Midea Group Co., Ltd.
The 2016 Annual Report
31 March 2017
The 2016 Annual Report of Midea Group Co., Ltd.
A Letter to Shareholders
“Go for our dreams no matter how difficult it will be”, we have kept that in mind ever since
the beginning of 2016.
In a changing era with global economic turmoil and China’s economy in a “New Normal”
state, we have never stopped chasing our dreams. With the courage to transform, the
pragmatic approach, the hard-working spirit and the enthusiasm in our genes, as well as a
market-oriented and open mechanism, the spirit of pioneering and sharing, we were able to
deliver an impressive performance for the past 2016 and move closer to achieving our
dreams.
The targets we set for 2016 were all achieved. We enjoy a higher position in this industry
with the improved efficiencies, optimized asset structure and growing overseas business.
Our efforts in global operations and asset allocation have produced remarkable results. The
acquisitions of Toshiba Lifestyle, KUKA, CLIVET, SERVOTRONIX, etc. around the world
are key steps of Midea advancing towards a global technology group of consumer
appliances, HVAC and robots & automation. Also, Midea has earned support and
recognition from all its shareholders and the capital market, with its market cap up 34% for
2016 and exceeding RMB200 billion for the first time. In this year, Midea made it to the
Fortune Global 500.
However, with the world now changing much faster than one might have imagined, the
fittest can never always be the fittest, and an enterprise has to keep adapting itself to
changes for survival and growth.
In 2017, we will “Keep the Wind in Our Sails”. We will maintain our strategic focusers, face
our weaknesses with a humble heart, keep working hard and believe that our efforts will be
rewarded someday. After decades of development, we are confident about Midea’s future.
It WILL become a global technology enterprise. To make it happen, we will remain
pioneering, hold onto Midea’s spirit and build a stronger and better Midea.
“Leading Products, Operational Efficiency & Global Operations” has been our core strategic
The 2016 Annual Report of Midea Group Co., Ltd.
focuses for the past few years, and we will stick to that with the following measures for a
long time to come:
Firstly, we will keep developing leading products by ensuring continual inputs to R&D, as
well as improving the R&D structure, R&D environment and innovation mechanism.
Meanwhile, we will strengthen R&D on a global basis by bringing in leading R&D talents for
achieving technology breakthroughs and better quality products. In this way, we will be able
to increase the core competitiveness of all our products.
Secondly, we never stop pursuing operational efficiency. We will unwaveringly promote lean
management through our whole value chain, as well as the MBS (Midea Business System)
and the “T+3” production strategy based on customer orders. With the end and retail
demand as the center, we produce accordingly, distribute rapidly, improve the product mix,
increase channel efficiency and reduce inventories so that our business cycles could be
further shortened and our cash flows further improved.
Finally, we will stick to global operations and continue with our efforts to expand in regional
markets so as to build up an international operation system. By promoting business growth
of our existing operations around the world and increasing the weight of overseas business,
we are trying to rebuild and optimize Midea’s international system at every level and link.
In the meantime, we will continue to foster new business. With KUKA as the platform, we
will work on industrial robots, commercial robots, service robots and artificial intelligence, as
well as increase investment in key components and application control in the field of
industrial automation.
We will try to achieve greater efficiency by streamlining the organization, further improving
the appraisal mechanism for employees and reforming the incentive mechanism, to make
sure that the organization is in line with our strategies and objectives.
With dreams, Midea takes only a few decades to grow from a workshop to a Fortune Global
500 company. Through hardship and changes, Midea is now in its golden age.
We have achieved so much in the past, and we will achieve so much more in the future.
Keeping in mind that we still have far to go to create long-term competitive edges and
further transformation, in 2017, we will continue to forge valiantly ahead with our dreams
The 2016 Annual Report of Midea Group Co., Ltd.
and try to achieve greater success.
Finally, we would like to express our gratitude for the support and trust of all our
shareholders. We wish to share our success with you!
The Board of Directors of Midea Group Co., Ltd.
March 2017
The 2016 Annual Report of Midea Group Co., Ltd.
Section I Important Statements, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and senior
management of Midea Group Co., Ltd. (hereinafter referred to as the “Company”) hereby
guarantee that the information presented in this report is free of any false records,
misleading statements or material omissions, and shall together be wholly liable for the
truthfulness, accuracy and completeness of its contents.
All directors of the Company attended the Board meeting to review this Annual Report.
There are no directors, supervisors, or senior management who do not warrant or who
dispute the truthfulness, accuracy and completeness of the contents of this Annual Report.
The financial statements of the Company for 2016 have been audited by
PricewaterhouseCoopers China (LLP) and have obtained a standard unqualified audit
report.
Mr. Fang Hongbo, chairman of the Board and president of the Company and Mr. Xiao
Mingguang, 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
2016: Based on the Company's total existing shares of 6,465,677,368, 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.
The 2016 Annual Report of Midea Group Co., Ltd.
Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS .. 5
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ............ 8
SECTION III BUSINESS PROFILE............................................................... 14
SECTION IV PERFORMANCE DISCUSSION AND ANALYSIS ................... 21
SECTION V SIGNIFICANT EVENTS ............................................................ 48
SECTION VI CHANGES IN SHARES AND INFORMATION ABOUT
SHAREHOLDERS ........................................................................................ 78
SECTION VII PREFERENCE SHARES ....................................................... 87
SECTION VIII INFORMATION ABOUT DIRECTORS, SUPERVISORS,
SENIOR MANAGEMENT AND EMPLOYEES .............................................. 88
SECTION IX CORPORATE GOVERNANCE ................................................ 99
SECTION X FINANCIAL REPORT ............................................................. 106
SECTION XI DOCUMENTS AVAILABLE FOR REFERENCE .................... 218
The 2016 Annual Report of Midea Group Co., Ltd.
Definitions
Term Definition
Company, the Company, or Midea
Midea Group Co., Ltd.
Group
Midea Holding Midea Holding Co., Ltd.
Little Swan Wuxi Little Swan Company Limited
Toshiba Toshiba Corporation
TLSC Toshiba Lifestyle Products & Services Corporation
KUKA KUKA Aktiengesellschaft
MECCA MECCA International (BVI) Limited
Reporting Period 1 Jan. 2016 to 31 Dec. 2016
The 2016 Annual Report of Midea Group Co., Ltd.
Section II Company Profile and Key Financial Results
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)
Abbr. of the Company name
Midea Group
in English (if any)
Legal representative Fang Hongbo
Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan
Registered address
City, Guangdong Province, China
Postal code
Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan
Business address
City, 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 Ou Yunbin
Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde
Address
District, Foshan City, Guangdong Province, China
Tel. 0757-22607708 0757-23274957
Fax 0757-26605456
E-mail IR@midea.com
The 2016 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
information disclosure News
Website designated by the China Securities
Regulatory Commission (CSRC) for the http: //www. cninfo.com.cn
publication of the Annual Report
Place where the Annual Report of the Company
Office of the Board of Directors of the Company
is kept
4. Company Registration and Alteration
Organization code 91440606722473344C
Changes in main business activities since
None
the Company was listed (if any)
Changes of controlling shareholders of
None
the Company (if any)
5. Other Relevant Information
Accounting firm engaged by the Company
Name of the accounting firm PricewaterhouseCoopers China (LLP)
Business address of the 11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road,
accounting firm Huangpu District, Shanghai 200021, PRC
Name of accountants for writing
Yao Wenping, Huang Meimei
signature
Sponsors engaged by the Company to continuously perform its supervisory function during the
Reporting Period
√ Applicable □ N/A
Representative
Name of the sponsor Business office of the sponsor Supervisory period
of the sponsor
CITIC Securities Tower, No. 8 Zhong Xin San Road,
CITIC Securities Co., Zeng Jinsong, 2015.6.26-2016.12.3
Futian District, Shenzhen City, Guangdong Province
Ltd. Qin Chengdong
Note: Upon the receipt of a personnel change notice from CITIC Securities Co., Ltd. on 21 October 2016, the Company
issued an announcement stating that Mr. Wu Hongri of CITIC Securities was no longer responsible for relevant work
during the supervisory period due to his personal reasons. Mr. Qin Chengdong would replace him to work with Mr. Zeng
Jinsong as a representative of the listing sponsor during the supervisory period.
