investment properties 12,576 - - - 12,576 993,673 302,260 (297,494) (152,392) 846,047 (18) Assets with ownership or use right restricted
As at 31 December 2015, details of assets with restricted ownership are as follows:
31 December 2015 31 December 2014 C ash at bank and on hand 9,421,586 3,059,518 Deposits with central bank 963,926 1,277,562 Deposits with banks and other financial
institutions 1,400,000 - Notes receivable 4,889,884 1,091,200 16,675,396 5,428,280 (19) Short-term borrowings
31 December 2015 31 December 2014
The 2015 Annual Report of Midea Group Co., Ltd. Unsecured borrowings 977,793 723,605 Trade financing 1,818,174 2,335,281 Pledged borrowings - 381,498 Guaranteed borrowings (a) 1,124,966 2,630,495 3,920,933 6,070,879 (a) As at 31 December 2015, bank borrowings of RMB852,234,000 (31 December 2014: RMB1,756,153,000) are guaranteed by the Company, and bank borrowings of RMB272,732,000 (31 December 2014: 874,342,000) are guaranteed by theCompany’s subsidiaries.
(b) As at 31 December 2015, the annual interest rate range of short-term borrowings is1% to8% (31 December 2014:1% to9%).
(20) Notes payable
31 December 2015 31 December 2014 B ank acceptance notes 17,078,520 12,648,497 (21) Accounts payable
31 December 2015 31 December 2014 Accounts payable for materials 15,521,933 17,659,332 Others 1,926,751 2,478,122 17,448,684 20,137,454 (a) As at 31 December 2015, accounts payable with ageing over 1 year with a carrying amount of RMB821,705,000 (31 December 2014: RMB1,312,169,000) are mainly unsettled accounts payable for materials.
(22) Advances from customers
31 December 2015 31 December 2014 Advances on sales 5,616,361 3,992,540 (a) As at 31 December 2015, accounts payable with ageing over 1 year with a carrying amount of RMB64,267,000 (31 December 2014: RMB94,388,000) are mainly unsettled advances on sales. (23) Employee benefits payable
31 December 2015 31 December 2014 S hort-term employee benefits (a) 2,114,196 2,083,515 Others 115,136 116,262 2,229,332 2,199,777 (a) Short-term employee benefits
The 2015 Annual Report of Midea Group Co., Ltd. 31 31 December December Increase in Decrease in
2014 current year current year 2015 W ages and salaries,
bonus, allowances and
subsidies 1,941,557 8,046,488 (8,037,030) 1,951,015 Staff welfare 77,897 557,211 (547,235) 87,873 Social security
contributions 21,552 545,035 (552,598) 13,989 Including: Medical
insurance 19,935 425,367 (432,577) 12,725 Work injury
insurance 828 91,387 (91,176) 1,039 Maternity
insurance 789 28,281 (28,845) 225 Housing funds 13,548 199,932 (198,196) 15,284 Labour union funds and
employee education
funds 18,978 63,998 (65,058) 17,918 Other employee
expenses 9,983 336,922 (318,788) 28,117 2,083,515 9,749,586 (9,718,905) 2,114,196 (24) Taxes payable
31 December 2015 31 December 2014 VAT payable 140,083 375,168 Corporate income tax payable 1,188,759 2,721,473 Others 278,339 183,510 1,607,181 3,280,151 (25) Other payables
31 December 2015 31 December 2014 D eposit and security deposit 521,495 715,119 Payables and temporary receipts 215,747 282,557 Refund for energy-saving and beneficial to
people 138,160 - Others 263,904 225,873 1,139,306 1,223,549 As at 31 December 2015, other payables with ageing over 1 year with a carrying amount of RMB244,788,000 (31 December 2014: RMB132,243,000) are mainly deposit and security deposit payable, which are unsettled for related projects that are uncompleted.
(26) Other current liabilities
The 2015 Annual Report of Midea Group Co., Ltd. 31 December 2015 31 December 2014 Accrued sales promotion expenses 828,535 986,114 Accrued sales rebate 13,765,370 13,428,468 Accrued installation and maintenance
expenses 4,587,651 4,231,211 Accrued transportation expenses 487,859 358,027 American commercial paper (a) 355,460 2,127,551 Others 2,073,302 1,647,565 22,098,177 22,778,936 (a) As at 31 December 2015, the American commercial paper is with an annual interest rate range of0.85% to0.97%, due within one year and guaranteed by Bank of China.
(27) Long-term borrowings
31 December 2015 31 December 2014 Guaranteed borrowings (a) 83,778 611,900 Unsecured borrowings 6,283 19,205 90,061 631,105 L ess: Current portion of long-term
guaranteed borrowings - (611,900) 90,061 19,205 (a) As at 31 December 2015, bank borrowings of RMB83,778,000 (31 December 2014: RMB611,900,000) was guaranteed by the directors ofCompany’s subsidiaries. Interest is payable every month and the principal are due for repayment in August 2018.
(b) As at 31 December 2015, the annual interest rate range of the long-term borrowings is2.09% to4.5% (31 December 2014:1.5% to4.5%).
(28) Share capital
Current year movement
31 December Newly Exercise of Repurchase 31 December 2014 issued stock options Desterilisation of shares Subtotal 2015 RMB-denominated ordinary
shares - (a) (b) (c)
RMB-denominated ordinary
shares subject to trading
restriction (a) 1,973,072 55,000 94 (1,823) - 53,271 2,026,343 RMB-denominated ordinary
shares not subject to trading
restriction (b) 2,242,736 - 25,529 1,823 (29,592) (2,240) 2,240,496 4,215,808 55,000 25,623 - (29,592) 51,031 4,266,839 Current year movement
31 December Newly Bonus Transferred 31 December 2013 issued share from reserves Others Subtotal 2014
The 2015 Annual Report of Midea Group Co., Ltd. RMB-denominated ordinary
shares -
RMB-denominated ordinary
shares subject to trading
restriction 1,000,005 - - 973,067 - 973,067 1,973,072 RMB-denominated ordinary
shares not subject to trading
restriction 686,318 - - 1,556,418 - 1,556,418 2,242,736 1,686,323 - - 2,529,485 - 2,529,485 4,215,808 (a) On 11 June 2015, pursuant to the Approval for the Non-public Offering of Midea Group Co. Ltd. (Zheng Jian Xu Ke[2015] No. 1169) issued by the China Securities Regulatory Commission (CSRC), the Company non-publicly issued 55,000,000 shares to Millet Technology Co., Ltd. with an issue price of RMB22.01 per share. The net amount of the funds raised is RMB1,203,543,000 after the deduction of the underwriting fee, of which RMB55,000,000 recognised as share capital and RMB1,148,543,000 recognised as “capital surplus-share premium”.
(b) Pursuant to the first stock option incentive plan as approved at the first extraordinary general meeting dated 17 February 2014 (the "First Options Incentive Programme"), the Company granted 99,863,000 stock 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 stock options granted will become effective after 1 year, 2 years and 3 years, respectively, since 18 February 2014. In 2015, the total number of shares exercised by the granted employees is 25,622,621 and the total amount of capital received is RMB454,034,000, of which RMB25,623,000 is recognised as share capital, RMB428,411,000 recognised as capital surplus (share premium) and RMB90,294,000 transferred from capital surplus (others) to capital surplus (share premium). The weighted average price of stock options exercised in current period is RMB36.37 as calculated based on the price of exercise date.
(c) On 6 August 2015, pursuant to the Preplan for the First Repurchase of Partial Ordinary Shares as approved at the second extraordinary general meeting in 2015, the Company repurchased 29,591,644 shares not subject to trading restriction in the total capital of RMB999,998,000, of which a RMB29,592,000 deduction to share capital and a RMB970,406,000 deduction to capital surplus (share premium).
(29) Capital reserve
31 December 31 December Increase in Decrease in
2014 current year current year 2015 Share premium (a) 10,391,194 1,667,248 (970,406) 11,088,036 Stock option incentive
plan (b) 150,991 327,907 (90,294) 388,604 Others (c) 2,482,698 551,852 - 3,034,550 13,024,883 2,547,007 (1,060,700) 14,511,190 31 December 31 December Increase in Decrease in
2013 current year current year 2014 S hare premium 13,075,813 - (2,684,619) 10,391,194 Stock option
compensation plan - 150,991 - 150,991 Others 2,490,491 1,808 (9,601) 2,482,698 15,566,304 152,799 (2,694,220) 13,024,883
The 2015 Annual Report of Midea Group Co., Ltd. (a) The increase in share premium arises from newly issued share with the amount of RMB1,148,543,000 and the exercise of stock options with the amount of RMB518,705,000. The decrease in share premium arises from the repurchase of shares with the amount of RMB970,406,000 (Note 4(28)).
(b) The increase in stock option incentive plan arises from the stock option expenses attributable to shareholders' equity of the Company with the amount of RMB327,907,000. The decrease in stock option incentive programme arises from the transfer of RMB90,294,000 stock options to share premium due to exercise of stock option.
(c) The increase in other capital reserve mainly arises from the transfer of demolition compensation of a subsidiary to special payables.
