Midea Group Co., Ltd.
2014 Annual Report
31 March 2015
2014 Annual Report of Midea Group Co., Ltd.
A Letter to Shareholders
Despite adverse conditions that have caused a general slowdown in growth in the household
appliance industry in 2014, we firmly upheld our strategy of “advanced products, efficiency-driven
and global operations” and continued to strengthen our transformation. As a result, we found
ourselves at a new starting point, with operating revenues exceeding RMB140 billion and net
profits exceeding RMB10 billion. At the same time, our product power and operating efficiency
were effectively increased, our functional quality was thoroughly improved, our overseas network
of business was further optimized and our own brands were developed at a high speed. Meanwhile,
we set up the “Central Research Institute”, the “Smart Home Research Institute”, a four-level R&D
system and the “Global Innovation Center” to pursue technological backup for our growth
resumption. We also established an E-commerce subsidiary to operate our official online shopping
mall and have vigorously expanded our online business. Meanwhile, we unveiled our M-SMART
Intelligent Home Strategy to help form a network and eco-chain in the Internet-based home sector
through open cooperation while providing integrated solutions for consumers. Furthermore, we put
forward an equity incentive plan to formulate a long-term incentive mechanism consequently
stepping up our corporate governance to a higher level. In 2014, thanks to the attention and support
from all our investors, our market value exceeded RMB100 billion for the first time.
The history of Midea has been one of constant reform and development. Without operational
transformation, our perseverance for quality operation and growth and the focus on business and
products that have been the essence of the company since 2011, today’s Midea would not even exist.
However, the world is changing faster than we might have imagined, and there is no time for us to
sit back and enjoy what we have achieved. We either reform or face the fate of being phased out.
This is a significant era, an era where we can touch the sky, as long as we are not afraid to reach out
with our hands and an era in which our dreams may just come true provided we never give up. This
is also an era of great change where changes are becoming greater and faster than our imagination
and where change has become the norm. Mobile Internet has radically changed the development
course of the whole world and how people live and work. There is not a single day that passes by
without a fierce collision between both traditional and modern thinking, amid conservativeness and
innovation, or whether to stay the same or to change. Profound changes have been happening to the
2014 Annual Report of Midea Group Co., Ltd.
entire world’s thinking, logic and business models as mobile Internet moves forward.
The Internet has directly connected users with enterprises. Fundamental changes have been taking
place in the relationship between products and users, and users have become the core in business
operation. Fundamentally by firmly embedding Internet thinking with technology, unconnected and
stationary household appliances will change. Mobile Internet will not only restructure the industry
and rebuild the competitiveness of enterprises, but it will also result in a broader industry with
unclear boundaries. All industries will go through revolutionary changes due to this Internet
thinking. The future of household appliance manufacturers depends on public systems or platforms,
leaving it extremely difficult for any enterprise to try to build such a platform or system on its own.
Being in such an era requires us to review all our business and management processes, growth
patterns and operating models. We are not shifting to an Internet company but using Mobile Internet
technology, tools and thinking to recreate a space dimension for the restructuring of our business
and operating models, which is the real challenge for us at present.
Midea is to become an up-to-date enterprise that keeps up with the times and not an old-fashioned
enterprise that stands still. How can we become a more modern enterprise? Through disruptive
innovation and opening up, we will redesign our development strategy and direction. Disruptive
innovation involves rethinking our ways of growth, management concepts, governance mechanism,
incentive mechanisms, business model, strategic direction, form of organizational development and
our successful experiences and traditions in the past. To open up is to, with an open mind, set up
open organizations and utilize all social resources in an open transparent manner with the intention
of working towards the right path for sustained growth.
We are never afraid of change. An excellent mechanism and culture as well as high-efficient
execution are our core competitive edges. With an innovative mind and an attitude of open-up
cooperation, we will embrace progress and any changes brought about by new technology reform as
well as by various public systems and platforms. Meanwhile, we shall never forget where we began.
We will uphold the hardworking spirit and our persistence in good product quality. High-quality
products and services will always be our foundation. We can only have a future through competitive
products of good quality.