Financial advisor engaged by the Company to continuously perform its supervisory function during the
The 2016 Annual Report of Midea Group Co., Ltd.
Reporting Period
√ Applicable □ N/A
Representative
Name of the financial
Business office of the financial advisor of the financial Supervisory period
advisor
advisor
CITIC Securities Tower, No. 8 Zhong Xin San Road,
CITIC Securities Co., Wu Renjun, Lin
Futian District, Shenzhen City, Guangdong Province 2017.1.6-2018.12.31
Ltd. Junjian
6. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data due to
changes of accounting policies and correction of accounting errors
□ Yes √ No
2016 2015 YoY Change (%)
Operating revenues (RMB'000) 159,044,041 138,441,226 14.88% 141,668,175
Net profits attributable to shareholders
14,684,357 12,706,725 15.56% 10,502,220
of the Company (RMB'000)
Net profits attributable to shareholders
of the Company before non-recurring 13,492,866 10,911,341 23.66% 9,476,849
gains and losses (RMB'000)
Net cash flows from operating activities
26,695,009 26,764,254 -0.26% 24,788,512
(RMB'000)
Basic earnings per share (RMB/share) 2.29 2.00 14.50% 1.66
Diluted earnings per share (RMB/share) 2.28 1.99 14.57% 1.66
Weighted average ROE (%) 26.88% 29.06% -2.18% 29.49%
At the end of
At the end of 2016 At the end of 2015 YoY Change (%)
Total assets (RMB'000) 170,600,711 128,841,935 32.41% 120,292,086
Net assets attributable to shareholders
61,126,923 49,201,852 24.24% 39,470,499
of the Company (RMB'000)
Notes: 1. For the Company granted, for 2015, 5 additional shares per 10 shares to all its shareholders with its capital
reserves, the earnings per share for both 2015 and 2014 are restated.
2. On 30 June 2016, the Company completed the transaction to acquire 80.1% stake in Toshiba’s home appliances
business, Toshiba Lifestyle Products & Services Corporation (TLSC), which has created market expansion and cost
synergies for TLSC. For 2016, TLSC contributed revenue of RMB7,523,598,000 and net profit of RMB32,181,000 to the
Company.
Total share capital of the Company on the last trading session before disclosure:
The 2016 Annual Report of Midea Group Co., Ltd.
Total share capital of the Company on the last trading
6,465,677,368
session before disclosure (share)
Fully diluted earnings per share based on the latest
2.27
share capital above (RMB/share)
Whether there are any corporate bonds
□ Yes √ No
7. Differences in Accounting Data under Domestic and Overseas Accounting
Standards
7.1 Differences in the net profits and net assets disclosed in the financial reports prepared under
the international and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
7.2 Differences in the net profits and net assets disclosed in the financial reports prepared under
the overseas and China accounting standards
□ Applicable √ N/A
No such differences for the Reporting Period.
7.3 Reasons for the differences in accounting data under domestic and foreign accounting
standards
□ Applicable √ N/A
8. Key Financial Results by Quarter
RMB'000
Q1 Q2 Q3 Q4
Operating revenues 38,341,624 39,180,663 38,856,130 42,665,624
Net profits attributable to
3,907,252 5,589,241 3,311,500 1,876,364
shareholders of the Company
Net profits attributable to
shareholders of the Company
3,745,392 5,354,852 3,131,646 1,260,976
before non-recurring gains and
losses
Net cash flows from operating
6,595,024 1,534,139 10,908,332 7,657,514
activities
Whether there are any material differences between the financial indicators above or their summations and those
The 2016 Annual Report of Midea Group Co., Ltd.
which have been disclosed in quarterly or semi-annual reports
□ Yes √ No
9. Non-recurring Profits and Losses
√ Applicable □ N/A
RMB'000
Item 2016 2015 2014 Note
Profit or loss from disposal of non-current
-134,258 -242,814 -223,943
assets
Government grants accounted for, in the profit
or loss for the current period (except for the
government grants closely related to the
1,330,065 1,348,652 790,501
business of the Company and given at a fixed
amount or quantity in accordance with the
State's uniform standards)
Profit generated for the costs of the Company
in the acquisition of subsidiaries, associates or
joint ventures are lower than the fair value of 19,513
the Company’s share in the identifiable net
assets of the investees
Profit or loss from entrusted investments or
1,008,770 953,661
entrusted asset management
Corporate restructuring costs (e.g. staff
replacement costs and expenses for -17,259
consolidation)
Except for effectively hedging business related
to normal business operations of the company,
profit or loss arising from the change in the fair
value of held-for-trading financial assets and
-25,408 369,806 -268,422
liabilities, as well as investment profit or loss
produced from the disposal of held-for-trading
financial assets and liabilities and
available-for-sale financial assets
Impairment provision reversal of the accounts
receivable on which the impairment test is 45,752
carried out separately
Other non-operating income and expenditure
246,361 -16,398 -62,072
except above-mentioned items
Less: Corporate income tax 272,925 505,642 204,646
The 2016 Annual Report of Midea Group Co., Ltd.
Minority interests (after tax) -47,656 232,255 -57,551
Total 1,191,491 1,795,384 1,025,371 --
Explain the reasons if the Company classifies an item as a non-recurring profit/loss according to the
definition in the , or classifies any non-recurring
profit/loss item mentioned in the said explanatory announcement as a recurring profit/loss item
□ Applicable √ N/A
No such cases for the Reporting Period.
The 2016 Annual Report of Midea Group Co., Ltd.
Section III Business Profile
1. Business Scope in the Reporting Period
1.1 Business scope and position in the household appliance industry
Midea is a global technology group with a diversified offering, including consumer appliances centered
on kitchen appliances, refrigerators, washing machines and various small appliances; HVAC centered
on household AC, central AC, heating and ventilation systems; and robots and automation systems with
KUKA and joint ventures with YASKAWA as the main producers. As of 31 December 2016, Midea had
approximately 120,000 employees around the world, about 200 subsidiaries and 10 strategic business
units. In January 2017, Midea became the largest shareholder of KUKA Aktiengesellschaft (KUKA), a
globally leading robot company in Germany, with an approximately 95% stake in it. Upholding the
principle of “Create Value for Customers”, Midea is committed to continual technical innovations, the
improvement of products and services, as well as a better life for consumers. It provides satisfactory
products and services for over 300 million consumers across the globe every year.
In 2016, Midea successfully entered into the Fortune Global 500 list, becoming the first Chinese home
appliance manufacturer on that list, and it has topped the other home appliance manufacturers on the list
of Fortune China 500 for a row of three years. According to Euromonitor’s Consumer Appliance Global
Ranking, Midea, with a global market share of 4.6%, is ranked the second among global home appliance
companies. According to the 2016 State of Innovation published by Thomson Reuters, Midea is ranked
highest among Top 10 Global Innovators–Home Appliances (2015) and Top 10 Kitchen Innovators–Asia
(2011-2015). Also, Midea is the only Chinese home appliance maker among the Top 200 on the
European Commission’s “2016 World Top 2500 R&D Investors” list.
Offline Retail market share of some of the Company’s products sourced from China Market Monitor:
Product 2016
category Market share Market ranking Market share Market ranking
Air-conditioners 23.9% 2 25.2%
Washing
23.0% 2 21.3%
machines
The 2016 Annual Report of Midea Group Co., Ltd.
