Midea Group Co., Ltd.
Semi-Annual Report 2018
August 2018
Midea Group Co., Ltd. Semi-Annual Report 2018 Section I Important Statements, Contents and Definitions The Board of Directors, the Supervisory Committee, 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 misrepresentations, 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 report.
The Company plans not to distribute cash dividends or bonus shares or convert capital reserves into share capital for the first half of 2018.
Mr. Fang Hongbo, Chairman of the Board and President of the Company and Mr. Xiao Mingguang, Director of Finance of the Company, have represented and warranted that the financial statements in this report are true, accurate and complete.
The financial statements in this report are unaudited by a CPAs firm.
The future plans and some 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.
Midea Group Co., Ltd. Semi-Annual Report 2018 Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS ...................... 1 SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ................................ 4 SECTION III BUSINESS PROFILE ..................................................................................... 8 SECTION IV PERFORMANCE DISCUSSION AND ANALYSIS ....................................... 13 SECTION V SIGNIFICANT EVENTS................................................................................. 38 SECTION VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS 64 SECTION VII PREFERENCE SHARES ............................................................................ 70 SECTION VIII INFORMATION ABOUT DIRECTORS, SUPERVISORS AND SENIOR MANAGEMENT ................................................................................................................. 71 SECTION IX CORPORATE BONDS................................ ................................................. 72 SECTION X FINANCIAL REPORT ................................................................................... 73 SECTION XI DOCUMENTS AVAILABLE FOR REFERENCE ........................................ 163
Midea Group Co., Ltd. Semi-Annual Report 2018 Definitions
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|-|-|
|Term|Definition|
|The “Company”, “Midea”, “Midea Group” or the|Midea Group Co., Ltd.|
|“Group”||
|Midea Holding|Midea Holding Co., Ltd.|
|Little Swan|Wuxi Little Swan Company Limited|
|Toshiba|Toshiba Corporation|
|TLSC|Toshiba Lifestyle Products & Services Corporation|
|KUKA|KUKA Aktiengesellschaft|
|Reporting Period|1 January 2018 to 30 June 2018|

Midea Group Co., Ltd. Semi-Annual Report 2018 Section II Company Profile and Key Financial Results
1. Corporate Information
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|-|-|-|-|
|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 in||||
||美的集团|||
|Chinese||||
|Name of the Company in||||
||Midea Group Co., Ltd.|||
|English (if any)||||
|Abbr. of the Company name in||||
||Midea Group|||
|English (if any)||||
|Legal representative|Fang Hongbo|||

2. Contact Us
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|-|-|-|
||Company Secretary|Representative for Securities Affairs|
|Name|Jiang Peng|Ou Yunbin|
|Address|Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde||
||District, Foshan City, Guangdong Province, China||
|Tel.|0757-22607708|0757-23274957|
|Fax|0757-26605456||
|E-mail|IR@midea.com||

3. Other Information
3.1 Ways to Contact the Company
Changes to the registered address, office address and their zip codes, website address and email address of the Company in the Reporting Period:
□ Applicable√ N/A
No such changes in the Reporting Period. The said information can be found in the 2017 Annual Report.
Midea Group Co., Ltd. Semi-Annual Report 2018 3.2 Information Disclosure and Place Where the Semi-Annual Report Is Kept
Changes to the media for information disclosure and the place where materials carrying disclosed information such as this Report were kept in the Reporting Period:
□ Applicable√ N/A
The newspapers designated by the Company for information disclosure, the website designated by the CSRC for disclosing this Report and the place where materials carrying disclosed information such as this Report were kept did not change in the Reporting Period. The said information can be found in the 2017 Annual Report.
3.3 Other Information
Changes to other information in the Reporting Period:
□ Applicable√ N/A
4. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□ Yes√ No
|||||
|-|-|-|-|
||H1 2018|H1 2017|Change (%)|
|Operating revenues (RMB'000)|142,623,837|124,450,065|14.60%|
|Net profits attributable to shareholders|12,936,846|10,811,322|19.66%|
|of the Company (RMB'000)||||
|Net profits attributable to shareholders||||
|of the Company before non-recurring|12,500,253|9,891,766|26.37%|
|gains and losses (RMB'000)||||
|Net cash flow from operating activities|7,613,688|13,895,932|-45.21%|
|(RMB'000)||||
|Basic earnings per share (RMB/share)|1.97|1.67|17.96%|
|Diluted earnings per share (RMB/share)|1.94|1.66|16.87%|
|Weighted average ROE (%)|16.43%|16.46%|-0.03%|
||30 June 2018|31 December 2017|Change (%)|
|Total assets (RMB'000)|250,997,801|248,106,858|1.17%|
|Net assets attributable to shareholders|79,301,793|73,737,437|7.55%|
|of the Company (RMB'000)||||

Midea Group Co., Ltd. Semi-Annual Report 2018 Note: The decline in net cash flow from operating activities was primarily driven by theCompany’s move in 2018 to invigorate capital and put it to more efficient use through more financing support for the upstream and downstream links of theCompany’s industrial chain. This move has promoted common development of the industrial chain and generated income for the Company.
Total share capital of the Company on the last trading session before disclosure:
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|-|-|
|Total share capital of the Company on the last trading|6,603,643,690|
|session before disclosure (share)||
|Fully diluted earnings per share based on the latest|1.96|
|share capital above (RMB/share)||

Note: TheCompany’s total share capital on 30 August 2018 was 6,642,976,396 shares. Minus the repurchased 39,332,706 shares up to that day, the number was 6,603,643,690 shares.
5. Differences in Accounting Data under Domestic and Overseas Accounting Standards
5.1 Differences in the net profits and net assets disclosed in the financial reports prepared under China Accounting Standards (CAS) and International Financial Reporting Standards (IFRS)□ Applicable√ N/A
No such differences for the Reporting Period.
5.2 Differences in the net profits and net assets disclosed in the financial reports prepared under CAS and foreign accounting standards
□ Applicable√ N/A
No such differences for the Reporting Period.
5.3 Reasons for the differences
□ Applicable√ N/A
6. Non-recurring Profits and Losses
RMB'000
||||
|-|-|-|
|Item|H1 2018|Note|
|Profit or loss from disposal of non-current assets|266,895||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||
|-|-|-|
|Except for effectively hedging business related to normal business|-521,715||
|operations of the Company, profit or loss arising from the change in|||
|the fair value of held-for-trading financial assets and 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|||
|Other|1,065,178||
|Less: Corporate income tax|253,535||
|Minority interests (after tax)|120,230||
|Total|436,593|--|

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
No such cases for the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 Section III Business Profile
1. Business Scope in the Reporting Period
Midea is a technologies group in HVAC systems, consumer appliances, robotics& industrial automation systems, and smart supply chain (logistics). Midea offers diversified products and services, including HVAC centered on residential air-conditioning, commercial air-conditioning, heating& ventilation systems; consumer appliances centered on kitchen appliances, refrigerators, laundry appliances, and various small home appliances; robotics and industrial automation systems centered on KUKA and Guangdong Midea Smart Robots Co., Ltd.; and integrated smart supply chain solutions with Annto Logistics Technology Co., Ltd. as the service platform.
Upholding the principle of “Creating Value for Customers”, Midea is committed to improving lives for consumers. Midea focuses on continuous technological innovation to improve products and services, and to make life more comfortable and pleasant for over 300 million users, major customers and strategic partners from all fields across the globe every year.
Midea, a global operating company, has now established a global platform of 15 overseas manufacturing bases, over 35,000 overseas employees, 24 operating agencies, covering more than 200 countries and regions with 22 settlement currencies. Additionally, it is the majority shareholder of KUKA, a Germany-based world-leading company in robotics and automation, with a stake of approximately95%.
Midea ranks No. 323 on the 2018 Fortune Global 500 list, a big step forward compared to No. 450 in 2017, and ranks No. 32 on the 2018 Fortune China 500 list, the highest-ranking among home appliance industry in the country. On the Forbes 2018 Global 2000 list, Midea ranks No. 245, outrunning a significant number of 90 compared to last year. In addition, Midea ranks No. 26 on the 2018BrandZ™ Top 100 Most Valuable Chinese Brands list, topping the domestic home appliance brands with its brand value up40%. Also, Midea takes the lead among domestic home appliance
Midea Group Co., Ltd. Semi-Annual Report 2018 makers by ranking No. 244 and No. 41 respectively on the Top 500 Most Valuable Brands list and the Top 100 Most Valuable Tech Brands list released by Brand Finance, a British brand assessment institution. Meanwhile, on the second “China Brand Day”, Midea is among the Most Popular Chinese Brands list announced byPeople’s Daily.
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
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|-|-|
|Main assets|Reasons for any significant change|
|Construction in progress|Up 77.61% YoY, primarily driven by the new construction in progress of KUKA|

 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 a white goods and HVAC enterprise with a whole industrial chain and full product line, 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 manufacturing technologies of core components (such as compressors, electrical controls and magnetrons), and ultimately based on its powerful capabilities in logistics and services. Midea is widely known as a top appliance and HVAC brand in China. Its dominance in the major appliance and HVAC markets means that it can provide a wide range of competitive product sets. It also means internal synergies in brand awareness, price negotiation as a whole, customer 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
Midea Group Co., Ltd. Semi-Annual Report 2018 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. With more than RMB20 billion invested inR&D over the past five years, the Group has set up a total of 20 research centers in nine countries including China, with itsR&D employees over 10,000 and senior foreign experts over 500. While establishing its own research centers around the world, the Group has also signed technical cooperation agreements with domestic and foreign scientific research institutions, such as MIT, UC Berkeley, UIUC, Stanford, Purdue University, Tsinghua University and the Chinese Academy of Sciences, in order to establish joint labs and build a global innovation ecosystem. TheGroup’s long-term focus on building technology, marketing, product and open innovation systems, building a cutting-edge research system and building reserves in technology for mid/long term, has provided a solid foundation for the Group to maintain technical superiority across the globe.
3.3 A stronger network of global operations developed and designed withMidea’s continual global resource allocation and investments, globally-advanced manufacturing capabilities and advantage of scale
The success of a series of global acquisitions and new business expansion moves has further solidifiedMidea’s global operations and leading advantages in robotics and automation. 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 overseas markets and is becoming a stronger competitor in those mature overseas markets. The Group is one of the biggest manufacturers in the world for many product categories, which gives it competitive edges in efficiency improving and cost reducing that its overseas competitors are unable to achieve. Overseas sales of theGroup’s accounts for close to50% of the total sales revenue. Its products have been exported to over 200 countries and it owns 15 overseas manufacturing bases and dozens of overseas operating agencies. In addition, with a deep knowledge and understanding on product characteristics and product demands in overseas market, Midea is promoting world-wild branding and expanding through global collaboration and cooperation. In this way, the global competitiveness of Midea is increasing steadily.
3.4 Broad channel networks and a well-established smart supply chain system 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
Midea Group Co., Ltd. Semi-Annual Report 2018 partnerships with large home appliance retail chains. While in the broad third and fourth-tier markets, the Company uses flagship stores, specialty shops, traditional channels and new channels as effective supplements. Currently, the Company has already covered the markets at all tiers. 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 sales exceeded RMB25 billion in the first half of 2018, up33% year-on-year. Market share of the Company exceeds20% and the ratio is growing steadily, in addition to maintaining the highest sales onChina’s mainstream e-commerce platforms such as JD.com, Tmall and Suning.com in various home appliance categories.
Annto Logistics Technology Co., Ltd. (Annto), a subsidiary of Midea, concentrates on its core business of “nationwide direct distribution”. Supported by its self-developed information technology system and nationwide distribution network, Annto is able to provide fully visualized direct distribution services covering every corner of the country. It is committed to becoming thecustomer’s most trustworthy logistics partner. Annto has established an efficient nationwide warehouses and direct distribution network with its warehouse network as the basis, which covers 118 logistics centers nationwide and is able to offer fast delivery including 24 hours for delivery in the same city around the country and 48 hours for city-to-city (or town-to-town) delivery.
3.5 A solid foundation for digitalization-driven Industrial Internet operations
Midea has been promoting a strategy of “Smart Home+ Smart Manufacturing”. With continual research and investment in artificial intelligence (AI), chip, sensor, big data, cloud computing and other new technologies, Midea has built the biggest AI team in the household appliance industry, which is committed to enabling products, machines, production processes and systems to sense, perceive, understand and make decision, driven by the combination of big data and AI, in order to reduce intermediaries for man- machine interaction to the minimum and create truly smart appliances without any assistance in interaction.
Upon years of a digitalized reform characterized by “One Midea, One System, One Standard”, Midea has successfully materialized operations driven by software and data through its value chain, connecting end to end and coveringR&D, PO, scheduling, flexible manufacturing, procurement, follow-up of product
quality, logistics, installation& post-sale services, etc. TheGroup’s cloud platform has made come true
Midea Group Co., Ltd. Semi-Annual Report 2018 C2M flexible manufacturing, platform-based, modularized and digitalized production techniques and simulation, intelligent logistics, digital marketing, digital customer service, etc. In addition to applying these cloud platform solutions to its manufacturing bases across the world and tens of thousands of its products, the Group also markets these solutions to other companies and sectors. Therefore, it is safe to say that Midea has built a solid foundation regarding industrial internet systems.
3.6 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, 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 operational practices of Midea Group. They have been working for Midea on average for more than 15 years, all with rich industrial and professional experience, deep understanding of the home appliance industry throughout both China and the world, and accurate understanding of theindustry’s functioning environment and corporate operations management. The Company's advantages in such systems and mechanisms have laid a solid foundation for the efficient and effective business operations, as well as the promising, stable and sustainable future development of the Company.
At present, the Company has launched five stock option incentive schemes, two restricted share incentive schemes and five “partner” stock ownership schemes for key managerial and technical personnel, 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.
Midea Group Co., Ltd. Semi-Annual Report 2018 Section IV Performance Discussion and Analysis
1. Overview
1.1 Industry Overview
A. Home Appliance Industry
According to the data published by the Ministry of Industry and Information Technology (MIIT), in the first half of this year, the main business revenue in the household appliances industry was RMB742.25 billion, and the accumulated growth year on year was13.1%; the gross profit was RMB52.29 billion, and the accumulated growth year on year was15.9%.
According to the Semi-Annual Report of 2018China’s Household Electrical Appliance Industry published by the China Household Electric Appliance Research Institute (CHEARI) and the National Household Electrical Appliance Industry Information Center together, in the first half of this year, the differentiation in the domestic market of household appliances was quite apparent. The market performances of different categories were imbalanced, products including air-conditioners, refrigerators, and washing machines basically maintained a steady growth, but with a decline in growth rate, and the overall performance of kitchen appliances was not good enough.
In the first half of 2018, the retail sales in the air-conditioning market was 38.63 million units, generating RMB132.1 billion, and the growth year on year was15.8% and18.9% respectively. Among those, the online market stood out, and the volume and revenue growth of retail sales year on year was44.9% and54.8% respectively. Regarding to product performances, the proportion of high-end products which are smart, comfortable, and energy-efficient increased, the commercial air-conditioners and fresh air products grew rapidly; and additional functions including self-cleaning, formaldehyde and PM2.5 removal have been gradually accepted by consumers. Consumer demand has developed from rigid demand of temperature control to health-friendly functions, clients has developed from all-age groups to target groups including children, pregnant women and the elderly, and thus health awareness has become a substantial driving force for industry growth.
In the first half of 2018, the retail sales in the laundry appliance market was 19.6 million units, generating RMB34.9 billion, and the growth year on year was4% and11.8% respectively. Analyzing from the type
Midea Group Co., Ltd. Semi-Annual Report 2018 of products, the volume and revenue growth of retail sales of top-loading washing machines was0.6% and2.8% year on year respectively. Meanwhile, the volume and revenue growth of retail sales of front- loading washing machines was13.5% and18.3% year on year respectively. There was an evident upgrading trend in the laundry appliance industry. Front-loading products, high-capacity products, health products and smart products have already become the main trend of market development. In the first 6 months, the share of the retail sales volume of front-loading products reached nearly50%, in which the washer-dryer combo machine was15.8%, pushing front-loading washer production forward.
In the first half of 2018, the retail sales in the refrigerator market was 16.58 million units, generating RMB46.5 billion, and the growth year on year was-1.3% and8.3% respectively. Product upgrade happens more frequently in the refrigerator market. In the first six months, the online sales of side-by- side refrigerators exceeded three-door products, becoming the best-seller in this market, and the share of retail sales was29.7%. Under the background of great upgrade in consumption, the refrigerator manufacturers are laying more emphasis on fresh-keeping technique, transforming the smart-only refrigerator market to a high-end, high-quality, and high-level smart market.
The first half of 2018 witnessed the first negative growth of the kitchen appliances industry. According to the omnichannel summarization of data from All View Cloud (AVC), the retail sales in this period was RMB31.1 billion, decreasing1.6% compared to the same period of last year. Analyzing from the development cycle of this industry, after experiencing several-decades growth in popularity at a medium and high speed, it is slowly developing towards “popularity plus replacement”. During this time, market competition became fiercer, and the industry was entering into a more rapid reshuffle period. Analyzing from the distribution channel, the online market remained growing. The monitoring data from AVC shows, the share of retail sales in the online market increased16.1% compared to the same period of last year. Although markets and channels at all levels of the offline retail sales terminals were declining at different extents, driven by the policy, channels including engineering and house decoration were increasing at different extents, and online retail, engineering, and internet-based house decoration channels all showed variable degrees of increase.
In 2017, the share of online sales of major appliances reached30.4% in all channels. In the first half of 2018, the online sales of home appliances reached RMB140.9 billion, increasing32.8% year on year. The online market maintained a high-speed growth, playing an important role in the steady market growth
in the first six months. Meanwhile, along with the exploration and development of new retail and the O2O
Midea Group Co., Ltd. Semi-Annual Report 2018 model, offline experience is increasingly important. More interactive, scenario-based marketing are seen, and companies are paying more attention to improving user loyalty and experience. In this whole new market, chain business giants in this industry are actively exploring online and offline collaboration, and building smart retail models. Through integrating advantageous resources both online and offline, giants are seeking to break the bottleneck of the downturn in market demand.
B. Robotics Industry
Based on the prediction of the International Federation of Robotics (IFR), the global demand for robotics and automation will further increase. In the world, the average annual growth rate between 2018 and 2020 is expected to be at least15%. In 2017, the scale of the global robotics industry was over 25 billion US dollars, growing20.3%, and it is expected to reach 30 billion US dollars in 2018. At present,China’s robotics market is entering into a high-speed development period. The market scale in 2017 was about 6.28 billion US dollars, and the average growth rate between 2012 and 2017 was28%. Among those, industrial robots were the largest application market in the world for five consecutive years, service robots have a huge potential in demand, and specialized robots have obviously expanded its application scenarios. The domestication of core components is growing rapidly, innovative companies are emerging in great numbers, and several techniques can already be transformed into industrialized products, which are showing significant advantages in certain fields. According to the report from GGII, in the first half of 2018, the industrial robot output reached 73,738 units, rising31.02% from a year ago with the sales volume up23%. Influenced by intelligent warehousing and the upgrade of workshop logistics systems, the sales volume growth rate of SCARA and AGV exceeded40%. In 2018, two guidelines issued by MIIT, the Guidelines for the Construction of National Intelligent Manufacturing Standard System and the Implementation Guide for Construction and Promotion of Industrial Internet Platform, have further specified the development direction of the industrial Internet and intelligent manufacturing.
1.2 Analysis of theCompany’s Main Business
In the first half of 2018, guided by the three core strategies of “Leading Products, Operational Efficiency and Global Operations” in a complicated political and economic environment at home and abroad, Midea focused on improving products, promoting lean management and high-performance operations in the value chain, continuously optimizing its product mix according to the consumption upgrade trends, and constructing sustainable competitiveness for the future through internal growth. As a result, the business
objectives set for H1 2018 were successfully fulfilled, with higher profitability, further improving indicators
Midea Group Co., Ltd. Semi-Annual Report 2018 such as self-owned capital and channel inventories, better product quality and reputation, as well as strengthened competitiveness in various product categories and global operation synergies. For H1 2018, Midea achieved, on a consolidated basis, total revenue of RMB143.7 billion, up15.02% YoY; and net profits attributable to Midea Group shareholders of RMB12.9 billion, up19.66% year-on-year.
In H1 2018, the Company carried out the following tasks:
A. Focused on users, developed innovative products and steadily improved product competitive advantages
Being user-oriented as always, Midea kept strengthening product competitiveness by increasingR&D investment, enhancing innovation inR&D, and placing importance on product quality and design improvement. In product design, Midea won a total of 33 international design awards during H1 2018, including 9 Red Dot Awards (Germany), 4 IDEA Awards (the U.S.), and 20 iF Awards (Germany).——Residential Air Conditioners: Midea New Refrigerant R290 Split Air Conditioner Series, with technical advantages including the extremely low GWP refrigerant, high energy efficiency, low noise and severe material safety control, is certified by Der Blaue Engel, with Midea becoming the first A/C maker around the world to obtain this certification.Midea’s innovative Air Space Station is the first home “Micro- Climate” regulator product in the world, achieving integrated regulation of “temperature, humidity, wind, cleanness and freshness”. With a 10.1-inch TFT full-colour screen clearly showing indoor air quality in detail, this product can help the user easily control the indoor air and environment. It has won the 2018 AWE Golden Award. Midea Whisperwind Series adopts the most advanced Angel Eye technology to achieve real-time monitoring of the human body, and features “responsiveness to body temperatures, three wind distribution directions and even coolness without feeling the wind”, and “various wind models”, protecting the user from being awakened by coldness and ensuring a sweet dream.
——Commercial Air Conditioners: As a leading HVAC provider worldwide, Midea Commercial Air Conditioners is a leader inR&D strength, product technology and market performance. In recent years, Midea Commercial Air Conditioners are increasingly being seen in iconic international key programmes. In terms of large complexes, Midea has successively provided integrated product solutions for Dalma Mall, the largest shopping mall in Abu Dhabi; Casa Shopping Mall, the largest home decoration and building material market in Latin America; Grand Comfort, the largest home decoration and building material market in Central Asia; and Vientiane Shopping Center, the landmark shopping center in Laos.
Midea Group Co., Ltd. Semi-Annual Report 2018 In terms of venues for international sports events, Midea won the bids for the commercial A/C projects for the 2018 FIFA World Cup Russia venues, the 2017 Africa Cup venues, the 2017 Tianjin China National Games Village, and the Asian Games venues, etc. As for international airports, Midea becomes the commercial A/C supplier for Terminal 2 of Guangzhou Baiyun International Airport, Terminal 3 of Beijing Capital International Airport, Singapore Changi Airport, Mauritius Sir Seewoosagur Ramgoolam International Airport, Milan Malpensa Airport, Maputo International Airport, and Soekarno-Hatta International Airport. Concerning “the Belt and Road”, Midea successively won the bids for the commercial A/C projects for the Zetas Thermal Power Station, one of the biggest thermal power stations in Turkey; Top Glove, theworld’s largest rubber gloves manufacturer in Malaysia; the Vinhtan Coal Power Plant, the largest China-invested power plant in Vietnam; a cement plant in Angola; a power station in Bali of Indonesia; and a semiconductor factory in Manila of the Philippines, proving that Midea has become a representative of Chinese global brand builders. According to the data from ChinaIOL.com, Midea Commercial Air Conditioners have topped the domestic market for five years in a row with a market share of nearly20%. Appearing in more and more iconic international key programmes, Midea Commercial Air Conditioners have won increasing recognition from consumers both at home and abroad, becoming an icon for “Made in China”.
As a leading brand inChina’s air-source heat pump industry, Midea is leading the technological upgrading in the industry again in 2018. The four major air-source products, including residential water heating products, residential heating products, commercial water heating products and commercial heating products, have all been upgraded into variable frequency products, with the fully variable frequency technology applied to their power units. This marks Midea entering the fully variable frequency era and being the first one industrywide to do so.
——Laundry Appliances: Little Swan under Midea has launched an ironing-free clothes dryer, which is of trans-era significance. To solve the pain points of the industry and consumers, this product is the first to provide a 15-minute ironing-free steaming function, and a 20-minute fast drying function. This healthy clothes-drying experience featuring “instant drying” has further strengthened the top position of Little Swan in the clothes-drying market. Little Swan has also introduced the Water Magic Cube Washing Machine, which is also of trans-era significance. This product is the first to adopt the “black technology” of cold wash, which can effectively solve the problems caused by traditional hot wash, such as fading
colour and deformation, providing unprecedented top-quality experience of color and shape protection,
Midea Group Co., Ltd. Semi-Annual Report 2018 as well as time and power saving. This product has passed the Germany VDE certification, which is considered the Nobel Prize in the electrical appliance sector, representing an icon in innovation in the laundry industry. The basic technology research and application of Midea Top-Loading Washing Machines, as well as the innovation and application of the intelligent sensing technology in washing machines have respectively won the second and third prizes of National Scientific and Technological Progress Awards, with more than 100 domestic and foreign patents applied for these core technologies.
——Refrigerators:Midea’s whole new “Microchip-Enabled Whole-Week Freshness” flagship product, which is the first of its kind worldwide and equipped with two smart fresh-keeping technologies of intelligent humidity-control and PST intelligent sterilization, as well as technologies including the L-shaped large freezing space, the firstly initiated and new side-by-side magic separated storage design, the i-wake soft lights, and the PST intelligent sterilizing breathing lights, has been certified by SGS, theworld’s leading inspection, verification, testing and certification institution.Midea’s brand-new AI Refrigerator with a pioneering“3+1” model including 5M remote voice recognition, worldwide leading millisecond-level image recognition, worldwide pioneering 21.5-inch hidden touch screen, and big data supportingusers’ control andrefrigerator’s operation, has materialized an intelligent machine, intelligent interaction, intelligent scenarios, intelligent ecology and intelligent service, which has opened up a new era of AI refrigerators. At the 2018 China Refrigerator Industry Summit Forum held by cheaa.com under the guidance of the China Household Electrical Appliance Association and the Department of Information Resource Development of the State Information Center, owing to its excellence in product development, Midea was entitled as “2017-2018 Leading Intelligent Refrigerator Brand ofChina’s Refrigerator Industry”. Besides, another two refrigerators of Midea won the title of “2017-2018 Leading Intelligent Fresh-Keeping Refrigerator ofChina’s Refrigerator Industry” and “2018Consumers’ Online Top-Choice Intelligent Odor- Free and Fresh-Keeping Refrigerator ofChina’s Refrigerator Industry” respectively.
——Small Household Appliances: Thanks to continuous technological innovations,Midea’s small household appliances have won various authoritative awards at home and abroad for consecutive years, manifesting the international first-class product competitiveness of Midea. As a leading brand inChina’s rice cooker industry,Midea’s rice cookers, which won two 2018 AWE Awards respectively in innovation and product, possess several leading technologies in the industry. With the multi-section IH technology, the pressure and smart control technologies, and the inner tank technology, rice are perfectly cooked.
Midea’s innovative FUN Smart Oven has a built-in HD camera with the image recognition algorithm
Midea Group Co., Ltd. Semi-Annual Report 2018 adopted that can automatically recognize 60 kinds of different food materials under 8 major categories, as well as with a 5-inch HD TFT touch screen and a 1080P HD camera that can be controlled through an App on the mobile phone and help post real-time videos and open up an oven-based social circle. Midea Variable Frequency Microwave Oven adopts the multi-level pulse-by-pulse and current limiting technology, the low power control technology, and the smart turn-on protection technology to increase the heating speed and sustain the nutritional ingredients. This product also has intelligent diagnosis and systematic health management capacity. Midea Radiator adopts double-side heating through black crystals to elevate the temperature faster, and its function of avoiding water-splashing in all directions can provide a more comfortable bathing environment. Besides, it has a double-side clothes-drying shelf attached, satisfying theuser’s needs anytime.Midea’s innovative Air Purifier adopts a centrifugal fan with double gravitational forces to increase the pressure and let the air in. By adding a two-fold integrated strainer plus a five-layer specialized strainer, multiple air pollutants including formaldehyde, smog and second- hand smoke can be effectively purified, achieving double air purification effects. Midea Built-in Dishwasher is the only product in this field with an AWE Award. With the global pioneering hot-air drying technology carrying nine patents, this product dries the dish effectively while removing the steam and mould to keep the dish clean and fresh for 72 hours. Midea Installation-Free Dishwasher not only has a pioneering function of sterilizing under 75 degrees Celsius and a voice broadcast system, but also has specific washing procedures forbaby’s products like baby bottles and toys, in order to protectbaby’s health. The Variable Power Storage Electric Water Heater in the Beverly “Future” Series launched byMidea’s Water Heater Division, by disrupting the principle of heating and heat storage and release, has made a new breakthrough in the structure and shape of water heaters. Its size is reduced by55% and the wall hanging burden is reduced by 30kg, so it is suitable for more places. This product has won the AWE Innovation Award. Toshiba Wireless Cleaner, equipped with a high power motor with a maximum gyration rate of 0.12 million times per minute and a “high-capacity lithium battery” with the maximum running time of 60 minutes, has won the “2017 IAUD Award” and the “iF Product Design Award”. B. Continued to invest inR&D to build a globalR&D platform and a responsive and innovativeR&D system
Midea continued to invest inR&D, made innovations with respect to mechanism, developed more advanced products through both premium quality and differentiated technologies, built a value chain
Midea Group Co., Ltd. Semi-Annual Report 2018 system featuring driving growth with product development based on the CDOC approach, and developed standard work flows to launch best-selling products to the market. In addition, it continued to improve its globalR&D centre network by deepening its technological research and localized development and strengthening in-depth cooperation with topR&D institutions at home and abroad, aiming to build a global innovation ecosystem.
In the first half of 2018, the Company arranged the certification of a dozen of its technological achievements, including “the Research and Commercialization of the Low-Noise Key Technology of Horizontal Dust-Cup Cleaners”, “the Research and Application of the Energy-Efficient Technology for the Midea Building Management System (M-BMS)”, “the Scenario-Based Dry-Burning Protection Technology and Gas-Leakage Alarm Technology”, “the Research and Application of the Efficient and Even Burning Technology”, “the Research and Commercialization of the Low Harmful-Gas Emission Technology for Gas Water Heaters”, “the Key Technology for R290 (Propane) Indoor Air Conditioners and Its Application”, “the Research and Application of the Strong Heating Capacity and the High-Level Comfort Key Technology for Air Heaters”, and “the Research and Application of the Indoor Micro-Climate Multidimensional Regulation Key Technology”. Upon review by academicians, professors, researchers, the chairman of CHEAA, the dean of CHEAR, and senior engineers with the rank of a professor, all these technologies have been certified as “Internationally Advanced”. Midea Rice Cooker won the Chinese Patent Golden Award. 12 patents including “the Water Heater and Its Blow-down System and the Blow- down Control Method” won the Excellent Chinese Patent Awards. The Reliability System of Midea Kitchen Appliances and the Application of Such a System in Refrigerator Development won the first prize of the China Association for Quality (CAQ). The Research and Commercialization of the Key Technology for Highly-Intelligent Indicator-Based Indoor Air Conditioners won the first prize of the China Light Industry Association (CLIA).
Up to July 2018, Midea Group had applied for around 83,000 patents domestically, of which about 40,000 have been granted.
C. Deepened the channel transformation, improved the channel efficiency and promoted the steady growth of the e-commerce business.
Midea continued to develop and expand its six major sales channels including flagship stores, Suning, Gome, Regional Chains (TOP Clients), micro-region chains (VIP Clients) and township exclusive shops.
Midea Group Co., Ltd. Semi-Annual Report 2018 In the meantime, special effort was made to cooperate with various house fittings chain platforms. So far, Midea has built six Whole House Appliances Experience Halls. Together with the Whole House Design Software Platform and the whole house appliances marketability, Midea is able to provide scenario-based appliance packages and one-stop solutions.
Midea resolutely promoted transformation at the retail end by strengthening digitalization in domestic sales, including fast order reception, quick policy implementation, automatic inventory management and a shared inventory system for all channels, so as to share the resources with clients in capital, inventory, logistics, staff, information, etc. and to further enhance its digital retail competency. Midea also flattened the channel hierarchy by promoting direct connection to chains and the TOP Clients. Meanwhile, it put in place a ceiling system for inventories of all channels as part of its destocking efforts, and achieved a systematic control over inventories for better channel efficiency. Also, Midea strengthened synergy in domestic sales, including enhancing shopping guide synergy at shop terminals through synergetic sales promotion, shopping guide ordering, shop sessions, etc., as well as frequent united promotion activities in diversified forms to strengthen full-category synergy. Proactive effort was also made to explore new retail models for all channels. Midea connected its user data with those of Alibaba and Tencent to achieve mutually-promoted online and offline operations and better empower the offline shops.
Importance was placed on the core business of integrated warehousing and distribution services. Supported by a self-developed information technology system and a distribution network across the country, Midea realized fully visualized direct distribution to every corner of the country for various scenarios. It also deepened its unified warehousing and distribution strategy by cutting unnecessary links to speed up all-channel distribution and capital turnover to build a supply chain logistics system featuring “Shared Warehouses, Unified Dispatch, Quick Response and Fast Distribution”. According to customer needs, services were further improved and customer satisfaction was enhanced by providing differentiated region- and time-specific products, improving the quality of the integrated delivery and installment services, and optimizing customer experience in specific key operational links. So far, Annto has established a logistics network, which covers 118 logistics centers nationwide and can offer fast delivery which can be finished in 24 hours for delivery in the same city and in 48 hours for city-to-city (or town-to-town) delivery across the country.
In terms of online channels, Midea continued to focus on products and users. Relying on the advantage
of its full-category products, it built an Internet-based big data platform and launched strategic cooperation
Midea Group Co., Ltd. Semi-Annual Report 2018 programmes with platforms such as JD.com and Tmall to continuously explore digital precision marketing models, improve the user operation system, better tap customer value and needs, and develop more competitive products for the online market. Meanwhile, a membership programme was launched to build a unified member pool to link online and offline data and realize unified identities, interests and assets for all users, which resulted in better online shopping experience. In addition, Midea continued to improve its online product mix to gradually improve profitability while maintaining effective growth in size. As a result,Midea’s online sales exceeded RMB25 billion in the first half of 2018, up33% year-on-year. It boasts over20% of the domestic home appliance market and the ratio is growing steadily, in addition to maintaining the highest sales onChina’s mainstream e-commerce platforms such as JD.com, Tmall and Suning.com in various home appliance categories.
D. Stepped up the industrial internet and digitalization 2.0 programmes to thoroughly improve operational efficiency of the entire value chain
Midea stepped up its industrial internet and digitalization 2.0 programmes. Guided by C2M (Customization), Midea drove end-to-end linking in business by means of software systems for full connection through the entire value chain. All links(R&D, the supply chain, manufacturing, logistics, finance and customer service) were driven by orders and data to realize flexible delivery. Midea gave play to its digital operation capability.
Based onconsumers’ real needs, a digital planning platform has been established, in which way, all data from the value chain throughout the process will be collected and analyzed by means of the big data platform. The product concept database is also built to complete the analysis of the product life cycle data and accordingly support the product digitalization planning; in terms of the product development, Midea propelled the product design of parameterization, standardization, modularization and platformization, and by implementing the super BOM, sales stimulated and determined the platform architecture, the module division, and the solidification and optimization of the modular interface; the digital process management system would be established to realize the electronization and structuralization of the process management data, improving efficiency by over40%.
With the C2M system, the customers can directly customize their products on the selection and matching platform, which means that Midea has entered into the age of customization. Under the digitalization planning, a whole new Internet-based CCS system was built to strengthen the integrated manufacturer
coordination system, further improve customer experience and coordination efficiency, optimize the
Midea Group Co., Ltd. Semi-Annual Report 2018 construction of the channel hierarchy, and support linking management of the purchase- sell-stock systems for various channel levels. As part of the domestic marketing reform, the Midea Cloud Sales System was constructed to provide shopping-mall-like, mobile platform experience for customers and improve the overall order placing and information transmission efficiency of distributors. Meanwhile, coordinated efforts were made to flatten the channel hierarchy, including overall digital management through the purchase-sell-stock process inMidea’s 2,200 flagship stores across the country, a business order model featuring direct supply from a business division to the stores, and digital application at the shopping guide level at the retail end with clear and transparent information.
The customer service system has completely combined with the mobile terminals in order to fully improve the work efficiency of all information staffs and various management levels. Meanwhile, electronic bills are also available now, including Electronic Invoice and Electronic Contract, and the electronic signature technology is also introduced. Besides, the legalperson’s identity information and three major certificates can also be authenticated online. Further, the signing of contract is visualized in real time, which will not only improve the contract signing efficiency and correctness, but also save corresponding costs. By means of the integrated planning and purchasing project, the supplychain’s upstream and downstream can thus be connected; the production can be stimulated and the seamless connection between the planning and the implementation will be realized. The production scheduling will be optimized in line with the actual production performance, and the 2-4 hour scheduling and stocking system has also been established to realize the intensive production scheduling and the intensive delivery, preparing a high-efficiency supply system for the flexible manufacturing and increasing83% production scheduling efficiency. Special attention is also paid to implement the supplier planned production synergy, the logistics synergy and the full coverage of the vehicle entry booking system, strengthen the capacity visualization synergy efficiency and thesystem’s usability, and support the order tracking throughout the process. By means of the prior order scheduling, it is possible to realize the quick appraisal of thefactory’s orders received based onT+3 Mode, the precise positioning and efficient analysis of corresponding resources gaps, which will promote the systematical implementation of the general collecting mode and effectively reduce corresponding product costs.
It’s also required to expand the big data technology platform, improve the enterprise-level indicator system and the data operation mechanism in order to visualize the whole process and drive the full-field
data. Related data will be collected based on various products, materials, techniques and projects for the
Midea Group Co., Ltd. Semi-Annual Report 2018 purpose of data research, and two kinds ofR&D data sub-products have also been developed including Product Cube andR&D Steward; in terms of the data from domestic sales and export sales, the omni- channel data monitoring system shall be established to focus on the product sales structure, the price system and the market layout, with a KPI-based monitoring indicator system, visualizing all data ranging from the order placement to the after-sales service, as well as integrating customer data for all-round customer assessment; the big manufacturing data shall regard the visualization of capacity as the core objective, and completely improve the digital management on the manufacturing field; big financial and economic data shall be analyzed and applied to measure the profit and loss, the profitability and the costs indicators so as to provide a valid data support for theenterprise’s endogenous growth.
E. Steadily promotedMidea’s globalized business layout and accelerated the cooperative integration of Toshiba Project.
Midea further promoted its global business layout to solidify its global basis and competency. It formulated a global supply cooperative mechanism, strengthened localized operations overseas, and promoted product globalization. Midea established 15 overseas manufacturing bases with over 35,000 employees, which has helped strengthen localized operations overseas and optimize the proportion of localized supply chain. In addition, it has 24 sales offices in North America, South America, Europe, Asia, Africa and Oceania, with business covering more than 200 countries and regions. Meanwhile, guided by the market and focusing on users, it has also established 20 globalR&D centres in 9 countries, including the U.S., Italy, Germany, India and Singapore, to work on future products and technologies with foresight. Distribution channels have been continuously expanded, and steady growth is seen in the overseas business under MideaGroup’s brands. For H1 2018, revenue under MideaGroup’s brands recorded two- digit growth from a year ago. Overseas headquarters have kicked off trial operation, the ASEAN and Indian operations are now able to run on an independent basis, and integration in theR&D-production- selling system for regional markets has been strengthened for better convergence effects. Midea also accelerated overseas e-commerce expansion by exploring various e-commerce platforms and models overseas for new potential growth points. By exploring a product manager mechanism for its overseas branches, Midea strengthened its localized, user-focused product management, market research and product development. Unified rules were applied to these overseas branches to enhance control and promote consistency and cooperativity inMidea’s business language and system.
Midea Group Co., Ltd. Semi-Annual Report 2018 Midea continued to promote synergies and integration in the Toshiba project. In order for better product and brand competitiveness, upfront investments were continued to be put intoR&D to set up an innovation centre for Japanese users; the cost competitiveness was strengthened by procurement cost reduction, cost reduction through technologies, as well as by optimizing the organization and mechanism of the supply chain system; and the branding centre would help formulate a unified global positioning and marketing strategies for the Toshiba brand with clear brand characteristics and a consumer profile, and make the Toshiba project part of the Mideafamily’s industrial design. In terms of the reform of the marketing and distribution systems, the Toshibaproject’s Japan business continued to work on the traditional existing channels such as variety stores and Toshiba flagship stores while proactively expanding new channels including TV shopping, online shopping and houseware centres; its overseas businesses completed the integration withMidea’s local platforms and proactively expanded its product lineup for the overseas markets; and with the ASEAN, China, India and North America markets as the priorities, its China business cooperated withMidea’s business divisions in the online operations to set up Toshiba full-category exhibition halls or Midea-Toshiba halls at the first- and second-tier cities, and also cooperated with Midea in online operations to achieve steady month-on-month growth in sales, mostly through the Tmall e-commerce platform. As for value chain cooperation, the Toshibaproject’s manufacturing and procurement systems were fully docked withMidea’s business divisions to integrate production capacity and strengthen lean production for better production efficiency with significantly lower costs. The Toshiba project also continued to optimize its organization and work flows by leveragingMidea’s digital platform to promote compliance and transparency in all the work flows for better operational efficiency. As a result, despite the unfavorable factors such as the rising raw material prices and the exchange rate fluctuations, the Toshiba managed to maintain effective improvements in revenue growth and cash flows in the first half of 2018 by means of optimizing the product mix, expanding new product categories and distribution channels, rigidly controlling non-operating expenses, etc.
F. Promoted innovation in robotic product development and accelerated integration and expansion of the robotics business for the China market
The integration ofKUKA’s robotics business in China was accelerated. Three joint ventures were incorporated by Midea and KUKA (each holding a50% stake in the joint venture) to undertake the combinedKUKA’s general industrial business in China andSwisslog’s (a subsidiary of KUKA) business
in China, which provides advanced automatic solutions for hospitals, warehouses and distribution centres.
Midea Group Co., Ltd. Semi-Annual Report 2018 This joint ventures will further expand three major businesses (industrial robots, medical care and automatic warehousing) in the China market to satisfyChina’s great demand in smart manufacturing, smart medical care, smart logistics, new retail, etc. Through developing products and solutions which are most needed by Chinese customers, this automation business division is expected to see fast growth. Meanwhile, a new manufacturing base will be built in the Shunde Technology Park in the Guangdong Province to develop new products, jointly develop feasible “Industry 4.0” business models with various partners, and invest in the key Human and Robot Collaboration (HRC) and mobile robot technologies, so as to solidifyKUKA’s leading position in technology. This new manufacturing base is expected to reach an annual production capacity of 75,000 robots by 2024. Together with the existing production capacity, the China operations will be able to produce a total of around 100,000 robots annually by that year.KUKA’s business continued to expand with a flood of orders, including an order of tens of millions of euros to provide industrial robots for GAC NE (a subsidiary of GAC Group) in China, an order to expand the automatic warehouses and production capacity of Spritzer, the producer ofMalaysia’s best-selling natural spring water, and a continual order to provide flexible manufacturing solutions for a high-end car manufacturer of Germany.
KUKA continued to make innovations in robotic product development and application. It is the first robotic manufacturer in the world to introduce sensitive light-duty robots into the production plant. At Hannover Messe 2018, KUKA exhibited its LBR IISY Sensitive Robot and HRC product packages, making it the first manufacturer with a product range covering cooperative robots, mobile robots and industrial heavy- duty robots. In terms of consumer robots, KUKA LBR IISY Cobot Consumer Robot with the “I-Do” mobile modular system concept allows personalized compilation and configuration, KUKA KR QUANTEC Series and KR FORTEC Series can handle missions in relation to car body manufacturing in a more effective way. In addition, KUKA further improved its warehouse automation solution, CarryPick, and developed the new KMP600 AGV. With a fully integrated system with better performance and reliability, the new CarryPick solution can effectively reduce downtime and provide global service network support for better satisfaction of customer needs. The Cloud-based platform KUKA Connect developed by KUKA can enable the customers to access to relevant robotic data for analysis and utilization. KUKA won quite many honours, including the “Innovation and Entrepreneurship in Robotics and Automation (IERA) Award” granted by theworld’s two major robotics institutions for its LBR Medical Care Robot, the World
Excellence Award granted by Ford Motor for its HRC application, and a third GM Annual Best Supplier
Midea Group Co., Ltd. Semi-Annual Report 2018 Award.
Integration and expansion ofMidea’s robotics and automation business were continued to be promoted, faster breakthroughs were made in terms of key components, and localization and domestication of theR&D, manufacturing and marketing of key components such as the servo motor, the actuator and the motion control have been gradually materialized. Meanwhile, the effort spent on industrial automation integrated application continued to produce remarkable results. Concerted efforts were made to helpMidea’s over 30 appliance plants in China to launch an industrial automation programme. This is aimed to boostMidea’s smart manufacturing competency and increase the robot use ratio from 150 robots per 10 thousand workers to an advanced level of 625 robots per 10 thousand workers.
G. Deepened the long-term incentive system and protected the interests of shareholders
In 2018, Midea continues to encourage its core management to take responsibility for theCompany’s long-term value and growth by further enhancing its long-term incentive schemes. In the year, Midea has launched the Fifth Stock Option Incentive Scheme, the Second Restricted Share Incentive Scheme, the Fourth Global Partner Stock Ownership Scheme and the First Business Partner Stock Ownership Scheme, which have helped, in a more effective manner, to align the long-term interests of senior management and key personnel with that of all shareholders.
Midea Group protects itsshareholders’ interests by ensuring a consistent dividend policy. It shares its growth with shareholders by having paid out cash dividends of RMB27.1 billion since its holistic listing, including a final dividend of RMB7.9 billion for 2017. Meanwhile, in response to the recent internal and external complexities and great market value fluctuations, Midea Group has launched the biggest-ever repo plan in the history ofChina’s A-stock market. This repo plan, with a limit of RMB4 billion, is aimed to maintain a stable market capitalization and protectshareholders’ interests. Up to the end of August 2018, a total of approximately RMB1.8 billion has been used for the share repurchase, indicating MideaGroup’s great effort in fulfilling its repo commitment.
Midea’s main work plans for H2 2018 are summarized as follows:
A. Implementing the three core strategies to increaseR&D investments, accelerate product innovation and efficiency improvement, strengthen the capabilities of developing innovative and leading products adopting the CDOC approach and the customer-oriented thinking, and provide competitive products and services for customers in a highly efficient way;
B. Continuing to enhance the basic systems to set up a unified business language and rules, strengthen
Midea Group Co., Ltd. Semi-Annual Report 2018 “One Midea, One System, One Standard”, give play to the synergies, reinforce the result-oriented process control and improve efficiency;
C. Promoting transformation in the domestic marketing to improve user-oriented domestic retail marketing, enhance product synergies, promote destocking, a flat channel hierarchy and better channel efficiency with the retail end as the focus, stabilize the channel structure and interests, and promote scenario- and experience-based, interactive new marketing ways for better recognition of the Midea brand among users; D. Strengthening the building of Midea as a digitalized enterprise by continuing to improve the digital operational methods and systems to link every link ofMidea’s value chain and improve efficiency, value creation and the fulfillment of operating objectives; and
E. Continuing to improve profitability of the Toshiba business and promote localized operations of the China-based joint venture incorporated by Midea and KUKA to offer competitive products and services as soon as possible.
2. Analysis of Main Business
Same with the contents presented in “1. Overview” of this section
√ Yes□ No
See “1. Overview” of this section.
YoY changes in key financial data:
Unit:RMB’000
||||||
|-|-|-|-|-|
||||YoY Change||
||H1 2018|H1 2017||Main reasons for change|
||||(%)||
|Operating revenues|142,623,837|124,450,065|14.60%||
|Operating costs|103,881,438|93,051,081|11.64%||
|Selling expenses|16,892,503|12,404,770|36.18%|Increased sales|
|Administrative expenses|7,234,520|6,832,958|5.88%||
||-984,113|346,614||Changes in exchange gains and|
|Finance costs|||-383.92%||
|||||losses|
|Corporate income tax|2,614,882|2,059,053|26.99%||
|Net cash flow from operating|7,613,688|13,895,932||More financing support for the|
||||-45.21%||
|activities||||industrial chain|
|Net cash flow from investing|-8,943,677|-26,751,897||Acquisition of subsidiary KUKA in the|
||||-66.57%||
|activities||||same period of last year|
|Net cash flow from financing|-10,166,609|20,990,804|-148.43%|Decreased borrowings|