The 2015 Annual Report of Midea Group Co., Ltd. (30) Other comprehensive income
Other comprehensive income in the income statement for the year ended 31 December Other comprehensive income in the balance sheet 2015
Attributable to Amount Less: Reclassifications Attributable Attributable to 31 the parent before of previous other Less: to the parent minority December company after 31 December income tax comprehensive income Income tax company shareholders after 2014 tax 2015 for year to profit or loss expenses after tax 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 41,166 (39,924) 1,242 (39,924) - - (39,924) - Gains or losses arising from changes in fair
value of available-for-sale financial assets (819) (159,887) (160,706) (181,763) 969 8,206 (159,887) (12,701) Effective portion of cash flow hedging gains
or losses 269,154 (74,392) 194,762 202,106 (285,733) 5,792 (74,392) (3,443) Exchange differences arising from translating
foreign operations 464,798 571,055 1,035,853 759,810 - - 571,055 188,755 774,299 296,852 1,071,151 740,229 (284,764) 13,998 296,852 172,611 Other comprehensiv e income in the ba lance Oth er comprehensive inc ome in the income st atement for the year ended 31 Dec ember sheet 2014
Attributable to Amount Less: Reclassifications Attributable Attributable to 31 the parent before of previous other Less: to the parent minority December company after 31 December income tax comprehensive income Income tax company shareholders after 2013 tax 2014 for year to profit or loss expenses after tax 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 36,054 5,112 41,166 5,112 - - 5,112 - Gains or losses arising from changes in fair
value of available-for-sale financial assets (524) (295) (819) (435) 213 33 (295) 106 Effective portion of cash flow hedging gains
or losses (53,962) 323,116 269,154 285,733 54,313 (14,556) 323,116 2,374 Exchange differences arising from translating
foreign operations 298,162 166,636 464,798 266,052 - - 166,636 99,416 279,730 494,569 774,299 556,462 54,526 (14,523) 494,569 101,896
The 2015 Annual Report of Midea Group Co., Ltd. (31) Surplus reserve
31 December Increase in 31 December 2014 current year 2015 S tatutory surplus
reserve 1,189,791 656,732 1,846,523 31 December Increase in 31 December 2013 current year 2014 S tatutory surplus
reserve 569,544 620,247 1,189,791 In accordance with the Company Law of the People's Republic of China and theCompany’s Articles of Association, the Company should appropriate10% of net profit for the year to the statutory surplus reserve, and the Company can cease appropriation when the statutory surplus reserve accumulated to more than50% of the registered capital. The statutory surplus reserve can be used to make up for the loss or increase the share capital after approval from the appropriate authorities. According to a resolution at the Board of Directors, the Company appropriated10% of net profit, amounting to approximately RMB656,732,000 in 2015 (2014:10% of net profit, amounting to approximately RMB620,247,000) to the statutory surplus reserve.
(32) Undistributed profits
2015 2014 Undistributed profits at the beginning of the
year 21,814,316 15,304,989 Add: Net profit attributable to the parent
company for current year 12,706,725 10,502,220 Less: Ordinary share dividends payable (a) (4,215,808) (3,372,646) Appropriation to general reserve (b) (118,624) - Others (50) - Appropriation to statutory surplus
reserve (Note 4(31)) (656,732) (620,247) Undistributed profits at end of year 29,529,827 21,814,316 (a) Ordinary share dividends distributed in current year
In accordance with the resolution at the Board ofShareholders’ meeting, dated on 31 March 2015, the Company distributed a cash dividend to the shareholders at RMB1.00 per share, amounting to RMB4,215,808,000 calculated by 4,215,808,472 issued shares (2014: RMB2.00 per share, amounting to RMB3,372,646,000).
(b) General reserve
According to the Administrative Measures for the Provisioning of Financial Enterprises issued by the Ministry of Finance (MOF), an provision for general risk amounting to RMB118,624,000 was made in 2015 (2014: Nil) at1.5% of the balance of financial enterprise risk assets net of recognised loan impairment provision.
The 2015 Annual Report of Midea Group Co., Ltd. (33) Operating revenue and cost of sales
2015 2014 Revenue from main operations 128,564,600 131,062,049 Revenue from other operations 9,876,626 10,606,126 138,441,226 141,668,175 2015 2014 Cost of sales from main operations 94,681,799 97,295,261 Cost of sales from other operations 7,981,019 8,374,425 102,662,818 105,669,686 (a) Revenue and cost of sales from main operations
2015 2014
Cost of sales Revenue from Cost of sales from Revenue from from main main operations main operations main operations operations Large household
appliances 87,932,142 63,685,678 92,402,440 67,622,503 Air-conditioner
motors and related
components 64,491,950 46,270,517 72,704,843 53,110,596 Refrigerator motors
and related
components 11,422,676 8,774,502 9,723,781 7,382,157 Washing machine
motors and related
components 12,017,516 8,640,659 9,973,816 7,129,750 Small household
appliances 35,445,859 26,574,533 32,709,715 24,618,303 Motor 3,533,842 2,966,665 3,983,549 3,336,928 Logistics services 1,652,757 1,454,923 1,966,345 1,717,527 128,564,600 94,681,799 131,062,049 97,295,261 In 2015, cost of sales is mainly material costs and labour costs, which accounts for over80% of total cost of sales from main operations (2014: over80%).
(b) Revenue and cost of sales from other operations
2015 2014
Revenue from Cost of sales from Revenue from Cost of sales from other operations other operations other operations other operations Revenue from sales
of materials 8,840,147 7,482,344 9,628,874 8,030,070 Others 1,036,479 498,675 977,252 344,355 9,876,626 7,981,019 10,606,126 8,374,425 In 2015, cost of sales from other operations is mainly material costs, which accounts for over80% of total cost of sales from other operations (2014: over80%).
The 2015 Annual Report of Midea Group Co., Ltd. (34) Interest income/(expenses)
Interest income and expenses arising from daily financial business of financial enterprises are presented as follows:
2015 2014 Interest income from loans and
advances 855,149 611,666 Including: Interest income from loans
and advances 220,635 39,936 Interest income from note
discounting 634,514 571,730 Interest income from deposits with
banks and other financial institutions 45,012 20,859 Interest income 900,161 632,525 Interest expenses (561,514) (404,527) 338,647 227,998 (35) Business taxes and surcharges
2015 2014 City maintenance and construction
tax 489,695 432,578 Educational surcharge 356,115 314,954 Others 65,520 62,064 911,330 809,596 (36) Selling and distribution expenses
2015 2014 Selling and distribution expenses 14,799,769 14,733,917 In 2015, 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 over80% of total selling and distribution expenses (2014: over80%).
(37) General and administrative expenses
2015 2014 General and administrative expenses 7,441,755 7,498,256 In 2015, general and administrative expenses are mainly employee benefits,R&D expenditures, expenses of depreciation and amortisation, technical maintenance expenses and administrative office expenses, which account for over80% of total general and administrative expenses (2014: over80%).
(38) Financial expenses
The Group's financial expenses, other than those arising from financial business (Note 4(34)),
are presented as follows:
The 2015 Annual Report of Midea Group Co., Ltd. 2015 2014 Interest expenses 231,938 183,752 Less: Interest income (556,617) (348,390) Exchange gains or losses 335,281 234,205 Others 128,330 181,760 138,932 251,327 (39) Asset impairment loss
2015 2014 (Reversal)/loss of bad debts (Note 4(5)) (45,825) 199,474 Loss on decline in the value of inventories (Note
4(8)) 119,542 93,908 Impairment loss on available-for-sale financial assets
(Note 4(10)) - 100 Impairment loss on fixed assets (Note 4(12)) 1,382 12,867 (Reversal)/loss of impairment of loans (Note 4(7)) (70,333) 43,469 4,766 349,818 (40) Gains/(losses) on changes in fair value
2015 2014 Financial instruments at fair value through profit or
loss - derivative financial instruments 81,611 (652,791) (41) Investment income
2015 2014 Investment income from wealth management
products purchased from financial institutions 1,309,633 953,661 Investment income from disposal of financial assets
at fair value through profit or loss 286,036 384,369 Income from long-term equity investment under
equity method 420,744 94,739 Others (5,144) 78,353 2,011,269 1,511,122 There is no restriction on recovery of investment income.
(42) Non-operating income
Amount recognised in non-recurring profit or 2015 2014 loss in 2015
Government grants (a) 1,373,128 819,042 1,348,652
The 2015 Annual Report of Midea Group Co., Ltd. Gains on disposal of
non-current assets 53,084 53,602 53,084 Including: Gains on disposal
of fixed assets 48,160 50,442 48,160 Gains on disposal
of intangible
assets 4,924 3,160 4,924 Other income 280,827 184,425 280,827 1,707,039 1,057,069 1,682,563 (a) Details of government grants
2015 2014 Assets/income related Special projects 1,368,522 807,509 Related to income Special projects 4,606 11,533 Related to assets 1,373,128 819,042
(43) Non-operating expenses
Amount recognised in non-recurring profit or 2015 2014 loss in 2015 Losses on disposal of
non-current assets 287,167 270,391 287,167 Including: Losses on disposal
of fixed assets 286,817 236,173 286,817 Losses on disposal
of intangible
assets 350 34,218 350 Donations 28,811 27,760 28,811 Other expenses 256,580 218,737 248,900 572,558 516,888 564,878 (44) Income tax expenses
2015 2014 Current income tax calculated based on tax law
and related regulations 923,694 3,665,359 Deferred income tax 1,503,005 (1,321,003) 2,426,699 2,344,356 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: 2015 2014
The 2015 Annual Report of Midea Group Co., Ltd. Total profit 16,051,354 13,990,684 Income tax calculated at tax rate of25% 4,012,839 3,497,671 Effect of different tax rates applicable to
subsidiaries (1,427,105) (1,006,392) Effect of income tax annual filing for prior periods (74,239) (6,606) Income not subject to tax (99,584) (118,858) Costs, expenses and losses not deductible for tax
purposes 102,016 32,130 Temporary differences for which no deferred
income tax asset was recognised in prior years (116,095) - Others 28,867 (53,589) Income tax expenses 2,426,699 2,344,356 (45) 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:
Unit 2015 2014 Consolidated net profit attributable to
ordinary shareholders of the parent
company RMB'000 12,706,725 10,502,220 Weighted average number of Thousand