Refrigerators 10.5% 3 9.6%
Rice cookers 42.2% 1 42.3%
Induction
50.0% 1 48.6%
cookers
Electric
pressure 45.5% 1 42.7%
cookers
Electric kettles 36.9% 1 32.2%
Microwave
45.7% 2 44.6%
ovens
Water heaters 12.7% 3 12.2%
Range hoods 9.5% 3 8.8%
1.2 Industry review and outlook
In 2016, in the face of a new environment where the global economic growth was weak, the domestic
economy growth was slowing down, the raw material price went up sharply, and the exchange rate
fluctuation intensified, the household appliances industry was in the process of continuous innovation,
reforming, integration, and transformation in the new economic environment. The core power for
sustainable growth in the industry should come from the action of focusing on users and products,
promoting technology innovation, product upgrade, as well as efficiency improvement, enlarging the
development of smart products and the layout of e-commerce channels, and carrying forward the
transformation of business models, as well as the innovation of whole-value-chain operation model. The
data from the
State ../../../../../Youdao/Dict/7.0.1.0227/resultui/dict/Statistics ../../../../../Youdao/Dict/7.0.1.0227/resultui/dict/Bureau shows
that from January to December 2016, the revenue from household appliances industry reached
RMB1.4606 trillion, a year-on-year 3.8% increase. From January to December 2016, the yield of room
air conditioners reached 160.49 million units, a year-on-year 4.5% increase; the yield of household
refrigerators reached 92.38 million units, a year-on-year 4.6% increase; and the yield of household
washing machines reached 76.209 million units, a year-on-year 4.9% increase. According to All View
Cloud data, the sales of major kitchen appliances such as hoods, ovens, and
disinfection ../../../../../Youdao/Dict/7.0.1.0227/resultui/dict/cabinets, were growing steadily due to the relatively low
penetration rate as well as the recovering real estate market. The sales revenue of kitchen appliances
was RMB62.7 billion, representing a 7.9% year-on-year increase. Various kinds of products in the small
The 2016 Annual Report of Midea Group Co., Ltd.
appliances market developed in different paths, of which the overall scale increased by 8.8%.
From mid to long term perspective, the growth momentum of home appliances and
HVAC ../../../../../Youdao/Dict/7.0.1.0227/resultui/dict/system industry in China will not have much change. The
major reasons are as follows:
a. With constant increase of people’s income and accelerated new urbanization in China, the new
demand for household appliances is still expected to be raised. According to the data from the National
Bureau of Statistics of China, the per capita disposable personal income (DPI) for 2016 is RMB 23,821,
which has 8.4% increase year-on-year. As for townsfolks in provinces and cities like Shanghai, Beijing,
Zhejiang, and Shenzhen, the per capita personal income has reached USD7,000. The improved
revenue and the rise of the young consumer groups give impetus to the arrival of a consumption age
featured by networking, individuation, and diversification, which makes the consumption of household
appliances more and more similar with goods for everyday consumption. The urbanization rate in China
is about 56%, which means there’s huge space for urbanization improvement no matter in quantity or
quality. If the target of urbanization rate of 60% in China by 2020 can be achieved, there’s expected to be
nearly 100 million rural population turning to urban population at that time. Meanwhile, urbanization has
been accelerated in China. A number of key projects have entered into implementation stage, which
created new growth opportunities. All these can effectively pull consumption and release potential of
domestic demands.
b. Consumption upgrade is becoming the major bonus for pushing the continuous development of
Chinese household appliances and heating ventilation air conditioning industry in future. The stock of
over 1.6 billion units of household appliances requires the sustainable and stable renewal demand to
become the important driving force for improving sales in the household appliances industry. The rise of
new consumer groups, as well as the improvement of performance and quality of household appliances
in aspects of energy saving, environmental protection, intelligence, interconnection, industry design, and
so on, will further accelerate the consumption upgrade of household appliances, and continuously
mobilize enterprises’ efforts on optimizing product structure and improving profitability. According to the
prediction of China Market Monitor, by 2020 the penetration rate of smart appliances will be further
improved in China with smart appliances accounting for 45%, 25%, and 28% respectively of white goods,
kitchen appliances and domestic appliances sales. In the future five years, the demand for smart
The 2016 Annual Report of Midea Group Co., Ltd.
appliances will reach RMB1.5 trillion in China.
c. Transformation and upgrade in household appliances industry will be further accelerated. The
intellectualization of products pushes forward the thorough improvement of capability in manufacturing
intellectualization and lean manufacturing management. The application of robots and industrial
automation will be further popularized. Channel reform will be further speeded up. The rise of the O2O
mode combining online and offline businesses, as well as the big data and mobile consumption thanks to
wide spread use of the internet, sustainably promotes the transform and upgrade of enterprises’
channels. The e-commerce channel has stepped into a rapid growth period. The B2C online sales
(including mobile terminal sales) in household appliances market for 2016 has reached RMB384.6 billion,
and achieved 27.9% growth year-on-year. The penetration rate of online shopping in household
appliances market has reached 19.95%. Intellectualization and high-end orientation become the new
trend for online household appliances shopping.
d. With competitive Chinese home appliance and HVAC makers, the ecology of this sector will further
improve and the markets will become increasingly centralized. Relying on their strengths in brand,
technology, industrial chain, service and distribution channels, the leading household appliance and
HVAC manufacturers are expected to further increase their market shares and profitability, and as a
result promote orderly competition and sound progress in the industry.
e. Relying on this giant domestic market in China, with a population of 1.4 billion, together with its
large-scale advantages, product cluster advantages, industrial support advantages and capital
advantages, China’s household appliance and HVAC industry will continue to keep its global competitive
position. Developing markets have large population and growing economy, and are now entering into
fast-developing period for home appliances. Chinese companies are expected to play a significant role
in these markets which will provide a solid foundation for the export growth of Chinese companies.
Meanwhile, Chinese companies are very active in the global M&A fields. Acquisitions of brands,
channels, technologies will provide Chinese companies with new competitive advantages worldwide.
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
Main assets Reasons for any significant change
The 2016 Annual Report of Midea Group Co., Ltd.
Equity assets Down 23% YoY, mainly due to the disposal of some equity investments
Fixed assets Up 12% YoY, mainly due to the acquisition of subsidiaries
Intangible assets Up 102% YoY, mainly due to the acquisition of subsidiaries
Construction in progress Down 39% YoY, mainly due to the carry-forward to fixed assets
2.2 Main assets overseas
□ Applicable √ N/A
3. Core Competitiveness Analysis
3.1 As one of the leaders among the global household appliance makers and a dominator in the major
appliance sectors, Midea Group provides high-quality, one-stop home solutions through its wide product
range, complete with full specifications.
As the only white goods and HVAC 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 an industry-leading R&D centre and the
manufacturing technology of core components (such as compressors, motors, electrical controls and
magnetrons), and ultimately based on its powerful capabilities in logistics and services. Midea is widely
known as a top appliance and HVAC brand in China. Its dominance in the major appliance and HVAC
markets means that it can provide a wide range of competitive product sets. It also means internal
synergies in brand awareness, price negotiation as a whole, customers’ needs research and R&D
investments. Compatibility, coordination and interaction among household appliances have become
increasingly important since smart home is gaining popularity. With a full product line, Midea has had a
head start in providing a combined and compatible e-home platform with integrated home solutions for
customers.
3.2 Global R&D resource integration capabilities, continuing lead in R&D and technical innovation
The Group is focused on building a competitive, multi-layered global R&D system centering on user
experience and product functions, which represents world-class R&D input and strength. With more than
RMB20 billion invested in R&D over the past five years, the Group has set up a total of 17 research
centers in eight countries, with its R&D employees over 10,000 and senior foreign experts over 300. It
The 2016 Annual Report of Midea Group Co., Ltd.
has also been in close cooperation with over 30 scientific research institutions at home and abroad such
as Tsinghua University, Zhejiang University, Huazhong University of Science and Technology, MIT, UCB
and Stanford, improving its R&D strength and facilitating its business relationships with their assistance.
According to the 2016 State of Innovation published by Thomson Reuters, Midea is ranked highest
among Top 10 Global Innovators–Home Appliances (2015) and Top 10 Kitchen Innovators–Asia
(2011-2015).