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||
|-|-|-|-|-|
|activities|||||
|Net increase in cash and cash|-11,404,259|8,272,701||Decreased net cash from operating|
||||-237.85%||
|equivalents||||and financing activities|

Major changes to the profit structure or sources of the Company in the Reporting Period:
□ Applicable√ Inapplicable
No such cases in the Reporting Period.
Breakdown ofMidea’s main business:
Unit: RMB'000
||||||||
|-|-|-|-|-|-|-|
|||||YoY change of|YoY change of|YoY change of|
||Operating||Gross profit||||
|||Operating cost||operating|operating cost|gross profit|
||Revenue||margin||||
|||||revenue (%)|(%)|margin (%)|
|By business segment|||||||
|Manufacturing|131,655,381|94,040,008|28.57%|14.03%|11.02%|1.94%|
|By product category|||||||
|HVAC|63,873,960|44,548,938|30.25%|27.69%|25.81%|1.04%|
|Consumer|||||||
||55,279,120|40,043,342|27.56%|6.66%|6.25%|0.28%|
|appliances|||||||
|Robotics and|||||||
||12,502,301|9,447,728|24.43%|-8.11%|-18.59%|9.73%|
|automation systems|||||||
|By geographical segment|||||||
|PRC|74,844,521|49,582,864|33.75%|22.55%|19.56%|1.66%|
|Outside PRC|58,233,192|45,802,611|21.35%|4.99%|3.47%|1.16%|

 Note: Consumer appliances primarily include refrigerators, washing machines, kitchen appliances and certain small home appliances.
3. Analysis of Non-Core Business
□ Applicable√ N/A
4. Assets and Liabilities
4.1 Material changes of asset items
Unit: RMB'000
|||||||
|-|-|-|-|-|-|
|30 June 2018||31 December 2017||Change in||
||||||Explanation about any|
||As a||As a|percentage||
|Amount||Amount|||material change|
||percentage of||percentage of|(%)||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||||||
|-|-|-|-|-|-|
|||total assets||total assets||
|||(%)||(%)||
|Cash at bank|45,087,756|||||
|||17.96%|48,274,200|19.46%|-1.50%|
|and in hand||||||
|Accounts|20,537,867|||||
|||8.18%|17,528,717|7.06%|1.12%|
|receivable||||||
|Inventories|23,723,338|9.45%|29,444,166|11.87%|-2.42%|
|Investment|411,198|||||
|||0.16%|420,802|0.17%|-0.01%|
|properties||||||
|Long-term|2,753,940|||||
|equity||1.10%|2,633,698|1.06%|0.04%|
|investments||||||
|Fixed assets|22,256,928|8.87%|22,600,724|9.11%|-0.24%|
|Construction in|1,562,256|||||
|||0.62%|879,576|0.35%|0.27%|
|progress||||||
|Short-term|1,261,033|||||
|||0.50%|2,584,102|1.04%|-0.54%|
|borrowings||||||
|Long-term|30,276,189|||||
|||12.06%|32,986,325|13.30%|-1.24%|
|borrowings||||||

4.2 Assets and liabilities measured at fair value
Unit: RMB'000
|||||||||
|-|-|-|-|-|-|-|-|
|||Profit or||||||
||||Cumulative|||||
|||loss from||||||
||||fair value||Purchased|||
||Opening|change in||||Sold in the|Closing|
|Item|||change|Other|in the|||
||balance|fair value||||period|balance|
||||charged to||period|||
|||during the||||||
||||equity|||||
|||period||||||
|Financial assets||||||||
|1. Financial assets with fair value||||||||
|changes included in profit or loss||||||||
|(excluding derivative||||||||
|financial assets)||||||||
|2. Derivative financial assets|714,185|-20,801|-350,397|-15,986|-|-|327,001|
|3. Financial assets available for||||||||
||22,213,426|-|168,582|-|8,873,379|18,516,741|12,738,646|
|sale||||||||
|Sub-total of financial assets|22,927,611|-20,801|-181,815|-15,986|8,873,379|18,516,741|13,065,647|
|Investment properties||||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||||||||
|-|-|-|-|-|-|-|-|
|Productive living assets||||||||
|Others||||||||
|Sub-total of the above|22,927,611|-20,801|-181,815|-15,986|8,873,379|18,516,741|13,065,647|
|Financial liabilities|92,308|593,127|386,436|-5,146|-|-|1,066,725|

 Whether there were any material changes on the measurement attributes of major assets of the Company during the Reporting Period
□ Yes√ No
4.3 Restricted asset rights as of the end of this Reporting Period
As of the end of this Reporting Period, there were no such circumstances where any main assets of the Company were sealed, distrained, frozen, impawned, pledged or limited in any other way.
5. Investment made
5.1 Total investment amount
||||
|-|-|-|
|Total investment amount of the|Total investment amount of the sameperiod of last year (RMB’000)||
|||YoY Change (%)|
|Reporting Period (RMB’000)|||
|41,811,802|69,512,207|-39.85%|

 Note: The change resulted from theCompany’s acquisition of subsidiary KUKA in the same period of last year.
5.2 Significant equity investment 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.
Midea Group Co., Ltd. Semi-Annual Report 2018 5.4.2 Derivatives investments
Unit: RMB'0,000
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
|||||||||||||Closing||
|||||||||||||investme||
||Rela|||||||Purch||||nt||
||||||||||Sold|||||
||tions|Rel|Typ|||||ased||Amount||amount|Actual|
||||||||Opening||in||Closing|||
|Oper|hip|ated|e of|Initial||||in||provided||as a|gain/loss|
||||||Starting|Ending|investme||Repor||investme|||
|ating|with|tran|deri|investment||||Repor||for||percenta|in|
||||||date|date|nt||ting||nt|||
|party|the|sact|vati|amount||||ting||impairme||ge of the|Reportin|
||||||||amount||Perio||amount|||
||Com|ion|ve|||||Perio||nt (if any)||Company|g Period|
||||||||||d|||||
||pany|||||||d||||’s closing||
|||||||||||||net||
|||||||||||||assets||
||||Futu|||||||||||
|Futur||||||||||||||
||||res|||||||||||
|es|||||01/01/2|31/12/2|||||||-|
||No|No|cont|6,588.2|||6,588.2|-|-|-|-895.3|-0.01%||
|comp|||||018|018|||||||17,725.4|
||||ract|||||||||||
|any||||||||||||||
||||s|||||||||||
||||For|||||||||||
||||war|||||||||||
||||d|||||||||||
||||fore||01/01/2|31/12/2|||||||-|
|Bank|No|No||55,599.5|||55,599.5|-|-|-|-73,077.1|-0.92%||
||||x||018|018|||||||62,171.6|
||||cont|||||||||||
||||ract|||||||||||
||||s|||||||||||
||||||||||||||-|
|Total||||62,187.7|--|--|62,187.7||||-73,972.4|-0.93%||
||||||||||||||79,897.0|
|Source of derivatives||||||||||||||
|||||All from the Company’s own money||||||||||
|investment funds||||||||||||||
|Litigation involved (if||||||||||||||
|||||N/A||||||||||
|applicable)||||||||||||||
|Disclosure date of||||||||||||||
|the announcement||||||||||||||
|about the board’s||||||||||||||
|||||31/03/2018||||||||||
|consent for the||||||||||||||
|derivative investment||||||||||||||
|(if any)||||||||||||||
|Disclosure date of||||||||||||||
|||||24/04/2018||||||||||
|the announcement||||||||||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||
|-|-|
|about the general||
|meeting’s consent for||
|the derivative||
|investment (if any)||
||For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a|
||result of significant fluctuations in raw material prices, the Company not only carried out futures|
||business for some of the materials, but also made use of bank financial instruments and promoted|
||forex funds business, with the purpose of avoiding the risks of exchange and interest rate|
||fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities,|
||as well as achieving locked-in costs. The Company has performed sufficient evaluation and control|
||against derivatives investment and position risks, details of which are described as follows:|
||1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in|
||compliance with laws and regulations, with clearly covenanted responsibility and obligation|
||relationship between the Company and the agencies.|
||Control measures: The Company has designated relevant responsible departments to enhance|
||learning of laws and regulations and market rules, conducted strict examination and verification of|
||contracts, defined responsibility and obligation well, and strengthened compliance check, so as to|
||ensure that the Company's derivatives investment and position operations meet the requirements|
|Risk analysis of|of the laws and regulations and internal management system of the Company.|
|positions held in|2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the|
|derivatives during the|Company to suffer from loss during the course of its futures business and forex funds business.|
|Reporting Period and||
||Control measures: The Company has not only developed relevant management systems that|
|explanation of control|clearly defined the assignment of responsibility and approval process for the futures business and|
|measures (Including|forex funds business, but also established a comparatively well-developed monitoring mechanism,|
|but not limited to|aiming to effectively reduce operational risk by strengthening risk control over the business,|
|market risk, liquidity|decision-making and trading processes.|
|risk, credit risk,||
||3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange|
|operational risk, legal||
||rate fluctuations in foreign exchange market could lead to greater market risk in the futures|
|risk, etc.)||
||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|

Midea Group Co., Ltd. Semi-Annual Report 2018
|||
|-|-|
||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||
|prices or fair value of||
|derivative products||
|during the Reporting|1. Loss from futures contracts during the Reporting Period was RMB-177,254,000.|
|Period, specific||
||2. Loss from forward forex contracts during the Reporting Period was RMB-621,716,000.|
|methods used and||
||3. Public quotations in futures market or forward forex quotations announced by the Bank of China|
|relevant assumption||
||are used in the analysis of derivatives fair value.|
|and parameter||
|settings shall be||
|disclosed for analysis||
|of fair value of||
|derivatives||
|Explanation of||
|significant changes in||
|accounting policies||
|and specific financial||
|accounting principles||
|in respect of the||
||N/A|
|Company's||
|derivatives for the||
|Reporting Period as||
|compared to the||
|previous Reporting||
|Period||
|Special opinions|The Company's independent directors are of the view that the futures hedging business is an|
|expressed by|effective instrument for the Company to eliminate price volatility and implement risk prevention|
|independent directors|measures through enhanced internal control, thereby improving the operation and management|
|concerning the|of the Company; the Company's foreign exchange risk management capability can be further|
|Company's|improved through the forex funds business, so as to maintain and increase the value of foreign|
|derivatives|exchange assets and the abovementioned investment in derivatives can help the Company to fully|
|investment and risk|bring out its competitive advantages. Therefore, it is practicable for the Company to carry out|
|control|derivatives investment business, and the risks are controllable.|

6. Sale of Major Assets and Equity Interests
6.1 Sale of major assets
□ Applicable√ N/A
No such cases in the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 6.2 Sale of major equity interests
□ Applicable√ N/A
7. Analysis of Major Subsidiaries
Main subsidiaries and joint stock companies with an over10% influence on theCompany’s net profit
||||||||||
|-|-|-|-|-|-|-|-|-|
|||||Total|Net|Operating|Operating||
|||||||||Net profit|
||Company|Business|Registered|assets (in|assets (in|revenue|profit (in||
|Company name||||||||(in RMB|
||type|scope|capital|RMB|RMB|(in RMB|RMB||
|||||||||million)|
|||||million)|million)|million)|million)||
|Guangdong Midea||Manufacturing|||||||
||Subsidiar||USD72|10,448.2|||||
|Kitchen Appliances||of home|||2,150.74|7,287.40|865.81|743.68|
||y||million|5|||||
|Manufacturing Co., Ltd.||appliances|||||||
|Guangdong Midea Air-||Manufacturing|||||||
||Subsidiar||RMB854|44,530.2||26,270.8|||
|conditioning Equipment||of air|||4,419.64||611.69|550.31|
||y||million|4||3|||
|Co., Ltd.||conditioners|||||||
|Foshan Shunde Midea||Manufacturing|||||||
||Subsidiar||USD42||||||
|Electric Appliance||of home||7,907.20|3,953.76|5,093.67|801.19|681.57|
||y||million||||||
|Manufacturing Co., Ltd.||appliances|||||||
|Wuhu Midea Kitchen &|||||||||
|||Manufacturing|||||||
|Bathroom Electric|Subsidiar||RMB60||||||
|||of water||5,755.63|732.44|4,707.51|733.25|558.91|
|Appliances|y||million||||||
|||heaters|||||||
|Manufacturing Co., Ltd.|||||||||

Acquisition and disposal of subsidiaries during the Reporting Period
The newly consolidated subsidiaries for the Reporting Period include Guangdong Midea Industrial Technology Co., Ltd., Midea Home Appliances UK Ltd. and Shanghai Chemours Electrical Appliances Co., Ltd. And the newly deconsolidated subsidiaries are Wuhan Midea Consumer Electric Manufacturing Co., Ltd. (dissolved) and Connyun GmbH (disposed). For further information, see Note 5 in “Section X Financial Report”.
8. Structured Bodies Controlled by the Company
□ Applicable√ N/A
Midea Group Co., Ltd. Semi-Annual Report 2018 9. Forecast of Business Performance from January to September in 2018
Warning about an estimated major change in the aggregate net profit from the beginning of the year to the end of the next reporting period compared with the same period in the previous year and explanation for the change:
□ Applicable√ N/A
10. Risks Facing by the Company and Countermeasures
A. Risk of macro economy fluctuation
The market demand for theCompany’s consumer appliances and HVAC equipment, among other products, can be easily affected by the economic situation and macro control. If the global economy encounters a heavy hit, or the domestic economy consumer demand slows down in growth, the growth of the household appliance industry, to which the Company belongs, will slow down accordingly, and as a result, this may affect the product sales of Midea Group.
B. Risks in the fluctuation of production factors
The raw materials required by Midea Group to manufacture its consumer appliances and core components 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 cost reduction resulted from lean production and improved efficiency, as well as the sale prices of end products cannot offset the total effects of cost fluctuations, theCompany’s business will be influenced to some degree.
C. Risk in global asset allocation and overseas market expansion
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. Progress has been made day by day regarding theCompany’s overseas operations and new business expansion. However, its efforts in global resource integration may not be able to produce expected synergies; and in overseas market expansion, there are still unpredictable risks such as local political and economic situations, significant changes in law and regulation systems, and sharp increases in production costs.
Midea Group Co., Ltd. Semi-Annual Report 2018 D. Risk in product export and foreign exchange losses caused by exchange rate fluctuation As Midea carries on with its overseas expansion plan, its export revenue has accounted for nearly50% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects on the export of the Company, but could also lead to exchange losses and increase its finance costs.
E. Market risks brought by trade barriers
With trade protectionism on the rise around the world, besides the tariff barriers, the non-tariff barriers among countries have become increasingly distinctive. This may aggravate the burden in costs and expenses for household appliance enterprises, and has brought about new challenges to market expansion for enterprises.
In face of the complicated and changeable environment and risks at home and abroad, Midea will strictly follow the Company Law, the Securities Law, the CSRC regulations and other applicable rules, keep improving its governance structure for better compliance, and reinforce its internal control system so as to effectively prevent and control various risks and ensure its sustained, steady and healthy development.
Midea Group Co., Ltd. Semi-Annual Report 2018 Section V Significant Events
1. Annual and Extraordinary General Meetings of Shareholders Convened during Reporting Period
1.1 General Meetings of Shareholders Convened during Reporting Period
|||||||
|-|-|-|-|-|-|
|||Investor||||
|Meeting|Type|participati|Convened date|Disclosure date|Index to disclosed information|
|||on ratio||||
||||||Announcement No. 2018-016 on|
|2017 Annual General||||||
||||||Resolutions of 2017 Annual|
|Meeting of|Annual|48.22%|23/04/2018|24/04/2018||
||||||General Meeting of Shareholders,|
|Shareholders||||||
||||||disclosed on www.cninfo.com.cn|