outstanding ordinary shares shares 4,244,047 4,215,808 RMB per
Basic earnings per share share 2.99 2.49 (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:
Currency unit 2015 2014 Consolidated net profit attributable to
ordinary shareholders of the parent
company RMB'000 12,706,725 10,502,220 Weighted average number of Thousand
outstanding ordinary shares shares 4,244,047 4,215,808 Weighted average number of ordinary
shares increased due to stock Thousand
options shares 10,708 3,920 Weighted average number of diluted Thousand
outstanding ordinary shares shares 4,254,755 4,219,728 RMB per
Diluted earnings per share share 2.99 2.49 (46) Notes to the consolidated cash flow statement
The 2015 Annual Report of Midea Group Co., Ltd. (a) Cash received relating to other operating activities
2015 2014 Non-operating income 1,432,614 1,193,400 Other operating income - others 777,894 958,972 Financial expenses - interest income 132,622 326,389 Others 867,857 15,424 3,210,987 2,494,185 (b) Cash paid relating to other operating activities
2015 2014 Selling and distribution expenses
(excluding employee benefits and
taxes and surcharges) 12,878,438 11,697,676 General and administrative expenses
(excluding employee benefits and
taxes and surcharges) 3,091,282 3,129,732 Others 366,246 778,764 16,335,966 15,606,172 (c) Supplementary information to the consolidated cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
2015 2014 Net profit 13,624,655 11,646,328 Add: Provision for assets impairment 4,766 349,818 Depreciation and amortisation 2,852,017 3,320,413 Net loss on disposal of non-current assets 234,083 216,789 (Gains)/losses on changes in fair value (81,611) 652,791 Financial (income)/expenses (317,043) 100,069 Investment income (2,011,269) (1,511,122) Stock options expenses 377,660 176,349 Decrease/(increase) in deferred income tax assets 1,497,537 (1,198,425) Increase/(decrease) in deferred income tax liabilities 5,468 (97,715) Decrease in inventories 4,656,838 118,729 Decrease/(increase) in operating receivables 3,769,036 (9,098,389) Increase in operating payables 2,152,117 20,112,877 Net cash flows from operating activities 26,764,254 24,788,512 Movement in cash and cash equivalents
Cash and cash equivalents at end of year 5,187,317 5,272,240 Less: Cash and cash equivalents at beginning of year (5,272,240) (16,763,874)
Net decrease in cash and cash equivalents (84,923) (11,491,634)
The 2015 Annual Report of Midea Group Co., Ltd. (d) Acquisition of subsidiaries
2015 Cash and cash equivalents paid in current year for business
combinations occurred in current year 514,403 Including: Main Power Electrical Factory Limited 119,955 Midea Petty Loan Co., Ltd. 231,132 Foshan Shunde Midea Petty Loan Co., Ltd. 157,814 PT Midea Planet Indonesia 5,502 Less: Cash and cash equivalents held by the subsidiaries at the
acquisition dates (230,672) Including: Main Power Electrical Factory Limited (201,429) Midea Petty Loan Co., Ltd. (5,897) Foshan Shunde Midea Petty Loan Co., Ltd. (14,948) PT Midea Planet Indonesia (8,398) Net cash paid for acquisition of the subsidiaries 283,731 Consideration for acquisition of subsidiaries in 2015
Main Power Electrical Factory Limited 228,068 Midea Petty Loan Co., Ltd. 231,132 Foshan Shunde Midea Petty Loan Co., Ltd. 157,814 PT Midea Planet Indonesia 5,502 622,516 Net assets of the subsidiaries acquired
As at the As at the acquisition acquisition dates in 2015 dates in 2014 Current assets 1,833,699 13,021 Non-current assets 227,348 407 Current liabilities (1,070,311) (7,799) Non-current liabilities (122,894) - 867,842 5,629 (e) Composition of cash and cash equivalents
31 December 31 December 2015 2014 Cash on hand 2,915 1,038
Cash at bank that can be readily drawn on demand 2,435,483 3,010,485
The 2015 Annual Report of Midea Group Co., Ltd. Other cash balances that can be readily drawn on
demand 1,993 132,242 Deposits with central bank that can be drawn on demand 84,119 2,030 Deposits with banks and other financial institutions 2,662,807 2,126,445 Cash and cash equivalents at end of year 5,187,317 5,272,240 (47) Monetary items denominated in foreign currencies
31 December 2015
Foreign currency
balance Exchange rate RMB balance Cash at bank and on
hand
USD 364,436 6.4936 2,366,502 HKD 276,475 0.8378 231,631 EUR 25,956 7.0952 184,163 BRL 37,354 1.6401 61,264 Other currencies N/A N/A 140,436 Subtotal 2,983,996 Deposits with central
bank
USD 18,212 6.4936 118,261 Deposits with banks
and other financial
institutions
USD 48,674 6.4936 316,069 EUR 6,352 7.0952 45,068 Subtotal 361,137 Accounts receivable
USD 743,404 6.4936 4,827,368 HKD 103,884 0.8378 87,032 EUR 58,027 7.0952 411,713 BRL 621,229 1.6401 1,018,870 Other currencies N/A N/A 474,455 Subtotal 6,819,438 Other receivables
USD 2,095 6.4936 13,606 HKD 151,578 0.8378 126,989 EUR 9,030 7.0952 64,070 BRL 47,863 1.6401 78,500 Other currencies N/A N/A 61,786 Subtotal 344,951 Total 10,627,795
31 December 2015
The 2015 Annual Report of Midea Group Co., Ltd. Foreign currency
balance Exchange rate RMB balance Short-term borrowings
USD 398,212 6.4936 2,585,828 EUR 98,534 7.0952 699,118 Others N/A N/A 88,661 Subtotal 3,373,607 Accounts payable
USD 227,104 6.4936 1,474,723 HKD 52,667 0.8378 44,123 EUR 2,167 7.0952 15,375 BRL 54,165 1.6401 88,835 Other currencies N/A N/A 133,750 Subtotal 1,756,806 Other payables
USD 16,244 6.4936 105,482 HKD 13,172 0.8378 11,035 EUR 1,135 7.0952 8,053 BRL 16,251 1.6401 26,653 Other currencies N/A N/A 16,390 Subtotal 167,613 Long-term borrowings
HKD 100,000 0.8378 83,778 BRL 3,577 1.6401 5,867 Other currencies N/A N/A 416 Subtotal 90,061 Other non-current
liabilities
USD 54,740 6.4936 355,460 Total 5,743,547 31 December 2014
Foreign currency
balance Exchange rate RMB balance Cash at bank and on
hand
USD 174,181 6.1190 1,065,810 HKD 270,435 0.7889 213,346 EUR 28,650 7.4556 213,606 BRL 214,876 2.3030 494,859 Other currencies N/A N/A 28,988 Subtotal 2,016,609
Deposits with central
The 2015 Annual Report of Midea Group Co., Ltd. bank
USD 16,134 6.1190 98,724 Deposits with banks
and other financial
institutions
USD 41,255 6.1190 252,437 EUR 1,226 7.4556 9,140 Subtotal 261,577 Accounts receivable
USD 795,721 6.1190 4,869,016 HKD 300,247 0.7889 236,865 EUR 25,110 7.4556 187,208 BRL 625,186 2.3030 1,439,804 Other currencies N/A N/A 181,038 Subtotal 6,913,931 Total 9,290,841 31 December 2014
Foreign currency
balance Exchange rate RMB balance Short-term borrowings
USD 932,190 6.1190 5,704,070 Other currencies N/A N/A 22,056 Subtotal 5,726,126 Accounts payable
USD 320,162 6.1190 1,959,069 HKD 65,894 0.7889 51,984 EUR 3,113 7.4556 23,210 BRL 142,565 2.3030 328,327 Other currencies N/A N/A 133,648 Subtotal 2,496,238 Long-term borrowings
BRL 8,022 2.3030 18,475 Other currencies N/A N/A 730 Subtotal 19,205 Other current liabilities
USD 347,696 6.1190 2,127,551 Total 10,369,120
The 2015 Annual Report of Midea Group Co., Ltd. 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.
Cash flows from Net cash flows Recognition
Revenues of
Net profit/(loss) of operating activities of of acquirees basis of acquirees from the acquirees from the acquirees from the from the Nature of Time
Acquisition Acquisition acquisition acquisition dates to acquisition dates to acquisition dates to acquisition dates Acquirees business of acquisition Acquisition cost % interest acquired method dates dates the year-end the year-end the year-end to the year-end Production and Effective
Main Power sale of small acquisition
Electrical household Cash 17 October of control
Factory Limited appliances 17 October 2015 RMB228,068,000 70% consideration 2015 right 103,975 (38,904) 110,054 (30,031)30% of
interests 70% of
30% of interests were were interests Effective
acquired in70% of interests were acquired in were acquisition
Midea Petty September
31 July
September 2011 with acquired in July 2015 September acquired in Cash 31 July of control
Loan Co., Ltd. Petty loans 2011 2015 RMB135,000,000 with RMB231,132,000 2011 July 2015 consideration 2015 right 39,385 13,652 (310,467) 42,83230% of 70% of
Foshan Shunde interests interests Effective
District Midea 30% of interests were70% of interests were were were acquisition
Petty Loan Co.,
May 31 July
acquired in May 2010 acquired in July 2015 acquired in acquired in Cash 31 July of control
Ltd. Petty loans 2010 2015 with RMB60,000,000 with RMB157,814,000 May 2010 July 2015 consideration 2015 right 20,997 10,438 66,420 (9,895)51% of 49% of
Import and 51% of interests were49% of interests were interests interests Effective
distribution of acquired on 6 April acquired on 7 May were were acquisition
PT Midea Planet household
6 April 7 May
2010 with 2010 with acquired on acquired on Cash of control
Indonesia appliances 2010 2015 RMB6,755,150 RMB5,501,790 6 April 2010 7 May 2015 consideration 7 May 2015 right 111,171 (6,718) 5,378 (459)
The 2015 Annual Report of Midea Group Co., Ltd. (b) Details of costs of combination and good will are as follows:
Main Power Electrical Foshan Shunde District Midea PT Midea Planet Factory Limited Midea Petty Loan Co., Ltd. Petty Loan Co., Ltd. Indonesia Costs of combination -
Cash consideration 228,068 231,132 157,814 5,502 Fair value of previously held equity at acquisition dates N/A 99,057 67,635 (21,156) Total costs of combination 228,068 330,189 225,449 (15,654) Less: Share of fair value of the identifiable net assets
obtained 247,581 330,189 225,449 (41,482) (Differences)/goodwill (i) (19,513) - - 25,828 The Group mainly uses valuation techniques such as market approach and income approach to determine the fair value of non-cash assets transferred and liabilities incurred.
(i)The Group recognises the differences between costs of combination and the share of fair value of the identifiable net assets of Main Power Electrical Factory Limited obtained in the combination as non-operating income for the period in which the combination incurs.
The 2015 Annual Report of Midea Group Co., Ltd. (c) Assets and liabilities of acquirees at acquisition dates are as follows:
(i) Main Power Electrical Factory Limited
Carrying Carrying Fair value at amount at amount at 31 acquisition acquisition December dates dates 2015 Current assets 588,263 631,128 493,405 Non-current assets 202,505 202,974 172,851 Current liabilities (314,187) (314,187) (265,179) Non-current liabilities (122,894) (122,894) (83,778) Net assets obtained 353,687 397,021 317,299 (ii) Midea Petty Loan Co., Ltd.
Carrying Carrying Fair value at amount at amount at 31 acquisition acquisition December dates dates 2015 Current assets 762,166 762,166 1,354,858 Non-current assets 10,929 10,929 11,500 Current liabilities (442,906) (442,906) (322,517) Net assets obtained 330,189 330,189 1,043,841 (iii) Foshan Shunde District Midea Petty Loan Co., Ltd.
