Midea Group Co., Ltd.
2015 Semi-Annual Report
August 2015
Section I Important Notes, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior
management of Midea Group Co., Ltd. (hereinafter referred to as the
“Company”) hereby guarantee that the information presented in this Report is
truthful, accurate and complete, and shall together be jointly and severally liable
for any false records, misleading statements or material omissions in this Report.
All directors of the Company attended the Board meeting for reviewing this
Report.
The Company plans not to distribute cash dividends or bonus shares or turn
capital reserves into share capital for the first half of 2015.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Ms.
Yuan Liqun, responsible person for the Company’s financial affairs have
represented and warranted that the financial statements carried in this Report
are truthful, accurate and complete.
This Report has not been audited by a CPAs firm.
The future plans and some other forward-looking statements mentioned in this
Report shall not be regarded as virtual promises of the Company to investors.
Therefore, investors are kindly reminded to pay attention to possible investment
risks.
This Report has been prepared in both Chinese and English. Should there be
any discrepancies or misunderstandings between the two versions, the Chinese
version shall prevail.
2015 Semi-Annual Report of Midea Group Co., Ltd.
Contents
Section I Important Notes, Contents and Definitions ................................................... 2
Section II Corporate Profile .......................................................................................... 3
Section III Summary of Accounting Data and Financial Indicators ............................. 5
Section IV Report of the Board of Directors................................................................. 8
Section V Significant Events ....................................................................................... 33
Section VI Changes in Shares and Information about Shareholders .......................... 54
Section VII Preference Shares ..................................................................................... 60
Section VIII Information about Directors, Supervisors and Senior Management ...... 60
Section IX Financial Report ........................................................................................ 61
Section X Documents Available for Reference ......................................................... 193
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2015 Semi-Annual Report of Midea Group Co., Ltd.
Definitions
Term Definition
Company, the Company or Midea Group Midea Group Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
Xiaomi Technology Xiaomi Technology Co., Ltd.
The CSRC China Securities Regulatory Commission
The Report Period The period from 1 January 2015 to 30 June 2015
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2015 Semi-Annual Report of Midea Group Co., Ltd.
Section II Corporate Profile
I Corporate information
Stock abbreviation Midea Group Stock code 000333
Stock exchange The Shenzhen Stock Exchange
Name of the Company in
美的集团股份有限公司
Chinese
Abbr. of the Company name
美的集团
in Chinese (if any)
Name of the Company in
MIDEA GROUP CO., LTD.
English (if any)
Legal representative Mr. Fang Hongbo
II Contact us
Company Secretary Representative for Securities Affairs
Name Jiang Peng Wang Jing
Midea Headquarters Building, 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City,
Address
Guangdong Province, China
Tel. 0757-26334559 0757-22607708
Fax 0757-26651991
E-mail IR@midea.com
III Other information
1. Ways to contact the Company
Changes in the report period to the registered address, office address and their zip codes, website address and
email address of the Company:
□ Applicable √ Inapplicable
No such changes in the report period. The said information can be found in the 2014 Annual Report.
2. About the media for information disclosure and the place where materials carrying disclosed
information such as this Report are kept
Changes in the report period to the media for information disclosure and the place where materials carrying
disclosed information such as this Report were kept:
□ Applicable √ Inapplicable
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2015 Semi-Annual Report of Midea Group Co., Ltd.
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 report period. The said information can be found in the 2014 Annual Report.
3. Changes in the registered information
Changes in the report period to the registered information:
□ Applicable √ Inapplicable
The registration date and place of the Company, its business license number, taxation registration number and
organizational code did not change in the report period. The said information can be found in the 2014 Annual
Report.
4. Other relevant information
Changes in the report period to other relevant information:
□ Applicable √ Inapplicable
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2015 Semi-Annual Report of Midea Group Co., Ltd.
Section III Summary of Accounting Data and Financial Indicators
I Key accounting data and financial indicators
Retroactive adjustments to or restatements of accounting data due to changes in the accounting policies or
corrections of accounting errors:
□ Yes √ No
Report Period Same period of last year +/-%
Operating revenues (RMB'000) 82,509,143.78 77,330,851.84 6.70%
Net profits attributable to the shareholders
8,324,122.61 6,610,132.76 25.93%
of the Company (RMB'000)
Net profits attributable to the shareholders
of the Company after non-recurring gains 7,433,037.00 6,667,645.57 11.48%
and losses (RMB'000)
Net cash flows from operating activities
8,815,671.89 13,171,462.85 -33.07%
(RMB'000)
Basic earnings per share (RMB/share) 1.97 1.57 25.48%
Diluted earnings per share (RMB/share) 1.96 1.57 24.84%
Weighted average ROE (%) 19.62% 18.97% 0.65%
As at the end of the Report
As at the end of last year +/-%
Period
Total assets (RMB'000) 141,782,687.12 120,292,088.16 17.87%
Net assets attributable to the shareholders
46,154,741.47 39,470,499.84 16.93%
of the Company (RMB'000)
Total share capital of the Company on the last trading session before the disclosure of this Report:
Total share capital of the Company on the last trading session
4,265,714,504
before the disclosure of this Report (share)
Whether the Company's share capital changed and the change affected the owners' equity due to reasons such as
new issues, additional issues, allotments of shares, the exercise of equity incentives and repurchases during the
time from the end of the Report Period to the date when this Report is released:
√ Yes □ No
During the time from the end of the Report Period to the date when this Report is released, the Company made an
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2015 Semi-Annual Report of Midea Group Co., Ltd.
additional issue of 5,183,551 shares as equity incentives and repurchased and cancelled 29,591,644 shares. Up to
the date when this Report is released, the share capital of the Company is 4,265,714,504 shares.
Basic earnings per share based on the latest share capital
1.9514
above (RMB/share)
II Differences in accounting data under the domestic and overseas accounting standards
1. Differences in the net profits and net assets disclosed in the financial reports prepared under the
international and China accounting standards
□ Applicable √ Inapplicable
2. Differences in the net profits and net assets disclosed in the financial reports prepared under the overseas
and China accounting standards
□ Applicable √ Inapplicable
3. Reasons for the differences in accounting data under the domestic and overseas accounting standards
□ Applicable √ Inapplicable
III Items and amounts of non-recurring gains and losses
√ Applicable □ Inapplicable
Unit: RMB'000
Item Amount Note
Gains or losses on disposal of non-current assets (including the offset asset
-45,667.95
impairment provisions)
Government grants accounted for in the gains or losses for the current
485,175.82
period
Gains or losses on entrusted investments or entrusted asset management 682,954.05
Gains or losses on debt restructuring 17.25
Gains or losses on the changes in the fair value of held-for-trading financial
assets and liabilities, as well as investment gains or losses on the disposal
of held-for-trading financial assets and liabilities and available-for-sale 95,856.62
financial assets, except for the effectively hedging business related to
normal business operations of the Company
Impairment provision reversal of the accounts receivable on which the
341.34
impairment test is carried out separately
Non-operating incomes and expense other than the above 82,747.20
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2015 Semi-Annual Report of Midea Group Co., Ltd.
Less: Income tax effects 287,749.72
Minority interests effects (after tax) 122,589.00
Total 891,085.61
Explain the reasons if the Company classifies an item as a non-recurring gain/loss according to the definition in
the Public—Non-recurring Gains and Losses>, or classifies any non-recurring gain/loss item mentioned in the said explanatory announcement as a recurrent gain/loss item: □ Applicable √ Inapplicable 7 2015 Semi-Annual Report of Midea Group Co., Ltd. Section IV Report of the Board of Directors 1 Overview As China’s economy steadily develops in a “new normal state”, its household appliance industry has stepped into a new period in operation featuring restructuring as well as product and consumption upgrading. In the new economies of “Internet Plus”, consumers play a more active role in the purchase and use of household appliances. Therefore, it has become a core driving force for the continuous growth of household appliance manufacturers to center on customers and products, increase efficiency and upgrade products, vigorously develop intelligent products and expand e-commerce channels as well as promote innovation in technology, marketing channels and service models. In the first half of 2015, against the backdrop of consumption upgrading, the sub-industries of the household appliance industry beefed up upgrading in their product structures, which has gradually become a key driving force for the continuous profit growth in the household appliance industry. According to the AVC data, in the air conditioner sector, an obvious upgrade trend towards inverter air conditioners and intelligent air conditioners was observed, with the market share of the former up to 62.7% and that of the latter over 15%. In the field of refrigerators, the high-end refrigerators, large-capacity refrigerators, air-cooling refrigerators and inverter refrigerators took up a larger market share, with the air-cooling refrigerators increasing 10.6% to 61.8% in the total sales, the inverter refrigerators growing 4.1% to 45.3% in the total sales and the four-door refrigerators, a dark horse, witnessing a year-on-year surge of 261% in its retail sales. In terms of washing machines, the high-end washing machines, 8.1KG+ washing machines, inverter washing machines and intelligent washing machines has flourished into four important directions for the development of the washing machine industry; the roller washing machines has grasped half of the market; and the market shares respectively possessed by the double-tub washing machines and the single-tub washing machines have been shrinking. As for the kitchen & bathroom appliances and small household appliances, a rapid growth was reported in the medium and high-end products such as the side-sucking smoke exhausters, the gas stoves featuring hot fire, high energy efficiency and safety, the robotic cleaners, the cellwall-breaking food processors and the like. In the long term, the impetus factors for China’s household appliance industry will remain unchanged, which are mainly as follows: 8 2015 Semi-Annual Report of Midea Group Co., Ltd. 1. As China’s per capita income continues to grow and the new-type urbanization is speeding up, the overall ownership rate of household appliances is expected to realize a further rise. The urban residents’ per capita income has reached USD7,000/year in Shanghai, Beijing, Shenzhen, Zhejiang Province, etc. As a result, the increased income and the rise of young consumers will quicken the coming of a networking, individualized and diversified time for consumption, and endow the household appliance consumption with much more features we can see in the goods for daily consumption. The rate of urbanization in China has only reached 54% or so at present with considerable progress to be made in both quantity and quality. If China’s rate of urbanization could realize the goal of 60% in 2020, a rural population of more than 100 million would turn themselves into urban residents, which will definitely stimulate a huge demand for household appliances. 2. The constant and stable demand for renewal from over 1.6 billion units of household appliances in total is an important impetus for the sales volume. The functional and quality improvements of household appliances in energy saving, environmental protection, intelligence, Internet and industrial design, will further promote an upgrade in consumption, optimize product structures and will increase the profitability of household appliance manufacturers. 3. The trend of “Internet +” has added new genes into the whole household appliance industry chain. Through thoroughly transforming the value chain of the conventional household appliance manufacturing industry, re-structuring R&D, production, marketing and user operation, “Internet +” will pose new challenges and bring new opportunities to the traditional household appliance enterprises. As an important “entrance” to the Internet, household appliances play a significant role in the whole Internet application. Furthermore, the maturity of intelligent control technology, electronic information technology, the technology of internet of things, and related supporting technologies, as well as the popularization of smart mobile end-products, will effectively drive the fast development of the smart household appliances market triggered by “Internet +”. Intelligent homes have gradually become a common trend in the industry. Perfecting unconnected high-level intelligent products to provide integrated solutions for intelligent homes ultimately leads to the creation of an intelligent home platform eco-chain characterized by integration, cooperation and sharing. There will be enormous growth room for leading household appliance makers with core resources. According to the AVC forecast, the total output value of intelligent household appliances will exceed RMB1 trillion by 2020, and figures for intelligent hardware hitting over RMB600 billion. 4. The O2O model, the Internet popularization of big data application and the rise of mobile consumption will 9 2015 Semi-Annual Report of Midea Group Co., Ltd. continue to promote transformation and upgrade in the marketing channels for home appliance makers. The information platform for the household appliance industry has taken shape, and the cross-field cooperation between household appliance and Internet enterprises shows a promising future, suggesting that the new channel of e-commerce has entered a fast growing stage. According to statistics, in the first half of 2015, the scale of China’s B2C market for household appliances reached RMB136.1 billion with a year-on-year increase of 64%, with the online retail sales of major household appliances all growing more than 10% as compared with the same period of last year. 5. Relying on the huge market supported by a population of 1.4 billion in the vast territory of China, and in parallel with existing competitive edges in scale, product clusters and complete industrial chains, China’s household appliances industry will remain competitive around the world. Meanwhile, India, South America, Africa, Middle East and other emerging markets which have large populations and are in their economic growth stage, are gradually entering the popularization period of household appliances, consequently providing an expected growth boost to China’s household appliance exports to these developing countries and thus creating new opportunities for export and global operations of China’s household appliances. 6. With new conditions and means of competition, the ecology (environment) of the household appliance industry will further improve and the markets will become increasingly centralized. Relying on their competitive edges such as the brand, technology, industrial chain, service, channel, the leading household appliance makers are expected to further increase their market shares and profitability, and as a result promoting orderly competition and sound progress in the industry. II Analysis of main business 1. Overview In the first half of 2015, guided by the three main strategies of “advanced products, efficiency-driven and global operations”, the Company focused on products and customers, clarified the business structure, simplified the organizational structure, promoted the organizational restructuring and the establishment of a collaborative platform and enhanced the innovation mechanism and the R&D capability. As a result, the product reputation and quality have kept improving, the profitability and operating quality have continued to increase and the competitive edge with multiple products has been further solidified. In the first half of 2015, the operating revenues of the Company achieved a year-on-year increase of 6.70%, the net profits attributable to the Company increased 10 2015 Semi-Annual Report of Midea Group Co., Ltd. 25.93% as compared with the same period of last year, the general gross margin of 27.43% increased by 1.58 percentage points as compared with the same period of last year, and the overall rate of net profits attributable to the Company of 10.09% reached a year-on-year increase of 1.54 percentage points as calculated with the same caliber. In the List of China Top 500 Enterprises in 2015 concluded by Fortune, Midea ranks the 32nd (the first among the household appliance industry). Meanwhile, Midea has also made itself among the top 500 in the List of 2015 Forbes Top 2000 Enterprises in the World, ranking the 436th. The main work accomplished in the first six months of 2015 includes the following: (1) Products and customers as the center, continuous product structure optimization and a steady improvement in product competitiveness The Company, according to the basic concept of making better products, insisted on customer research, paid special attention to user experience, innovated product research and development, resulting to continuous optimized product structure, stable enhancement of high-end product ratio, and increasingly improved public praises for products. In addition, a series of new products were put on the market including air conditioner featuring intelligent temperature control, the children’s air conditioner that could prevent the children from catching cold, “i young” colorful air conditioner capable of intelligent interaction with MIUI wristband, Auto Power-on and sleep temperature control, new washing machines with auto throw-in, intelligent roller and quick washing function, intelligent refrigerator featuring intelligent food management, nutrition management and intelligent app remote control function, “steam cleaning” extractor hoods with auto high temperature adjustment and auto extinguishing function, safe stove with children lock, intelligent “DINGFU” rice cooker featuring multi-stage IH heating and high-temperature steam cooking function, double-filter running water heater capable of guaranteeing a healthy bath, and water purifier made of medical-grade nano-antibacterial materials with the 2nd-generation dynamic filter element technology etc. to continuously satisfy the consumer’s individualized and differentiated needs through making competitive quality and differentiation strategy as the weapon to occupy the market. Most of our products have won various important awards at home and abroad for many times. (2) Strengthening Core Channel Expanding, the rapid growth of E-business, and the overall upgrading of the synergy of logistics By right of the synergy of diversified Midea products, unremitting effort was made to expand the offline strategic channels including flagship stores, Suning, Gome and regional chain stores (TOP Clients) and the online strategic channels including Tmall and JD.COM, and to form the synergy of various businesses. As at the end of June in 11 2015 Semi-Annual Report of Midea Group Co., Ltd. 2015, Midea flagship stores were over 2100 in total, and realized a coverage scale of 90% in the 3rd- and 4th-class market; the O2O converged businesses of E-commerce mainly based on flagship stores were gradually being implemented with the thorough improvement of comprehensive after-sales services. Meanwhile, special effort was made to deepen the strategic cooperation with more than 80 TOP clients including Suning and Gome, and joint promotion activities exclusively geared to our brand were carried out on a regular basis to enhance the occupation rate in the market with continuously increased share. Centering on the user and product, we further propelled the full-channel strategy layout of Midea’s E-commerce business, and completely established strategic cooperation with such platform as JD.COM, Tmall, and Suning E-commerce. As a result, Midea flagship stores relying on various platforms achieved initial success in their operation. In the first half year of 2015, the retail sales of Midea E-commerce throughout the network exceeded RMB 7 billion, ranking first in household appliance industry, and 11 single-category products occupied the No. 1 status in the market. We sped up the construction of the internal e-commerce platform, and the brand-new Midea Shop was formally put into service; besides, preliminary work relating to the establishment of interactive O2O Platform geared to Users was completed to summarize the internal operation, users, orders and data. Through making use of the collaborative advantages, emphasis was put on the construction of large logistic platform for the market and the integration of the full-category branches, agents and online & offline logistics businesses to implement collaborative storage and integrated delivery through canceling the redundant link between the branch and the agent. Therefore, a great progress was made to improve the unified logistics operating ability from the Company to the terminal, and to enhance the monitoring and analysis ability in managing big data relating to product sales and inventory throughout the process, and the overall user experience was also largely intensified by means of the improved overlay network, response speed, service quality and “last kilometer” delivery ability. At the end of June, large logistics platform Guangzhou Project was successfully established to realize the goal that the client’s order would be launched and entrucked in the same day, and delivered the next day. Thus, the cost saved for the value chain achieved RMB 5 million per year on the whole, and unremitting effort would be continuously made to propel the construction of large logistic platforms in more than 5 provinces so as to establish the logistics system from the terminal to terminal linking storage, main line, branch line and last kilometer. (3) Propelling and Carrying forward Smart Home Furnishing & Smart Manufacturing Double Smart Strategy as well as arranging growth space for new businesses 12 2015 Semi-Annual Report of Midea Group Co., Ltd. Efforts were centralized on positively and pragmatically carrying forward the M-SMART home furnishing strategy on the basis of the advantage of the most comprehensive product groups and user base of the Company in the globe, resulting in the transformation from manufacturers of single products to providers with service of integrated solutions of smart home for clients, and the construction of smart home furnishing scene application under the Internet + mode. In 2015, the Company improved its internal cooperation and collaboration, and put more than 80 smart products on the market. By adopting technologies of sense, big data and smart control, the Company accelerated the construction of the interconnected platform of smart home furnishing for whole-category household electric appliances, and an initial success was also achieved in setting up the steward system. The Company opened and integrated with external sides, published smart home furnishing white book, succeeded in linking M-SMART system with Alibaba, JD.COM and Suning E-commerce platforms as well as the MIUI OS, and launched Midea APP2.0 for smart home furnishing management to largely simplify relevant processes and improve user experience. In August 2015, the Company signed an agreement with Japanese Yaskawa Electric Co., Ltd. ---the tycoon in manufacturing robots in the world to establish a joint-venture Company specialized in manufacturing industrial robots and service robots. By right of the mode Smart Manufacturing & Industrial Robot, Midea’s smart manufacturing skills were completely strengthened. With the rapid development of core elements including servo motor and the integrated system triggered by industrial robots, Midea B2B industrial space would be further expanded; the mode of Smart Home Furnishing & Service Robot would propel the fast development and construction of the ecology of Midea smart home furnishing, and service robot played an important role in expanding the sensor, artificial intelligence and smart home furnishing businesses and in reinforcing the advantage of integrated Midea smart home furnishing system and the ecological chain. (4) Integrating the overseas business platform; strengthening overseas joint-venture cooperation; propelling the stable growth of self-owned brand and overseas businesses An international headquarters was established to facilitate the overall planning of overseas self-owned brand businesses, and to push forward the transition of overseas sales mode from “OEM-oriented” to “OBM-oriented”, and the organization form from “supporting Chinese export” to “supporting local operation”. At the same time, special attention was also attached to continuously improve the management rules of self-owned brand, guide the business department to allocate resources, propel the transformation of overseas sales organization, set up a platform for operation, management and control, strengthen the integrated working process from the product & 13 2015 Semi-Annual Report of Midea Group Co., Ltd. business department to the overseas Company, and to gradually formulate a second track for developing relevant self-owned brand businesses. In the first half year, although Europe experienced an unstable economic environment with sharp fluctuation in exchange rate, a good growth trend remained in the Asia-pacific region and the Middle East for our self-owned brand. However, our businesses achieved a year-on-year increase of more than 20% in India, Malaysia, the Philippines, UAE and Egypt, and the gross margin equaled that in last year. Meanwhile, the sales volume earned by OEM export businesses still kept a stable growth trend. Especially such product as washing machine, refrigerator and dust collector etc. achieved an increase 35-45% higher than the average increase of the industry. In addition, continuous effort was made to further deepen the joint-venture cooperation with the leading heating & ventilation and household appliances tycoons around the globe, and to expand the business development space. In March 2015, Carrier became a shareholder for Midea central air conditioner Chongqing Base with 35% share equity for the purpose of expanding the market for large-scale water chilling units and further occupying the global market with stronger competitive force. In the same month, the Company established a joint-venture Company together with BOSCH in order to further develop the market for multi-connected machines through making full use of professional knowledge relating to the multi-connection system accumulated by both companies and relatively completed regional sales network. In April 2015, Midea declared its cooperation with SIIX to establish a joint-venture Company, carrying forward high-quality product strategy, expanding the smart industry, and carrying out in-depth cooperation in such filed as household appliance control, intelligent sensing, energy management, intelligent security and protection and e-health system. (5) Increasing R&D input; making a breakthrough in innovation mechanism; establishing a global innovation center Centering on the consumer’s needs, we increased relevant R&D investment and improved product development in order to create a technical R&D system of strong competitive force around the globe and further enhance our innovation ability. By this June, about 35,000 pieces of Midea products applied for patents, and about 18,000 pieces for authorized patents; Midea made a breakthrough in its innovation mechanism and established a global innovation center which would not only gear itself to the future and focus on the basic technology’s sharing & synergism, the research innovation of common technology and core technology, as well as the research, application & scene building of the artificial intelligence including image identification and speech recognition, but also be oriented towards the market and user to promote popular and hot products by means of the brand-new 14 2015 Semi-Annual Report of Midea Group Co., Ltd. Internet thinking way and operation mode. In fact, the innovation center would become the incubator for Midea’s innovative projects including the “A Fresh Start” project for creating a new platform for existing categories and “The Second Track” project for the cross-boundary innovative product development in such field as health, intelligence, cosmetics, nutrition and environment protection etc. through breaking through previous organizational system and development mode, innovating the incentive mechanism and guaranteeing relevant resources to support innovative businesses. (6) Promoting the Company’s reconstructing and process transformation; creating an organization form geared to product and user; launching a high-efficiency operation system Focusing on the user and product, the Company reconstructed the group’s organizational system, operation mechanism and process, abandoned the bureaucratic system and centralized department, established a sharing and open business and function platform, and formed a culture atmosphere featuring Equality, Mutual Trust, No-boundary and Partner by applying the Internet thinking and method. Besides, seven major platforms for e-commerce, logistics, service, innovation, finance, purchasing and internationalization were successfully established by means of integrating relevant businesses and stimulating the effect of synergy. Efforts were continued to facilitate the work of One Midea, One System and One Standard so as to bridge the internal and external value chain and set up a market-oriented and high-efficiency operation process system. As an important basis for the work of One Midea, One System and One Standard, Midea’s 632 Project covering six major operation systems, three major management platforms, and two major technical platforms began to spread its impact on the whole group and was widely adopted with Unified Process, Unified Big Data, and Unified IT System as its goal. The implementation of 632 project by means of the unification of process, data and system further reinforced the basis for Midea’s management, control and operation, and generally optimized and improved the group’s diversified businesses from various aspects such as customer experience, management standards, transparent operation and internal & external collaboration. (7) Improving the long-term incentive mechanism, and enhancing the Company’s management level After the stock option incentive plan was carried out to cover more than 600 medium- and high-level management and core business backbones on the first stage, the 2nd-stage stock option incentive plan was implemented to cover more than 700 medium-level and core backbones as well. In addition, the 1st-stage Midea “Partner” share-holding plan was carried forward to cover 31 core management staffs that played a significant role in the Company’s overall achievement and medium- and long-term development, promoting the status transition from 15 2015 Semi-Annual Report of Midea Group Co., Ltd. Manager to Partner. The behavior of purchasing the Company’s share quota was linked up with corresponding business achievements, and by means of defining equity attribution by stages and extending the binding mode, the management layer was stimulated to create great value for the Company in the long run. In May 7 to 18, 2015, a total of RMB 230 million including the special fund and financing & self-raised capital was used to purchase 6, 483, 800 shares from Midea. Basically, the implementation of “Partner” share-holding plan and stock equity incentive plan facilitated the construction of the equity structure consistent with the long-term benefit of all shareholders, and further promoted the optimization of the Company’s management mechanism. Main work plans for the second half year of 2015 include: (1) Further accelerate the continuous transformation and upgrade of existing businesses; understand the user’s needs; improve user experience; push forward high-quality product project; improve product structure; guarantee the continuous increase of operation efficiency and the stable growth of profit; (2) Focus on the User and Product, and further promote the Company’s organization reconstructing, process reconstructing, team reconstructing, performance reconstructing and cultural reconstructing by means of Internet+ thinking mode and method; give the advantage of synergy a full play, and enhance the operation development of seven major platforms; (3) Continuously promote the marketing transformation; enhance the construction of the national large-scale logistics platform; concentrate on the core channel; improve the weak market; guarantee a rapid development for e-commerce businesses; establish the Midea Terminal-to-Terminal logistics platform; (4) Focus on the international strategy market; promote Midea’s global businesses by stages; guide and propel various business departments to establish the professional management and operation system for the terminal-to-terminal product line covering the headquarters and the overseas companies; stabilize and optimize OEM project; boost the self-owned brand’s business development; (5) Continue delicacy management; improve the capital’s turnover efficiency; form new cost advantages; make continuous effort to enhance lean manufacturing and automation level; promote the efficiency in manufacturing and the product’s quality; (6) Stabilize the innovative orientation; promote the development of new products; positively explore and seek new business development direction; create a second track, and arrange relevant growth space for new businesses in advance. 16 2015 Semi-Annual Report of Midea Group Co., Ltd. 2. YoY movements in key financial data Unit: RMB’000 Same period of last Report Period YoY +/- Main reasons for movements year Operating revenues 82,509,143.78 77,330,851.84 6.70% Operating costs 59,878,905.74 57,343,283.31 4.42% Selling expenses 8,986,099.39 7,623,680.06 17.87% Administrative expenses 3,604,757.13 3,349,324.40 7.63% Financial expenses -777.60 -288,553.70 99.73% Decrease in the exchange gains Income tax expenses 1,808,006.29 1,530,715.47 18.12% Net cash flows from operating Increase in the loans and advances 8,815,671.89 13,171,462.85 -33.07% activities granted by the financial subsidiary Net cash flows from investing -8,825,100.10 -22,486,720.02 -60.75% Movement in the investment activities Net cash flows from financing 272,708.87 4,791,762.54 -94.31% Decrease in the loans secured activities Net increase in cash and cash 234,907.88 -4,534,542.85 -105.18% Reasons above equivalents Major changes to the profit structure or sources of the Company in the Report Period: □ Applicable √ Inapplicable No such cases in the Report Period. Report Period progress of any development planning in the disclosed documents of the Company such as share-soliciting prospectuses, offering prospectuses, asset reorganization reports, etc.: □ Applicable √ Inapplicable No such cases in the Report Period. Report Period progress of any operating plans previously disclosed by the Company: In the Report Period, we moved forward with all of our tasks according to our schedules of the beginning of the year and progress has been made. For details, see “I Overview” in this section. III Main business breakdown Unit: RMB'000 17 2015 Semi-Annual Report of Midea Group Co., Ltd. YoY YoY YoY increase/decrea Operating Gross profit increase/decrease increase/decrease Operating cost se in gross revenue margin (%) in operating in operating cost profit margin revenue (%) (%) (%) By industry Manufacturing 75,866,473.43 54,465,377.02 28.21% 6.49% 4.01% 1.72% Logistics 838,437.50 729,233.60 13.02% -11.51% -15.39% 3.99% By product Large household 54,499,203.35 38,401,893.57 29.54% 6.24% 2.62% 2.48% appliances Air conditioners 42,816,687.06 29,866,998.57 30.24% 2.70% -2.10% 3.42% and components Refrigerators and 6,027,598.60 4,505,284.31 25.26% 20.34% 22.97% -1.60% components Washing machines 5,654,917.69 4,029,610.69 28.74% 22.99% 24.05% -0.61% and components Small household 19,327,755.83 14,344,267.36 25.78% 8.63% 9.36% -0.49% appliances Motors 3,794,178.22 3,283,760.31 13.45% -7.92% -6.39% -1.41% Logistics 2,063,867.89 1,914,766.39 7.22% 31.23% 37.86% -4.46% By geographical segment PRC 49,409,948.21 33,648,370.85 31.90% 10.06% 4.13% 3.87% Other countries and 27,294,962.72 21,546,239.77 21.06% 0.01% 3.02% -2.30% regions In order to help investors learn about the actual scale of operation and operational capability in terms of motors and logistics, the above mentioned data include the sales of motors and logistics within the Company. Please refer to the notes to the financial statements in this Report for the data excluding the sales within the Company. IV Core competitiveness analysis 1. Steadily leading innovation and R&D capabilities Having been committed to product innovation and research, Midea Group has acquired leading high-end technical talents within the industry and maintained technical cooperation with leading domestic and foreign research institutions. Relying on a sound innovation mechanism and sustained strong investment in research resources, the Group has maintained its advanced level of science and technology at home and abroad. Meanwhile, it has taken 18 2015 Semi-Annual Report of Midea Group Co., Ltd. the lead in developing and launching a series of innovative products, such as the full DC inverter air conditioner consuming "1 kWh per night", the “intelligent air conditioners designed for children”, the wristband-controlled air conditioners, the "intelligent auto-dispensing" washer-dryer, the "Steam Cube" (Zhenglifang) Series microwave ovens, the IH smart electric rice cooker, the high-temperature steam cleaning range hood and the running water heater, which are highly recognized within the market. Midea Group has set up a global innovation center. In light of its wide product range and vast customer base, Midea put forward the M-Smart Home Appliance Strategy, marking a step ahead in the development of intelligent products, the provision of complete solutions and the construction of an eco-industrial chain. 2. Broad and stable channel network By virtue of years of development and layout, Midea Group has formed all-dimensional market coverage. In the mature first and second-tier markets, the Company has maintained good cooperation relationships with large home appliance retail chains such as Gome and Suning. While in the extensive third and fourth-tier markets, the Company uses flagship stores, exclusive shops, traditional channels and new channels as effective supplements. Already, the Company has achieved full coverage of the first and second-tier markets and over 95% coverage of the third and fourth-tier markets. Besides, 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. In China, Midea Group have established operative long-lasting relationships with a majority of our original distributors over the years therefore cultivating good brand loyalty. Internationally, Midea Group has set up a number of overseas branches, opening production bases in six countries, hence accelerating the construction of its marketing network that covers Southeast Asia, North America, South America, Europe, Middle East and other potential markets. 