3.3 A stronger network of global operations developed and designed with Midea’s continual global
resource allocation and acquisitions, globally-advanced manufacturing capabilities, enormous business
size and wide product range
Midea has quickened its pace in global resource allocation and new business expansion. In 2016 and
the beginning of 2017, it completed the acquisitions of Toshiba Lifestyle Products & Services
Corporation, Clivet (an Italian central AC manufacturer), KUKA Aktiengesellschaft (one of the world’s top
four robot makers) and Servotronix (an Israeli company specializing in motion control and automation
solutions), which has further solidified Midea’s global operations and leading advantages in robot
manufacturing and automation. With the world’s leading production capacity and experience, and a wide
variety of products as well as its production bases all over the world, the Group has been able to expand
rapidly into the emerging overseas markets and is becoming a stronger competitor in those mature
markets. The Group is one of the biggest manufacturers in the world for many product categories, which
gives it its competitive edges in efficiency and cost, that its overseas competitors are unable to compete
with or replicate. Overseas sales have accounted for nearly 50% of the Group’s total sales. Its products
are exported to over 200 countries. In addition, with a deep knowledge and understanding about the
characteristics and needs of overseas markets, it is promoting overseas branding and expansion
through overseas joint ventures set up by seizing opportunities. In this way, it is trying to shift its focus
from OEM to OBM and giving direct supervision to local operations.
3.4 Broad channel networks ensuring the steady growth of Midea’s online and off-line sales
By virtue of years of development and investments, Midea Group has formed an all-dimensional market
coverage. In the mature first and second-tier markets, the Company has developed and maintained
good partnerships with large home appliance retail chains such as Gome and Suning. While in the broad
third and fourth-tier markets, the Company uses flagship stores, specialty shops, traditional channels
The 2016 Annual Report of Midea Group Co., Ltd.
and new channels as effective supplements. Already, the Company has achieved its full coverage in first,
second, third and fourth-tier markets. Additionally, the Company's dominance in branding, products,
offline channels and logistics distribution have also created powerful guarantees for the Company's rapid
expansion of its e-commerce business and channels. Achieving the highest online sales among China’s
household appliance manufacturers, Midea’s online retail sales exceeded RMB23 billion in 2016.
3.5 Sound corporate governance mechanism and effective incentive mechanism to provide a solid
foundation for Midea’s sustained and steady development
Paying close attention to the construction of a governance framework, regarding its corporate control,
centralization and decentralization systems, the Group formed a mature management system for
professional managers. The divisional system has been in operation for many years, and its
performance-oriented evaluation and incentive mechanism featuring full decentralization has become a
training and growth platform for the Group's professional managers. The Group's senior management
team consists of professional managers who have been trained and forged in the operational practices
of Midea Group. They have been working for Midea on average for more than 15 years, so they all have
rich industry and professional experience, a deep understanding of the home appliance industry
throughout both China and the world, and an accurate understanding of the industry’s functioning
environment and corporate operations management. The Company's advantages in systems and
mechanisms have laid a solid foundation for the promising, stable and sustainable future development of
the Company.
Currently, the senior core management team and the key managerial staff hold a stake in the Company
through direct or indirect stock ownership, multiple stock option incentive plans and employee stock
ownership plans, marking the establishment of a governance structure aligning the interests of
management and shareholders, as well as the formulation of an incentive scheme comprising long and
short-term incentives and restrains.
The 2016 Annual Report of Midea Group Co., Ltd.
Section IV Performance Discussion and Analysis
1. Overview
In 2016, guided by the three main strategies of “Leading Products, Operational Efficiency and Global
Operations”, Midea strengthened its transformation by focusing on improving products, investigating
customers’ needs, increasing inputs to technology, improving its global R&D network and promoting lean
manufacturing and management. As a result, its product quality and reputation have kept improving, the
profitability of quite many products has reached new highs, and the efficiency indicators and risk
indicators have continued to improve. Its asset structure has been further improved and it has achieved
increased revenues from almost all its overseas operations. Meanwhile, new breakthroughs have been
made in internalization and new business expansion. The consummation of a series of significant
overseas acquisitions, marking a crucial step of Midea in its efforts for global operations and new
business expansion, has further solidified its competitive edges with an enriched product range and
global operations synergies. For 2016, Midea achieved, on a consolidated basis, operating revenues of
RMB159.842 billion, up 15% from last year; net profits of RMB15.862 billion (net profits attributable to
Midea exclusive of subsidiaries at RMB14.684 billion, a 16% year-on-year increase); and a gross profit
margin of 27.39%, 1.47 percentage points higher than last year.
In 2016, the Company carried out the following tasks:
a. Focused on products and users, continuously optimized product structure, and steadily improved
product competitive advantages
—Household Air-conditioners: While focusing on core connotation of refrigeration, heating, energy
saving and so on, the Company innovated on product development, continuously optimized product
structure, and promoted a series of differentiated products. Midea “Smart King” series of air conditioners,
with features of neoteric design of sphere appearance, voice and gesture control function, as well as
smart functions such as smart air supply and safety protection, won the Best Product Award in Jin Xuan
Award election for Chinese household appliances in 2016, as well as the Innovation Award in the 12th
Chinese Household Appliances Election. The OP series of hanging air conditioners, with features of
excellent performance in energy saving, smart scene control for comfortable air supply, and heating
The 2016 Annual Report of Midea Group Co., Ltd.
under low temperature of minus 30°C, won wide acclaim from clients. North America High-efficiency and
Energy-saving air conditioners developed by Midea, with technology breakthrough in highly effective
heat exchanger, refrigeration and heating in ultralow temperature, and so on, won the Most Efficient Mini
Split Certificate by the Air Conditioning, Heating, and Refrigeration Institute (AHRI) from the United
States. By virtue of deep technology accumulation, as well as positive exploration and innovation, the
project of Research and Application of Key Technologies in Comfortableness of Air Conditioners won the
First Prize for Technology Advancement in Chinese Household Appliances in 2016 awarded by Chinese
Household Appliances Technology Conference. In the Y2016-Y2017 Chinese Air Conditioner Industry
Summit Forum, the Midea air conditioners won the Leading Brand of Smart Air Conditioners in Air
Conditioner Industry in Y2016-Y2017.
—Commercial Air-conditioners: As a leading Chinese brand in the commercial air conditioning industry,
Midea holds over 1000 patents in this field and won a lot of important projects worldwide including
Changi International Airport from Singapore, Capital International Airport T3 Terminal, the UAE
government’s Residential Villa, Shanghai World Expo exhibition hall, the European Youth Olympic
Festival, the African Games, the Abu Dhabi, UAE shopping center, and Guangzhou Asian Games
stadiums. Relying on globally leading products, as well as the superior and perfect service system,
Midea has provided Beijing-Shanghai express railway, Beijing-Guangzhou express railway,
Nanjing-Anqing express railway, Shanghai-Nanjing express railway, Shanghai-Hangzhou Interurban
Passenger Railway, Guangzhou-Zhuhai Interurban Railway with all-around solutions. With heating and
ventilation projects covering more than 50% railway field, Midea has become the brand with the highest
market share in railway industry market. 2016 witnessed Midea air conditioning won all the public
biddings officially hold by Olympic Committee of Rio Olympic Games stadiums, as well as won the
biddings of significant projects such as Guangzhou New Baiyun Airport, Country Garden Malaysia
Forest City, the Philippines Semiconductor Factory, Brazil Rio Marriott Hotel, Hong Kong Police North
New Territories Regional Headquarter, and Taiwan Taoyuan Hospital. Because of the outstanding
performance, Midea commercial air conditioners were granted by the Air Conditioning, Heating, and
Refrigeration Institute (AHRI) from the United States the first Modular Air Conditioning Unit Performance
Certificate in the world, the first Heat Pump Performance Certificate in Asia, and by Eurovent Certita
Certification from the Europe the first VRF Performance Certificate. In the Annual Selection for Board of
The 2016 Annual Report of Midea Group Co., Ltd.