Carrying Carrying Fair value at amount at amount at 31 acquisition acquisition December dates dates 2015 Current assets 411,948 411,948 352,070 Non-current assets 2,020 2,020 1,596 Current liabilities (188,519) (188,519) (117,779) Net assets obtained 225,449 225,449 235,887 (iv) PT Midea Planet Indonesia
Carrying
Fair value at amount at Carrying amount acquisition acquisition at 31 December dates dates 2015 Current assets 71,322 71,322 95,919
Non-current assets 11,894 11,894 16,681
The 2015 Annual Report of Midea Group Co., Ltd. Current liabilities (124,699) (124,699) (160,922) Net assets obtained (41,483) (41,483) (48,322) (d) Cash flows for the period from the acquisition date to 31 December 2015 are as follows:
For the period from the acquisition dates to 31 December 2015 Main Power Foshan Shunde
Electrical District Midea PT Midea Factory Midea Petty Loan Petty Loan Co., Planet Limited Co., Ltd. Ltd. Indonesia Net cash flows
from
operating
activities 110,054 (310,467) 66,420 5,378 Net cash flows
from
investing
activities (53,143) - (6) (208) Net cash flows
from
financing
activities (86,942) 353,299 (76,309) (5,629) (30,031) 42,832 (9,895) (459) (2) Changes in consolidation scope due to other reasons
(a) Increase of consolidation scope
In January 2015, the Company invested RMB273,077,000 by property ownership in the establishment of Foshan Shunde Meihui Management Service Co., Ltd., a fully-owned subsidiary.
In March 2015, the Company invested RMB100,000,000 by cash in the establishment of Midea Group Payment Technology Co., Ltd., a fully-owned subsidiary.
In April 2015, the Company and its subsidiary Foshan City Midea Air-conditioners Industrial Investment Co., Ltd. invested RMB35,000,000 and RMB15,000,000, respectively, in the establishment of Media Innovation Investment Co., Ltd., obtaining a shareholding of70% and30% respectively.
In May 2015, theCompany’s subsidiary Guangdong Midea Heating& Ventilation Equipment Co., Ltd. and Hicks Hong Kong Limited invested RMB37,500,000 and RMB12,500,000, respectively, in the establishment of Guangdong Midea Hicks Electronics Limited, obtaining a shareholding of75% and25% respectively.
In July 2015, the Company and its subsidiary Foshan City Midea Air-conditioners Industrial Investment Co., Ltd. subscribed contributions of RMB800,000,000 and RMB200,000,000, respectively, in the establishment of Midea Robotics Industry Development Co., Ltd., obtaining a shareholding of80% and20% respectively. As at 31 December 2015, the Company has contributed RMB7,000,000, obtaining a shareholding of80%.
In August 2015, the Company, together with Yaskama Motors (China) Co., Ltd., established a
The 2015 Annual Report of Midea Group Co., Ltd. joint venture Guangdong Midea-Yaskawa Service Robotics Ltd., registered capital of which is RMB100,000,000. The Company contributed RMB60,100,000 by cash, obtaining a shareholding of60.1%. As at 31 December 2015, the Company has contributed RMB12,020,000, obtaining a shareholding of60.1%.
In October 2015, the Company's subsidiary Hefei Midea Heating& Ventilation Equipment Co., Ltd. and Bosch (China) Investments Co., Ltd. invested RMB48,000,000 and RMB32,000,000, respectively, in the establishment of HefeiM&B Air-Conditioning Equipment Co., Ltd., obtaining a shareholding of60% and40% respectively.
In November 2015, the Company's subsidiary Annto Logistics Company Limited subscribed contributions of RMB10,000,000 in the establishment of a fully-owned subsidiary Shenzhen Meian Internet Technology Co., Ltd. As at 31 December 2015, the Company has not paid the subscription amount.
In December 2015, theCompany’s subsidiary Wuhu Annto Investment Co., Ltd.
invested RMB20,000,000 by cash in the establishment of a fully-owned subsidiary Ningbo Meian Logistics Co., Ltd.
(b) Decrease of consolidation scope
Decrease of consolidation scope mainly includes deregistration of subsidiaries and mergers. Details are as follows:
Disposal method of Disposal time-point of Name of entity the equity the equity Zhongshan Midea Environmental Appliance
Installation Service Co., Ltd. Deregistration May 2015 Welling Macao Commercial Offshore Ltd. Deregistration December 2015 Zhuzhou Annto Logistics Co., Ltd. Deregistration April 2015 Maytag International Investment I B.V. Deregistration June 2015 Maytag International Investment IV B.V. Deregistration June 2015 Solar Energy Technology Co., Ltd. Wuhu Midea Deregistration May 2015 Hefei Royalstar Midea Electric Marketing Co.,
Ltd. Deregistration December 2015 Carrier Transicold Argentina S.A. Deregistration January 2015 Jiangxi Midea Guiya Green Lighting Co., Ltd. Deregistration July 2015 Merger by the
Guangdong Midea Overall Home Furniture Co., Company’s
Ltd. subsidiary March 2015 Merger by the
Company’s
Ningbo Midea United Material Supply Co., Ltd. subsidiary January 2015 Merger by the
Foshan Midea Household Appliances Co., Ltd Company July 2015 Merger by the
Foshan Shunde Hongbang Investments CO., Company’s
Ltd. subsidiary July 2015
The 2015 Annual Report of Midea Group Co., Ltd. 6 Interests in other entities
(1) Interests in subsidiaries
(a) Information of significant subsidiaries
Name of Subsidiaries Major business location Place of registration Nature of business Shareholding(%) Acquisition method Direct Indirect
Business combinations involving enterprises Hefei Midea Refrigerator Co., Ltd. Hefei, PRC Hefei, PRC Manufacture of refrigerator 75% 25% not under common control Hefei Midea Heating& Ventilation Equipment Co., Ltd. Hefei, PRC Hefei, PRC Manufacture of air conditioner 99% 1% Establishment Anhui GMCC Precision Manufacturing Co.,Ltd. Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 95% 5% Establishment Business combinations involving enterprises Guangdong GMCC Refrigeration Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 60% - not under common control Business combinations involving enterprises Guangdong Midea Refrigeration Equipment Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of air conditioner 73% 7% not under common control Business combinations involving enterprises Guangdong Midea Group Wuhu Refrigeration Equipment Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 73% 7% 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 enterprises Ningbo Midea United Material Supply Co., Ltd. Ningbo, PRC Ningbo, PRC Manufacture of air conditioner 100% - under common control Midea Electric Appliance (Singapore) Trade Co., Ltd. Singapore Singapore Export trading - 100% Establishment Manufacture of small household
Wuhu Midea Electric Appliance Manufacturing Co., Ltd. Wuhu, PRC Wuhu, PRC appliances - 100% Establishment Business combinations involving enterprises Wuxi Little Swan Company Limited Wuxi, PRC Wuxi, PRC Manufacture of washing machine 38% 15% not under common control Business combinations involving enterprises Hefei Midea Washing Machine Co., Ltd. Hefei, PRC Hefei, PRC Manufacture of washing machine 5.53% 94.47% not under common control Business combinations involving enterprises Guangdong Welling Motor Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of motors - 68.64% not under common control Business combinations involving enterprises Welling (Wuhu) Motor Manufacturing Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of motors - 100% not under common control Business combinations involving enterprises Foshan Welling Washer Motor Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC Manufacture of motors - 100% not under common control Manufacture of small household
Guangdong Midea Kitchen Electric Manufacturing Co., Ltd. Foshan, PRC Foshan, PRC appliances - 100% Establishment Manufacture of small household
Foshan Shunde manufacturing co., LTD., Foshan, PRC Foshan, PRC appliances - 100% Establishment Business combination involving enterprises Annto Logistics Co., Ltd. Wuhu, PRC Wuhu, PRC Cargo storage and transportation 55% 25% under common control Business combination involving enterprises Ningbo Annto Logistics Co., Ltd. Ningbo, PRC Ningbo, PRC Cargo storage and transportation - 100% under common control Anhui GMCC Compressor Sales Co., Ltd. Wuhu, PRC Wuhu, PRC Manufacture of air conditioner 95% 5% Establishment Midea Group Finance Co., Ltd. Foshan, PRC Foshan, PRC Financial industry 95% 5% Establishment
The 2015 Annual Report of Midea Group Co., Ltd.