3. Integrating capabilities in industry chain collaboration and resource sharing As the only white goods enterprise with a whole industrial chain and full product line in China, Midea Group has developed a complete industrial chain combining R&D, manufacturing and sales of key components and finished products, supported by industry-leading R&D and manufacturing technology of home appliance’s core components (such as compressors, electrical controls and magnetrons), and based on the powerful capabilities in the production and logistics services of upstream parts and components, for example, motors. As for the product line, the Group produces major appliances such as air conditioners, refrigerators, washing machines, and almost all mainstream small household appliances like microwave ovens, rice cookers, dishwashers and other kitchen & 19 2015 Semi-Annual Report of Midea Group Co., Ltd. bath appliances, so laying an innately favorable foundation for the provision of integrated solutions to consumers. After giving comprehensive consideration to regional distribution, supply support, logistics cost and other factors, the Group conducted systematic planning and rational distribution in productivity and structure while carrying out the integration of multi-product scale and flexible production, thus enabling the company to be more flexible in responding to market demands. Meanwhile, the Group has achieved a full sharing of resources and an all-round coordination in procurement, branding, technology, channels and other aspects because of the advantages of this whole industry chain and full product line. 4. Sound corporate governance mechanism and effective incentive mechanism Paying close attention to the construction of a governance framework, its corporate control, the separation of powers, the centralization and decentralization system, 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 operation practice of Midea Group. They have been working for Midea for more than 15 years, so they all have rich industry and management experience, a deep understanding of the home appliance industry of both China and the world, and an accurate understanding of the industry operating environment and corporate operation management. The Company's advantages in systems and mechanisms have laid a solid foundation for the promising, stable and sustaining development of the Company in the future. Currently, the senior core management team and the key middle-level staff hold a stake of about 10% in the Company through direct or indirect shareholdings, stock option incentive plans, “partners” shareholding plans and the like, marking the formulation of an equity architecture with convergent interests comprising the management level and all shareholders as well as an incentive mechanism featuring a combination of long and short-term incentives and disciplines. 5. Industry-leading advantages of scale The Group has a complete industrial chain from air conditioners and refrigerators to washing machines, as well as a complete group of small household electrical appliances. With 16 production bases that cover 5 regions including southern, eastern, central, southwestern and northern parts of China, the Group also has production bases in Vietnam, Belarus, Egypt, Brazil, Argentina and India. The Company ranks forefront both at home and abroad in terms of production capacity, yield and sales volume of major household appliances. 20 2015 Semi-Annual Report of Midea Group Co., Ltd. Meanwhile, Midea Group has a strong supply capacity of upstream components of household appliances, with overall production capacity for nearly 200 million motors, remaining at the forefront of the production and sales scale of main motor products. Furthermore, the strong transportation and distribution ability of the Group's logistics sector has provided a powerful guarantee for the development of the company's household appliances industry. Midea Group has a large-scale layout in household appliances and related industries, which reinforces the Company's position at the cutting edge of the industry and protects the Company's comprehensive advantages in terms of cost control, quality control, resource integration and timeliness of delivery. V Analysis of investments 1. External equity investments (1) External investments □ Applicable √ Inapplicable No such cases in the Report Period. (2) The Company's shareholdings in financial corporations √ Applicable □ Inapplicable Shareholdi Shareholdi ng Gain or loss Initial Number of Number of ng Carrying value percentage for the Type of investment shares held at shares held at percentage as at the end Account Source Company name at the Report company amount the beginning of the end of the at the end of the period ing title of shares beginning Period (RMB'000) the period period of the (RMB'000) of the (RMB'000) period (%) period (%) Promote Golden Eagle Long-ter r shares Asset Fund m equity 50,000.00 50,000,000 20.00% 50,000,000 20.00% 30,682.87 2,734.74 in Management company investme establish Co., Ltd. nt ment Long-ter Non-pub Bank of Jiangsu Commerci m equity 13,220.45 5,232,676 0.00% 5,232,676 0.00% 13,330.45 418.61 lic Co., Ltd. al bank investme issue nt Hubei Bank Commerci 5,000.00 5,870,266 1.29% 5,870,266 1.29% 5,000.00 Long-ter Non-pub 21 2015 Semi-Annual Report of Midea Group Co., Ltd. Corporation al bank m equity lic Limited investme issue nt Foshan Shunde Long-ter Rural Non-pub Commerci m equity Commercial 1,318,539.89 328,874,160 9.40% 373,085,433 9.69% 1,318,539.89 118,394.70 lic al bank investme Bank Company issue nt Limited Zhangshu Long-ter Non-pub Shunyin County Commerci m equity 6,000.00 6,000,000 6.00% 6,000,000 6.00% 6,000.00 312.00 lic Bank Company al bank investme issue Limited nt Fengcheng Long-ter Non-pub Shunyin County Commerci m equity 6,000.00 6,000,000 6.00% 6,000,000 6.00% 6,000.00 274.16 lic Bank Company al bank investme issue Limited nt Total 1,398,760.34 401,977,102.00 -- 446,188,375.00 -- 1,379,553.21 122,134.21 -- -- (3) Securities investments □ Applicable √ Inapplicable No such cases in the Report Period. (4) Shareholdings in other listed companies □ Applicable √ Inapplicable No shareholdings in other domestic listed companies in the Report Period. 2. Entrusted asset management, derivatives investments and entrusted loans (1) Entrusted asset management Unit: RMB'0,000 Whether Actual Actual Amount it is a Method principal gain or Related Value of Commenc provided Name of related-pa Product Terminatio of amount Projected loss party or entrusted ement for trustee rty type n date remuner recovered income amount not assets date impairme transactio ation for the for the nt (if any) n period period Bank No No Bank 7,272,380 2015.1.1 2015.6.30 As 7,433,708 68,295.41 68,295.41 22 2015 Semi-Annual Report of Midea Group Co., Ltd. financial agreed product Total 7,272,380 -- -- -- 7,433,708 68,295.41 68,295.41 Source of entrusted assets The Company's own funds Cumulative amount of principals and 0 revenues overdue Litigations involved (if applicable) Inapplicable Disclosure date of the announcement about the board’s consent for the asset management 2015.03.31 entrustment (if any) Disclosure date of the announcement about the general meeting’s consent for the asset 2015.04.22 management entrustment (if any) (2) Derivatives investments √ Applicable □ Inapplicable Unit: RMB'0,000 Ratio of Wheth investment Investmen Rela er it is Amount amount at the t amount Investment Actual gain ted a Type of Initial provided end of the Operating Commence Termination at the amount or loss party related derivativ investment for period to the party ment date date beginning at the end of amount for or -party e amount impairmen Company's of the the period the period not transac t (if any) net assets at period tion the end of the period (%) Futures Futures No No -327.94 2015.01.01 2015.12.31 -327.94 0.00 0.00 0.00% 860.97 company contracts Forward Bank No No forex -19,490.04 2015.01.01 2015.12.31 -19,490.04 0.00 -5,035.26 -0.11% 36,853.94 contracts Total -19,817.98 -- -- -19,817.98 0.00 -5,035.26 -0.11% 37,714.91 Source of derivatives investment All from the Company's own funds funds Litigation involved (if applicable) Inapplicable Disclosure date of the announcement about the board’s 2015.03.31 consent for the derivative 23 2015 Semi-Annual Report of Midea Group Co., Ltd. investment (if any) Disclosure date of the announcement about the general 2015.04.22 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 of the laws and regulations and internal management system of the Company. 2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the Risk analysis of positions held in Company to suffer from loss during the course of its futures business and forex funds business. derivatives during the Reporting Control measures: The Company has not only developed relevant management systems that clearly Period and explanation of control defined the assignment of responsibility and approval process for the futures business and forex funds measures (including but not limited business, but also established a comparatively well-developed monitoring mechanism, aiming to to market risk, liquidity risk, credit effectively reduce operational risk by strengthening risk control over the business, decision-making and risk, operational risk and legal risk) trading processes. 3. Market risk Uncertainties caused by changes in the prices of bulk commodity and exchange rate fluctuations in foreign exchange market could lead to greater market risk in the futures business and forex funds business. Meanwhile, inability to timely raise sufficient funds to establish and maintain hedging positions in futures operations, or the forex funds required for performance in forex funds operations being unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company shall always be conducted by adhering to prudent operation principles. For futures business, the futures transaction volume and application have been determined strictly according to the requirements of production & operations, and the stop-loss mechanism has been implemented. Besides, to determine the prepared margin amount which may be required to be supplemented, the futures risk measuring system has been established to measure and calculate the margin amount occupied, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted application for funds business should conduct risk analysis on the conditions and environment affecting operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update 24 2015 Semi-Annual Report of Midea Group Co., Ltd. operating status of the funds business on a timely basis to ensure proper funds arrangement before the expiry dates. Changes in market price or fair value of derivatives product 1. Gain/loss from futures hedging contracts incurred during the Report Period was RMB8,609,700; invested during the Report Period: 2. Gain/loss from forward forex contracts incurred during the Report Period was RMB368,539,400; specific methods used and relevant 3. Public quotations in futures market or forward forex quotations announced by Bank of China are used assumption and parameter settings in the analysis of derivatives fair value. 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 Company's No changes derivatives for the Report Period as compared to the previous report period The Company's independent directors are of the view that the futures hedging business is an effective instrument for the Company to eliminate price volatility and implement risk prevention measures Special opinions expressed by through enhanced internal control, thereby improving the operation and management of the Company; independent directors concerning the Company's foreign exchange risk management capability can be further improved through the forex the Company's derivatives funds business, so as to maintain and increase the value of foreign exchange assets and the investment and risk control abovementioned investment in derivatives can help the Company to fully bring out its competitive advantages. Therefore, it is practicable for the Company to carry out derivatives investment business, and the risks are controllable. (3) Entrusted loans □ Applicable √ Inapplicable No such cases in the Report Period. 3. Use of raised funds √ Applicable □ Inapplicable In the Report Period, the Company made a private issue of restrictedly tradable shares of 55,000,000 to Xiaomi Technology, which were listed with the Shenzhen Stock Exchange dated 26 June 2015. With RMB22.01 for every share, this private issue has raised a total of RMB1,210,550,000 (all paid in cash). And the net raised funds stand at RMB1,203,543,228.39 after the issue expense of RMB7,006,771.61 (including the sponsoring and underwriting fees, the fees for the CPAs, law firm and other intermediary agencies as well as other direct expense). The funds raised in this private issue have been deposited in the Company’s special account for raised funds. In 25 2015 Semi-Annual Report of Midea Group Co., Ltd. compliance with the applicable laws, regulations, normative documents and the Company’s rules regarding its raised funds, the Company will use all the said raised funds for working capital as detailed in its use plan. In addition, as per the applicable rules of the Shenzhen Stock Exchange, the sponsor institution, the raised funds deposit bank and the Company will sign a three-party supervision agreement to supervise the use of the raised funds together. As at 30 June 2015, RMB523,286,398.87 in the raised funds special account had been used and the balance was RMB680,256,829.52. 4. Analysis to major subsidiaries and investees √ Applicable □ Inapplicable Particulars about major subsidiaries and investees: Operating Operating Compan Principal Total assets Net assets Net profits Registered capital revenues profits Company name y Industry products or (RMB (RMB (RMB (RMB'0,000) (RMB (RMB type services million) million) million) million) million) Guangdong Midea Air Subsidia Manufac Refrigeration Equipment Co., conditioner RMB85,400 32,099.52 3,190.56 18,367.65 939.27 825.68 ry turing Ltd. s Kitchen & Guangdong Midea Kitchen Subsidia Manufac bathroom Appliances Manufacturing Co., USD7,200 7,177.91 2,203.20 5,991.20 693.81 598.48 ry turing electric Ltd. appliances Guangdong Midea Heating & Air Subsidia Manufac Ventilation Equipment Co., conditioner RMB30,000 6,046.75 1,073.14 4,947.14 646.72 569.12 ry turing Ltd. s Foshan Shunde Midea Electric Small Subsidia Manufac Appliance Manufacturing Co., household USD4,200 4,436.24 1,537.45 3,539.82 495.01 428.74 ry turing Ltd. appliances Hefei Midea Washing Subsidia Manufac Washing USD13,552 4,428.62 2,044.26 2,889.16 196.17 163.77 Machines Co., Ltd. ry turing machines Guangdong Welling Motor Co., Subsidia Manufac Motors USD4,881 2,647.00 1,289.04 1,617.82 125.31 111.62 Ltd. ry turing Guangdong Midea Group Air Subsidia Manufac Wuhu Refrigeration Equipment conditioner USD692.8 16,350.74 1,291.99 11,528.48 422.68 367.05 ry turing Co., Ltd. s Wuhu Midea Kitchen & Subsidia Manufac Kitchen & RMB6,000 3,146.66 420.42 2,957.01 342.13 310.82 26 2015 Semi-Annual Report of Midea Group Co., Ltd. Bathroom Electric Appliances ry turing Bathroom Manufacturing Co., Ltd. Electric Appliances Guangdong Midea Life Small Subsidia Manufac Electric Manufacturing Co., household USD6,926 2,422.07 744.68 847.14 34.58 23.47 ry turing Ltd. appliances Foshan Shunde Midea Washing Subsidia Manufac Dish Appliance Manufacturing Co., USD4,600 2,578.99 726.62 1,492.30 150.53 133.09 ry turing washers Ltd. 5. Major investments not financed by raised funds □ Applicable √ Inapplicable No such cases in the Report Period. VI Forecast of business performance from January to September in 2015 Warning about an estimated major change in the aggregate net profit from the beginning of the year to the end of the next report period compared with the same period in the previous year and explanation for the change: □ Applicable √ Inapplicable VII Explanations by the Board of Directors and the Supervisory Committee regarding the "non-standard auditor’s report" issued by the CPAs firm for the Report Period □ Applicable √ Inapplicable VIII Explanations by the Board of Directors regarding the "non-standard auditor’s report" issued by the CPAs firm for last year □ Applicable √ Inapplicable IX Profit distribution plan carried out during the Report Period Profit distribution plan carried out during the Report Period, especially the execution of or the adjustments to the parts in the plan about cash dividends and turning capital reserves into share capital: √ Applicable □ Inapplicable The 2014 Annual Profit Distribution Plan was carried out during the Report Period, which is detailed as follows: Based on its total of 4,215,808,472 shares as at 31 December 2014, the Company would distribute a cash dividend 27 2015 Semi-Annual Report of Midea Group Co., Ltd. of RMB10.00 (taxes included) for every 10 shares of all shareholders. The said plan was reviewed and approved at the 2014 Annual General Meeting held on 21 April 2015. The book closure date for this profit distribution was 29 April 2015, and the ex-right and ex-dividend date was 30 April 2015. The said plan has been smoothly carried out. Special statement about the cash dividend policy In compliance with the Company’s Articles of Association and the resolution of the Yes general meeting: Specific and clear dividend standard and ratio: Yes Complete decision-making procedure and mechanism: Yes Independent directors fulfilled their responsibilities and played their due role: Yes Minority shareholders have the chance to fully express their opinion and desire and Yes their legal rights and interests were fully protected: In adjustment or alteration of the cash dividend policy, the conditions and procedure Inapplicable were in compliance with regulations and transparent: X Pre-plan for profit distribution and turning capital reserves into share capital for the Report Period □ Applicable √ Inapplicable The Company plans not to distribute cash dividends or bonus shares or turn capital reserves into share capital for the first half of 2015. XI Visitors in the Report Period √ Applicable □ Inapplicable Type of Date Place Occasion Visitor visitor China Universal Asset Management, Zeal Asset Management, CICC, Strategy Institutio Value Partners, Matthews International, Och-Ziff, Xijing, Lighthorse 2015-01-08 Hong Kong meeting n Asset Management, Indus, TPG-AXON Capital, Farallon, Marshall Wace, Rays Capital, LBN, BAM, Pine River, Full Vision Capital, Primero Changli Capital, Goldman Sachs, Blackrock, Henderson Global Investors, Fidelity, Invesco, Cathay Life Insurance, J.P. Morgan Asset Management, Shanghai Baoyin, Value Partners, Harvest Fund, Temasek, Yiheng Strategy Institutio 2015-01-12 Shanghai Capital, Protek (HK), Prudence Investment Management, Nomura, The meeting n New Idea of Investment, UBS Asset Management, APS Asset Management, REYHER Investment, Springs Capital, Baring Assets, BOSVALEN, Panah Fund, Kingsmead, Tiger Pacific, Highbridge, 28 2015 Semi-Annual Report of Midea Group Co., Ltd. Wellington Management, Sparx, Carrhae Capital, Stone Forest Capital, Bestinver, Turiyacapital, Comgest, Bernstein, PIMCO, Matthews, Truck, Broad Peak The On-Site Institutio Jingyuan Capital, Trivest Investment, Matthews International, SMC China 2015-01-16 Company survey n Fund, Pacific Eagle, BlueCrest, UG, Acorn Capital The On-Site Institutio 2015-01-21 Stock Department of China Life Insurance Asset Company survey n The On-Site Institutio 2015-01-23 GLG Company survey n The On-Site Institutio 2015-01-23 Carmignac Gestion Company survey n The On-Site Institutio 2015-01-27 Tiger Fund Company survey n The Teleconferenc Institutio 2015-01-28 Government of Singapore Investment Corp Company e n The On-Site Institutio 2015-01-28 Fedelity Company survey n Taiwan SinoPac Securities, Fuh Hwa Securities Investment Trust, Mega International Investment Trust, Taishin Securities Investment Trust, Fubon The Teleconferenc Institutio 2015-01-29 Securities Investment Trust, Nan Shan Life Insurance, MassMutual Company e n Mercuries Life, CTBC Life Insurance, Fubon Life Insurance, Central Reinsurance Corporation, Ruiteng Investment The On-Site Institutio 2015-01-29 China Merchants Securities Company survey n The On-Site Institutio 2015-01-29 Nikko Asset Company survey n Shenyin & Wanguo Investment Management, Princeton Capital Management, Value Partners, Blue Pool Capital, Janchor, The Bank of On-Site Institutio Tokyo-Mitsubishi UFJ Ltd., The Bank of China Life Insurance, Oberweis, 2015-01-30 Hong Kong survey n Daiwa Asset Investment, VL Asset Investment, Taiping Assets, Xinsheng Assets, Hong Kong Huguang International Investment, BOSVALEN, Morgan Stanley, Karst Peak, Primero The On-Site Institutio 2015-02-02 Putnam Investment Management Company survey n The Teleconferenc Institutio 2015-02-04 Yuanta Securities Investment Trust, KGI Securities Company e n The On-Site Institutio 2015-02-05 Capital World Investors Company survey n The On-Site Institutio 2015-2-6 Singapore Jin Rong Assets Company survey n The Teleconferenc Institutio 2015-02-11 Falcon Edge Company e n 29 2015 Semi-Annual Report of Midea Group Co., Ltd. The On-Site Institutio 2015-02-11 Merrill Lynch Company survey n The Teleconferenc Institutio 2015-02-12 Broad Peak Company e n The On-Site Institutio 2015-03-05 Merrill Lynch Company survey n The On-Site Institutio 2015-03-10 Kora Capital Company survey n The On-Site Institutio Excel Investment, Trilogy Partners, Farallon Capital, Myriad Asset, 2015-03-10 Company survey n Azentus Capital The On-Site Institutio 2015-03-12 Investec Company survey n The On-Site Institutio 2015-03-16 Broad Peak Company survey n The On-Site Institutio 2015-03-18 Mercuries Life Insurance Company survey n Bank of China Investment Management, CITIC Asset Management Corporation Ltd, CITICS, CICC, Zheng Xiang Investment, China Merchants investment Management, Great Wall Fund, Yuan Xin, Golden Trust Sinopac Fund Management, Galaxy Securities, E Fund, Aegon-industrial Fund Management, New China Assets, Co-power Capital, Century Securities, Rongtong Fund, Invesco Great Wall, Greenwoods Asset, Jin Niu Investment, Harvest Fund, Huili Assets, ChinaAMC, Huaqiang investment, Citibank, Hanxi Fund, Korea Investment Trust, Haitong Securities, Guosen Securities, Guotai Junan Performance Institutio Security Assets Management, GuoDu Securities Institute, Guangzhou 2015-03-31 Shenzhen seminar n Long Term Investment, GF Securities, Everbright Prudential Fund, GUANJUN Asset, ICBC Credit Suisse, ICBCI - Circulation Capital, Gaoyi Capital, Goldman Sachs Gao Hua, ChinaVenture Investment, Fengling Capital, Soochow Fund, Orient Securities, Daoning Investment, Springs Capital, Da Hong Assets, Bosera Fund, Essence Securities, Yiheng Capital, Ward Ferry, Value partners, Trilogy Partners, Sumeru Capital, Senrigan Capital Group Limited, RCM Asia Pacific Limited, Ozcap, Overlook capital, Norges, First State, Eton Park Asia Limited, Comgest, Cloud Ridge Capital, Central Asset, Bosvalen Asset Management, Black Rock, Axis Capital, APS Asset, etc. (over 120 institutions) The On-Site Institutio 2015-04-21 Yale Fund Company survey n The Teleconferenc Institutio 2015-04-22 Tengyue Fund Company e n The Teleconferenc Institutio 2015-04-23 PCC Asset Company e n The Teleconferenc Institutio 2015-04-23 Acion Partners Company e n 30 2015 Semi-Annual Report of Midea Group Co., Ltd. The On-Site Institutio 2015-04-24 Ginkgo Investment Company survey n The Teleconferenc Institutio 2015-04-29 Matthews International Company e n IKON Asset, Anbang Asset, Essence Securities, Och-Ziff, Baishan Investment, Baoyin Investment, Homeo Capital, Broad Capital, Ivy Capital, Springs Capital, Allianz Global Investors, Deutsche Bank, Dongjin, Fidelity, Hillhouse Capital, GF Securities, Guotai Junan Securities, HFT Investment Management, South Korea Investment, Xingzhi Venture Capital, Honghu Investment, Houde Asset Management, The Performance Institutio Value Partners, Greenwoods Asset, Neuberger-Berman, Merrill Lynch, 2015-04-29 Company seminar n Qianzhan Investment, Capital Securities, Rongtong Fund, Credit Suisse, UBS, Ruihui Investment, Shanghai River Fund, Shenyin & Wanguo, Tengyue Fund, Tianqi Investment, Western Securities, Citibank Hong Kong, E Fund, Galaxy Securities, Ginkgo Investment, Yuanta Securities, Yunsong Capital, Changsheng Fund, Chang Xin Asset Management, CITIC Securities, BOC International, Broad Peak, Diam, East Capital, EIFINi, Eton Park , HCC , Point72, TRILOJY The Teleconferenc Institutio 2015-04-29 T. Rowe Price Global Company e n The Teleconferenc Institutio 2015-04-30 Tiger Global Company e n Shanghai Baoyin, Credit Suisse, SAIF Partners, Goldman Sachs Asia, The On-Site Institutio Taiping Shengshi Investment, SMAM, GE Asset, Pacific Eagle Asset, 2015-05-07 Company survey n Flowering Tree, GIC, TPG-AXON, Taconic Capital, Neuberger Berman, Azentus Capital, Noonday, Generation, Indus Morgan Stanley Asset, Mirae Asset, Eastspring Investments, BOC Strategy Institutio International, Och-Ziff, Value Partners, Nezu Asia Captial Management, 2015-05-08 Hong Kong meeting n Citibank, Baring Asset, UBS, Marshall Wace, Allianz, Turiya Capital, Fidelity The Teleconferenc Institutio 2015-05-11 Kiara Advisors Company e n The On-Site Institutio 2015-05-12 Harding Loevner Company survey n Owl Creek Hong Kong Limited, Yulan Capital, Libra Capital, Pacific Strategy Institutio Eagle Asset, Pinpoint, Value Partners, Xingtai Capital, Mirae Asset, 2015-05-15 Shanghai meeting n Neuberger Berman, Artisan Partners, AXA, Chang Xin Asset, Munsun Asset, Truston Asset, Fidelity, Pictet The On-Site Institutio 2015-05-19 Puxin Asset Company survey n Strategy Institutio Columbia Threadneedle, Millennium Management, Fidelite Worldwide 2015-05-20 Singapore meeting n Investment, JP.Morgan, Flowing Tree, Henderson Global Investors, Broad 31 2015 Semi-Annual Report of Midea Group Co., Ltd. Peak Investment, Lazard AM, CDP Capital, Carmignac Gestion, Pictet AM, Pacific Eagle AM, DCG Capital, Indus Capital Partners, Ellis Munro AM, Henderson Global Investors, Credit Suisse AM, Brandes Investment Partners, New Silk Road Investment, Truston AM, Eastspring, Truston AM, Adapa CM State Investments, Eastspring Investments, Morgan Stanley Investment Institutio 2015-05-22 Singapore Road show Management, GIC Private Limited, UBS Global AM, GMO LLC, Capital n World Investors, Aberdeen AM, Seatown Holdings International Pte Ltd The On-Site Institutio 2015-06-01 Taiwan Yuanta Securities Company survey n The On-Site Institutio 2015-06-04 Cederberg Capital (UK) Company survey n The On-Site Institutio 2015-06-04 Gaoguan Investment Company survey n Changsheng Fund, CICC Asset Management, APS Asset, Yinhua Fund, Strategy Institutio 2015-06-05 Nanjing Ping An Asset, Value Partners, China International Fund Management, meeting n Broad Peak The On-Site Institutio 2015-06-05 Dodge & Cox Company survey n New Vision AM, Overlook Investment, Primero, Och-Ziff, VL Asset, Strategy Institutio Foundation AM, Barings, China Asset Management, Springboard, 2015-06-10 Hong Kong meeting n Rongying Capital, Hamon, Harvest Global, Samsung Asset, Cathay Life, Trueland Investment, Norges Bank Strategy Institutio Cathay, Fuh Hwa, Taiwan Life, Fubon Financial, Shin Kong Life, Taishin 2015-06-16 Taiwan meeting n Holdings, Rellance Securities Investment Trust Strategy Institutio Nezu Asia Capital, Indus Capital, Eton Park, Wellington, Tiger Pacific, 2015-06-17 Hong Kong meeting n Viking Global, Marshall Wace, Balyasny AM The On-Site Institutio 2015-06-23 Somerset Capital Management Company survey n The Teleconferenc Institutio 2015-06-26 SAIF Partners Company e n Main talking points with investors included: (1) industry and development status; (2) condition of business and development strategies; (3) periodic report released by other companies and other contents involved. Main contents and materials Materials: periodical report, announcement and other information disclosure. Except institutional investors, the Company pays great attention to communications with individuals and other minority investors by phone, email and interactive platform in replying to all questions and suggestions that need special attention. 32 2015 Semi-Annual Report of Midea Group Co., Ltd. Section V Significant Events I Corporate governance The governance of the Company complied with the Company Law and the CSRC requirements in the Report Period. II Lawsuits Material lawsuits and arbitrations □ Applicable √ Inapplicable No such cases in the Report Period. Other lawsuits □ Applicable √ Inapplicable III Media criticism □ Applicable √ Inapplicable No such cases in the Report Period. IV Bankruptcy and reorganization □ Applicable √ Inapplicable No such cases in the Report Period. V Asset transactions 1. Acquisition of assets □ Applicable √ Inapplicable 2. Sale of assets □ Applicable √ Inapplicable No such cases in the Report Period. 33 2015 Semi-Annual Report of Midea Group Co., Ltd. 3. Business combination □ Applicable √ Inapplicable No such cases in the Report Period. VI Implementation of any equity incentive plan and its effects √ Applicable □ Inapplicable Overview of the First Phase of the Stock Option Incentive Plan: 1. As authorized at the First Special General Meeting for 2014, the Company convened the 26th Meeting of the First Board of Directors on 27 March 2015, at which the Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the Stock Option Incentive Plan was reviewed and approved. As such, it was agreed to adjust the incentive receivers and their exercisable stock options of the Stock Option Incentive Plan due to the outgo, position changes and failure in the performance appraisal of some incentive receivers. Upon the adjustments, the incentive receivers decreased from 681 to 626, and their exercisable stock options (entitled but not yet exercised) were also reduced from 99,862,500 to 90,660,000. 2. On 21 April 2015, the 2014 Annual Profit Distribution Pre-Plan was reviewed and approved at the 2014 Annual General Meeting, deciding to distribute a cash dividend of RMB10.00 for every 10 shares of all the shareholders based on the total of 4,215,808,472 shares of the Company. The book closure date was 29 April and the ex-right and ex-dividend date was 30 April 2015. As authorized at the First Special General Meeting for 2014, the Company convened the 27th Meeting of the First Board of Directors on 27 April 2015, at which the Proposal for the Adjustment to the Exercise Price for the First Phase of the Stock Option Incentive Plan was reviewed and approved. As the said profit distribution pre-plan had been carried out, the exercise price for the First Phase of the Stock Option Incentive Plan was revised from RMB18.72 to RMB17.72 per share. 3. On 31 March 2015, the exercise conditions grew mature for the first exercise period of the First Phase of the Stock Option Incentive Plan. Upon the examination by the Shenzhen Stock Exchange and the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., the incentive receivers for the First Phase have started to exercise their stock options since 18 May 2015. Up to the end of the Report Period, 19,314,125 stock options have been exercised. Overview of the Second Phase of the Stock Option Incentive Plan: 1. On 27 March 2015, the Second Phase of the Stock Option Incentive Plan (Draft) and its Abstract of Midea 34 2015 Semi-Annual Report of Midea Group Co., Ltd. Group Co., Ltd. was reviewed and approved at the 26th Meeting of the First Board of Directors, and the incentive receiver list for the Second Phase of the Stock Option Incentive Plan (Draft) was examined at the 18th Meeting of the First Supervisory Committee. 2. The Company filed the materials of the Second Phase of the Stock Option Incentive Plan to the CSRC and the CSRC raised no objection against the materials. On 27 April 2015, the Second Phase of the Stock Option Incentive Plan (Draft) and its Abstract (Revised) and the Proposal for the Formulation of the Implementation and Appraisal Measures for the Second Phase of the Stock Option Incentive Plan (Revised) were reviewed and approved at the 27th Meeting of the First Board of Directors. 3. On 25 May 2015, the Company convened the First Special General Meeting for 2015, at which the Second Phase of the Stock Option Incentive Plan (Draft) and its Abstract (Revised) of Midea Group Co., Ltd. (the “Second Phase of the Stock Option Incentive Plan”), the Implementation and Appraisal Measures for the Second Phase of the Stock Option Incentive Plan (Revised) of Midea Group Co., Ltd., the Proposal for Asking the General Meeting to Authorize the Board to Handle Mattes Related to the Second Phase of the Stock Option Incentive Plan and other relevant proposals were reviewed and approved. 4. In light of the authorization by the First Special General Meeting for 2015 and the completion of the aforesaid 2014 Annual Profit Distribution Plan, the Company convened the 28th Meeting of the First Board of Directors on 27 May 2015, at which the Proposal for the Adjustments to the Exercise Price, the Incentive Receiver List and the Number of Granted Stock Options for the Second Phase of the Stock Option Incentive Plan, the Proposal for the Determination of the Grant Date for the Second Phase of the Stock Option Incentive Plan and the Proposal for the Grant-Related Matters for the Second Phase of the Stock Option Incentive Plan were reviewed and approved. As such, the Company was agreed to grant 83,790,000 stock options to 733 receivers on 27 May 2015 and the exercise price was adjusted from RMB31.54 to RMB30.54 per share. VII Significant related-party transactions 1. Related-party transactions arising from routine operation √ Applicable □ Inapplicable Type of Transaction Proportion Approve Obtain Index to Related Contents Over the Way of Relationsh the Pricing Transact amount in the total d able Disclosure the transactio of the approve settleme ip transacti principle ion price (RMB’0,000 amount of transacti market date disclose n party transaction d line nt on ) transaction on line price d 35 2015 Semi-Annual Report of Midea Group Co., Ltd. s of the (RMB’0 for a informa same kind ,000) transac tion (%) tion of the same kind Zhejiang Company Procureme Payment www.cn Procure Market nt of - 55,805.58 1.08% 200,000 No after 2015-03-31 info.co Shangfen controlled ment price goods delivery m.cn g by family Customs Industrial members As per clearance Market the Holdings of the Services and - 0 0 350 No price agreeme logistics Co., Ltd. actual nt services controller Total -- -- 55,805.58 -- 200,350 -- -- -- -- Details of any sales return of a large Inapplicable amount Give the actual situation in the Report Period (if any) where a forecast had been The associated amount limit between the Company and the related parties and the subsidiaries did not made for the total amounts of routine exceed the estimated total amounts of routine related-party transactions by type. related-party transactions by type to occur in the current period Reason for any significant difference between the transaction price and the Inapplicable market reference price (if applicable) 2. Related-party transactions regarding purchase and sales of assets □ Applicable √ Inapplicable No such cases in the Report Period. 3. Related-party transitions arising from joint investments in external parties □ Applicable √ Inapplicable No such cases in the Report Period. 4. Credits and liabilities with related parties □ Applicable √ Inapplicable 36 2015 Semi-Annual Report of Midea Group Co., Ltd. No such cases in the Report Period. 