Fame in Chinese Real Estate industry, Midea commercial air conditioning was honored as the
First-choice Qualified Brand for Commercial Air Conditioning for Chinese Real Estate, and was awarded
as the Leading Brand in Household Central Air Conditioning Market in Y2016-Y2017.
—Washing machines: Midea continued to invest heavily in R&D and product innovation by investing in
advanced technologies, smart technologies and core technologies, as well as continuously launching
new products. For instance, this year the Company placed a major emphasis on launching its premium
series Beverly and differentiation series Disney, so as to create high-quality life experience for users.
The Beverly series design was an outcome from working with an Italian craft research institute, which
adopted the advanced Italian craftsmanship and applied diamond cutting technology to forge the
door-rings similar with rose-like diamond, loaded the wide-gamut seven-inch HD screen and the
exclusive PUSH take-out box, and realized smart and precise input. The Beverly series were granted the
Red Dot Award from Germany, the Appliance Product Award from China, as well as the GD Award from
Korea. Disney series design was tailor-made for children, covering roller wash machines in versions of
Iron Man and Captain America, wall-hung wash machines, portable mini-wash machines, and so on.
Disney series met differentiated consumer demand, possessed the features of both art and practical-use,
and represented the Company’s continuous efforts on launching fashionable and competitive goods. In
2016, Little Swan, the Company’s subsidiary, was granted Certificates for its Water Cubic High Efficiency
& Energy Saving Technology and for BLDC Motor 20-Year Operating Life Quality by VDE, as well as
honored as the Leading Brand in Chinese wash machines industry. The Little Swan and Beverly product
series won multiple Red Dot Awards from Germany, and the Beverly roller wash machines were granted
the GD Award from Korea and the Appliance Product Award by China Household Electrical Appliance
Association.
—Refrigerators: Midea focused on user research in the trend of consumption upgrade, and was
committed to R&D, as well as application of smart technologies, so as to lead the product upgrade in the
refrigerator industry. Midea premium smart refrigerator BCD-646WGPZVA showed the innovation and
application of real-time image identification system, RIFD food management system, personalized
nutrition management system, smart pharmacy system, and the first smart weight calculation function
that can be applied for mass production. And at the same time, with the development of online shopping
function, as well as the set-up of media and entertainment platform in kitchen, the Midea product was
The 2016 Annual Report of Midea Group Co., Ltd.
created to set up the biggest and most complete nutrition knowledge base in the field of smart
refrigerators. Midea refrigerator 401WGPZV was granted the Appliance Product Award by China
Household Electrical Appliance Association due to its unique selling features such as two separate
keeping fresh systems technology, two cabinets separate temperature control technology, auto-control
atomization and moisture reservation technology. 5 types of Midea refrigerators including
BCD-530WGPZV were honored as the Star of Energy Saving due to the focus on energy-saving
application. In the last years, Midea refrigerators have been granted various international and domestic
certifications such as UL safety certification from the United States, Energy Star certification from Europe,
TUV quality certification, Greenhouse Gas Emission Certification (first one received in the industry), the
first CSC Energy-saving technology certification, CQC quality certification, etc. Media refrigerators have
not only focused on the improvement of product and technology, but also set an excellent example in the
household appliances industry, and led the industry standards keep being improved.
—Small household appliances: Midea kept deeply digging out users’ trigger points. Midea microwave
oven of smart Steam Cube applied the technology of humidity reaction and stepleess-frequency
smart-control heat power, which required no manual work for setting time and heat power, and delivered
highly efficient, nutritious, and healthy cooking. Midea microwave oven of Super OTR series combined
traditional microwave oven with smoke exhaust ventilator, making space highly utilized. IH electric
cooker, the vacuum pressure-variable vessel-pot, could cook fluffy, smooth, and whippy rice by IH
heating technology applying instant pressure control and broadband partition. The technology was
authenticated as internationally advanced by experts from academicians of the Chinese Academy of
Engineering. The constant even-firepower technology realized by each-wave control and iso-electric
control for induction cooker, as well as the technology for delicious meal realized by maglev magnetic
levitation and pressure stabilization for electric pressure cooker, won the identification as the
internationally leading technology. The premium positioned HALO series and MINI Food Era series for
young families, as the systematic and integrated solutions, both won the Red Dot Awards from Germany.
Midea Original Ecology AH electric cooker, which combined functions of boiling, steaming, stewing, and
cooking rice and dishes into one machine, and as a result, solved problems including lack of space in
kitchen in a cross-boundary way, won international awards including IF from Germany, IDEA from the
USA, and Excellent Patent Award from China on the basis of plenty of innovation items. Midea Tianmu
The 2016 Annual Report of Midea Group Co., Ltd.
series European-style steam-lampblack-cleaning machine conducted intelligent auto steam-cleaning,
broke through large air flow of 22m/min, and was widely acclaimed. Midea Qingyu smart electric fan
adopted feather-imitation blade design, which could produce soft winds and address the concerns of
elders and children. It could connect with air condition and provide an auto control air treatment solution.
Midea MUSE water heater was embedded with JBL high-quality Bluetooth loud speaker, which could be
quickly connected by one key operation, and enabled people to listen to music and receive phone calls
during showering. In 2016, a number of Midea small appliance categories were granted international and
domestic authoritative awards such as IF Design Awards, Red Dot Awards, and Appliance Awards for
consecutive years, which effectively demonstrated the first-class competitiveness of Midea products in
international market.
b. Kept enlarging input on R&D, and improving global R&D capability
The Company concentrated on consumers, kept enlarging input on R&D and product development,
focused on R&D and innovation, and built a R&D system with global competitiveness. Midea Group took
the central research institute as the core, continued to perfect the 4-grade R&D system in business
divisions, paid attention to advanced technology research, and arranged middle-and-long term
technology reservation. As at the end of 2016, Midea had built 17 research centers in 8 countries in the
world, conducted R&D for localized product and technology, established deep technology cooperation
relations with international and domestic scientific research institutions including MIT, UC Berkeley,
UIUC, Stanford, Purdue University, Tsinghua, and Chinese Academy of Sciences, and set up the global
innovation ecosystem. There had been over 10,000 R&D staffs in all, of which the staffs in advanced
R&D accounted for 10%. While strengthening the layout of global R&D centers, the Company also
attached importance to the conversion of R&D results, and promoted a series of innovative and initiate
products in the industry, such as the Smart King air conditioner, 6D flowing water heater,
high-temperature steam-lampblack-cleaning machine, precise-input and washing-and-dryer integrated
machine, the vacuum IH smart cooker, microwave cooker, the Qingyu electric fan, and so on.
As at the end of 2016, Midea group had possessed over 26,000 authorized patents. In 2016, Midea
Group applied 13,546 patents and invented 5,562 patents, still ranking the first in household appliance
field. According to the appraisal result of the 18th China Patent Award announced by the State
Intellectual Property Office, Media was granted 7 China Excellent Patent Awards and 6 China Excellent
The 2016 Annual Report of Midea Group Co., Ltd.
Appearance Design Awards, ranking as the second to none among Chinese enterprises in terms of
award quantity and taking the lead in the household appliance industry. Midea was the only one among
Chinese household appliances enterprises to enter the top 200 in the Ranking List of R&D Input of
Enterprises in the World in 2016 announced by the European Commission.
c. With a global view, strengthened the position in the industry and explored new business
In 2016, with a global view, Midea Group launched three international M&A deals and strategic
cooperation with total value exceeding RMB30 billion.
The strategic cooperation with Toshiba home appliance business was completed in the end of Jun. 2016.
Through this transaction, Midea acquired 80.1% stake in Toshiba Lifestyle Products & Services
Corporation (“TLSC”), the home appliance arm of Toshiba Corporation. Midea obtained 5,000 IP assets
and is licensed to use the Toshiba brand worldwide for 40 years. This transaction will improve Midea’s
capability in branding, technology, channel and manufacturing so as to strengthen Midea’s global
influence and competitiveness.