 1.2 Extraordinary General Meetings of Shareholders Convened at Request of Preference Shareholders with Resumed Voting Rights
□ Applicable√ N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Reserves into Share Capital for the Reporting Period
□ Applicable√ N/A
The Company plans not to distribute cash dividends or bonus shares or convert capital reserves into share capital for the first half of 2018.
3. Undertakings of theCompany’s actual controller, shareholders, related parties and acquirer, as well as the Company and other commitment makers fulfilled in the Reporting Period or overdue at the period-end
||||||||
|-|-|-|-|-|-|-|
|||Type of||||Particulars|
||Undertaki|||Undertaki|||
|Undertaking||undertakin|Details of undertaking||Term|on the|
||ng giver|||ng date|||
|||g||||performance|
||||Xiaomi Technology has given||||
||||||36 months from the||
|Undertakings|Xiaomi||an undertaking that it shall|||Fulfilled,|
|||Private||26/06/20|listing date of this||
|given in time of|Technolo||not transfer the shares that it|||without|
|||issue||15|private placement, i.e.||
|IPO or refinancing|gy||had subscribed for in this|||violations|
||||||to 26 June 2018||
||||private placement with Midea||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||
|-|-|-|
|||Group within 36 months from|
|||the completion date of this|
|||offering (26 June 2015, the|
|||listing date for this offering).|
|Whether the|||
|undertaking is|Yes||
|fulfilled on time|||
|Specific reasons|||
|for failing to fulfill|||
|any undertaking|N/A||
|and plan for the|||
|next step|||

4. Engagement and Disengagement of CPAs Firm
Have the H1 2018 financial statements been audited by a CPAs firm?
□ Yes√ No
The H1 2018 financial statements are unaudited by a CPAs firm.
5. Explanation of the Board of Directors and the Supervisory Committee Regarding the "Non-standard Audit Opinion" for the Reporting Period
□ Applicable√ N/A
6. Explanation of the Board of Directors Regarding the "Non-standard Audit Opinion" for Last Year
□ Applicable√ N/A
7. Bankruptcy and Reorganization
□ Applicable√ N/A
No such cases in the Reporting Period.
8. Litigation
Material litigation and arbitration:
□ Applicable√ N/A
No such cases in the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 Other legal matters:
□ Applicable√ N/A
9. Punishments and Rectifications
□ Applicable√ N/A
No such cases in the Reporting Period.
10. Credit Conditions of the Company as well as Its Controlling Shareholder and Actual Controller
□ Applicable√ N/A
11. Implementation of any Equity Incentive Scheme, Employee Stock Ownership Scheme or Other Incentive Measures for Employees
A. Overview of the First Stock Option Incentive Scheme
a. On 26 April 2018, the Announcement on the 2017 Annual Profit Distribution was disclosed by the Company, with a decision to distribute a cash dividend of RMB12.00 per 10 shares to all the shareholders based on the total of 6,584,022,574 shares of the Company. The book closure date was 3 May 2018 and the ex-dividend date was 4 May 2018.
b. The Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Exercise Price for the First Stock Option Incentive Scheme was reviewed and approved. As the 2017 Annual Profit Distribution had been carried out, the exercise price for the First Stock Option Incentive Scheme was revised from RMB10.01 to RMB8.81 per share. B. Overview of the Second Stock Option Incentive Scheme
a. The Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Exercise Price for the Second Stock Option Incentive Scheme was reviewed and approved. As the 2017 Annual Profit Distribution had been carried out, the exercise price for the Second Stock Option Incentive Scheme was revised from RMB18.56 to RMB17.36 per share. b. The Company convened the 35th Meeting of the 2nd Board of Directors on 4 June 2018, at which the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the Second Stock Option Incentive Scheme was reviewed and approved. As such, it was agreed to adjust
Midea Group Co., Ltd. Semi-Annual Report 2018 the incentive receivers and their exercisable stock options for the Second Stock Option Incentive Scheme due to the departure, positional changes, low performance appraisals or other factors of some incentive receivers. Upon the adjustments, the number of incentive receivers decreased from 583 to 554, and the number of locked-up stock options granted to them was also reduced from 33,255,000 to 31,470,000. The Proposal for Matters Related to the Stock Option Exercise for the Third Exercise Period of the Second Stock Option Incentive Scheme was also considered and approved. Because the exercise conditions have grown mature for the third exercise period, a total of 550 incentive receivers who have been verified for the Second Stock Option Incentive Scheme have been allowed to exercise 31,470,000 stock options in the third exercise period (ended 27 May 2020).
C. Overview of the Third Stock Option Incentive Scheme
a. The Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Exercise Price for the Third Stock Option Incentive Scheme was reviewed and approved. As the 2017 Annual Profit Distribution had been carried out, the exercise price for the Third Stock Option Incentive Scheme was revised from RMB20.35 to RMB19.15 per share. b. The Company convened the 36th Meeting of the 2nd Board of Directors on 3 July 2018, at which the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the Third Stock Option Incentive Scheme was reviewed and approved. As such, it was agreed to adjust the incentive receivers and their exercisable stock options for the Third Stock Option Incentive Scheme due to the departure, positional changes, low performance appraisals or other factors of some incentive receivers. Upon the adjustments, the number of incentive receivers decreased from 891 to 850, and the number of locked-up stock options granted to them was also reduced from 81,090,000 to 76,149,557. The Proposal for Matters Related to the Stock Option Exercise for the Second Exercise Period of the Third Stock Option Incentive Scheme was also considered and approved. Because the exercise conditions have grown mature for the second exercise period, a total of 840 incentive receivers who have been verified for the Third Stock Option Incentive Scheme have been allowed to exercise 38,079,557 stock options in the second exercise period (ended 27 June 2020).
D. Overview of the Fourth Stock Option Incentive Scheme
a. The Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Exercise Price for the Fourth Stock Option Incentive Scheme was
Midea Group Co., Ltd. Semi-Annual Report 2018 reviewed and approved. As the 2017 Annual Profit Distribution had been carried out, the exercise price for the Fourth Stock Option Incentive Scheme was revised from RMB32.72 to RMB31.52 per share. b. The Company convened the 34th Meeting of the 2nd Board of Directors on 21 May 2018, at which the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the Fourth Stock Option Incentive Scheme was reviewed and approved. As such, it was agreed to adjust the incentive receivers and their exercisable stock options for the Fourth Stock Option Incentive Scheme due to the departure, positional changes, low individual or business division performance appraisals or other factors of some incentive receivers. Upon the adjustments, the number of incentive receivers decreased from 1,463 to 1,354, and the number of locked-up stock options granted to them was also reduced from 98,274,000 to 90,185,800.
The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of the Fourth Stock Option Incentive Scheme was also considered and approved. Because the exercise conditions have grown mature for the first exercise period, a total of 1,339 incentive receivers who have been verified for the Fourth Stock Option Incentive Scheme have been allowed to exercise 29,509,800 stock options in the first exercise period (ended 11 May 2019).
E. Overview of the Fifth Stock Option Incentive Scheme
a. On 29 March 2018, the Fifth Stock Option Incentive Scheme (Draft) of Midea Group Co., Ltd (hereinafter referred to as the “Fifth Stock Option Incentive Scheme (Draft)”) and its abstract were reviewed and approved at the 30th Meeting of the 2nd Board of Directors, and the incentive receiver list for the Fifth Stock Option Incentive Scheme (Draft) was examined at the 22nd Meeting of the 2nd Supervisory Committee.
b. On 23 April 2018, the Company convened the 2017 Annual General Meeting of Shareholders, at which the Proposal on the Fifth Stock Option Incentive Scheme (Draft) and Its Abstract, the Proposal on the Implementation and Appraisal Measures for the Fifth Stock Option Incentive Scheme, the Proposal for Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the Fifth Stock Option Incentive Scheme and other relevant proposals were reviewed and approved.
For this Incentive Scheme, the Company intended to grant 62,080,000 stock options, including 55,080,000 stock options(88.72% of the total grant) to 1,341 incentive receivers for the first phase with the exercise price being RMB57.54 per share, and 7,000,000 reserved stock options(11.28% of the total
Midea Group Co., Ltd. Semi-Annual Report 2018 grant).
c. In light of the authorization given at the 2017 Annual General Meeting of Shareholders, the Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Exercise Price for the First Phase, Incentive Receiver List and Number of Stock Options to Be Granted for the Fifth Stock Option Incentive Scheme, the Proposal for the Determination of the Grant Date for the First Phase of the Fifth Stock Option Incentive Scheme and the Proposal for the First-Grant-Related Matters for the Fifth Stock Option Incentive Scheme were reviewed and approved. As such, the Company agreed to grant 54,520,000 stock options to 1,330 incentive receivers on 7 May 2018 for the first phase with the exercise price revised from RMB57.54 per share to RMB56.34 per share. F. Overview of the First Partner Stock Ownership Scheme
a. The Company disclosed the Reminder of the Advanced Completion of the Vesting under the First Partner Stock Ownership Scheme on 28 April 2018. As such, the final30% installment of shares under the First Partner Stock Ownership Scheme had been vested, marking the completion of this scheme. A total of 1,796,850 shares had been vested in theCompany’s incumbent senior management (Fang Hongbo, Yin Bitong, Zhu Fengtao, Gu Yanmin, Wang Jinliang, Wang Jianguo and Xiang Weimin), 906,000 shares had been vested in other incentive receivers, and the remaining unvested 240,150 shares and the corresponding dividends (if any) had been taken back by the administrative committee of this scheme for no compensation, and sold at a proper timing before this scheme expired. The earnings on the sale belonged to the Company.
G. Overview of the Second Partner Stock Ownership Scheme
a. The Company disclosed the Announcement on the Vesting of the Second Installment under the Second Partner Stock Ownership Scheme on 28 April 2018. As such, the second30% installment of shares under the Second Partner Stock Ownership Scheme was vested. A total of 615,459 shares were vested in theCompany’s incumbent senior management (Fang Hongbo, Yin Bitong, Zhu Fengtao, Gu Yanmin, Wang Jinliang, Wang Jianguo and Xiang Weimin), and 332,091 shares were vested in other incentive receivers. H. Overview of the Third Partner Stock Ownership Scheme
a. TheCompany’s performance requirement for the Third Partner Stock Ownership Scheme is a weighted average ROE not lower than20% for 2017. According to the 2017 AnnualAuditor’s Report for Midea Group Co., Ltd. issued by PricewaterhouseCoopers China (LLP), this ROE requirement has been met at
Midea Group Co., Ltd. Semi-Annual Report 201825.88%.
b. After theCompany’s performance requirement for this scheme had been met, the shares for each partner were determined according to how well the performance objectives of the Company, its business divisions and operating units for 2017 had been achieved and how much a partner had contributed to that. And then the shares would be vested in the partners in three installments with a 12-month interval. c. A total of 2,846,445 of theCompany’s shares have been purchased for this scheme. As per the relevant rules, the administrative committee of this scheme has confirmed the number of shares to be granted to each partner, with the total shares to be granted being 2,774,565 shares (1,926,385 shares for senior management Fang Hongbo, Yin Bitong, Zhu Fengtao, Gu Yanmin, Wang Jinliang, Wang Jianguo, Xiang Weimin and Xiao Mingguang, and the remaining 848,180 shares for other seven core management personnel). The committee has also confirmed the first40% installment (1,109,826 shares in total) for this scheme. The remaining 71,880 shares and the corresponding dividends (if any) will be taken back by the administrative committee for no compensation, and will be sold before this scheme expires. The earnings on the sale will belong to the Company.
I. Overview of the Fourth Global Partner Stock Ownership Scheme
a. The Fourth Core Management and Global Partner Stock Ownership Scheme was approved at the 30th Meeting of the 2nd Board of Directors on 29 March 2018 and the 2017 Annual General Meeting of Shareholders on 23 April 2018. As resolved by a meeting of the partners of the Fourth Global Partner Stock Ownership Scheme, China International Capital Corporation Limited (CICC) was entrusted to conduct the “CICC Directional Asset Management Scheme for MideaGroup’s Fourth Global Partner Stock Ownership Scheme” with Midea Group shares purchased from the secondary market.
b. From 14 to 15 May 2018, CICC, the scheme administrator, purchased a total of 3,318,540 Midea Group shares at an average price of RMB54.98/share from the secondary market. The funds used for the share purchase were sourced from MideaGroup’s special fund for this scheme of RMB182.50 million. As such, the shares needed by this scheme have been purchased, with a lock-up period from 16 May 2018 to 15 May 2019.
J. Overview of the First Business Partner Stock Ownership Scheme
a. The First Core Management and Business Partner Stock Ownership Scheme was approved at the 30th Meeting of the 2nd Board of Directors on 29 March 2018 and the 2017 Annual General Meeting of
Midea Group Co., Ltd. Semi-Annual Report 2018 Shareholders on 23 April 2018. As resolved by a meeting of the partners of the First Business Partner Stock Ownership Scheme, China International Capital Corporation Limited (CICC) was entrusted to conduct the “CICC Directional Asset Management Scheme for MideaGroup’s First Business Partner Stock Ownership Scheme” with Midea Group shares purchased from the secondary market.
b. From 14 to 15 May 2018, CICC, the scheme administrator, purchased a total of 1,779,300 Midea Group shares at an average price of RMB54.98/share from the secondary market. The funds used for the share purchase were sourced from MideaGroup’s special fund for this scheme and part of the seniormanagement’s performance bonuses of an aggregate amount of RMB97.85 million. As such, the shares needed by this scheme have been purchased, with a lock-up period from 16 May 2018 to 15 May 2019. K. Overview of the 2017 Restricted Share Incentive Scheme
a. In light of the authorization given at the 2016 Annual General Meeting of Shareholders, the Company convened the 29th Meeting of the 2nd Board of Directors on 29 December 2017, at which the Proposal on Grant of 2017 Reserved Restricted Shares to Incentive Receivers was reviewed and approved. As such, the Company agreed to grant 5,475,000 reserved restricted shares to 55 incentive receivers on 29 December 2017 at the price of RMB27.99 per share. And the incentive receiver list was examined at the 21st Meeting of the 2nd Supervisory Committee.
b. The Company had intended to grant 5,475,000 reserved restricted shares to 55 incentive receivers. However, after the date of grant, one incentive receiver left the Company and the 90,000 reserved restricted shares that had been granted to this incentive receiver were cancelled. As such, the Company actually granted 5,385,000 reserved restricted shares to 54 incentive receivers. PricewaterhouseCoopers China (LLP) issued on 26 January 2018 the Capital Verification Report PwC China CV (2018) No. 0061, verifying the corresponding increase in theCompany’s registered capital and the payment thereof as of 24 January 2018. As verified, as of 24 January 2018, the Company had received RMB150,726,150 from 54 incentive receivers for reserved restricted share subscription, representing an increase of RMB5,385,000 in share capital and an increase of RMB145,341,150 in capital reserves.
c. As per theCSRC’s Measures for the Administration of Equity Incentives of Listed Companies, and as confirmed by the Shenzhen Stock Exchange and China Securities Depository and Clearing Co., Ltd. (Shenzhen branch), the reserved shares in theCompany’s 2017 Restricted Share Incentive Scheme had been registered and were to go public on 7 February 2018.
Midea Group Co., Ltd. Semi-Annual Report 2018 d. The Proposal on the Cancellation of the Remaining Reserved Restricted Shares for 2017 was approved at the 30th Meeting of the 2nd Board of Directors on 29 March 2018. The Company decided to cancel the remaining 75,000 such shares as there were no other personnel that met the conditions for the restricted share incentives within the effective period.
e. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017 Restricted Share Incentive Scheme was approved at the 34th Meeting of the 2nd Board of Directors on 21 May 2018. As such, it was agreed to repurchase and retire 1,701,834 restricted shares that had been granted to 31 personnel but were still in lockup, for the reason of their departure, violation of company rules, businessunit’s 2017 performance appraisal result being “just so-so”, positional change or other factors.
Also, the Proposal on the Satisfaction of the Conditions for the First Unlocking Period for the First Phase of the 2017 Restricted Share Incentive Scheme was approved at the aforesaid meeting. A total of 131 personnel were eligible for this unlocking, with 7,198,166 restricted shares unlocked and allowed for public trading, accounting for0.11% of theCompany’s existing total shares.
f. Up to 29 June 2018, the Company had returned an aggregate amount of RMB28,810,587.24 in cash to the incentive receivers, representing a decrease of RMB1,701,834.00 in share capital and a decrease of RMB27,108,753.24 in capital reserves. This matter was verified by GP Certified Public Accountants, which issued the Capital Verification Report GP CV[2018] No. G18026510012.
The Company submitted the application to China Securities Depository and Clearing Co., Ltd. (Shenzhen branch) for the retirement of the 1,701,834 restricted shares that had been granted but were still in lockup. On 30 July 2018, as confirmed by the said institution, the retirement of the said restricted shares had been completed.
L. Overview of the 2018 Restricted Share Incentive Scheme
a. On 29 March 2018, the 2018 Restricted Share Incentive Scheme (Draft) of Midea Group Co., Ltd. (hereinafter referred to as the “2018 Restricted Share Incentive Scheme (Draft)”) and its abstract were reviewed and approved at the 30th Meeting of the 2nd Board of Directors, and the incentive receiver list for the 2018 Restricted Share Incentive Scheme (Draft) was examined at the 22nd Meeting of the 2nd Supervisory Committee.
b. On 23 April 2018, the Company convened the 2017 Annual General Meeting of Shareholders, at which
Midea Group Co., Ltd. Semi-Annual Report 2018 the Proposal on the 2018 Restricted Share Incentive Scheme (Draft) and Its Abstract, the Proposal on the Implementation and Appraisal Measures for the 2018 Restricted Share Incentive Scheme, the Proposal for Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the 2018 Restricted Share Incentive Scheme and other relevant proposals were reviewed and approved. For this scheme, the Company intended to grant 25,010,000 restricted shares, including 22,210,000 restricted shares(88.80% of the total grant) to 344 incentive receivers for the first phase with the price being RMB28.77/share, and 2,800,000 reserved restricted shares(11.20% of the total grant).
c. In light of the authorization given at the 2017 Annual General Meeting of Shareholders, the Company convened the 33rd Meeting of the 2nd Board of Directors on 7 May 2018, at which the Proposal for the Adjustments to the Grant Price, Incentive Receiver List and Number of Restricted Shares to Be Granted for the First Phase of the 2018 Restricted Share Incentive Scheme, the Proposal for the Determination of the Grant Date for the First Phase of the 2018 Restricted Share Incentive Scheme and the Proposal for the Grant-Related Matters for the First Phase of the 2018 Restricted Share Incentive Scheme were reviewed and approved. As such, the Company agreed to grant 22,150,000 restricted shares to 343 incentive receivers on 7 May 2018 for the first phase of the said scheme with the price revised from RMB28.77 per share to RMB27.57 per share.
d. For the first phase of this scheme, the Company intended to grant 22,150,000 restricted shares to 343 incentive receivers, but after the grant date, 24 of them decided to waive their subscription right to a total of 1,580,000 restricted shares. Therefore, the Company actually granted 20,570,000 restricted shares to 319 incentive receivers. GP Certified Public Accountants (LLP) issued the Capital Verification Report GP CV[2018] No. G18027340015 on 8 June 2018, verifying the increase in theCompany’s registered capital and the payment thereof as of 6 June 2018 due to theCompany’s issue of restricted shares of its A-stock to 319 incentive receivers in the first phase of its 2018 Restricted Share Incentive Scheme. As verified, as of 6 June 2018, the Company had received RMB567,114,900.00 from 319 incentive receivers for restricted share subscription, representing an increase of RMB20,570,000.00 in share capital and an increase of RMB546,544,900.00 in capital reserves.
e. As per theCSRC’s Measures for the Administration of Equity Incentives of Listed Companies, and as confirmed by the Shenzhen Stock Exchange and China Securities Depository and Clearing Co., Ltd. (Shenzhen branch), the shares in the first phase of theCompany’s 2018 Restricted Share Incentive
Scheme had been registered and were to go public on 21 June 2018.
Midea Group Co., Ltd. Semi-Annual Report 2018 12. Significant Related Transactions
12.1 Related transactions arising from routine operation
|||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|-|
||||||||Propo|||||||
||||||||rtion||||Obtaina|||
||||||||in the||||ble|||
||||||||total|Approv|||market||Index|
|||||||Transacti||||||||
|Related||Type of|Content||Tran||amou|ed||Mode|price||to the|
|||||Pricing||on|||Over|||Disclos||
|transac|Relatio|the|s of the||sacti||nts of|transact||of|for the||disclo|
|||||principl||amount|||approved|||ure||
|tion|n|transac|transac||on||transa|ion line||settlem|transac||sed|
|||||e||(RMB’0,|||line|||date||
|party||tion|tion||price||ction|(RMB’0,||ent|tion of||inform|
|||||||000)||||||||
||||||||of the|000)|||the||ation|
||||||||same||||same|||
||||||||kind||||kind|||
||||||||(%)|||||||
||Controll|||||||||||||
|Infore|ed by|||||||||||||
|Environ|family|||||||||||||
|ment|membe||||||||||||www.|
||||Procure|||||||Payme||||
|Technol|r of|Procure||Market||61,486.9||||||31/03/2|cninf|
||||ment of||-||0.68%|155,000|No|nt after|-|||
|ogy|Compa|ment||price||0||||||018|o.co|
||||goods|||||||delivery||||
|Group|ny’s||||||||||||m.cn|
|Co.,|actual|||||||||||||
|Ltd.|controll|||||||||||||
||er|||||||||||||
||Controll|||||||||||||
||ed by|||||||||||||
||family|||||||||||||
||membe||||||||||||www.|
|Orinko|||Procure|||||||Payme||||
||r of|Procure||Market||17,057.8||||||31/03/2|cninf|
|Plastics|||ment of||-||0.19%|45,000|No|nt after|-|||
||Compa|ment||price||0||||||018|o.co|
|Group|||goods|||||||delivery||||
||ny’s||||||||||||m.cn|
||actual|||||||||||||
||controll|||||||||||||
||er|||||||||||||
|||||||78,544.7||||||||
|Total||||--|--||--|200,000|--|--|--|--|--|
|||||||0||||||||
|Details of any sales return of a||||||||||||||
|||||Zero||||||||||
|large amount||||||||||||||
|Give the actual situation in the||||||||||||||
|||||The line for routine related transactions between the Company and the related||||||||||
|Reporting Period (if any) where a||||||||||||||
|||||parties and their subsidiaries did not exceed the total amount of routine related||||||||||
|forecast had been made for the||||||||||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||
|-|-|
|total amounts of routine related-|transactions estimated by the Company by type.|
|party 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)||

12.2 Related transactions regarding purchase or sales of assets or equity interests
□ Applicable√ N/A
No such cases in the Reporting Period.
12.3 Related transitions arising from joint investments in external parties
|||||||||
|-|-|-|-|-|-|-|-|
||||||Total assets|||
||Relationship||Core|Registered||Net assets of|Net profit of|
|Joint|||||of investee|||
||with the|Investee|business of|capital of||investee|investee|
|investor|||||(RMB’0,000|||
||Company||investee|investee||(RMB’0,000)|(RMB’0,000)|
||||||)|||
|||Midea||||||
||||Equity|||||
|Guangdong||Capital||||||
||Controlled by Li||investment|||||
|Meizhi||(Guangdon||||||
||Feide, a||and|||||
|Investment||g)||RMB20 million|1,000|1,000|0|
||director of the||management,|||||
|Managemen||Investment||||||
||Company||asset|||||
|t Co., Ltd.||Manageme||||||
||||management|||||
|||nt Co., Ltd.||||||
|Progress of any major||||||||
|ongoing construction of the||N/A||||||
|investee (if any)||||||||

12.4 Credits and liabilities with related parties
□ Applicable√ N/A
No such cases in the Reporting Period.
12.5 Other significant related transactions
The Proposal for Related Transactions Regarding Making Deposits in and Obtaining Loans from Shunde
Rural Commercial Bank in 2018 was reviewed and approved at the 30th Meeting of the 2nd Board of
Midea Group Co., Ltd. Semi-Annual Report 2018 Directors held on 29 March 2018 and later at the 2017 Annual General Meeting of Shareholders held on 23 April 2018.
In 2018, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceed RMB5 billion and neither shall the credit balance provided by the bank to the Company exceed RMB5 billion. Index to the announcement about the said related transactions disclosed
||||
|-|-|-|
|Title of announcement|Disclosure date|Disclosure website|
|Announcement on Related Transactions Regarding MakingDeposits in and Obtaining Loans from ShundeRural Commercial Bank in 2018|||
||31/03/2018|www.cninfo.com.cn|