5. Other related-party transactions √ Applicable □ Inapplicable The Proposal for Related-party Transactions Regarding Making Deposits in and Securing Loans from Shunde Rural Commercial Bank and the Proposal for the Related-Party Transaction Regarding Note Discounting for Shangfeng Industrial were reviewed and approved at the 2014 Annual General Meeting held on 21 April 2015. According to the Proposals, in 2015, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceed RMB3 billion and neither shall the credit balance provided by the bank to the Company exceed RMB3 billion; and a subsidiary of the Company intends to provide note discounting services for Shangfeng Industrial and its subsidiaries, with the total amount of discounted notes expected not to exceed RMB1.4 billion and the interest charged not exceeding RMB30 million. Index to the announcements about the said related-party transactions disclosed Announcement title Disclosure date Disclosure website Proposal for Related-party Transactions Regarding Making Deposits in and Securing Loans from Shunde 2015-03-31 www.cninfo.com.cn Rural Commercial Bank Proposal for the Related-party Transaction Regarding 2015-03-31 www.cninfo.com.cn Note Discounting for Shangfeng Industrial VIII Occupation of the Company’s funds for non-operating purposes by the controlling shareholder and its related parties □ Applicable √ Inapplicable IX Significant contracts and their execution 1. Trusteeship, contracting and leasing (1) Trusteeship □ Applicable √ Inapplicable (2) Contracting □ Applicable √ Inapplicable 37 2015 Semi-Annual Report of Midea Group Co., Ltd. (3) Leasing □ Applicable √ Inapplicable 2. Guarantees provided by the Company √ Applicable □ Inapplicable Unit: RMB'0,000 Guarantees provided by the Company for external parties (excluding those for subsidiaries) Disclosure Actual Guarantee date of the occurrence Actual for a guarantee Line of date (date guarante Type of Term of Guaranteed party Due or not related line guarantee of e guarantee guarantee party or announce agreement amount not ment signing) Shanxi Huaxiang Group Co., Ltd. 2015-3-31 38,200 2015-1-1 38,200 Warranty 2015-12-31 No No Total actual external Total external guarantee line approved during the Report guarantee amount 2,800 2,800 Period (A1) during the Report Period (A2) Total actual external Total approved external guarantee line at the end of the guarantee balance at 38,200 38,200 Report Period (A3) the end of the Report Period (A4) Guarantees provided by the Company for its subsidiaries Disclosure Actual Guarantee date of the occurrence Actual for a guarantee Line of date (date guarante Type of Term of Due or Guaranteed party related line guarantee of e guarantee guarantee not party or announce agreement amount not ment signing) Midea Group Finance Co., Ltd. 2015-3-31 950,000 2015-1-1 63,939 Warranty 2015-12-31 No No Guangdong Midea Refrigeration Equipment 770,000 220,403 Warranty 2015-12-31 No No Co., Ltd. 2015-3-31 2015-1-1 Guangdong Midea Kitchen Appliances 500,000 121,350 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Guangdong Witt Vacuum Electronics 43,600 660 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Guangdong Midea Heating & Ventilation 65,000 5,458 Warranty 2015-12-31 No No Equipment Co., Ltd. 2015-3-31 2015-1-1 Midea Commercial Air Conditioning 2015-3-31 14,500 2015-1-1 0 Warranty 2015-12-31 No No 38 2015 Semi-Annual Report of Midea Group Co., Ltd. Equipment Co., Ltd., Guangdong Province Guangdong Midea Consumer Electric 27,500 306 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Foshan Shunde Midea Electric Appliance 109,500 636 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Guangdong Midea Kitchen & Bathroom 10,000 0 Warranty 2015-12-31 No No Appliances Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Foshan Shunde Midea Drinking 19,300 0 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Foshan Midea Clear Lake Water Purification 10,000 0 Warranty 2015-12-31 No No Equipment Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Guangdong Midea Environment Appliances 176,500 20,037 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Foshan Shunde Midea Washing Appliance 274,800 35,905 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Guangdong GMCC Refrigeration Equipment 67,800 997 Warranty 2015-12-31 No No Co., Ltd. 2015-3-31 2015-1-1 Guangdong GMCC Precise Manufacture Co., 34,000 141 Warranty 2015-12-31 No No Ltd. 2015-3-31 2015-1-1 Guangdong Welling Motor Co., Ltd. 2015-3-31 65,700 2015-1-1 9,176 Warranty 2015-12-31 No No Foshan Welling Electronic and Electric 10,000 55 Warranty 2015-12-31 No No Appliances Co., Ltd. 2015-3-31 2015-1-1 Foshan Welling Washer Motor 92,400 0 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Ningbo Midea Joint Materials Supply Co. 66,000 9,483 Warranty 2015-12-31 No No Ltd. 2015-3-31 2015-1-1 Foshan Welling Material Co., Ltd. 2015-3-31 21,000 2015-1-1 2,495 Warranty 2015-12-31 No No Guangzhou Kaizhao Trading Co., Ltd. 18,000 0 Warranty 2015-12-31 No No 2015-3-31 2015-1-1 Foshan Midea Carrier Refrigeration 46,000 0 Warranty 2015-12-31 No No Equipment Co., Ltd. 2015-3-31 2015-1-1 Guangdong Midea Group Wuhu 30,000 0 Warranty 2015-12-31 No No Refrigeration Equipment Co., Ltd. 2015-3-31 2015-1-1 Wuhu GMCC Air Conditioning Equipment 123,000 1,296 Warranty 2015-12-31 No No Co., Ltd. 2015-3-31 2015-1-1 Hefei Midea Refrigerator Co., Ltd. 2015-3-31 38,000 2015-1-1 2,500 Warranty 2015-12-31 No No Hubei Midea Refrigerator Co., Ltd. 2015-3-31 10,000 2015-1-1 5 Warranty 2015-12-31 No No Hefei Hualing Co., Ltd. 2015-3-31 63,000 2015-1-1 235 Warranty 2015-12-31 No No Guangzhou Midea Hualing Refrigerator 2015-3-31 20,000 2015-1-1 192 Warranty 2015-12-31 No No 39 2015 Semi-Annual Report of Midea Group Co., Ltd. Equipment Co., Ltd. Hefei Midea Heating & Ventilation 7,000 0 Warranty 2015-12-31 No No Equipment Co., Ltd. 2015-3-31 2015-1-1 Wuhu Midea Kitchen & Bathroom Electric 5,000 1,119 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Wuhu Midea Washing Appliance 12,500 202 Warranty 2015-12-31 No No Manufacturing Co., Ltd. 2015-3-31 2015-1-1 Anhui GMCC Refrigeration Equipment Co., 10,000 635 Warranty 2015-12-31 No No Ltd. 2015-3-31 2015-1-1 Anhui GMCC Precise Manufacture Co., Ltd. 2015-3-31 20,000 2015-1-1 9,190 Warranty 2015-12-31 No No Welling (Wuhu) Motor Manufacturing Co., 10,000 49 Warranty 2015-12-31 No No Ltd. 2015-3-31 2015-1-1 Hefei Midea Washing Machine Co., Ltd. 2015-3-31 40,000 2015-1-1 0 Warranty 2015-12-31 No No Annto Logistics Co., Ltd. 2015-3-31 20,000 2015-1-1 0 Warranty 2015-12-31 No No Jiangsu Midea Chunhua Electric Co., Ltd. 2015-3-31 14,000 2015-1-1 0 Warranty 2015-12-31 No No Jiangxi Midea Guiya Lighting Co., Ltd. 2015-3-31 5,000 2015-1-1 0 Warranty 2015-12-31 No No Chongqing Midea General Refrigeration 12,000 0 Warranty 2015-12-31 No No Equipment Co., Ltd. 2015-3-31 2015-1-1 Zhejiang GMCC Compressor Co., Ltd. 2015-3-31 50,000 2015-1-1 - Warranty 2015-12-31 No No Changzhou Welling Motor Manufacturing 12,500 - Warranty 2015-12-31 No No Co., Ltd. 2015-3-31 2015-1-1 Midea International Holdings Ltd. 2015-3-31 750,000 2015-1-1 282,529 Warranty 2015-12-31 No No Midea International Trading Co., Ltd 2015-3-31 70,000 2015-1-1 0 Warranty 2015-12-31 No No Midea Electric Investment (BVI) Limited 2015-3-31 50,000 2015-1-1 37,904 Warranty 2015-12-31 No No Calpore Macao Commercial Offshore Ltd. 2015-3-31 30,000 2015-1-1 0 Warranty 2015-12-31 No No Century Carrier Residential Air-Conditioning 6,300 0 Warranty 2015-12-31 No No Equipment Co., Ltd. 2015-3-31 2015-1-1 Welling International Hong Kong Limited 2015-3-31 30,500 2015-1-1 0 Warranty 2015-12-31 No No Welling Macao Commercial Offshore Ltd. 2015-3-31 7,000 2015-1-1 0 Warranty 2015-12-31 No No Midea Electric Trading (Singapore) Co. Pte. 300,000 146,726 Warranty 2015-12-31 No No Ltd. 2015-3-31 2015-1-1 Midea Consumer Electric (Vietnam) Co., Ltd. 2015-3-31 30,500 2015-1-1 0 Warranty 2015-12-31 No No Midea Electrics Netherlands B.V. 2015-3-31 6,300 2015-1-1 0 Warranty 2015-12-31 No No Midea America Corp. 2015-3-31 6,300 2015-1-1 0 Warranty 2015-12-31 No No PT Midea Heating and Ventilating Air 2015-3-31 12,600 2015-1-1 3,057 Warranty 2015-12-31 No No Conditioner Indonesia 40 2015 Semi-Annual Report of Midea Group Co., Ltd. Midea Malaysia Joint Venture 2015-3-31 3,150 2015-1-1 583 Warranty 2015-12-31 No No Total actual guarantee amount Total guarantee line for subsidiaries approved during the 1,109,357 for subsidiaries 1,109,357 Report Period (B1) during the Report Period (B2) Total actual guarantee balance Total approved guarantee line for subsidiaries at the end 977,260 for subsidiaries at 977,260 of the Report Period (B3) the end of the Report Period (B4) Total guarantee amount provided by the Company (total of the above-mentioned two kinds of guarantees) Total actual Total guarantee line approved during the Report Period guarantee amount 1,112,157 1,112,157 (A1+B1) during the Report Period (A2+B2) Total actual guarantee balance at Total approved guarantee line at the end of the Report 1,015,460 the end of the 1,015,460 Period (A3+B3) Report Period (A4+B4) Proportion of the total actual guarantee amount (A4+B4) in net assets of the 22% Company Of which: Amount of guarantees provided for shareholders, the actual controller and their 0.00 related parties (C) Amount of debt guarantees provided directly or indirectly for entities with a 509,085 liability-to-asset ratio over 70% (D) Portion of the total guarantee amount in excess of 50% of net assets (E) 0.00 Total amount of the three kinds of guarantees above (C+D+E) 509,085 Joint responsibilities possibly borne for undue guarantees Inapplicable Provision of external guarantees in breach of the prescribed procedures Inapplicable 3. Other significant contracts □ Applicable √ Inapplicable 4. Other significant transactions □ Applicable √ Inapplicable 41 2015 Semi-Annual Report of Midea Group Co., Ltd. X Undertakings made by the Company and its shareholders interested in 5% or more of the shares of the Company made in the Report Period or subsisting to the Report Period √ Applicable □ Inapplicable Undertaki Undertaking Undertaking Details of undertaking Term Particulars on the performance ng giver date 1. Undertaking of Midea Holding Ltd. (hereinafter referred to as "Midea Apart from the 1. There has been no violation of this undertaking. Holding"), and He Xiangjian, respectively the controlling shareholder and actual first item of controller of Midea Group Co., Ltd., towards the lock-up period of shares. undertakings, He Xiangjian and Midea Holding have undertaken as follows: Within 36 months from its duration Undertakings the listing date of Midea Group's stocks, they will neither transfer or entrust others to validity spans given in Controllin manage their directly and indirectly held shares of Midea Group issued prior to this 36 months from offering g issuance, nor sell them to Midea Group. If they break the above undertaking, they will the day of documents or shareholde 2013-3-28 assume all liabilities arising therefrom. Midea Group’s shareholding r, actual 2. Undertaking of Midea Holding and the actual controller He Xiangjian towards listing which is 2. There is no violation of this undertaking. alternation controller the maintenance of the independence of Midea Group. 18 September documents He Xiangjian and Midea Holding have undertaken as follows: He Xiangjian, Midea 2013 to Holding and their controlled enterprises will remain independent from Midea Group in 18 September respect of personnel, finance, assets, business and institutions, etc. in accordance with 2016, all other relevant laws and regulations and regulatory documents. They will faithfully fulfill the items are 42 2015 Semi-Annual Report of Midea Group Co., Ltd. above undertaking, and assume the corresponding legal liability. If they fail to fulfill their indefinite. obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal liabilities according to relevant laws, rules, regulations and regulatory documents. 3. Undertaking of Midea Holding and the actual controller He Xiangjian towards 3. There has been no violation of this undertaking. avoiding competition within the industry. In order to avoid possible competition within the industry between Midea Group and Midea Holding and its controlled enterprises as well as He Xiangjian, his immediate family and his controlled companies, He Xiangjian and Midea Holding have undertaken as follows: (1) None of the entities or individuals mentioned above is or will be engaged in the same or similar business as the existing main business of Midea Group and its controlled companies. They are not or will not engage or participate in such business that is competitive to the existing main business of Midea Group and its controlled companies by controlling other economic entities, institutions or economic organizations; (2) If Midea Group and its controlled companies expand their business on the basis of the existing ones to those where the above mentioned related entities or individuals are already performing production and operation, as long as He Xiangjian is still the actual controller of Midea Group, and Midea Holding the controlling shareholder, they will agree on solving the problem of competition within the industry arising therefrom, within 43 2015 Semi-Annual Report of Midea Group Co., Ltd. a reasonable period; (3) If Midea Group and its controlled companies expand their business scope on the basis of the existing ones to those where the above mentioned related subjects have not gone into production or operation, as long as He Xiangjian is still the actual controller of Midea Group, and Midea Holding the controlling shareholder, they would undertake as not to engage in any business competing with the new ones of Midea Group and its controlled companies; (4) In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as He Xiangjian is identified as the actual controller of Midea Group, and Midea Holding the controlling shareholder, they will not change or terminate this undertaking. (5) He Xiangjian and Midea Holding shall faithfully fulfill the above undertaking, and assume the corresponding legal responsibilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they would bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. 4. Undertaking of Midea Holding and the actual controller He Xiangjian towards 4. There has been no violation of this undertaking. the regulation of related transactions. In order to regulate matters of related transactions that may occur in the future between Midea Group and Midea Holding and its controlled companies as well as He Xiangjian, his immediate family and his controlled companies, He Xiangjian and Midea Holding 44 2015 Semi-Annual Report of Midea Group Co., Ltd. have undertaken as follows: (1) They will regulate any related transactions with Midea Group and its controlled companies using their utmost efforts to reduce them. For unavoidable related transactions with Midea Group and its controlled companies, including but not limited to commodity trading, providing services to each other or as agent, they will sign legal normative agreements with Midea Group, and go through approval procedures in accordance with related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They guarantee to offer fair prices for related transactions, and fulfill the information disclosure obligations in respect of the related transactions according to related laws, regulations, rules, other regulatory documents, and relevant provisions of the Articles of Association of Midea Group. They also guarantee not to illegally transfer funds or profits from Midea Group, or damage the interests of its shareholders at their advantages during the related transactions. (2) They shall fulfill the obligation of withdrawing from voting that involves the above mentioned related transactions at the general meeting of Midea Group; (3) The related subject mentioned above shall not require Midea Group to offer more favorable conditions than those to any independent third party in any fair market transactions. (4) In accordance with effective laws, regulations or other regulatory documents of People's Republic of China, as long as He Xiangjian is identified as the actual controller 45 2015 Semi-Annual Report of Midea Group Co., Ltd. of Midea Group, and Midea Holding the controlling shareholder, they shall not change or terminate this undertaking. (5) He Xiangjian and Midea Holding will faithfully fulfill the above undertaking and assume the corresponding legal liabilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal responsibilities according to relevant laws, rules, regulations and regulatory documents. 5. Related undertaking by He Xiangjian, the actual controller of Midea Group, on 5. So far, this shareholding transfer has not brought Midea Trade Union Committee transferring its limited equity of Midea Group. about any loss caused by any dispute or potential On 4 January , 2001, the Midea Trade Union Committee signed the "Equity Transfer disputes. There has been no violation of this Contract" with five people, i.e. He Xiangjian, Chen Dajiang, Feng Jingmei, Chen undertaking. Kangning and Liang Jieyin, where it transfered all limited equity of Midea Group (22. 85%) respectively to those five people. According to the confirmation letter issued by members of the Midea Trade Union Committee at that time, the equity transfer price was determined after mutual discussion on the basis of their true opinions, therefore there was no dispute or potential dispute. On 28 June, 2013, Foshan Shunde Beijiao General Union, superior department of Midea Trade Union Committee, issued a confirmation letter to the fact that Midea Trade Union Committee funded the establishment of Midea Group Co., Ltd. In addition, the letter also confirmed that the council of Midea Trade Union Committee is entitled to dispose any property of the committee, and such property disposal does not need agreement from all 46 2015 Semi-Annual Report of Midea Group Co., Ltd. staff committee members. Midea Holding and He Xiangjian, respectively the controlling shareholder and actual controller of Midea Group Co., Ltd. have undertaken as follows: For any loss of Midea Group caused by any dispute or potential dispute arising from the matters of equity transfer mentioned above, they are willing to assume full liability for such loss. 6. Undertakings on Issues about Payment of the Staff Social Insurance and the Housing Provident Fund involved in Midea Group's Overall Listing 6. So far, the payment of the staff social insurance Midea Holding and He Xiangjian: Midea Holding have undertaken to be liable for (1) and the housing provident fund has not brought paying such expenses and related expenses on time based on the requirements of relevant about any controversy or potential disputes. There state departments, if Midea Group is required to be liable for the payment of staff social has been no violation of this undertaking. insurance and the housing provident fund and the payment required by relevant state authorities prior to this merger, (2) paying corresponding compensation for all direct and indirect losses incurred by Midea Group and its subsidiaries due to this merger, (3) indemnifying and holding harmless Midea Group and its subsidiaries in time from such expenses where Midea Group and its subsidiaries are required to pay them in advance. 7. Undertakings on issues about asset alteration, asset flaw and house leasing of Midea Group and its subsidiaries 7.1 The Process of Property Ownership Certificate: Midea Holding and He Xiangjian have undertaken as follows: The Report discloses that the Company is trying to get (1) Midea Holding will do its utmost to assist and urge Midea Group (including its the Property Ownership Certificate for 177 of its subsidiaries) to complete renaming procedures of related assets, such as land, houses, properties, which cover an area of 2,148,485.65 square 47 2015 Semi-Annual Report of Midea Group Co., Ltd. trademarks, patents and stock rights, declared in the related files of this merger. Midea meters. So far, 51 applications have been approved, the Holding will be liable for all compensations of losses caused by issues about renaming total area covers 1,638,892.27 square meters, which procedures of related assets mentioned above to Midea Group. accounts for 76.28% of total area; 11 applications are (2) Midea Holding shall do its utmost to assist Midea Group (including its subsidiaries) under process, covering an area of 447,465.15 square to apply for ownership certificates of land and property declared in related files of this meters, accounting for 20.83% of the total area. These merger. 11 properties are in possession of ownership certificates (3) For those houses without ownership certificates due to incomplete formalities in the have not brought about any controversy or dispute. past, Midea Holding shall assist Midea Group (including its controlled subsidiaries) in Another property with an area of 1,966.69 square going through relevant construction-related formalities again and obtaining the meters (0.09% of the total area) has been disposed. The corresponding house ownership certificates. If the competent authorities require Midea remaining 114 properties, spanning an area of Group to dismantle buildings that can not acquire the real estate registration procedures 60,161.54 square meters account for 2.8% of the total re-application, Midea Holding shall do its utmost to provide assistance and be liable for area. These properties are all small unit size auxiliary any related expenses used in dismantling such buildings by Midea Group (including its facilities such as security booth, transformer room, subsidiaries). power room, pump room, gas station and so on, for (4) Under any circumstances that Midea Group suffers from losses incurred through no which property ownership certificates cannot be granted longer using those properties or failing to obtain or collect in time, the ownership or applied for. So far these 114 properties have not been certificates of those properties currently being used or any losses caused by other required to be dismantled by competent departments so reasons, Midea Holding shall compensate any loss for these reasons in time and in full. that these buildings are still in regular use, which has Midea Holding shall compensate the actual loss Midea Group suffers, from any not brought about any controversy or any company loss circumstances above resulting from penalties subjected to by competent authorities or caused by disputes. There is no violation of 48 2015 Semi-Annual Report of Midea Group Co., Ltd. through claims by any third party. undertakings. (5) Based on issues of defective house leasing declared in related files of this merger, 7.2 The Use of Rental Houses of This Company Midea Holding shall provide sufficient compensations for all economic losses incurred The Report discloses that as of 31 December, 2012 , our by Midea Group (including its subsidiaries) where the leasehold relations above become company used 113 leasing houses in total, of which our invalid or other disputes occur, which are caused by rights claims from a third party or by company can't get the property certificate of 100 leasing means of an administrative authority exercising a right and therefore results in any houses from the leasing party. So far the contracts of 81 economic losses due to eviction from rental houses, or any penalties subjected to by out of the 113 rental houses haven't been signed to competent government departments or any recourse from related parties. extend the leasehold. The property certificates of 2 of (6) Based on the issues of defective land leasing declared in related files of this merger, the remaining 32 houses have been obtained while the when leasehold relations become invalid caused by defects of land leasing or when other other 30 certificates haven't been obtained. These 30 disputes occur, resulting in any economic losses to Midea Group (including its rental houses haven't rendered our company any subsidiaries) or through any penalties administered by competent government economic loss or penalty caused by defective property departments. Likewise if the lessor can't compensate for losses caused by such defective rights, which result in removing to other rental houses. leasing, Midea Holding shall compensate Midea Group for losses caused by such 7.3 Land Use Rights of Leasing Use defective land leasing The "Report" discloses that as of 31 December, 2012, Midea Holding will compensate any losses of Midea Group where a violation of our company has had one case of using rental houses, guarantees and undertakings referred to previously occurs or such guarantees and covering a total area of 57,506.95 square meters for undertakings are not consistent with the reality. which the lessor of the rental land mentioned above did not provide any legal ownership files showing or detailing ownership of this land. So far this rental land 49 2015 Semi-Annual Report of Midea Group Co., Ltd. has not rendered our company any controversy or any loss caused by disputes. There has been no violation of undertakings. 7.4 The Procedures of Renaming Land Owner Under Process Caused by the Alteration of the Company's Name The Report discloses that there are still 10 cases in the process of registering a new land owner caused by changing the company's name of our company and its subsidiaries. So far, five cases have been approved and the other five cases are still under review, which have not rendered any loss to the company. There has been no violation of undertakings. 7.5 Processing the Renaming Procedures of Some Trademarks So far, 8 of the 62 trademarks cases involved in the Report have applied for cancellation of the subjects through their owners and these trademarks shall no longer be in use. The company will not apply for the renaming procedures for those trademarks. The 50 2015 Semi-Annual Report of Midea Group Co., Ltd. renaming procedures of the remaining 54 cases have been processed and this undertaking has been fulfilled. There has been no violation of this undertaking. 36 months from 18 September Shareholders of Midea Group, Ningbo Maysun, Fang Hongbo, Huang Jian, Cai Qiwu, 2013, the date Yuan Liqun, Huang Xiaoming, Li Jianwei, Zheng Weikang, promise that since Midea Other of Midea Group is listed on the Shenzhen Stock Exchange Center, the transferal or delegation of 2013-3-28 shareholde Group’s listing, There has been no violation of this undertaking. others to manage these issued shares who have direct or indirect ownership of Midea rs to 18 Group, has been forbidden for a period of 36 months. Midea Group is not allowed to buy September back those shares either. 2016 1. In strict accordance with the rules of the CSRC, the Shenzhen Stock Exchange and the Company regarding the use of raised funds, the Company shall have a special account for The its raised funds and use the funds only for the previously set purposes. undertakings 2. The funds raised in this private issue (after the issue expenses) shall all be used as Undertakings The shall expire working capital. 2015-6-15 There has been no violation of this undertaking. given in time Company when the raised 3. The Company shall not use the funds raised in this private issue to make any financial of IPO or funds have been investment such as purchasing held-for-trading financial assets and available-for-sale refinancing used up. financial assets, lending the funds to others and entrusted investments or to directly or indirectly invest in marketable securities. Xiaomi Xiaomi Technology has given an undertaking that it shall not transfer the shares that it 2015-6-26 36 months from There has been no violation of this undertaking. Technolog had subscribed for in this private offering of Midea Group within 36 months from the 51 2015 Semi-Annual Report of Midea Group Co., Ltd. y completion date of this offering (26 June 2015, the listing date for this offering). the listing date of this private offering, i.e. to 26 June 2018 Whether the undertaking is Yes fulfilled in time Specific reasons for failing to fulfill any Inapplicable undertaking and plan for the next step (if any) 52 2015 Semi-Annual Report of Midea Group Co., Ltd. XI Engagement and disengagement of the CPAs firm Has the semi-annual financial report been audited by a CPAs firm? □ Yes √ No XII Punishments and rectifications □ Applicable √ Inapplicable XIII Delisting risk due to violation of laws or regulations □ Applicable √ Inapplicable XIV Other significant events √ Applicable □ Inapplicable The Pre-Plan for the First Repo of Some Public Shares was reviewed and approved at the 30th Meeting of the First Board of Directors on 26 June 2015 and later at the Second Special General Meeting for 2015 on 13 July 2015. According to the Pre-Plan, the Company would repurchase some of its shares under the price of RMB48.54/share and the total price for the repo should not exceed RMB1 billion. 29,591,644 shares were bought back during the period from 21 July 2015 to 31 July 2015, accounting for 0.69% of the Company’s total shares. With the highest price at RMB35.74/share and the lowest at RMB30.69/share, the total repo price stood at RMB999,997,670.86, reaching the limit. As such, this repo plan has been carried out. And the Company cancelled the repo shares of 29,591,644 with the Shenzhen branch of China Securities Depository and Clearing Co., Ltd. on 6 August 2015. 53 2015 Semi-Annual Report of Midea Group Co., Ltd. Section VI Changes in Shares and Particulars about Shareholders I Changes in shares Unit: share Before the change Increase/decrease in the change (+, -) After the change Capitalizatio Proporti Bonus Proporti Number New issue n of capital Other Subtotal Number on (%) shares on (%) reserves I Restricted shares 1,973,072,529 46.80% 55,093,750 0 0 -1,822,529 53,271,221 2,026,343,750 47.23% 1. Shares held by the state 0 0 0 0 0 0 0 0 0.00% 2. Shares held by 0 0 0 0 0 0 0 0 0.00% state-owned corporations 3. Shares held by other 1,973,072,529 46.80% 55,093,750 0 0 -1,822,529 53,271,221 2,026,343,750 47.23% domestic investors Among which: Shares held by domestic 1,571,250,000 37.27% 55,000,000 0 0 55,000,000 1,626,250,000 37.91% corporations Shares held by 401,822,529 9.53% 93,750 0 0 -1,822,529 -1,728,779 400,093,750 9.33% domestic individuals 4. Shares held by foreign 0 0 0 0 0 0 0 0 0.00% investors Among which: Shares held by foreign 0 0 0 0 0 0 0 0 0.00% corporations Shares held by 0 0 0 0 0 0 0 0 0.00% foreign individuals II Non-restricted shares 2,242,735,943 53.20% 19,220,375 0 0 1,822,529 21,042,904 2,263,778,847 52.77% 1. RMB ordinary shares 2,242,735,943 53.20% 19,220,375 0 0 1,822,529 21,042,904 2,263,778,847 52.77% 2. Domestically listed 0 0 0 0 0 0 0 0 0.00% foreign shares 3. Overseas listed foreign 0 0 0 0 0 0 0 0 0.00% shares 4. Other 0 0 0 0 0 0 0 0 0.00% III Total shares 4,215,808,472 100.00% 74,314,125 0 0 0 74,314,125 4,290,122,597 100.00% Reasons for the changes in the shares: √ Applicable □ Inapplicable 54 2015 Semi-Annual Report of Midea Group Co., Ltd. 1. In the Report Period, the Company made a private offering of 55,000,000 restrictedly tradable shares to Xiaomi Technology, which were listed on the Shenzhen Stock Exchange on 26 June 2015. 2. On 15 May 2015, the Company disclosed the Indicative Announcement on the Commence of the Self-Decided Exercise by the Eligible Incentive Receivers for the First Exercise Period for the First Phase of the Stock Option Incentive Plan. And the exercise of stock options started on 18 May 2015. Up to the end of the Report Period, the incentive receivers have exercised 19,314,125 stock options in the First Phase of the Stock Option Incentive Plan, of which 125,000 stock options have been exercised by Company Secretary Jiang Peng on his own decision (93,750 shares locked up due to the 75% lock-up ratio requirement for the senior executives). 3. In June 2014, with confidence in the Company’s long-term solid growth, Fang Hongbo, Yuan Liqun and Li Jianwei in the top management of the Company increased their shareholdings in the Company by approximately 2,430,037 shares in total from the secondary market (1,822,529 shares locked up due to the 75% lock-up ratio requirement for the senior executives). According to the applicable rules, the annual transferable shares for the senior executives shall be calculated [the transferable shares=(restrictedly tradable shares+non-restrictedly tradable shares) × 25%] at the first trading day of every year. As such, the aforesaid locked-up shares have been unlocked for trading at the beginning of 2015. Approval of changes in the shares: √ Applicable □ Inapplicable 1. On 20 May 2015, the Issue Review Committee of the CSRC reviewed and approved the Company’s application for a private offering to Xiaomi Technology. 2. On 11 June 2015, the Company received from the CSRC the Reply Regarding the Approval for the Private Offering of Midea Group Co., Ltd. (CSRC Permit [2015] No. 1169), approving a private offering of no more than 55,000,000 new shares by the Company to Xiaomi Technology. Transfer of share ownership: □ Applicable √ Inapplicable Effects of the changes in shares on the basic EPS, diluted EPS, net assets per share attributable to the common shareholders of the Company and other financial indexes for the last year and the last report period: 55 2015 Semi-Annual Report of Midea Group Co., Ltd. √ Applicable □ Inapplicable In the Report Period, the total shares of the Company increased from 4,215,808,472 to 4,290,122,597 due to the 19,314,125 stock options exercised by the incentive receivers on their own decision according to the First Phase of the Stock Option Incentive Plan and the 55,000,000 new shares in the private offering to Xiaomi Technology. And the effects of these changes in the shares on the basic EPS, diluted EPS, net assets per share attributable to the common shareholders of the Company and other financial indexes for the last year and the last report period are as follows: 2014 First half of 2015 Calculated on the previous total Index Calculated on the new total shares Calculated on the new total shares shares Basic EPS 2.49 2.45 1.97 Diluted EPS 2.49 2.45 1.96 Net assets per share 9.36 9.20 10.76 Other information that the Company considers necessary or is required by the securities regulatory authorities to disclose: □ Applicable √ Inapplicable Changes in the total shares, the shareholder structure and the asset and liability structure: √ Applicable □ Inapplicable In the Report Period, the total shares of the Company increased from 4,215,808,472 to 4,290,122,597 due to the 19,314,125 stock options exercised by the incentive receivers on their own decision according to the First Phase of the Stock Option Incentive Plan and the 55,000,000 new shares in the private offering to Xiaomi Technology. II Total number of shareholders and their shareholdings Unit: share Total number of common Total number of preference shareholders with resumed shareholders at the end of 86,731 0 voting rights at the period-end (if any) the Report Period Shareholdings of the common shareholders with a stake of over 5% or the top 10 common shareholders 56 2015 Semi-Annual Report of Midea Group Co., Ltd. Sharehol Increase/dec Number of Pledged or frozen Total shares Number of Nature of ding rease during non-restricte shares Name of shareholder held at the restricted shareholder percenta the Report d shares Status of Number of period-end shares held ge (%) Period held shares shares Domestic Midea Holding Co., Ltd. non-state-own 34.88 1,496,250,000 1,496,250,000 0 Pledged 238,500,100 ed corporation Rongrui Equity Investment Domestic (Zhuhai) Partnership non-state-own 7.10 304,500,000 0 304,500,000 (limited partnership) ed corporation Domestic Fang Hongbo 2.13 91,326,995 90, 000,000 1,326,995 individual Tianjin CDH Jiatai Equity Domestic Investment Partnership non-state-own 1.82 78,000,000 0 78,000,000 (limited partnership) ed corporation Domestic Huang Jian 1.75 75,181,900 75,000,000 181,900 individual Ningbo Maysun Equity Domestic Investment Partnership non-state-own 1.75 75,000,000 75,000,000 0 (limited partnership) ed corporation Domestic Yuan Liqun 1.41 60,500,000 60,000,000 500,000 individual CDH M-Tech (HK) Co., Overseas 1.40 60,000,000 0 60,000,000 Ltd. corporation Overseas CDH Spark (HK) Co., Ltd. 1.34 57,500,000 0 57,500,000 corporation Domestic Xiaomi Technology Co., non-state-own 1.28 55,000,000 55,000,000 50,000,000 0 Ltd. ed corporation Strategic investors or common corporations The Company made a private offering of 55,000,000 restrictedly tradable shares to Xiaomi becoming top-10 shareholders due to Technology, which were listed on the Shenzhen Stock Exchange on 26 June 2015. placing of new shares (if any) Two individual shareholders Mr. Fang Hongbo and Ms. Yuan Liqun, serve as director and Related-parties or acting-in-concert parties senior executive in Midea Group. CDH Jiatai, CDH M-Tech and CDH Spark, which hold a among the shareholders above total of 4.56% shares in Midea Group, are related parties. Shareholdings of the top 10 non-restricted common shareholders Number of non-restricted Type of shares Name of shareholder shares held at the period-end Type Number Rongrui Equity Investment (Zhuhai) Partnership (limited partnership) 304,500,000 RMB ordinary 304,500,000 57 2015 Semi-Annual Report of Midea Group Co., Ltd. share Tianjin CDH Jiatai Equity Investment Partnership (limited RMB ordinary 78,000,000 78,000,000 partnership) share RMB ordinary CDH M-Tech (HK) Co., Ltd. 60,000,000 60,000,000 share RMB ordinary CDH Spark (HK) Co., Ltd. 57,500,000 57,500,000 share 53,849,234 RMB ordinary 53,849,234 Merrill Lynch International share 51,289,194 RMB ordinary 51,289,194 UBS AG share 41,953,094 RMB ordinary 41,953,094 Deutsche Bank Aktiengesellschaft share 36,974,378 RMB ordinary 36,974,378 Carmignac Gestion－Carmignac Patrimoine（ETF） share 33,388,888 RMB ordinary 33,388,888 National Social Security Fund Portfolio 104 share 31,786,204 RMB ordinary 31,786,204 Fidelity Investments Management (HK) Ltd.－Clients’ Funds share CDH Jiatai, CDH M-Tech and CDH Spark are related parties. Apart from that, the Company does not know whether there are Related-parties or acting-in-concert parties among the top ten other related parties among other shareholders of tradable shares non-restricted shareholders and between the top ten non-restricted and whether other shareholders of tradable shares belong to parties shareholders and the top ten shareholders acting in concert as prescribed in the Administrative Measures for Information Disclosure for Shareholding Alteration in a Listed Company. Explanation on the top 10 common shareholders participating in Inapplicable securities margin trading (if any) Note: Up to 14 August 2015, according to the register of shareholders of the Company (the top 100 shareholders) provided by the Shenzhen branch of China Securities Depository and Clearing Co., Ltd., China Securities Finance Co., Ltd. (CSF) directly holds 76,113,783 shares in the Company, representing a stake of 1.78%, which makes it the Company’s third majority shareholder with tradable shares. Meanwhile, dozens of funds hold a total of 79,999,000 shares (a stake of 1.90%) in the Company through an asset management plan of CSF. In addition, Central Huijin Investment Ltd. directly holds 52,316,600 shares in the Company, representing a stake of 1.23%, which makes it the Company’s sixth majority shareholder with tradable shares. The aforesaid 12 shareholders hold a total of 208,429,383 shares in the Company, accounting for 4.91% of the Company’s total shares. Whether any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the Company conducted any promissory repo during the Report Period: 58 2015 Semi-Annual Report of Midea Group Co., Ltd. □ Yes √ No No such cases in the Report Period. III Change of the controlling shareholder and the actual controller Change of the controlling shareholder in the Report Period □ Applicable √ Inapplicable Change of the actual controller in the Report Period □ Applicable √ Inapplicable IV Shareholding increase schemes proposed or implemented by the shareholders and their acting-in-concert parties during the Report Period □ Applicable √ Inapplicable No such cases in the Report Period to the best knowledge of the Company. 