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Name of Subsidiaries||Major business location||Place of registration||Nature of business|||Shareholding|||Acquisition method||
||||||||||(%)|||||
||||||||||Direct|I|ndirect|||
||Midea International Trade Co., Ltd.||Hong Kong||Hong Kong||Export trading||-||100%||Establishment|
||MideaElectricTrading（Singapore）Co.Pte.Ltd.］||Singapore||Singapore||Export trading||-||100%||Establishment|
|Calpore Macao Commercial Offshore Limited||Macau||Macau||Export trading||-||100%|||Business combinations involving enterprises not|
||Calpore Macao Commercial Offshore Limited||Macau||Macau||Export trading||-||100%||under common control|
||Midea International Holding Co., Ltd.||Hong Kong||Hong Kong||Holding investment||100%||-||Establishment|
||Wuhu Meizhi Air-Conditioning Equipment Co., Ltd.||Wuhu, PRC||Wuhu, PRC.||Manufacture of air conditioner||88%||12%||Establishment|
||Zhejiang Meizhi Compressor Co., Ltd||Ningbo, PRC||Ningbo, PRC.||Manufacture of air conditioner||100%||-||Establishment|
|Wuhu Midea Kitchen & Bathroom Electric Manufacturing||Wuhu, PRC||Wuhu, PRC.|||Manufacture of small household|90%||10%|||Business combination involving enterprises under|
||||||||appliances||||||common control|
|Huaian Welling Motor Manufacturing Co., Ltd.||Huaian, PRC||Huaian, PRC.||Manufacture of motors||-||100%|||Business combinations involving enterprises not|
||||||||||||||under common control|
|Wuhu Welling Motor Sales Co., Ltd.||Wuhu, PRC||Wuhu, PRC.||Manufacture of motors||-||100%|||Business combinations involving enterprises not|
||||||||||||||under common control|
|Hefei Annto Logistics Co., Ltd.||Hefei, PRC||Hefei, PRC.||Cargo storage and transportation||-||100%|||Business combination involving enterprises under|
||||||||||||||common control|
|Wuxi Filin Electronics Co., Ltd.||Wuxi, PRC||Wuxi, PRC.||Manufacture of washing machine||-||100%|||Business combinations involving enterprises not|
||||||||||||||under common control|
|Springer Carrier Ltda.||Brazil||Brazil||Manufacture of air conditioner||-||100%|||Business combinations involving enterprises not|
||||||||||||||under common control|

The 2015 Annual Report of Midea Group Co., Ltd. (b) Subsidiaries that have significant minority interests
Total profit or loss
attributable to
minority Dividends distributed
Shareholding of shareholders for the to minority interests Minority interests as minority year ended 31 for the year ended 31 at 31 December Name of Subsidiaries shareholders December 2015 December 2015 2015 Guangdong Midea Group Wuhu Refrigeration
Equipment Co., Ltd. 20% 33,120 72,325 229,246 Midea Group Wuhan Refrigeration Equipment Co.,
Ltd. 20% 58,419 41,863 160,376 Guangdong Midea Refrigeration Equipment Co., Ltd. 20% 154,598 120,063 678,938 Wuxi Little Swan Company Limited 47% 438,387 134,725 2,366,217 Guangdong GMCC Refrigeration Equipment Co., Ltd. 40% 82,053 41,020 704,187 South American Holding Co.II B.V 49% (88,639) 39,748 196,911 Foshan Midea Carrier Refrigeration Equipment Co.,
Ltd. 40% 59,180 41,231 191,261 Annto Logistics Company Limited 20% (11,640) - 157,047 Welling Holding Limited 31% 136,591 53,108 1,205,080
The 2015 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:
31 December 2015 31 December 2014
Current Non-current Current Non-current Total Current Non-current Current Non-current Total assets assets Total assets liabilities liabilities liabilities assets assets Total assets liabilities liabilities liabilities Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd. 11,985,129 642,113 12,627,242 11,548,308 - 11,548,308 10,801,030 1,247,292 12,048,322 10,763,058 - 10,763,058 Midea Group Wuhan Refrigeration
Equipment Co., Ltd. 2,068,234 377,247 2,445,481 1,643,602 - 1,643,602 1,643,639 322,411 1,966,050 1,254,919 - 1,254,919 Guangdong Midea Refrigeration
Equipment Co., Ltd. 26,446,641 2,338,070 28,784,711 25,359,562 30,460 25,390,022 17,563,390 3,368,998 20,932,388 17,967,667 30,670 17,998,337 Wuxi Little Swan Company Limited 12,752,480 1,575,176 14,327,656 8,298,112 41,816 8,339,928 9,794,839 1,643,784 11,438,623 6,216,177 33,822 6,249,999 Guangdong GMCC Refrigeration
Equipment Co., Ltd. 3,223,492 668,582 3,892,074 2,127,737 3,870 2,131,607 3,556,196 650,589 4,206,785 2,569,820 - 2,569,820 SouthAmericanHoldingCo.IIB.V. 2,823,102 462,988 3,286,090 2,704,748 6,137 2,710,885 3,427,891 560,500 3,988,391 2,838,263 18,475 2,856,738 Foshan Midea Carrier Refrigeration
Equipment Co., Ltd. 846,723 54,389 901,112 452,206 96 452,302 857,040 53,926 910,966 513,514 - 513,514 Annto Logistics Company Limited 945,234 2,286,923 3,232,157 2,438,900 8,020 2,446,920 2,734,842 2,406,594 5,141,436 3,989,454 153,026 4,142,480 Welling Holding Limited 4,683,680 1,655,305 6,338,985 2,543,690 35,004 2,578,694 4,702,104 1,631,599 6,333,703 2,815,635 37,435 2,853,070 2015 2014
Total
comprehensive Cash flows from Total comprehensive Cash flows from operating Revenue Net profit income operating activities Revenue Net profit income activities Guangdong Midea Group Wuhu Refrigeration
Equipment Co., Ltd. 15,438,076 150,586 150,586 446,258 19,913,332 485,631 485,631 3,474,335 Midea Group Wuhan Refrigeration Equipment
Co., Ltd. 6,430,034 292,093 292,093 282,015 9,989,491 289,043 289,043 (216,703) Guangdong Midea Refrigeration Equipment
Co., Ltd. 28,038,917 954,644 954,927 1,358,924 33,280,720 835,654 834,652 4,566,967 Wuxi Little Swan Company Limited 13,131,627 1,053,125 1,101,679 3,598,695 10,804,217 795,340 795,270 1,657,114 Guangdong GMCC Refrigeration Equipment
Co., Ltd. 5,701,596 205,132 209,866 304,826 5,773,337 157,561 155,592 100,333 South American HoldingCo.IIB.V. 4,952,052 (180,896) (180,896) (1,184,662) 7,157,466 162,345 162,345 371,842 Foshan Midea Carrier Refrigeration
Equipment Co., Ltd. 1,771,429 147,755 151,487 166,890 1,493,575 123,641 127,373 150,011 Annto Logistics Company Limited 4,009,788 59,759 59,759 (454,307) 3,564,559 152,944 152,944 224,969 Welling Holding Limited 6,787,530 439,743 439,743 478,801 7,696,585 532,779 540,234 667,953
The 2015 Annual Report of Midea Group Co., Ltd. (3) Interests in associates and a joint venture
The impact of theGroup’s associates and joint venture on the Group is not significant. Summarised information is as follows:
2015 2014 Aggregated carrying amount of investments 2,888,274 951,874 Aggregate of the following items calculated in
proportion to shareholding
Net profit (i) 420,744 94,739 Other comprehensive income (i) 39,924 (5,112) Total comprehensive income 460,668 89,627 (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 conditioners and components segment
- Refrigerators and components segment
- Washing machines and components segment
- Small household appliances segment
- Motors 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 eachsegment’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.
The 2015 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 as at and for the year ended 31 December 2015 is as follows:
Other segments
and
Air conditioners and Refrigerators and Washing machines and Small household
Motors
Logistics unallocated
components segment components segment components segment appliances segment segment segment amount Elimination Total Revenue from external customers 71,080,793 12,296,942 13,204,070 36,330,913 3,841,012 1,654,066 939,328 - 139,347,124 Inter-segment revenue 122,969 10,307 15,951 3,043 2,946,519 2,355,722 1,497,030 (6,951,541) - Operating expenses (65,239,608) (11,455,116) (12,116,092) (31,891,565) (6,361,320) (4,047,728) (2,493,403) 7,081,701 (126,523,131) Segment profit 5,964,154 852,133 1,103,929 4,442,391 426,211 (37,940) (57,045) 130,160 12,823,993 Other profit or loss 3,227,361 Total profit 16,051,354 Total assets 82,279,374 9,904,735 14,391,477 39,167,999 7,207,315 3,193,752 50,321,733 (77,624,450) 128,841,935 Total liabilities 60,595,819 5,630,201 8,366,181 27,112,921 2,578,694 2,254,926 49,467,906 (83,196,335) 72,810,313 Long-term equity investments in associates
and a joint venture 336,592 - - - 303,057 - 2,248,625 - 2,888,274 Investment income from investments in
associates and a joint venture 19,624 - - - 43,218 - 357,902 - 420,744 Increase in non-current assets (excluding
available-for-sale financial assets,
long-term equity investments and
deferred income tax assets) 1,389,959 300,941 80,557 795,560 196,769 105,821 569,953 - 3,439,560 Asset impairment losses/(reversal) 78,456 (9,293) 22,452 (3,012) (4,642) 8,422 (2,797) (84,820) 4,766 Depreciation and amortisation expenses 1,316,771 307,836 129,552 509,380 147,637 130,143 310,698 - 2,852,017
The 2015 Annual Report of Midea Group Co., Ltd. (a) Information on the profit or loss, assets and liabilities of reported segment(Cont’d)
Segment information as at and for the year ended 31 December 2014 is as follows:
Air conditioners Refrigerators and Washing machines Small household
and components components and components appliances
Motors Logistics Other segments and
segment segment segment segment segment segment unallocated amount Elimination Total Revenue from external
customers 80,929,082 9,906,284 10,855,702 33,551,078 4,468,630 1,966,345 633,846 - 142,310,967 Inter-segment revenue 75,865 46,686 24,035 271,235 3,404,503 1,598,214 851,462 (6,272,000) - Operating expenses (74,272,409) (9,282,138) (10,055,396) (30,369,040) (7,219,266) (3,519,965) (1,345,592) 6,345,011 (129,718,795) Segment profit 6,732,538 670,832 824,341 3,453,273 653,867 44,594 139,716 73,011 12,592,172 Other profit or loss 1,398,512 Total profit 13,990,684 Total assets 66,395,208 8,039,501 11,438,623 24,061,391 7,109,579 5,147,059 57,775,325 (59,674,600) 120,292,086 Total liabilities 46,164,397 4,620,201 6,249,999 20,286,712 2,853,071 3,994,166 39,539,181 (49,147,095) 74,560,632 Long-term equity investments in
associates and a joint
venture 352,759 - 2,850 - 248,344 - 347,921 - 951,874 Investment income from
investments in associates
and a joint venture 15,936 - (319) - 32,689 - 46,433 - 94,739 Increase in non-current assets
(excluding available-for-sale
financial assets, long-term
equity investments and
deferred income tax assets) 2,452,925 318,629 73,111 495,735 260,654 142,844 565,208 - 4,309,106 Asset impairment
losses/(reversal) 205,572 4,408 38,221 18,379 24,402 (256) 45,798 13,294 349,818 Depreciation and amortisation
expenses 1,473,420 402,088 166,493 757,918 138,625 49,397 332,472 - 3,320,413
The 2015 Annual Report of Midea Group Co., Ltd. (b) Geographical area information
TheGroup’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, Brazil, etc.) are as follows:
Revenue from external customers 2015 2014 Domestic 89,906,850 92,484,771 Other countries/geographical areas 49,440,274 49,826,196 139,347,124 142,310,967 Total non-current assets 31 December 2015 31 December 2014 Domestic 28,261,309 26,529,163 Other countries/geographical areas 1,698,967 1,900,367 29,960,276 28,429,530 9 Related parties and significant related party transactions
(1) Information of the parent company
(a) General information of the parent company