13. 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.
14. Significant Contracts and Their Execution
14.1 Trusteeship, contracting and leasing
14.1.1 Trusteeship
□ Applicable√ N/A
No such cases in the Reporting Period.
14.1.2 Contracting
□ Applicable√ N/A
No such cases in the Reporting Period.
14.1.3 Leasing
□ Applicable√ N/A
No such cases in the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 14.2 Major Guarantees
14.2.1 Guarantees provided
Unit: RMB'0,000
||||||||||
|-|-|-|-|-|-|-|-|-|
|Guarantees provided by the Company for external parties (excluding those for subsidiaries)|||||||||
||Disclosur||Actual|||||Guar|
||e date of||occurrenc|||||antee|
|||||||Term|||
||the|Line of|e date|Actual||||for a|
||||||Type of|of|Due||
|Guaranteed party|guarante|guarante|(date of|guarantee||||relate|
||||||guarantee|guara|or not||
||e line|e|agreeme|amount||||d|
|||||||ntee|||
||announce||nt|||||party|
||ment||signing)|||||or not|
|Misr Refrigeration and Air Conditioning|2018-3-|||||One|||
|||1,100|-|0|Joint liability||No|No|
|Manufacturing Co.|31|||||year|||
|||||Total actual external|||||
|Total external guarantee line approved during the|||||||||
|||1,100||guarantee amount during||0|||
|Reporting Period (A1)|||||||||
|||||the Reporting Period (A2)|||||
|||||Total actual external|||||
|Total approved external guarantee line at the end of||||guarantee balance at the|||||
|||1,100||||0|||
|the Reporting Period (A3)||||end of the Reporting Period|||||
|||||(A4)|||||
|Guarantees provided by the Company for its subsidiaries|||||||||
||Disclosur||Actual|||||Guar|
||e date of||occurrenc|||||antee|
|||||||Term|||
||the|Line of|e date|Actual||||for a|
||||||Type of|of|Due||
|Guaranteed party|guarante|guarante|(date of|guarantee||||relate|
||||||guarantee|guara|or not||
||e line|e|agreeme|amount||||d|
|||||||ntee|||
||announce||nt|||||party|
||ment||signing)|||||or not|
||2018-3-||2018-2-|||One|||
|Midea Group Finance Co., Ltd.||838,000||0|Joint liability||No|No|
||31||28|||year|||
|Guangdong Midea Refrigeration|2018-3-|1,188,60|2018-1-||||||
|||||7,784|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31|0|11||||||
|Guangzhou Hualing Refrigeration|2018-3-||||||||
|||119,600|2018-2-9|33|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
|Guangdong Midea Kitchen Appliances|2018-3-||||||||
|||396,000|2018-1-8|37,501|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||||||||
|Foshan Shunde Midea Washing|2018-3-||2018-1-||||||
|||207,000||25,618|Ditto|Ditto|Ditto|Ditto|
|Appliance Manufacturing Co., Ltd.|31||12||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|Guangdong Witt Vacuum Electronics|2018-3-||2018-1-||||||
|||18,000||34|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||12||||||
|Guangdong Midea Precision Mold|2018-3-||||||||
|||11,400|-|0|Ditto|Ditto|Ditto|Ditto|
|Technology Co., Ltd.|31||||||||
|Guangdong AEG Electrical Appliances|2018-3-||||||||
|||36,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|31||||||||
|Guangdong Midea Heating & Ventilation|2018-3-||||||||
|||133,200|2018-1-2|14,833|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
|Guangdong Midea-SIIX Electronics Co.,|2018-3-||||||||
|||15,120|2018-1-8|74|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
|Guangdong Midea Consumer Electric|2018-3-||2018-1-||||||
|||5,000||830|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||16||||||
|Foshan Shunde Midea Electric Appliance|2018-3-||2018-1-||||||
|||10,000||277|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||10||||||
|Guangdong Midea Kitchen & Bathroom|2018-3-||||||||
|||3,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Appliances Manufacturing Co., Ltd.|31||||||||
|Foshan Shunde Midea Drinking|2018-3-||||||||
|||45,600|2018-1-9|2,450|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||||||||
|Foshan Midea Clear Lake Water|||||||||
||2018-3-||||||||
|Purification Equipment Manufacturing||3,600|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Co., Ltd.|||||||||
|Guangdong Midea Environment|2018-3-||2018-4-||||||
|||35,200||0|Ditto|Ditto|Ditto|Ditto|
|Appliances Manufacturing Co., Ltd.|31||27||||||
|Guangdong GMCC Refrigeration|2018-3-||||||||
|||14,000|2018-1-9|3,155|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
|Guangdong GMCC Precise Manufacture|2018-3-||2018-3-||||||
|||9,000||716|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|31||13||||||
||2018-3-||||||||
|Guangdong Welling Motor Co., Ltd.||11,600|2018-1-9|847|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Foshan Welling Washer Motor|2018-3-||||||||
|||36,200|2018-1-2|905|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||||||||
|Guangdong Midea Environment|2018-3-||||||||
|||4,800|-|0|Ditto|Ditto|Ditto|Ditto|
|Technology Co., Ltd.|31||||||||
|Ningbo Midea Joint Materials Supply Co.|2018-3-||||||||
|||44,880|2018-1-9|10,800|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
||2018-3-||2018-1-||||||
|Foshan Welling Material Co., Ltd.||3,000||2,250|Ditto|Ditto|Ditto|Ditto|
||31||26||||||
||2018-3-||2018-1-||||||
|Guangzhou Kaizhao Trading Co., Ltd.||720||1,367|Ditto|Ditto|Ditto|Ditto|
||31||12||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|Guangdong Midea Smart Robots Co.,|2018-3-||||||||
|||2,400|-|0|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
|Midea Group Electronics Commerce Co.,|2018-3-||||||||
|||6,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
||2018-3-||||||||
|Annto Logistics Technology Co., Ltd.||4,000|2018-3-9|320|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Guangdong Midea Group Wuhu|2018-3-||||||||
|||172,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Refrigeration Equipment Co., Ltd.|31||||||||
|Wuhu GMCC Air Conditioning Equipment|2018-3-||||||||
|||11,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|31||||||||
|Wuhu Midea Kitchen Appliances|2018-3-||||||||
|||14,600|-|0|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||||||||
||2018-3-||2018-4-||||||
|Hefei Hualing Co., Ltd.||6,000||66|Ditto|Ditto|Ditto|Ditto|
||31||13||||||
||2018-3-||||||||
|Hubei Midea Refrigerator Co., Ltd.||48,000|2018-2-5|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||2018-4-||||||
|Hefei Midea Refrigerator Co., Ltd.||88,660||2,000|Ditto|Ditto|Ditto|Ditto|
||31||10||||||
|Guangzhou Midea Hualing Refrigerator|2018-3-||||||||
|||40,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
|Hefei Midea Heating & Ventilation|2018-3-||||||||
|||9,000|2018-1-1|1,542|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
||2018-3-||||||||
|Hefei Midea & SIIX Electronics Co., Ltd.||10,500|2018-1-1|1,159|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Hefei Midea-Bosch Air Conditioning|2018-3-||||||||
|||1,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
|Wuhu Midea Kitchen & Bathroom Electric|2018-3-||2018-1-||||||
|||38,400||1,890|Ditto|Ditto|Ditto|Ditto|
|Manufacturing Co., Ltd.|31||12||||||
|Anhui GMCC Refrigeration Equipment|2018-3-||2018-2-||||||
|||3,000||0|Ditto|Ditto|Ditto|Ditto|
|Co., Ltd.|31||27||||||
|Anhui GMCC Precise Manufacture Co.,|2018-3-||||||||
|||3,600|2018-3-1|71|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
|Welling (Wuhu) Motor Manufacturing Co.,|2018-3-||||||||
|||2,400|-|0|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
||2018-3-||2018-1-||||||
|Hefei Midea Washing Machine Co., Ltd.||127,000||633|Ditto|Ditto|Ditto|Ditto|
||31||18||||||
|Jiangsu Midea Cleaning Appliances Co.,|2018-3-||2018-1-||||||
|||33,500||546|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||10||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||
|-|-|-|-|-|-|-|-|-|
|Chongqing Midea General Refrigeration|2018-3-||||||||
|||4,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Equipment Co., Ltd.|31||||||||
||2018-3-||||||||
|Jiangxi Midea Guiya Lighting Co., Ltd.||19,700|2018-6-8|230|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Changzhou Welling Motor Co., Ltd.||2,400|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Huai’an Welling Motor Co., Ltd.||2,000|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Zhejiang GMCC Compressor Co., Ltd.||180,000|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||2018-1-||||||
|Midea International Holdings Ltd.||667,844||211,504|Ditto|Ditto|Ditto|Ditto|
||31||1||||||
||2018-3-||||||||
|Midea International Trading Co., Ltd||83,350|2018-1-1|38,569|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Midea Investment and Development Co.,|2018-3-||2018-1-||||||
|||700,000||457,516|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||1||||||
||2018-3-||||||||
|Main Power Electrical Factory Ltd||34,806|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea Electric Investment (BVI) Limited||80,780|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea Refrigeration (Hong Kong) Ltd.||3,500|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Welling International Hong Kong Limited||32,100|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
|Midea Electric Trading (Singapore) Co.|2018-3-||2018-1-||||||
|||538,400||60,551|Ditto|Ditto|Ditto|Ditto|
|Pte. Ltd.|31||5||||||
|Toshiba Lifestyle Products & Services|2018-3-||2018-1-||||||
|||419,760||14,618|Ditto|Ditto|Ditto|Ditto|
|Corporation and its subsidiaries|31||15||||||
|Midea Consumer Electric (Vietnam) Co.,|2018-3-||||||||
|||13,000|-|0|Ditto|Ditto|Ditto|Ditto|
|Ltd.|31||||||||
||2018-3-||||||||
|Springer Carrier Ltda.|||||Ditto|Ditto|Ditto|Ditto|
||31||||||||
|||126,100|2018-1-4|40,116|||||
||2018-3-||||||||
|Climazon Industrial Ltda.|||||Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea India private limited||6,900|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||2018-1-||||||
|Carrier(Chile) S.A.||3,500||4,184|Ditto|Ditto|Ditto|Ditto|
||31||30||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||
|-|-|-|-|-|-|-|-|-|
||2018-3-||||||||
|Midea Middle East||10,300|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea America (Canada) Corp.||5,500|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea Austria GmbH||3,400|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||2018-2-||||||
|Midea Electric Trading (Thailand) Limited||10,300||600|Ditto|Ditto|Ditto|Ditto|
||31||15||||||
||2018-3-||||||||
|Midea America Corp.||18,200|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|PT. Midea Planet Indonesia||15,100|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea Europe GmbH||6,900|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-||||||||
|Midea México, S. De R.L. De C.V.||13,800|-|0|Ditto|Ditto|Ditto|Ditto|
||31||||||||
||2018-3-|2,960,00|||||||
|Midea Electric Netherlands（Ⅰ）B.V.|||2018-1-1|2,893,044|Ditto|Ditto|Ditto|Ditto|
||31|0|||||||
|||||Total actual guarantee|||||
|Total guarantee line for subsidiaries approved||||amount for subsidiaries|||||
|||9,772,220||||4,294,447|||
|during the Reporting Period (B1)||||during the Reporting Period|||||
|||||(B2)|||||
|||||Total actual guarantee|||||
|Total approved guarantee line for subsidiaries at the||||balance for subsidiaries at|||||
|||9,772,220||||3,838,633|||
|end of the Reporting Period (B3)||||the end of the Reporting|||||
|||||Period (B4)|||||
|Guarantees between subsidiaries|||||||||
||Disclosur||Actual|||||Guar|
||e date of||occurrenc|||||antee|
|||||||Term|||
||the|Line of|e date|Actual||||for a|
||||||Type of|of|Due||
|Guaranteed party|guarante|guarante|(date of|guarantee||||relate|
||||||guarantee|guara|or not||
||e line|e|agreeme|amount||||d|
|||||||ntee|||
||announce||nt|||||party|
||ment||signing)|||||or not|
|No such cases|||||||||
|Total guarantee amount (total of the above-mentioned three kinds of guarantees)|||||||||
|||||Total actual guarantee|||||
|Total guarantee line approved during the Reporting|||||||||
|||9,773,320||||4,294,447|||
|||||amount during the|||||
|Period (A1+B1+C1)|||||||||
|||||Reporting Period|||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||||
|-|-|-|-|
|||(A2+B2+C2)||
|||Total actual guarantee||
|Total approved guarantee line at the end of the||balance at the end of the||
||9,773,320||3,838,633|
|Reporting Period (A3+B3+C3)||Reporting Period||
|||(A4+B4+C4)||
|Proportion of the total actual guarantee amount (A4+B4+C4) in net||||
|||48.41%||
|assets of the Company||||
|Of which:||||
|Amount of guarantees provided for shareholders, the actual controller||||
|||0||
|and their related parties (D)||||
|Amount of debt guarantees provided directly or indirectly for entities with||||
|||3,460,921||
|a liability-to-asset ratio over 70% (E)||||
|Portion of the total guarantee amount in excess of 50% of net assets (F)||0||
|Total amount of the three kinds of guarantees above (D+E+F)||3,460,921||
|Joint responsibilities possibly borne for undue guarantees (if any)||N/A||
|Provision of external guarantees in breach of the prescribed procedures||||
|||N/A||
|(if any)||||

14.2.2 Illegal provision of guarantees for external parties
□ Applicable√ N/A
No such cases in the Reporting Period.
14.3 Other significant contracts
□ Applicable√ N/A
No such cases in the Reporting Period.
15. Social Responsibility (CSR)
15.1 Major environmental issues
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||||Number|||||Approv||
||||||Concentr||||Exce|
|Name of the|||of|||Pollutant|Total|ed total||
||Major|Discharge||Distribution of|ation of||||ss|
|Company or|||dischar|||discharge|discharge|dischar||
||pollutants|method||discharge outlets|the||||disch|
|subsidiary|||ge|||standards|（kg）|ge||
||||||discharge||||arge|
||||outlets|||||（kg）||
|Guangdong||Discharge||The eastern side||The emission||||
|Midea|COD|after being|1|of wastewater|110 mg/L|limit of water|12,129|47,520|No|
|Kitchen||treated by||treatment in||pollutants in||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|-|
|Appliances||wastewater||Malong base|||||Guangdong DB-||||
|Manufacturin||treatment|||||||44/26-2001||||
|g Co., Ltd||system and|||||||||||
|||reaching|||||||||||
|||the|||||||||||
|||standard|||||||||||
|||Discharge|||||||||||
|||after being|||||||||||
|||treated by|||||||||||
|||wastewater|||||||||||
||Ammonia||||||||||||
|||treatment|||15 mg/L|||||263|6,480|No|
||nitrogen||||||||||||
|||system and|||||||||||
|||reaching|||||||||||
|||the|||||||||||
|||standard|||||||||||
|||High|||||||||||
||||||200||||||||
||Soot|altitude||||||||4,525|40,480|No|
|||||2 outlets at the|mg/||m³||The emission||||
|||discharge|||||||||||
|||||western side of|||||limit of air||||
|||High|||||||||||
||Sulfur|||A1 plant, 4|||||pollutants from||||
|||altitude|6||22 mg/|||m³||1,771|10,210|No|
||dioxide|||outlets at the|||||industrial||||
|||discharge|||||||||||
|||||western side of|||||furnace GB-||||
|||High|||||||||||
||Nitrogen|||A2 plant|98.2mg/||||9078-1996||||
|||altitude||||||||17,058|19,510|No|
||oxide|||||m³|||||||
|||discharge|||||||||||
||COD|Discharge|||49 mg/L|||||16,170|33,000|No|
||||||||||《comprehensiv||||
||Ammonia|after being|||5.07||||||||
||||||||||e wastewater|1,673|3,300|No|
||nitrogen|treated by||At the southern|mg/L||||||||
||||||||||discharge||||
|||wastewater||side of No.6 shift|16.1||||||||
||BOD||||||||standard》|5,313|16,500|No|
|||treatment|1|building at the|mg/L||||||||
||||||||||（GB8978-||||
||SS|system and||northern side of|9 mg/L|||||2,970|16,500|No|
||||||||||1996）chart 4||||
|||reaching||plant|||||||||
||Petroleum||||3.28||||third-level||||
|||the||||||||1,082|6,600|No|
|Anhui|products||||mg/L||||standard||||
|||standard|||||||||||
|GMCC|||||||||||||
|||||1-8# discharge|||||120||||
|Precise|||||||||||||
|||||outlet for the|28.23||||（comprehensiv||||
|Manufacture|||||||||||||
|||||welding waste|mg/||m³||e emission||||
|Co., Ltd||Collected|||||||||||
|||||gas|||||standard of air||||
|||by gas trap||||||||16,596||No|
|||||9#-10#|||||pollutants||||
|||hood+21m|||||||||||
||Particles||9|discharge outlet|31.2mg/||||GB16297-1996||36,000||
|||high|||||||||||
|||||for the welding||m³|||chart 2 second-||||
|||exhaust|||||||||||
|||||waste gas|||||level）||||
|||cylinder|||||||||||
|||||Stator + rotor|||||200（emission||||
||||||13.5mg/||||||||
|||||heat-treating|||||standard of air|3,317||No|
|||||||m³|||||||
|||||furnace|||||pollutants for||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|-|
||||2#discharge|||||industrial kiln||||
||||outlet|||||and furnace||||
||||2#stator heat-|||||GB9078-1996||||
||||treating furnace|39.9mg/||||chart 2 second-||||
||||3#discharge||m|³||level）||||
||||outlet|||||||||
||||Stator + rotor|||||||||
||||heat-treating|||||||||
|||||192||||||||
||||furnace|||||||||
|||||mg/||m³||||||
||||1#discharge|||||||||
||||outlet|||||||||
||||The head of|||||||||
||||discharge outlet|30.4||||||||
||||of 3#stator|mg/||m³||||||
||||furnace|||||||||
||||The head of|||||||||
||||discharge outlet|||||||||
|||||30.2||||||||
||||of 2# stator|||||||||
|||||mg/||m³||||||
||||furnace and|||||||||
||||4#rotor furnace|||||||||
||||The tail of 3#|||||||||
||||and 4# stator|||||||||
||||furnace and the|||||||||
||||general|79.5mg/||||||||
||||discharge outlet||m|³||||||
||||of four melting|||||||||
||||aluminum|||||||||
||||furnace|||||||||
||||The discharge|||||||||
||||outlet for the|||||||||
||||waste gas of|29.1mg/||||||||
||||melting||m|³||||||
||||aluminum|||||||||
||||furnace|||||||||
||||Stator + rotor|||||850||||
||||heat-treating|||||（comprehensiv||||
||Collected||furnace|68 mg/|||m³|e emission||||
||by gas trap||2#discharge|||||standard of air||||
|Sulfur|hood +21m||outlet|||||pollutants for||||
|||7|||||||7,142|20,000|No|
|dioxide|high||2# stator heat-|||||industrial||||
||exhaust||treating furnace|602||||furnace||||
||cylinder||3#discharge|mg/||m³||GB9078-1996||||
||||outlet|||||chart 2 second-||||
||||Stator +rotor|ND||||level）||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||heat-treating||||||||
||||furnace 1#||||||||
||||discharge outlet||||||||
||||The head of||||||||
||||discharge outlet|245mg/||m|||||
||||of 3# stator|³|||||||
||||furnace||||||||
||||The head of||||||||
||||discharge outlet||||||||
|||||146|||||||
||||of 2#stator||||||||
|||||mg/|m³||||||
||||furnace and the||||||||
||||4#rotor furnace||||||||
||||The tail of 3#||||||||
||||and 4#stator||||||||
||||furnace and the||||||||
||||general|124|||||||
||||discharge outlet|mg/|m³||||||
||||for 4 melting||||||||
||||aluminum||||||||
||||furnaces||||||||
||||The discharge||||||||
||||outlet for waste||||||||
|||||136|||||||
||||gas of melting||||||||
|||||mg/|m³||||||
||||aluminum||||||||
||||furnace||||||||
||||Stator + rotor||||||||
||||heat-treating|244|||||||
||||furnace2#discha|mg/|m³||||||
||||rge outlet||||||||
||Collected||||||||||
||||2#stator heat-||||||||
||by gas trap||||||||||
||||treating furnace|790|||||||
|Nitrogen|hood +21m||||||||||
|||3|3#discharge|mg/|m³||/|8,028|18,000|No|
|oxide|high||outlet||||||||
||exhaust||||||||||
||||Stator + rotor||||||||
||cylinder||||||||||
||||heat-treating||||||||
|||||275|||||||
||||furnace||||||||
|||||mg/|m³||||||
||||1#discharge||||||||
||||outlet||||||||
||Direct-fired||1-4#discharge||||120||||
|||||13.09|||||||
||waste gas||outlet for drying||||（comprehensiv||||
|||||mg/|m³||||||
||incinerator||waste gas||||e discharge||||
|VOCs||2||||||2,947|5,000|No|
||+21m high||5-10#discharge||||standard of air||||
|||||30.36|||||||
||exhaust||outlet for drying||||pollutant||||
|||||mg/|m³||||||
||cylinder||waste gas||||GB16297-1996||||

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||||||chart 2 the||||
||||||||second level）||||
|||Discharge|||||||||
|||after being|||||Wastewater||||
|||treated by||4#Southeastern|39||discharge||||
||COD|||||||2,318||No|
|||wastewater||plant|mg/L||standard for||||
|||treatment|||||Guangdong||||
|||station|||||electroplating||||
||||1||||||14,600||
|||Discharge|||||industry||||
|||after being|||||（DB441597-||||
|Guangdong|Ammonia|treated by||4#Southeastern|0.631||2015）chart||||
|||||||||1,510||No|
|Midea|nitrogen|wastewater||plant|mg/L||2The standard of||||
|Refrigeration||treatment|||||Pearl River Delta||||
|Equipment||station|||||||||
|Co., Ltd|||||||《VOC Emission||||
||||||||Standards for||||
||||||||Furniture||||
|||High|||||Manufacturing||||
||||||10.26||||||
||Total VOCs|altitude|4|4#plant|||Industry》|87|5,930|No|
||||||mg/|m³|||||
|||discharge|||||（DB44/814-||||
||||||||2010）the||||
||||||||second time||||
||||||||period||||

The construction of pollution prevention facilities and their operation
During the Reporting Period, all subsidiaries have strictly abided by the laws and regulations related to environment protection, and no major environmental pollution incidents occurred. All subsidiaries have set up reliable waste water and gas treatment systems. Through regular monitoring, supervision and inspection mechanisms, as well as third-party testing, it is ensured that the discharge of waste water, waste gas and solid waste during the production and operation process meets the national and local laws and regulations. There is no excessive discharge by any subsidiary, which is in compliance with the relevant requirements of the environment administrations. The specific treatments for waste water, waste gas and solid wastes are as follows:
A. Waste water treatments: The waste water from subsidiaries is classified as household waste water and industrial waste water. Household waste water is discharged to the municipal waste water treatment network and waste water treatment plants after being pre-treated in septic tanks, etc. And industrial waste
water is discharged to the municipal waste water treatment network and waste water treatment plants
after being pre-treated in thesubsidiaries’ waste water treatment stations.
Midea Group Co., Ltd. Semi-Annual Report 2018 B. Waste gas treatments: The waste gas from subsidiaries is mainly the industrial waste gas and dust produced during the production process. Corresponding waste gas treatment systems have been set up for different types of waste gas. The waste gas is let out at a high altitude after being treated in the corresponding treatment system. As for dust, the polishing machines operate in a closed environment, with a fully automated cleaner sucking in the dust in the waste gas.
C. Solid waste treatments: The solid waste from subsidiaries is classified into general solid waste, hazardous solid waste, and household solid waste. Hazardous solid waste, according to laws and regulations, is required to be treated by qualified treatment institutions; general solid waste, after being classified at the subsidiaries, is collected and treated by resource recycling plants; and household solid waste is treated by the local sanitation administration, which is in compliance with the relevant regulations. The environmental effect evaluation of construction projects and other administrative permits in relation to environmental protection
All subsidiaries strictly observe the laws and regulations governing environmental protection, and all construction projects are in compliance with the environmental effect requirements and other rules, with no misdeeds during the Reporting Period. Once a construction project is finished, a third-party testing institution is hired to examine indexes including waste water, waste gas and noise, and the compilation and approval of the environmental effect evaluation report is finished in time.
Contingency plans for environmental accidents
All subsidiaries have finished the compilation and approval of their contingency plans for environmental accidents. Emergency mechanisms for environmental pollution accidents have been established and improved, and thesubsidiaries’ ability to deal with environmental pollution accidents has been enhanced, so as to maintain social stability, protect the lives, health and properties of the public, protect the environment, and promote a comprehensive, coordinated and sustainable development of the society. According to the accident levels, subsidiaries have formulated rules covering working principles, contingency plans, risk prevention measures, commanding departments, responsibilities and labor division, and have filed these contingency plans with the government.
Environment self-monitoring plans
All subsidiaries have formulated their own environment self-monitoring plans according toChina’s relevant laws and regulations, and have entrusted third-party qualified institutions to monitor the
discharge of waste including waste water and waste gas on a regular basis. Meanwhile, 11 factories have
Midea Group Co., Ltd. Semi-Annual Report 2018 been equipped with an online waste water monitoring system, and such a system is underway for other operations.
Other environment-related information that should be made public
According to the national and local laws and regulations, information including pollutant discharge information, the construction and operation of pollution prevention facilities, environmental effect evaluations of construction projects and other administrative permits in relation to environmental protection, contingency plans for environmental accidents, and environment self-monitoring results is all made public through the official WeChat account on a regular basis.
Other environment-related information
None
15.2 Measures taken for targeted poverty alleviation
15.2.1 Summary of the work done for targeted poverty alleviation during the Reporting Period Midea attaches great importance to helping those in need as a way to meet its social responsibility and give back to society. In 2018, in response to the call of the Guangdong provincial government and thegovernment’s office, Midea has been trying to help reduce poverty through industrial development, creating more jobs and giving donations for public welfare. It has donated RMB10 million to the Beijiao Town Charity Federation for a ninth consecutive year for poverty alleviation and public welfare. And another RMB10 million has been given on the Guangdong Poverty Alleviation Day to improve education, medical care and housing in poor villages of the province.
15.2.2 Targeted poverty alleviation plans for the coming future
To support rural revitalization, Midea Group has signed a co-working framework agreement with the Huanglong Village (in Beijiao Town, Shunde District, Guangdong Province). According to the framework, it will donate approximately RMB16.98 million in total to support two projects of the village, including building a new provincial kindergarten and renovating the existing kindergarten as part of the Huanglong Academy, which emphasizes party building.
Moreover, to help with the Foshancity’s poverty alleviation support for Liangshan, Sichuan Province under an east and west China co-working poverty alleviation framework, Midea has undertaken to donate RMB100 million for new housing, industrial development, vocational education and labour service
Midea Group Co., Ltd. Semi-Annual Report 2018 introduction for the local Yi people in Liangshan in June 2018.
16. Other Significant Events
The Proposal on the Plan for the Repurchase of Some Public Shares was approved at the 37th Meeting of the 2nd Board of Directors on 4 July 2018 and later at the 2018 First Extraordinary General Meeting of Shareholders on 23 July 2018. As such, the Company was agreed to repurchase, with its own capital of no more than RMB4 billion, some of its shares through bidding at the stock exchange at a price not exceeding RMB50/share. The Report on the Repurchase of Some Public Shares was disclosed on 26 July 2018.
As per the Measures for the Administration of ListedCompanies’ Repurchasing Shares Held by the Public (Trial), the Supplementary Provisions on the Share Repurchase by Listed Companies by Means of Centralized Bidding, the Guides of the Shenzhen Stock Exchange for the Share Repurchase by Listed Companies by Means of Centralized Bidding, and other applicable rules, the Company shall disclose the share repurchase progress in its periodic reports.
Up to 17 August 2018 (share repurchase is not allowed within the 10 trading days before the disclosure of a periodic report according to the Guides of the Shenzhen Stock Exchange for the Share Repurchase by Listed Companies by Means of Centralized Bidding), the Company had accumulatively repurchased 39,332,706 shares(0.5921% of theCompany’s total shares on 30 August 2018) with a total payment of around RMB1.8 billion (to be specific, RMB1,799,726,974.66, exclusive of transaction charges), with the highest trading price being RMB48.40/share and the lowest being RMB42.12/share.
17. Significant Events of Subsidiaries
□ Applicable√ N/A
Midea Group Co., Ltd. Semi-Annual Report 2018 Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
||Before||Increase/decrease in Reporting Period (+/-)|||||After||
|||||Sha||||||
|||||res||||||
|||||as||||||
||||||Shares|||||
|||||divi||||||
||||||as|||||
|||||den||||||
||||||dividen|||||
|||||d|||||Perc|
|||Perce|||d|||||
|||||con|||||enta|
||Shares|ntage|New issue||convert|Other|Subtotal|Shares||
|||||vert|||||ge|
|||(%)|||ed from|||||
|||||ed|||||(%)|
||||||capital|||||
|||||from||||||
||||||reserve|||||
|||||retai||||||
||||||s|||||
|||||ned||||||
|||||earn||||||
|||||ings||||||
|||||||-|-|||
|1. Restricted shares|212,022,910|3.23|25,955,000|0|0|||146,621,635|2.21|
|||||||91,356,275|65,401,275|||
|1.1 Shares held by the||||||||||
||0|0|0|0|0|0|0|0|0|
|state||||||||||
|1.2 Shares held by state-||||||||||
||0|0|0|0|0|0|0|0|0|
|owned corporations||||||||||
|1.3 Shares held by other||||||-|-|||
||211,272,910|3.22|24,645,000|0|0|||144,871,635|2.19|
|domestic investors||||||91,046,275|66,401,275|||
|Among which: Shares||||||||||
|||||||-|-|||
|held by domestic|82,500,000|1.26||0|0|||0|0|
|||||||82,500,000|82,500,000|||
|corporations||||||||||
|Shares held by||||||||||
||128,772,910|1.96|24,645,000|0|0|- 8,546,275|16,098,725|144,871,635|2.19|
|domestic individuals||||||||||
|1.4 Shares held by||||||||||
||750,000|0.01|1,310,000|0|0|-310,000|1,000,000|1,750,000|0.02|
|foreign investors||||||||||

Midea Group Co., Ltd. Semi-Annual Report 2018
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Among which: Shares||||||||||
|held by foreign|0|0|0|0|0|0|0|0|0|
|corporations||||||||||
|Shares held by||||||||||
||750,000|0.01|1,310,000|0|0|-310,000|1,000,000|1,750,000|0.02|
|foreign individuals||||||||||
||6,349,030,40||||||131,259,46|6,480,289,87|97.7|
|2. Non-restricted shares||96.77|41,605,028|0|0|8 9,654,441||||
||9||||||9|8|9|
||6,349,030,40||||||131,259,46|6,480,289,87|97.7|
|2.1 RMB common shares||96.77|41,605,028|0|0|8 9,654,441||||
||9||||||9|8|9|
|2.2 Domestically listed||||||||||
|shares for foreign|0||0|0|0|0|0|0|0|
|investors||||||||||
|2.3 Overseas listed||||||||||
|shares for foreign|0||0|0|0|0|0|0|0|
|investors||||||||||
|2.4 Other|0||0|0|0|0|0|0|0|
||6,561,053,31|||||||6,626,911,51||
|3. Total shares||100|67,560,028|0|0|- 1,701,834|65,858,194||100|
||9|||||||3||

 Reasons for the changes in shares
a. 5,385,000 reserved restricted shares were granted to 54 employees for theCompany’s 2017 Restricted Share Incentive Scheme, of which 240,000 were granted to foreign employees who work in China.
b. 20,570,000 restricted shares were granted to 319 employees for the first phase of theCompany’s 2018 Restricted Share Incentive Scheme, of which 1,070,000 were granted to foreign employees who work in China.
c. As the conditions for the first unlocking period for the first phase of the 2017 Restricted Share Incentive Scheme had been satisfied, the 7,198,166 restricted shares of a total of 131 eligible employees were unlocked and allowed for public trading, including 250,000 restricted shares of foreign employees who work in China.
d. The repurchase and retirement of 1,701,834 shares under the 2017 Restricted Share Incentive Scheme was completed on 30 July 2018.
e. The 82,500,000 restricted shares held by Xiaomi Technology Co., Ltd. were unlocked and allowed for public trading. Approval of share changes
□ Applicable√ N/A
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
Midea Group Co., Ltd. Semi-Annual Report 2018□ 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
Unit: share
||||||||
|-|-|-|-|-|-|-|
||Opening|Unlocked in|Increased in|Closing|||
||||||Reason for||
|Name of shareholder|restricted|current|current|restricted||Date of unlocking|
||||||change||
||shares|period|period|shares|||
|Incentive receivers of|||||||
|reserved restricted|||||||
||||||Lockup according|29 December|
|shares under 2017|0|0|5,385,000|5,235,000|||
||||||to the Scheme|2018|
|Restricted Share|||||||
|Incentive Scheme ①|||||||
|Incentive receivers of|||||||
||||||Lockup according||
|2018 Restricted Share|0|0|20,570,000|20,570,000||7 May 2020|
||||||to the Scheme||
|Incentive Scheme|||||||
|Incentive receivers of|||||||
|2017 Restricted Share|||||Lockup according||
||23,130,000|7,198,166|0|14,380,000||12 May 2018|
|Incentive Scheme (first|||||to the Scheme||
|phase) ①|||||||
||||||Promised lockup||
|Xiaomi Technology Co.,|||||||
||82,500,000|82,500,000|0|0|of privately issued|29 June 2018|
|Ltd.|||||||
||||||shares||
||||||Lockup for senior||
|Li Feide|843,750|0|17,500|861,250|management||
||||||position||
||||||Lockup of new||
||||||shares for senior||
|Zhang Xiaoyi|0|0|53,725|53,725|||
||||||management||
||||||position||
||||||Lockup for senior||
|Jiang Peng|458,750|27,500|0|431,250|management||
||||||position||
|Total|106,932,500|89,725,666|26,026,225|41,531,225|--|--|

Notes:① 150,000 reserved restricted shares under the 2017 Restricted Share Incentive Scheme that had been granted
but were still in lockup were retired on 30 July 2018, reducing the closing restricted shares by 150,000 shares.
① 1,551,834 restricted shares for the first phase of the 2017 Restricted Share Incentive Scheme that had been granted but
Midea Group Co., Ltd. Semi-Annual Report 2018 were still in lockup were retired on 30 July 2018, reducing the closing restricted shares by 1,551,834 shares.
2. Issuance and Listing of Securities
□ Applicable√ N/A
3. Total Number of Shareholders and Their Shareholdings
Unit: share
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
||||||Total number of preferenceshareholders with resumedvoting rights at the period-end (if any)||||||
|Total number of common|||||||||||
|shareholders at the end of the||165,179||||||0|||
|Reporting Period|||||||||||
|5% or greater common shareholders or top 10 common shareholders|||||||||||
||||Share||||||Pledged or frozen||
||||||Increase/d||||||
||||holdin|||Number of|Number of||shares||
|||||Total common|ecrease||||||
||Nature of||g|||restricted|non-restricted||||
|Name of shareholder||||shares held at|during the||||||
||shareholder||perce|||common|common||Stat||
|||||the period-end|Reporting|||||Shares|
||||ntage|||shares held|shares held||us||
||||||Period||||||
||||(%)||||||||
|Midea Holding Co., Ltd.|Domesticnon-state-ownedcorporation||33.37|2,212,046,613|0|0|2,212,046,613||||
||||||||||Pled||
|||||||||||666,065,000|
||||||||||ged||
|Hong Kong Exchangesand Clearing Limited|Foreigncorporation||11.59|768,294,661|141,347,166|0|768,294,661||||
||||||||||-|-|
|China SecuritiesFinance Co., Ltd.|State-ownedcorporation||4.09|271,434,266|48,756,611|0|271,434,266||||
||||||||||-|-|
|Fang Hongbo|Domesticindividual||2.07|136,990,492|0|102,742,869|34,247,623||||
||||||||||-|-|
|Hillhouse CapitalManagement Limited－HCM China Fund|Foreigncorporation||1.62|107,658,338|-6,232,800|0|107,658,338||||
||||||||||-|-|
|Huang Jian|Domesticindividual||1.33|88,005,400|25,400|0|88,005,400||Pled||
|||||||||||22,999,900|
||||||||||ged||
|Xiaomi Technology Co.,Ltd.|Domesticnon-state-ownedcorporation||1.24|82,500,000|0|0|82,500,000||||
||||||||||-|-|