59 2015 Semi-Annual Report of Midea Group Co., Ltd. Section VII Preference Shares □ Applicable √ Inapplicable No preference shares in the Report Period. Section VIII Information about Directors, Supervisors and Senior Management I Changes in the shareholdings of the directors, supervisors and senior management √ Applicable □ Inapplicable Restricted Shares Shares Restricted Restricted Shares held Shares held shares Incumbe increased in decreased in shares held shares held at at the at the granted in Name Office title nt/ the Report the Report at the the period-begin period-end the Report Former Period Period period-begin period-end ning (share) (share) Period (share) (share) ning (share) (share) (share) Incumbe Li Jianwei Director 50,603,042 0 203,042 50,400,000 0 0 0 nt Company Incumbe Jiang Peng 0 125,000 0 125,000 0 0 0 Secretary nt Total -- -- 50,603,042 125,000 203,042 50,525,000 0 0 0 Note: Company Secretary Jiang Peng increased his shareholdings in the Company during the Report Period for he exercised on his own decision the stock options granted to him according to the First Phase of the Stock Option Incentive Plan. II Changes in the directors, supervisors and senior management □ Applicable √ Inapplicable 60 2015 Semi-Annual Report of Midea Group Co., Ltd. Section IX Financial Report (The 2015 Semi-annual Financial Report of the Company has not been audited by a CPAs firm.) Consolidated Balance Sheet Prepared by: Midea Group Co., Ltd. 30 June 2015 Unit: RMB’000 Asset Note Closing balance Opening balance Current Assets: Monetary funds 1 14,619,199.45 6,203,282.81 Deposit in Central Bank 2 1,827,040.08 1,279,592.47 Deposit in other banks 3 2,024,431.24 2,126,444.99 Derivative financial 4 14,339.10 162,513.84 assets Notes receivable 5 26,229,378.71 17,097,233.37 Accounts receivable 6 13,617,075.57 9,362,102.75 Accounts paid in 7 1,813,795.05 1,414,470.45 advance Loans and advances to 8 8,864,168.57 5,940,800.47 customers Interest receivable Dividends receivable 9 53,512.81 45,943.22 Other accounts 10 1,227,915.83 1,180,767.53 receivable Inventories 11 Non-current assets due 10,209,853.18 15,020,030.26 within 1 year Other current assets 12 Total current assets Non-current assets: Available-for-sale 13 2,257,721.98 1,655,494.72 financial assets Held-to-maturity investments Long-term accounts receivable 61 2015 Semi-Annual Report of Midea Group Co., Ltd. Long-term equity 14 906,155.83 951,874.39 investments Investing properties 15 146,845.84 171,634.90 Fixed assets 16 18,857,466.98 19,521,814.06 Construction in progress 17 673,746.74 661,882.29 Engineering materials Disposal of fixed assets Intangible assets 18 3,265,368.09 3,431,958.12 R&D expense Goodwill 19 2,957,619.51 2,931,791.41 Long-term deferred 20 803,688.22 758,576.10 expenses Deferred income tax 21 4,181,374.55 3,779,987.55 assets Other non-current assets 122,852.23 Total non-current assets 34,172,839.97 33,865,013.54 Total assets 141,782,687.12 120,292,088.16 Person-in-charge of Legal representative: Chief of the accounting the accounting work: Fang Hongbo division: Chen Jianwu Yuan Liqun Consolidated Balance Sheet (Continued) Prepared by: Midea Group Co., Ltd. 30 June 2015 Unit: RMB’000 Liabilities and Note Closing balance Opening balance shareholders’ equity Current liabilities: Short-term borrowings 22 10,346,605.38 6,070,879.03 Borrowings from the Central Bank Customer bank deposits and due to banks and other 23 21,200.85 7,493.81 financial institutions Intra-group borrowings Derivative financial 24 155,571.85 74,960.70 liabilities 62 2015 Semi-Annual Report of Midea Group Co., Ltd. Financial assets sold and 131,807.66 repurchased Notes payable 25 22,787,992.23 12,648,496.99 Accounts payable 26 19,270,838.33 20,137,454.46 Accounts received in 27 2,868,186.11 3,992,540.46 advance Payroll payable 28 1,486,339.67 2,199,776.95 Taxes and fares payable 29 4,124,942.46 3,280,150.71 Interest payable 30 39,693.38 22,912.17 Dividends payable 31 292,795.58 93,799.03 Other accounts payable 32 1,120,799.95 1,223,548.76 Non-current liabilities 33 due within 1 year Other current liabilities 34 25,978,102.27 22,778,936.05 Total current liabilities 88,624,875.72 73,142,849.12 Non-current liabilities: Long-term borrowings 35 10,575.18 19,205.03 Bonds payable 36 158,501.30 153,026.30 Long-term payables Specific payables 37 116,311.16 851,825.49 Projected liabilities 38 25,980.02 25,573.83 Deferred revenues 39 371,492.54 342,235.91 Deferred income tax 21 25,525.79 25,917.24 liabilities Other non-current liabilities Total non-current liabilities 708,385.99 1,417,783.80 Total liabilities 89,333,261.71 74,560,632.92 Shareholders’ equity Share capital 40 4,290,122.60 4,215,808.47 Capital reserves 41 15,311,738.38 13,024,883.19 Less: Treasury stock Other comprehensive 42 -559,540.66 -774,298.83 income 63 2015 Semi-Annual Report of Midea Group Co., Ltd. Surplus reserves 43 1,189,791.32 1,189,791.32 Provisions for general 44 40,516.92 risks Retained profits 45 25,882,112.91 21,814,315.69 Total equity attributable to 46,154,741.47 39,470,499.84 owners of the Company Minority interests 6,294,683.94 6,260,955.40 Total shareholders’ equity 52,449,425.41 45,731,455.24 Total liabilities and 141,782,687.12 120,292,088.16 shareholders’ equity Person-in-charge of Legal representative: Chief of the accounting the accounting work: Fang Hongbo division: Chen Jianwu Yuan Liqun Consolidated Income Statement Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Item Note Current period Same period of last year I. Operating revenues 82,875,070.41 77,708,218.36 Including: Sales income 1 82,509,143.78 77,330,851.84 Interest income 2 363,832.38 376,858.22 Handling charge and 2,094.25 508.30 commission income II. Operating costs 73,632,412.38 69,018,279.27 Including: Cost of sales 1 59,878,905.74 57,343,283.31 Interest expenses 2 317,071.49 191,553.43 Handling charge and 3 888.28 727.61 commission expenses Business tax and surtaxes 4 568,635.77 446,827.77 Selling expenses 5 8,986,099.39 7,623,680.06 Administrative expenses 6 3,604,757.13 3,349,324.40 Financial expenses 7 -777.60 -288,553.70 Asset impairment loss 8 276,832.18 351,436.39 Add: Gain/(loss) from change in fair 9 -217,464.01 -788,353.68 value (“-” for loss) Investment gains 10 1,181,204.85 426,447.09 64 2015 Semi-Annual Report of Midea Group Co., Ltd. Including: share of profits in 43,126.51 34,977.39 associates and joint ventures III. Operating profits 10,206,398.87 8,328,032.50 Add: non-operating income 11 650,591.41 553,423.06 Including: gains from non-current 38,172.48 40,031.43 asset disposal Less: non-operating expense 12 100,416.37 133,112.02 Including: loss from non-current asset 77,444.62 99,791.39 disposal IV. Total profits 10,756,573.91 8,748,343.54 Less: Income tax expense 13 1,808,006.29 1,530,715.47 V. Net profit 8,948,567.62 7,217,628.07 Including: Net profit achieved by combined parties before the combinations Attributable to owners of the 8,324,122.61 6,610,132.76 Company Minority shareholders’ income 624,445.01 607,495.31 VI. After-tax net amount of other 14 123,525.49 -391,206.22 comprehensive incomes After-tax net amount of other comprehensive incomes attributable 214,758.17 -424,263.31 to owners of the Company (I) Other comprehensive incomes that will not be reclassified into gains and losses 1. Changes in net liabilities or assets with a defined benefit plan upon re-measurement 2. Enjoyable shares in other comprehensive incomes in investees that cannot be reclassified into gains and losses under the equity method (II) Other comprehensive incomes that will be reclassified into 214,758.17 -424,263.31 gains and losses 1. Enjoyable shares in other -5,421.14 2,917.31 comprehensive incomes in investees 65 2015 Semi-Annual Report of Midea Group Co., Ltd. that will be reclassified into gains and losses under the equity method 2. Gains and losses on fair value changes of available-for-sale 10,918.32 -20.83 financial assets 3. Gains and losses on reclassifying held-to-maturity investments into available-for-sale financial assets 4. Effective hedging gains 360,415.30 -397,294.30 and losses on cash flows 5. Foreign-currency financial statement translation -151,154.31 -29,865.49 difference 6. Other After-tax net amount of other comprehensive incomes attributable -91,232.68 33,057.09 to minority shareholders VII. Total comprehensive incomes 9,072,093.110 6,826,421.85 Attributable to owners of the 8,538,880.78 6,185,869.45 Company Attributable to minority 533,212.33 640,552.40 shareholders VIII. Earnings per share (I) Basic earnings per share XVI 1.97 1.57 (II) Diluted earnings per share XVI 1.96 1.57 Person-in-charge of the Legal representative: Chief of the accounting division: accounting work: Fang Hongbo Chen Jianwu Yuan Liqun Consolidated Cash Flow Statement Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Item Note Current period Same period of last year I. Cash flows from operating activities: Cash received from sale of 60,039,034.87 50,376,575.36 commodities and rendering of service 66 2015 Semi-Annual Report of Midea Group Co., Ltd. Net increase of deposits from 13,707.04 216.14 customers and dues from banks Net increase of loans from the central bank Cash received from interest, 365,926.63 377,366.52 handling charges and commissions Tax refunds received 2,127,729.60 1,916,846.95 Other cash received relating to 1 1,746,301.16 1,235,894.43 operating activities Subtotal of cash inflows from 64,292,699.30 53,847,189.77 operating activities Cash paid for goods and services 32,721,673.09 23,640,077.67 Net increase of customer lendings 2,923,618.32 -140,373.38 and advances Net increase of funds deposited in the central bank and amount due 349,941.04 -74,239.40 from banks Cash for paying interest, handling 317,959.77 193,074.20 charges and commissions Cash paid to and for employees 6,130,766.11 5,562,772.47 Various taxes paid 5,135,145.75 4,432,638.16 Other cash payment relating to 2 7,897,923.33 7,061,777.20 operating activities Subtotal of cash outflows from 55,477,027.41 40,675,726.92 operating activities Net cash flows from operating 8,815,671.89 13,171,462.85 activities II. Cash flows from investing activities: Cash received from retraction of 6,736.94 4,001,000.00 investments Cash received from return on 1,042,100.46 288,626.73 investments Net cash received from disposal of fixed assets, intangible assets and 205,285.26 1,116,283.31 other long-term assets Net cash received from disposal of 67 2015 Semi-Annual Report of Midea Group Co., Ltd. subsidiaries or other business units Other cash received relating to investing activities Subtotal of cash inflows from 1,254,122.66 5,405,910.04 investing activities Cash paid to acquire fixed assets, intangible assets and other long-term 1,166,630.67 1,388,961.92 assets Cash paid for investment 8,915,487.43 26,488,790.03 Net cash paid to acquire -2,895.34 14,878.11 subsidiaries and other business units Other cash payments relating to investing activities Subtotal of cash outflows from 10,079,222.76 27,892,630.06 investing activities Net cash flows from investing -8,825,100.10 -22,486,720.02 activities III. Cash flows from financing activities: Cash received from capital 1,493,431.29 contributions Including: Cash received from minority shareholder investments by 13,459.97 subsidiaries Cash received from borrowings 12,782,285.41 24,804,161.79 Cash received from issuance of medium term notes Cash received from issuance of short-term financing bonds Other cash received relating to financing activities Subtotal of cash inflows from 14,275,716.70 24,804,161.79 financing activities Cash repayment of borrowings 9,388,064.09 15,368,031.10 Cash for repaying medium term 1,000,000.00 notes Cash for repaying short-term 68 2015 Semi-Annual Report of Midea Group Co., Ltd. financing bonds Cash paid for interest expenses 4,614,943.74 3,644,368.15 and distribution of dividends or profit Including: dividends or profit paid by subsidiaries to minority 378,347.40 268,328.09 shareholders Other cash payments relating to financing activities Sub-total of cash outflows from 14,003,007.83 20,012,399.25 financing activities Net cash flows from financing 272,708.87 4,791,762.54 activities IV. Effect of foreign exchange rate -28,372.78 -11,048.22 changes on cash and cash equivalents V. Net increase in cash and cash 234,907.88 -4,534,542.85 equivalents Add: Opening balance of cash 5,272,238.35 16,763,873.80 and cash equivalents VI. Closing balance of cash and cash 5,507,146.23 12,229,330.95 equivalents Person-in-charge of Legal representative: Chief of the accounting division: the accounting work: Fang Hongbo Chen Jianwu Yuan Liqun 69 2015 Semi-Annual Report of Midea Group Co., Ltd. Consolidated Statement of Changes in Shareholders’ Equity Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Current period Equity attributable to shareholders of the Company Item Total Less: Other Preparation Minority interests shareholders’ Capital Specific Surplus Retained Share capital treasury comprehensive for general equity reserve reserve reserve profit stock income risks I. Balance at the end of the previous 4,215,808.47 13,024,883.19 -774,298.83 1,189,791.32 21,814,315.69 6,260,955.40 45,731,455.24 year Add: change of accounting policy Correction of errors in previous 0 periods Enterprise merger under the same control Other II. Balance at the beginning of the 4,215,808.47 13,024,883.19 -774,298.83 1,189,791.32 21,814,315.69 6,260,955.40 45,731,455.24 year III. Increase/ 74,314.13 2,286,855.19 214,758.17 40,516.92 4,067,797.22 33,728.54 6,717,970.17 70 2015 Semi-Annual Report of Midea Group Co., Ltd. decrease in the period (“-” means decrease) (I) Total amount of the 214,758.17 8,324,122.61 533,212.33 9,072,093.11 comprehensive income (II) Capital paid in and reduced by 74,314.13 1,571,763.72 28,635.93 1,674,713.78 owners 1. Capital paid by 74,314.13 1,541,545.15 13,464.34 1,629,323.62 owners 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments 30,218.57 15,171.59 45,390.16 recognized in owners’ equity 4. Other (III) Profit 40,516.92 -4,256,325.39 -534,219.99 -4,750,028.46 distribution 1. Appropriations to surplus reserves 71 2015 Semi-Annual Report of Midea Group Co., Ltd. 2. Appropriations to general risk 40,516.92 -40,516.92 provisions 3. Appropriations -4,215,808.47 -534,219.99 -4,750,028.46 to owners 4. Other (IV) Internal carry-forward of owners’ equity 1. New increase of capital from capital public reserves 2. New increase of capital from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 72 2015 Semi-Annual Report of Midea Group Co., Ltd. 2. Used in the period (VI) Other 715,091.47 6,100.27 721,191.74 IV. Closing 4,290,122.60 15,311,738.38 -559,540.66 1,189,791.32 40,516.92 25,882,112.91 6,294,683.94 52,449,425.41 balance Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun Chief of the accounting division: Chen Jianwu Consolidated Statement of Changes in Shareholders’ Equity (Continued) Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Same period of last year Equity attributable to shareholders of the Company Item Total Less: Other Preparation Minority interests shareholders’ Capital Specific Surplus Retained Share capital treasury comprehensive for general equity reserve reserve reserve profit stock income risks I. Balance at the end of the previous 1,686,323.39 15,620,790.78 -334,216.66 569,544.32 15,304,989.21 6,233,131.24 39,080,562.28 year Add: change of -54,486.84 54,486.84 accounting policy Correction of errors in previous periods Enterprise 73 2015 Semi-Annual Report of Midea Group Co., Ltd. merger under the same control Other II. Balance at the beginning of the 1,686,323.39 15,566,303.94 -279,729.82 569,544.32 15,304,989.21 6,233,131.24 39,080,562.28 year III. Increase/ decrease in the 2,529,485.08 -2,541,420.75 -494,569.01 620,247.00 6,509,326.48 27,824.16 6,650,892.96 period (“-” means decrease) (I) Total amount of the -494,569.01 10,502,220.26 1,042,212.60 11,049,863.85 comprehensive income (II) Capital paid in and reduced by 152,799.76 33,285.23 186,084.99 owners 1. Capital paid by 7,927.91 7,927.91 owners 2. Capital increased by holders of other equity instruments 3. Amounts of share-based 150,991.31 25,357.32 176,348.63 payments 74 2015 Semi-Annual Report of Midea Group Co., Ltd. recognized in owners’ equity 4. Other 1,808.45 1,808.45 (III) Profit 620,247.00 -3,992,893.78 -535,379.84 -3,908,026.62 distribution 1. Appropriations 620,247.00 -620,247.00 to surplus reserves 2. Appropriations to general risk provisions 3. Appropriations -3,372,646.78 -535,379.84 -3,908,026.62 to owners 4. Other (IV) Internal carry-forward of 2,529,485.08 -2,529,485.08 owners’ equity 1. New increase of capital 2,529,485.08 -2,529,485.08 from capital public reserves 2. New increase of capital from surplus reserves 3. Surplus reserves 75 2015 Semi-Annual Report of Midea Group Co., Ltd. for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other -164,735.43 -512,293.83 -677,029.26 IV. Closing 4,215,808.47 13,024,883.19 -774,298.83 1,189,791.32 21,814,315.69 6,260,955.40 45,731,455.24 balance Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun Chief of the accounting division: Chen Jianwu 76 2015 Semi-Annual Report of Midea Group Co., Ltd. Balance Sheet of the Company Prepared by: Midea Group Co., Ltd. 30 June 2015 Unit: RMB’000 Asset Note Closing balance Opening balance Current Assets: Monetary funds 22,997,109.64 8,452,623.95 Derivative financial assets 6,571.22 Notes receivable 4,040,598.01 693,828.61 Accounts receivable Accounts paid in advance 7,360.97 1,102.42 Interest receivable Dividends receivable 967,484.80 280,771.02 Other accounts receivable 1 3,925,952.78 2,418,306.21 Inventories Non-current assets due within 1 year Other current assets 20,709,941.05 22,892,049.61 Total current assets 52,655,018.47 34,738,681.82 Non-current assets: Available-for-sale financial 1,218,277.80 1,230,277.80 assets Held-to-maturity investments Long-term accounts receivable Long-term equity 2 16,945,396.09 16,548,882.73 investments Investing properties 287,025.23 323,355.75 Fixed assets 1,347,841.97 1,653,024.17 Construction in progress 94,389.83 42,386.34 Engineering materials Disposal of fixed assets Intangible assets 261,404.65 280,656.35 R&D expenses 77 2015 Semi-Annual Report of Midea Group Co., Ltd. Goodwill Long-term deferred expenses 59,731.03 68,787.68 Deferred income tax assets 302.04 4,483.56 Other non-current assets Total non-current assets 20,214,368.64 20,151,854.38 Total assets 72,869,387.11 54,890,536.20 Legal representative: Person-in-charge of the accounting work: Chief of the accounting Fang Hongbo Yuan Liqun division: Chen Jianwu Balance Sheet of the Company (Continued) Prepared by: Midea Group Co., Ltd. 30 June 2015 Unit: RMB’000 Liabilities and shareholders’ Note Closing balance Opening balance equity Current liabilities: Short-term borrowings Derivative financial liabilities Notes payable Accounts payable 3,469.28 2,671.39 Accounts received in advance Payroll payable 3,691.69 16,865.00 Taxes and fares payable 116,856.80 51,951.23 Interest payable 171,502.27 217,050.96 Dividends payable Other accounts payable 52,649,761.67 36,057,338.71 Non-current liabilities due within 1 year Other current liabilities Total current liabilities 52,945,281.71 36,845,932.07 Non-current liabilities: Long-term borrowings Bonds payable 78 2015 Semi-Annual Report of Midea Group Co., Ltd. Long-term payables Specific payables Projected liabilities Deferred income tax 1,642.81 liabilities Other non-current liabilities Total non-current liabilities 1,642.81 Total liabilities 52,946,924.52 36,845,932.07 Shareholders’ equity Share capital 4,290,122.60 4,215,808.47 Capital reserves 6,831,090.74 5,356,080.10 Less: Treasury stock Other comprehensive income Surplus reserves 1,189,791.32 1,189,791.32 Retained profits 7,611,457.93 7,282,924.24 Shareholders’ equity 19,922,462.59 18,044,604.13 Total liabilities and 72,869,387.11 54,890,536.20 shareholders’ equity Legal representative: Person-in-charge of the accounting work: Chief of the accounting Fang Hongbo Yuan Liqun division: Chen Jianwu Income Statement of the Company Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Item Note Current period Same period of last year I. Sales income 1 469,983.10 365,575.75 Less: cost of sales 1 14,341.34 8,067.65 Business tax and 937.58 4,834.15 surtaxes Selling expenses Administrative 265,620.33 173,013.55 expenses Financial costs 388,212.87 17,137.16 Asset impairment loss 193.72 -4,436.52 79 2015 Semi-Annual Report of Midea Group Co., Ltd. Add: gain from change in 6,626.00 -8,329.12 fair value Investment gains 2 4,808,389.03 3,499,071.54 Including: income form investment on associates 6,062.32 44.77 and joint ventures II. Operating profits 4,615,692.29 3,657,702.18 Add: non-operating income 50,143.78 8,477.51 Less: non-operating 4,459.28 8,870.09 expense Including: loss from 3,734.46 8,769.43 non-current asset disposal III. Total profits 4,661,376.79 3,657,309.60 Less: income tax expense 117,034.63 3,841.65 IV. Net profit 4,544,342.16 3,653,467.95 V. After-tax net amount of other comprehensive incomes (I) Other comprehensive incomes that will not be reclassified into gains and losses 1. Changes in net liabilities or assets with a defined benefit plan upon re-measurement 2. Enjoyable shares in other comprehensive incomes in investees that cannot be reclassified into gains and losses under the equity method (II) Other comprehensive incomes that will be reclassified into gains and losses 1. Enjoyable shares in other comprehensive incomes in investees that will be reclassified into gains and losses under the equity method 2. Gains and losses on fair 80 2015 Semi-Annual Report of Midea Group Co., Ltd. value changes of available-for-sale financial assets 3. Gains and losses on reclassifying held-to-maturity investments into available-for-sale financial assets 4. Effective hedging gains and losses on cash flows 5. Foreign-currency financial statement translation difference 6. Other VI. Total comprehensive income 4,544,342.16 3,653,467.95 Legal representative: Person-in-charge of the accounting work: Chief of the accounting Fang Hongbo Yuan Liqun division: Chen Jianwu Cash Flow Statement of the Company Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Item Note Current period Same period of last year I. Cash flows from operating activities: Cash received from sale of commodities and rendering of service Tax refunds received Other cash received relating to 14,694,988.17 19,341,190.68 operating activities Subtotal of cash inflows from operating 14,694,988.17 19,341,190.68 activities Cash paid for goods and services Cash paid to and for employees 145,199.43 27,900.87 Various taxes paid 12,464.53 4,309.27 Other cash payment relating to 1,786,332.95 59,580.27 operating activities Subtotal of cash outflows from 1,943,996.91 91,790.41 operating activities Net cash flows from operating activities 12,750,991.26 19,249,400.27 81 2015 Semi-Annual Report of Midea Group Co., Ltd. II. Cash flows from investing activities: Cash received from retraction of 12,000.00 24,901.98 investments Cash received from return on 4,004,819.44 2,705,700.46 investments Net cash received from disposal of fixed assets, intangible assets and other 354.15 36,984.39 long-term assets Net cash received from disposal of subsidiaries or other business units Other cash received relating to investing activities Subtotal of cash inflows from 4,017,173.59 2,767,586.83 investing activities Cash paid to acquire fixed assets, intangible assets and other long-term 239,058.60 172,426.07 assets Cash paid for investment 6,049,973.45 20,875,420.03 Net cash paid to acquire subsidiaries and other business units Other cash payments relating to investing activities Subtotal of cash outflows from 6,289,032.05 21,047,846.10 investing activities Net cash flows from investing activities -2,271,858.46 -18,280,259.27 III. Cash flows from financing activities: Cash received from capital 1,479,971.31 contributions Of which: Cash received by subsidiaries as minority shareholder investments Cash received from borrowings 1,100,000.00 Cash received from issuance of medium term notes Cash received from issuance of 82 2015 Semi-Annual Report of Midea Group Co., Ltd. short-term financing bonds Other cash received relating to financing activities Subtotal of cash inflows from financing 1,479,,971.31 1,100,000.00 activities Cash repayment of borrowings 500,000.00 740,000.00 Cash for repaying medium term 1,000,000.00 notes Cash for repaying short-term financing bonds Cash paid for interest expenses and 4,965,193.24 3,670,757.28 distribution of dividends or profit Of which: Dividends and shares of profit paid by subsidiaries to minority shareholders Other cash payments relating to financing activities Sub-total of cash outflows from 5,465,193.24 5,41,757.28 financing activities Net cash flows from financing activities -3,985,221.93 -4,310,757.28 IV. Effect of foreign exchange rate - changes on cash and cash equivalents V. Net increase in cash and cash 6,493,910.87 -3,341,616.28 equivalents Add: Opening balance of cash and 6,879,717.05 13,809,135.41 cash equivalents VI. Closing balance of cash and cash 13,373,627.92 10,467,519.13 equivalents Legal representative: Person-in-charge of the accounting Chief of the accounting Fang Hongbo work: Yuan Liqun division: Chen Jianwu 83 2015 Semi-Annual Report of Midea Group Co., Ltd. Statement of Changes in Shareholders’ Equity of the Company Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Current period Item Less: Other Specific Total shareholders’ Share capital Capital reserve treasury comprehensive Surplus reserve Retained profit reserve equity stock income I. Balance at the end of the 4,215,808.47 5,356,080.10 1,189,791.32 7,282,924.24 18,044,604.13 previous year Add: change of accounting policy Correction of errors in previous periods Other II. Balance at the beginning 4,215,808.47 5,356,080.10 1,189,791.32 7,282,924.24 18,044,604.13 of the year III. Increase/ decrease in the 74,314.13 1,475,010.64 328,533.69 1,877,858.46 period (I) Total comprehensive 4,544,342.16 4,544,342.16 incomes (II) Capital increased and 74,314.13 1,475,010.64 1,549,324.77 reduced by owners 77 2015 Semi-Annual Report of Midea Group Co., Ltd. 1. Common shares 74,314.13 1,541,545.15 1,615,859.28 increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in -66,534.51 -66,534.51 owners’ equity 4. Other (III) Profit distribution -4,215,808.47 -4,215,808.47 1. Appropriations to surplus reserves 2. Appropriations to owners -4,215,808.47 -4,215,808.47 (or shareholders) 3. Other (IV) Internal carry-forward of owners’ equity 1. New increase of capital (or share capital) from capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for 78 2015 Semi-Annual Report of Midea Group Co., Ltd. making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other IV. Closing balance 4,290,122.60 6,831,090.74 1,189,791.32 7,611,457.93 19,922,462.59 Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun Chief of the accounting division: Chen Jianwu Statement of Changes in Shareholders’ Equity of the Company (Continued) Prepared by: Midea Group Co., Ltd. January-June 2015 Unit: RMB’000 Same period of last year Item Less: Other Specific Total shareholders’ Share capital Capital reserve treasury comprehensive Surplus reserve Retained profit reserve equity stock income I. Balance at the end of the 1,686,323.39 7,880,598.46 569,544.32 5,073,348.03 15,209,814.20 previous year Add: change of accounting policy Correction of errors in previous periods Other 79 2015 Semi-Annual Report of Midea Group Co., Ltd. II. Balance at the beginning 1,686,323.39 7,880,598.46 569,544.32 5,073,348.03 15,209,814.20 of the year III. Increase/ decrease in the 2,529,485.08 -2,524,518.36 620,247.00 2,209,576.21 2,834,789.93 period (I) Total comprehensive 6,202,469.99 6,202,469.99 incomes (II) Capital increased and 4,966.72 4,966.72 reduced by owners 1. Common shares increased by shareholders 2. Capital increased by holders of other equity instruments 3. Amounts of share-based payments recognized in 3,105.73 3,105.73 owners’ equity 4. Other 1,860.99 1,860.99 (III) Profit distribution 620,247.00 -3,992,893.78 -3,372,646.78 1. Appropriations to surplus 620,247.00 -620,247.00 reserves 2. Appropriations to owners -3,372,646.78 -3,372,646.78 (or shareholders) 3. Other (IV) Internal carry-forward 2,529,485.08 -2,529,485.08 80 2015 Semi-Annual Report of Midea Group Co., Ltd. of owners’ equity 1. New increase of capital (or share capital) from 2,529,485.08 -2,529,485.08 capital public reserves 2. New increase of capital (or share capital) from surplus reserves 3. Surplus reserves for making up losses 4. Other (V) Specific reserve 1. Withdrawn for the period 2. Used in the period (VI) Other IV. Closing balance 4,215,808.47 5,356,080.10 1,189,791.32 7,282,924.24 18,044,604.13 Legal representative: Fang Hongbo Person-in-charge of the accounting work: Yuan Liqun Chief of the accounting division: Chen Jianwu 81 2015 Semi-Annual Report of Midea Group Co., Ltd. Midea Group Co., Ltd. Notes to the Financial Statements Currency unit: RMB’000 1. Basic Information of Our Company Midea Group Co. Ltd. (hereinafter referred to as “the Company”) was promoted and set up by the Council of Trade Unions of GD Midea Group Co. Ltd., and had registered in Foshan Shunde Market Safety Supervision Bureau on 7 April 2000, of which the headquarter located in Foshan, Guangdong Province. On 29 July 2013, CSRC issued the “Reply on Approval of Merger of GD Midea Electric Appliance Co. Ltd. by Midea Group Co. Ltd.”, approving the Company’s issuance of 686,323,389 shares to merge GD Midea Electric Appliance Co. Ltd. The shares of the Company had been listed for trading in SZSE on 18 September 2013. On 30 June 2015, the total amount of the shares was of 4,290,122,597 shares (with the book value of RMB1 per share). Of which, the A share of the circulating shares with restricted conditions was of 2,026,343,750 shares while the non-restricted was of 2,263,778,847 shares. The Company belongs to the household appliance industry. And the business scope: Production and business of home appliances, motors and their parts; import and export of home appliances, home appliances raw materials and parts (application is handled in accordance with relevant government regulations as products not involved in state-owned trade management, but involved in quota and license management); IT services; investment consultancy and management services for companies; development of computer software and hardware; installation, maintenance and after-sales service of home appliances; design of industrial products; management of hotels; agency of advertisements; property management; research, development, marketing and promotion of projects and technologies needed by companies. (Items of business scope covering administrative license should be run with valid license or certificate of approval). The major products or the labor provided: household electrical appliances, motor and its components. The Company included more than one hundred subsidiaries such as Guangdong Midea Refrigeration Equipment Co., Ltd., Guangdong Midea Group Wuhu Refrigeration Equipment Co., Ltd., and Midea Group Wuhan Refrigeration Equipment Co., Ltd. into the current consolidated financial statement scope, of which the details, 77 2015 Semi-Annual Report of Midea Group Co., Ltd. please refer to the notes of the changes of the notes of the consolidated scope of the financial statement as well as the equities of other entities. II. Preparation basis of the financial statements (I) Preparation basis The financial statement prepared according to the ASBE - Basic Standards, each regulation of the specific accounting standards and the relevant regulations (hereinafter referred to as “ASBE”) issued by Ministry of Finance on 15 February 2006 and the periods afterwards. The financial statement executed the presentation and the disclosure according to the requirements of No. 32 of ASBE – Medium-term Financial Report issued by Ministry of Finance and the financial statement should be read accompanied with the Y2014 financial statement of the Group. The accounting policies adopted by the financial statement were the same as that adopted by the Group when preparing the Y2014 financial statement. The Company’s preparation of the financial statements is based on continuing operations. (II) Assessment on the constant operating ability There was no any event or situation which led the assumption of the constant operating within 12 months since the period-end cause any significant misgiving. III. Significant accounting policies and accounting estimates Important reminders: the Company formulated the specific accounting policies and accounting estimates aimed at the transactions or events such as the bad debt provisions of the receivable accounts, depreciation of the fixed assets, amortization of intangible assets and the confirm of the revenues according to the actual production and operating characteristics. (I) Declaration on compliance with the Accounting Standards for Enterprises The Company’s financial statements meet the requirements of the Accounting Standards for Enterprises, truthfully and completely reflecting information on its financial condition, results of operations and cash flows. (II) Accounting period The accounting year starts on 1 January and ends on 31 December of Gregorian calendar. (III) Operating cycle The operating cycle of the operating business of the Company is fairly short and regards 12 months as the dividend standard of the mobility of the assets and liabilities. 78 2015 Semi-Annual Report of Midea Group Co., Ltd. (IV) Reporting currency RMB is adopted as the reporting currency. (V) Accounting treatment of business combination under common control and not under common control 1. Accounting treatment of business combination under common control The assets and liabilities that the Company obtains in a business combination are measured on the basis of their carrying amount of the combined party among the consolidated financial statement of the final control party on the combining date. As for the balance between the book value amount of the owners’ equities of the combined party among the consolidated financial statement of the final control party and the book value of paid consolidated consideration and the total amount of the book value of the shares issued, the additional paid-in capital has been adjusted. If the additional paid-in capital is insufficient to be offset, the retained earnings are adjusted. 2. Accounting treatment of business combination not under common control The Company recognizes the positive balance between the combination costs and the fair value of the identifiable net assets it obtains from the acquiree as business reputation. For the balance between the combination costs and the fair value of the identifiable net assets the Company obtains from the acquiree, it first reexamines the measurement of the fair values of the identifiable assets, liabilities and contingent liabilities it obtains from the acquiree as well as the combination costs; if, after the reexamination, the combination costs are still less than the fair value of the identifiable net assets it obtains from the acquiree, it records the balance into the profits and losses of the current period. (VI) Preparation method of the financial statements The consolidated financial statements of the parent company involve all its subsidiaries. The consolidated financial statements is prepared by parent enterprise in accordance with the “Accounting Standard for Business Enterprises No 33-Consolidated Financial Statements” based on the financial statement of parent enterprise and subsidiaries, in accordance with other relevant materials, as adjusted long term share investment by equity method. (VII) Category of the joint venture arrangement and the accounting treatment of the joint operation 1. Joint venture arrangement classified into joint operation and joint venture enterprises. 2. When the Company is the joint venture party of the joint operating, the following items related to the interests shares of the joint operation should be confirmed: 79 2015 Semi-Annual Report of Midea Group Co., Ltd. (1) Confirms the assets individually held and confirms the assets jointly held according to the holding portion; (2) Confirms the liabilities individually undertook and confirms the liabilities jointly undertook according to the holding portion; (3) Confirms the revenues occurred from the selling of the output shares of the joint operation enjoyed by the Company; (4) Confirms the revenues occurred from the selling of the assets of the joint operation according to the holding portion of the Company; (5) Confirms the expenses individually occurred and confirms the expenses occurred from the joint operation according to the holding portion of the Company. (VIII) Recognition criteria of cash and cash equivalents The term “cash” listed in the cash flow statement refers to cash on hand and deposits that are readily available for payment. The term "cash equivalents" refers to short-term and highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. (IX) Translation of foreign currency transactions and statements 1. Translation of foreign currency transactions At the time of initial recognition of a foreign currency transaction, the amount in the foreign currency is translated into RMB amount at the spot exchange rate of the transaction date. On the balance sheet date, the foreign currency monetary items are translated at the spot exchange rate of that day. The balance of exchange arising from the exchange rate difference, except the exchange balance of principal and interest of foreign currency borrowings used in acquisition and construction of assets eligible for capitalization, is recorded into the profits and losses at the current period or other comprehensive income. 2. Translation of foreign currency statements The asset and liability items in the balance sheets are translated at a spot exchange rate on the balance sheet date. Among the owner's equity items, except the ones as "undistributed profits", others are translated at the spot exchange rate at the time when they are incurred. The income and expense items in the profit statements are translated at the spot exchange rate of the transaction date. The balance arisen from the translation of foreign currency financial statements in compliance with the aforesaid translation methods is presented separately under the owner's equity item of the balance sheets. 80 2015 Semi-Annual Report of Midea Group Co., Ltd. (X) Financial instruments 1. Classification of financial assets and liabilities Financial assets are classified into the following four categories when they are initially recognized: Financial assets which are measured at their fair values and the variation of which is recorded into the profits and losses of the current period (including transactional financial assets and the financial assets which are measured at their fair values and of which the variation is included in the current profits and losses), the investments which will be held to their maturity, loans and the account receivables, and financial assets available for sale. Financial liabilities are classified into the following two categories when they are initially recognized: Financial liabilities measured by fair value and their change is recorded in current profit and loss (including transactional financial liabilities and the financial liabilities which are measured at their fair values and of which the variation is included in the current profits and losses), and other financial liabilities. 2. Recognition, measurement and derecognizing conditions of financial assets and liabilities When the Company becomes a party to a financial instrument, it recognizes a financial asset or financial liability. Financial assets and liabilities are measured by fair value when they are initially recorded. For financial assets and liabilities measured by fair value and their change is recorded in current profit and loss, their related transaction expenses are directly recorded in current profit and loss. For financial assets and liabilities of other categories, their related transaction expenses are recorded in the initially recognized amount. The Company makes subsequent measurement on its financial assets according to their fair values, and may not deduct the transaction expenses that may occur when it disposes of the said financial asset in the future However, those under the following circumstances are excluded: (1) The investments held until their maturity, loans and accounts receivable are measured on the basis of the post-amortization costs by adopting the actual interest rate method; (2) The equity instrument investments for which there is no quotation in the active market and whose fair value cannot be measured reliably, and the derivative financial assets which are connected with the said equity instrument and must be settled by delivering the said equity instrument are measured on the basis of their costs. The Company makes subsequent measurement on its financial liabilities on the basis of the post-amortization costs by adopting the actual interest rate method, with the exception of those under the following circumstances: (1) For the financial liabilities measured at their fair values and of which the variation is recorded into the profits and losses of the current period, they are measured at their fair values, and none of the transaction expenses may be deducted, which may occur when the financial liabilities are settled in the future; (2) For the derivative 81 2015 Semi-Annual Report of Midea Group Co., Ltd. financial liabilities, which are connected to the equity instrument for which there is no quotation in the active market and whose fair value cannot be reliably measured, and which must be settled by delivering the equity instrument, they are measured on the basis of their costs; (3) For the financial guarantee contracts which are not designated as a financial liability measured at its fair value and the variation thereof is recorded into the profits and losses of the current period, and for the commitments to grant loans which are not designated to be measured at the fair value and of which the variation is recorded into the profits and losses of the current period and which will enjoy an interest rate lower than that of the market, a subsequent measurement is made after they are initially recognized according to the higher one of the following: i. the amount as determined according to the Accounting Standards for Enterprises No 13 - Contingencies.; ii. the surplus after accumulative amortization as determined according to the principles of the Accounting Standards for Enterprises No 14 - Revenues is subtracted from the initially recognized amount. The profits and losses arising from the change in the fair value of a financial asset or financial liability are dealt with according to the following provisions, unless it is related to hedging: (1) The profits and losses, arising from the change in the fair value of the financial asset or financial liability which is measured at its fair value and of which the variation is recorded into the profits and losses of the current period, are recorded into the profits and losses on the changes in fair value. The interests or cash dividends obtained during the holding of assets are recognized as investment income. Upon disposal, the differences between actual amount received and the amount initially recorded are recognized as investment income, and the profits and losses on the changes in fair value account are adjusted into investment income. (2) The change in the fair value of a sellable financial asset is included in capital reserve. The interest calculated according to the actual interest rate method is recorded into investment income. The cash dividends of the sellable equity instrument investments are recorded into investment income when the investee announces the distribution of dividends. Upon disposal, the differences between actual amount received and the carrying amount deducted of the accumulated amount of changes in the fair value that has been originally recorded in capital reserve are recognized as investment income. Financial assets are derecognized as the rights to receive cash flows from the investments have expired, or all substantial risks and rewards to the ownership have been transferred. When all or part of the current obligation of the financial liability is discharged, the financial asset or part of it is derecognized subsequently. 3. Recognition and measurement methods of transfer of financial assets Financial assets are derecognized when the Company has transferred all risks and rewards to the ownership to the 82 2015 Semi-Annual Report of Midea Group Co., Ltd. transferee. When the Company still retains nearly all of the risks and rewards related to the ownership of the transferred financial asset, it continues to recognize the entire financial asset to be transferred and recognizes the consideration it receives as a financial liability. If the Company does not transfer or retain nearly all of the risks and rewards related to the ownership of the financial assets, it deals with them under the following circumstances: (1) Financial assets are derecognized when the Company has waived its control; (2) If the Company does not waive its control over the financial asset, the relevant asset and liability are recognized according to the degree where it is continuously involved in the financial asset to be transferred. If the transfer of an entire financial asset satisfies the conditions of derecognition, the difference between the amounts of the following 2 items is recorded in the profits and losses of the current period: (1) The carrying amount of the financial asset to be transferred; (2) The sum of consideration received from the transfer of financial assets and accumulated amount of changes in the fair value that has been originally recorded in owner's equity. If the transfer of partial financial asset satisfies the conditions of derecognition, the entire carrying amount of the financial asset to be transferred, between the portion who has been derecognized and the portion who has not been derecognized, is apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items is included into the profits and losses of the current period: (1) The carrying amount of the financial asset to be transferred; (2) The sum of consideration received from the derecognization of partial financial assets and accumulated amount of changes in the fair value that has been originally recorded in owner's equity which corresponds to the portion who has been derecognized. 