Place of Nature of Name of the parent company Relationship registration business Controlling Shunde District,
Midea Holding Co., Ltd. shareholder Foshan Commercial TheCompany’s ultimate controlling person is Mr. He Xiangjian
(b) Registered capital and changes in registered capital of the parent company
31 December 2015 and 31 December 2014 Midea Holding Co., Ltd. 330,000 (c) The percentages of shareholding and voting rights in the Company held by the parent company 31 December 2015 31 December 2014
Shareholding(%) Voting Shareholding(%)
Voting rights
rights(%) Direct Indirect (%) Direct Indirect
Midea Holding
Co., Ltd. 35.07% - 35.07% 35.49% - 35.49%
The 2015 Annual Report of Midea Group Co., Ltd. (2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of theCompany’s main subsidiaries
(3) Information of other related parties
Name of other related parties Relationship Under common control of the direct relatives of the Company's Guangzhou Wellkey Electrician Material Co., Ltd. ultimate controlling shareholders Under common control of the direct relatives of the Company's Anhui Wellkey Electrician Material Co., Ltd. ultimate controlling shareholders Under common control of the direct relatives of the Company's Infore Investment Holding Group Co., Ltd. ultimate controlling shareholders It is no longer a related party of the Company due to the equity transfer in 2015 (It was under common control of the direct relatives Guangdong Infore Electronics Co., Ltd. of the Company's ultimate controlling shareholders in 2014) Foshan Shunde Midea Development Co., Ltd. Under common control of the Company's actual controlling persons Foshan Midea Real Estate Development Co.,
Ltd. Under common control of the Company's actual 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 Guangdong Midea Property Co., Ltd. Under common control of the Company's actual 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:
Pricing policies
Content of related of related party
Related party party transactions transactions 2015 2014 Guangzhou WellkeyElectrician Material
Co., Ltd. Purchase of goods Agreed price 672,426 819,286 Foshan Micro Midea Filter MFG Co.,
Ltd. Purchase of goods Agreed price 109,306 108,981 Shanxi Huaxiang Group Co., Ltd. Purchase of goods Agreed price 244,539 214,149 Guangdong Infore Electronics Co., Ltd. Purchase of goods Agreed price - 148,238 Anhui Wellkey Electrician Material Co.,
Ltd. Purchase of goods Agreed price 247,960 347,228 Hefei Orinko Plastics Group. Purchase of goods Agreed price 62,091 - 1,336,322 1,637,882 (b) Guarantee
The Group as the guarantee provider:
Guaranteed Commencement Fully performed Guarantee receiver amount date Maturity date or not 16 November
Shanxi Huaxiang Group Co., Ltd. 150,000 31 August 2015 2016 No (c) Investment income
The 2015 Annual Report of Midea Group Co., Ltd. Content 2015 2014 Wealth
management
Foshan Shunde Rural Commercial Bank Co., Ltd. product 114,461 108,393 (d) Remuneration of key management
31 December 2015 31 December 2014 Remuneration of key management 31,250 41,260 (5) Receivables from and payables to related parties
Receivables from related parties:
Items Related party 31 December 2015 31 December 2014 Advances to Guangzhou Wellkey Electrician
suppliers Material Co., Ltd. 756 - Foshan Micro Midea Filter MFG
Co., Ltd. 8,000 - Hefei Orinko Plastics Group 28,756 - 37,512 - Items Related party 31 December 2015 31 December 2014 Other current Foshan Shunde Rural
assets Commercial Bank Co., Ltd. 1,100,000 300,000 Items Related party 31 December 2015 31 December 2014 Cash at bank
and on Foshan Shunde Rural
hand Commercial Bank Co., Ltd. 2,030,948 290,584 Payables to related parties:
Items Related party 31 December 2015 31 December 2014 Accounts
payable Guangzhou Wellkey Electrician Material Co., Ltd. 64,330 103,114 Foshan Micro Midea Filter MFG Co., Ltd. 32,901 - Shanxi Huaxiang Group Co., Ltd. 49,705 60,495 Guangdong Infore Electronics Co., Ltd. - 26,696 Hefei Huitong New Material Co., Ltd. 6,153 - Anhui Wellkey Electrician Material Co., Ltd. 51,755 96,658 Foshan Midea Real Estate Development Co., Ltd. 3,677 - 208,521 286,963
The 2015 Annual Report of Midea Group Co., Ltd. 10 Share-based payment
(1) Pursuant to the second stock option incentive plan (the “Second Stock Option Incentive Plan”) approved at the first extraordinary general meeting dated 25 May 2015, the Company granted 83,790,000 stock options with exercise price of RMB30.54 to 733 employees. Under the circumstance that the Company meets expected performance, 1/3 of the total stock options granted will become effective after 1 year, 2 years and 3 years respectively since 27 May 2015.
Determination method for fair value of stock options at the grant date
Exercise price of options RMB30.54 Effective period of options: 5 years Current price of underlying shares RMB39.63 Estimated fluctuation rate of share price: 34.10% Estimated dividend rate: 5.46% Risk-free interest rate within effective period of options: 2.17% The fair value of the Second Stock Option Incentive Plan calculated pursuant to the above parameters is: RMB847,684,000.
(2) Movements of stock options during the year
2015 2014 (stock options in (stock options in thousands) thousands) Stock options issued at beginning of year 90,863 - Stock options granted during the current year 83,790 99,863 Stock options exercised during the current year (25,623) - Stock options lapsed during the current year (13,300) (9,000) Stock options issued at end of year 135,730 90,863 As at 31 December 2015, the maturity date of the First Option Incentive Plan is on 17 February 2019. The residual contractual maturity date of the Second Stock option Incentive Plan is on 25 May 2021. (3) Impact of share-based payment transactions on financial position and financial performance.
The total stock option expenses recognised in 2015 were RMB377,660,000 (2014: RMB176,349,000). As at 31 December 2015, the balance relating to the option incentive plan and provided for in capital surplus was RMB388,604,000 (31 December 2014: RMB150,991,000).
11 Contingencies
The amount in tax disputes involving Brazilian subsidiary with51% interests held by the Company is about BRL584 million (equivalent to RMB1,045 million) (Some cases have lasted for more than 10 years. The above amount includes the principal and interest). As at 31 December 2015, relevant cases are still at court. Original shareholders of Brazilian subsidiary have agreed to compensate the Company according to verdict results of the above tax disputes. The maximum compensation amount is about BRL220 million (equivalent to RMB394 million). With reference to judgements of third-party attorneys, management believes that the probability of losing lawsuits and making compensation is small, and expects no significant risk of debt default, therefore, no provisions are made.
The 2015 Annual Report of Midea Group Co., Ltd. 12 Commitments
(1) Capital commitments
Capital expenditures contracted for by the Group at the balance sheet date but are not yet necessary to be recognised on the balance sheet are as follows:
31 December 2015 31 December 2014 Buildings, machinery and equipment 1,372,126 473,894 (2) Operating lease commitments
The Group has no significant operating lease commitments at the balance sheet date.
13 Subsequent events
(1) Significant non-adjusting events
On 17 March 2016, the Group and Toshiba Corporation (“Toshiba”) signed a memorandum of understanding regarding acquisition of the white household appliance business of Toshiba. The Group will obtain control of the white household appliance business of Toshiba through the acquisition. As at the issuance date of the financial statements, the acquisition was still under negotiation and no formal agreement was signed.
(2) Profit distribution
On 24 March 2016, on the basis of the 4,267,391,228 shares of the Company, the Board of Directors proposed a distribution of cash dividends of approximately RMB5,120,869,000 at RMB1.20 per share (including tax) and grant of shares to all shareholders at 5 per 10 shares by capital surplus. The distribution of cash dividends proposed subsequent to the balance sheet date is not recognised as liabilities at the balance sheet date.
14 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 theGroup’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 2015 Annual Report of Midea Group Co., Ltd. TheGroup’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 currencies, primarily with respect to US dollars. TheGroup’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.
As at 31 December 2015 and 31 December 2014, the carrying amounts in RMB equivalent of theGroup’s assets and liabilities denominated in foreign currencies are summarised below:
31 December 2015
USD EURO HKD Others Total Financial assets
denominated in
foreign currency-
Cash at bank and
on hand 2,035,065 134,089 168,023 140,436 2,477,613 Receivables 2,258,964 411,713 81,828 474,455 3,226,960 4,294,029 545,802 249,851 614,891 5,704,573 Financial liabilities
denominated in
foreign currency-
Short-term
borrowings 830,323 699,118 - 88,661 1,618,102 Payables 1,473,826 15,375 44,124 133,748 1,667,073 Other non-current
liabilities 355,460 - - - 355,460 2,659,609 714,493 44,124 222,409 3,640,635 31 December 2014
USD EURO HKD Others Total Financial assets
denominated in
foreign
currency-
Cash at bank and
on hand 757,049 107,112 185,542 28,988 1,078,691 Receivables 1,848,695 187,208 - 181,038 2,216,941 2,605,744 294,320 185,542 210,026 3,295,632 Financial liabilities
denominated in
foreign
currency-
Short-term
borrowings 3,144,179 - - 22,056 3,166,235 Payables 1,959,069 23,210 33,929 133,648 2,149,856 Other non-current
liabilities 2,127,551 - - - 2,127,551 Long-term
borrowings - - - 730 730 7,230,799 23,210 33,929 156,434 7,444,372 As at 31 December 2015, if the currency had strengthened/weakened by10% against the USD, EURO, HKD and other foreign currencies while all other variables had been held constant, theGroup’s net profit for the year would have been approximately RMB175,190,000 lower/higher (31 December 2014: RMB345,355,000 higher/lower) for financial assets and liabilities of the Group
The 2015 Annual Report of Midea Group Co., Ltd. denominated in USD, EURO, HKD and other foreign currencies.
(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. As at 31 December 2015, the long-term interest bearing borrowings at floating rates of the Group are RMB83,778,000 (31 December 2014: Nil) (Note 4(27))
TheGroup’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 theGroup’s outstanding floating rate borrowings, and therefore could have a material adverse effect on theGroup’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 31 December 2015, if interest rates on the floating rate borrowings had risen/fallen by 50 basis points while all other variables had been held constant, theGroup’s net profit would have decreased/increased by approximately RMB356,000 (31 December 2014: Nil).