Midea Group Co., Ltd. Semi-Annual Report 2018
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Central Huijin AssetManagement Ltd.|State-ownedcorporation|1.18|78,474,900||0|0|78,474,900||||
||||||||||-|-|
|Canada Pension PlanInvestment Board－self-owned capital(stock exchange)|Foreigncorporation|1.09|72,309,875||47,145,264|0|72,309,875||||
||||||||||-|-|
|Li Jianwei|Domesticindividual|0.89|59,176,770||-4,968,064|0|59,176,770||Pled||
|||||||||||5,400,000|
||||||||||ged||
|Strategic investors or general|||||||||||
|corporations becoming top-ten|||||||||||
|||N/A|||||||||
|common shareholders due to placing|||||||||||
|of new shares (if any)|||||||||||
|Related-parties or acting-in-concert|||||||||||
|||N/A|||||||||
|parties among the shareholders above|||||||||||
|Top 10 non-restricted common shareholders|||||||||||
|||||Number of non-restricted||Type of shares|||||
|Name of shareholder||||common shares held at|||||||
|||||||Type||Shares|||
|||||the period-end|||||||
|Midea Holding Co., Ltd.||||2,212,046,613||RMB common stock||2,212,046,613|||
|Hong Kong Exchanges and Clearing Limited||||768,294,661||RMB common stock||768,294,661|||
|China Securities Finance Co., Ltd.||||271,434,266||RMB common stock||271,434,266|||
|Hillhouse Capital Management Limited－HCMChina Fund||||107,658,338||||107,658,338|||
|||||||RMB common stock|||||
|Huang Jian||||88,005,400||RMB common stock||88,005,400|||
|Xiaomi Technology Co., Ltd.||||82,500,000||RMB common stock||82,500,000|||
|Central Huijin Asset Management Ltd.||||78,474,900||RMB common stock||78,474,900|||
|Canada Pension Plan Investment Board－self-owned capital (stock exchange)||||72,309,875|||||||
|||||||RMB common stock||72,309,875|||
|Li Jianwei||||59,176,770||RMB common stock||59,176,770|||
|Yuan Liqun||||54,916,850||RMB common stock||54,916,850|||
|Related-parties or acting-in-concert parties|||||||||||
|among the top ten non-restricted common|||||||||||
|shareholders and between the top ten non-||||N/A|||||||
|restricted common shareholders and the top ten|||||||||||
|common shareholders|||||||||||
|Explanation on the top 10 common shareholders|||||||||||
|||||N/A|||||||
|participating in securities margin trading (if any)|||||||||||

Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the
Midea Group Co., Ltd. Semi-Annual Report 2018 Company conduct any promissory repurchase during the Reporting Period
□ Yes√ No
No such cases in the Reporting Period.
4. Change of Controlling Shareholder or Actual Controller in the Reporting Period Change of the controlling shareholder during the Reporting Period
□ Applicable√ N/A
No such cases in the Reporting Period.
Change of the actual controller during the Reporting Period
□ Applicable√ N/A
No such cases in the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 Section VII Preference Shares
□ Applicable√ N/A
No such cases in the Reporting Period.
Midea Group Co., Ltd. Semi-Annual Report 2018 Section VIII Information about Directors, Supervisors and Senior Management
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|||||||||Restricted||
|||||Shares|Shares|Shares|Granted|||
||||Shares|||||shares|Granted|
|||||increased|decrease|held at|Restricted|||
|||Incumbe|held at|||||granted in|restricted|
|||||at the|d at the|the|shares at|||
|Name|Office title|nt /|the year-|||||the|shares at the|
|||||Reporting|Reporting|period-|the year-|||
|||Former|begin|||||Reporting|period-end|
|||||Period|Period|end|begin|||
||||(share)|||||Period|(share)|
|||||(share)|(share)|(share)|(share)|||
|||||||||(share)||
|||Incumbe||||||||
|Li Feide|Director||1,335,000|100,000|0|1,435,000|210,000|100,000|240,000|
|||nt||||||||
|Hu|Vice|Incumbe||||||||
||||300,000|100,000|0|400,000|300,000|100,000|300,000|
|Ziqiang|President|nt||||||||
|Zhang|Vice|Incumbe||||||||
||||258,300|100,000|0|358,300|210,000|100,000|240,000|
|Xiaoyi|President|nt||||||||
|Xiao||||||||||
||Director of|Incumbe||||||||
|Minggua|||0|250,000|0|250,000|0|250,000|250,000|
||Finance|nt||||||||
|ng||||||||||
|Jiang|Company|Incumbe||||||||
||||575,000|0|143,700|431,300|0|0|0|
|Peng|Secretary|nt||||||||
|Total|--|--|2,468,300|550,000|143,700|2,874,600|720,000|550,000|1,030,000|

 Note: Locked-up incentive shares were unlocked for trading in the public market on 31 May 2018 during the first unlocking period of the first phase of the 2017 Restricted Share Incentive Scheme, including 70,000 shares of Li Feide, 100,000 shares of Hu Ziqiang and 70,000 shares of Zhang Xiaoyi.
2. Changes in Directors, Supervisors and Senior Management
||||||
|-|-|-|-|-|
|Name|Office title|Type of change|Date|Reason|
|Zhang Xiaoyi|Vice President|Appointed|2018-04-23|Senior management appointment|

Midea Group Co., Ltd. Semi-Annual Report 2018 Section IX Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were undue before the date of thisReport’s approval or were due but could not be redeemed in full?
□ Yes√ No
Section X Financial Report
1.Auditor’s Report
Have the H1 2018 financial statements been audited by a CPAs firm?
□ Yes√ No
The H1 2018 financial statements are unaudited by a CPAs firm.
2. Financial Statements
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||
|-|-|-|-|-|-|
|ASSETS|Note|30 June 2018|31 December2017|30 June 2018|31 December2017|
|||Consolidated|Consolidated|Company|Company|
|Current assets:||||||
|Cash at bank and on hand|4(1)|45,087,756|48,274,200|33,118,924|29,349,926|
|Derivative financial assets||316,540|353,327|-|-|
|Notes receivable|4(2)|16,777,243|10,854,226|-|-|
|Accounts receivable|4(3)|20,537,867|17,528,717|-|-|
|Advances to suppliers|4(4)|1,885,815|1,672,248|52,710|23,877|
|Loans and advances|4(5)|15,474,368|12,178,953|-|-|
|Dividends receivable||-|-|133,078|897,040|
|Other receivables|4(3), 17(1)|2,027,623|2,657,568|10,217,662|8,403,564|
|Inventories|4(6)|23,723,338|29,444,166|-|-|
|Including: Completed butunsettled||4,309,124|4,023,467|-|-|
|Other current assets|4(7)|46,376,007|46,847,271|30,118,604|27,311,464|
|Total current assets||172,206,557|169,810,676|73,640,978|65,985,871|
|Non-current assets:||||||
|Available-for-sale financial assets|4(8)|2,044,442|1,831,051|61,768|56,868|
|Long-term receivables||44,116|362,248|-|-|
|Long-term equity investments|4(9), 17(2)|2,753,940|2,633,698|26,883,508|24,540,601|
|Investment properties||411,198|420,802|572,008|597,200|
|Fixed assets|4(10)|22,256,928|22,600,724|1,164,872|1,245,998|
|Construction in progress|4(11)|1,562,256|879,576|54,093|36,313|
|Intangible assets|4(12)|15,034,199|15,167,036|227,774|231,154|
|Goodwill|4(13)|28,494,163|28,903,785|-|-|
|Long-term prepaid expenses||908,621|859,106|148,393|121,452|
|Deferred tax assets|4(14)|4,618,066|4,023,334|144,139|152,069|
|Other non-current assets||663,315|614,822|13,711|9,700|
|Total non-current assets||78,791,244|78,296,182|29,270,266|26,991,355|
|TOTAL ASSETS||250,997,801|248,106,858|102,911,244|92,977,226|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department: Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS(CONT’D)
AS AT 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||
|-|-|-|-|-|-|
|Liabilities andshareholders' equity|Note|30 June 2018|31 December2017|30 June 2018|31 December2017|
|||Consolidated|Consolidated|Company|Company|
|Current liabilities:||||||
|Short-term borrowings|4(17)|1,261,033|2,584,102|-|-|
|Borrowings from the central bank||30,367|-|-|-|
|Customer deposits and depositsfrom banks and other financialinstitutions||103,071|108,926|-|-|
|Derivative financial liabilities||678,413|90,432|-|-|
|Financial assets sold underrepurchase agreements||-|-|-|-|
|Notes payable|4(18)|24,345,348|25,207,785|-|-|
|Accounts payable|4(19)|35,995,885|35,144,777|-|-|
|Advances from customers|4(20)|11,009,217|17,409,063|-|-|
|Including: Settled but notcompleted||1,633,114|1,670,855|-|-|
|Employee benefits payable|4(21)|3,901,384|5,247,500|124,860|427,806|
|Taxes payable|4(22)|4,355,575|3,544,154|134,595|45,179|
|Interest payable||90,677|94,801|205,997|146,513|
|Dividends payable||42,859|95,317|23,538|-|
|Other payables|4(23)|3,444,684|3,170,405|66,698,166|57,867,535|
|Current portion of non-currentliabilities||6,726,551|136,605|-|-|
|Other current liabilities|4(24)|32,191,163|26,257,990|27,532|40,830|
|Total current liabilities||124,176,227|119,091,857|67,214,688|58,527,863|
|Non-current liabilities:||||||
|Long-term borrowings|4(25)|30,276,189|32,986,325|-|-|
|Debentures payable||-|4,553,054|-|-|
|Long-term payables||309,180|248,036|-|-|
|Payables for specific projects||2,500|2,500|-|-|
|Provisions||275,222|330,736|-|-|
|Deferred revenue||559,456|536,443|-|-|
|Long-term employee benefitspayable|4(26)|2,430,786|2,465,854|-|-|
|Deferred tax liabilities|4(14)|4,014,510|3,972,823|-|-|
|Other non-current liabilities||1,015,129|994,059|-|-|
|Total non-current liabilities||38,882,972|46,089,830|-|-|
|Total liabilities||163,059,199|165,181,687|67,214,688|58,527,863|
|Shareholders' equity:||||||
|Share capital|4(27)|6,626,912|6,561,053|6,626,912|6,561,053|
|Capital surplus|4(28)|17,323,156|15,911,504|9,590,860|7,726,237|
|Less: Treasury stock||(918,171)|(366,842)|(918,171)|(366,842)|
|Other comprehensive income|4(29)|(644,579)|(244,692)|130,373|33,459|
|General reserve||366,947|366,947|-|-|
|Surplus reserve|4(30)|3,882,232|3,882,232|3,882,232|3,882,232|
|Undistributed profits|4(31)|52,665,296|47,627,235|16,384,350|16,613,224|
|Total equity attributable to equityholders of the parent company||79,301,793|73,737,437|35,696,556|34,449,363|
|Minority interests||8,636,809|9,187,734|-|-|
|Total shareholders’ equity||87,938,602|82,925,171|35,696,556|34,449,363|
|TOTAL LIABILITIES ANDSHAREHOLDERS’ EQUITY||250,997,801|248,106,858|102,911,244|92,977,226|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department: Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||
|-|-|-|-|-|-|
|Item|Note|For the sixmonths ended 30June 2018|For the sixmonths ended30 June 2017|For the sixmonths ended30 June 2018|For the sixmonths ended30 June 2017|
|||Consolidated|Consolidated|Company|Company|
|Total revenue||143,735,916|124,963,616|866,310|701,070|
|Including: Operating revenue|4(32), 17(3)|142,623,837|124,450,065|866,310|701,070|
|Interest income|4(33)|1,112,014|513,549|-|-|
|Fee and commission income||65|2|-|-|
|Total cost of sales||(128,341,849)|(113,963,618)|43,359|(323,655)|
|Including: Cost of sales|4(32)|(103,881,438)|(93,051,081)|(21,954)|(19,329)|
|Interest expenses|4(33)|(168,235)|(165,666)|-|-|
|Fee and commission expense||(1,529)|(1,661)|-|-|
|Taxes and surcharges|4(34)|(847,650)|(754,771)|(17,701)|(3,779)|
|Selling and distribution expenses|4(35)|(16,892,503)|(12,404,770)|-|-|
|General and administrative expenses|4(36)|(7,234,520)|(6,832,958)|(167,898)|(105,438)|
|Financial expenses|4(37)|984,113|(346,614)|250,626|(194,963)|
|Asset impairment losses|4(38)|(300,087)|(406,097)|286|(146)|
|Add: Gains on changes in fair value|4(39)|(613,928)|(9,523)|-|-|
|Investment income|4(40), 17(4)|912,624|1,199,452|6,583,452|6,125,238|
|Including: Share of profit of associatesand joint ventures||187,245|287,134|127,081|214,433|
|Gains on disposal of assets|4(41)|(18,759)|744,102|263|(119)|
|Other income|4(42)|626,278|846,226|184,077|-|
|Operating profit||16,300,282|13,780,255|7,677,461|6,502,534|
|Add: Non-operating income||150,800|209,685|4,418|757|
|Less: Non-operating expenses||(56,509)|(382,816)|(4,038)|(922)|
|Total profit||16,394,573|13,607,124|7,677,841|6,502,369|
|Less: Income tax expenses|4(43)|(2,614,882)|(2,059,053)|(7,930)|(7,902)|
|Net profit||13,779,691|11,548,071|7,669,911|6,494,467|
|(1) Classified by continuity of operations||||||
|Net profit from continuing operations||13,779,691|11,548,071|7,669,911|6,494,467|
|Net profit from discontinued operations||-|-|-|-|
|(2) Classified by ownership of the equity||||||
|Attributable to shareholders of the Company||12,936,846|10,811,322|7,669,911|6,494,467|
|Minority interests||842,845|736,749|-|-|
|Other comprehensive income, net of tax||(586,379)|26,322|96,914|(3,426)|
|Other comprehensive income attributable to shareholders ofthe parent company||(399,887)|9,682|96,914|(3,426)|
|(1) Other comprehensive income items which will not bereclassified subsequently to profit or loss||18,286|39,579|-|-|
|1) Changes arising from remeasurement of net liability ornet asset of defined benefit plan||18,286|39,579|-|-|
|2) Share of other comprehensive income of theinvestee accounted for using equity method thatwill not be subsequently reclassified to profit orloss||-|-|-|-|
|(2) Other comprehensive income items which will bereclassified subsequently to profit or loss||(418,173)|(29,897)|96,914|(3,426)|
|1) Share of the other comprehensive income of theinvestee accounted for using equity method which willbe reclassified subsequently to profit and loss||45,974|(8,069)|34,306|(3,426)|
|2) Change in fair value of available-for-sale financial assets||14,579|(292,475)|62,608|-|
|3) Losses or profits arising from the reclassification of held-to-maturity investments into available-for-sale financialassets||-|-|-|-|
|4) Effective portion of cash flow hedging gains or losses||(634,467)|168,716|-|-|
|5) Translation of foreign currency financial statements||155,741|101,931|-|-|
|Other comprehensive income attributable to minorityshareholders, net of tax||(186,492)|16,640|-|-|
|Total comprehensive income||13,193,312|11,574,393|7,766,825|6,491,041|
|Attributable to shareholders of the parent company||12,536,959|10,821,004|7,766,825|6,491,041|
|Minority interests||656,353|753,389|-|-|
|Earnings per share:||||||
|(1) Basic earnings per share|4(44)|1.97|1.67|N/A|N/A|
|(2) Diluted earnings per share|4(44)|1.94|1.66|N/A|N/A|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department: Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||
|-|-|-|-|-|-|
|Item|Note|For the sixmonths ended30 June 2018|For the sixmonths ended30 June 2017|For the sixmonths ended30 June 2018|For the sixmonths ended30 June 2017|
|||Consolidated|Consolidated|Company|Company|
|1. Cash flows from operating activities:||||||
|Cash received from sales of goods or rendering ofservices||101,192,080|99,984,184|-|-|
|Net increase in customer deposits and depositsfrom banks and other financial institutions||-|73,308|-|-|
|Net increase in borrowings from the central bank||30,367|-|-|-|
|Cash received for interest, fee and commission||656,777|543,915|-|-|
|Refund of taxes and surcharges||3,648,098|2,593,364|-|-|
|Cash received relating to other operating activities|4(45)(a)|3,556,377|2,485,847|9,646,377|8,176,371|
|Sub-total of cash inflows||109,083,699|105,680,618|9,646,377|8,176,371|
|Cash paid for goods and services||(62,574,802)|(58,343,060)|-|-|
|Net increase in loans and advances||(3,345,537)|(1,903,898)|-|-|
|Net decrease in customer deposits and depositsfrom banks and other financial institutions||(5,855)|-|-|-|
|Net increase in deposits with the central bank||(1,332,232)|(528,948)|-|-|
|Cash paid for interest, fee and commission||(169,952)|(167,327)|-|-|
|Cash paid to and on behalf of employees||(13,600,798)|(11,456,781)|(325,065)|(112,878)|
|Payments of taxes and surcharges||(6,994,367)|(5,982,427)|(17,702)|(94,326)|
|Cash paid relating to other operating activities|4(45)(b)|(13,446,468)|(13,402,245)|(1,592,701)|(1,958,570)|
|Sub-total of cash outflows||(101,470,011)|(91,784,686)|(1,935,468)|(2,165,774)|
|Net cash flows from operating activities|4(45)(c)|7,613,688|13,895,932|7,710,909|6,010,597|
|2. Cash flows from investing activities:||||||
|Cash received from disposal of investments||31,793,113|40,674,727|13,502,964|27,815,545|
|Cash received from returns on investments||1,007,924|1,223,225|7,568,060|5,297,145|
|Net cash received from disposal of fixed assets,intangible assets and other long-term assets||36,333|859,943|-|12,049|
|Net cash received from disposal of subsidiaries andother business units||30,755|2,415|-|-|
|Cash received relating to other investing activities||-|-|-|-|
|Sub-total of cash inflows||32,868,125|42,760,310|21,071,024|33,124,739|
|Cash paid to acquire fixed assets, intangible assetsand other long-term assets||(2,368,539)|(1,520,059)|(115,266)|(59,406)|
|Cash paid to acquire investments||(39,300,659)|(42,660,602)|(21,358,367)|(32,378,633)|
|Net cash paid to acquire subsidiaries and otherbusiness units||(142,604)|(25,331,546)|-|-|
|Cash paid relating to other investing activities||-|-|-|-|
|Sub-total of cash outflows||(41,811,802)|(69,512,207)|(21,473,633)|(32,438,039)|
|Net cash flows from investing activities||(8,943,677)|(26,751,897)|(402,609)|686,700|
|3. Cash flows from financing activities:||||||
|Cash received from capital contributions||1,711,968|629,854|1,168,515|629,854|
|Including: Cash received from capitalcontributions by minorityshareholders of subsidiaries||521,351|-|-|-|
|Cash received from borrowings||1,117,310|31,631,302|-|1,600,000|
|Cash received from issuing short-term financingbonds||-|-|-|-|
|Cash received relating to other financing activities||-|-|-|-|
|Sub-total of cash inflows||2,829,278|32,261,156|1,168,515|2,229,854|
|Cash repayments of borrowings||(2,493,061)|(4,198,336)|-|(1,600,000)|
|Cash payment for issuing short-term financingbonds||-|-|-|-|
|Cash payments for interest expenses anddistribution of dividends or profits||(8,667,397)|(7,072,016)|(8,093,220)|(6,816,712)|
|Including: Cash payments for dividends or profitto minority shareholders ofsubsidiaries||(497,161)|(395,950)|-|-|
|Cash paid relating to other financing activities||(1,835,429)|-|(28,811)|-|
|Sub-total of cash outflows||(12,995,887)|(11,270,352)|(8,122,031)|(8,416,712)|
|Net cash flows from financing activities||(10,166,609)|20,990,804|(6,953,516)|(6,186,858)|
|4. Effect of foreign exchange rate changes on cash andcash equivalents||92,339|137,862|-|-|
|5. Net increase in cash and cash equivalents||(11,404,259)|8,272,701|354,784|510,439|
|Add: Cash and cash equivalents at beginning ofperiod||21,831,653|12,513,730|25,978,543|8,174,915|
|6. Cash and cash equivalent at end of period||10,427,394|20,786,431|26,333,327|8,685,354|

Legal representative: Person in charge of accounting function: Person in charge of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Item|Current figure|||||||||
||Equity attributable to the parent company|||||||Minorityinterests|Totalshareholders’equity|
||Share capital|Capitalsurplus|Less:Treasurystock|Othercomprehensiveincome|Surplusreserve|Generalreserve|Undistributedprofits|||
|Balance at end of last year|6,561,053|15,911,504|(366,842)|(244,692)|3,882,232|366,947|47,627,235|9,187,734|82,925,171|
|Add: Changes in accounting policies|-|-|-|-|-|-|-|-|-|
|Balance at beginning of current period|6,561,053|15,911,504|(366,842)|(244,692)|3,882,232|366,947|47,627,235|9,187,734|82,925,171|
|Movements in current period|65,859|1,411,652|(551,329)|(399,887)|-|-|5,038,061|(550,925)|5,013,431|
|(1) Total comprehensive income|-|-|-|(399,887)|-|-|12,936,846|656,353|13,193,312|
|(2) Capital contribution andwithdrawal by shareholders|65,859|1,415,125|(551,329)|-|-|-|-|(786,740)|142,915|
|1)Capital contribution from shareholders|67,560|1,695,573|(717,841)|-|-|-|-|-|1,045,292|
|2)Business combinations|-|-|-|-|-|-|-|521,504|521,504|
|3)Share-based payment included inshareholders' equity|-|232,497|-|-|-|-|-|65,123|297,620|
|4)Others|(1,701)|(512,945)|166,512|-|-|-|-|(1,373,367)|(1,721,501)|
|(3) Profit distribution|-|-|-|-|-|-|(7,898,785)|(420,252)|(8,319,037)|
|1)Appropriation to surplus reserve|-|-|-|-|-|-|-|-|-|
|2)Appropriation to general reserve|-|-|-|-|-|-|-|-|-|
|3)Profit distribution to shareholders|-|-|-|-|-|-|(7,898,785)|(420,252)|(8,319,037)|
|4)Others|-|-|-|-|-|-|-|-|-|
|(4) Transfer within shareholders'equity|-|-|-|-|-|-|-|-|-|
|1)Transfer from capital surplus to paid-incapital|-|-|-|-|-|-|-|-|-|
|2)Transfer from surplus reserve to paid-in capital|-|-|-|-|-|-|-|-|-|
|3)Surplus reserve used to offsetaccumulated losses|-|-|-|-|-|-|-|-|-|
|4)Others|-|-|-|-|-|-|-|-|-|
|(5) Specific reserve|-|-|-|-|-|-|-|-|-|
|1)Increase in current period|-|-|-|-|-|-|-|-|-|
|2)Usage in current period|-|-|-|-|-|-|-|-|-|
|(6) Others|-|(3,473)|-|-|-|-|-|(286)|(3,759)|
|Balance at the end of current period|6,626,912|17,323,156|(918,171)|(644,579)|3,882,232|366,947|52,665,296|8,636,809|87,938,602|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
|||||||||||
|-|-|-|-|-|-|-|-|-|-|
|Item|Comparative figure|||||||||
||Equity attributable to the parent company|||||||Minorityinterests|Totalshareholders’equity|
||Share capital|Capitalsurplus|Less:Treasurystock|Othercomprehensiveincome|Surplusreserve|Generalreserve|Undistributedprofits|||
|Balance at end of last year|6,458,767|13,596,569|-|13,125|2,804,469|148,602|38,105,391|7,849,773|68,976,696|
|Add: Changes in accounting policies|-|-|-|-|-|-|-|-|-|
|Balance at beginning of current period|6,458,767|13,596,569|-|13,125|2,804,469|148,602|38,105,391|7,849,773|68,976,696|
|Movements in current period|102,286|2,314,935|(366,842)|(257,817)|1,077,763|218,345|9,521,844|1,337,961|13,948,475|
|(1) Total comprehensive income|||-|(257,817)|-|-|17,283,689|1,274,690|18,300,562|
|(2) Capital contribution andwithdrawal by shareholders|102,286|2,273,030|(366,842)|-|-|-|-|796,545|2,805,019|
|1)Capital contribution from shareholders|102,286|1,947,025|(366,842)|-|-|-|-|690,282|2,372,751|
|2)Business combinations||-||-|-|-|-|-|-|
|3)Share-based payment included inshareholders' equity|-|326,005|-|-|-|-|-|106,263|432,268|
|4)Others|||-|-|-|-|-|-|-|
|(3) Profit distribution|-|-|-|-|1,077,763|218,345|(7,761,845)|(733,274)|(7,199,011)|
|1)Appropriation to surplus reserve|-|-|-|-|1,077,763|-|(1,077,763)|-|-|
|2)Appropriation to general reserve|-|-|-|-|-|218,345|(218,345)|-|-|
|3)Profit distribution to shareholders|-|-|-|-|-|-|(6,465,677)|(733,274)|(7,198,951)|
|4)Others|-|-|-|-|-|-|(60)|-|(60)|
|(4) Transfer within shareholders'equity|-|-|-|-|-|-|-|-|-|
|1)Transfer from capital surplus to paid-incapital|-|-|-|-|-|-|-|-|-|
|2)Transfer from surplus reserve to paid-in capital|-|-|-|-|-|-|-|-|-|
|3)Surplus reserve used to offsetaccumulated losses|-|-|-|-|-|-|-|-|-|
|4)Others|-|-|-|-|-|-|-|-|-|
|(5) Specific reserve|-|-|-|-|-|-|-|-|-|
|1)Increase in current period|-|-|-|-|-|-|-|-|-|
|2)Usage in current period|-|-|-|-|-|-|-|-|-|
|(6) Others|-|41,905|-|-|-|-|-|-|41,905|
|Balance at the end of current period|6,561,053|15,911,504|(366,842)|(244,692)|3,882,232|366,947|47,627,235|9,187,734|82,925,171|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|Current figure||||||||
||Share capital|Capitalsurplus|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserve|Undistributedprofits|Totalshareholders’equity|
|Balance at end of last year|6,561,053|7,726,237|(366,842)|33,459|-|3,882,232|16,613,224|34,449,363|
|Add: Changes in accounting policies|-|-|-|-|-|-|-|-|
|Balance at beginning of current period|6,561,053|7,726,237|(366,842)|33,459|-|3,882,232|16,613,224|34,449,363|
|Movements in current period|65,859|1,864,623|(551,329)|96,914|-|-|(228,874)|1,247,193|
|(1) Total comprehensive income|-|-|-|96,914|-|-|7,669,911|7,766,825|
|(2) Capital contribution and withdrawal byshareholders|65,859|1,864,623|(551,329)|-|-|-|-|1,379,153|
|1)Capital contribution from shareholders|67,560|1,695,573|(717,841)|-|-|-|-|1,045,292|
|2)Capital contribution from owners of other equityinstruments|-|-|-|-|-|-|-|-|
|3)Share-based payment included in owners'equity|-|196,159|-|-|-|-|-|196,159|
|4)Others|(1,701)|(27,109)|166,512|-|-|-|-|137,702|
|(3) Profit distribution|-|-|-|-|-|-|(7,898,785)|(7,898,785)|
|1)Appropriation to surplus reserve|-|-|-|-|-|-|-|-|
|2)Profit distribution to shareholders|-|-|-|-|-|-|(7,898,785)|(7,898,785)|
|3)Others|-|-|-|-|-|-|-|-|
|(4) Transfer within shareholders' equity|-|-|-|-|-|-|-|-|
|1)Transfer from capital surplus to paid-in capital|-|-|-|-|-|-|-|-|
|2)Transfer from surplus reserve to paid-in capital|-|-|-|-|-|-|-|-|
|3)Surplus reserve used to offset accumulatedlosses|-|-|-|-|-|-|-|-|
|4)Others|-|-|-|-|-|-|-|-|
|(5) Specific reserve|-|-|-|-|-|-|-|-|
|1)Increase in current period|-|-|-|-|-|-|-|-|
|2)Usage in current period|-|-|-|-|-|-|-|-|
|(6) Others|-|-|-|-|-|-|-|-|
|Balance at end of year|6,626,912|9,590,860|(918,171)|130,373|-|3,882,232|16,384,350|35,696,556|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
||||||||||
|-|-|-|-|-|-|-|-|-|
|Item|Comparative figure||||||||
||Share capital|Capitalsurplus|Less:Treasurystock|Othercomprehensiveincome|Specificreserve|Surplusreserve|Undistributedprofits|Totalshareholders’equity|
|Balance at end of last year|6,458,767|5,455,268|-|(9,069)|-|2,804,469|13,379,033|28,088,468|
|Add: Changes in accounting policies|-|-|-|-|-|-|-|-|
|Balance at beginning of current period|6,458,767|5,455,268|-|(9,069)|-|2,804,469|13,379,033|28,088,468|
|Movements in current period|102,286|2,270,969|(366,842)|42,528|-|1,077,763|3,234,191|6,360,895|
|(1) Total comprehensive income|-|-|-|42,528|-|-|10,777,631|10,820,159|
|(2) Capital contribution and withdrawalby shareholders|102,286|2,231,354|(366,842)|-|-|-|-|1,966,798|
|1)Capital contribution from shareholders|102,286|1,947,025|(366,842)|-|-|-|-|1,682,469|
|2)Capital contribution from owners ofother equity instruments|-|-|-|-|-|-|-|-|
|3)Share-based payment included inowners' equity|-|284,329|-|-|-|-|-|284,329|
|4)Others|-|-|-|-|-|-|-|-|
|(3) Profit distribution|-|-|-|-|-|1,077,763|(7,543,440)|(6,465,677)|
|1)Appropriation to surplus reserve|-|-|-|-|-|1,077,763|(1,077,763)|-|
|2)Profit distribution to shareholders|-|-|-|-|-|-|(6,465,677)|(6,465,677)|
|3)Others|-|-|-|-|-|-|-|-|
|(4) Transfer within shareholders'equity|-|-|-|-|-|-|-|-|
|1)Transfer from capital surplus to paid-incapital|-|-|-|-|-|-|-|-|
|2)Transfer from surplus reserve to paid-incapital|-|-|-|-|-|-|-|-|
|3)Surplus reserve used to offsetaccumulated losses|-|-|-|-|-|-|-|-|
|4)Others|-|-|-|-|-|-|-|-|
|(5) Specific reserve|-|-|-|-|-|-|-|-|
|1.Increase in current period|-|-|-|-|-|-|-|-|
|2.Usage in current period|-|-|-|-|-|-|-|-|
|(6) Others|-|39,615|-|-|-|-|-|39,615|
|Balance at end of year|6,561,053|7,726,237|(366,842)|33,459|-|3,882,232|16,613,224|34,449,363|