4. Methods for determining fair value of financial assets and liabilities The Company shall determine fair value of financial assets and liabilities applicable to current circumstance with sufficient data available and valuation techniques for other information. The Company shall divide the input values used by valuation techniques into following levels. (1) First-level input value refers to unadjusted price in active market obtaining same assets or liabilities on measurement date. (2) Second-level input value refers to direct or indirect observable input value related to relevant assets or liabilities except the first-level input value, including quotation of similar assets or liabilities in active market; quotation of same or similar assets or liabilities in inactive market; and other observable input value besides quotation, such as observable interest rate and yield curve in normal quotation interval and market verified input value. 83 2015 Semi-Annual Report of Midea Group Co., Ltd. (3) Third-level input value refers to unobservable input value of relevant assets or liabilities, including unobservable interest rate or interest rate not verified by observable market data, stock volatility, future cash flow undertaken by enterprises in the merger and financial forecasting from own data, etc. 5. Impairment test and impairment provision methods of financial assets (1) The Company carries out an inspection, on the balance sheet day, on the carrying amount of the financial assets other than those measured at their fair values and of which the variation is recorded into the profits and losses of the current period. Where there is any objective evidence proving that such financial asset has been impaired, an impairment provision is made. (2) As for the held-to-maturity investment, the loans and the account receivables , should tell apart the financial assets with significant single amounts and individually execute the impairment test; with regard to the financial assets with insignificant single amounts, an independent impairment test may be carried out, or they may be included in a combination of financial assets with similar credit risk features so as to carry out an impairment-related test; where, upon independent test, the financial asset (including those financial assets with significant single amounts and those with insignificant amounts) has not been impaired, it shall be included in a combination of financial assets with similar risk features so as to conduct another impairment test. If the test results indicate there is impairment, should confirm the impairment losses according to the difference of which the book value higher than the current value of the expected future cash flow. (3) Available-for-sale financial assets 1) The subjective evidences indicate there is impairment of the available-for-sale debt instruments investment including: ① A serious financial difficulty occurs to the debtor; ② The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal; ③ The Company makes any concession to the debtor who is in financial difficulties due to economic or legal factors etc.; ④ The debtor will probably become bankrupt or carry out other financial reorganizations; ⑤ The debt instruments can no longer continue to be traded in the active market due to serious financial difficulties of the debtor; 84 2015 Semi-Annual Report of Midea Group Co., Ltd. ⑥ Other conditions showing the impairment of the sellable debt instruments. 2) Objective evidences that can prove the impairment of sellable equity instrument investment include that the fair value of the equity instrument investment drops significantly or not contemporarily. The Company shall inspect all available-for-sale equity instrument investment individually on balance sheet date. For equity instrument investment measured by fair value, if the fair value on balance sheet date is lower than 50% (including 50%) of costs for more than 12 months (including 12 months), it indicates that the impairment has occurred. If the fair value is lower than 20% (including 20%) no more than 50% on balance sheet date or for more than 6 months (including 6 months) but no more than 12 months, the Company shall consider other relevant factors, such as fluctuations in prices, to determine whether impairment occurs for equity instrument investment. For the equity instrument investment measured by costs, the Company shall consider whether material adverse change occurs for the technologies, market, economics or legal environment to determine whether impairment occurs. When the available-for-sale financial assets measured by fair value are impaired, original accumulating losses caused by decrease of fair value and directly included in other comprehensive income should be transferred out and included in impairment loss. When investing the available-for-sale debt instrument with determined impairment loss, if fair value rebounds related to events after original impairment losses after date, original impairment losses should be transferred out and included in current profits and losses. For available-for-sale equity instrument investment with determined impairment loss, the fair value rebounds and includes in other comprehensive income directly. When there is impairment of the available-for-sale equity instruments which measured by cost, should confirm the difference between the book value of the equity instruments investment and the current value confirmed by the discount of the future cash flow according to the market earnings rate at that moment of the similar financial assets as the impairment losses and included in the current gains and losses, and once the occurred impairment losses be confirmed, should not be reserved. (XI) Accounts receivable 1. Receivables single bad debt provision in significant single amount The Company recognizes accounts receivable of single amount, which is no less than RMB500,0 00,000, and Recognition criteria or amount standard of provision for other receivables of single amount, which is no less than bad debt in receivables of significant single amount RMB50,000,000 as receivables of significant single amount. 85 2015 Semi-Annual Report of Midea Group Co., Ltd. The Company takes individual impairment test for those significant receivable accounts to determine the Method of provision for single bad debt in significant impairment loss and makes provision for bad debts single amount based on the difference between their future cash flow value and carrying amount. 2. Accounts receivable with provision for bad debts based on the business characteristics (1) Specific groups and the withdrawal methods of the bad debt provision Withdrawal method with provision for bad debts based on the business characteristics Aging group Aging analysis method The Company takes individual impairment test for those significant Related come-and-go group within the receivable accounts to determine the impairment loss and makes provision consolidated scope for bad debts based on the difference between their future cash flow value and carrying amount. (2) Aging analysis method For those receivable portfolios, the Company classifies them as several groups of different credit risk levels by their age, and determines the proportional provision for bad debts based on the business characteristics: Age Within six Six months to Over five 1-2 years 2-3 years 3-5 years Business characteristics months one year years Air conditioning and the parts 5% 5% 10% 30% 50% 100% Refrigerator and the parts 5% 5% 10% 30% 50% 100% Washing machine and the parts 5% 5% 10% 30% 50% 100% Small home appliances 5% 5% 10% 30% 50% 100% Logistics and transport 5% 5% 10% 30% 50% 100% Motor 5% 10% 30% 50% 100% Others 5% 5% 10% 30% 50% 100% Midea Carrier Co. Of Latin America, subsidiary of the Company, takes no proportional provision for bad debts in accounts receivable of within 1 year, but for those of over 1 year as 100.00%, and no for other receivables. 3. Receivables without significant single amount but with single bad debt provision There significant differences between the future cash flow value of receivables and that of receivables grouped by credit Reason for single bad debt provision risk feature of age as well as of receivables grouped by specific identification method. The Company takes individual impairment test for those Method of bad debt provision significant receivable accounts to determine the impairment loss and makes provision for bad debts based on the 86 2015 Semi-Annual Report of Midea Group Co., Ltd. difference between their future cash flow value and carrying amount. Provision for bad debt is taken for notes receivable, prepayments, interest receivable, long-term receivables, etc. based on the difference between their future cash flow value and carrying amount. (XII) Inventories 1. Classification of inventories Inventories refer to the finished products or merchandise held by the company for sale in ordinary life, products in process or the materials to be consumed in the process of production or during rendering of labor services. 2. Valuation method of dispatched inventories The dispatched inventories adopt the first-in first-out method. 3. The recognition basis of the inventories discountable net value On the balance sheet date, inventories are measured on the basis of the lower one of cost and net realizable value. The excess of the cost over the net realizable value of each item of inventories or inventory categories is recognized as the basis for counting and drawing inventory falling price reserves. For inventories directly for sale, net realizable value is measured on the basis of the estimated selling price less the estimated costs and the relevant taxes in the ordinary course of business production and operation. For inventories that need processing, net realizable value is measured on the basis of the estimated selling price of the finished goods less the estimated costs during processing and the relevant taxes in the ordinary course of business production and operation. On the balance sheet date, net realizable values are determined by different condition of each item of inventories, where some portions have the contractual price agreement while the others have not. Net realizable values are then compared with their corresponding costs to determine the basis for counting and drawing inventory falling price reserves or the amount of reversal respectively for different proportions. 4. Inventory system The Company adopts the perpetual inventory system. 5. Amortization methods of low-value consumables and packaging materials (1) Low-value consumables Low-value consumables are amortized at a time. (2) Packaging materials 87 2015 Semi-Annual Report of Midea Group Co., Ltd. Low-value consumables are amortized at a time. (XIII) Divided as assets held for sale The Company divided the non-current assets (excluding the financial assets) which meet with the following conditions as the held-for-sale assets: 1. the component part could be immediately sold merely according to the general and idiomatic clauses of selling the component part under its current condition; 2. had made resolution on disposing the component part; 3. had signed the irrevocable transfer agreement with the transfees; 4. the transfer could be finished probably within 1 year. (XIV) Long-term equity investment 1. The judgment of the jointly control and significant influence The term “jointly control” refers to the control jointly owned by the relevant agreements on certain arrangement and the relevant activities of the arrangement must be decided only after the consensus of the participated party which had shared control right. The term “significant influence” means having the power to participate in the formulation of financial and operating policies of the investees, but not the power to control or jointly control the formulation of these policies together with other parties. 2. Determination of investment cost The initial investment cost is the obtained share of carrying amounts of shareholders' equity of the party combined at the combination date, on the condition that a business combination involves entities under common control, and that the consideration for combination is settled in cash, by way of transfer of non-cash assets, assumption of liabilities or issuance of equity securities. Capital reserve is adjusted based on the difference between the initial investment cost of the long-term equity investment and the carrying amounts of the consideration paid for the total nominal value of shares issued. If the balance of the capital reserve is insufficient, any excess is adjusted to retained profits. As for the long-term equity investment formed by the enterprise combination under the same control which realized by step by step multiple transactions, the Company judges which whether belongs to the “package deal”. As for those belongs to the “package deal”, should regard each transaction as a transaction which gains the control right for accounting treatment. As for those not belongs to the “package deal”, should be confirmed as the initial investment cost according to the shares of the book value of the net assets enjoyed from the combined party after the combination among the consolidated financial statement of the final control party on the merger date. As for 88 2015 Semi-Annual Report of Midea Group Co., Ltd. the difference between the initial investment cost of the long-term equity investment on the merger date and the sum of the book value of the long-term equity investment before reaching the combination and the book value of the newly paid consideration of the further gained shares on the merger date, should adjust the capital reserve; if the capital reserve is insufficient to dilute, the retained earnings shall be adjusted. (2) If the long-term equity investment is obtained through a business combination involving entities under different control, the initial investment cost is the fair value of the consideration paid for combination at the acquisition date. Accounting respectively to individual financial statements and consolidated financial statements when the company obtained the long-term equity investment through a business combination involving entities under different control: 1) In the individual financial statements, the initial investment cost is determined by the combination of the equity carrying amount of the combining party before the combination date and the new investment cost at the combination date. 2) Judge whether belongs to the “package deal” among the consolidated financial statement. As for those belongs to “package deal”, should regard each transaction as a transaction which gains the control right for accounting treatment. As for those not belongs to the “package deal”, for the equities held by the acquirees before the purchase date, should execute the remeasurement according to the fair value of the equity on the purchase date and the difference between the fair value and the book value should be included into the current investment income; if the equities held by the acquirees before the purchase date involve with the other comprehensive income and so on under the measurement of the equity method, the other comprehensive income and so on related with which should be transferred as the current revenues belongs to the purchase date. But except for the other comprehensive income occurs from the remeasurement of the net liabilities of the defined benefit a plan of the investees or the changes of the net assets. (3) If the long-term equity investment is obtained through means other than a business combination, the initial investment cost is the actual consideration paid if the investment is obtained by cash, the fair value of the equity securities issued if the investment is obtained by issuing equity securities, the No. 12 of ABSE-Debt Restructuring restricted if the investment is obtained by debt restructuring and the No. 7 of ASBE-Exchange of Non-monetary assets exchanged if the investment is obtained by exchanging the non-monetary assets. 3. Subsequent measurement and the profit and loss determination 89 2015 Semi-Annual Report of Midea Group Co., Ltd. When the Company controls the investment, a long-term equity investment is calculated using the cost method and adjusted using equity method during consolidated financial statement compilation. As for the long-term equity investment of the associated enterprises and joint ventures, should adopt the equity method for measurement. 4. Method of using multiple transactions to deal with loss of control over the subsidiary investment (1) Individual financial statement As for the disposed equity, should include the difference between the book value and the actual gained cost in the current gains and losses. As for the residual equity, for those still possess significant influences or execute the jointly control with other parties on the investees, should be transferred for measured by equity method; for those no longer could execute the control, jointly control or the significant influences on the investees, should be confirmed as financial assets and be measured according to the relevant regulations of the No. 22 of ASBE-Recognition and Measurement of the Financial Instruments. (2) Consolidated financial statement 1) Step by step disposes the investment of the subsidiaries until lost the control right through multiple transactions and not belongs to the “package deal” Before losing the control right, the difference between the disposed cost and the portion of the net assets be constantly calculated since the purchase date or the merger date correspondingly enjoyed by the subsidiaries of disposing the long-term equity investment should be adjusted the capital reserve (capital premium), if the capital premium insufficient to dilute, the retained earnings shall be written down. When losing the control right on the original subsidiaries, the remaining equity should be re-measured according to the fair value at the date of losing control. The difference should be included into the investment income in the period of losing control and the goodwill should be written down at the same time, which is defined as the value of equity disposal consideration plus the remaining equity fair value and less the share of assets of the original subsidiary calculated by the original ownership share since the acquisition day. Other comprehensive income related to the equity investment of the original subsidiary should transfer into the current investment income when the control power is lost. 2) Step by step disposes the investment of the subsidiaries until lost the control right through multiple transactions and belongs to the “package deal” Each transaction should be regarded as a transaction conducted to deal with a subsidiary out of control power. 90 2015 Semi-Annual Report of Midea Group Co., Ltd. However, the balance of shared net assets of the subsidiary corresponding to each disposal cost and investment before control power loss should be defined as other comprehensive income in the consolidated financial statements, and should be transferred into the current investment income when the control power is lost. (XV) Investment property 1. Investment property includes land use rights let out, land use rights held for sale, and buildings let out. 2. Investment property is measured initially based on cost and subsequently based on the cost pattern, and depreciated or amortized using the same methods for depreciating or amortizing fixed assets and intangible assets. (XVI) Fixed assets 1. Recognition, measurement and depreciation of fixed assets Fixed assets represent the tangible assets held for production or supply of goods or services, rental or for administrative purposes with useful life of over one accounting year. Recognizes the fixed assets when the economic interests probably inflow and the cost could be reliable measured. 2. Depreciation methods for different types of fixed assets (1) The Company and subsidiaries (excluding Wuxi Little Swan Company Limited and Midea-Carrier Latin American Company Limited) Annual Depreciation Useful Life Residual Value Rate Fixed Asset Type Depreciation method Rate (Years) (%) (%) Plant and buildings Straight-line method 20-40 0.00, 5.00 5.00-2.38 Machinery and Straight-line method 10-18 0.00, 5.00 10.00-5.28 equipment Motor vehicles Straight-line method 4-12 0.00, 5.00 25.00-7.92 Electronics and other Straight-line method 3-8 0.00, 5.00 33.33-11.88 equipment (2) Wuxi Little Swan Co., Ltd., a holding subsidiary of the Company Estimated Useful Life Estimated Residual Annual Depreciation Fixed Asset Type Depreciation method (Years) Value Rate (%) Rate (%) Plant and buildings Straight-line method 20-35 5.00 2.71-4.75 Machinery and Straight-line method 10-15 5.00 6.33-9.50 equipment Electronics Straight-line method 3-5 5.00 19-31.67 equipment Motor vehicles Straight-line method 5 5.00 19 91 2015 Semi-Annual Report of Midea Group Co., Ltd. Other equipment Straight-line method 5 5.00 19 (3) Midea-Carrier Latin American Company Limited Annual Estimated Useful Life Estimated Residual Fixed Asset Type Depreciation method depreciation (Years) Value Rate (%) Rate (%) Plant and buildings Straight-line method 25 4.00 Machinery and Straight-line method 8 12.50 other equipment (XVII) Construction-in-progress 1. Construction-in-progress is recognized when the inflow of economic benefits is probable and the cost can be reliably measured, and is measured by the actual cost incurred before it is ready for intended use. 2. Construction-in-progress is transferred into fixed assets when it is ready for intended use based on the actual cost. For a completed project ready for intended use but with final account unsettled, the asset is transferred into fixed assets based on estimated value. After the final account of the project has been settled, the Company shall make adjustment on the previous estimated value based on actual cost, but do not need to adjust the depreciation retrospectively. (XVIII) Borrowing costs 1. Capitalization of borrowing costs Borrowing costs directly attributable to the acquisition, construction or origination of assets qualified for capitalization are capitalized as part of the cost of those assets. Other borrowing costs are expensed and charged to current profit or loss when incurred. 2. Timing of borrowing costs capitalization (1) Borrowing costs shall be capitalized if the following conditions are met at the same time: 1) Capital expenditures and borrowing costs have been incurred. 2) Construction or production activities that are necessary to prepare the asset for intended use or sale have commenced. (2) Capitalization of borrowing costs should be suspended during periods in which abnormal interruption has lasted for more than three months during the process of construction or production of assets qualified for capitalization. The borrowing cost incurred during interruption is recognized as current expenses until the construction or production activities resume. (3) The capitalization of borrowing costs ceases when the assets qualified for capitalization are constructed or 92 2015 Semi-Annual Report of Midea Group Co., Ltd. produced and ready for intended use or sale. 3. Capitalization rate and capitalized amount of borrowing costs For specific borrowings used to acquire, construct or produce assets qualified for capitalization, the amount of interest costs (including amortization of discount or premium determined using the effective interest method) actually incurred on such borrowings for the period shall be capitalized after deducting any interest earned from depositing the unused borrowings in the bank or any investment income arising from the temporary investment of those borrowings during the capitalization period. For general borrowings used to construct or produce assets qualified for capitalization, the capitalized amount of interests on general borrowings shall be determined on the basis that the weighted average (of the excess of cumulative assets expenditures over the specific borrowings) times capitalization rate (of used general borrowings). (XIX) Intangible asset 1. Intangible assets, including land use rights, non-patented technologies etc., are initially measured based on cost. 2. Intangible assets with definite useful lives are reasonably amortized over their useful lives based on the anticipated realization pattern of related economic benefits. Intangible assets whose economic benefits realization pattern cannot be reliably anticipated are amortized using the straight-line method over the useful life specified in the following table: Intangible Asset Type Useful Life (Year) Land use right Beneficial period Non-patent technologies Period specified in the contract or beneficial period 3. The research expenditures for internal research and development projects are recorded into the profits and losses of the current period in which they are incurred; the development expenditures for internal research and development projects can be recognized as intangible assets when they satisfy all the following conditions: (1) It is feasible technically to finish intangible assets for use or sale; (2) It is intended to finish and use or sell the intangible assets; (3) Methods for intangible assets to generate economic benefits is proved useful, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or for the intangible assets itself, or that the intangible assets will be used internally; (4) With the support of sufficient technology, financial resources and other resources, intangible assets can be developed and used or sold; (5) Expenditures attributable to intangible asset development can be reliably measured. (XX) Part long-term assets impairment 93 2015 Semi-Annual Report of Midea Group Co., Ltd. If long-term equity investment, investment real estate measured by cost model, fixed assets, construction in progress, intangible assets with limited service life and other long-term assets are impaired on balance sheet with obvious evidence, it should estimate the recoverable amount. For business goodwill from business merger and intangible assets with uncertain service life, no matter there is obvious evidence indicating impairment, impairment test should be conducted every year. The business goodwill shall, together with the related asset group or combination of asset group, be subject to the impairment test. If recoverable amount of above long-term assets is lower than book value of assets, preparation for the impairment of assets shall be determined by the difference and included in current profits and losses. (XXI) Long-term unamortized expenses The expenses for more than 1 year (excluding one year) in amortization period are accounted for in the long-term prepaid expenses. Long-term unamortized expenses shall be accounted for according to actual amount and amortized averagely during benefit period or defined period. If the long-term prepaid expenses do not benefit future accounting period, amortized mortgage value shall be included in current profits and losses. (XXII) Employee compensation 1. Employee compensation including the short-term compensation, departure welfare, dismission welfare and other long-term employee compensation 2. Accounting treatment of the short-term compensation During the accounting period of the employees providing the services for the Company, the actual occurred short-term compensation should be recognized as liabilities and be included in the current gains and losses or the relevant capital cost. 3. Accounting treatment of the departure welfare The departure welfare is divided as defined contribution plans and defined benefit plans (1) During the accounting period of the employees providing the services for the Company, the payable amount calculated according to the defined contribution plans should be recognized as liabilities and is included in the current gains and losses or the relevant capital cost. (2) Accounting treatment process of defined benefit plans include: 1) According to expected accumulative welfare unit method, unbiased and consistent actuarial assumption are adopted to estimate demographic variables and financial variables, measure obligations for defined benefit plans 94 2015 Semi-Annual Report of Midea Group Co., Ltd. and determine the obligation period. Meanwhile, obligations for defined benefit plans should be discounted to determine the present value for defined benefit plans and current service costs. 2) If assets exist for defined benefit plans, the deficit or surplus from obligation present value deducting asset fair value is determined as net liabilities or net assets. If surplus exists for defined benefit plan, the lower of surplus of defined benefit plans or asset top limit is measured as net assets of defined benefit plans. 3) At the end of term, payroll cost generated from defined benefit plans is determined as service cost, net liabilities of defined benefit plans or net interest amount of assets and net liabilities of remeasured defined benefit plans or changes in net assets. The service cost and net interest of net liabilities or assets of defined benefit plan is included in current profits and losses or relevant capital cost. Changes in net liabilities or net assets of remeasured defined benefit plans are included in other comprehensive income and not allowed to be transferred to profits and losses in subsequent accounting period, but the determined amount of other comprehensive income could be transferred within the scope of interest. 4. Accounting treatment methods of dismission welfare Dismission welfare provided to employees adopts the early one that could determine the compensation liabilities for dismission welfare in following items to be included in current profits and losses: (1) the company could not unilaterally withdraw the dismission welfare due to termination of labor relations or personnel cutback; (2) the Company confirms costs or expenses related to reorganization of dismission welfare. 5. Accounting treatment methods of other long-term employee benefits Other long-term benefits provided to employees meeting the defined contribution plans should be used in accounting treatment according to defined contribution plans. Besides the long-term benefits, it should be treated in accounting according to regulations of defined benefit plans. In order to simplify other accounting treatment, the payroll cost is determined as service cost, net liabilities of other long-term employee benefits or net interest of net assets and changes from other remeasured net liabilities or net assets of long-term employee benefits. The net amount is included in current profits and losses or related asset cost. (XXIII) Estimated liabilities 1. Estimated liabilities are recognized when the Company has a present obligation as a result of contingencies such as provision of external guarantee, litigation, quality warranty, or onerous contract, and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount of the obligation expenditure 95 2015 Semi-Annual Report of Midea Group Co., Ltd. can be reliably measured. 2. Estimated liabilities are initially measured at the best estimate of the expenditure required to settle the present obligation. Carrying amounts of all estimated liabilities are reviewed at each balance sheet date. (XXIV) Share-based payment 1. Types of share-based payments It includes equity-settled share-based payment and cash-settled share-based payment. 2. Accounting for implementation, amendment and termination of share-based payments (1) Equity-settled share-based payment For equity-settled share-based payment made in return for the rendering of employee services that may be exercised immediately after the grant, the fair value of such instrument shall, on the date of the grant, be recognized in relevant costs or expenses with the adjustment in the capital reserve accordingly. For equity-settled share-based payment made in return for the rendering of employee services that cannot be exercised until the services are fully rendered during vesting period or specified performance targets are met, on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best estimate of the number of exercisable instruments, be recognized in relevant costs or expenses and the capital reserves shall be adjusted accordingly at the fair value of such instruments on the date of the grant. For equity-settled share-based payment made in return of other parties' services and the fair value of the other parties' services can be reliably measured, it will be measured based on the fair value of the other parties' services on the date of grant; if the fair value of the other parties' services cannot be reliably measured but the fair value of equity instruments can be reliably measured, it will be recognized in relevant costs or expenses and the capital reserves shall be adjusted accordingly at the fair value of such instruments on the date of the grant. (2) Cash-settled share-based payment For the cash-settled share-based payment made in return for the rendering of employee services that may be exercised immediately after the grant, the fair value of the liability incurred by the Company shall, on the date of the grant, be recognized in relevant costs or expenses and the liabilities shall be increased accordingly. For cash-settled share-based payment made in return for the rendering of employee services that cannot be exercised until the services are fully provided during the vesting period or specified performance targets are met, on each balance sheet date within the vesting period, the services acquired in the current period shall, based on the best 96 2015 Semi-Annual Report of Midea Group Co., Ltd. estimate of the number of exercisable instruments, be recognized in relevant costs or expenses and the corresponding liabilities at the fair value of the liability incurred by the Company. (3) Revision and termination of share-based payment plans If the revision results in an increase in the fair value of the equity instruments granted, the Company shall recognize the increase in the services rendered accordingly at the increased fair value of the equity instruments. If the revision results in an increase in the number of equity instruments granted, the Company will recognize the increase in the services rendered accordingly at the fair value of the increased number of equity instruments. If the Company revises the vesting conditions on terms favorable to the employees, the Company will take into consideration of the revised vesting conditions when dealing with the vesting conditions. If the revision results in a decrease in the fair value of the equity instruments granted, the Company shall continue recognize the amount of services rendered accordingly at the fair value of the equity instruments on the date of grant without considering the decrease in the fair value of the equity instruments. If the revision results in a decrease in the number of equity instruments granted, the Company will account for such decrease by reducing part of the cancellation of equity instruments granted. If the Company revises the vesting conditions on terms not favorable to the employees, the Company will not take into consideration of the revised vesting conditions when dealing with the vesting conditions. If the Company cancels the equity instruments granted or settles the equity instruments granted during the vesting period (other than cancellation as a result of failure to satisfy the vesting conditions), such cancellation or settlement will be treated as accelerated exercisable rights and the original amount in the remaining vesting period will be recognized immediately. (XXV) Revenue 1. Revenue recognition principles (1) Sales of goods Revenue from sales of goods is recognized when all the following conditions are satisfied: 1) The significant risks and rewards of product ownership have been transferred to the buyer; 2) The Company maintains neither managerial right usually associated with ownership nor effective control over products sold; 3) The amount of revenue can be measured reliably; 4) It is probable that the economic benefits will flow to the Company; 5) Relevant costs incurred or to be incurred can be measured reliably. 97 2015 Semi-Annual Report of Midea Group Co., Ltd. (2) Rendering of services For the revenue of rendering of services that may be measured reliably on the balance sheet date (at the same time, the amount of revenue can be measured reliably; it is probable that related economic benefits will flow to the Company; the completion schedule may be identified reliably; and related costs incurred or to be incurred can be measured reliably), it will be recognized upon completion of service. For the revenue of rendering of services that may not be measured On the balance sheet date, if related service costs incurred are estimated to be compensated, it will be confirmed as the service costs incurred and be transferred to service costs based on the same amounts; if related service costs incurred are estimated to be uncompensated, it will be recorded into the profit and loss of the current period and cannot be recognized. (3) Transfer of asset use rights Revenue from transfer of asset use rights is recognized when the relevant economic benefits will probably flow to the Company, and the amount of revenue can be measured reliably. Interest income is recognized based on the length of time for which the Company's monetary funds are used by others and the effective interest rate. Income from usage fee is recognized based on timing and method agreed under relevant contracts or agreements. 2. Revenue recognition methods (1) Sales of goods The Company mainly sells household appliances and mechanical productions. The recognition of products for domestic sale shall meet the following requirements: the Company has transferred the goods to buyers according to agreed contracts; the revenue of sales of goods has been confirmed; the Company has received payments or receipt vouchers; and the associated economic benefits may flow in and costs related to the product can be measured in a reliable way. The recognition of products for export shall meet the following requirements: the Company has complete customs declaration, transportation and receipt of bill of lading, and determined the sales revenues of the product; and the Company has received the payment or receipt vouchers, and the associated economic benefits may flow in and costs related to the product can be measured in a reliable way. (2) Rendering of services The Company provides the costumers with various services and the revenue is received after the services have been finished. The revenue includes repairing revenue, installment revenue, transportation service revenue, warehousing services revenue and distribution revenue. 98 2015 Semi-Annual Report of Midea Group Co., Ltd. 1) The revenue of repairing and installment services is received after being finished. 2) Transportation services mean that the Company provides customers with long-distance road transportation of goods and arranges for the transportation teams to carry goods based on customer requirements. The revenue is counted according to contracts and received after the Company reconciles with the customers at the end of each month. 3) Warehousing services include warehousing services for general goods, capital and goods circulation and spare parts. In addition, the company also provides value-added services such as inventory and warehouse age analysis, bar code and returns management and so on. The revenue is counted according to contracts and received after the Company reconciles with the customers at the end of each month. 4) Distribution services mean that the Company provides the customers with goods loading and unloading, short-distance distribution. The revenue is counted according to contracts and received after the Company reconciles with the customers at the end of each month. (XXVI) Government grants 1. Judgment basis of the asset-related government grants and the accounting treatment Long-term assets used for construction and production or formed in other ways are recognized as asset-related government grants. The asset-related government grants should be recognized as deferred income and be average distributed within the useful life of the relevant assets as well as be included in the current gains and losses. However, as for the government grants measured according to the nominal amount, should be directly included in the current gains and losses. 