As part of the “Smart Home + Intelligent Manufacturing” strategy, Midea launched a voluntary public
tender offer for all shares in KUKA AG (KUKA), a leading global supplier of robots, automation
production equipment, and automation solutions, and completed the transaction in Jan. 2017. Midea
held 94.55% shares of KUKA. The accomplishment of the transaction marked Midea becoming the
leading science-and-technology enterprise in the field of robot and automation in China, even in the
world. In Jan. 2017, Midea accomplished the acquisition for Servotronix in Israel, which further enriched
Media’s technology and product reservation in the field of motion control and automation solution, and
perfected the platform and layout for robot industry.
Midea entered into a Definitive Agreement with the shareholder of Clivet for the acquisition of 80% stake
in Clivet, a well-known air conditioning enterprise in Italy, which was accomplished in Oct. 2016.
Benefited from Clivet’s position in commercial air conditioner industry in Europe, Midea will further
improve its market share of large-capacity commercial air conditioner in Europe as well as worldwide,
expand sales channels, as well as obtain complete production lines and technology synergy for
large-capacity commercial air conditioners, so as to improve its integral value.
d. Thoroughly improved the channel network, resulting in fast-growing e-commerce
Relying on the collaborative advantages of multiple product types of Midea, the Company enlarged 6
The 2016 Annual Report of Midea Group Co., Ltd.
channels covering the flagship stores, Suning, Gome, Regional Chain (TOP100), Small Regional Chain
(VIP200) and exclusive shops in villages and towns, realized the channel layout in markets in different
levels from villages and towns to ultra-first-tier cities. In 2016, Media flagship stores achieved rapid
growth of sales revenue, Suning and Gome, the two large strategic cooperation partners kept stable
sales, regional chain reached overall retail sales revenue to RMB10 billion, and the channel coverage
over counties, towns, and villages made effective breakthrough.
Taking users and products as the core and relying on product advantages, the Company built the
internet big-data platform and system, further accelerated Media’s strategic layout in whole channels for
e-commerce, and thoroughly developed strategic cooperation with platforms such as Tmall and JD, and
as a result, achieved preliminary operating effects in Media flagship stores in all platforms. In 2016, the
overall sales of Media’s e-commerce exceeded RMB23 billion, the systems of Tmall and JD both
realized the scale of RMB10 billion, the e-commerce kept ranking the first among the whole network, and
the online sales accounted for over 20% for the Company’s domestic sales.
e. Centered on core capability establishment of “a plate of goods” in whole channels, and
comprehensively improved logistics platforms and capability
The core business pattern of “whole-net-work distribution and delivery” has been implemented in
domestic market. The Company provided integrated service of product distribution, delivery, and
installation in nationwide. Through effective links of intelligent cloud warehouse, truckload / less
truckload, urban distribution, and delivery combining with installation, the Company accomplished the
establishment of an integrated network covering distribution, delivery, and installation in nationwide, as
well as the layout arrangement of a network covering 72 logistics centers in the country that helped with
B2B and B2C integrated operation, effectively improved the one-stop service in the last kilometer and
the logistic service for end-to-end of “a plate of goods”, and realized 99.6% in-time signing rate of orders
after goods delivery. In the field of international logistics carriage, the Company has set up an
international logistics information system, which could provide clients with integrated logistics services in
container truck transportation in domestic ports, international railway, international air express,
international full or consolidated container shipping, and so on, as well as provide clients with a package
of overseas logistics solutions.
f. Enlarged the smart home business, deepened the layout of smart home business, and maintained a
The 2016 Annual Report of Midea Group Co., Ltd.
leading position in the industry
Based on its wide product category and large amount of users, Midea has been actively pushing forward
its smart home strategy. In 2016, Midea kept enhancing the implementation of M-SMART strategy,
sustainably optimized the cloud platform, Midea home, communication module, household appliance
single-item intelligence, and after-sales service, etc. on the basis of the original functions, and
continuously improved user satisfaction.
The Company deeply dug out market potential of smart household appliances, enlarged input on R&D
and market resources for smart household appliances, as well as continuously improved the market
competitiveness of smart household appliances. In 2016, the Technology Research Center of the
Internet of Things and Smart Home Engineering of Guangdong Province settled down in Media. The
Company was the first household appliances enterprise in Asia to join ZigBee, the international
internet-of-things alliance, and became the top of the table. The Company independently researched
and developed the first internet-of-things security module in the industry, established safety-union labs
for smart home with companies and institutions such as Huawei, Tencent, Infineon, Opple, China
Electronics Standardization Institute, Philips, and China Mobile, and built strategic cooperation
partnership with companies such as Huawei, the State Grid Corporation of China, China Oil and Food
Import and Export Corporation, Honyar, Onstar, Whaley, Ayla Networks, so as to build the smart home
ecosphere.
The Company positively enlarged and distributed the smart home industry in the whole house, input
R&D and market resources in security, lighting, air purification, bath, health management, and so on,
developed deep cooperation with well-known real estate companies such as Evergrande, Poly, Country
Garden, and COFCO in respects of smart community and property management, and so on, and put
related projects into practice. As a result, the integrated smart home solution with the core of smart home
suits, smart leasing, smart hardware, as well as smart core modules, was preliminarily formulated.
g. Reinforced input on quality improvement, established a highly-effective operation system, and pushed
forward whole-value-chain lean management
The Company further clarified the middle-and-long-term policy for quality strategy as ultimate experience
for users, quality management and control system under globalization, as well as establishment of
professional capability for internationalization, focused on core factors such as delicate appearance,
The 2016 Annual Report of Midea Group Co., Ltd.
outstanding performance, and reliable quality, and developed a series of quality improvement work
which sharply improved product quality and satisfaction.
Midea 632 project, which covers 6 operation systems, 3 management platforms and 2 technical
platforms, has been fully launched, which further enhanced the Company’s management principle of
“One Midea, One System, One Standard” and helped the overall improvement in business fields from
dimensions covering client experience, management standard, operation transparency, as well as
internal and external synergy.
Oriented by the market, the Company further promoted whole-value-chain lean management, overall
implemented the new production and sales mode of T+3 client-order system, transformed from the
previous production for reservation to production for client orders, reduced intermediate links like transit,
forced the improvement of manufacturing capability by dual assessment in production and sales,
accelerated turnover, and improved market competitiveness. The execution of T+3 order system
effectively strengthened the management and control on inventory cycle, as well as the occupation of
inventory area, and remarkably upgraded the efficiency of operation and turnover.
h. Made further investment in developing overseas market, improved the development of overseas sales
platform, and increased OBM sales
The Company continued to propel the global operation strategy, planned the overseas expansion layout
and OBM sales, optimized product structure and ensured steady growth of overseas revenue by unit
efforts from overseas branch offices in the front-end and product division in the back-end. The Company
constructed Midea’s globally uniformed operation and service platform, kept perfecting the management
on overseas compliance and the establishment of internal control system, strengthened the appraisal
mechanism for overseas branch offices’ businesses and risks, launched the global IT integrated project;
continued to carry forward the establishment of localized project in overseas strategic market, improved
the localization rate in supply chain, and speeded up the synergic promotion of its own brands by virtue
of the “full-product-line” advantage of Midea.
In 2016, the export sales of Midea obtained rapid year-on-year growth. The overseas exports of
household air conditioner, microwave oven, washing machine, refrigerator, dish-washing machine, water
heater, and so on kept taking the lead in Chinese household appliances enterprises. Local sales revenue
in overseas market went up steadily and healthily, and the launch speed of new products of OBM sales
The 2016 Annual Report of Midea Group Co., Ltd.
in overseas market was remarkably improved.
i. Continuously implementing long-term incentive plans, and improving corporate governance:
In 2016, after the third term of stock option incentive plan for its medium and high-level management as
well as for key-business employees, Midea continued to carry out the second term of “partner” stock
ownership plan for its core management personnel that have played a significant role in the Company’s
medium and long-term business performance, therefore trying to change them from “managers” to
“partners”. Through allocating share purchase quotas according to their performances, executing stock
options in stages and extending their share lock-up periods, management are empowered with the
responsibility to create long-term value for the Company. The “partner” stock ownership plans and the
stock option incentive plans have helped to align the long-term interests of senior management and key
personnel with that of all shareholders . In this way, the governance mechanism of the Company was
further improved.