 Legal representative: Person in charge of accounting function: Person in charge of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
1 General information
Midea Group is a techonology company that boasts a diversified offering in products and services, mainly comprisesheating&ventilation, as well as air-conditioner(“HVAC”), consumer appliances, robots and automatic system and smart supply chain. Consumer appliances centred on kitchen appliances, refrigerators, washing machines and various small appliances. HVAC centred on household air-conditioner, commercial air-conditioner, heating and ventilation systems. Robots and automation systems centred on KUKA Aktiengesellschaft and its subsidiaries (hereinafter referred to as “KUKA Group”) and robots corporations of Midea Group, and smart supply chain systems centred on smart integrated logistics solutions. Other operations include 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, Foshan on 7 April 2000, with its headquarters located in Shunde District, Foshan. On 30 August 2012, 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., 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 30 June 2018, the Company's registered capital is RMB 6,626,911,513, the same as share capital, and the total number of shares in issue is 6,626,911,513, of which 146,621,635 shares are restricted tradable shares and 6,480,289,878 shares are unrestricted tradable shares. The detailed information of major subsidiaries included in the consolidation scope in current period is set out in Notes 5 and 6. Entities newly included in the consolidation scope in current period include Guangdong Midea Industrial Technology Co., Ltd., Midea Home Appliances UK Ltd., and Shanghai Chemours Electric Appliances Co., Ltd. Please refer to Note 5(2)(a) for details. The detailed information of subsidiaries no longer included in the consolidation scope in current period is set out in Note 5(1) and 5(2)(b).
These financial statements were authorised for issue by theCompany’s Board of Directors on 29 August 2018.
2. Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on the features of production and operation, mainly including the recognition method of provision for bad debts of accounts receivable (Note 2(10)), valuation method of inventory (Note 2(12)), depreciation of fixed assets and amortisation of intangible assets (Note 2(15), (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(33).
(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 Summary of significant accounting policies and accounting estimates(Cont’d)
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the six months ended 30 June 2018 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 30 June 2018 and their financial performance, cash flows and other information for the six months then ended.
(3) Accounting period
TheCompany’s accounting year starts on 1 January and ends on 31 December.
(4) Functional currency
The functional currency of the Company is Renminbi (“RMB”). The subsidiaries determine their functional currency based on the primary economic environment in which the business is operated, mainly including KUKAGroup’s functional currency-EUR and Toshiba lifestyle Products& Services Corporation(“TLSC”)’s functional currency-JPY. The financial statements are presented in RMB.
(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. If the absorbing party was bought by the ultimate controller from a third party in prior years, the value of its assets and liabilities (including goodwill generated due to the combination) are based on the carrying amount in the ultimatecontroller’s consolidated financial statements. 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 date. 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(5) Business combinations(Cont’d)
(b) Business combination involving enterprises not under common control(Cont’d)
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 belong, excluding those arising from changes in the investee's remeasurements of net liability or net asset related to the defined benefit plan. The excess of the sum of fair value of the previously- held equity and fair value of the consideration paid at the acquisition dates over share of fair value of identifiable net assets acquired from the subsidiary is recognised as goodwill.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are de- consolidated from the date that such control ceases. For a subsidiary that is acquired in a business combination involving enterprises under common control, it is included in the consolidated financial statements from the date when it, together with the Company, comes under common control of the ultimate controlling party. The portion of the net profits realised before the combination date is presented separately in the consolidated income statement. 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 date.
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 income 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 owners of the parent. 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 owners 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 owners 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(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 the functional currency using the spot exchange rates on the balance sheet date. Exchange differences arising from these translations are recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings that have been taken out specifically for the acquisition or construction of qualifying assets, which are capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated at the spot exchange rates on the balance sheet date. Among theowners’ equity items, the items other than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The income and expense items in the income statements of overseas operations are translated at the spot exchange rates of the transaction dates. The differences arising from the above translation are presented in other comprehensive income. The cash flows of overseas operations are translated at the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on cash is presented separately in the cash flow statement.
(9) Financial instrument
(a) Financial assets
(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 and derivative financial instruments.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(9) Financial instrument(Cont’d)
(a) Financial assets(Cont’d)
(i) Classification of financial assets(Cont’d)
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 the 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 prepares formal written documents for relations between hedging instruments and hedged items, 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 hedging
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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(9) Financial instrument(Cont’d)
(a) Financial assets(Cont’d)
(ii) Derivative financial instruments(Cont’d)
Cash flow hedging(Cont’d)
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 in current period and accumulated in equity in the “other comprehensive income”. The ineffective portion is recognised immediately in the profit or loss.
Accumulated profits or loss originally included in equities of shareholders 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 inshareholder’s 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(9) Financial instrument(Cont’d)
(a) Financial assets(Cont’d)
(iv) Impairment of financial assets
The Group assesses the carrying amounts of financial assets other than those at fair value through profit or loss at each balance sheet date. If there is objective evidence that a financial asset is impaired, an impairment loss is provided for.
Objective evidence indicating impairment of financial assets refers to the matter that actually occurs after the initial recognition of financial assets, it will affect estimated future cash flows of financial assets, and its impact can be reliably measured.
Objective evidence indicating impairment of available-for-sale investments in equity instruments includes a significant or prolonged decline in the fair value of an investment in an equity instrument. The Group reviews available-for-sale investments in equity instruments on an individual basis at the balance sheet date. If the fair value of an equity instrument investment at the balance sheet date is lower 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 cost of available-for-sale equity instrument 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 is incurred, 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 available-for-sale financial asset, which is measured at cost model, is impaired, the amount of loss is measured as 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. Impairment losses on these assets are recognised in profit or loss for the current period. 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(9) Financial instrument(Cont’d)
(a) Financial assets(Cont’d)
(v) Derecognition of financial assets
A financial asset is derecognised when any of the below criteria is met: (1) the contractual rights to receive the cash flows from the financial asset expire; (2) the financial asset has been transferred and the Group transfers substantially all the risks and rewards of ownership of the financial asset to the transferee; or (3) the financial asset has been transferred and the Group has not retained control of the financial asset, although the Group neither transfers nor retains substantially all the risks and rewards of ownership of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount and the sum of the consideration received and the cumulative changes in fair value that had been recognised directly in equity, is recognised in profit or loss.
(b) Financial liabilities
Financial liabilities are classified into two categories at initial recognition: financial liabilities at fair value through profit or loss and other financial liabilities. The Group's financial liabilities include derivative financial liabilities, accounts payable, notes payable, borrowings, customer deposits and deposits from banks and other financial institutions, financial assets sold under repurchase agreements and interest payable.
Payables comprise accounts payable, other payables and other current liabilities, and are recognised at fair value at initial recognition. Payables are subsequently measured at amortised cost using the effective interest method.
Borrowings and debentures payable are recognised initially at fair value, net of transaction costs incurred, and subsequently measured at amortised cost using the effective interest method. Other financial liabilities of which the period is within one year (inclusive) are classified as the current liabilities; the period is over one year while will be due within one year (inclusive) since the balance sheet date are classified as current portion of non-current liabilities; and the 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 a financial liability (or part of a financial liability) extinguished and the consideration paid, shall be 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. During valuation, the Group uses valuation technique appropriate in the current situation with sufficient available data and other supporting information, and select input with the same feature of assets or liabilities which are taken into consideration by market participants in transactions of related assets and liabilities, and observable inputs are preferential. When relevant observable inputs are impossible or not practicable be obtained, unobservable inputs are used.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(10) Receivables
Receivables comprise accounts receivable, other receivables and notes receivable. 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 RMB 5,000,000 for accounts receivable and RMB 500,000 for other receivables.
The method of providing for bad debts for those individually significant amounts is as follows: the amount of the present value of the future cash flows expected to be derived from the receivable below its carrying amount.
(b) Accounts receivable and other receivables that are subject to provision for bad debts on the grouping basis
Receivables with amounts that are not individually significant and those receivables that have been individually assessed for impairment and have not been found impaired are classified into certain groupings based on their credit risk characteristics. The provision for bad debts is determined based on the historical loss experience for the groupings of receivables with similar credit risk characteristics, taking into consideration of the current circumstances.
The Group assesses the recovery risk of receivables based on the characteristics of different regions. No provision for bad debts of notes receivable was made because the notes receivable are all bank-acceptance bills with low credit risk.
The Company's subsidiaries in Mainland China classify the credit risk groupings by taking the ageing of receivables as the risk characteristics and determine different provision ratios based on business features:
Within 6 6 months 1 to 2 2 to 3 3 to 5
months to 1 year years years years Over 5 years HVAC 0% or5% 5% 10% 30% 50% 100% Consumer appliances 0% or5% 5% 10% 30% 50% 100% Robots and automatic system 0% or5% 5% 10% 30% 50% 100% Others 0% or5% 5% 10% 30% 50% 100% The Company's subsidiaries in Japan classify the credit risk groupings by taking the overdue of receivables as the risk characteristics and make bad debts provision using percentage-of- balance method with reference to the average percentage of bad debts during last three years. For the receivables that are overdue, they make bad debts provision on an individual basis.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(10) Provision for bad debts of receivables(Cont’d)
(b) Accounts receivable and other receivables that are subject to provision for bad debts on the grouping basis(Cont’d)
The Company's subsidiaries in Hong Kong, Macau, Singapore and Italy 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. The Company's subsidiaries in Germany classify the credit risk groupings by taking the expiring date of receivables as the risk characteristics.
The Company's subsidiaries in Israel classify the credit risk groupings by taking the ageing of receivables as the risk characteristics.
(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 of the present value of the future cash flows expected to be derived from the receivable below its carrying amount.
(d) When the Group transfers the accounts receivable to the financial institutions without recourse, the difference between the proceeds received from the transaction and their carrying amounts and the related taxes is recognised in profit or loss for the current period.
(11) Provision for bad debts of loans and advances
The provision for bad debts of loans and advances is provided by five-tier loan classification of ending balances of loans and advances as follows:
The Five-class Classification Provision ratio
Pass Risk Assets 1.5%
Special mention Risk Assets 3.0%
Substandard Risk Assets 30.0%
Doubtful Risk Assets 60.0%
Loss Risk Assets 100.0%
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(12) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low value consumables, work in progress, completed but unsettled products and finished goods, etc., are measured at the lower of cost and net realisable value.
The amount of completed but unsettled works is determined on the basis of individual contract at the cost of contract incurred plus profits thereof and less losses recognised and amount settled. It is recognised as assets when the balance is positive and recognised as liabilities when the balance is negative.
(b) Costing of inventories
Other than completed but unsettled products, cost is determined using the first-in first-out method when issued. The cost of goods of finished goods and work in progress comprises raw materials, direct labour and systematically allocated production overhead based on the normal production capacity.
(c) Basis for determining net realisable values of inventories and method for making provision for decline in the value of inventories
Inventories are initially measured at cost. The cost of inventories comprises purchase cost, processing cost and other expenditures to bring the inventories to current site and condition. On the balance sheet date, inventories are measured at the lower of cost and net realisable value. Net realisable value is determined based on the estimated selling price in the ordinary course of business, less the estimated costs to completion and estimated costs necessary to make the sale and related taxes.
Provision for decline in the value of inventories is determined at the excess amount of the cost as calculated based on the classification of inventories over their net realisable value, and are recognised in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of related assets or in profit or loss for the current period.
(13) Long-term equity investments
Long-term equity investments comprise theCompany’s long-term equity investments in its subsidiaries, and theGroup’s long-term equity investments in its associates and joint venture.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(13) Long-term equity investments(Cont’d)
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 of equity of the party being absorbed in the consolidated financial statements of the ultimate controller 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. For previously-held equity accounted for using the equity method, the accounting treatment of related other comprehensive income from disposal of the equity is carried out on a same basis with the investee's direct disposal of related assets or liabilities. Shareholders' equity, which is recognised due to changes 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(13) Long-term equity investments(Cont’d)
(b) Subsequent measurement and recognition of related profit and loss(Cont’d)
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 date, 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 date, the difference is included in profit or loss and the cost of the long-term equity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Group recognises the investment income according to its share of net profit or loss of the investee. The Group discontinues recognising its share of the net losses of an investee after the carrying amounts 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 of theGroup’s share of theinvestee’s owner's equity 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 transactions between the Group and its investees are eliminated in proportion to theGroup’s equity interest in the investees, based on which the investment gain or losses are recognised. Any losses resulting from transactions between the Group and its investees attributable to asset impairment losses are not eliminated.
(c) Basis for determining existence of control, jointly control or significant influence over investees Control is the power to govern an investee and obtain variable returns from participating the investee's activities, and the ability to utilise the power of an investee to affect its returns.
Joint control is the contractually agreed sharing of control over an arrangement, and relevant economic activity can be arranged upon the unanimous approval of the Group and other participants sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint venture and associates are reduced to the recoverable amounts when the recoverable amounts are below their carrying amounts (Note 2(20)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(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 residual Annual depreciation Estimated useful lives values (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 its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2. Summary of significant accounting policies and accounting estimates(Cont’d)
(15) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, land with permanent ownership, machinery and equipment, motor vehicles, computers and electronic equipment and office equipment.
Fixed assets are recognised when it is probable that the related economic benefits will flow to the Group and the costs can be reliably measured. The initial cost of purchased fixed assets include purchase price, related taxes and expenditures that are attributable to the assets incurred before the assets are ready for their intended use. The initial cost of self-constructed fixed assets is determined based on Note 2(16).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed asset when it is probable that the associated economic benefits will flow to the Group and the related cost can be reliably measured. The carrying amount of the replaced part is derecognised. All the other subsequent expenditures are recognised in profit or loss in the period in which they are incurred.
(b) Depreciation methods of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their estimated residual values over their estimated useful lives. For the fixed assets that have been provided for impairment loss, the related depreciation charge is prospectively determined based upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated residual values expressed as a percentage of cost and the annual depreciation rates of the Group's fixed assets are as follows:
Estimated net residual Annual depreciation Category Estimated useful lives values rates Buildings 15 to 60 years 0% to10% 6.7% to1.5% Machinery and equipment 2 to 18 years 0% to10% 50% to5.0% Motor vehicles 2 to 20 years 0% to10% 50% to4.5% Electronic equipment and
other equipment 2 to 20 years 0% to10% 50% to4.5% Land Permanent N/A N/A 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(15) Fixed assets(Cont’d)
(c) Basis for identification of fixed assets held under finance leases and related measurement A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease. The leased asset is recognised at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amount of the leased asset and the minimum lease payments is accounted for as unrecognised finance charge.
Fixed assets held under a finance lease is depreciated on a basis consistent with the depreciation policy adopted for fixed assets that are self-owned. When a leased asset can be reasonably determined that its ownership will be transferred at the end of the lease term, it is depreciated over the period of expected use; otherwise, the leased asset is depreciated over the shorter period of the lease term and the period of expected use.
(d) The carrying amount of a fixed asset is reduced to the recoverable amount when the recoverable amount is below the carrying amount (Note 2(20)).
(e) 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 disposal 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 an asset is interrupted abnormally and the interruption lasts for more than 3 months, until the acquisition or construction is resumed.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(17) Borrowing costs(Cont’d)
For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting any interest income earned from depositing the unused specific borrowings in the banks or any investment income arising on the temporary investment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed asset qualifying for capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the weighted average effective interest rate of general borrowings, to the weighted average of the excess amount of cumulative expenditures on the asset over the amount of specific borrowings. The effective interest rate is the rate at which the estimated future cash flows during the period of expected duration of the borrowings or applicable shorter period are discounted to the initial amount of the borrowings.
(18) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademark rights, trademark use rights, royalties 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) Trademark rights
The trademark rights is measured at cost when acquired and is amortised over the estimated useful life of 30 years. The cost of trademark rights obtained in the business combinations involving enterprises not under common control is measured at fair value.
(d) Trademark use rights
The trademark use rights is measured at cost when acquired. The cost of trademark use rights obtained in the business combinations involving enterprises not under common control is measured at fair value, and is amortised over the estimated useful life of 40 years.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(18) Intangible assets(Cont’d)
(e) 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.
(f) 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 the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research of production processes or products is categorised as expenditure on the research phase, and it is recognised in profit or loss when it is incurred. Expenditure on design and test for the final application of the development of production processes or products before mass production is categorised as expenditure on the development phase, which is capitalised only if all of the following conditions are satisfied:
 The development of production processes or products has been fully justified by technical team;
 The budget on the development of production processes or products has been approved by the management;
 There is market research analysis that demonstrates the product produced by the production process or product has the ability of marketing;
 There are sufficient technical and financial resources to support the development of production processes or products and subsequent mass production; and
 Expenditure attributable to the development of production processes or products can be reliably measured.
Other development expenditures that do not meet the conditions above are recognised in profit or loss in the period in which they are incurred. Development costs previously recognised as expenses are not recognised as an asset in a subsequent period. Capitalised expenditure on the development phase is presented as development costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended use.
(g) 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)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(19) Long-term prepaid 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 and land with permanent ownership 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, 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. Employee benefits which are non-
monetary benefits are measured at fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(21) Employee benefits(Cont’d)
(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 defined contribution plans mainly include basic pensions and unemployment insurance, while the defined benefit plans are that TLSC and KUKA Group, theGroup’s subsidiaries, provide supplemental retirement benefits beyond the national regulatory insurance system.
Basic pensions
TheGroup’s employees participate in the basic pension plan set up and administered by local authorities of Ministry of Human Resource and Social Security. Monthly payments of premiums on the basic pensions are calculated according to prescribed bases and percentage by the relevant local authorities. 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. Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method at the interest rate of treasury bonds with similar obligation term and currency. The charges related to the supplemental retirement benefits (including current service costs, past-service costs and gains or losses on settlement) and net interest costs are recognised in the statement of profit or loss or included in the cost of an asset, and the changes of remeasurement in net liabilities or net assets arising from the benefit plan are charged or credited to equity in other comprehensive.
(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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(21) Employee benefits(Cont’d)
(c) Termination benefits(Cont’d)
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.
(23) General reserve
General reserve is the reserve appropriated from undistributed 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2. Summary of significant accounting policies and accounting estimates(Cont’d)
(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.
The provisions expected to be settled within one year since the balance sheet date are classified as current liabilities.
(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 share option plan is the equity-settled share-based payment in exchange of employees' services and is measured at the fair value of the equity instruments at grant date. The equity instruments are exercisable after services in vesting period are completed or specified performance conditions are met. In the vesting period, the services obtained in current period are included in relevant cost and expenses at the fair value of the equity instruments at grant date based on the best estimate of the number of exercisable equity instruments, and capital surplus is increased accordingly. If the subsequent information indicates the number of exercisable equity instruments differs from the previous estimate, an adjustment is made and, on the exercise date, the estimate is revised to equal the number of actual vested equity instruments. On the exercise date, the recognised amount calculated based on the number of exercised equity instruments is transferred into share capital.
TheGroup’s restricted share 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 vested 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 vested equity instruments, and capital surplus is increased accordingly. If the subsequent information indicates the number of vested 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(26) Share-based payment (Cont'd)
(b) Determination of the fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which is Black - Scholes option pricing model.
The Group determine the fair value of restricted shares based on the market value of restricted shares on the grant date and the price that incentive objects pay, taking into account the effects of relevant clause of theGroup’s restricted shares plan.
(c) Basis for determining best estimate of tradable or 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 or desterilisation date, the final number of estimated exercisable or tradable equity instruments is consistent with the number of exercised or tradable equity instruments.
(d) Accounting treatment related to the exercise of share 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 period are carried forward to share premium.
On the grant day of restricted shares, the Group debit bank deposit and increase equity and capital reserves (equity premium) when receiving subscription paid by the employees. In the meanwhile, recognise the debt for repurchase obligation (deem as acquisition of treasury stock), debit treasury stock and credit other payables-repurchase obligations of restricted share based on the number of restricted stocks issued and related repurchase price.
When restricted shares are vested, capital surplus recognised in the vesting period are carried forward to share premium based on the actual vesting results.
(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 (mainly comprises HVAC and consumer appliances), and robots and automatic system (mainly comprises robots and automatic system).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(27) Revenue(Cont’d)
(a) Sales of goods(Cont’d)
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.
Revenue from sales of robots and automatic system 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.
(b) Rendering of services
Revenue from transportation service, storage service, distribution service and installation service as provided by the Group is recognised when the services are completed.
Revenue from providing automation system business and intelligent logistics integration solution is recognised according to the percentage of completion.
(c) Construction contract
Where the outcome of a construction contract can be estimated reliably, revenue and costs thereof are recognised using the “percentage-of-completion” method as at the balance sheet date. The stage of completion is measured by reference to the contract costs incurred up to the end of the reporting period as a percentage of total estimated costs for each contract.
The outcome of a construction contract can be estimated reliably when all of the following conditions are concurrently met: (1) the total contract revenue can be measured reliably; (2) it is highly probable that the economic benefits associated with the contract will flow to the enterprise; (3) the contract costs incurred thus far can be clearly identified and measured reliably; (4) both the stage of completion and the costs necessary to complete the contract can be reliably measured.
Where the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent that contract costs can be recovered actually. Contract costs are recognised as expenses in the period in which they are incurred. Otherwise, contract costs are recognised as expenses immediately, not as contract revenue. If the unexpected factors no longer exist which make construction contract unable to be estimated reliably, revenue and costs are recognised using the percentage-of-completion method.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(27) Revenue(Cont’d)
(c) Construction contract(Cont’d)
When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
As at the balance sheet date, the actual total contract revenue multiply the percentage of completion less the total contract revenue recognised in previous accounting periods should be recognised as the revenue for the current period. Similarly, the total contract costs multiply the percentage of completion incurred less the total contract costs recognised in previous accounting periods should be recognised as the expenses for the current period.
(d) Interest income
Interest income from financial instruments is calculated by effective interest method and recognised in profit or loss for the current period. Interest income comprises premiums or discounts, or the amortisation based on effective rates of other difference between the initial carrying amount and the due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financial asset or liability and the interest income or expense based on effective rates. Actual interest rate is the rate at which the estimated future cash flows during the period of expected duration of the financial instruments or applicable shorter period are discounted to the current carrying amount of the financial instruments. When calculating the effective interest rate, the Group estimates cash flows by considering all contractual terms of the financial instrument (e.g. early repayment options, similar options, etc.), but without considering future credit losses. The calculation includes all fees and interest paid or received that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is used for discounting estimated future cash flow when measuring the impairment loss.
(e) Dividend income
Dividend income is recognised when the right to receive dividend payment is established. (f) Rental income
Rental income from investment prosperities is recognised in the income statement on a straight- line basis over the lease period.
(g) 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates(Cont’d)
(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.
Government grants related to assets could be offset the carrying amount of related assets, or recognised as deferred income, and reasonably and systematically amortised to profit or loss over the useful life of the related asset. 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 or offset the related cost 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 or offset the related cost for the current period.
The same kind of government grants are presented with the same method, that is, those related to ordinary activities are recorded into operating profit while other in non-operating income and expenses.
Loans to the Group at political preferential rate are recorded at the actual amount received, and the related loan expenses are calculated based on the principal and the political preferential rate. Finance discounts directly received offset related loans expenses.
(29) Deferred tax assets tax assets and deferred tax liabilities
Deferred tax assets tax assets and deferred tax liabilities are calculated and recognised based on the differences arising between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred income tax asset is recognised for the tax losses that can be carried forward to subsequent years for deduction of the taxable profit in accordance with the tax laws. No deferred t income tax liability is recognised for a temporary difference arising from the initial recognition of goodwill. No deferred income tax asset or deferred income tax liability is recognised for the temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than a business combination, which affects neither accounting profit nor taxable profit (or tax loss). At the balance sheet date, deferred tax assets tax assets and deferred 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates (Cont'd)
(29) Deferred tax assets tax assets and deferred tax liabilities(Cont’d)
Deferred 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 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 tax assets tax assets are recognised. Deferred 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) Operating leases
Rental expenses for assets held under operating leases are recognised as the cost of relevant assets or expenses on a straight-line basis over the lease period. Contingent rentals are recognised as profit and loss for the current period when incurred.
Fixed assets leased out under operating leases, other than investment prosperities (Note 2(14)), are depreciated in accordance with the depreciation policy stated in Note 2(15)(b) and provided for impairment loss in accordance with the policy stated in Note 2(20). Rental income from operating leases is recognised as revenue on a straight-line basis over the lease period. Initial direct costs in large amount arising from assets leased out under operating leases are capitalised when incurred and recognised as profit and loss for the current period over the lease period on a same basis with revenue recognition; initial direct costs in small amount are directly recognised as profit and loss for the current period. Contingent rentals are recognised as profit and loss for the current period when incurred.
(b) Finance leases
The leased asset is recognised at the lower of the fair value of the leased asset and the present value of the minimum lease payments. The difference between the recorded amount of the leased asset and the minimum lease payments is accounted for as unrecognised finance charge and is amortised using the effective interest method over the period of the lease. A long-term payable is recorded at the amount equal to the minimum lease payments less the unrecognised finance charge.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates (Cont'd)
(31) Held for sale and discontinued operations
A non-current asset or a disposal group is classified as held for sale when all of the following conditions are satisfied: (1) the non-current asset or the disposal group is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such non-current asset or disposal group; (2) the Group has entered a legally enforceable sales agreement with other party and obtained relevant approval, and the sales transaction is expected to be completed within one year.
Non-current assets (except for financial assets, investment properties at fair value and deferred tax assets) that meet the recognition criteria for held for sale are recognised at the amount equal to the lower of the fair value less costs to sell and the carrying amount, and the excess of the original carrying amount over the fair value less costs to sell is recognised as asset impairment loss.
Assets and liabilities of a non-current asset or disposal group which is classified as held for sale are classified as current assets and current liabilities, which are separately presented in the balance sheet.
A discontinued operation is a component which has been disposed or classified as held for sale of thegroup’s business and the operations and financial reporting of the discontinued operation can be clearly distinguished from the rest of the group and can meet one of the following criteria: (1) this component of the business represents a separate major line of business or geographic area of operations; (2) this component of the business is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; (3) this component of the business is a subsidiary acquired exclusively with a view to resale.
The net profit from discontinued operations in the income statement includes operating profit or loss and disposal gains or losses of discontinued operations.
(32) 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates (Cont'd)
(33) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgements applied based on historical experience and other factors, including expectations of future events that are believed to be reasonable.
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) The fair value assessment of identifiable assets and recognition of goodwill related to the
business combination not under common control
For business combinations not under common control (Note 5(1)(a)), the combination cost and the identifiable net assets acquired in the combination should be measured at fair value at the acquisition date. The Group shall allocate the cost of combination to the identifiable assets and liabilities measured at fair value at the acquisition date. The excess of the consideration transferred over share of fair value of identifiable net assets acquired from the acquiree is recognised as goodwill.
The Group needs to make critical judgements in identifying the identifiable assets and liabilities, especially in identifying intangible assets and assessing their fair value, which affect the recognition of goodwill. The key assumptions adopted in assessing fair value of intangible assets include revenue growth, tax rates, EBITDA margins, contributory asset charges, royalty rates, remaining useful lives of intangible assets and discount rate, etc.
(ii) Provision for impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverable amount of the asset group and the combination of asset group that contain the apportioned goodwill is determined by the higher value between the use value and the net value that is calculated by the fair value less the disposal costs. Accounting estimate is required for the calculation of the recoverable amount. The impairment testing is performed by assessing the recoverable amount of the groups of assets containing the relevant goodwill, based on the present value of cash flows forecasts. Key assumptions adopted in the impairment testing of goodwill included expected revenue growth rates, EBITDA margins, perpetual annual growth rates, discount rates, etc. which involved critical accounting estimates and judgement.
(iii) 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
2 Summary of significant accounting policies and accounting estimates (Cont'd)
(34) Significant changes in accounting policies
In 2017, the Ministry of Finance released the Accounting Standard for Business Enterprises No. 42 - Non-current Assets or Disposal Groups Held for Sale and Discontinued Operations, revised Accounting Standard for Business Enterprises No. 16 - Government Grants and the Circular on Amendment to Formats of Financial Statements of General Industry (Cai Kuai[2017] No. 30). The financial statements for the six months ended 30 June 2018 are prepared in accordance with the above standards and circular, and impacts are as follows:
Details and reasons of the changes in The line items affected The amounts affected for the six accounting policies months ended 30 June 2017
The Group recorded the gains or Gains on disposal of assets Increase by 744,102,000
losses on disposal of fixed assets Non-operating income Decrease by 781,229,000
and intangible assets, occurred for Non-operating expenses Decrease by 37,127,000
the six months ended 30 June 2018,
in gains on disposal of assets. The
comparatives as at 30 June 2017
were restated accordingly.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
3 Taxation
(1) Main tax category and rate
Category Tax base Tax rate
Corporate income Levied based on taxable income 5%,14%,15%,16.5%, tax (a) 17%,25%,19%, 20-31.5%,32%,34% or35% Value-added tax Taxable value-added amount (Tax payable is 3%,5%,6%,10%,11%, (VAT) (b) calculated using the taxable sales amount 16%,17%,19%
multiplied by the applicable tax rate less
deductible VAT input of the current period)
City maintenance The amount of VAT paid 5% or7%
and construction
tax
Educational The amount of VAT paid 3% or5%
surcharge
Local educational The amount of VAT paid 2%
surcharge
Property tax Price-based property is subject to a1.2% tax rate1.2% or12%
after a30% 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 2018 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate. No. of the Certificate
of the High-tech
Name of tax payer Enterprise Dates of issuance Effective period Jiangsu Midea Cleaning Appliance Company
Limited GR201732001675 17 November 2017 3 years Guangdong Midea Environmental Electric
Appliance Manufacturing Co., Ltd. GR201644002286 30 November 2016 3 years Jiangxi Midea Guiya lighting Co., Ltd. GR201736000187 23 August 2017 3 years Guangdong Midea Kitchen Appliances
Manufacturing Co., Ltd. GR201544000202 30 September 2015 3 years Guangdong Witt Vacuum Electronics
Manufacturing Co., Ltd. GR201744000489 9 November 2017 3 years Foshan Shunde Midea Washing Appliance
Manufacturing Co., Ltd. GR201744002837 9 November 2017 3 years Foshan Shunde Midea Electric Appliance
Manufacturing Co., Ltd. GR201544001470 10 October 2015 3 years Foshan Shunde century Tongchuang Technology
Co., Ltd. GR201644000331 30 November 2016 3 years Foshan Shunde Midea Electric Technology Co.,
Ltd. GR201644000358 30 November 2016 3 years Guangdong Midea Heating& Ventilation
Equipment Co., Ltd. GF201544000292 20 October 2015 3 years Hefei Midea Heating& Ventilation Equipment Co.,
Ltd. GR201634000207 21 October 2016 3 years Anhui GMCC Precision Manufacturing Co., Ltd. GR201534000785 15 October 2015 3 years Guangzhou Midea Hualing Refrigerator Co., Ltd. GR201644002925 30 November 2016 3 years Guangdong Welling Motor Manufacturing Co., Ltd. GR201744002062 9 November 2017 3 years Foshan Welling Washer Motor Manufacturing Co.,
Ltd. GR201744001025 9 November 2017 3 years Huaian Weiling Motor Manufacturing Co., Ltd. GR201632004278 3 November 2016 3 years
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
3 Taxation (Cont'd)
(1) Main tax category and rate (Cont'd)
(a) Notes to the corporate income tax rate of the principal tax payers with different tax rates(Cont’d) (a-1) The following subsidiaries of the Company are subject to corporate income tax at the rate of15% in 2018 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate. (Cont'd)
No. of the Certificate of
the High-tech
Name of tax payer Enterprise Dates of issuance Effective period Wuxi Little Swan Company Limited GR201532000606 6 July 2015 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 Guangdong Midea Refrigeration Equipment Co., Ltd. GR201744000337 9 November 2017 3 years Handan Midea Refrigeration Equipment Co., Ltd. GR201713000957 27 October 2017 3 years Midea Group Wuhan Refrigeration Equipment Co.,
Ltd. GR201742002075 30 November 2017 3 years Guangzhou Hualing Refrigeration Equipment Co.,
Ltd. GR201744010610 11 December 2017 3 years Wuhu Meizhi Air-Conditioning Equipment Co., Ltd. GR201734001246 7 November 2017 3 years Chongqing Midea General Refrigeration Equipment
Co., Ltd. GR201751100113 28 December 2017 3 years Guangdong GMCC Refrigeration Equipment Co.,
Ltd. GR201744000895 9 November 2017 3 years Hubei Midea Refrigerator Co., Ltd. GR201742001255 28 November 2017 3 years Guangdong Midea Life Electric Appliance
Manufacturing Co., Ltd. GR201744006141 11 December 2017 3 years Anhui GMCC Refrigeration Equipment Co., Ltd GR201634000994 5 December 2016 3 years Foshan Shunde Midea Water Dispenser
Manufacturing Co., Ltd. GR201744008471 11 December 2017 3 years Midea Welling Motor Technologies (Shanghai) Co.,
Ltd. GR201731001731 23 November 2017 3 years Hefei Hualing Co., Ltd.
(a-2) The application for corporate income tax preferential treatment by 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 2018.
(a-3) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) and (a-2) are subject to corporate income tax at the rate of25%.
(a-4) In August 2008, Midea Electric Appliance (Singapore) Co., Ltd., the Company's subsidiary, was awarded with the Certificate of Honour 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 at the rate of5% while the unqualified income is subject to the corporate income tax at the rate of17%. Midea Electric Appliance (Singapore) Co., Ltd. and Little Swan International (Singapore) Co., Ltd., the Company's subsidiary, is subject to corporate income tax at the rate of17%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
3 Taxation (Cont'd)
(1) Main tax category and rate (Cont'd)
(a) Notes to the corporate income tax rate of the principal tax payers with different tax rates(Cont’d) (a-5) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate of16.5%. Such subsidiaries include Midea International Trade Co., Ltd., Midea International Co., Ltd., Midea Appliance Investment (Hong Kong) Ltd., Chairing Holding Ltd., Century Carrier Household Air-conditioning Co., Ltd., Midea Refrigeration (Hong Kong) Ltd., Welling Holding Limited (Hong Kong), Welling International Hong Kong Ltd (HK), and Midea Investment (Asia) Co., Ltd. and Main Power Electrical Factory Limited.
(a-6) 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., Midea Holding (Cayman Islands) Ltd. and Midea Investment Development Ltd.
(a-7) Springer Carrier Ltda., the Company's subsidiaries in Brazil, is subject to Brazil corporate income tax at the rate of34%.
(a-8) TLSC, the Company's subsidiaries in Japan, and its subsidiaries, are subject to Japan corporate income tax at the rate of30.58%.
(a-9) Clivet S.P.A and ClivetEspaña S.A.U. (“Clivet”), the Company's subsidiaries in Italy, is subject to Italy corporate income tax at the rate between20% and31.4%.
(a-10) KUKA Group, the Company's subsidiaries in Germany, is subject to Germany corporate income tax at the rate of32%.
(a-11) SMC, the Company's subsidiaries in Israel, is subject to Israel corporate income tax at the rate of24%.
(b) Notes to the VAT rate of the principal tax payers with different tax rates
(b-1) According to the Notice for the Full Implementation of Transformation from business tax to value- added tax Pilot (Cai Shui[2016] No. 36) and the relevant provisions issued by Ministry of Finance and the State Administration of Taxation, since 1 May 2016, revenue from rental services, real estate management services, financial services, consulting services and logistics services of the Company and its subsidiaries are subject to VAT, while these services are subject to business tax at the rate of5% before 1 May 2016.
(b-2) Sales of goods and provision of repairs and replacement service provided by certain subsidiaries of the Company are subject to VAT at the rate of17% before 1 May 2018 and of16% after 1 May 2018.
(b-3) Rental services on real estate and distribution services provided by the Company and certain subsidiaries are subject to VAT at the rate of11% before 1 May 2018 and of10% after 1 May 2018.
(b-4) Financial services, consulting services and storage services provided by the Company and certain subsidiaries are subject to VAT at the rate of6%.
(b-5) Rental revenue of Hefei Midea Refrigerator Co., Ltd., which is a subsidiary of the Company, is subject to easy levy of VAT at the rate of5%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
||
|-|
|Ending balance|
|5,232|
|15,708,849|
|122,131|
|3,167,283|
|81,100|
|26,003,161|
|45,087,756|
|4,806,621|