2. Judgment basis of the income-related government grants and the accounting treatment The government grants other than the asset-related ones are divided as income-related government grants. Income-related government grants are applied to reimbursement of related costs or losses in subsequent periods are recognized as deferred income and taken to current profit or loss for the period when the related costs are recognized. Government grants applied to reimbursement of related costs or losses already incurred are directly recognized in current profit or loss. (XXVII) Deferred tax assets or deferred tax liabilities 1. Deferred tax assets or deferred tax liabilities are calculated based on the difference between the carrying amounts of the assets or liabilities and their tax bases (or the difference between the tax base and the carrying 99 2015 Semi-Annual Report of Midea Group Co., Ltd. amount for items which cannot be recognized as assets or liabilities but whose tax base can be determined under tax laws), and are calculated at the tax rates expected to apply to the period when assets are recovered or liabilities are settled. 2. Deferred tax assets are recognized for all deductible temporary differences if it is probable that taxable profit will be available against which the deductible temporary differences can be utilized. On the balance sheet date, deferred tax assets unrecognized in prior periods are recognized if there is obvious evidence that it has become probable that sufficient taxable profit will be available in subsequent periods against which the deductible temporary differences can be utilized. 3. The carrying amount of deferred tax assets is reviewed On the balance sheet date and written down if it is no longer probable that sufficient taxable profit will be available against which the deferred tax asset can be utilized. Such amount is written back if it has become probable that sufficient taxable profit will be available. 4. The Company's current and deferred income taxes are recognized in current profit or loss as tax expense or profit, excluding income tax arising from business combination or transactions or items directly recognized in equity. (XXVIII) Operating leases When the company acts as the lessee, rental expenses under operating leases are recognized as relevant asset costs or in current profit or loss using the straight-line method over the lease term, with any initial direct cost incurred directly recognized to current profit or loss. Contingent rental is charged to current profit or loss when incurred. When the company acts as the lessor, rental under operating leases are recognized in current profit or loss using the straight-line method over the lease term, with any initial direct cost incurred directly charged to current profit or loss, excepting for significant amount which will be capitalized and included in profit or loss in installments. Contingent rental is charged to current profit or loss when incurred. (XXIX) Other significant accounting policies and accounting estimates 1. Recognition criteria and accounting treatment methods of discontinuing operation Any part disposed by the Company or classified as available-for-sale, operating and individual identified meeting following conditions is regarded as discontinuing operation. (1) Representing the primary service or a main operating region; (2) Part of an independent service or disposition plan in a main operating region; 100 2015 Semi-Annual Report of Midea Group Co., Ltd. (3) The part is the subsidiary obtained only for resale. 2. Basis and accounting treatment of the hedge accounting adopted (1) The hedge business of the Company is cash flow hedges. 2. Hedge accounting is applied to hedges that meet the following conditions: (1) At the beginning of a hedge, the Company formally designates the hedge relationship (the relationship between the hedging instrument and the hedged project) and documents regarding the hedge relationship, risk management objectives and its hedging strategy; (2) Such hedges are expected to be highly effective and comply with the initial risk management strategy set by the Company for the hedge relationship; (3) For cash flow hedges for expected transactions, such expected transactions will probably take place and must expose the Company to risks of movement in cash flows that will eventually affect the profit or loss; (4) The hedge effectiveness can be reliably measured; (5) The hedge effectiveness is evaluated on an ongoing basis, ensuring the hedge is highly effective in the period in which the hedge relationship is designated. A hedge is deemed highly effective if it meets the following conditions at the same time: (1) It is expected at the inception or for subsequent periods to effectively offset movement in fair value or cash flows arising from the hedged risks in the period in which the hedge is designated; (2) The actual offset result of the hedge ranges from 80% to 125%. (3) Hedge accounting treatment (1) The effective portion of the gain or loss on the hedging instrument is recognized directly in equity, while the ineffective portion is recognized in current profit or loss. (2) If the hedged item is an expected transaction for which the Company subsequently recognizes a financial asset or financial liability, the gain or loss directly recognized in equity is transferred to current profit or loss in the same period in which the financial asset or financial liability affects the profit or loss. If the Company subsequently recognizes a non-financial asset or non-financial liability due to the expected transaction, the gain or loss directly recognized in equity is transferred to the amount initially recognized on the non-financial asset or non-financial liability. If the Company subsequently recognizes an asset or liability due to the expected transaction, the gain or loss directly recognized in equity is transferred to current profit or loss in the same period in which the asset or liability affects the profit or loss. For other cash flow hedges, the gain or loss on the hedging instrument directly recognized in equity is transferred 101 2015 Semi-Annual Report of Midea Group Co., Ltd. to current profit or loss in the same period in which the hedged, expected transaction affects the profit or loss. (XXX) Significant accounting policies and accounting estimates changes 1. Significant accounting policies changes (1) Content and reasons of the changes of accounting policies The Company and the subsidiary Annto Logistics Co., Ltd. and the subordinate subsidiary, for better indicate the financial conditions of the Company, had alternated the accounting estimates of the withdrawal proportion of the bad debt provision of the accounts receivable since the date of the review and approval from the Board of Directors according to the relevant regulations of the ASBE and the market environment attributed to. (2) Report projects and amount affected by significant influences Report projects affected by significant influences Influenced amount Notes Projects of the balance sheet on 30 June 2015 Accounts receivable 169,359.99 Other accounts receivable 14,718.05 Projects of the income statement of the semi-annual of Y2015 Losses of the assets impairment 9,203.90 Total amount of the profits -9,203.90 Net profits -7,778.54 IV. Taxation (I) Main tax types and tax rates Tax type Basis of taxation Tax rate Value added tax Sales of goods or provision of services 17%, 6%, 11%, 3% Business tax Taxation turnover 3%, 5% Price-based property is subject to 1.2% tax rate after a 30% Property tax cut in original price. Rent-based is subject to 12% tax rate 1.2%, 12% for the rental income. Urban maintenance and Turnover tax payables 5%, 7% construction tax Educational surcharges Turnover tax payables 3% Local educational Turnover tax payables 1%, 2% surcharges Enterprise income tax Taxable income 12.5%, 15%, 25% Notes of the corporate tax rate of the significant taxpaying bodies with different tax rate 102 2015 Semi-Annual Report of Midea Group Co., Ltd. Name of the taxpaying bodies Tax rate of income tax Guangdong GMCC Refrigeration Equipment Co., Ltd. 15% Midea Group Wuhan Refrigeration Equipment Co., Ltd. 15% Guangdong Midea Heating & Ventilation Equipment Co., 15% Ltd. Anhui GMCC Refrigeration Equipment Co., Ltd. 15% Anhui GMCC Precision Manufacturing Co., Ltd. 15% Guangdong Midea Refrigeration Equipment Co., Ltd. 15% Hefei Midea Refrigerator Co., Ltd. 15% Chongqing Midea General Refrigeration Equipment Co, 15% Ltd. Hefei Hualing Co., Ltd. 15% Guangdong Midea Group Wuhu Refrigeration Equipment 15% Co., Ltd. Hubei Midea Refrigerator Co., Ltd. 15% Wuxi Little Swan Holding Co., Ltd. 15% Foshan Shunde Midea Washing Appliance Manufacturing 15% Co., Ltd. Guangdong Witt Vacuum Electronics Manufacturing Co., 15% Ltd. Jiangxi Midea Guiya Lighting Co., Ltd. 15% Wuhu Midea Kitchen & Bathroom Electric 15% Manufacturing Co., Ltd. Wuhu Midea Washing Appliance Manufacturing Co., Ltd. 15% Annto Logistics Co., Ltd. 15% Foshan Shunde Midea Electric Appliance Manufacturing 15% Co., Ltd. Foshan Welling Washer Motor Manufacturing Co., Ltd. 15% Guangdong Welling Motor Co., Ltd. 15% Huaian Welling Motor Co., Ltd. 15% Welling (Wuhu) Motor Co., Ltd. 15% 103 2015 Semi-Annual Report of Midea Group Co., Ltd. Jiangsu Midea Chunhua Electric Co., Ltd. 15% Hefei Midea Washing Machine Co., Ltd. 15% Wuxi Feiling Electronics Co., Ltd. 15% Wuxi Little Swan Electric Appliance Co., Ltd. 15% Guangdong Midea Kitchen Appliances Manufacturing 15% Co., Ltd. Chongqing Midea Refrigeration Equipment Co., Ltd. 15% Hefei Midea Heating & Ventilation Equipment Co., Ltd. 15% Foshan Shunde Midea Electronic and Science 12.5% &Technology Co., Ltd. Wuhu Maty Air-Conditioning Equipment Co., Ltd. 15% Handan Midea Refrigeration Equipment Co., Ltd. 15% Guangzhou Hualing Refrigeration Equipment Co., Ltd. 15% (II) Tax preferential treatments 1. On 10 October 2014, Guangdong GMCC Refrigeration Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000397. The subsidiary was subject to 15% corporate income tax rate in 2015. 2．On 14 October 2014, Midea Group Wuhan Refrigeration Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201442000091. The subsidiary was subject to 15% corporate income tax rate in 2015. 3. On 26 November 2012, Guangdong Midea Heating & Ventilation Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201244000708. The subsidiary was subject to 15% corporate income tax rate in 2015. 4. On 14 October 2013, Anhui GMCC Refrigeration Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201334000093. The subsidiary was 104 2015 Semi-Annual Report of Midea Group Co., Ltd. subject to 15% corporate income tax rate in 2015. 5. On 3 July 2012, Anhui GMCC Precision Manufacturing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR2012234000097. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015, while during the process of the approval, each index was met with the application standards with the corporate income tax rate in 2015 was 15%. 6. On 10 October 2014, Guangdong Midea Refrigeration Equipment Co., Ltd. a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000965. The subsidiary was subject to 15% corporate income tax rate in 2015. 7. On 21 October 2014, Hefei Midea Refrigerator Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434001001. The subsidiary was subject to 15% corporate income tax rate in 2015. 8. On 14 October 2014, Chongqing Midea General Refrigeration Equipment Co, Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201451100044. The subsidiary was subject to 15% corporate income tax rate in 2015. 9. On 21 October 2014, Hefei Hualing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434000715. The subsidiary was subject to 15% corporate income tax rate in 2015. 10. On 21 October 2014, Guangdong Midea Group Wuhu Refrigeration Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434001130. The subsidiary was subject to 15% corporate income tax rate in 2015. 11. On 14 October 2014, Hubei Midea Refrigerator Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High 105 2015 Semi-Annual Report of Midea Group Co., Ltd. Technology Enterprise Certificate. The certificate number was GF201442000015. The subsidiary was subject to 15% corporate income tax rate in 2015. 12. On 21 May 2012, Wuxi Little Swan Holding Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201232000096. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015, while during the process of the approval, each index was met with the application standards with the corporate income tax rate in 2015 was 15%. 13. On 10 October 2014, Foshan Shunde Midea Washing Appliance Manufacturing Co., Ltd. a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444001324. The subsidiary was subject to 15% corporate income tax rate in 2015. 14. On 10 October 2014, Guangdong Witt Vacuum Electronics Manufacturing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000159. The subsidiary was subject to 15% corporate income tax rate in 2015. 15. On 9 April 2014, Jiangxi Midea Guiya Lighting Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201436000009. The subsidiary was subject to 15% corporate income tax rate in 2015. 16. On 16 October 2014, Wuhu Midea Kitchen & Bathroom Electric Manufacturing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201434000129. The subsidiary was subject to 15% corporate income tax rate in 2015. 17. On 15 November 2012, Wuhu Midea Washing Appliance Manufacturing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201234000405. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015, while during the process of the approval, each index was met with the application standards with the corporate 106 2015 Semi-Annual Report of Midea Group Co., Ltd. income tax rate in 2015 was 15%. 18. On 29 June 2014, Annto Logistics, a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201234000055. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015 which had passed the reexamination with the corporate income tax rate in 2015 was 15%. 19. On 26 November 2012, Foshan Shunde Midea Electric Appliance Manufacturing Co., Ltd., a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201244000587. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015, while during the process of the approval, each index was met with the application standards with the corporate income tax rate in 2015 was 15%. 20. On 10 October 2014, Foshan Welling Washer Motor Manufacturing Co., Ltd., a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000608. The subsidiary was subject to 15% corporate income tax rate in 2015. 21. On 10 October 2014, Guangdong Welling Motor Co., Ltd., a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000268. The subsidiary was subject to 15% corporate income tax rate in 2015. 22. On 25 September 2013, Huaian Welling Motor Co., Ltd., a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201332000124. The subsidiary was subject to 15% corporate income tax rate in 2015. 23. On 2 July 2014, Welling (Wuhu) Motor Co., Ltd., a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434000371. The subsidiary was subject to 15% corporate income tax rate in 2015. 24. On 5 August 2014, Jiangsu Midea Chunhua Electric Co., Ltd., a wholly owned subsidiary of the Company, 107 2015 Semi-Annual Report of Midea Group Co., Ltd. was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201432000806. The subsidiary was subject to 15% corporate income tax rate in 2015. 25. On 2 July 2014, Hefei Midea Washing Machine Co., Ltd. , a wholly owned subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434000147. The subsidiary was subject to 15% corporate income tax rate in 2015. 26. On 6 August 2012, Wuxi Feiling Electronics Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201232000673. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015 which had passed the reexamination with the corporate income tax rate in 2015 was 15%. 27. On 21 May 2012, Wuxi Little Swan Electric Appliance Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201232000077. The certificate number was GR201232000673. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015 which had passed the reexamination with the corporate income tax rate in 2015 was 15%. 28. On 12 September 2012, Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GF201244000221. The certificate number was GR201232000673. The certificate had due in Y2015, and the Company had applied again for the Hi-tech Technology Enterprise of 2015 which had passed the reexamination with the corporate income tax rate in 2015 was 15%. 29. On 3 June 2014, the application of the remission of the corporate income tax of the west development which put forward by Chongqing Midea Refrigeration Equipment Co., Ltd., had approved by the National Taxation Bureau of Chongqing Economic and Technological Development Zone. The subsidiary was subject to 15% corporate income tax rate in 2015. 30. On 16 July 2013, Hefei Midea Heating & Ventilation Equipment Co., Ltd, a controlled subsidiary of the 108 2015 Semi-Annual Report of Midea Group Co., Ltd. Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201334000033. The subsidiary was subject to 15% corporate income tax rate in 2015. 31．Certified by No. (2012) 27 document from Foshan Shunde State Administration of Taxation, the holding subsidiary, Foshan Shunde Midea Electronic Technology Co., Ltd enjoys the benefits of corporate income tax reduction and exemption for software enterprise. Before December 31, 2017, the grace period starts from profit-making year; corporate income tax is exempted in the first and second year and levied half of 25% statutory tax rate until expiration. The year of 2015 is the fifth profit-making year when corporate income tax is levied by the tax rate of 12.5%. 32．On 21 October 2014, Wuhu Maty Air-Conditioning Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201434001064. The subsidiary was subject to 15% corporate income tax rate in 2015. 33．On 19 September 2014, Handan Midea Refrigeration Equipment Co., Ltd., a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201413000242. The subsidiary was subject to 15% corporate income tax rate in 2015. 34. On 10 October 2014, Guangzhou Hualing Refrigeration Equipment Co., Ltd. , a controlled subsidiary of the Company, was recognized as an enterprise of new and high technology for a valid term of 3 years and granted the New and High Technology Enterprise Certificate. The certificate number was GR201444000463. The subsidiary was subject to 15% corporate income tax rate in 2015.。 V. Notes to the Items in the Consolidated Financial Statements (I) Notes to the Consolidated Balance Sheet 1. Cash on hand and in bank (1) Detailed Information Items Closing balance Opening balance Cash in Stock 933.79 1,037.93 Cash in Bank 11,336,729.87 5,505,459.73 Other Currency Fund 3,281,535.79 696,785.15 109 2015 Semi-Annual Report of Midea Group Co., Ltd. Total 14,619,199.45 6,203,282.81 Of which: total amount deposited in 1,282,969.73 1,177,384.39 overseas (2) Notes on the funds with restriction on use due to mortgage, pledge or freezing, or deposited overseas, or with potential risk of capital recovery. Ending balance of other monetary fund mainly refers to bank acceptance deposits. 2. Deposit in Central Bank (1) Detailed Information Items Closing balance Opening balance Statutory reserves deposited in the central bank 1,627,504.64 1,277,563.60 Excess deposit reserve deposited in the central bank 199,535.44 2,028.87 Total 1,827,040.08 1,279,592.47 (2) Notes on the funds with restriction on use, deposited overseas, or with potential risk of capital recovery Statutory reserves deposited in the central bank refer to the statutory reserves deposited in the People's Bank of China in accordance with relevant regulations, which shall not be used for daily operations. 3. Deposit in other banks Items Closing balance Opening balance Deposited in domestic banks 2,024,431.24 2,126,444.99 Subtotal 2,024,431.24 2,126,444.99 Less: Provision for bad account Total 2,024,431.24 2,126,444.99 4. Derivative financial assets Items Closing balance Opening balance Derivative financial assets 14,339.10 162,513.84 Total 14,339.10 162,513.84 Ending balance of derivative financial assets mainly refers to the changes in fair value of forward foreign exchange contracts not yet settled. 5. Notes receivable (1) Detailed Information Closing balance Opening balance Classificat Provision Provision ion Book balance for bad Book value Book balance for bad Book value account account Bank 110 2015 Semi-Annual Report of Midea Group Co., Ltd. acceptanc 26,229,378.71 26,229,378.71 17,097,233.37 17,097,233.37 e bill Total 26,229,378.71 26,229,378.71 17,097,233.37 17,097,233.37 (2) Notes of the notes receivable which have been endorsed to others or discounted that had not due on the balance sheet date Non-derecognition Items Derecognition amount at the period-end amount at the period-end Bank acceptance bill 30,727,763.61 Subtotal 30,727,763.61 6. Account receivable (1) Detailed Information 1) Category details Closing balance Book balance Provision for bad account Classification Proportion Withdrawal Book value Amount Amount (%) proportion (%) Significant single amount and individual provision 42,200.24 0.29 42,200.24 100.00 for bad debts Withdraw the bad debt provision by credit risks 14,448,519.84 99.40 833,040.00 5.77 13,615,479.84 characteristics Non-significant single amount and individual 45,249.95 0.31 43,654.22 96.47 1,595.73 provision for bad debts Total 14,535,970.03 100.00 918,894.46 6.32 13,617,075.57 (Continued) Closing balance Book balance Provision for bad account Classification Withdrawal Proportion Book value Amount Amount proportion (%) (%) 111 2015 Semi-Annual Report of Midea Group Co., Ltd. Significant single amount and individual provision for bad 70,985.01 0.71 45,112.27 63.55 25,872.74 debts Withdraw the bad debt provision by credit risks 9,951,637.43 98.99 615,407.42 6.18 9,336,230.01 characteristics Non-significant single amount and individual provision for bad 30,657.10 0.30 30,657.10 100.00 debts Total 10,053,279.54 100.00 691,176.79 6.88 9,362,102.75 2) Accounts receivable with significant single amount but with provision for bad debts by period-end Withdrawal Bad debt Name of the units Book balance provision Withdrawal reason provision (%) Confirmed that Arcodym Home appliance 42,200.24 42,200.24 100.00 couldn’t be recovered Subtotal 42,200.24 42,200.24 3) Accounts receivable in the combination which adopts aging analysis method to determine provision for bad debt Closing balance Age Book balance Bad debt provision Withdrawal proportion (%) Within 1 Year 14,233,807.70 647,330.45 4.55 1-2 Years 117,540.34 85,248.27 72.53 2-3 years 39,881.92 33,633.86 84.33 3-5 years 43,509.86 43,047.40 98.94 Over 5 years 23,780.02 23,780.02 100.00 Subtotal 14,448,519.84 833,040.00 5.77 (2) Situation of the bad debt provision withdrawn, recovered or reversed The amount of the bad debt provision of the period was of RMB293,275,350. (3) Accounts receivable actually written off in this period 1) The amount of the accounts receivable actually written off in this period was of RMB712,090. 2) List of the significant accounts receivable written off in this period 112 2015 Semi-Annual Report of Midea Group Co., Ltd. Whether due to Executed Name of the units Nature Amount Reason associated write-off process transactions Decided by the Jiangyin Changyi Group Estimated to be Loans 240.00 Board of No Co., Ltd. uncollectible Directors Decided by the Hisense (Zhejiang) Estimated to be Loans 100.01 Board of No Air-conditioning Co., Ltd. uncollectible Directors Decided by the Estimated to be AVEST Loans 316.18 Board of No uncollectible Directors Subtotal 656.19 (4) Top 5 of the accounts receivable The total amount of the top 5 accounts receivable of the closing balance was of RMB1,681,766,490 that was 11.58% of the total amount of the closing balance of the accounts receivable, and the total amount of the corresponding withdrawn bad debt provision was of RMB84,088,320. 7. Advance payment (1) Aging analysis 1) Detailed situation Closing balance Provision Aging Book Balance Proportion (%) for bad Book Value account Within 1 Year 1,728,602.52 95.31 1,728,602.52 1-2 Years 63,156.39 3.48 63,156.39 2-3 years 16,390.27 0.90 16,390.27 Over 3 years 5,645.87 0.31 5,645.87 Total 1,813,795.05 100.00 1,813,795.05 (Continued) Opening balance Provision Aging Book Balance Proportion (%) for bad Book Value account 113 2015 Semi-Annual Report of Midea Group Co., Ltd. Within 1 Year 1,298,444.25 91.79 1,298,444.25 1-2 Years 93,716.42 6.63 93,716.42 2-3 years 16,962.10 1.20 16,962.10 Over 3 years 5,347.68 0.38 5,347.68 Total 1,414,470.45 100.00 1,414,470.45 2) Reason for not timely settling advanced payments aged more than 1 year and with significant amount Name of the unit Closing balance Unsettle reason Jiangsu Gaoko Logistics Science & Technology Co., Ltd. 3,087.00 Not accepted Subtotal 3,087.00 (2) Top 5 of the advanced payment The total amount of the top 5 prepayment of the closing balance was of RMB351,933,190 that was 19.40% of the total amount of the closing balance of the prepayment. 8. Granting loans and advances (1) Classified by individual and enterprise distribution Items Closing balance Opening balance Individual loans and advances Company loans and advances 8,953,705.63 6,030,087.31 including: Loan 5,226,969.63 964,523.26 Notes discount 3,726,736.00 5,065,564.05 Total loans and advances 8,953,705.63 6,030,087.31 Less: Provision for loan loss 89,537.06 89,286.84 Total 8,864,168.57 5,940,800.47 (2) Loans and advances classified by guaranty method Items Closing balance Opening balance Credit loans 1,052,600.00 110,500.00 Guaranteed loans 4,144,369.64 770,323.26 including: collateral loans Pledge loans 3,756,735.99 5,149.264.05 Subtotal 8,953,705.63 6,030,087.31 Less: Provision for loan loss 89,537.06 89,286.84 Total 8,864,168.57 5,940,800.47 (3) Changes in loan loss reserves 114 2015 Semi-Annual Report of Midea Group Co., Ltd. Items Closing balance Opening balance Beginning Balance 89,286.84 45,818.24 Provision in this period 250.22 43,468.60 Transfer-in in this period Write-off in this period Transfer-out in this period Balance at year end 89,537.06 89,286.84 9. Dividend receivables Items Closing balance Opening balance Misr Refrigeration and Air-conditioning 53,512.81 45,943.22 Mfg. Co. S.A.E. Total 53,512.81 45,943.22 10. Other receivables (1) Detailed Information 1) Category details Closing balance Book balance Bad debt provision Classification Proportion Proportion Book value Amount Amount (%) (%) Significant single amount and 226,949.98 17.70% 226,949.98 individual provision for bad debts Withdraw the bad debt provision by 1,031,771.09 80.46% 54,401.35 5.27% 977,369.74 credit risks characteristics Non-significant single amount and 23,782.26 1.85% 186.15 0.78% 23,596.11 individual provision for bad debts Total 1,282,503.33 100.01% 54,587.5 4.26% 1,227,915.83 (Continued) Opening balance Book balance Bad debt provision Classification Proporti Proportion Book value Amount Amount on (%) (%) Significant single amount and individual 154,562.5 12.62% 154,562.5 provision for bad debts Withdraw the bad debt provision by 1,069,799.51 87.37% 43,594.48 4.08% 1,026,205.03 115 2015 Semi-Annual Report of Midea Group Co., Ltd. credit risks characteristics Non-significant single amount and 101.15 0.01% 101.15 100.00% individual provision for bad debts Total 1,224,463.16 100.00% 43,695.63 3.57% 1,180,767.53 2) Other accounts receivable with significant single amount and provision for bad debt Bad debt Withdrawal Other Accounts Receivable Book balance Provision reason provision provision (%) Come-and-go money 67,824.98 Come-and-go money 159,125 Subtotal 226,949.98 3) Other accounts receivable in the combination which use aging analysis method to determine provisions for bad debts Closing balance Aging Withdrawal Book balance Bad debt provision provision (%) Within 1 Year 933,283.81 39,379.59 4.22 1-2 Years 79,555.51 5,287.94 6.65 2-3 years 1,244.47 330.65 26.57 3-5 years 16,519.34 8,235.20 49.85 Over 5 years 1,167.95 1,167.97 100.00 Subtotal 1,031,771.09 54,401.35 5.27 (2) Situation of the bad debt provision withdrawn, recovered or reversed in this period The amount of the bad debt provision of the period was of RMB24,606,990. (3) Accounts receivable actually written off in this period 1) The amount of the other accounts receivable actually written off in this period was of RMB403,650. (4) Top 5 of the other accounts receivable Proportion of the balance of the Bad debt Name of the units Nature Book balance Aging other accounts provision receivable No. 1 Land funds 347,472.00 Within 1 year 27.09 17,373.60 No. 2 Cash deposit 159,125.00 2-3 years 12.41 116 2015 Semi-Annual Report of Midea Group Co., Ltd. Exercise accounts No. 3 67,824.98 Within 1 year 5.29 of share option No. 4 Subsidy payments 33,916.56 1-2 years 2.64 3,391.66 No. 5 Land funds 27,430.80 Within 1 year 2.14 1,371.54 Total -- 635,769.34 -- 49.57 22,136.80 11. Inventories (1) Detailed Information Closing balance Items Book balance Price fall preparation Book value Raw materials 1,765,151.19 25,136.18 1,740,015.01 Materials under consigned 190,016.88 190,016.88 processing Low-value consumables 12,763.34 12,763.34 Work in process 415,017.35 415,017.35 Goods in stock 7,953,637.11 101,596.51 7,852,040.60 Total 10,336,585.87 126,732.69 10,209,853.18 (Continued) Opening balance Items Book balance Price fall preparation Book value Raw materials 2,453,511.83 18,436.81 2,435,075.02 Materials under consigned 376,930.37 376,930.37 processing Low-value consumables 843.51 843.51 Work in process 392,333.54 392,333.54 Goods in stock 11,934,496.06 119,648.24 11,814,847.82 Total 15,158,115.31 138,085.05 15,020,030.26 (2) Inventory Falling Price Reserves 1) Detailed information Increase Decrease Items Opening balance Closing balance Withdrawal Other Reversed or written off Other Raw materials 18,436.81 27,270.12 20,570.75 25,136.18 Goods in stock 119,648.24 13,970.21 32,021.94 101,596.51 117 2015 Semi-Annual Report of Midea Group Co., Ltd. Total 138,085.05 41,240.33 52,592.69 126.732.69 2) Specific basis of recognizing the net realizable value and the notes of the reasons of the inventory falling price reserves reserved or written off in this period Reason for carrying back Proportion of carried back Basis of provision for inventory Items inventory falling price amount in period-end falling price reserves reserves inventory balance Lower of Cost or Net Realizable Raw Materials Production consuming 0.14 Value Method Lower of Cost or Net Realizable Goods in Stock sales 0.05 Value Method 12. Other current assets Items Closing balance Opening balance Fees to be Apportioned 681,642.51 493,138.51 Hedging instrument 108,415.34 Margins 374,692.96 4,498.4 Taxes 969,580.14 1,303,175.55 Bank financing* 24,974,806.61 24,793,080 Total 27,109,137.56 26,593,892.46 *The closing balance of the bank financing was the bank financial products purchased by the self-owned funds. 13. Financial assets available for sale (1) Detailed information Closing balance Items Book balance Impairment provision Book value Available-for-sale debt instruments Available-for-sale equity instruments 2,257,822.28 100.30 2,257,721.98 Of which: measured by fair value 539,001.94 100.30 538,901.64 measured by cost 1,718,820.34 1,718,820.34 Total 2,257,822.28 100.30 2,257,721.98 (Continued) Opening balance Items Book balance Impairment provision Book value Available-for-sale debt instruments 118 2015 Semi-Annual Report of Midea Group Co., Ltd. Available-for-sale equity instruments 1,655,595.02 100.30 1,655,494.72 Of which: measured by fair value 1,290.97 100.30 1,190.67 measured by cost 1,654,304.05 1,654,304.05 Total 1,655,595.02 100.30 1,655,494.72 (2) Available-for-sale financial assets measured by fair value at the period-end Category of available-for-sale Available-for-sale Available-for-sale debt Subtotal financial assets equity instruments instruments Cost of the equity instruments 527,263.45 527,263.45 Fair value 538,901.64 538,901.64 1,190.67 Changed amount of the fair value accumulatively included in the other 11,738.49 11,738.49 comprehensive income Depreciation reserve amount 100.30 100.30 (3) Available-for-sale financial assets measured by cost at the period-end Book balance Investees Closing Opening balance Increase Decrease balance Bank of Jiangsu Co., Ltd. 13,330.45 13,330.45 Hubei Bank Co., Ltd. 5,000.00 5,000.00 Inner Mongolia Baotou Department Store Co., Ltd. 50.00 50.00 Suzhou People’s Shopping Centre Co., Ltd. 150.00 150.00 Foshan Shunde Rural Commercial Bank Company 1,263,773.60 54,766.29 1,318,539.89 Limited Zhangshu City Shunyin Rural Bank Co., Ltd. 6,000.00 6,000.00 Fengcheng Shunyin Rural Bank Co., Ltd. 6,000.00 6,000.00 Wanjiang Financial Leasing Co., Ltd. 360,000.00 360,000.00 Yunding Network Technology Co., Ltd. 9,750.00 9,750.00 Subtotal 1,654,304.05 64,516.29 1,718,820.34 (Continued) Depreciation reserve Sharehol ding Cash bonus proporti Investees Opening Incre Decre Closing of the on of the balance ase ase balance period investees (%) 119 2015 Semi-Annual Report of Midea Group Co., Ltd. Bank of Jiangsu Co., Ltd. 418.61 Hubei Bank Co., Ltd. 1.29 Inner Mongolia Baotou Department Store 0.04 Co., Ltd. Suzhou People’s Shopping Centre Co., 0.25 Ltd. Foshan Shunde Rural Commercial Bank 9.40 118,394.70 Company Limited Zhangshu City Shunyin Rural Bank Co., 6.00 312.00 Ltd. Fengcheng Shunyin Rural Bank Co., Ltd. 6.00 274.16 Wanjiang Financial Leasing Co., Ltd. 12.00 28,800.00 Yunding Network Technology Co., Ltd. 13.00 Subtotal -- 148,199.47 (4) Changes of the depreciation reserve of the available-for-sale financial assets Available-for-sal Available-for-sal Subtota Category of available-for-sale financial assets e equity e debt l instruments instruments Amount of the withdrawn impairment at the period-begin Withdrawn amount of the period 100.30 100.30 Of which: transferred from other comprehensive income Decreased of the period Of which: recovered and reserved of the fair value after the period Amount of the withdrawn impairment at the period-end 100.30 100.30 14. Long-term equity investment (1) Classification situation Closing balance Items Depreciation Book balance Book value reserve Investment in the associated enterprises 906,155.83 906,155.83 Total 906,155.83 906,155.83 (Continued) Items Opening balance 120 2015 Semi-Annual Report of Midea Group Co., Ltd. Book balance Depreciation reserve Book value Investment in the 951,874.39 951,874.39 associated enterprises Total 951,874.39 951,874.39 (2) Detailed situation Increase/decrease Gains and losses of the Opening Investees Additional Decreased investment balance investment investment confirmed by the equity method Associated enterprises Golden Eagle Asset Management Co., Ltd. 27,948.13 2,734.74 Guangzhou Antaida Logistics Co. Ltd. 2,850.04 -123.44 Misr Refrigeration And Air Conditioning 309,822.44 11,563.36 Manufacturing Co. Shanxi Huaxiang Group Co., Ltd. 248,344.27 24,586.16 Linkgo-HK Limited 24,138.73 -664.69 Foshan Micro Midea Filter Co., Ltd. 25,495.16 3,000.75 (Philippines) CONCEPCION MIDEA INC 18,797.82 -2,202.05 Hefei Royalstar Motor Co., Ltd. 99,957.63 -153.17 Foshan City Shunde District Midea 72,298.05 4,458.12 Micro-Credit Inc. Midea Micro-Credit Inc. 109,311.06 -2,445.42 PT.MIDEA PLANET INDONESIA 2,372.15 Zhuhai Lidewan Electronics Co., Ltd. 12,911.06 -12,911.06 Total 951,874.39 -12,911.06 43,126.51 (Continued) Increase/decrease Adjustment of Cash bonus or Changes of Withdrawal of Investees other profits other depreciation comprehensive declared to equities reserve income issue Associated enterprises 121 2015 Semi-Annual Report of Midea Group Co., Ltd. Golden Eagle Asset Management Co., Ltd. Guangzhou Antaida Logistics Co. Ltd. Misr Refrigeration And Air Conditioning -5,998.60 - 16,993.04 Manufacturing Co. Shanxi Huaxiang Group Co., Ltd. Linkgo-HK Limited Foshan Micro Midea Filter Co., Ltd. 2,000.00 (Philippines) CONCEPCION MIDEA INC -168.52 Hefei Royalstar Motor Co., Ltd. Foshan City Shunde District Midea 9,601.40 Micro-Credit Inc. Midea Micro-Credit Inc. 14,444.56 PT.MIDEA PLANET INDONESIA 745.98 Zhuhai Lidewan Electronics Co., Ltd. Total -5,421.14 43,039.00 (Continued) Increase/decrease Closing balance of Closing Investees depreciation Other balance reserve Associated enterprises Golden Eagle Asset Management Co., Ltd. 30,682.87 Guangzhou Antaida Logistics Co. Ltd. 2,726.60 Misr Refrigeration And Air Conditioning -24,339.15 274,055.01 Manufacturing Co. Shanxi Huaxiang Group Co., Ltd. 272,930.43 Linkgo-HK Limited 23,474.04 Foshan Micro Midea Filter Co., Ltd. 26,495.91 (Philippines) CONCEPCION MIDEA INC -16.59 16,410.66 Hefei Royalstar Motor Co., Ltd. 99,804.46 Foshan City Shunde District Midea Micro-Credit 67,154.77 Inc. Midea Micro-Credit Inc. 92,421.08 PT.MIDEA PLANET INDONESIA -3,118.13 Zhuhai Lidewan Electronics Co., Ltd. 122 2015 Semi-Annual Report of Midea Group Co., Ltd. Total -27,473.87 906,155.83 15. Investment properties Houses and bui Items Land use right Total ldings Original book value Opening balance 225,279.11 47,569.90 272,849.01 Increased amount of the period 2,515.80 2,515.80 1) Outsourcing 175.80 175.80 2) Transferred from fixed assets/intangible assets 3) Increased from enterprise merger 4) Other 2,340 2,340.00 Decreased amount of the period 45,600.31 11,096.31 56,696.62 1) Disposal 2) Transferred into fixed 45,600.31 11,096.31 56,696.62 assets/intangible assets Closing balance 182, 194.60 36, 473.59 218,668.19 (Continued) Houses and Item Land use right Total buildings Accumulative depreciation and accumulative amortization Opening balance 78,693.88 9,944.16 88,638.04 Increased amount of the period 10,117.11 1,870.50 11,987.61 1) Withdrawal or demortization 10,117.11 1,870.50 11,987.61 2) Transferred from fixed assets/intangible assets Decreased amount of the period 38,283.89 3,095.48 41,379.37 1) Disposal 2) Transferred into fixed 38,283.89 3,095.48 41,379.37 assets/intangible assets Closing balance 50,527.10 8,719.18 59,246.28 Depreciation reserve Opening balance 12,576.07 12,576.07 123 2015 Semi-Annual Report of Midea Group Co., Ltd. Increased amount of the period 1) Withdrawal Decreased amount of the period 1) Disposal 2) Transferred from others Closing balance 12,576.07 12,576.07 Book value at the period-end 119,091.43 27,754.41 146,845.84 Book value at the period-begin 134,009.16 37,625.74 171,634.9 16. Fixed Assets (1) Detailed Information Electronic Houses and Machinery Transportatio Item equipments and Total buildings equipments n facilities other Original book value Opening balance 14,938,851.13 13,364,556.17 799,461.03 2,220,616.04 31,323,484.37 Increased amount of 265,733.22 724,676.36 4,429.34 196,050.33 1,190,889.25 the period 1) Purchase 72,731.97 587,424.54 1,535.25 194,642.90 856,334.66 2) Transferred from construction in 147,400.94 137,251.82 284,652.76 progress 3) Increased from 2,894.09 1,407.43 4,301.52 enterprise merger 4) Transferred from investment 45,600.31 45,600.31 properties Decreased amount 771,164.92 311,111.49 19,067.87 108,491.16 1,209,835.44 of the period 1) Disposal or 646,236.89 251,462.78 18,827.31 100,025.88 1,016,552.86 scrapping 2) Transferred from 124,928.03 59,648.71 240.56 8,465.28 193,282.58 others Closing balance 14,433,419.43 13,778,121.04 784,822.5 2,308,175.21 31,304,538.18 (Continued) Item Houses and Machinery Transportatio Electronic Total 124 2015 Semi-Annual Report of Midea Group Co., Ltd. buildings equipments n facilities equipments and other Accumulative depreciation Opening balance 2,911,240.00 5,222,779.17 386,332.70 1,536,363.55 10,056,715.42 Increased amount of the period 860,280.09 1,177,670.37 91,575.49 317,867.83 2,447,393.78 1) Withdrawal 761,173.28 1,177,670.37 91,575.49 317,867.83 2,348,286.97 2) Transferred from investment 99,106.81 99,106.81 properties 3) Transferred from enterprise merger Decreased amount of the period 70,898.49 384,798.58 61,578.61 203,917.06 721,192.74 1) Disposal or scrapping 51,050.42 381,612.77 61,578.61 201,150.86 695,392.66 2) Transferred from others 19,848.07 3,185.81 2,766.20 25,800.08 Closing balance 3,700,621.60 6,015,650.96 416,329.58 1,650,314.32 11,782,916.46 Depreciation reserve Opening balance 4,550.55 19,133.16 293.97 1,492.00 25,469.68 Increased amount of the period 12,801.38 4.11 61.49 12,866.98 1) Withdrawal 12,801.38 4.11 61.49 12,866.98 Decreased amount of the period 632.10 18,538.17 247.06 165.48 19,582.81 1) Disposal or scrapping 632.10 18,538.17 247.06 165.48 19,582.81 2) Transferred from others Closing balance 125 2015 Semi-Annual Report of Midea Group Co., Ltd. 3,918.45 13,396.37 51.02 1,388.01 18,753.85 Book value at the period-end 11,234,311.08 7,335,508.84 383,080.43 568,913.71 19,521,814.06 Book value at the period-begin 10,987,264.72 7,544,859.53 506,449.30 533,587.77 19,572,161.32 (2) Fixed assets without issued title certificate Items Book value Unsettle reason Chongqing Refrigeration 1 & 2 plants 261,581.09 In progress Wuhu Annto Logistics Park 241,097.88 In progress Shenyang Meian Logistics Park 175,510.10 In progress Hefei Annto Logistics Park 268,556.40 In progress Chongqing Annto Logistics Park 166,902.93 In progress Subtotal 1,113,648.40 17. Construction in progress (1) Detailed Information Closing balance Opening balance Name of the Depreciation Depreciation projects Book balance Book value Book