We have dreams; through our persistence, our willingness to change, our improved technology and
2014 Annual Report of Midea Group Co., Ltd.
product strength, and our expanding global business network, we shall enjoy a leading position in
the domestic household appliance industry as well as a strong position in the global industry. We
have a good culture. We will care more about employees, improve the long-term incentive
mechanisms, perform our social responsibilities, devote ourselves to new products, technologies
and fields that are helpful to the society and recognized by consumers consequently enabling a lot
more people to realize their dreams.
In 2015, competition will become fiercer in the industry, posing tougher challenges and to deal with
this, we will work on the following aspects. Firstly, we will carry out bold in-depth transformation
on our existing traditional business by increasing product competitiveness, efficiency and lean
management. Secondly, we will make bold innovations to boost development of the four platforms
of e-commerce, logistics, capital and internationalization, and carry out open cooperation to reform
our existing household appliance business and strengthen the development of intelligent products
and the building of platforms that will provide integrated solutions. Finally, we will introduce new
business lines alongside our existing household appliance business and unflinchingly seek new
business directions and models to find new growth points for our development, within five or ten
years.
We are grateful for the companionship of all shareholders. To have investors, who share respect and
embrace the same values, is an important source of power for us to persist in our dreams and
ultimately to realize them. We will work harder to become the most welcomed and trusted
enterprise among investors and we look forward to sharing this promising future of Midea with you.
Our best wishes to all shareholders and investors!
Board of Directors of Midea Group Co., Ltd.
March 2015
2014 Annual Report of Midea Group Co., Ltd.
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
free of any false records, misleading statements or material omissions, and shall
together be wholly liable for the truthfulness, accuracy and completeness of its
contents.
All directors of the Company attended the Board meeting for reviewing this
Annual Report. There are no directors, supervisors, or senior management who
do not warrant or who dispute the truthfulness, accuracy and completeness of
the contents of this Annual Report.
The financial statements of the Company for 2014 have been audited by
Pan-China Certified Public Accountants Co., Ltd. and have obtained a standard
unqualified audit report.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Ms.
Yuan Liqun, responsible person for the Company’s financial affairs have
represented and warranted that the financial statements in this report are true
and complete.
The Board has considered and approved the following profit distribution plan
for the year 2014: Based on the Company's share capital at the end of 2014, it is
proposed that the Company will distribute cash dividends of RMB10 per 10
shares (tax inclusive) to all shareholders.
The future plans and some other forward-looking statements mentioned in this
report shall not be considered as virtual promises of the Company to investors.
Therefore investors are kindly reminded to pay attention to possible investment
risks.
This report has been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese
version shall prevail.
2014 Annual Report of Midea Group Co., Ltd.
Contents
Section I Important Notes, Contents and Definitions ........................................................................................... 5
Section II Corporate Profile.................................................................................................................................... 8
Section III Summary of Accounting Data and Financial Indicators ..................................................................11
Section IV Report of the Board of Directors ....................................................................................................... 13
Section V Significant Events ................................................................................................................................. 57
Section VI Changes in Shares and Information about Shareholders................................................................ 79
Section VII Preferred Shares ................................................................................................................................ 87
Section VIII Information about Directors, Supervisors, Senior Management and Employees ...................... 88
Section IX Corporate Governance ....................................................................................................................... 99
Section X Internal Control ...................................................................................................................................112
Section XI Financial Report ................................................................................................................................116
Section XII Documents Available for Reference ............................................................................................... 262
2014 Annual Report of Midea Group Co., Ltd.
Definitions
Term Definition
Company, the Company, or Midea Group Midea Group Co., Ltd.
Midea Holding Midea Holding Co., Ltd.
GD Midea Holding GD Midea Holding Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
SDE Bank Guangdong Shunde Rural Commercial Bank Co., Ltd.
Midea Group Finance Midea Group Finance Co., Ltd.