 (a) As at 30 June 2018, cash at bank includes fixed deposits with the term of over three months, amounting to RMB 6,960,071,000 (31 December 2017: RMB 3,540,237,000).
(b) Other cash balances mainly includes security deposits, bank acceptance note and letter of credit. (c) 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% and5% for eligible RMB deposits and foreign currency deposits, respectively, and are not available for use in theGroup’s daily operations.
(d) As at 30 June 2018, deposits with banks and other financial institutions include time deposits with the term of over three months, amounting to RMB 24,470,000,000 (31 December 2017: RMB 20,800,000,000).
(2) Notes receivable
||
|-|
|Ending balance|
|16,777,243|

 (a) As at 30 June 2018, 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|
|19,637,640|

 (3) Receivables
(a) Accounts receivable
||
|-|
|Ending balance|
|21,599,626|
|(1,061,759)|
|20,537,867|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(3) Receivables(Cont’d)
(a) Accounts receivable(Cont’d)
The ageing of other receivables is analysed as follows:
||
|-|
|Ending balance|
|21,261,129|
|158,074|
|109,769|
|45,791|
|24,863|
|21,599,626|

 Accounts receivable are analysed by categories as follows:
||||||||
|-|-|-|-|-|-|-|
|Ending balance|||||||
|Book balance||Provision for bad debts||Book balance|||
|Amount|% of totalbalance|Amount|Ratio|Amount|% of totalbalance|Amount|
|7,469|0.03%|7,469|100.00%|32,448|0.18%|6,960|
|21,231,784|98.30%|1,022,832|4.82%|18,079,721|98.20%|867,797|
|360,373|1.67%|31,458|8.73%|297,945|1.62%|6,640|
|21,599,626|100.00%|1,061,759|4.92%|18,410,114|100.00%|881,397|

 Accounts receivable that the related provision for bad debts is provided on grouping basis using the ageing analysis method are analysed as follows:
||||||
|-|-|-|-|-|
|Ending balance|||||
|Book balance|Provision for bad debts||Book balance||
|Amount|Amount|Ratio|Amount|Amount|
|20,951,267|873,108|4.17%|17,693,549|673,853|
|113,531|33,581|29.58%|191,494|59,250|
|101,587|62,262|61.29%|101,994|61,313|
|45,437|33,919|74.65%|57,889|38,586|
|19,962|19,962|100.00%|34,795|34,795|
|21,231,784|1,022,832|4.82%|18,079,721|867,797|

 The provision for bad debts reversed for the six months ended 30 June 2018 was RMB 129,660,000. The accounts receivable written off by the Group for the six months ended 30 June 2018 were arising from transactions with third parties and there were no written-off accounts receivable that are individually significant.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(3) Receivables(Cont’d)
(a) Accounts receivable(Cont’d)
As at 30 June 2018, the top 5 accounts receivable assembled by debtors were analysed as follows:
|||
|-|-|
|Amount|Provision for bad debts|
|1,704,630|85,232|

 (b) Other receivables
||
|-|
|Ending balance|
|2,102,785|
|(75,162)|
|2,027,623|

 Other receivables mainly include exercising accounts, current accounts, petty cash to staff and deposits. The ageing of other receivables is analysed below:
||
|-|
|Ending balance|
|1,966,437|
|82,939|
|38,893|
|5,762|
|8,754|
|2,102,785|

 Other receivables are analysed by categories as follows:
||||||||
|-|-|-|-|-|-|-|
|Ending balance|||||||
|Book balance||Provision for baddebts||Book balance|||
|Amount|% of totalbalance|Amount|Ratio|Amount|% of totalbalance|Amount|
|389,365|18.52%|-|-|64,760|2.39%|-|
|1,709,847|81.31%|72,106|4.22%|2,642,152|97.61%|49,344|
|3,573|0.17%|3,056|85.53%|-|-|-|
|2,102,785|100.00%|75,162|3.57%|2,706,912|100.00%|49,344|

 As at 30 June 2018, 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:
||||
|-|-|-|
|Book balance|Provision forbad debts|Ratio|
|389,365|-|0%|

The provision for bad debts reversed for the six months ended 30 June 2018 is RMB 7,811,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(3) Receivables(Cont’d)
(b) Other receivables(Cont’d)
As at 30 June 2018, the top 5 other receivables assembled by debtors are analysed as follows:
|||
|-|-|
|Amount|Provision for bad debts|
|447,190|2,891|

 As at 30 June 2018, the Group' has no significant government grants recognised at amounts receivable. (4) Advances to suppliers
||
|-|
|Ending balance|
|1,885,815|

 (a) The ageing of advances to suppliers is analysed below:
||||
|-|-|-|
|Ending balance|||
|Amount|% of totalbalance|Amount|
|1,751,811|92.89%|1,620,207|
|109,295|5.80%|36,689|
|13,729|0.73%|5,662|
|10,980|0.58%|9,690|
|1,885,815|100.00%|1,672,248|

 As at 30 June 2018, advances to suppliers over 1 year with a carrying amount of RMB 134,004,000 (31 December 2017: RMB 52,041,000) are mainly unsettled advances paid for raw materials. As at 30 June 2018, the top five balances of advances to suppliers assembled by debtors are summarised as follows:
||
|-|
|Amount|
|310,569|

 (5) Loans and advances
(a) Financial enterprises' loans and advances analysed to individual and corporation are as follows:
||
|-|
|Ending balance|
|892,068|
|14,800,076|
|15,692,144|
|(217,776)|
|15,474,368|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(5) Loans and advances(Cont’d)
(b) Financial enterprises' loans and advances analysed by type of collateral held or other credit enhancements are as follows:
||
|-|
|Ending balance|
|755,307|
|497,990|
|14,438,847|
|15,692,144|
|(217,776)|
|15,474,368|

 (6) Inventories
(a) Inventories are summarised by categories as follows:
||||||
|-|-|-|-|-|
|Ending balance|||||
|Bookbalance|Provision fordeclines invalue ofinventories|Carryingamount|Bookbalance|Provision fordeclines invalue ofinventories|
|12,856,895|(156,317)|12,700,578|17,625,714|(160,843)|
|4,739,541|(19,608)|4,719,933|5,680,125|(46,139)|
|1,751,363|-|1,751,363|2,040,630|-|
|201,642|-|201,642|221,842|-|
|40,698|-|40,698|59,370|-|
|4,309,124|-|4,309,124|4,023,467|-|
|23,899,263|(175,925)|23,723,338|29,651,148|(206,982)|

 (b) Provision for decline in the value of inventories is analysed as follows:
|||||
|-|-|-|-|
|Openingbalance|Increase incurrent period|Decrease of reversal orwrite-off in currentperiod|Differences on translation offoreign currencyfinancial statements|
|160,843|132,283|(157,781)|(8,943)|
|46,139|33,135|(29,759)|8|
|-|-|-|-|
|-|-|-|-|
|206,982|165,418|(187,540)|(8,935)|

 (c) Provision for decline in the value of inventories is as follows:
||
|-|
|Basis for provision for decline in thevalue of inventories|
|Stated at the lower of cost and netrealisable value|
|Stated at the lower of cost and netrealisable value|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(7) Other current assets
||
|-|
|Ending balance|
|12,642,160|
|29,378,897|
|1,595,049|
|639,313|
|2,120,588|
|46,376,007|

 (a) As at 30 June 2018, wealth management products due within one year are presented as other current assets, mainly including non-principal-guaranteed wealth management products with floating earnings (Note 15(1)).
(b) The Companydidn’t purchase wealth management products and assets management plan due more than one year which are presented as other non-current assets.
(8) Available-for-sale financial assets
||
|-|
|Ending balance|
|96,486|
|1,947,956|
|2,044,442|

 (a) As at 30 June 2018, available-for-sale financial assets measured at fair value mainly include equity investments of TLSC and KUKA Group.
(b) The available-for-sale financial assets measured at cost mainly include the unlisted equity investments held by the Group, which do not have a quoted market price 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.
(9) Long-term equity investments
Long-term equity investments are classified as follows:
||
|-|
|Ending balance|
|2,753,940|
|-|
|2,753,940|

 (a) Investment in associates mainly refers to the investments in Foshan Shunde Rural Commercial Bank Co., Ltd., Misr Refrigeration and Air Conditioning Manufacturing Co. and Hefei Royalstar Motor Co., Ltd. and other companies by the Group.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(10) Fixed assets
||||||
|-|-|-|-|-|
|Buildings|Land|Machineryandequipment|Motorvehicles|Electronicequipment andother equipment|
|16,760,157|1,090,527|17,892,971|779,279|3,635,383|
|281,430|31,282|809,288|12,676|394,859|
|261,856|31,282|778,465|12,676|353,809|
|19,574|-|30,823|-|41,050|
|-|-|-|-|-|
|-|-|-|-|-|
|-|-|-|-|-|
|(8,146)|-|(415,266)|(22,503)|(196,566)|
|(8,146)|-|(415,266)|(22,503)|(196,566)|
|-|-|-|-|-|
|-|-|-|-|-|
|5,512|(3,323)|19,773|(39)|(6,415)|
|17,038,953|1,118,486|18,306,766|769,413|3,827,261|
|5,734,279|-|8,932,987|434,515|2,429,550|
|447,446|-|864,964|48,168|325,931|
|447,446|-|864,964|48,168|325,931|
|-|-|-|-|-|
|(3,886)|-|(253,385)|(20,298)|(172,045)|
|(3,886)|-|(253,385)|(20,298)|(172,045)|
|-|-|-|-|-|
|2,411|-|5,295|(131)|(950)|
|6,180,250|-|9,549,861|462,254|2,582,486|
|3,925|-|21,846|218|273|
|508|5,561|-|-|1,010|
|508|5,561|-|-|1,010|
|-|-|(4,319)|(19)|(26)|
|-|-|(4,319)|(19)|(26)|
|9|100|(3)|(1)|18|
|4,442|5,661|17,524|198|1,275|
|10,854,261|1,112,825|8,739,381|306,961|1,243,500|
|11,021,953|1,090,527|8,938,138|344,546|1,205,560|

 (a) For the six months ended 30 June 2018, the depreciation of fixed assets amounted to RMB 1,686,509,000 (for the six months ended 30 June 2017: RMB 1,669,291,000) and is included in income statement.
(b) As at 30 June 2018, the Company is still in the course of obtaining the ownership certificate for the fixed asset with a carrying amount of RMB 594,344,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(11) Construction in progress
(a) Movement of significant projects of construction in progress
|||||||||
|-|-|-|-|-|-|-|-|
|Openingbalance|Increase incurrent period|Transfer tofixed assets|Otherdecreases|Endingbalance|Accumulativeamount ofcapitalisedborrowingcosts|Including:Borrowingcostscapitalised incurrent period|Capitalisationrate ofborrowingcosts incurrent period|
|561,675|604,426|-|-|1,166,101|-|-|-|
|36,313|17,780|-|-|54,093|-|-|-|
|281,588|153,815|(91,447)|(1,894)|342,062|-|-|-|
|879,576|776,021|(91,447)|(1,894)|1,562,256|-|-||

As at 30 June 2018, 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(12) Intangible assets
||||||
|-|-|-|-|-|
|Land userights|Non-patenttechnology|PatentsandTrademarkrights|Trademarkuse rights|Others|
|3,862,449|2,039,958|4,948,967|2,433,542|5,653,312|
|134,051|19,298|-|-|319,540|
|134,051|19,298|-|-|179,650|
|-|-|-|-|-|
|-|-|-|-|139,890|
|-|(12,551)|-|-|(1,856,070)|
|-|(12,551)|-|-|(1,856,070)|
|-|-|-|-|-|
|-|-|-|-|-|
|132|(36,661)|(76,145)|84,535|(74,256)|
|3,996,632|2,010,044|4,872,822|2,518,077|4,042,526|
|752,029|418,260|40,199|99,960|2,448,693|
|50,595|138,171|18,981|29,098|293,055|
|50,595|138,171|18,981|29,098|293,055|
|-|-|-|-|-|
|-|(8,117)|-|-|(1,850,967)|
|-|(8,117)|-|-|(1,850,967)|
|-|-|-|-|-|
|(324)|(3,863)|(108)|4,484|(36,314)|
|802,300|544,451|59,072|133,542|854,467|
|-|10,738|-|-|1,313|
|-|82|-|-|-|
|-|82|-|-|-|
|-|(56)|-|-|-|
|-|(56)|-|-|-|
|-|(8)|-|-|1|
|-|10,756|-|-|1,314|
|3,194,332|1,454,837|4,813,750|2,384,535|3,186,745|
|3,110,420|1,610,960|4,908,768|2,333,582|3,203,306|

 (a) For the six months ended 30 June 2018, the amortisation of intangible assets amounted to RMB 529,900,000 (for the six months ended 30 June 2017: RMB 1,477,108,000) and is included in income statement.
(b) As at 30 June 2018, the Group had no certificates of land use rights to be obtained.
(c) As at 30 June 2018, other intangible assets mainly represented customer relationship.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(13) Goodwill
The goodwill allocated to the asset groups of the Group are summarised as follows:
|||||
|-|-|-|-|
|Opening balance|Increase|Differences ontranslation offoreign currencyfinancialstatements|Others|
|1,361,306|-|-|-|
|498,724|-|(9,696)|-|
|569,493|-|(75,415)|-|
|2,695,355|-|94,553|-|
|22,202,569|-|(429,123)|-|
|1,576,338|9,999|60|-|
|28,903,785|9,999|(419,621)|-|

 (14) Deferred tax assets tax assets and deferred tax liabilities
(a) Deferred tax assets tax assets without taking into consideration the offsetting of balances
||||
|-|-|-|
|Ending balance|||
|Deductible temporarydifferences anddeductible losses|Deferred tax assets|Deductible temporarydifferences anddeductible losses|
|1,654,550|572,418|1,482,569|
|1,269,040|246,896|1,121,334|
|632,368|149,876|1,294,431|
|17,897,074|3,561,189|15,398,407|
|4,563,944|1,040,376|3,544,103|
|26,016,976|5,570,755|22,840,844|

 (b) Deferred tax liabilities without taking into consideration the offsetting of balances
||||
|-|-|-|
|Ending balance|||
|Taxable temporarydifferences|Deferred tax liabilities|Taxable temporarydifferences|
|64,727|12,506|482,092|
|11,847,714|3,521,284|12,152,077|
|4,746,776|1,433,409|4,723,128|
|16,659,217|4,967,199|17,357,297|

 (c) The net balances of deferred tax assets and liabilities after offsetting are as follows:
||
|-|
|Balance after offsetting at end of period|
|4,618,066|
|4,014,510|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(15) Details of provision for asset impairments
||||||
|-|-|-|-|-|
|Opening balance|Increase incurrent period|Decrease in current period||Differences ontranslation offoreign currencyfinancialstatements|
|||Reversal|Write-off||
|1,098,395|403,352|(137,471)|1,627|(11,206)|
|881,397|319,716|(129,660)|1,627|(11,321)|
|167,654|50,122|-|-|-|
|49,344|33,514|(7,811)|-|115|
|206,982|165,418|(138,373)|(49,167)|(8,935)|
|2,254|-|-|-|(42)|
|26,262|7,079|-|(4,364)|123|
|12,051|82|-|(56)|(7)|
|12,576|-|-|-|-|
|1,358,520|575,931|(275,844)|(51,960)|(20,067)|

 (16) Assets with ownership or use right restricted
As at 30 June 2018, details of assets with restricted ownership are as follows:
||
|-|
|Ending balance|
|7,023,079|
|3,167,283|
|24,470,000|
|34,660,362|

 (17) Short-term borrowings
||
|-|
|Ending balance|
|1,244,051|
|16,982|
|1,261,033|

 (a) As at 30 June 2018, the annual interest rate range of short-term borrowings is1.34% to11.63% (31 December 2017:0.81% to11%).
(18) Notes payable
||
|-|
|Ending balance|
|24,345,348|

 (19) Accounts payable
||
|-|
|Ending balance|
|32,066,265|
|3,929,620|
|35,995,885|

 (a) As at 30 June 2018, accounts payable with ageing over 1 year with a carrying amount of RMB 951,557,000 (31 December 2017: RMB 978,692,000) are mainly unsettled accounts payable for
materials.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(20) Advances from customers
||
|-|
|Ending balance|
|9,376,103|
|1,633,114|
|11,009,217|

 (a) As at 30 June 2018, accounts payable with ageing over 1 year with a carrying amount of RMB 403,229,000 (31 December 2017: RMB 202,302,000) are mainly unsettled advances on sales. (21) Employee benefits payable
||
|-|
|Ending balance|
|3,839,959|
|61,425|
|3,901,384|

 (a) Short-term employee benefits
||||
|-|-|-|
|Opening balance|Increase in currentperiod|Decrease in currentperiod|
|4,622,447|10,410,385|(11,620,399)|
|264,274|341,267|(351,247)|
|107,013|783,380|(792,658)|
|103,801|752,293|(760,201)|
|2,278|18,293|(19,026)|
|934|12,794|(13,431)|
|22,129|164,972|(166,474)|
|18,821|43,664|(44,171)|
|28,582|285,151|(277,177)|
|5,063,266|12,028,819|(13,252,126)|

 (22) Taxes payable
||
|-|
|Ending balance|
|2,823,019|
|874,069|
|658,487|
|4,355,575|

 (23) Other payables
(a) Other payables are mainly restricted share repurchase obligation, deposit and security deposit payable, reimbursed logistics expense, manufacturing equipment expense and refund for energy-saving and beneficial to people.
(b) As at 30 June 2018, accounts payable with ageing over 1 year with a carrying amount of RMB 853,161,000 (31 December 2017: RMB 405,709,000) are mainly restricted share repurchase obligation, deposit and security deposit payable, which are unsettled for related projects that are uncompleted.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(24) Other current liabilities
||
|-|
|Ending balance|
|19,268,259|
|6,544,828|
|2,148,102|
|707,460|
|3,522,514|
|32,191,163|

 (25) Long-term borrowings
||
|-|
|Ending balance|
|28,363,014|
|-|
|1,913,175|
|30,276,189|

 (a) As at 30 June 2018, mortgage borrowings of RMB 28,363,014,000 was pledged by81.04% equity of KUKA Group, which was acquired by the subsidiary of the Company (31 December 2017: RMB 28,922,008,000). Interest is paid on a semi-annual basis.
(b) As at 30 June 2018, the annual interest rate range of the long-term borrowings was0.9% to5.5% (31 December 2017:0.4% to6%).
(26) Long-term employee benefits payable
||
|-|
|Ending balance|
|2,297,939|
|132,847|
|2,430,786|

 (a) Supplementary retirement benefits arise from KUKA Group and TLSC (subsidiaries).
(27) Share capital
|||||||
|-|-|-|-|-|-|
|Openingbalance|Movements in current period|||||
||Exercise ofshare options|Restrictedshares|Desterilisation|Others|Sub-total|
||(a)|(b)||||
|212,023|-|25,955|(89,655)|(1,701)|(65,401)|
|6,349,030|41,605|-|89,655|-|131,260|
|6,561,053|41,605|25,955|-|(1,701)|65,859|

 (a) Pursuant to the Proposal on Write-offs of Partial Incentive Shares Repurchase for the 2017 Restricted Share Incentive Plan as approved at the 34th meeting of 2ndshareholders’ meeting dated 21 May 2018, the Company determined to repurchase 1,551,000 initial restricted shares granted to 29 employees, reducing the share capital by RMB 1,551,000 and the share premium by RMB 23,060,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(27) Share capital(Cont’d)
Pursuant to the Restricted Share Incentive Plan for 2017 as approved at theshareholders’ meeting for the year ended 31 December 2016 dated 21 April 2017 (the "Restricted Share Incentive Plan for 2017 "), and pursuant to the Proposal to Grant Reserved Restricted Shares to Targeted Employees for 2017 as approved at the 29th meeting of the 2ndshareholders’ meeting dated 29 December 2017, the Company determined to grant reserved restricted shares of 5,385,000 to 54 employees with the initial granting price of RMB 27.99. Under the circumstance that specified performance conditions are met, one third of the total restricted shares granted will become effective after 1 year, 2 years and 3 years, respectively, since 29 December 2017. For the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 5,385,000, of which RMB 5,385,000 was recognised as share capital, and RMB 145,341,000 was recognised as capital surplus (share premium). Pursuant to the Proposal on Write-offs of Partial Incentive Shares Repurchase for the 2017 Restricted Share Incentive Plan as approved at the 34th meeting of 2ndshareholders’ meeting dated 21 May 2018, the Company determined to repurchase 150,000 reserved restricted shares granted to 2 employees, reducing the share capital by RMB 150,000 and the share premium by RMB 4,049,000.
Pursuant to the restricted share incentive plan for 2018 as approved at theshareholders’ meeting for the year ended 31 December 2017 dated 23 April 2018 (the "Restricted Share Incentive Plan for 2018 "), the Company granted restricted shares of 20,570,000 to 319 employees for the first time with the initial granting price of RMB 27.57. Under the circumstance that specified performance conditions are met, one third of the total share options granted will become effective after 1 year, 2 years, 3 years and 5 years, respectively, since 7 May 2018. For the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 20,570,000, of which RMB 20,570,000 was recognised as share capital, and RMB 546,545,000 was recognised as capital surplus (share premium).
(b) Pursuant to the first share option incentive plan as approved at the first extraordinary general meeting dated 17 February 2014 (the "First Options Incentive Programme"), for the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 10,640,000, of which RMB 10,640,000 was recognised as share capital, and RMB 130,420,000 was recognised as capital surplus (share premium), of which RMB 39,042,000 transferred from capital surplus (others) to capital surplus (share premium).
Pursuant to the second share option incentive plan as approved at the first extraordinary general meeting dated 25 May 2015 (the "Second Options Incentive Programme"), for the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 14,271,000, of which RMB 14,271,000 was recognised as share capital, and RMB 337,763,000 was recognised as capital surplus (share premium), of which RMB 96,851,000 transferred from capital surplus (others) to capital surplus (share premium).
Pursuant to the third share option incentive plan as approved at the first extraordinary general meeting dated 6 June 2016 (the "Third Options Incentive Programme"), for the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 7,389,000, of which RMB 7,389,000 was recognised as share capital, and RMB 179,741,000 was recognised as capital surplus (share premium), of which RMB 40,255,000 transferred from capital surplus (others) to capital surplus (share premium).
Pursuant to the fourth share option incentive plan as approved at the first extraordinary general meeting dated 21 April 2017 (the "Fourth Options Incentive Programme"), for the six months ended 30 June 2018, the total number of shares exercised by the granted employees was 9,305,000, of which RMB 9,305,000 was recognised as share capital, and RMB 355,763,000 was recognised as capital surplus (share premium), of which RMB 71,763,000 transferred from capital surplus (others) to capital surplus (share premium).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(28) Capital surplus
||||
|-|-|-|
|Opening balance|Increase in current period|Decrease in currentperiod|
|11,908,475|1,695,573|(27,109)|
|943,243|480,408|(247,911)|
|3,059,786|1,147|(490,456)|
|15,911,504|2,177,128|(765,476)|

 (a) The increase in share premium arose from the exercise of share options with the amount of RMB 1,003,687,000, and restricted shares subscription with amount of RMB 691,886,000, and the decrease in share premium arose from the repurchased restricted shares with the amount of RMB 27,109,000.
(b) Share-based payment incentive plan included share option incentive plan and restricted share plan. The increase of share-based payment incentive plan arose from expenses attributable to shareholders' equity of the Company in the share option incentive plan and restricted share plan with the amount of RMB 480,408,000, while the decrease arose from the transfer of RMB 247,911,000 to share premium due to exercise of share option.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(29) Other comprehensive income
||||||||
|-|-|-|-|-|-|-|
|Other comprehensive income in the balance sheet|||||||
|Openingbalance|Attributable to theparent companyafter tax|Ending balance|Amount arisingbefore income taxfor current period|Less: Reclassification ofprevious othercomprehensive incometo profit or loss|Less: Income taxexpenses|Attributable to theparent company aftertax|
|51,091|18,286|69,377|22,515|-|3,174|18,286|
|(111,070)|45,974|(65,096)|45,751|-|-|45,974|
|151,781|14,579|166,360|157,955|151,845|(2,679)|14,579|
|323,147|(634,467)|(311,320)|(508,730)|228,101|(55,072)|(634,467)|
|(659,641)|155,741|(503,900)|21,499|-|-|155,741|
|(244,692)|(399,887)|(644,579)|(261,010)|379,946|(54,577)|(399,887)|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(30) Surplus reserve
||||
|-|-|-|
|Opening balance|Increase in current period|Decrease in currentperiod|
|3,882,232|-|-|

 (31) Undistributed profits
||
|-|
|Current figure|
|47,627,235|
|12,936,846|
|7,898,785|
|-|
|52,665,296|

 (a) Ordinary share dividends distributed in current period
In accordance with the resolution at the Board ofShareholders’ meeting, dated on 21 April 2018, the Company distributed a cash dividend to the shareholders at RMB1.20 per share, amounting to RMB7,898,785,000 (deducting a portion of dividend from repurchased restricted shares ) calculated by 6,584,022,574 issued shares (2017: RMB1 per share, amounting to RMB6,465,677,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(32) Revenue and cost of sales
||
|-|
|Current figure|
|133,077,713|
|9,546,124|
|142,623,837|

||
|-|
|Current figure|
|95,385,475|
|8,495,963|
|103,881,438|

 (a) Revenue and cost of sales from main operations
||||
|-|-|-|
|Current figure|||
|Revenue|Cost of sales|Revenue|
|63,873,960|44,548,938|50,022,802|
|55,279,120|40,043,342|51,827,140|
|12,502,301|9,447,728|13,606,260|
|1,422,332|1,345,467|1,078,404|
|133,077,713|95,385,475|116,534,606|

 For the six months ended 30 June 2018, cost of sales was mainly material costs and labour costs, which accounted for over80% of total cost of sales from main operations (for the six months ended 30 June 2017: over80%).
(b) Revenue and cost of sales from other operations
||||
|-|-|-|
|Current figure|||
|Revenue|Cost of sales|Revenue|
|8,605,866|8,225,748|7,276,885|
|940,258|270,215|638,574|
|9,546,124|8,495,963|7,915,459|

 For the six months ended 30 June 2018, cost of sales from other operations is mainly material costs, which accounts for over80% of total cost of sales from other operations (for the six months ended 30 June 2017: over80%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(33) Interest income/(expenses)
Interest income and expenses arising from financial enterprises are presented as follows:
||
|-|
|Current figure|
|430,800|
|681,214|
|1,112,014|
|(168,235)|

 (34) Taxes and surcharges
||
|-|
|Current figure|
|377,860|
|274,527|
|195,263|
|847,650|

 (35) Selling and distribution expenses
||
|-|
|Current figure|
|16,892,503|

 For the six months ended 30 June 2018, selling and distribution expenses were mainly maintenance and installation expenses, advertisement and promotion fee, transportation and storage fee, employee benefits and rental expenses, which accounted for over80% of total selling and distribution expenses (for the six months ended 30 June 2017: over80%).
(36) General and administrative expenses
||
|-|
|Current figure|
|7,234,520|

 For the six months ended 30 June 2018, general and administrative expenses were mainly employee benefits,R&D expenditures, expenses of depreciation and amortisation, technical maintenance expenses and administrative office expenses, which accounted for over80% of total general and administrative expenses (for the six months ended 30 June 2017: over80%). (37) Financial expenses
The Group's finance expenses, other than those arising from financial business (Note 4(33)), are presented as follows:
||
|-|
|Current figure|
|304,703|
|(757,815)|
|(585,871)|
|54,870|
|(984,113)|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(38) Asset impairment loss
||
|-|
|Current figure|
|215,759|
|27,045|
|-|
|7,079|
|82|
|50,122|
|300,087|

 (39) Gains/(losses) on changes in fair value
||
|-|
|Current figure|
|(613,928)|

 (40) Investment income
||
|-|
|Current figure|
|347,371|
|92,213|
|187,245|
|285,795|
|912,624|

 There is no restriction on recovery of investment income.
(41) Gains on disposal of assets
||
|-|
|Current figure|
|17,902|
|(36,661)|
|(18,759)|

 (42) Other income
||
|-|
|Current figure|
|626,278|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(43) Income tax expenses
||
|-|
|Current figure|
|3,098,450|
|(483,568)|
|2,614,882|