2. Analysis of Main Business
2.1 Overview
Same with the contents presented in “1. Overview” of this section
√ Yes □ No
See “1. Overview” of this section.
2.2 Revenues and Costs
2.2.1 Breakdown of operating revenues
Unit: RMB’000
2016
As a percentage of As a percentage of
YoY Change (%)
Amount operating revenues Amount operating revenues
(%) (%)
Total 159,044,041 100% 138,441,226 100% 14.88%
By business segment
Manufacturing 145,266,238 91.34% 126,911,843 91.67% 14.46%
Logistics
1,907,746 1.20% 1,652,757 1.19% 15.43%
transportation
The 2016 Annual Report of Midea Group Co., Ltd.
By product
Large home
97,855,794 61.53% 87,932,142 63.52% 11.29%
appliances
Air conditioners
66,780,877 41.99% 64,491,950 46.58% 3.55%
and components
Refrigerators
14,955,684 9.40% 11,422,676 8.25% 30.93%
and components
Washing
machines and 16,119,233 10.14% 12,017,516 8.68% 34.13%
components
Small household
43,282,927 27.21% 35,445,859 25.60% 22.11%
appliances
Motors 7,220,463 4.54% 6,471,372 4.67% 11.58%
Logistics 5,018,196 3.16% 4,008,479 2.90% 25.19%
By geographical segment
PRC 83,162,174 56.51% 79,147,263 61.56% 5.07%
Outside PRC 64,011,810 43.49% 49,417,336 38.44% 29.53%
Note: In order to help investors learn about the actual scale of operation and operational capability of motors and logistics,
the above mentioned data include the intracompany sales of motors and logistics within the Company. Please refer to the
notes to the financial statements in this Annual Report for the data excluding the intracompany sales amount.
2.2.2 Business segments, products or geographical segments contributing over 10% of the
operating revenues or profits
√ Applicable □ N/A
Unit: RMB’000
YoY change of YoY change of YoY change of
Operating Operating Gross profit
operating operating costs gross profit
Revenue costs margin
revenue (%) (%) margin (%)
By business segment
Manufacturing 145,266,238 103,246,836 28.93% 14.46% 10.75% 2.39%
By product
Large home
97,855,794 69,390,846 29.09% 11.29% 8.96% 1.52%
appliances
Air conditioners
66,780,877 46,372,262 30.56% 3.55% 0.22% 2.31%
and components
Washing 16,119,233 11,511,915 28.58% 34.13% 33.23% 0.48%
The 2016 Annual Report of Midea Group Co., Ltd.
machines and
components
Small household
43,282,927 30,431,915 29.69% 22.11% 14.52% 4.66%
appliances
By geographical segment
PRC 83,162,174 56,959,663 31.51% 5.07% 3.06% 1.34%
Outside PRC 64,011,810 48,131,794 24.81% 29.53% 22.11% 4.57%
Under the circumstances that the statistical standards for the Company's main business data adjusted in
the Reporting Period, the Company's main business data in the recent year is calculated based on
adjusted statistical standards at the end of the Reporting Period
□ Applicable √ N/A
2.2.3 Whether revenue from physical sales is higher than service revenue
√ Yes □ No
Business segment Item Unit 2016 2015 YoY Change (%)
Sales volume 0,000 units/sets 31,727.72 27,945.50 13.53%
Home appliances Output volume 0,000 units/sets 32,712.74 26,691.48 22.56%
Inventory 0,000 units/sets 3,473.23 2,524.80 37.54%
Note: The aforementioned statistics about output volume, sales volume and inventory were calculated based on internal
standards. Lighting products are excluded because they are difficult to count.
Reason for any over 30% YoY movements in the data above
√ Applicable □ N/A
The 37.54% YoY increase in the inventory was mainly due to more orders and the acquisition of TLSC.
2.2.4 Execution of significant sales contracts in the Reporting Period
□ Applicable √ N/A
2.2.5 Breakdown of operating costs
By product
Unit: RMB’000
2016
As a percentage As a percentage YoY Change
Product Item
Amount of operating Amount of operating (%)
costs (%) costs (%)
Home Raw materials 87,868,769 85.11% 78,714,556 84.43% 11.63%
The 2016 Annual Report of Midea Group Co., Ltd.
appliances Labor costs 6,267,030 6.07% 5,602,646 6.01% 11.86%
Depreciation 2,330,741 2.26% 2,135,140 2.29% 9.16%
Energy 1,574,007 1.52% 1,417,455 1.52% 11.04%
2.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period
√ Yes □ No
For the main subsidiaries included the scope of the consolidated financial statements for the current year,
please refer to Note 5 and Note 6 to the Financial Statements. And the main companies newly
consolidated in the current year are Guangdong Midea Cuchen Consumer Electric Manufacturing Co.,
Ltd., Midea Factoring Co., Ltd., Toshiba Lifestyle Products & Services Corporation, Clivet S.P.A & Clivet
Espaa S.A.U. and Shenzhen Shenzhoutongfu Technology Co., Ltd. (for details, please see “5.1” and
“a”, “5.2” under Note 5 to the Financial Statements). For the companies deconsolidated in the current
year, please refer to “b”, “5.2” under Note 5 to the Financial Statements.
2.2.7 Major changes in the business, products or services in the Reporting Period
□ Applicable √ N/A
2.2.8 Main customers and suppliers
Sales to major customers of the Company
Total sales to top five customers (RMB'000) 16,070,907.67
Total sales to top five customers as a percentage of the total
10.10%
sales for the year (%)
Total sales to related parties among top five customers as a
percentage of the total sales for the year (%)
Information on top five customers
As a percentage of the total sales for
No. Customer Sales amount (RMB'000)
the year (%)
1 Customer A 6,795,001.07 4.27%
2 Customer B 3,854,215.54 2.42%
3 Customer C 2,596,843.02 1.63%
4 Customer D 1,448,781.59 0.91%
5 Customer E 1,376,066.44 0.87%
Total -- 16,070,907.67 10.10%
The 2016 Annual Report of Midea Group Co., Ltd.
Major suppliers of the Company
Total purchases from top five suppliers (RMB'000) 5,279,942.17
Total purchases from top five suppliers as a percentage of the
4.82%
total purchases for the year (%)
Total purchases from related parties among top five suppliers
as a percentage of the total purchases for the year (%)
Information on top five suppliers of the Company
As a percentage of the total purchases
No. Supplier Purchases (RMB'000)
for the year (%)
1 Supplier A 1,711,044.36 1.56%
2 Supplier B 1,182,847.45 1.08%
3 Supplier C 902,236.47 0.82%
4 Supplier D 799,119.51 0.73%
5 Supplier E 684,694.38 0.63%
Total -- 5,279,942.17 4.82%
2.3 Expense
Unit: RMB'000
YoY Change
2016 2015 Reason for any significant change
(%)
Selling and distribution
17,678,451 14,799,769 19.45%
expenses
General and
Administrative 9,620,777 7,441,755 29.28%
expenses
Exchange gains and gains on structural
Finance costs -1,005,979 138,932 -824.08%
deposits
2.4 R&D input
√ Applicable □ N/A
In the Reporting Period, Midea carried on with technological innovation and product improvement
“Based on Customers’ Needs”. It integrated innovation resources globally and increased its R&D inputs
to build an open R&D system covering four links from prior study to product development. Also, a
world-class R&D team has been set up to work on core technology, cutting-edge technology and basic
The 2016 Annual Report of Midea Group Co., Ltd.
technology. In this way, Midea is able to create its own unique selling points and differential competitive
edges for continuously advanced products. For more details about the R&D input and product
competitiveness improvements, please refer to the relevant contents presented in “Core
Competitiveness Analysis” under “Section III Business Profile” and “Overview” under “Section IV
Performance Discussion and Analysis”.