(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 theGroup’s finance department in its headquarters. TheGroup’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:
31 December 2015
Over 5
Within 1 year 1 to 2 years 2 to 5 years years Total
The 2015 Annual Report of Midea Group Co., Ltd. Short-term borrowings
(including interest) 3,996,592 - - - 3,996,592 Notes payable 17,078,520 - - - 17,078,520 Accounts payable 17,448,684 - - - 17,448,684 Interest payable 9,343 - - - 9,343 Dividends payable 118,851 - - - 118,851 Other payables 1,139,306 - - - 1,139,306 Customer deposits and
deposits from banks
and other financial
institutions 52,000 - - - 52,000 Derivative financial
liabilities 33,377 - - - 33,377 Financial assets sold under
repurchase agreements 651,784 - - - 651,784 Other non-current liabilities 22,098,177 - - - 22,098,177 External guarantee 150,000 - - - 150,000 Long-term borrowings
(including interest) 23,290 38,908 33,060 120 95,378 62,799,924 38,908 33,060 120 62,872,012 31 December 2014
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total Short-term borrowings
(including interest) 6,098,106 - - - 6,098,106 Notes payable 12,648,497 - - - 12,648,497 Accounts payable 20,137,454 - - - 20,137,454 Interest payable 22,912 - - - 22,912 Dividends payable 93,799 - - - 93,799 Derivative financial
liabilities 74,961 - - - 74,961 Customer deposits and
deposits from banks and
other financial
institutions 7,494 - - - 7,494 Other payables 1,223,549 - - - 1,223,549 Current portion of
non-current liabilities
(including interest) 621,996 - - - 621,996 Long-term borrowings
(including interest) 96 96 19,253 - 19,445 Other non-current liabilities 22,778,936 - - - 22,778,936 External guarantee 330,000 - - - 330,000 Debentures payable 3,026 - 150,000 - 153,026 64,040,826 96 169,253 - 64,210,175
The 2015 Annual Report of Midea Group Co., Ltd. 15 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 31 December 2015, the assets and liabilities measured at fair value on a recurring basis by the above three levels are analysed below:
Level 1 Level 2 Level 3 Total Financial assets at fair value through
profit or loss -
Derivative financial assets - 158,822 - 158,822 Available-for-sale financial assets -
Other current assets - wealth
management products purchased
from financial institutions - - 18,136,831 18,136,831 Available-for-sale financial assets 1,862,444 - - 1,862,444 Total assets 1,862,444 158,822 18,136,831 20,158,097 Financial liabilities at fair value through
profit or loss -
Derivative financial liabilities - 33,377 - 33,377 Total liabilities - 33,377 - 33,377 As at 31 December 2014, the assets and liabilities measured at fair value on a recurring basis by the above three levels are analysed below:
Level 1 Level 2 Level 3 Total Financial assets at fair value through
profit or loss -
Derivative financial assets - 162,514 - 162,514 Available-for-sale financial assets -
Other current assets - Wealth
management products purchased
from financial institutions - - 24,788,080 24,788,080 Available-for-sale financial assets 1,191 - - 1,191 Total assets 1,191 162,514 24,788,080 24,951,785 Financial liabilities at fair value through
profit or loss -
Derivative financial liabilities - 74,961 - 74,961 Total liabilities - 74,961 - 74,961 (1) Assets and liabilities measured at fair value on a recurring basis(Cont’d)
The 2015 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. 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 was no change in the valuation technique for the fair value of theGroup’s financial instruments in current year.
The changes in Level 3 financial assets are analysed below:
Available-for-sale financial assets - Av ailable-for-sale equity instruments 1 January 2015 24,788,080 Purchases 24,041,361 Sales (32,055,176) Total gains of current period
Investment income recognised in the income
statement 1,306,890 Gains recognised in other comprehensive
income 55,676 31 December 2015 18,136,831 There was no change in the valuation technique for the fair value of theGroup’s financial instruments in current year.
Information about the Level 3 fair value measurement is as follows:
Inputs
Fair value at
31 December Valuation Relationship
Observable/ 2015 technique Name Range with fair value unobservable Available-for-sale
financial assets -
Other current Discounted Estimated
assets 18,136,831 cash flows annual yield3.5%~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 16(1)), accounts payable, notes payable, short-term borrowings, long-term borrowings, customer deposits and deposits from banks and other financial institutions,
The 2015 Annual Report of Midea Group Co., Ltd. financial assets sold under repurchase agreements, interest payable and other current liabilities, etc. Carrying amounts of theGroup’s financial assets and financial liabilities as at 31 December 2015 and 31 December 2014 approximated their fair value.
16 Capital management
TheGroup’s capital management policies aim to safeguard theGroup’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).
As at 31 December 2015 and 31 December 2014, the Group's gearing ratio is as follows:
31 December 2015 31 December 2014 Total liabilities 72,810,313 74,560,632 Total assets 128,841,935 120,292,086 Gearing ratio 56.51% 61.98% 17 Notes to the parentcompany’s financial statements
(1) Other receivables
31 December 2015 31 December 2014 Current accounts 7,460,438 2,418,832 Deposits 864 488 7,461,302 2,419,320 Less: Provision for bad debts (263) (1,014) 7,461,039 2,418,306 (a) Other receivables are analysed by ageing as follows:
31 December 2015 31 December 2014 Within 1 year (inclusive) 7,461,224 2,414,017 1 to 2 years (inclusive) 60 5,282 2 to 3 years (inclusive) 18 21 7,461,302 2,419,320 Less: Provision for bad debts (263) (1,014) 7,461,039 2,418,306 (b) Other receivables are analysed by categories as follows:
31 December 2015 31 December 2014
Provision for bad Provision for bad Carrying amount debts Carrying amount debts
The 2015 Annual Report of Midea Group Co., Ltd.% of total % of total
Amount balance Amount Ratio Amount balance Amount Ratio Provision for bad
debts provided
on the
individual basis 7,456,18299.93% - - 2,404,421 99.38% - - Provision for bad
debts provided on
the grouping basis 5,120 0.07% 263 5.14% 14,899 0.62% 1,014 6.81% 7,461,302100.00% 2630.004% 2,419,320 100.00% 1,014 0.04% (c) Other receivables that the related provision for bad debts is provided on grouping basis using the ageing analysis method are analysed as follows:
31 December 2015 31 December 2014
Carrying Carrying
amount Provision for bad debts amount Provision for bad debts Amount Amount Ratio Amount Amount Ratio Within 1 year 5,042 252 5.00% 9,596 480 5.00% 1 to 2 years 60 6 10.00% 5,282 528 10.00% 2 to 3 years 18 5 30.00% 21 6 30.00% 5,120 263 5.14% 14,899 1,014 6.81% (d) As at 31 December 2015, other receivables from the top five debtors are analysed as below:% of total other Provision for Nature Balance Ageing receivables bad debts Midea International Corporation Current Within 1
Company Limited accounts 6,055,777 year 81.16% - Midea Electric Appliance (Singapore) Current Within 1
Trade Co., Ltd. accounts 700,000 year 9.38% - Guangdong Midea Household
Appliances Import and Export Current Within 1
Trade Co., Ltd accounts 67,489 year 0.90% - Foshan City Midea Air-conditioners Current Within 1
Industrial Investment Co., Ltd. accounts 162,600 year 2.18% - Guangdong Midea Refrigeration Current Within 1
Equipment Co., Ltd. accounts 19,737 year 0.26% - 7,005,603 93.89% - (2) Long-term equity investments
Long-term equity investments are classified as below:
31 December 2015 31 December 2014 Subsidiaries (a) 21,466,087 16,288,332 Associates (b) 1,282,323 260,551 Joint venture(b) 378,136 - 23,126,546 16,548,883 Less: Provision for impairment - - 23,126,546 16,548,883
The 2015 Annual Report of Midea Group Co., Ltd. (a) Subsidiaries
Movements for the current year
Movements
due to Provision Cash dividends 31 December Additional share-based Reduced 31 December for declared in current 2014 investment payments investment Merger Others 2015 impairment year Wuxi Little Swan Company Limited 2,639,969 - 28,192 - - - 2,668,161 - 107,527 Foshan Midea Household
Appliances Co., Ltd (i) 1,954,936 - - - (1,954,936) - - - - Midea Group Finance Co., Ltd. 1,425,000 - 2,988 - - - 1,427,988 - 199,305 Hefei Midea Heating& Ventilation
Equipment Co., Ltd. 1,045,000 - 3,377 - - - 1,048,377 - 487,697 Hubei Midea Refrigerator Co., Ltd. 830,239 - 2,965 - - - 833,204 - 164,152 Anhui GMCC Precision
Manufacturing Co., Ltd. 800,000 - 3,508 - - - 803,508 - 449,939 Foshan Shunde Midea Home
Appliance Industry Co., Ltd. 749,000 1,700,000 - - - - 2,449,000 - - Wuhu Meizhi Air-Conditioning
Equipment Co., Ltd. 726,000 - 4,244 - - - 730,244 - 196,225 Guangdong Midea Refrigeration
Equipment Co., Ltd. 641,920 - 155,163 - - - 797,083 - 438,230 Annto Logistics Company Limited 626,739 - 8,896 (168,993) - - 466,642 - 211,950 Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd. 569,430 - - - - - 569,430 - 15,390 Ningbo Midea United Material
Supply Co., Ltd. 480,000 - 1,635 - - - 481,635 - 440,723 Guangzhou Hualing Refrigeration
Equipment Co., Ltd. 479,409 - 8,269 - - - 487,678 - 101,945 Guangzhou Midea Hualing
Refrigerator Co., Ltd. 420,000 - 2,082 - - - 422,082 - 28,421 Hefei Midea Refrigerator Co., Ltd. 414,686 - 21,876 - - - 436,562 - 22,851 Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd. 339,074 - 6,496 - - - 345,570 - 263,985 Anhui GMCC Refrigeration
Equipment Co., Ltd. 308,750 - 3,918 - - - 312,668 - - Guangdong Midea Heating&
Ventilation Equipment Co., Ltd. 270,000 - 39,682 - - - 309,682 - 409,337 Midea Electric Investment (BVI)
Limited 236,543 - - - - - 236,543 - - Midea International Corporation
Company Limited 176,974 - - - - - 176,974 - -