balance Book value reserve reserve GMCC Compressor 91,949.88 91,949.88 89,066.83 89,066.83 Engineering Household Air-conditioner 19,932.30 19,932.30 14,397.00 14,397.00 (Chongqing) Project Handan Air-Conditioner 61,454.24 61,454.24 Expansion Project Suzhou Xiang City Cao Lake 225,233.44 225,233.44 121,599.18 121,599.18 Base Project Compressor 1,997.77 1,997.77 9,567.02 9,567.02 (Anhui) Project Guiyang Meian 61,081.56 61,081.56 34,172.59 34,172.59 Project 126 2015 Semi-Annual Report of Midea Group Co., Ltd. The Fifth Industrial Zone Dormitory 95,294.71 95,294.71 83,416.71 83,416.71 Building Engineering of Midea Guangdong Welling 48,151.79 48,151.79 71,714.45 71,714.45 Construction in Progress Headquarters Innovation 52,995.49 52,995.49 992.00 992.00 Center Project Hefei Annto 40,340.00 40,340.00 Project Wuhan Annto 24,151.65 24,151.65 Project Zhengzhou 26,360.83 26,360.83 Annto Project Other projects 77,109.80 77,109.80 84,649.79 84,649.79 Total 673,746.74 673,746.74 661,882.29 661,882.29 (2) List of the changes of the significant construction in progress of this period Opening Transferred in Decreased in Closing Name of the projects Increase balance fixed assets others balance GMCC Compressor 89,066.83 46,487.04 39,371.51 4,232.48 91,949.88 Engineering Household Air-conditioner 14,397.00 5,535.30 19,932.30 (Chongqing) Project Handan Air-Conditioner 61,454.24 61,454.24 Expansion Project Suzhou Xiang City Cao 121,599.18 103,634.26 225,233.44 Lake Base Project Compressor (Anhui) Project 9,567.02 1,393.16 8,962.41 1,997.77 Guiyang Meian Project 34,172.59 26,908.97 61,081.56 The Fifth Industrial Zone Dormitory Building 83,416.71 12,724.15 846.15 95,294.71 Engineering of Midea Guangdong Welling 71,714.45 47,730.93 71,293.59 48,151.79 127 2015 Semi-Annual Report of Midea Group Co., Ltd. Construction in Progress Headquarters Innovation 992.00 52,003.49 52,995.49 Center Project Hefei Annto Project 40,340.00 40,340.00 Wuhan Annto Project 24,151.65 3,163.83 27,315.48 Zhengzhou Annto Project 26,360.83 6,165.82 15,595.42 16,931.23 Other projects 84,649.79 23,756.04 20,320.11 10,975.92 77,109.80 Total 661,882.29 329,502.99 284,652.76 32,985.78 673,746.74 (Continued) Accumulative Amount of the Capitalized amount of the capitalized interests rate Resources of the Name of the projects capitalized interests of the of the period capital interests period (%) GMCC Compressor Engineering Self-financing Household Air-conditioner Self-financing (Chongqing) Project Handan Air-Conditioner Expansion Self-financing Project Suzhou Xiang City Cao Lake Base Self-financing Project Compressor (Anhui) Project Self-financing Guiyang Meian Project 2,362.12 1,404.79 6.00 Loans The Fifth Industrial Zone Dormitory Self-financing Building Engineering of Midea Guangdong Welling Construction in Self-financing Progress Headquarters Innovation Center Project Self-financing Hefei Annto Project Self-financing Wuhan Annto Project 1,799.36 192.74 6.00 Loans Zhengzhou Annto Project 4,612.05 237.26 6.00 Loans Other projects Self-financing Total 8,773.53 1,834.79 18. Intangible assets (1) Detailed information 128 2015 Semi-Annual Report of Midea Group Co., Ltd. Non-patented Items Land use right Other Total technology Original book value Opening balance 3,830,963.13 187,224.13 49,822.03 4,068,009.29 Increased amount of 27,287.82 65.48 27,353.30 the period 1) Purchase 16,191.51 65.48 16,256.99 2) Internal R&D 3) Increased in enterprise merger 4) Transferred from investment property 11,096.31 11,096.31 and others Decreased amount 154,918.24 8,043.94 41.48 163,003.66 of the period 1) Disposal 153,724.82 153,724.82 2) Transferred from others 1,193.42 8,043.94 41.48 9,278.84 Closing balance 3,703,332.71 179,180.19 49,846.03 4,068,009.29 (Continued) Non-patented Items Land use right Other Total technology Accumulative amortization Opening balance 481,906.06 134,744.81 19,400.30 636,051.17 Increased amount of 39,896.16 8,069.08 793,02 48,758.26 the period 1) Withdrawal 36,800.68 8,069.08 793,02 45,662.78 2) Transferred from investment property 3,095.48 3,095.48 and others Decreased amount 12,182.81 5,610.11 25.67 17,818.59 of the period 1) Disposal 11,896.04 11,896.04 2) Transferred from 286.77 5,610.11 25.67 5,922.55 others 129 2015 Semi-Annual Report of Midea Group Co., Ltd. Closing balance 509,619.41 137,203.78 20,167.65 666,990.84 Depreciation reserve Opening balance Increased amount of the period 1) Withdrawal Decreased amount of the period 1) Disposal 2) Transferred from others Closing balance Book value at the 3,193,713.30 41,976.41 29,678.38 3,265,368.09 period-end Book value at the 3,349,057.07 52,479.32 30,421.73 3,431,958.12 period-begin 19. Goodwill (1) Original book value of goodwill Formed Decrease by the enterprise Closing Name of the investees Opening balance merger in Disposal Other amount the period Wuhu Lexiang Electric Appliance 4,817.20 Co., Ltd. 4,817.20 Guangdong GMCC Compressor Co., 13,732.33 Ltd. 13,732.33 Guangdong Midea Wuhu 46,787.54 Refrigeration Equipment Co., Ltd. 46,787.54 Guangdong Midea Refrigeration 11,436.08 Equipment Co., Ltd. 11,436.08 Midea Group Wuhan Refrigeration 10,160.73 Equipment Co., Ltd. 10,160.73 Hefei Midea Royalstar Refrigerator 5,259.68 Co., Ltd. 5,259.68 Hefei Royalstar Midea Appliance 9,008.52 130 2015 Semi-Annual Report of Midea Group Co., Ltd. Marketing Co., Ltd. 9,008.52 Hefei Royalstar Washing Equipment 34,373.76 Manufacturing Co., Ltd. 34,373.76 Chongqing Midea General 8,210.30 Refrigeration Equipment Co., Ltd. 8,210.30 Wuxi Little Swan Company Limited 1,326,932.45 1,326,932.45 Midea Carrier Latin American 1,037,366.70 Company 1,037,366.70 Jiangxi Midea Elegant Lighting Co., 54,427.28 Ltd. 54,427.28 Calpore Macao Commercial 329,956.93 Offshore Ltd. 329,956.93 Kim Eng Enterprise Co., Ltd. 29,467.39 29,467.39 Other 9,854.52 25,828.10 35,682.62 Total 2,931,791.41 25,828.10 2,957,619.51 (2) Impairment test process, parameters and recognition method of the impairment losses of the goodwill Our company tests impairment of goodwill based on cash flows, discount rate, and other indicators. After testing and calculation, the book value of the goodwill which is corresponding to relevant asset groups or combination of assets groups is not depreciated; therefore it’s unnecessary to prepare provision for goodwill impairment. (3) Decrease in goodwill In May 2015, the subsidiary of the Company, Midea Electric Trading (Singapore) Co. Pte. Ltd. purchased the equities with the difference between the purchased cost and the enjoyed share of the net assets of the acquirees on the purchase date is included in the goodwill. 20. Long-term unamortized assets Opening Increase in current Amortized of the Other Closing Items balance period current period decreases balance IT software and 212,152.11 96,225.87 66,749.18 12,621.26 229,007.54 consulting fees Mould fees 301,516.15 134,365.51 118,478.98 317,402.68 Technical 1,415.09 283.02 1,132.07 getting-started fees 131 2015 Semi-Annual Report of Midea Group Co., Ltd. Expenses on improvement of assets 7,388.15 255.19 546.64 7,096.70 under operating lease Others 236,104.60 125,890.96 89,228.98 23,717.35 249,049.23 Total 758,576.10 356,737.53 275,286.80 36,338.61 803,688.22 21. Deferred income tax assets and deferred tax liabilities (1) Deferred income tax assets had not been offset Closing balance Opening balance Deductible Deferred Deductible Deferred Items temporary income tax temporary income tax differences assets differences assets Deductible losses 614,180.13 193,054.60 420,646.74 128,425.13 Provision for assets impairment 807,290.35 140,952.15 587,439.08 96,013.22 Workers compensation and dismissal costs 396,968.57 69,605.18 1,679,405.74 290,303.22 Accrued expenses 23,449,682.80 3,669,655.22 19,641,041.97 3,143,330.25 Unrealized profits of internal transactions 293,217.83 44,414.64 172,023.68 41,586.58 Change of fair value 11,200.94 826.99 253,864.35 15,992.96 Estimated liabilities 25,980.02 3,897.00 25,573.83 3,836.07 Deferred revenue 367,096.63 57,651.32 338,852.58 52,722.28 Others 8,782.96 1,317.45 50,552.55 7,777.84 Total 25,974,400.23 4,181,374.55 23,169,400.52 3,779,987.55 (2) Deferred income tax liabilities had not been offset Closing balance Opening balance Deductible Deductible Deferred income tax liabilities Deferred income Deferred income temporary temporary tax liabilities tax liabilities differences differences 132 2015 Semi-Annual Report of Midea Group Co., Ltd. Change of fair value 101,244.12 25,525.79 101.673.89 25,917.24 Total 101,244.12 25,525.79 101.673.89 25,917.24 22. Short-term borrowings Items Closing balance Opening balance Credit Loans 862,359.66 723,606.26 Hypothecated Loans 72,253.87 381,497.53 Guaranteed Loans 2,355,067.16 2,630,494.73 Trade financing 7,056,924.69 2,335,280.51 Total 10,346,605.38 6,070,879.03 23. Deposit taking and deposit taking of interbank Items Closing balance Opening balance Deposit taking 21,200.85 7,493.81 Total 21,200.85 7,493.81 24. Derivative financial liabilities Items Closing balance Opening balance Derivative financial liabilities 155,571.85 74,960.70 Total 155,571.85 74,960.70 25. Notes payable Classification Closing balance Opening balance Bank acceptance bill 22,787,992.23 12,648,496.99 Total 22,787,992.23 12,648,496.99 26. Accounts payable Aging Closing balance Opening balance Within 1 Year 18,520,544.25 18,825,285.22 1-2 Years 378,306.74 906,360.45 2-3 years 146,381.64 211,023.92 Over 3 years 225,605.7 194,784.87 Total 19,270,838.33 20,137,454.46 27. Advances from customers Aging Closing balance Opening balance Within 1 Year 2,806,257.29 3,798,152.11 133 2015 Semi-Annual Report of Midea Group Co., Ltd. 1-2 Years 12,050.96 127,180.66 2-3 years 6,126.84 14,382.35 Over 3 years 43,751.02 52,825.34 Total 2,868,186.11 3,992,540.46 28. Employee benefits payable (1) Detailed information Items Opening balance Increase Decrease Closing balance Short-term compensation 2,083,515.11 4,984,014.55 5,678,340.05 1,389,189.61 Departure welfare—defined 36,924.82 385,207.07 397,360.44 24,771.45 contribution plans Dismission welfare 79,337.02 48,107.21 55,065.62 72,378.61 Total 2,199,776.95 5,417,328.83 6,130,766.11 1,486,339.67 (2) List of short-term compensation Items Opening balance Increase Decrease Closing balance Wages, bonuses, allowances and subsidies 1,941,556.96 4,315,677.64 4,990,231.78 1,267,002.82 Employee welfare fund 77,897.16 231,569.75 250,599.71 58,867.20 Social security charges 21,552.18 192,788.65 199,677.36 14,663.47 Including: medical insurance premium 19,934.72 161,675.73 167,807.33 13,803.12 Premium on work Injury 828.20 17,696.47 17,963.57 561.10 Premium on birth 789.26 13,416.45 13,906.46 299.25 Housing fund 13,548.16 92,661.58 91,116.21 15,093.53 Labor union funds and education funds 18,977.88 20,991.76 21,920.96 18,048.68 Other 9,982.77 130,325.17 124,794.03 15,513.91 Subtotal 2,083,515.11 4,984,014.55 5,678,340.05 1,389,189.61 (3) List of defined contribution plans Items Opening balance Increase Decrease Closing balance Basic pension insurance 35,248.33 370,185.2 381,093.94 24,339.59 Unemployment insurance 1,676.49 15,021.87 16,266.50 431.86 premium Subtotal 36,924.82 385,207.07 397,360.44 24,771.45 29. Taxes payable Items Closing balance Opening balance 134 2015 Semi-Annual Report of Midea Group Co., Ltd. Added-value tax 457,631.65 375,167.87 Business tax 10,136.49 7,523.05 Corporate income tax 3,470,472.16 2,721,473.24 Personal income tax deduction and withholding 30,710.30 22,713.69 Housing property tax 25,101.33 29,868.71 Land use tax 16,825.35 14,366.12 City maintenance construction tax 22,517.60 40,701.95 Education surcharge 10,991.33 17,630.65 Local education surcharge 4,742.42 7,783.64 Other 75,813.83 42,921.79 Total 4,124,942.46 3,280,150.71 30. Interests payable Items Closing balance Opening balance Enterprise bond interest 6,922.06 8,878.24 Short-term loan interests payable 32,771.32 14,033.93 Total 39,693.38 22,912.17 31. Dividend payables Items Closing balance Opening balance Dividends of common shares 292,795.58 93,799.03 Total 292,795.58 93,799.03 32. Other payables (1) Detailed information Aging Closing balance Opening balance Within 1 year 969,930.71 1,091,306.26 1-2 years 104,435.59 7,025.78 2-3 years 22,305.98 90,606.5 Over 3 years 24,127.67 34,610.22 Total 1,120,799.95 1,223,548.76 (2) Other significant accounts payable aging over 1 year Reasons of unpaid or Items Closing balance unreversed Foshan City Hanyu Investment Development Co., Ltd. 10,000.00 Margin 135 2015 Semi-Annual Report of Midea Group Co., Ltd. Saiyi Electric Appliance Group Co., Ltd. 3,321.81 Margin Guangdong Saipu Appliances Manufacturing Co., Ltd. 2,006.00 Margin Foshan Gaoming Yinyuan Metalwork Co., Ltd. 1,811.00 Margin Hefei Tatong Gelan Plastic Industry Co., Ltd. 1,810.00 Margin Subtotal 18,948.81 33. Non-current liabilities due within one year Items Closing balance Opening balance Long-term loans within 1 year 611,900.00 Bonds payable due within 1 year Total 611,900.00 34. Other current liabilities Items Closing balance Opening balance Withholding promotion fees 1,224,304.47 986,113.85 Withholding utilities 129,940.67 106,723.68 Withholding sale's returned profits 14,867,867.04 13,428,467.67 Withholding installation maintenance 5,699,450.89 4,231,210.96 Withholding rent 53,967.50 53,978.42 Withholding technology commission 75,883.08 126,984.70 Withholding traffic expenses 649,149.85 358,027.23 Hedging instrument 18,112.13 285,732.99 Withholding other expenses 1,332,581.97 1,074,145.49 U.S. commercial notes 1,926,844.67 2,127,551.06 Total 25,978,102.27 22,778,936.05 35. Long-term loans Items Closing balance Opening balance Credit loans 10,575.18 19,205.03 Mortgage loans Guaranteed loans Total 10,575.18 19,205.03 36. Bonds payable (1) Detailed information Items Closing balance Opening balance 136 2015 Semi-Annual Report of Midea Group Co., Ltd. Collective bond of 12 Wuhu small and medium enterprises 158,501.30 153,026.30 Total 158,501.30 153,026.30 (2) Changes of the bonds payable (excluding the other financial instruments such as the preferred shares and the perpetual capital securities divided as financial liabilities) Opening Bond name Par value Issue date Bonds period Amount balance Collective bond of 12 Wuhu 150,000 small and medium 100.00 2012/7/19 6 years 153,026.30 .00 enterprises 150,000 Subtotal 153,026.30 .00 Issued in Interests withdrawal Overflow Paid in Closing Bond name the according to the face discount the balance period value amortization period Collective bond of 12 Wuhu small and medium 5,475.00 158,501.30 enterprises Subtotal 5,475.00 158,501.30 37. Special payable Opening Closing Items Increase Decrease Formed reason balance balance Demolition compensation shall 851,825.49 735,514.33 116,311.16 Demolition Total 851,825.49 735,514.33 116,311.16 38. Estimated liabilities Items Closing balance Opening balance Formed reason Deposit for assurance of 25,980.02 25,573.83 Settlement of loss product quality Total 25,980.02 25,573.83 39. Deferred income Items Opening balance Increase Decrease Closing balance Formed reason Deferred income 342,235.91 35,817.06 6,560.43 371,492.54 Total 342,235.91 35,817.06 6,560.43 371,492.54 40. Capital stock 137 2015 Semi-Annual Report of Midea Group Co., Ltd. (1) Detailed information Items Opening balance Increase Decrease Closing balance Total amount of shares 4,215,808.47 74,314.13 4,290,122.60 Total 4,215,808.47 74,314.13 4,290,122.60 (2) Other notes In June 2015, the Company issued the RMB common share (Share A) of 55 million shares with per share of RMB23.01 for Xiaomi Science & Technology Co., Ltd. as well as the face value of per share was of RMB1.00. The increase of the other share capital was due to motivate executing rights of the employee equities. 41. Capital reserve (1) Detailed Information Items Opening balance Increase Decrease Closing balance Stock premium 10,391,193.96 1,541,545.15 11,932,739.11 Other capital reserve 2,633,689.23 813,373.02 68,062.98 3,378,999.27 Total 13,024,883.19 2,354,918.17 68,062.98 15,311,738.38 (2) Other notes 1) The increase of the capital reserve-stock premium of the report period was due to the directional seasoned offering of the Company for Xiaomi. 2) The increase of the other capital reserve of the report period was due to the equity incentive of the employees granted on 27 May 2015. 42. Other comprehensive income Amount Less: the previous amount included in Amount Attributed Attributed the other Less: Opening of the to the to the Closing Items comprehens income balance pre-tax parent minority balance ive income tax income of company shareholde with the expenses the period after tax rs after tax current amount in the gains and losses 138 2015 Semi-Annual Report of Midea Group Co., Ltd. Other comprehensive income could not be re-classified in the gains and losses afterwards Of which: changes of re-measured the net liabilities and the net assets of defined benefit plans Shares enjoyed by the other comprehensive income could not be re-classified in the gains and losses of the investees under the equity method Other comprehensive income be -774,298.8 430,163.1 13,878.6 214,758.1 -559,540.6 re-classified in 292,758.99 -91,232.68 3 0 2 7 6 the gains and losses afterwards Of which: shares enjoyed by the other comprehensive -41,165.72 635.89 6,057.03 -5,421.14 -46,586.86 income be re-classified in the gains and losses of the 139 2015 Semi-Annual Report of Midea Group Co., Ltd. investees under the equity method Flexible gains and losses of the fair value of the 820.17 11,738.49 968.97 -145.35 10,918.32 -3.45 11,738.49 available-for-sa le financial assets Gains and losses of the held-to-maturit y investment be re-classified as available-for-sa le financial assets Effective part of the gains and -269,153.8 662,346.0 14,023.9 360,415.3 285,732.99 2,173.83 91,261.44 losses of cash 6 9 7 0 flow hedging Difference of the foreign currency -464,799.4 -244,557.3 -151,154.3 -615,953.7 -93,403.06 financial 2 7 1 3 statement translation Total of other -774,298.8 430,163.1 13,878.6 214,758.1 -559,540.6 comprehensive 292,758.99 -91,232.68 3 0 2 7 6 income 43. Surplus reserve Items Opening balance Increase Decrease Closing balance Statutory surplus reserve 1,189,791.32 1,189,791.32 Total 1,189,791.32 1,189,791.32 44. General risk preparation Items Closing balance Opening balance General risk preparation 40,516.92 140 2015 Semi-Annual Report of Midea Group Co., Ltd. Total 40,516.92 The Company withdrew the general risk preparation according to the risk assets items of the finance company of the subsidiaries. 45. Undistributed profits Withdrawal or Items Amount distribution proportion Undistributed profit at the end of previous period before 21,814,315.69 adjustment Adjustment of the total undistributed profit at the beginning of the period (“+” for increase, and “-” for decrease) Undistributed profit after adjustment at the begin of this 21,814,315.69 period Add: net profit attributable to the owners of the parent 8,324,122.61 company for the period Less: statutory accumulation reserve 10.00% Discretionary surplus reserve Appropriation of general risk reserve 40,516.92 Withdrawal of bonus and welfare fund for staff and workers Ordinary share dividends payable 4,215,808.47 Common stock dividend transferred to share capital Others Undistributed profit end the year 25,882,112.91 15,304,989.21 (II) Notes to the consolidated income statement 1. Operating income/ Operating cost (1) Detailed information 2015 2014 Items Income Cost Income Cost Income of main 76,704,910.93 55,194,610.62 72,187,759.06 53,228,417.90 business Income of other 6,170,159.48 5,002,254.89 5,520,459.30 4,307,146.45 business Total 82,875,070.41 60,196,865.51 77,708,218.36 57,535,564.35 141 2015 Semi-Annual Report of Midea Group Co., Ltd. (2) Main operating incomes and costs (by products) Category of product 2015 2014 or business Income Cost Income Cost Large home 54,499,203.35 38,401,893.57 51,299,125.77 37,419,693.85 appliances Air-conditioner and 42,816,687.06 29,866,998.57 41,692,542.15 30,507,576.85 spare parts Refrigerator and 6,027,598.60 4,505,284.31 5,008,742.18 3,663,813.70 spare parts Washing machine 5,654,917.69 4,029,610.69 4,597,841.44 3,248,303.30 and spare parts Small household 19,327,755.83 14,344,267.36 17,792,284.51 13,116,945.26 electrical appliance Motor 2,039,514.25 1,719,216.09 2,148,868.18 1,829,908.68 Logistics 838,437.50 729,233.60 947,480.60 861,870.11 Subtotal 76,704,910.93 55,194,610.62 72,187,759.06 53,228,417.90 2. Interest income/expense Items 2015 2014 Interest income 363,832.38 376,858.22 Granting loans and advances 339,295.12 366,942.90 Including: personal loans and advances Corporate loans and advances 66,326.78 17,096.17 Notes discount 272,968.34 349,846.73 Deposit in other banks 24,537.26 9,915.32 Interest expense 317,071.49 191,553.43 Interest net income 46,760.89 185,304.79 3. Fees and commission income/expenditure Items 2015 2014 Settlement business fees and 2,094.25 508.30 commission income Settlement business fees and 888.28 727.61 commission expenditure Fees and commissions net income 1,205.97 -219.31 4. Business tax and surcharges Items 2015 2014 Business tax 21,615.67 15,931.12 City maintenance Construction Tax 314,765.13 241,478.66 142 2015 Semi-Annual Report of Midea Group Co., Ltd. Education Surcharge and other 232,254.97 189,417.99 Total 568,635.77 446,827.77 5. Selling expenses Items 2015 2014 Selling expenses 8,986,099.39 7,623,680.06 Total 8,986,099.39 7,623,680.06 6. Administrative expenses Items 2015 2014 Administrative expense 3,604,757.13 3,349,324.40 Total 3,604,757.13 3,349,324.40 7. Financial expense Items 2015 2014 Interest expense 64,637.44 67,587.44 Less: interest income 133,341.10 217,234.47 Add: exchange Loss 5,889.86 -223,491.13 Add: others 62,036.20 84,584.46 Total -777.60 -288,553.70 8. Assets impairment losses Items 2015 2014 Bad debt loss 280,419.06 301,328.25 Inventory falling price loss -3,837.10 32,133.63 Fixed assets impairment loss 13,737.44 Available-for-sale financial assets impairment loss Loan impairment loss 250.22 4,237.07 Total 276,832.18 351,436.39 9. Gain on change in fair value Items 2015 2014 Financial assets measured by fair value with the -217,464.01 -788,353.68 changes included in the current gains and losses Including: gains on change in fair value of derivative -217,464.01 -788,353.68 143 2015 Semi-Annual Report of Midea Group Co., Ltd. financial instruments Total -217,464.01 -788,353.68 10. Investment income Sources of generating investment income 2015 2014 Long-term equity investment income 43,126.51 34,977.39 measured using equity method Investment income obtained from disposal -8,554.58 of long-term equity investment Investment income obtained from disposal of the financial assets measured by fair 313,320.63 131,824.68 value with the changes included in the current gains and losses Investment income of the available-for-sale financial assets during 148,199.47 84,654.96 the holding period Investment income obtained from disposal 2,158.77 of the available-for-sale financial assets Financial investment income 682,954.05 174,990.06 Total 1,181,204.85 426,447.09 11. Non-operating income (1) Detailed information Amount recorded in current Items 2015 2014 extraordinary profit and loss Total gain on disposal of 38,172.48 40,031.43 38,172.48 non-current assets Including: income to dispose 29,165.76 36,950.36 29,165.76 fixed assets Gain on disposal of intangible 9,006.72 3,081.07 9,006.72 assets Income from claim 6,267.09 9,277.21 6,267.09 reimbursement Reimbursable receipts 21,121.63 19,353.97 21,121.63 Governmental subsidies 509,575.75 459,987.53 485,175.82 Gain from debt restructuring 17.25 1,688.20 17.25 Other incomes 75,437.21 23,084.72 75,437.21 Total 650,591.41 553,423.06 626,191.48 144 2015 Semi-Annual Report of Midea Group Co., Ltd. 12. Non-operating expenses Amount recorded in current Items 2015 2014 extraordinary profit and loss Total loss on disposal of 77,444.62 99,791.39 77,444.62 non-current assets Including: loss on disposition 77,150.89 99,791.39 77,150.89 fixed assets Loss on disposal of intangible 293.73 293.73 assets Fixed assets inventory loss 10,078.02 12,362.93 10,078.02 External donation 3,331.09 8,995.94 3,331.09 Other Expenses 9,562.64 11,961.76 6,669.61 Total 100,416.37 133,112.02 97,523.34 13. Income tax expenses (1) Detailed information Items 2015 2014 Income tax expenses of the current 2,262,867.37 2,459,809.78 period Deferred income tax expenses -454,861.08 -929,094.31 Total 1,808,006.29 1,530,715.47 (2) Accounting profits and the adjustment process of the income tax expenses Items 2015 Total amount of the profits 10,756,573.91 Income tax expenses calculated according to the statutory/applicable tax rate 2,689,143.48 Influences of adopting different tax rate by the subsidiaries -835,447.52 Influences of the tax rate of the period before adjustment -47,083.95 Influences of the non-taxable income -64,692.78 Influences of the non-deductible cost, expenses and losses 49,080.30 Influences of the deductible loss of the unrecognized deferred income tax -46.40 assets of the previous using period Influences of the deductible temporary difference or the deductible loss of the 17,053.16 unrecognized deferred income tax assets at the period-end Other Income tax expenses 1,808,006.29 14. Net after-tax amount of other comprehensive income For the details of the net after-tax amount of other comprehensive income, please refer to the notes to the other 145 2015 Semi-Annual Report of Midea Group Co., Ltd. comprehensive income of the items of the consolidated balance sheet of the notes of the financial statement. (III) Notes to Consolidated Cash Flow Statement 1. Other cash received relating to operating activities Items 2015 2014 Property rental received 10,537.59 24,491.15 Government subsidies received 531,104.14 455,672.43 Interest income 133,681.65 156,813.70 Income from claim reimbursement 25,378.10 24,591.31 Security Money 261,978.64 74,532.25 Intercourse funds 143,997.78 Other incomes 639,623.26 499,793.59 Total 1,746,301.16 1,235,894.43 2. Other cash paid relating to operating activities Items 2015 2014 Cash paid for management expenses 1,552,194.52 1,626,344.44 Cash paid for sales expenses 6,263,503.17 5,125,931.23 Intercourse funds 194,812.07 Other expenses 82,225.64 114,689.46 Total 7,897,923.33 7,061,777.20 3. Cash paid for the investment Items 2015 2014 Cash paid for the investment 8,915,487.43 26,488,790.03 Total 8,915,487.43 26,488,790.03 The cash paid for the investment of the period was due to the investment such as purchasing the bank financing. 4. Supplementary information on cash flow statements (1) Supplementary information on cash flow statements Supplementary information 2015 2014 1) To adjust the net-profit as cash flow of operating activities: Net profit 8,948,567.62 7,217,628.07 Add: Provision for asset impairment 276,832.18 351,436.39 Depreciation of fixed assets and investment property 1,122,983.88 1,176,192.05 Amortization of intangible assets 45,662.78 45,124.17 146 2015 Semi-Annual Report of Midea Group Co., Ltd. Amortization of long-term deferred expenses 275,286.80 232,750.36 Losses on disposal of fixed assets, intangible assets and 39,272.14 59,759.96 other long-term assets Fixed asset abandoned losses The borrowings from central bank -59,709.63 The deposit taking and the deposit taking of interbank 13,707.04 216.14 Decrease of the accounts deposited in central bank and -349,941.04 74,239.40 the same trade accounts Increase in discount Decrease in loans granted -2,923,618.32 140,373.38 Sound value flexible loss 217,464.01 788,353.68 Financing expense 43,254.90 29,010.03 Investment loss -1,181,204.85 -426,447.09 Decrease in deferred income tax assets -406,064.44 -862,823.62 Increase in Deferred Income Tax Liabilities -513.89 -70,684.04 Decrease in inventory 4,849,751.12 5,140,620.78 Decrease in operating items receivable -15,165,695.75 -8,947,160.59 Increase of operating payable 12,896,474.57 8,282,583.41 Others 113,453.14 Net cash flow from operating activities 8,815,671.89 13,171,462.85 (Continued) Supplementary information 2015 2014 2. Significant investment and financing activities without cash receipts and payments Conversion of debt into capital Convertible bonds due within 1 year Fixed assets under finance leases 3.Change in cash and cash equivalents Cash at the end of the period 5,507,146.23 12,229,330.95 Less: amount at the beginning period 5,272,238.35 16,763,873.80 Add: amount of cash equivalents at the end of period Less: amount of cash equivalents at the beginning period Net increase in cash and cash equivalents 234,907.88 -4,534,542.85 (2) Net cash amount of obtaining the subsidiaries paid in the current period Items 2015 Cash or cash equivalents paid of the period for the enterprise merger occurred in the 5,501.79 current period Less: cash and cash equivalents held by the subsidiaries 8,397.13 on the purchase date Add: cash and cash equivalents paid of the period for the enterprise merger occurred 147 2015 Semi-Annual Report of Midea Group Co., Ltd. in the previous period Obtained the net cash amount paid by the subsidiaries -2,895.34 (3) Composition of cash and cash equivalents Items 2015 2014 1) Cash 5,507,146.23 12,229,330.95 Including: cash in stock 933.79 1,210.89 Bank deposit available for immediate payment 3,193,004.10 11,668,252.58 Other currency available for immediate payment 89,241.66 258,540.86 Deposit in central bank available for payment 199,535.44 Deposit in other banks 2,024,431.24 301,326.62 Withdraw of deposit from other banks 2) Cash equivalents Including: bond investment maturing within 3 months 3) Balance of cash and cash equivalents at the end of the 5,507,146.23 12,229,330.95 period (IV) Other 1. Assets with restricted ownership or usage right Items Book value at the period-end Restricted reason Cash deposit and fixed time Monetary capital 11,336,019.90 deposit Due from central bank 1,627,504.64 Legal reserve Notes receivable L/C guarantee Total 12,963,524.54 2. Foreign currency monetary items (1) Detailed information Foreign currency balance Convert into RMB balance Items Exchange rate convert at the period-end at the period-end Monetary capital Of which: USD 377,194.72 6.1136 2,306,017.65 JPY 173,971.07 0.0501 8,707.60 HKD 172,748.49 0.7886 136,231.19 EUD 23,782.97 6.8699 163,386.63 BRL 28,205.44 1.9709 55,588.92 Dong 21,388,044.70 0.0003 5,997.52 INR 63,271.55 0.0961 6,082.61 148 2015 Semi-Annual Report of Midea Group Co., Ltd. MYR 7.00 1.6387 11.47 Accounts receivable Of which: USD 1,163,152.80 6.1136 7,111,050.98 JPY 335,600.78 0.0501 16,797.49 HKD 17,916.70 0.7886 14,129.29 EUD 26,790.47 6.8699 184,047.84 BRL 240,636.17 1.9709 474,259.73 Dong 257,743,248.75 0.0003 72,274.97 INR 1,988,085.61 0.0961 191,124.61 Short-term loans Of which: USD 882,776.51 6.1136 5,396,942.48 HKD 400,000.00 0.7886 315,444.00 BRL 60,491.57 1.9709 119,220.29 Accounts payable Of which: USD 232,743.52 6.1136 1,422,900.81 JPY 312,924.56 0.0501 15,662.50 HKD 1,115.99 0.7886 880.08 EUD 496.08 6.8699 3,408.00 BRL 75,256.32 1.9709 148,319.52 Dong 310,696,340.35 0.0003 87,123.79 INR 320,071.36 0.0961 30,770.06 Long-term loans Of which: BRL 5,079.07 1.9709 10,010.13 VI. Changes of the consolidated scope (I) Enterprise merger not under the same control 1. Enterprise merger occurred not under the same control in the current period Obtaining Obtaining Cost obtained Obtained time-point of the equity proportion of the method of the from the equity equity (%) equity May 2015 5,501.78 49.00 Purchase (II) Changes of the consolidated scope with other reasons 1. Increase of the consolidated scope Obtaining Obtaining Contribution Contribution Name of the companies method of the time-point of the amount proportion equity equity 149 2015 Semi-Annual Report of Midea Group Co., Ltd. Midea Group Payment Establishment March 2015 100,000.00 100.00% Technology Co. Ltd. Midea Innovation Investment Establishment April 2015 50,000.00 100.00% Co. Ltd. Shunde District, Foshan City, Meihui Management Services Establishment May 2015 273,077.20 100.00% Co. Ltd. Guangdong Midea SIIX Establishment June 2015 50,000.00 75.00% Electronics Co. Ltd. 2. Decrease of the consolidated scope Disposal Disposal Net profits from the Net assets on the Name of the companies method of the time-point of the period-begin to the disposal date equity equity disposal date Consolidation Ningbo Midea Material Supplies Co., Ltd. January 2015 158,948.29 1.22 by merger Carrier Transicold Argentina S.A. Written off January 2015 Guangdong Midea Whole Household Consolidation March 2015 28,048.83 -127.11 Integration Co. Ltd. by merger Foshan City, Jimei Detection Technology Consolidation March 2015 25,693.55 4.17 Co. Ltd. by merger Zhuzhou Annto Logistics Co. Ltd. Written off April 2015 20,507.39 504.13 Zhongshan City, Midea Environmental Electrical Engineering Product Installation Written off May 2015 4,120.14 -0.84 Services Co. Ltd. Wuhu Midea Solar Energy Technology Co. Written off May 2015 28,911.49 -25.38 Ltd. Maytag International Investment Ⅰ B.V. Written off June 2015 3,358.43 Maytag International Investment Ⅳ B.V. Written off June 2015 3,376.45 VII. Equities among other entities (I) Equities amount the significant subsidiaries 1. Composition of the significant subsidiaries Name of the subsidiaries Main operating place Registered place Business nature GD Midea Holding (Singapore) Trading Singapore Singapore Commerce Co., Ltd. Guangdong Midea HVAC Equipment Co., Foshan Foshan Manufacturing Ltd. Guangzhou Hualing Refrigeration Guangzhou Guangzhou Manufacturing Equipment Co., Ltd. 150 2015 Semi-Annual Report of Midea Group Co., Ltd. Foshan Shunde Midea Electrothermal Foshan Foshan Manufacturing Equipment Manufacturing Co., Ltd. Ningbo Midea United Material Supply Ningbo Ningbo Commerce Co., Ltd. Anhui GMCC Precision Manufacturing Wuhu Wuhu Manufacturing Co., Ltd. Anhui GMCC Compressor Sales Co., Ltd. Wuhu Wuhu Commerce Wuhu Midea Life Electric Appliance Wuhu Wuhu Manufacturing Manufacturing Co., Ltd. Guangdong Midea Kitchen Appliance Foshan Foshan Manufacturing Manufacturing Co., Ltd. Hefei Midea Refrigerator Co., Ltd. Hefei Hefei Manufacturing (Continued) Shareholding Name of the subsidiaries proportion (%) Obtaining method Directly Indirectly GD Midea Holding (Singapore) Trading 100.00 Establishment Co., Ltd. Guangdong Midea HVAC Equipment Co., 100.00 Establishment Ltd. Guangzhou Hualing Refrigeration 75.00 25.00 Establishment Equipment Co., Ltd. Foshan Shunde Midea Electrothermal 100.00 Establishment Equipment Manufacturing Co., Ltd. Ningbo Midea United Material Supply 100.00 Establishment Co., Ltd. Anhui GMCC Precision Manufacturing 95.00 5.00 Establishment Co., Ltd. Anhui GMCC Compressor Sales Co., Ltd. 95.00 5.00 Establishment Wuhu Midea Life Electric Appliance 100.00 Establishment Manufacturing Co., Ltd. Enterprise merger Guangdong Midea Kitchen Appliance 100.00 under the same Manufacturing Co., Ltd. control Enterprise merger not Hefei Midea Refrigerator Co., Ltd. 75.00 25.00 under the same control 2. Significant non-wholly-owned subsidiaries 151 2015 Semi-Annual Report of Midea Group Co., Ltd. Dividends Gains and losses Balance of the Shareholding declared to attributed to the equities of the proportion of distribute to the Name of the subsidiaries minority minority minority minority shareholders of shareholders at the shareholders (%) shareholders of the current period period-end the current period Guangdong Midea Group Wuhu 20.00 73,762.37 72,324.64 269,043.07 Refrigeration Equipment Co., Ltd. Midea Group Wuhan Refrigeration 20.00 26,750.71 41,863.39 127,460.56 Equipment Co., Ltd. Guangdong Midea Refrigeration 20.00 147,356.20 120,062.93 656,093.90 Equipment Co., Ltd. Wuxi Little Swan Co., Ltd. 47.33 204,587.96 134,700.62 2,105,925.48 Guangdong GMCC Compressor Co., 40.00 42,118.20 41,019.65 659,020.61 Ltd. Weiling Holding Limited 31.36 99,501.50 52,548.52 1,149,118.22 3. Main financial information of the significant non-wholly owned subsidiaries (1) List of assets and liabilities Closing balance Name of Non-current Total of Current Non-current Total of subsidiaries Current assets assets assets liabilities liabilities liabilities Guangdong Midea Group Wuhu Refrigeration 14,796,498.39 1,554,242.08 16,350,740.47 15,058,753.17 15,058,753.17 Equipment Co., Ltd. Midea Group Wuhan Refrigeration 2,686,914.46 356,088.26 3,043,002.73 2,405,699.93 2,405,699.93 Equipment Co., Ltd. Guangdong Midea Refrigeration 33,429.97 28,716,960.23 3,382,564.54 32,099,524.77 28,875,534.89 28,908,964.86 Equipment Co., Ltd. Wuxi Little 15,469.73 Swan Co., Ltd. 9,682,677.89 1,547,480.23 11,230,158.12 5,848,813.85 5,864,283.58 Guangdong 57.42 152 2015 Semi-Annual Report of Midea Group Co., Ltd. GMCC 3,050,482.84 674,012.33 3,724,495.17 2,076,886.22 2,076,943.64 Compressor Co., Ltd. Weiling Holding 34,689.77 4,892,304.60 1,684,557.39 6,576,861.99 2,903,442.94 2,938,132.71 Limited (Continued) Opening balance Name of Non-current Total of Current Non-current Total of subsidiaries Current assets assets assets liabilities liabilities liabilities Guangdong Midea Group Wuhu Refrigeration 10,801,029.64 1,247,291.63 12,048,321.27 10,763,058.27 10,763,058.27 Equipment Co., Ltd. Midea Group Wuhan Refrigeration 1,643,639.02 322,411.43 1,966,050.45 1,254,919.46 1,254,919.46 Equipment Co., Ltd. Guangdong Midea Refrigeration 30,669.97 17,563,389.95 3,368,997.75 20,932,387.70 17,967,667.01 17,998,336.98 Equipment Co., Ltd. Wuxi Little 33,822.49 Swan Co., Ltd. 9,794,839.33 1,643,783.83 11,438,623.16 6,216,176.98 6,249,999.47 Guangdong GMCC Compressor 3,556,196.47 650,588.80 4,206,785.27 2,569,820.04 2,569,820.04 Co., Ltd. Weiling Holding 37,435.43 4,702,104.07 1,631,599.18 6,333,703.25 2,815,635.23 2,853,070.66 Limited (2) List of gains and losses and cash flow 2015 Name of subsidiaries Operating Total amount Cash flow from Net profits income of the operating 153 2015 Semi-Annual Report of Midea Group Co., Ltd. comprehensive activities income Guangdong Midea Group Wuhu 11,528,483.96 367,049.15 367,049.15 -2,332,957.49 Refrigeration Equipment Co., Ltd. Midea Group Wuhan Refrigeration 4,497,526.79 133,753.55 133,753.55 2,094,865.98 Equipment Co., Ltd. Guangdong Midea Refrigeration 18,367,647.93 825,684.00 825,077.81 7,713,772.14 Equipment Co., Ltd. Wuxi Little Swan Co., Ltd. 6,101,903.86 498,509.02 498,482.28 1,365,269.48 Guangdong GMCC Compressor 4,023,165.30 105,295.50 107,590.14 43,551.50 Co., Ltd. Weiling Holding Limited 3,992,399.47 321,758.80 321,621.44 635,840.19 (Continued) 2014 Total amount Cash flow from Name of subsidiaries Operating of Net profits the operating income comprehensive activities income Guangdong Midea Group Wuhu 10,756,039.49 217,971.53 217,971.53 2,346,586.17 Refrigeration Equipment Co., Ltd. Midea Group Wuhan Refrigeration 5,223,359.51 136,653.21 136,653.21 180,727.18 Equipment Co., Ltd. Guangdong Midea Refrigeration 19,393,786.00 600,067.54 596,788.14 3,563,594.47 Equipment Co., Ltd. Wuxi Little Swan Co., Ltd. 4,974,057.02 350,363.72 350,589.73 825,104.44 Guangdong GMCC Compressor 3,271,999.73 78,001.90 78,001.90 41,638.08 Co., Ltd. Weiling Holding Limited 4,120,335.82 303,858.45 305,721.48 210,078.53 (II) Transactions with the shares of the owners’ equities of the subsidiaries changed but still control the subsidiaries 1. List of the changes of the shares of the owners’ equities of the subsidiaries Changing Shareholding proportion Shareholding proportion Name of subsidiaries time before changes after changes January Weiling Holding Limited* 68.68% 68.66% 2015 Weiling Holding Limited* February 68.66% 68.64% 154 2015 Semi-Annual Report of Midea Group Co., Ltd. 2015 *The changes of the shares of the owners’ equities of the Company in Weiling Holding Limited were due to the executing rights of the equity incentive policies of Weiling Holding Limited. (III) Equities among the joint venture enterprises 1. Significant joint venture enterprises (1) Basic information Shareholding Accounting proportion (%) treatment of the Name of the joint venture Main operating Registration Nature investment of enterprises place place Directly Indirectly the joint venture enterprises Foshan City Shunde District Financial Measured by Foshan Foshan 30.00 Midea Micro-Credit Inc. industry equity method Financial Measured by Midea Micro-Credit Inc. Wuhu Wuhu 16.67 13.33 industry equity method Misr Refrigeration and Manufactu Measured by Air-conditioning Mfg. Co. Cairo Cairo ring 32.50 equity method S.A.E. industry Hefei Royalstar Motor Co., Measured by Hefei Hefei Commerce 49.50 49.50 Ltd. equity method Manufactu Shanxi Huaxiang Group Co., Measured by Linfen Linfen ring 49.00 Ltd. equity method industry 2. Main financial information of significant joint venture enterprises Closing balance/2015 Foshan City Misr Refrigeration Items Shunde District Midea Shanxi Huaxiang Group Co., and Air-conditioning Midea Micro-Credit Inc. Ltd. Mfg. Co. S.A.E. Micro-Credit Inc. Current assets 420,565.35 1,159,954.54 729,309.13 1,214,577.00 Non-current assets 1,971.23 10,107.13 63,162.51 623,897.50 Total of assets 422,536.58 1,170,061.67 792,471.64 1,838,474.50 Current liabilities 198,687.33 861,991.41 462,640.58 1,119,072.83 Non-current liabilities 14,790.35 118,674.19 Total of liabilities 198,687.33 861,991.41 477,430.93 1,237,747.02 155 2015 Semi-Annual Report of Midea Group Co., Ltd. Equities of minority 8,532.34 87,533.70 shareholders Owners’ equities attributed 223,849.25 308,070.26 306,508.37 513,193.78 to the parent company Net assets shares calculated according to the 67,154.77 92,421.08 99,615.22 251,464.95 shareholding proportion Book value of the investment of the equities of 67,154.77 92,421.08 274,055.01 272,930.43 the joint venture enterprises Operating income 29,066.15 50,547.88 571,429.44 638,009.18 Net profits 15,170.95 4,503.70 43,782.15 49,586.24 Net profits of discontinued operations Other comprehensive -18,457.23 income Total of comprehensive 15,170.95 4,503.70 25,324.92 49,586.24 income Shares dividends received from the joint venture 9,601.40 14,444.56 16,993.04 enterprises (Continued) Opening balance/2014 Foshan City Misr Refrigeration Items Shunde District Midea Shanxi Huaxiang Group Co., and Air-conditioning Midea Micro-Credit Inc. Ltd. Mfg. Co. S.A.E. Micro-Credit Inc. Current assets 354,707.78 743,765.32 580,036.53 935,622.34 Non-current assets 1,858.73 14,538.13 72,520.86 670,776.40 Total of assets 356,566.51 758,303.45 652,557.39 1,606,398.74 Current liabilities 115,572.99 516,914.76 287,448.00 1,013,633.57 Non-current liabilities 8,652.70 43,107.12 Total of liabilities 115,572.99 516,914.76 296,100.70 1,056,740.69 Equities of minority 14,104.00 81,856.24 shareholders Owners’ equities attributed 240,993.52 241,388.69 342,352.69 467,801.81 to the parent company Net assets shares calculated according to the 72,298.05 108,624.91 111,264.62 229,222.89 shareholding proportion 156 2015 Semi-Annual Report of Midea Group Co., Ltd. Book value of the investment of the equities of 72,298.05 109,311.06 309,822.44 248,344.27 the joint venture enterprises Operating income 22,410.78 29,855.45 523,764.16 664,603.78 Net profits 223.21 -3,674.83 40,519.80 49,088.28 Net profits of discontinued operations Other comprehensive 10,787.92 income Total of comprehensive 223.21 -3,674.83 51,307.72 49,088.28 income Shares dividends received from the joint venture 28,283.68 enterprises 3. Summary of the financial information of the insignificant joint venture enterprises Items Closing balance/2015 Opening balance/2014 Joint venture Total of the investment book 199,594.54 212,098.58 value Total amount of the followings calculated according to the shareholding proportion Net profits -1,076.85 4,155.85 Other comprehensive 577.46 -588.77 income Total amount of the -499.39 3,567.08 comprehensive income VIII. Risks related to the financial instruments The Company should balance the risks and benefits in risk management, minimize negative effects for business performance and maximize the benefits for shareholders and other equity investors. Based on the risk management target, the basic strategy for risk management is to define and analyze all possible risks, establish risk baseline for risk management, monitor all risks reliably and control the risks within agreed limits. The Company will face all possible risks related to financial instruments during daily activities, including credit risk, liquidity risk and market risk. The management has reviewed and approved the management policies for risks, including: 157 2015 Semi-Annual Report of Midea Group Co., Ltd. (I) Credit risk Credit risk is the possibility of financial loss to one party of financial instruments from failure of fulfillment of obligations of the other party. Credit risk is related to accounts receivables, loans, acceptance, internal and external businesses in letter of guarantee. In order to control the risk, the Company takes following measures: 1. Bank deposit The Company would deposit the money in financial institutions with high credit rating. Therefore, credit risk is low. 2. Accounts receivables The Company would assess the customers for deal on credit. According to credit assessment, customers with good faith would be approved for transactions. The accounts receivables should be monitored to avoid significant risks of bad debts. 