Reporting Period 1 Jan. 2014 to 31 Dec. 2014
2014 Annual Report of Midea Group Co., Ltd.
Section II Corporate Profile
1. Corporate Information
Stock abbreviation Midea Group
Stock code
Stock exchange where the
shares of the Company are Shenzhen Stock Exchange
listed
Name of the Company in
美的集团股份有限公司
Chinese
Abbr. of the Company name
美的集团
in Chinese
Name of the Company in
MIDEA GROUP CO.,LTD.
English (if any)
Legal representative Fang Hongbo
Midea Headquarters Building, No. 6 Meidi Dadao, Beijiao Town, Shunde District, Foshan City,
Registered address
Guangdong Province, China
Postal code
Midea Headquarters Building, No. 6 Meidi Dadao, Beijiao Town, Shunde District, Foshan City,
Business address
Guangdong Province, China
Postal code
Company website http: //www. midea. com
E-mail IR@midea. com
2. Contact us
Company Secretary Representative for Securities Affairs
Name Jiang Peng Wang Jing
Midea Headquarters Building, No. 6 Meidi Dadao, Beijiao Town, Shunde District,
Address
Foshan City, Guangdong Province, China
Tel. 0757-26334559 0757-22607708
Fax 0757-26651991
E-mail IR@midea.com
2014 Annual Report of Midea Group Co., Ltd.
3. Information Disclosure and Place Where the Annual Report Is Kept
Newspaper designated by the Company for
China Securities Journal, Securities Times and Shanghai Securities News
information disclosure
Website designated by the China Securities
Regulatory Commission (CSRC) for the http: //www. cninfo.com.cn
publication of the Annual Report
Place where the Annual Report of the Company is
Office of the Board of Directors of the Company
kept
4. Company Registration and Alteration
Registration No.
Registration Taxation registration
Place of registration of business license Organization code
date No.
for a legal entity
Administration for Industry and 4406812005736 440681722473344 72247334-4
Commerce of Shunde District in
Initial registration 2000-04-07
Foshan City, Guangdong
Province, China
2014-09-19 Market Security Supervision 440681000038581 440681722473344 72247334-4
Registration at the
Bureau of Shunde District in
end of the Reporting
Foshan City, Guangdong
Period
Province, China
Changes in main business
activities since the Company was None
listed
Changes of controlling
None
shareholders of the Company
5. Other Relevant Information
Accounting firm engaged by the Company
Name of the accounting firm Pan-China Certified Public Accountants Co., Ltd. (Special General Partnership)
Business address of the accounting
4-10F, Xinhu Commercial Tower, No. 128 Xixi Road, Hangzhou, Zhejiang Province, China
firm
Name of accountants for writing
Zhang Weigang, Huang Zhiheng
signature
2014 Annual Report of Midea Group Co., Ltd.
Sponsors engaged by the Company to continuously perform its supervisory function during the Reporting Period
Representative
Name of the sponsor Business office of the sponsor Supervisory period
of the sponsor
North Block of Times Square Excellence (Phase II), No. 8
CITIC Securities Wu Hongri, Qin
Zhongxin San Road. Futian District, Shenzhen City, 2013.9.18-2015.12.31
Company Limited Chengdong
Guangdong Province, China
China International
27 and 28F, International Trade Building 2, No. 1 Li Xiaodai,
Capital Corporation 2013.9.18-2015.12.31
Jianguomenwai Avenue, Beijing, China Zhao Liang
Limited
Financial advisor engaged by the Company to continuously perform its supervisory function during the Reporting
Period
Representative of
Name of the financial
Business office of the financial advisor the financial Supervisory period
advisor
advisor
China International
27 and 28F, International Trade Building 2, 1 Li Xiaodai, Gao
Capital Corporation 2013.9.18-2015.12.31
Jianguomenwai Avenue, Beijing, China Shu
Limited
Notes: Upon the receipt of a personnel change notice from China International Capital Corporation Limited
(CICC) on 30 Jan. 2014, the Company issued an announcement stating that Mr. Song Yong of the CICC was no
longer responsible for relevant work during the supervisory period due to his job change. Mr. Zhao Liang and Mr.
Zeng Luhai would replace him