The 2015 Annual Report of Midea Group Co., Ltd. Movements for the current year
Movements
due to
31 December Additional share-based Reduced 31 December Provision for Cash dividends 2014 investment payments investment Merger Others 2015 impairment declared in current year Guangzhou Hualing Refrigeration
Equipment Co., Ltd. 136,745 - - - - - 136,745 - - Foshan Midea Carrier Refrigeration
Equipment Co., Ltd. 120,000 - 4,030 - - - 124,030 - 61,846 Hefei Midea Material Supplies Co., Ltd. 117,000 - - - - - 117,000 - 7,383 Midea Group E-commerce Co., Ltd. 100,000 - 5,722 - - - 105,722 - - Anhui GMCC Compressor Sales Co., Ltd. 95,000 - - - - - 95,000 - 136,767 Guangdong GMCC Refrigeration
Equipment Co., Ltd. 89,788 - 26,158 - - - 115,946 - 61,529 Hefei Hualing Co., Ltd. 88,646 - 8,066 - - - 96,712 - 94,351 Midea Group Wuhan Refrigeration
Equipment Co., Ltd. 60,508 - 9,362 - - - 69,870 - 152,801 Foshan City Midea Material Supplies Co.,
Ltd. 54,000 - - - - - 54,000 - 5,972 Zhejiang GMCC Compressor Co., Ltd 50,000 - 817 - - - 50,817 - 175,605 Chongqing Midea Refrigeration
Equipment Co., Ltd. 47,500 - 5,776 - - - 53,276 - 47,709 Wuhu Little Swan Refrigeration
Equipment Co., Ltd. 47,500 - - - - - 47,500 - - Guangdong GMCC Precision
Manufacturing Co., Ltd. 38,438 - - - - - 38,438 - 35,550 Foshan City Midea Air-conditioners
Industrial Investment Co., Ltd. 36,062 - - - - - 36,062 - - Chongqing Midea General Refrigeration
Equipment Co., Ltd. 31,421 - 3,783 - - - 35,204 - 3,521 Ningbo Meimei Jiayuan Electric Service
Co., Ltd. 18,305 19,900 - - - - 38,205 - - Hefei Royalstar Midea Electric Marketing
Co., Ltd. 14,668 - - (14,668) - - - - - Foshan City Shunde District Midea Electronic
Technology Co., Ltd. 9,000 - 4,736 - - - 13,736 - 24,943 Midea Holdings (BVI) Ltd. 82 - - - - - 82 - - Handan Midea Refrigeration Equipment
Co., Ltd. - 120,810 3,732 - - - 124,542 - - Midea Group Payment Technology Co.,
Ltd. - 100,000 - - - - 100,000 - -
The 2015 Annual Report of Midea Group Co., Ltd. Movements for the current year
Cash dividends 31 December Additional Movements due to Reduced 31 December Provision for declared in current 2014 investment share-based payments investment Merger Others 2015 impairment year Media Innovation Investment Co., Ltd. - 35,000 - - - - 35,000 - - Foshan Shunde Meihui Management Service
Co., Ltd. - 273,077 - (273,077) - - - - - Guangdong Midea Microwave Electric
Manufacturing Co., Ltd. (ii) - - - - 1,880,041 - 1,880,041 - 547,099 Wuhu Midea Kitchen Appliances
Manufacturing Co., Ltd. (ii) - - - - 20,000 - 20,000 - - Jiangsu Midea Chunhua Electric Co., Ltd. (ii) - - 1,408 - 92,119 - 93,527 - - Guangdong Witt Vacuum Electronics
Manufacturing Co., Ltd. (i) - - 224 - 195,972 - 196,196 - 79,909 Guangdong Midea Life Electric Appliance
Manufacturing Co., Ltd (ii) - - 8,955 - 976,509 - 985,464 - 379,211 Wuhu Midea Electric Appliance
Manufacturing Co., Ltd. (ii) - - - - 56,223 - 56,223 - - Foshan Shunde Water machine
manufacturing co., LTD., (ii) - - 815 - 33,653 - 34,468 - 87,587 Foshan Midea Qinghu purification equipment
co., LTD(ii) - - 1,116 - 55,720 - 56,836 - - Guangdong midea boutique electrical
appliance manufacturing co., LTD (ii) - - - - 60,015 - 60,015 - - Wuhan Midea electric appliance
manufacturing co., LTD (ii) - - - - 80,000 - 80,000 - - Guangdong Midea Environmental Electric
Appliance Manufacturing Co., Ltd. (ii) - - 6,855 - 285,462 - 292,317 - 163,423 Foshan Shunde Midea Washing Appliance
Manufacturing Co., Ltd. (ii) - - 5,851 - 398,865 - 404,716 - 132,798 Guangdong Midea Kitchen& Bathroom
Electric Manufacturing (ii) - - 1,079 - 78,472 - 79,551 - 19,542 Wuhu Midea Kitchen& Bathroom Electric
Manufacturing Co., Ltd. (ii) - - 7,337 - 54,000 - 61,337 - - Guangdong Midea lighting electric
manufacturing co., LTD (ii) - - - - 100,000 - 100,000 - - Jiangxi Midea Guiya lighting co., LTD(ii) - - 1,270 - 160,000 - 161,270 - -
The 2015 Annual Report of Midea Group Co., Ltd. Movements for the current year
Movements
31 due to 31 Provision Cash dividends December Additional share-based Reduced December for declared in 2014 investment payments investment Merger Others 2015 impairment current year Guangdong Midea
Household Appliances
Import and Export Trade
Co., Ltd. (ii) - - - - 53,207 - 53,207 - - JVMIDEA–HORIZONT Co.,
Ltd. (ii) - - - - 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 - - Midea Robotics Industry
Development Co., Ltd. - 7,000 - - - - 7,000 - - Wuhu Midea Household
Consultation Service Co.,
Ltd. (ii) - - 759 - 100,000 - 100,759 - - Hefei Midea Washing
Machine Co., Ltd. - - 5,314 - - 68,455 73,769 - - Chinese Refrigerator
Industry Co., Ltd. - - - - - 2,430 2,430 - - Total 16,288,332 2,267,807 406,456 (456,738) 2,766,679 193,551 21,466,087 - 5,755,223 (i) The Company's subsidiary Foshan Midea Household Appliances Co., Ltd. (“Midea Household”) was merged by the Company in 2015. Its assets, liabilities and undistributed profits were transferred to the Company at carrying amounts at the date of merger.
(ii) These companies are subsidiaries prior to the merger of Midea Household by the Company and are directly held by the Company after the merger.
The 2015 Annual Report of Midea Group Co., Ltd. (b) Associates and joint venture
Movements for the current year
Net profit or Adjustments of
31 Additional or loss adjusted other Provision December reduced under equity comprehensive Cash dividends or 31 December for 2014 investments method income profits declared Others 2015 impairment Associates -
Foshan Shunde Rural
Commercial Bank Co., Ltd. - - 206,691 20,910 (88,201) 787,392 926,792 (i) - Hefei Royalstar Motor Co.,
Ltd. 99,958 - 373 - - - 100,331 - Foshan Shunde District
Midea Petty Loan Co., Ltd. 72,298 - 4,938 - (9,601) (67,635) - - Midea Petty Loan Co., Ltd. 60,347 - 2,709 - (8,025) (55,031) - - GE Fund Management Co.,
Ltd. 27,948 - 6,324 - - 95 34,367 - Foshan Micro Midea Filter
MFG Co., Ltd. - 26,496 5,176 - - - 31,672 - Anhui Efort Intelligent
Equipment Co., Ltd. - 178,534 857 - - - 179,391 - Guangdong YASKAWA-MIDEA
Industrial Robotics System
Ltd. - 9,800 (30) - - - 9,770 - Joint venture - -
Wanjiang Financial Leasing
Co., Ltd., - - 46,936 - (28,800) 360,000 378,136 (ii) - 260,551 214,830 273,974 20,910 (134,627) 1,024,821 1,660,459 - (i) In 2015, the Company believed that it had significant influence on Foshan Shunde Rural Commercial Bank Co., Ltd. after taking into account all factors and accordingly accounted for the Company under equity method.
(ii) In 2015, the Company believed that it had common control over Wanjiang Financial Leasing Co., Ltd., after taking into account all factors and accordingly accounted for the Company under equity method.
The 2015 Annual Report of Midea Group Co., Ltd. (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
2015 2014 Income from long-term equity investment under cost method 5,755,223 5,639,070 Investment income from wealth management products
purchased from financial institutions 1,091,191 790,954 Income from long-term equity investment under equity method 273,974 31,114 Losses on disposal of long-term equity investment (12,936) (28,062) Income earned during the holding period of available-for-sale
financial assets - 84,655 7,107,452 6,517,731 There is no significant restriction on repatriation of the Company's investment income.
1 Details of non-recurring profit or loss.
2015 2014 Profit or loss on disposal of non-current assets (242,814) (223,943) Government grants recognised in profit or loss for the
current period 1,348,652 790,501 Profit or loss on entrusted investments or assets
under entrusted management 1,008,770 953,661 Enterprise restructuring expenses including staff
resettlement expenses and integration expenses - (17,259) Income arising from investment cost ofenterprises’
acquisition of subsidiaries, associates and joint
venture which is less than the share of the fair
value of theinvestee’s identifiable net assets at
the time of acquisition of investment (negative
goodwill) 19,513 - 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 369,806 (268,422)
The 2015 Annual Report of Midea Group Co., Ltd. course of business of the company.
Reversal of impairment provision for receivables
individually assessed for impairment 45,752 - Other operating income and expenses other than the
above mentioned (16,398) (62,072) 2,533,281 1,172,466 L ess: Income tax effect (505,642) (204,646) Minority interests effect (after tax) (232,255) 57,551 1,795,384 1,025,371 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 theCompany’s normal course of business and that are related to theCompany’s normal course of business but have impact on the right judgement of theCompany’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:
Weighted average Earnings per share (RMB Yuan)
return on net asset Basic earnings per Diluted earnings(%) share per share
2015 2014 2015 2014 2015 2014 .
Net profit attributable
to shareholders of
the parent company29.06% 29.49% 2.99 2.49 2.99 2.49 Net profit attributable
to shareholders of
the parent company
net of non-recurring
profit or loss 24.96% 26.61% 2.57 2.25 2.56 2.25
The 2015 Annual Report of Midea Group Co., Ltd. Section XI Documents Available for Reference
1. The original of the 2015 Annual Report of Midea Group Co., Ltd. signed by the legal representative;
2. Financial statements signed and stamped by the legal representative, the financial head and the accounting supervisor;
3. The original of theauditor’s report with the seal of the accounting firm, and signed and stamped by CPAs;
4. The originals of all company documents and announcements that are disclosed to the public via newspaper designated for information disclosure during the Reporting Period; and
5. The electronic version of the 2015 Annual Report that is released on http://www.cninfo.com.cn.
Midea Group Co., Ltd. Legal Representative: Fang Hongbo 26 March 2016