3. Highest credit risk exposure Without considering available collateral or other credit enhancement (such as netting agreement of mutual offset for nonconformance), amount of highest credit risk exposure on balance sheet date refers to book value of book balance of financial assets deducting depreciation reserves. 4. Overdue and impairment of financial assets Non-overdue financial assets are those not overdue for principal and interest. Overdue financial assets are those overdue one day or more for principal and interest. Impaired financial assets are those impaired after individual impairment test. Credit risk of financial assets should be assessed according to five credit quality categories classified by China Banking Regulatory Commission. Until June 30, 2015, financial assets not overdue or impaired should be classified into normal category according to five credit quality categories classified by China Banking Regulatory Commission. (II) Liquidity risk Liquidity risk refers to that with capital shortage when the Company is fulfilling obligations of cash payment or payment by other financial assets methods. Liquidity risk comes from financial assets not sold by fair value as 158 2015 Semi-Annual Report of Midea Group Co., Ltd. early as possible; or contractual liabilities unable to be paid; or premature liabilities; or unexpected cash flow. In order to control the risk, the Company adopts settlement of instruments, bank loans and other financial means and combines short-term and long-term financing methods to optimize financing structure and balance the persistence and flexibility. The Company has obtained bank line of credit from multiple commercial banks to satisfy the requirements of working capital and expenditures. (III) Market risk Market risk refers to that fluctuant caused by market price development of fair value of financial instrument or future cash flow. Market risk includes interest rate risk and foreign exchange risk. 1. Interest rate risk Interest rate risk refers to that fluctuant caused by market interest rate change of fair value of financial instrument or future cash flow. Risks related to market interest rate change is related to loans calculated by floating interest rate. So far, the risk of change of market rate does not affect the total profit and shareholders’ equity. 2. Foreign exchange risk Foreign exchange risk is caused by fluctuation in exchange rate. Foreign exchange risk for the Company is related to foreign currency monetary assets and liabilities. If foreign currency assets and liabilities are unbalanced in the short term, the Company should buy or sell foreign currency when necessary to ensure the acceptable level of net risk exposure. The Company’s mainland businesses are using RMB for quoting price. Therefore, foreign exchange risk undertaken by the Company is not significant. Refer to the appended notes of foreign exchange monetary items for the foreign exchange financial assets and liabilities. IX. Disclosure of the fair value (I) Detailed information of the fair value of the assets and liabilities measured by fair value at the period-end Fair value at the period-end Measurement of Measurement of Measurement of Items the first level fair the second level the third level Total value fair value fair value Continuous fair value measurement 159 2015 Semi-Annual Report of Midea Group Co., Ltd. Financial assets measured by fair value with the changes included in the current gains and losses 1. Trading financial assets 14,339.10 14,339.10 (1) Investment of the liabilities instruments (2) Investment of the equity instruments (3) Derivative financial assets 14,339.10 14,339.10 2. Available-for-sale financial assets 538,901.64 538,901.64 (1) Investment of the equity 538,901.64 538,901.64 instruments Total amount of the assets 553,240.74 553,240.74 continuously measured by fair value Financial liabilities measured by fair value with the changes included in the current gains and losses 1. Trading financial liabilities 155,571.85 155,571.85 (1) Issued trading bonds (2) Derivative financial liabilities 155,571.85 155,571.85 (3) Other Total amount of the liabilities 155,571.85 155,571.85 continuously measured by fair value Inconsistent fair value measurement Held for sale assets Total amount of the assets inconsistently measured by fair value Total amount of the liabilities inconsistently measured by fair value (II) The items of the continuous and non-continuous first level fair value measurement adopted the market price at the period-end of the Exchange or the commercial bank as the basis of the fair value measurement. X. Associated Party and Their Transactions (I) Associated Party 1. List of the parent company of the Company (1) Parent company of the Company 160 2015 Semi-Annual Report of Midea Group Co., Ltd. Percentage of Voting right of the Name of parent Place of Registered parent company’s Nature parent company company Registration capital shareholding rate (%) (%) Foshan City Midea Holding Co., Commer Shunde 330,000.00 34.88 34.88 Ltd. cial District (2) The ultimate controller of the Company is Mr. He Xiangjian. 2. For the details of the subsidiaries of the Company, please refer to the notes of the equities among the other entities of the notes of the financial statement. 3. List of the joint ventures enterprise of the Company For the significant joint venture enterprise of the Company, please refer to the notes of the equities among the other entities of the notes of the financial statement. 4. List of the other related parties of the Company Relationship of the other related parties with the Name of other related parties Company Foshan Weishang Technology Industry Development Controlled by the actual controller of the Company Group Co., Ltd. Foshan City Midea Household Appliances Co., Ltd. Controlled by the actual controller of the Company Controlled by direct relative of the ultimate controlling Hefei City Bainian Molding Technology Co., Ltd. shareholder of the Company Controlled by direct relative of the ultimate controlling Guangdong Wellkey Electric Material Co., Ltd. shareholder of the Company Controlled by direct relative of the ultimate controlling Anhui Wellkey Electric Material Co., Ltd. shareholder of the Company Controlled by direct relative of the ultimate controlling Infore Holding Group Co., Ltd. shareholder of the Company Controlled by direct relative of the ultimate controlling Guangdong Yingke Electronics Co., Ltd. shareholder of the Company Foshan City Shunde Midea Development Co., Ltd. Controlled by the actual controller of the Company Foshan Midea Real Estate Development Co., Ltd. Controlled by the actual controller of the Company Joint venture of the shareholding subsidiary of the Shanxi Huaxiang Group Co., Ltd. Company Shanxi Huaxiang Tongchuang Casting Co., Ltd. Subsidiary of the Company’s joint-venture company Guangdong Midea Property Co., Ltd. Controlled by the actual controller of the Company 161 2015 Semi-Annual Report of Midea Group Co., Ltd. Guangdong Meilongbao Wine Co., Ltd. Controlled by the actual controller of the Company Foshan Shunde Rural Commercial Bank Company Share held by the Company Limited (II) Associated party transactions 1. Associated party transactions in relation to sales of goods, provision and receipt of labor services (1) Associated party transactions in relation to purchase of goods and receipt of labor service Transaction Associated party 2015 2014 content Hefei City Bainian Molding Technology Co., Purchase Ltd. commodities Guangdong Wellkey Electric Material Co., Purchase 394,941.99 247,459.88 Ltd. commodities Purchase Foshan Micro Midea Filter Co., Ltd. 79,648.54 59,537.24 commodities Shanxi Huaxiang Tongchuang Casting Co., Purchase 80,924.50 55,638.59 Ltd. commodities Purchase Shanxi Huaxiang Group Co., Ltd. 4,597.01 commodities Purchase Guangdong Yingke Electronics Co., Ltd. 4,456.81 70,429.79 commodities Purchase Anhui Wellkey Electric Material Co., Ltd. 163,113.76 164,519.36 commodities Total 723,085.60 602,181.87 (2) Associated party transactions in relation to sales of goods and provision of labor service Transaction Associated party 2015 2014 content Hefei City Bainian Molding Technology Co., Sell Ltd. commodities Sell PT.MIDEA PLANET INDONESIA 19,508.06 commodities Sell Anhui Wellkey Electric Material Co., Ltd. commodities Guangdong Wellkey Electric Material Co., Sell 944.61 Ltd. commodities Sell Guangdong Yingke Electronics Co., Ltd. commodities 162 2015 Semi-Annual Report of Midea Group Co., Ltd. Total 20,452.67 2. Associated party lease (1) List of the lease of the Company Leasing income Leasing income Types of recognized of the Lessee recognized of the leasing assets same period of last current period year Foshan City Shunde Midea Development Co., Office Ltd. building Office Infore Holding Group Co., Ltd. 1,349.20 1,616.62 building Office Midea Holding Co., Ltd. 353.08 350.38 building Guangdong Meilongbao Wine Co., Ltd. Plant 78.30 127.10 Office Foshan Micro Midea Filter Co., Ltd. 217.62 building Office Guangdong Midea Property Co., Ltd. 2,323.41 2,318.16 building Foshan City Shunde District Midea Micro-Credit Office 267.01 Inc. building Guangdong He Xiangjian Philanthropic Office 56.36 Foundation building 3. Deposit of associated funds Name of the Associated parties 2015 2014 items Deposit of Foshan Shunde Rural Commercial Bank monetary 12,563,085.61 7,348,418.81 Company Limited capital 4. Notes discount interests paid by Associated Party Name of the Associated parties 2015 2014 items Notes discount Anhui Wellkey Electric Material Co., Ltd. 3,924.80 1,137.42 interests Notes discount Guangdong Wellkey Electric Material Co., 4,916.05 4,898.67 interests Ltd. Total 8,840.85 6,036.09 163 2015 Semi-Annual Report of Midea Group Co., Ltd. (III) Associated party accounts receivable and accounts payable 1. Accounts receivables due from associated party Name of the Associated parties Closing amount Opening amount items Accounts PT.MIDEA PLANET INDONESIA 4,378.06 receivable Subtotal 4,378.06 Other accounts receivable Guangdong Midea Property Co., Ltd. 1,164.85 Subtotal 1,164.85 2. Accounts payables due to associated party Name of the Associated parties Closing amount Opening amount items Accounts payable Hefei City Bainian Molding Technology Co., Ltd. 0.88 Guangdong Wellkey Electric Material Co., Ltd. 142,575.52 103,113.58 Foshan Micro Midea Filter Co., Ltd. 1,050.24 Shanxi Huaxiang Group Co., Ltd. 32,537.59 60,495.05 Guangdong Yingke Electronics Co., Ltd. 23,993.32 26,695.69 Anhui Wellkey Electric Material Co., Ltd. 46,619.52 96,658.11 Subtotal 246,776.19 286,963.31 Other accounts payable Guangdong Wellkey Electric Material Co., Ltd. 200.00 Foshan Micro Midea Filter Co., Ltd. Guangdong Yingke Electronics Co., Ltd. 560.00 Subtotal 760.00 XI. Stock payment (I) Overall situation of stock payment 1. Detailed information 164 2015 Semi-Annual Report of Midea Group Co., Ltd. Items Number Amount Total of equity instruments granted in 83,790.00 847,684.27 this period Total of equity instruments executed 19,314.13 342,246.30 in this period Total of equity instruments invalid in this period The first authorization date was 18 February 2014, the executive price of RMB18.72; the first exercise schedule: since the first trading date after 12 months of the authorization date to the last trading date among the 36 months since the authorization date with the right proportion of 1/3; the second exercise schedule: the first trading date after 24 months of the authorization date to the last trading date among 48 months since the trading date with the right proportion of 1/3; the third exercise schedule: since the first trading date after 36 months of the authorization date to the last trading date among the 60 The scope and the remaining period months since the authorization date with the right proportion of the contract of the executive price of 1/3; of the outstanding share option issued The second authorization date was 27 May 2015, the at the period-end of the Company executive price of RMB30.54; the first exercise schedule: since the first trading date after 12 months of the authorization date to the last trading date among the 36 months since the authorization date with the right proportion of 1/3; the second exercise schedule: the first trading date after 24 months of the authorization date to the last trading date among 48 months since the trading date with the right proportion of 1/3; the third exercise schedule: since the first trading date after 36 months of the authorization date to the last trading date among the 60 months since the authorization date with the right proportion of 1/3; The scope and the remaining period of the contract of the executive price of the outstanding other equity instruments issued at the period-end of the Company (II) List of the share-based payment settled by equity Confirmation of fair value of equity instruments Black-Scholes Option Pricing Models at the grant date Recognition basis of the number of the vested Measured according to the expected lapsed option equity instruments 165 2015 Semi-Annual Report of Midea Group Co., Ltd. Reasons of the significant difference between the estimates of the current period with that of the last period Accumulative amount of the share-based payment settled by equity and be included in the 249,272.86 capital surplus Total amount of the expenses recognized according to the share-based payment settled by 113,453.14 equity of the current period XII. Commitments and contingencies (I) Significant commitments Up to 30 June 2015, there was no any significant commitment needed to be disclosed. (II) Contingencies Amount in tax affairs disputes for Brazil subsidiary with 51% shares held by the Company is about 496 million BRL (some cases are lasted for more than 10 years; above amount involves the principal and interest). Until 30 June 2015, some cases remain at the court. According to judgment of practicing lawyers in Brazil, it would be likely to win most cases. Besides, original shareholders of Brazil subsidiary have signed the agreement and promised to compensate the Company according to verdict results in above tax affairs disputes. Maximum compensation amount is about 220 million BRL. XIII. Events after the balance sheet date Naught XIV. Other significant events (I) Segment information 1. Recognition basis and accounting treatment of the segment of the report The Company recognizes the operating segments based on the internal organizational structure, management requirements, internal report system etc. The operating segments of the Company refer to the components that satisfy the following conditions at the same time: 166 2015 Semi-Annual Report of Midea Group Co., Ltd. (1) The components can cause revenues and also occurs expenses among the daily activities; (2) The management layer can periodically assess the operating results of the component for deciding to allot the resources and assess the performance; (3) Can acquire the relevant accounting information of the financial conditions, operating results and the cash flow of the components through analysis. The Company recognizes the report segments based on the products segments and distributes the assets and liabilities jointly used by each segment according to the scale proportion within different segments. 2. Financial information of the report segments Products segments 2015 Items Air conditioning and Refrigerators and Washing machines Small appliances parts parts and parts I. Operating income 46,965,224.32 6,460,838.66 6,135,993.01 19,775,539.04 Of which: external transaction 46,877,053.92 6,455,581.99 6,129,704.41 19,773,346.97 income Transaction income among the 88,170.40 5,256.67 6,288.60 2,192.07 segments II. Operating expenses 41,336,355.70 5,947,895.70 5,596,300.55 17,577,826.41 III. Operating profits (losses) 5,628,868.62 512,942.96 539,692.46 2,197,712.63 IV. Total amount of the assets 83,840,421.80 8,748,702.32 11,288,807.74 33,692,910.69 V. Total amount of the 62,952,871.14 4,615,427.26 5,882,185.21 22,166,007.72 liabilities (Continued) 2015 Items Electric Logistics Other Offset Total machine I. Operating income 3,992,399.46 2,063,887.43 879,639.35 3,398,450.86 82,875,070.41 Of which: external 2,232,470.95 838,438.59 568,473.58 82,875,070.41 transaction income Transaction income 1,759,928.51 1,225,448.84 311,165.77 3,398,450.86 among the segments II. Operating expenses 3,701,322.33 2,038,907.82 929,979.04 3,496,175.17 73,632,412.38 III. Operating profits 291,077.13 24,979.61 -50,339.69 -97,724.31 9,242,658.03 (losses) IV. Total amount of the 7,464,861.50 3,620,940.79 103,220,718.00 110,094,675.72 141,782,687.12 167 2015 Semi-Annual Report of Midea Group Co., Ltd. assets V. Total amount of the 2,938,132.71 2,356,273.99 82,665,440.41 94,243,076.73 89,333,261.71 liabilities (Continued) 2014 Items Air conditioning and Refrigerators and Washing machines Small appliances parts parts and parts I. Operating income 45,730,908.83 5,116,460.93 5,014,772.33 18,200,687.82 Of which: external 45,725,950.84 5,108,993.06 5,014,176.48 18,122,438.71 transaction income Transaction income 4,957.99 7,467.87 595.85 78,249.11 among the segments II. Operating expenses 40,837,961.18 4,643,341.61 4,612,009.72 15,934,024.11 III. Operating profits 4,892,947.65 473,119.32 402,762.61 2,266,663.71 (losses) IV. Total amount of the 60,164,050.80 7,738,064.93 9,749,018.01 17,431,634.77 assets V. Total amount of the 41,264,886.59 5,020,421.49 5,009,297.54 12,798,897.03 liabilities (Continued) 2014 Items Electric Logistics Other Offset Total machine I. Operating income 4,120,335.82 1,572,766.55 826,828.74 2,874,542.66 77,708,218.36 Of which: external 2,404,253.64 947,480.60 384,925.03 77,708,218.36 transaction income Transaction income 1,716,082.18 625,285.95 441,903.71 2,874,542.66 among the segments II. Operating expenses 3,762,376.99 1,557,863.37 514,109.23 2,843,406.94 69,018,279.27 III. Operating profits 357,958.83 14,903.18 312,719.51 31,135.72 8,689,939.09 (losses) IV. Total amount of the 6,821,221.25 3,678,636.47 74,852,446.07 62,345,514.51 118,089,557.79 assets V. Total amount of the 2,803,298.94 2,638,086.62 51,737,990.04 45,341,424.36 75,931,453.89 liabilities (II) Significant transactions and events with influences on the decision of other investors Naught XV. Project notes of financial statements of the parent company (I) Notes on items in the balance sheet of the parent company 168 2015 Semi-Annual Report of Midea Group Co., Ltd. 1. Other receivables (1) Detailed Information 1) Category details Closing balance Bad debt Book balance Category provision Book value Proportion Amount Amount Proportion (%) (%) Significant single amount and individual provision for bad debts 67,824.98 1.73 67,824.98 Withdraw the bad debt provision by credit risks characteristics 3,835,866.59 97.67 1,208.16 0.03 3,834,658.43 Non-significant single amount and individual provision for bad debts 23,469.37 0.60 23,469.37 Total 3,927,160.94 100.00 1,208.16 0.03 3,925,952.78 (Continued) Opening balance Bad debt Book balance Category provision Book value Proportion Amount Amount Proportion (%) (%) Significant single amount and individual provision for bad debts Withdraw the bad debt provision by credit risks characteristics 2,419,320.65 100.00 1,014.44 0.04 2,418,306.21 Non-significant single amount and individual provision for bad debts Total 2,419,320.65 100.00 1,014.44 0.04 2,418,306.21 2) Other receivables with provision for bad debt by the aging analysis method in the combination Closing balance Aging Provision for bad Withdrawal Book balance account proportion (%) Within 1 year 23,369.29 1,168.47 5.00 169 2015 Semi-Annual Report of Midea Group Co., Ltd. 1 to 2 years 343.10 34.31 10.00 2 to 3 years 17.94 5.38 30.00 Subtotal 23,730.33 1,208.16 5.09 3) Receivables with provision for bad debt by the specific identification method in the combination Closing balance Name of the groups Provision for Withdrawal Book balance bad account proportion (%) Related come-and-go groups 3,812,136.26 among the consolidated scope (2) List of the bad debt provision withdrawn, recovered or reversed The amount of the reversed bad debt provision was of RMB193720 (3) List of the category of the nature of the other accounts receivable Nature Closing balance Opening balance Margin 422.14 488.08 Suspense payment receivable 3,926,738.80 2,418,832.57 Subtotal 3,927,160.94 2,419,320.65 (4) List of the top 5 of other accounts receivable Proportion to Name of the the balance of Bad debt Nature Book balance Aging entities the accounts provision receivable (%) Suspense payment Within 1 No. 1 receivable 1,797,710.93 year 45.78 Suspense payment Within 1 No. 2 receivable 718,800.00 year 18.30 Suspense payment Within 1 No. 3 receivable 604,726.22 year 15.40 Suspense payment Within 1 No. 4 receivable 167,251.50 year 4.26 Suspense payment Within 1 No. 5 receivable 148,800.00 year 3.79 Subtotal 3,437,288.65 87.53 170 2015 Semi-Annual Report of Midea Group Co., Ltd. 2. Long-term equity investment (1) Detailed information Closing balance Items Depreciation Book balance Book value reserves Investment on the subsidiaries 16,696,408.94 16,696,408.94 Investment on the joint venture enterprises 248,987.15 248,987.15 Total 16,945,396.09 16,945,396.09 (Continued) Opening balance Items Depreciation Book balance Book value reserves Investment on the subsidiaries 16,288,331.74 16,288,331.74 Investment on the joint venture enterprises 260,550.99 260,550.99 Total 16,548,882.73 16,548,882.73 (2) Investment on the subsidiaries Investees Opening balance Increase Decrease Wuxi Little Swan Company Limited 2,639,969.13 Foshan City Midea Household 1,954,935.95 Appliances Group Co., Ltd. Midea Group Finance Co., Ltd. 1,425,000.00 Hefei Midea HVAC Equipment Co., 1,045,000.00 Ltd. Hubei Midea Refrigerator Co., Ltd. 830,239.03 Anhui GMCC Precision 800,000.00 Manufacturing Co., Ltd. Foshan City Shunde District Midea 749,000.00 Home Appliance Industry Co., Ltd. Wuhu GMCC Air-Conditioning 726,000.00 Equipment Co., Ltd. Guangdong Midea Refrigeration 641,920.00 Equipment Co., Ltd. Annto Logistics Company Limited 626,739.34 Guangdong Midea Commercial Air 569,430.35 171 2015 Semi-Annual Report of Midea Group Co., Ltd. Conditioning Equipment Co., Ltd. Ningbo Midea United Material Supply 480,000.00 Co., Ltd. Guangzhou Hualing Refrigeration 479,408.58 Equipment Co., Ltd. Guangzhou Midea Hualing 420,000.00 Refrigerator Co., Ltd. Hefei Royalstar Refrigerator Co., Ltd. 414,685.93 Guangdong Midea Group Wuhu 339,074.28 Refrigeration Equipment Co., Ltd. Anhui GMCC Refrigeration 308,750.00 Equipment Co., Ltd. Guangdong Midea HVAC Equipment 270,000.00 Co., Ltd. Midea Electric Investment (BVI) 236,542.62 Limited Midea International Corporation 176,974.50 Limited Company Guangzhou Hualing Air-conditioners 136,745.27 Equipment Co., Ltd. Foshan City Midea Carrier 120,000.00 Refrigeration Equipment Co., Ltd. Hefei Midea Material Supplies Co., 117,000.00 Ltd. Midea Group E-commerce Co., Ltd. 100,000.00 Anhui GMCC Compressor Sales Co., 95,000.00 Ltd. Guangdong GMCC Compressor Co., 89,787.77 Ltd. Hefei Hualing Co., Ltd. 88,646.33 Midea Group Wuhan Refrigeration 60,508.23 Equipment Co., Ltd. Foshan City Midea Material Supplies 54,000.00 Co., Ltd. Zhejiang GMCC Compressor Co., Ltd. 50,000.00 Wuhu Little Swan Refrigeration 47,500.00 Equipment Co., Ltd. Chongqing Midea Refrigeration 47,500.00 Equipment Co., Ltd. Guangdong GMCC Precision 38,437.80 Manufacturing Co., Ltd. Foshan City Midea Air-conditioners 36,061.94 Industrial Investment Co., Ltd. 172 2015 Semi-Annual Report of Midea Group Co., Ltd. Chongqing Midea General 31,420.56 Refrigeration Equipment Co., Ltd. Ningbo Meijia Investment 18,305.20 Management Co., Ltd. Hefei Royalstar Midea Appliance 14,668.09 Marketing Co., Ltd. Foshan City Shunde District Midea 9,000.00 Electronic Technology Co., Ltd. Midea Electric Investment (BVI) 80.84 Limited Midea Group Payment Technology Co. 100,000.00 Ltd. Midea Innovation Investment Co. Ltd. 35,000.00 Shunde District, Foshan City, Meihui 273,077.20 Management Services Co. Ltd. Total 16,288,331.74 408,077.20 (Continued) Depreciation Closing balance reserves of the Investees Closing balance withdrawn of the depreciation current period reserves Wuxi Little Swan Company Limited 2,639,969.13 Foshan City Midea Household 1,954,935.95 Appliances Group Co., Ltd. Midea Group Finance Co., Ltd. 1,425,000.00 Hefei Midea HVAC Equipment Co., 1,045,000.00 Ltd. Hubei Midea Refrigerator Co., Ltd. 830,239.03 Anhui GMCC Precision 800,000.00 Manufacturing Co., Ltd. Foshan City Shunde District Midea 749,000.00 Home Appliance Industry Co., Ltd. Wuhu GMCC Air-Conditioning 726,000.00 Equipment Co., Ltd. Guangdong Midea Refrigeration 641,920.00 Equipment Co., Ltd. Annto Logistics Company Limited 626,739.34 Guangdong Midea Commercial Air 569,430.35 Conditioning Equipment Co., Ltd. Ningbo Midea United Material 480,000.00 Supply Co., Ltd. 173 2015 Semi-Annual Report of Midea Group Co., Ltd. Guangzhou Hualing Refrigeration 479,408.58 Equipment Co., Ltd. Guangzhou Midea Hualing 420,000.00 Refrigerator Co., Ltd. Hefei Royalstar Refrigerator Co., 414,685.93 Ltd. Guangdong Midea Group Wuhu 339,074.28 Refrigeration Equipment Co., Ltd. Anhui GMCC Refrigeration 308,750.00 Equipment Co., Ltd. Guangdong Midea HVAC 270,000.00 Equipment Co., Ltd. Midea Electric Investment (BVI) 236,542.62 Limited Midea International Corporation 176,974.50 Limited Company Guangzhou Hualing Air-conditioners Equipment Co., 136,745.27 Ltd. Foshan City Midea Carrier 120,000.00 Refrigeration Equipment Co., Ltd. Hefei Midea Material Supplies Co., 117,000.00 Ltd. Midea Group E-commerce Co., Ltd. 100,000.00 Anhui GMCC Compressor Sales 95,000.00 Co., Ltd. Guangdong GMCC Compressor 89,787.77 Co., Ltd. Hefei Hualing Co., Ltd. 88,646.33 Midea Group Wuhan Refrigeration 60,508.23 Equipment Co., Ltd. Foshan City Midea Material 54,000.00 Supplies Co., Ltd. Zhejiang GMCC Compressor Co., 50,000.00 Ltd. Wuhu Little Swan Refrigeration 47,500.00 Equipment Co., Ltd. Chongqing Midea Refrigeration 47,500.00 Equipment Co., Ltd. Guangdong GMCC Precision 38,437.80 Manufacturing Co., Ltd. Foshan City Midea Air-conditioners 36,061.94 Industrial Investment Co., Ltd. 174 2015 Semi-Annual Report of Midea Group Co., Ltd. Chongqing Midea General 31,420.56 Refrigeration Equipment Co., Ltd. Ningbo Meijia Investment 18,305.20 Management Co., Ltd. Hefei Royalstar Midea Appliance 14,668.09 Marketing Co., Ltd. Foshan City Shunde District Midea 9,000.00 Electronic Technology Co., Ltd. Midea Electric Investment (BVI) 80.84 Limited Midea Group Payment Technology 100,000.00 Co. Ltd. Midea Innovation Investment Co. 35,000.00 Ltd. Shunde District, Foshan City, Meihui Management Services Co. 273,077.20 Ltd. Total 16,696,408.94 (3) Investment on the joint venture enterprises Increase/decrease Gains and losses of the Opening Adjustment of other Investees Additional Negative investment balance comprehensive investment investment recognized income under the equity method Joint venture enterprises Hefei Royalstar Motor Co., Ltd. 99,957.63 -153.17 Foshan City Shunde District 72,298.05 4,458.12 Midea Micro-Credit Inc. Midea Micro-Credit Inc. 60,347.18 -977.37 Golden Eagle Asset 27,948.13 2,734.74 Management Co., Ltd. Subtotal 260,550.99 6,062.32 (Continued) Increase/decrease Balance Closing Investees Changes Cash Withdra of the Other balance of other dividends wal of depreciati 175 2015 Semi-Annual Report of Midea Group Co., Ltd. equities or profits deprecia on declared to tion reserves issue reserves at the period-en d Joint venture enterprises Hefei Royalstar Motor Co., 99,804.46 Ltd. Foshan City Shunde District Midea 9,601.40 67,154.77 Micro-Credit Inc. Midea Micro-Credit Inc. 8,024.76 51,345.05 Golden Eagle Asset 30,682.87 Management Co., Ltd. Subtotal 17,626.16 248,987.15 (II) Notes to profit statement of the parent company 1. Operating income/ Operating cost 2015 2014 Items Income Cost Income Cost Income of other 469,983.10 14,341.34 365,575.75 8,067.65 business Total 469,983.10 14,341.34 365,575.75 8,067.65 2. Investment income Items 2015 2014 Long-term investment incomes accounted for 4,071,858.09 3,314,391.81 by cost method Long-term investment incomes accounted for 6,062.32 44.77 by equity method Investment income produced from disposing -22,598.02 the long-term equity investment Investment income of the holding period of 1,860.00 the available-for-sale financial assets Financial investment income 117,001.50 84,654.96 Total 611,607.12 122,578.02 Long-term investment incomes accounted for 4,808,389.03 3,499,071.54 by cost method 176 2015 Semi-Annual Report of Midea Group Co., Ltd. XVI. Other supplementary information (I) Non-recurring profits and losses Items Amount Profits and losses of disposal of illiquid assets, including the offset part with -45,667.95 provision for the impairment of assets Tax refund or exemption with ultra vires approval, without formal approval documents, or as sporadic The government subsidies included in the current profits and losses(the government subsidiary is closely related with normal business of the company, it keeps with the 485,175.82 state industrial policy, but it does not include the government subsidiaries which based on standard quota or quantitative continuous enjoyment ) Payment for occupied funds collected from the non-financial enterprises and recorded into the current profits and losses When the company obtains the subsidiary, the investment cost of associated enterprises and joint venture is less than the income produced from fair value of the identifiable net assets which shared by the investment company at the acquisition of the investment. Gain or loss arising from non-monetary asset trade Profits or losses which entrust others for investment or asset management. 682,954.05 Provision of impairment of various assets for force majeure, i.e., natural disaster Gain or loss from debt recombination 17.25 Expenses for enterprise restructuring, i.e., expenditures for laid-off staff, combination, etc. (Continued) Items Amount Gain or loss arising from the trading price higher than fair value Net gain or loss of current period of the enterprises under common control from beginning of period to the date of merger. Profits and losses produced from contingencies which have nothing to do with the normal operation of business of the company In addition to the effective hedging business related with the normal operation of business of the company, holding the tradable financial assets, profits and losses of fair value variable produced from transaction monetary assets, and disposal of 95,856.62 tradable financial assets, transaction financial liabilities and investment income produced from salable financial assets Reversals of Provision for amounts receivable impairment which tested alone for 341.34 177 2015 Semi-Annual Report of Midea Group Co., Ltd. impairment Profits and losses gained from foreign trusted loans Profits and losses produced form fair value variables of investment real estate by using the fair value modes for subsequent measurement The influences of current profits and losses by one-time adjustment according to the laws and regulations of the revenue, accountancy and so on Hosting fees obtained by entrusting the operation Other operating income and expenditure except the items mentioned above 82,747.20 Other profit and loss items in accordance with the definition of non-recurring profits and losses Subtotal 1,301,424.33 Less: the number of the influence of income tax of the enterprise(the income tax 287,749.72 decreased as “-”) The influence amount of the minority interests (after tax) 122,589.00 The net amount of non-recurring gains and losses belonged to the owner of the parent 891,085.61 company (II) The rate of return on net assets and earnings per share 1. Detailed information The rate of Earnings per share (RMB / share) return on common Profits of Reporting Period stockholder's Basic EPS Diluted EPS equity by weighted average method Net-profits pertaining to the ordinary share 19.62% 1.97 1.96 shareholders Net profits attributed to the holders of ordinary shares 17.52% 1.76 1.75 of the company after deducting abnormal losses 2. Counting process of the rate of return of the weighted average net assets Items S/N 2015 Net-profits pertaining to the ordinary A 8,324,122.61 share shareholders Extraordinary gain or loss B 891,085.61 Net profits attributed to the holders of ordinary shares of the company after C=A-B 7,433,037.00 deducting the nonrecurring gains and losses 178 2015 Semi-Annual Report of Midea Group Co., Ltd. The opening net assets attributed to the D 39,470,499.84 holders of ordinary shares of the company The issue of new shares or debt and other E1 246,210.97 new shares, these all belong to the net assets which attributed to the holders of ordinary shares of the company E2 1,301,585.33 The cumulative number of months of the increased net assets during the next month to final Reporting Period Repurchase or cash dividends decreased, F1 1 these are parts of the net assets attributed to the holders of ordinary shares of the F2 company Net-profits pertaining to the ordinary G 4,215,808.47 share shareholders Extraordinary gain or loss H 2 Other change of net assets attributable to I1 326,143.62 common shareholders of the parent I2 701,987.57 company The cumulative number of months of the J1 3 increased and decreased net assets during J2 the next month to final Reporting Period The number of months during the K 6 Reporting Period L= The weighted average net assets D+A/2+(E1×F1+E2×F2)/K-G×H/K+(I 42,431,398.63 1×J1+I2×J2)/K The rate of return on the weighted average M=A/L 19.62% net assets The rate of return on weighted average net assets after deducting the nonrecurring N=C/L 17.52% gains and losses 3. Counting process of the basic EPS and diluted EPS (1) Counting process of the basic EPS Items S/N 2015 Net-profits pertaining to the ordinary share A shareholders 8,324,122.61 Extraordinary gain or loss B 891,085.61 Net profits attributed to the holders of ordinary C=A-B 179 2015 Semi-Annual Report of Midea Group Co., Ltd. shares of the company after deducting the 7,433,037.00 nonrecurring gains and losses Total amount of the shares at the period-begin D 4,215,808.47 Amount of the increased shares owing to accumulation fund turn add equity or the E distribution of the shares dividends Amount of the increased shares owing to the F1 issue of new shares or the debt-to-equity swap 13,894.52 The cumulative number of months of the increased shares during the next month to final F2 60,419.60 Reporting Period Amount of the decreased shares owning to G1 1 re-purchasement The cumulative number of months of the G2 decreased shares during the next month to final Reporting Period The number of the share compressing during H the Reporting Period The number of months during the Reporting I Period Weighted average amount of the outstanding J common shares Basic EPS K 6 Basic EPS deducting the non-current gains and L=D+E+(F1×G1+F2×G2)/K-H×I/K-J losses 4,218,124.22 Net-profits pertaining to the ordinary share M=A/L shareholders 1.97 Extraordinary gain or loss N=C/L 1.76 (2) Counting process of the diluted EPS Items S/N 2015 Net-profits pertaining to the ordinary share shareholders A 8,324,122.61 Influence number of the net profits by the dilutive B potential ordinary shares Diluted net profits attributed to the common share C=A-B 8,324,122.61 shareholders of the Company Extraordinary gain or loss D 891,085.61 Diluted net profits attributed to the common share E=C-D 7,433,037.00 shareholders of the Company deducting the non-current 180 2015 Semi-Annual Report of Midea Group Co., Ltd. gains and losses Weighted average amount of the outstanding common F 4,218,124.22 shares Weighted average amount of the increased common shares owning to the stock warrant, the stock option and G 20,630.47 the convertible bonds Diluted weighted average amount of the outstanding H=F+G 4,238,754.69 common shares Diluted EPS M=C/H 1.96 Diluted EPS deducting the non-current gains and losses N=E/H 1.75 181 2015 Semi-Annual Report of Midea Group Co., Ltd. Section X Documents Available for Reference 1. The original of the 2015 Semi-Annual Report of Midea Group Co., Ltd. signed by the legal representative; 2. The financial statements signed and stamped by the legal representative, the financial head and the person-in-charge of the accounting work; 3. The originals of all company documents and announcements that have been disclosed to the public via newspaper designated for information disclosure during the Report Period. Midea Group Co., Ltd. Legal Representative: Fang Hongbo 31 August 2015 182
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