 The reconciliation from income tax calculated based on the applicable tax rates and total profit presented in the consolidated income statement to the income tax expenses is listed below:
||
|-|
|Current figure|
|16,394,573|
|4,098,643|
|(1,018,015)|
|(88,464)|
|(156,177)|
|154,906|
|(83,582)|
|18,168|
|(310,597)|
|2,614,882|

 (44) 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|Current figure|
|RMB’000|12,936,846|
|Thousands shares|6,575,678|
|RMB per share|1.97|

 (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:
|||
|-|-|
|Unit|Current figure|
|RMB’000|12,936,846|
|Thousands shares|6,575,678|
|Thousands shares|95,007|
|Thousands shares|6,670,685|
|RMB per share|1.94|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(45) Notes to the cash flow statement
(a) Cash received relating to other operating activities
||
|-|
|Current figure|
|148,745|
|649,291|
|908,034|
|140,352|
|1,709,955|
|3,556,377|

 (b) Cash paid relating to other operating activities
||
|-|
|Current figure|
|3,210,192|
|10,057,941|
|178,335|
|13,446,468|

 (c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
||
|-|
|Current figure|
|13,779,691|
|300,087|
|2,431,629|
|18,759|
|613,928|
|(356,164)|
|(912,624)|
|545,531|
|(581,702)|
|105,493|
|5,575,127|
|(19,845,991)|
|5,939,924|
|7,613,688|
|10,427,394|
|21,831,653|
|-|
|-|
|(11,404,259)|

 (d) Composition of cash and cash equivalents
||
|-|
|Current figure|
|5,232|
|8,748,778|
|59,123|
|81,100|
|1,533,161|
|10,427,394|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(46) Monetary items denominated in foreign currencies
Item 30 June 2018
|||
|-|-|
|Foreign currency balance|Exchange rate|
|1,495,148|6.6166|
|1,415,286|0.0599|
|209,169|0.8431|
|169,635|7.6515|
|289,682|1.7161|
|N/A|N/A|
|1,126,227|6.6166|
|26,014,080|0.0599|
|110,575|0.8431|
|371,671|7.6515|
|260,881|1.7161|
|N/A|N/A|
|53,792|6.6166|
|2,109,846|0.0599|
|1,788|0.8431|
|51,841|7.6515|
|46,064|1.7161|
|N/A|N/A|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(46) Monetary items denominated in foreign currencies(Cont’d)
Item 30 June 2018
|||
|-|-|
|Foreign currency balance|Exchange rate|
|43,828|6.6166|
|58,611|7.6515|
|95,953|1.7161|
|N/A|N/A|
|277,301|6.6166|
|18,027,349|0.0599|
|87,119|0.8431|
|318,583|7.6515|
|256,356|1.7161|
|N/A|N/A|
|53,395|6.6166|
|6,206,512|0.0599|
|188,209|0.8431|
|27,085|7.6515|
|N/A|N/A|
|697,909|6.6166|
|271,048|7.6515|
|N/A|N/A|
|3,956,272|7.6515|
|829|1.7161|
|N/A|N/A|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(46) Monetary items denominated in foreign currencies(Cont’d)
Item 31 December 2017
|||
|-|-|
|Foreign currency balance|Exchange rate|
|1,601,324|6.5342|
|2,292,090|0.0579|
|167,138|0.8359|
|181,609|7.8023|
|173,113|1.9755|
|N/A|N/A|
|969,755|6.5342|
|26,231,623|0.0579|
|52,543|0.8359|
|283,715|7.8023|
|480,808|1.9755|
|N/A|N/A|
|48,777|6.5342|
|2,234,111|0.0579|
|723|0.8359|
|50,804|7.8023|
|44,134|1.9755|
|N/A|N/A|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
4 Notes to the consolidated financial statements(Cont’d)
(46) Monetary items denominated in foreign currencies(Cont’d)
Item 31 December 2017
|||
|-|-|
|Foreign currency balance|Exchange rate|
|258,328|6.5342|
|30,233|7.8023|
|135,206|1.9755|
|N/A|N/A|
|350,735|6.5342|
|18,175,112|0.0579|
|53,468|0.8359|
|259,337|7.8023|
|208,088|1.9755|
|N/A|N/A|
|54,810|6.5342|
|8,281,744|0.0579|
|96,625|0.8359|
|33,701|7.8023|
|N/A|N/A|
|4,227,267|7.8023|
|933|1.9755|
|N/A|N/A|
|696,804|6.5342|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
5 Changes in consolidation scope
(1) Disposal of subsidiaries
KUKA Group, the subsidiary of the Company, disposed of Connyun GmbH toKörber GmbH in June 2018, which do not have significant impact on the financial position of the Group.
(2) Changes in consolidation scope due to other reasons
(a) Increase of consolidation scope
In February 2018, Guangdong Midea Electric Co., Ltd. (a fully-owned subsidiary of the Company) invested an amount of RMB 100,000,000 by cash in the establishment of Guangdong Midea Industrial Technology Co., Ltd.
In April 2018, Midea Electrics Netherlands B.V. (a fully-owned subsidiary of the Company) established Midea Home Appliances UK Ltd.
In May 2018, the Company established Shanghai Chemours Electric Co., Ltd.
(b) Decrease of consolidation scope
Decrease of consolidation scope mainly includes deregistration of subsidiaries. Details are as follows:
||
|-|
|Disposal method of the equity|
|Deregistration|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
6 Interests in other entities
(1) Interests in subsidiaries
(a) Information of significant subsidiaries
||||||
|-|-|-|-|-|
|Major business location|Place of registration|Nature of business|Shareholding (%)||
||||Direct|Indirect|
|Foshan, PRC|Foshan, PRC|Manufacture and sales of air conditioner|73%|7%|
|Wuhu, PRC|Wuhu, PRC|Manufacture and sales of air conditioner|73%|7%|
|Wuhan, PRC|Wuhan, PRC|Manufacture of air conditioner|73%|7%|
|Wuhu, PRC|Wuhu, PRC|Manufacture of air conditioner|88%|12%|
|Guangzhou, PRC|Guangzhou, PRC|Manufacture of air conditioner|90%|10%|
|Foshan, PRC|Foshan, PRC|Manufacture of air conditioner|90%|10%|
|Foshan, PRC|Foshan, PRC|Manufacture of compressors|60%||
|Ningbo, PRC|Ningbo, PRC|Manufacture of compressors|100%||
|Hefei, PRC|Hefei, PRC|Manufacture of refrigerator|75%|25%|
|Ningbo, PRC|Ningbo, PRC|Manufacture of air conditioner|100%|-|
|Foshan, PRC|Foshan, PRC|Manufacture of small householdappliances|-|100%|
|Foshan, PRC|Foshan, PRC|Manufacture of small householdappliances|-|100%|
|Wuxi, PRC|Wuxi, PRC|Manufacture of washing machine|38%|15%|
|Wuhu, PRC|Wuhu, PRC|Sales of motors||100%|
|Singapore|Singapore|Export trade||100%|
|Foshan, PRC|Foshan, PRC|Financial industry|95%|5%|
|Wuhu, PRC|Wuhu, PRC|Petty loan|5%|95%|
|Shenzhen, PRC|Shenzhen, PRC|Assets management||100%|
|British Virgin Islands|British Virgin Islands|Investment holding|-|100%|
|Hong Kong|Hong Kong|Investment holding|100%|-|
|British Virgin Islands|British Virgin Islands|Investment holding||100%|
|Netherlands|Netherlands|Investment holding||100%|
|Brazil|Brazil|Sales of home appliances||49%|
|Japan|Japan|Manufacture of home appliances||100%|
|Japan|Japan|Manufacture of home appliances||100%|
|Germany|Germany|Manufacture and sales of robots|-|94.55%|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
6 Interests in other entities(Cont’d)
(1) Interests in subsidiaries(Cont’d)
(b) Subsidiaries that have significant minority interests
||||
|-|-|-|
|Shareholding of minorityshareholders|Total profit or loss attributableto minority shareholders forcurrent period|Dividends distributed tominority interests for thecurrent period|
|47%|426,575|299,335|

 (2) Information of enterprise group
The major financial information of the subsidiaries that have significant minority interests is listed below:
||||||||||||
|-|-|-|-|-|-|-|-|-|-|-|
|Ending balance|||||||||||
|Currentassets|Non-currentassets|Total assets|Currentliabilities|Non-currentliabilities|Totalliabilities|Currentassets|Non-currentassets|Total assets|Currentliabilities|Non-currentliabilities|
|17,738,535|1,810,991|19,549,526|10,912,290|14,712|10,927,002|19,564,974|1,773,447|21,338,421|13,103,359|16,764|

||||||||
|-|-|-|-|-|-|-|
|Current figure|||||||
|Revenue|Net profit|Total comprehensiveincome|Cash flows fromoperating activities|Revenue|Net profit|Total comprehensiveincome|
|12,056,938|1,003,465|990,991|173,229|10,568,061|832,760|800,344|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
6 Interests in other entities
(3) Interests in associates and joint ventures
The impact of theGroup’s associates and joint ventures on the Group is not significant. Summarised information is as follows:
||
|-|
|Current figure|
|2,753,940|
|187,245|
|45,751|
|232,996|

 (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 4 reportable segments as follows:
- Heating& ventilation, as well as air-conditioner
- Consumer appliances
- Robots and automatic system
- Others
Inter-segment transfer prices are measured 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, taxes and surcharges, selling and distribution expenses, general and administrative expenses, financial expenses and asset impairment losses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
8 Segment reporting
(a) Information on the profit or loss, assets and liabilities of reported segment
Segment information as at and for the six months ended 30 June 2018 was as follows:
Current figure
||||||
|-|-|-|-|-|
|Heating & ventilation,as well as air-conditioner|Consumer appliances|Robots and automaticsystem|Other segments andunallocated|Elimination|
|71,054,762|57,431,088|12,527,883|2,722,183|-|
|683,380|169,729|27,628|3,026,975|(3,907,712)|
|(63,782,969)|(51,448,350)|(12,506,308)|(4,574,615)|3,970,393|
|7,955,173|6,152,467|49,203|1,174,543|62,681|
|102,561,819|91,717,760|27,920,064|95,439,400|(66,641,242)|
|69,244,032|64,756,334|19,205,830|89,728,014|(79,875,011)|
|328,824|65,662|114,220|2,245,234||
|41,003|(3,538)|(10,705)|160,485||
|731,745|932,421|1,217,350|118,287|-|
|206,497|(20,413)|24,230|121,847|(32,074)|
|770,940|890,286|513,702|256,701|-|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
8 Segment reporting(Cont’d)
(a) Information on the profit or loss, assets and liabilities of reported segment(Cont’d)
Segment information as at and for the six months ended 30 June 2017 is as follows:
Comparative figure
||||||
|-|-|-|-|-|
|Heating & ventilation,as well as air-conditioner|Consumerappliances|Robots and automaticsystem|Other segments andunallocated|Elimination|
|55,624,107|54,049,321|13,655,523|1,634,665|-|
|1,216,745|139,860|433|2,879,845|(4,236,883)|
|(51,390,893)|(48,664,743)|(14,486,022)|(3,640,771)|4,218,811|
|5,449,959|5,524,438|(830,066)|873,739|(18,072)|
|92,062,091|90,073,822|27,602,655|81,363,914|(60,085,990)|
|62,786,365|92,183,380|17,183,416|68,684,125|(84,815,686)|
|209,974|74,533|138,011|2,163,811|-|
|37,670|4,097|(7,902)|253,269|-|
|471,922|1,011,631|12,736,618|110,494|-|
|248,101|47,601|27,591|18,859|63,945|
|794,475|947,541|1,462,109|202,267|-|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
8 Segment reporting(Cont’d)
(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, long-term equity investments, goodwill and deferred tax assets located domestically and in foreign countries or geographical areas (including Germany, Japan, Hong Kong, Macau, Singapore, and Brazil, etc.) are as follows:
||
|-|
|Current figure|
|85,166,057|
|58,569,859|
|143,735,916|

||
|-|
|Current figure|
|22,617,962|
|18,262,671|
|40,880,633|

 9 Related parties and significant related party transactions
(1) Information of the parent company
(a) General information of the parent company
|||
|-|-|
|Relationship|Place of registration|
|Controlling shareholder|Shunde District, Foshan|

 TheCompany’s ultimate controlling person is Mr. He Xiangjian.
(b) Registered capital and changes in registered capital of the parent company
Name of the parent company Registered capital Midea Holding Co., Ltd. 330,000 (c) The percentages of shareholding and voting rights in the Company held by the parent company
||||||
|-|-|-|-|-|
|At the end of period|||||
|Shareholding (%)||Voting rights (%)|Shareholding (%)||
|Direct|Indirect||Direct|Indirect|
|33.37%|-|33.37%|33.71%|-|

 (2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of theCompany’s main subsidiaries.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
9 Related parties and significant related party transactions(Cont’d)
(3) Information of other related parties
Name of other related parties Relationship Under the common control of the direct relatives of the Guangzhou Wellkey Electrician Material Co., Ltd. Company’s ultimate controlling shareholders Under the common control of the direct relatives of the Anhui Wellkey Electrician Material Co., Ltd. Company’s ultimate controlling shareholders Under the common control of the direct relatives of the Guangdong Infore Electronics Co., Ltd. Company’s ultimate controlling shareholders Under the common control of the direct relatives of the Hefei Orinko Plastics Group. Company’s ultimate controlling shareholders Foshan Micro Midea Filter MFG Co., Ltd. Associates of the Company Foshan Shunde Rural Commercial Bank Co., Ltd. Associates of the Company (4) Information of related party transactions
The following related party transactions are conducted in accordance with normal commercial terms or relevant agreements.
(a) Purchase of goods
||||
|-|-|-|
|Content of relatedparty transactions|Pricing policiesof related partytransactions|Current figure|
|Purchase of goods|Agreed price|170,578|
|Purchase of goods|Agreed price|449,123|
|Purchase of goodsPurchase of goods|Agreed priceAgreed price|93,526165,746|
|||878,973|

 (b) Investment income
|||
|-|-|
|Content|Current figure|
|Wealth management product|35,625|

 (5) Receivables from and payables to related parties
Receivables from related parties:
|||
|-|-|
|Related parties|Ending balance|
|Foshan Shunde Rural Commercial Bank Co., Ltd.|49,387|

 Payables to related parties:
|||
|-|-|
|Related parties|Ending balance|
|Guangzhou Wellkey Electrician Material Co., Ltd.|180,972|
|Foshan Micro Midea Filter MFG Co., Ltd.|35,917|
|Hefei Orinko Plastics Group.Anhui Wellkey Electrician Material Co., Ltd.|32,91964,428|
||314,237|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
10 Share-based payment
(1) Share Option Incentive Plan
(a) Pursuant to the fifth share option incentive plan (the “Fifth Share Option Incentive Plan”) approved at the shareholders' meeting for the year ended 31 December 2017 dated 23 April 2018, the Company granted 54,520,000 share options with exercise price of RMB 56.34 to 1330 employees. Under the circumstance that the Company meets expected performance, 1/4 of the total share options granted will become effective after 2 years, 3 years, 4 years and 5 years respectively since 7 May 2018.
Determination method for fair value of share options at the grant date
Exercise price of options: RMB 56.34 Effective period of options: 6 years Current price of underlying shares: RMB 52.4 Estimated fluctuation rate of share price: 37.34% Estimated dividend rate: 2.95% Risk-free interest rate within effective period of options: 2.89% The fair value of the Fifth Share Option Incentive Plan calculated pursuant to the above parameters is: RMB 668,983,000.
(b) Movements of share options during the six months
||
|-|
|For the six months ended 30 June2018 (share options in thousands)|
|253,541|
|54,520|
|(41,605)|
|(501)|
|265,955|

 As at 30 June 2018, the maturity date of the First Option Incentive Plan is on 17 February 2019. The residual contractual maturity date of the Second Share Option Incentive Plan is on 27 May 2020. The residual contractual maturity date of the Third Share Option Incentive Plan is on 28 June 2021. The residual contractual maturity date of the Fourth Share Option Incentive Plan is on 12 May 2021. The residual contractual maturity date of the Fifth Share Option Incentive Plan is on 7 May 2024.
(c) Impact of share-based payment transactions on financial position and financial performance The total share option expenses recognised for the six months ended 30 June 2018 were RMB 346,659,000.
(2) Restricted shares
(a) Pursuant to the Restricted Share Incentive Plan for 2018 as approved at theshareholders’ meeting dated 23 April 2018 (the "Restricted Share Incentive Plan for 2018"), the Company granted 20,570,000 restricted shares with an exercise price of RMB 27.57 to 319 employees. Under the circumstance that specified performance conditions are met, one fourth of the total share options granted will become effective after 2 years, 3 years, 4 years and 5 years, respectively, since 7 May 2018.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
10 Share-based payment(Cont’d)
(2) Restricted shares(Cont’d)
(b) Movements of share options during the six months
||
|-|
|For the six months ended 30 June2018 (share options in thousands)|
|28,605|
|20,570|
|(7,198)|
|(1,876)|
|40,101|

 (c) Impact of share-based payment transactions on financial position and financial performance The total share option expenses recognised for the six months ended 30 June 2018 were RMB 198,872,000.
11 Contingencies
The amount in tax disputes involving Brazilian subsidiary with51% interests held by the Company is about BRL 672 million (equivalent to RMB 1,153 million) (Some cases have lasted for more than 10 years. The above amount includes the principal and interest). As at 30 June 2018, 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 BRL 157 million (equivalent to RMB 269 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 and appropriate disclosures are made in the financial statements.
12 Commitments
The Group has no significant commitments at the balance sheet date.
13 Subsequent events
Nil
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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
14 Financial risk(Cont’d)
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 Group mainly operates in Mainland China, Europe, America, Asia and Africa for the manufacturing, sales, investments and financing activities. Any foreign currency denominated monetary assets and liabilities other than in RMB would subject the Group to foreign exchange exposure.
TheGroup’s finance department at its headquarters has a professional team to manage foreign exchange risk, with approach of the natural hedge for settling currencies, signing forward foreign exchange hedging contracts and controlling the scale of foreign currency assets and liabilities, to minimise foreign exchange risk, and to reduce the impact of exchange rate fluctuations on business performance.
(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 30 June 2018, the Group had no long-term interest bearing borrowings at floating rates (31 December 2017: nill) (Note 4(25)). 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.
(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.
14 Financial risk(Cont’d)
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
(2) Credit risk
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. 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. As at the balance sheet date, monetary assets held by the Group, including cash at bank and on hand, notes assets, discounted assets and wealth management funds in other current assets, amounted to RMB 114,423,861,000.
The financial liabilities of the Group at the balance sheet date are analysed by their maturity date below at their undiscounted contractual cash flows:
30 June 2018
|||||
|-|-|-|-|
|Within 1 year|1 to 2 years|2 to 5 years|Over 5 years|
|1,270,216|-|-|-|
|24,345,348|-|-|-|
|35,995,885|-|-|-|
|90,677|-|-|-|
|42,859|-|-|-|
|3,444,684|-|-|-|
|30,367|-|-|-|
|103,071|-|-|-|
|678,413|-|-|-|
|6,850,601|-|-|-|
|32,191,163|-|-|-|
|353,474|334,641|30,795,857|-|
|-|185,743|163,374|666,012|
|105,396,758|520,384|30,959,231|666,012|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
14 Financial risk(Cont’d)
(3) Liquidity risk(Cont’d)
31 December 2017
|||||
|-|-|-|-|
|Within 1 year|1 to 2 years|2 to 5 years|Over 5 years|
|2,602,067|-|-|-|
|25,207,785|-|-|-|
|35,144,777|-|-|-|
|94,801|-|-|-|
|95,317|-|-|-|
|3,170,405|-|-|-|
|108,926|-|-|-|
|90,432|-|-|-|
|9,017,975|-|-|-|
|108,631|4,682,571|-|-|
|306,723|2,415,508|31,643,935|2,087|
|-|189,404|138,643|666,012|
|75,947,839|7,287,483|31,782,578|668,099|

 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 30 June 2018, the assets and liabilities measured at fair value on a recurring basis by the above three levels are analysed below:
Item Fair value at end of period
||||
|-|-|-|
|Level 1|Level 2|Level 3|
|-|316,540|-|
|-|10,461|-|
|-|-|12,642,160|
|-|-|96,486|
|-|327,001|12,738,646|
|-|678,413|-|
|-|388,312|-|
|-|1,066,725|-|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
15 Fair value estimates(Cont’d)
(1) Assets and liabilities measured at fair value on a recurring basis(Cont’d)
As at 31 December 2017, the assets and liabilities measured at fair value on a recurring basis by the above three levels are analysed below:
Item Fair value at beginning of year
||||
|-|-|-|
|Level 1|Level 2|Level 3|
|-|353,327|-|
|-|360,858|-|
|-|-|22,094,715|
|38,460|-|80,251|
|38,460|714,185|22,174,966|
|-|90,432|-|
|-|1,877|-|
|-|92,309|-|

 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 among the three levels.
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 period.
The changes in Level 3 financial assets are analysed below:
Available-for-sale financial assets
Item - Available-for-sale equity instruments 1 January 2018 22,174,966 Increase 8,873,379 Decrease (18,825,652) Total gains of current period
Investment income recognised in the income statement 347,371 Gains recognised in other comprehensive income 168,582 30 June 2018 12,738,646 Available-for-sale financial assets
Item - Available-for-sale equity instruments 1 January 2017 30,109,067 Increase 26,513,177 Decrease (35,571,427) Total gains of current period
Investment income recognised in the income statement 975,534
Gains recognised in other comprehensive income 148,615
31 December 2017 22,174,966
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
15 Fair value estimates(Cont’d)
(1) Assets and liabilities measured at fair value on a recurring basis(Cont’d)
Information about the Level 3 fair value measurement is as follows:
Inputs
30 June 2018 Valuation Relationship Observable/ Fair value technique Name Range with fair value unobservable Available-for-sale financial
assets -
Discounted cash Estimated
Other current assets 12,642,160 flows annual yield 2.2% to5.4% Positive Unobservable Available-for-sale financial
assets 96,486 Income approach - - - - 12,738,646
Assets and liabilities subject to level 2 fair value measurement are mainly forward exchange contracts and are evaluated by income approach.
(2) Assets and liabilities not measured at fair value but disclosed
The Group's financial assets and financial liabilities measured at amortised cost mainly include: cash at bank and on hand, deposits with central bank, deposits with banks and other financial institutions, notes receivable, accounts receivable, loans and advances, other receivables, other current assets (excluding those mentioned in Note 15(1)), accounts payable, notes payable, short- term borrowings, long-term borrowings, customer deposits and deposits from banks and other financial institutions, financial assets sold under repurchase agreements, interest payable and other current liabilities, etc.
Carrying amounts of theGroup’s financial assets and financial liabilities as at 30 June 2018 and 31 December 2017 approximated to 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 divide total liabilities).
As at 30 June 2018 and 31 December 2017, the Group's gearing ratio is asfollows：
||
|-|
|Ending balance|
|163,059,199|
|250,997,801|
|64.96%|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements
(1) Other receivables
||
|-|
|Ending balance|
|9,824,397|
|393,767|
|10,218,164|
|(502)|
|10,217,662|

 (a) Other receivables are analysed by ageing as follows:
||
|-|
|Ending balance|
|10,212,392|
|5,772|
|10,218,164|
|（502）|
|10,217,662|

 (b) Other receivables are analysed by categories as follows:
||||||||
|-|-|-|-|-|-|-|
|Ending balance|||||||
|Book balance||Provision for bad debts||Book balance|||
|Amount|% of totalbalance|Amount|Ratio|Amount|Ratio|Amount|
|10,211,488|99.93%|-|-|8,392,449|99.86%|-|
|6,676|0.07%|502|7.52%|11,904|0.14%|789|
|10,218,164|100.00%|502|0.00%|8,404,353|100.00%|789|

 (c) Other receivables that the related provision for bad debts is provided on grouping basis using the ageing analysis method are analysed as follows:
||||||
|-|-|-|-|-|
|Ending balance|||||
|Book balance|Provision for bad debts||Book balance||
|Amount|Amount|Ratio|Amount|Amount|
|3,306|165|5.00%|8,020|401|
|3,370|337|10.00%|3,884|388|
|6,676|502|7.52%|11,904|789|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements(Cont’d)
(1) Other receivables(Cont’d)
(d) As at 30 June 2018, other receivables from the top five debtors are analysed as below:
|||||
|-|-|-|-|
|Nature|Book balance|Ageing|% of totalbalance|
|Current accounts|5,410,000|Within 1 year|53%|
|Current accounts|3,100,000|Within 1 year|30%|
|Current accounts|956,000|Within 1 year|9%|
|Exercising accounts|389,365|Within 1 year|4%|
|Current accounts|88,946|Within 1 year|1%|
||9,944,311||97%|

 (2) Long-term equity investments
Long-term equity investments are classified as follows:
||
|-|
|Ending balance|
|25,359,456|
|1,524,052|
|26,883,508|
|-|
|26,883,508|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements(Cont’d)
(2) Long-term equity investments(Cont’d)
(a) Subsidiary
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Movements in current period|||||Ending balance|
||Additionalinvestment|Changes arising fromshare-based payment|Decrease ininvestment|Absorption andmerger|Others||
|2,754,240|-|38,512|-|-|-|2,792,752|
|1,442,479|-|7,007|-|-|-|1,449,486|
|1,058,887|-|4,543|-|-|-|1,063,430|
|839,749|-|2,167|-|-|-|841,916|
|817,266|-|5,909|-|-|-|823,175|
|2,949,000|-|-|-|-|-|2,949,000|
|745,841|-|5,501|-|-|-|751,342|
|1,180,664|-|146,800|-|-|-|1,327,464|
|479,028|-|1,284|-|-|-|480,312|
|569,430|-|-|-|-|-|569,430|
|486,738|-|787|-|-|-|487,525|
|503,762|-|3,900|-|-|-|507,662|
|426,238|-|1,949|-|-|-|428,187|
|484,312|-|19,311|-|-|-|503,623|
|352,041|-|588|-|-|-|352,629|
|322,072|-|3,027|-|-|-|325,099|
|402,829|-|39,320|-|-|-|442,149|
|236,543|-|-|-|-|-|236,543|
|176,974|-|-|-|-|-|176,974|
|136,745|-|-|-|-|-|136,745|
|132,807|-|1,468|-|-|-|134,275|
|117,000|-|-|-|-|-|117,000|
|131,356|-|9,717|-|-|-|141,073|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements(Cont’d)
(2) Long-term equity investments(Cont’d)
(a) Subsidiary(Cont’d)
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Movements in current period|||||Ending balance|
||Additionalinvestment|Changes arising fromshare-based payment|Decrease ininvestment|Absorptionand merger|Others||
|164,640|-|18,153|-|-|-|182,793|
|126,286|-|15,231|-|-|-|141,517|
|89,275|-|5,493|-|-|-|94,768|
|54,000|-|23|-|-|-|54,023|
|56,302|-|2,089|-|-|-|58,391|
|65,728|-|2,878|-|-|-|68,606|
|47,500|-|-|-|-|-|47,500|
|38,714|-|363|-|-|-|39,077|
|36,062|-|-|-|-|-|36,062|
|47,106|-|3,494|-|-|-|50,600|
|19,526|-|1,473|-|-|-|20,999|
|82|-|-|-|-|-|82|
|137,186|-|3,024|-|-|-|140,210|
|35,000|-|-|-|-|-|35,000|
|1,880,041|-|-|-|-|-|1,880,041|
|21,706|-|1,330|-|-|-|23,036|
|103,414|-|6,381|-|-|-|109,795|
|198,147|-|1,385|-|-|-|199,532|
|1,034,420|-|21,480|-|-|-|1,055,900|
|56,223|-|-|-|-|-|56,223|
|43,465|-|5,001|-|-|-|48,466|
|65,652|-|4,620|-|-|-|70,272|
|80,000|-|-|(80,000)|-|-|-|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements(Cont’d)
(2) Long-term equity investments(Cont’d)
(a) Subsidiary(Cont’d)
||||||||
|-|-|-|-|-|-|-|
|Openingbalance|Movements in current period|||||Ending balance|
||Additionalinvestment|Changes arisingfrom share-basedpayment|Decrease ininvestment|Absorptionand merger|Others||
|342,233|-|19,958|-|-|-|362,191|
|427,372|-|6,922|-|-|-|434,294|
|88,260|-|7,585|-|-|-|95,845|
|103,643|-|13,408|-|-|-|117,051|
|170,464|-|2,755|(545)|-|-|172,674|
|53,207|-|-|-|-|-|53,207|
|41,357|-|-|-|-|-|41,357|
|24,040|-|45|-|-|-|24,085|
|69,766|-|1,154|-|-|-|70,920|
|55,381|-|88|-|-|-|55,469|
|7,000|-|-|-|-|-|7,000|
|101,648|-|-|-|-|-|101,648|
|84,895|-|4,172|-|-|-|89,067|
|2,430|-|-|-|-|-|2,430|
|50,000|-|34|-|-|-|50,034|
|13,000|-|-|-|-|-|13,000|
|20,000|-|-|-|-|-|20,000|
|50,000|1,900,000|-|-|-|-|1,950,000|
|1,000|-|-|-|-|-|1,000|
|150,000|-|-|-|-|-|150,000|
|50,000|-|-|-|-|-|50,000|
|47,500|-|-|-|-|-|47,500|
|23,099,672|1,900,000|440,329|(80,545)|-|-|25,359,456|

MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
17 Notes to the parentcompany’s financial statements(Cont’d)
(2) Long-term equity investments(Cont’d)
(b) Associates
Investments in associates are mainly the investments in Foshan Shunde Rural Commercial Bank Co., Ltd., Misr Refrigeration And Air Conditioning Manufacturing Co. and Hefei Royalstar Motor Co., Ltd. and other companies.
(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 from the subsidiaries.
(4) Investment income
||
|-|
|Current figure|
|6,275,165|
|257,771|
|127,081|
|(76,565)|
|-|
|6,583,452|

 There is no significant restriction on repatriation of the Company's investment income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for referenceonly]
1 Details of non-recurring profit or loss
||
|-|
|Currentfigure|
|266,895|
|-|
|-|
|-|
|-|
|-|
|(521,715)|
|-|
|1,065,178|
|810,358|
|(253,535)|
|(120,230)|
|436,593|

 Basis of preparation of details of non-recurring profit or loss:
Under the requirements in Explanatory announcement No. 1 on information disclosure by companies offering securities to the public– non-recurring profit or loss[2008] from CSRC, non-recurring profit or loss refer to that arises from transactions and events that are not directly relevant to ordinary activities, or that is relevant to ordinary activities, but is extraordinary and not expected to recur frequently that would have an influence on users of financial statements making economic decisions on the financial performance and profitability of an enterprise.
2 Return on net assets 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 return onnet assets (%)|||||
|||Basic earnings pershare|||
|Current figure|Comparativefigure|Currentfigure|Comparativefigure|Currentfigure|
|16.43%|16.46%|1.97|1.67|1.94|
|15.88%|15.06%|1.90|1.53|1.87|

Section XI Documents Available for Reference
1. The original of The Semi-Annual Report 2018 of Midea Group Co., Ltd. signed by the legal representative;
2. The financial statements signed and stamped by the legal representative, the Chief Financial Officer and the accounting supervisor;
3. 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
4. The electronic version of The Semi-Annual Report 2018 that is released on http://www.cninfo.com.cn.
Midea Group Co., Ltd. Legal Representative: Fang Hongbo 31 August 2018