Information about R&D input
2016 2015 YoY Change (%)
Number of R&D personnel 8,741 8,672 0.79%
R&D personnel as a percentage in
9.07% 9.30% -0.23%
total employees
R&D input (RMB’000) 6,045,800 5,262,600 14.87%
R&D input as a percentage in
3.80% 3.80%
operating revenues
Capitalized R&D input (RMB Yuan) - - -
Capitalized R&D input as a
- - -
percentage in total R&D input
Note: The data in the table above do not include TLSC and KUKA. If included, Midea’s R&D personnel would be over
10,000 globally.
Reason for any significant YoY change in the percentage of the R&D input in the operating revenues
□ Applicable √ N/A
Reason for any sharp variation in the percentage of the capitalized R&D input and rationale
□ Applicable √ N/A
2.5 Cash flows
Unit: RMB'000
Item 2016 2015 YoY Change (%)
Subtotal of cash inflows from
162,658,812 134,278,290 21.14%
operating activities
Subtotal of cash outflows due to
135,963,803 107,514,036 26.46%
operating activities
Net cash flows from operating
26,695,009 26,764,254 -0.26%
activities
Subtotal of cash inflows from
76,323,327 44,741,136 70.59%
investing activities
Subtotal of cash outflows due to 96,104,411 62,730,329 53.20%
The 2016 Annual Report of Midea Group Co., Ltd.
investing activities
Net cash flows from investing
-19,781,084 -17,989,193 -9.96%
activities
Subtotal of cash inflows from
35,236,372 26,383,619 33.55%
financing activities
Subtotal of cash outflows due to
35,076,460 35,260,272 -0.52%
financing activities
Net cash flows from financing
159,912 -8,876,653 101.80%
activities
Net increase in cash and cash
7,326,413 -84,923 8,727.12%
equivalents
Explanation of why the data above varied significantly
√ Applicable □ N/A
a. Mainly due to more borrowings obtained, net cash flows from financing activities increased 101.80%
from last year.
b. Mainly due to the increased operating cash flows, net increase in cash and cash equivalents soared
8,727.12% as compared with last year.
Explanation of main reasons leading to the material difference between net cash flows from operating
activities during the Reporting Period and net profit for the year
□ Applicable √ N/A
3. Analysis of Non-Core Business
□ Applicable √ N/A
4. Assets and Liabilities
4.1 Material changes of asset items
Unit: RMB'000
As at the end of 2016 As at the end of 2015
As a Change in
As a Explanation about any
percentage of percentage
Amount percentage of Amount material change
total assets (%)
total assets (%)
(%)
Cash at bank 17,196,070 10.08% 11,861,977 9.21% 0.87%
and on hand
Accounts 13,454,511 7.89% 10,371,718 8.05% -0.16%
receivable
The 2016 Annual Report of Midea Group Co., Ltd.
Inventories 15,626,897 9.16% 10,448,937 8.11% 1.05%
Investment 494,122 0.29% 150,803 0.12% 0.17%
properties
Long-term 2,211,732 1.30% 2,888,274 2.24% -0.94%
equity
investments
Fixed assets 21,056,791 12.34% 18,729,881 14.54% -2.20%
Construction in 580,729 0.34% 954,761 0.74% -0.40%
progress
Short-term 3,024,426 1.77% 3,920,933 3.04% -1.27%
borrowings
Long-term 2,254,348 1.32% 90,061 0.07% 1.25%
borrowings
4.2 Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit: RMB'000
Profit or loss
Cumulative fair
from change Purchased
Opening value change Sold in the Closing
Item in fair value Other in the
balance charged to period balance
during the period
equity
period
Financial assets
1. Financial assets
measured at fair value
with fair value changes
included in profit and loss
for the year (excluding
derivative financial
assets)
2. Derivative financial
166,421 173,836 3,751 80,155.89 424,163
assets
3. Financial assets
19,999,275 1,270,941 451,820 13,330.00 37,598,466 25,706,072 33,627,760
available for sale
Sub-total of financial
20,165,696 1,444,777 455,571 93,485.89 37,598,466 25,706,072 34,051,923
assets
Investment properties
Productive living assets
The 2016 Annual Report of Midea Group Co., Ltd.
Others
Sub-total of the above 20,165,696 1,444,777 455,571 93,485.89 37,598,466 25,706,072 34,051,923
Financial liabilities 243,083 56,460 -203,441 96,102
Whether there were any material changes on the measurement attributes of major assets of the
Company during the Reporting Period
□ Yes √ No
4.3 Restricted asset rights as of the end of this Reporting Period
As of the end of this Reporting Period, there were no such circumstances where any main assets of the
Company were sealed, distrained, frozen, impawned, pledged or limited in any other way.
5. Investments Made
5.1 Total investments made
√ Applicable □ N/A
Investments made in the Reporting Investments made in the prior year
YoY Change
Period (RMB’000) (RMB’000)
96,104,411 62,730,329 53.20%
5.2 Significant equity investments made in the Reporting Period
□ Applicable √ N/A
5.3 Significant non-equity investments ongoing in the Reporting Period
□ Applicable √ N/A
5.4 Financial investments
5.4.1 Securities investments
□ Applicable √ N/A
No such cases in the Reporting Period.
5.4.2 Derivatives investments
√ Applicable □ N/A
The 2016 Annual Report of Midea Group Co., Ltd.
Unit: RMB'0,000
Rel Ratio of
ated investme
Investme Amount
- Investme nt Actual
Rel nt provide
Opera part Initial Purch nt amount profit
ated Invest Commen Termina amount Sold d for
ting y investme ased amount to net and loss
part ment cement tion at the in the impairm
Partie tran nt in the at the end asset at amount
y or type date date beginning period ent (if
s sact amount period of the the end of for the
not of the applica
ion period the period
period ble)
or period
not (%)
Futur Futur
es es 2016.01. 2016.12
No No 748.2 748.2 - -11.50 -0.0002% 306.10
comp contra 01 .31
any cts
Forwa
rd
2016.01. 2016.12 32,817.6
Bank No No forex -8,414.40 -8,414.40 - 0.5369% 1,178.60
01 .31
contra
cts
32,806.1
Total -7,666.20 -- -- -7,666.20 - 0.5367% 1,484.70
Source of derivatives
All from the Company's own funds
investment funds
Litigation involved (if
N/A
applicable)
Disclosure date of the
announcement about
the board’s consent for 2016.03.26
the derivative
investment (if any)
Disclosure date of the
announcement about
the general meeting’s
2016.04.27
consent for the
derivative investment (if
any)
Risk analysis of For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a
positions held in result of significant fluctuations in raw material prices, the Company not only carried out futures
derivatives during the business for some of the materials, but also made use of bank financial instruments and
Reporting Period and promoted forex funds business, with the purpose of avoiding the risks of exchange and interest
The 2016 Annual Report of Midea Group Co., Ltd.
explanation of control rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex
measures (including but liabilities, as well as achieving locked-in costs. The Company has performed sufficient
not limited to market evaluation and control against derivatives investment and position risks, details of which are
risk, liquidity risk, credit described as follows:
risk, operational risk 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted
and legal risk) in compliance with laws and regulations, with clearly covenanted responsibility and obligation
relationship between the Company and the agencies.
Control measures: The Company has designated relevant responsible departments to enhance
learning of laws and regulations and market rules, conducted strict examination and verification
of contracts, defined responsibility and obligation well, and strengthened compliance check, so
as to ensure that the Company's derivatives investment and position operations meet the
requirements of the laws and regulations and internal management system of the Company.
2. Operational risk: Imperfect internal process, staff, systems and external issues may cause
the Company to suffer from loss during the course of its futures business and forex funds
business.
Control measures: The Company has not only developed relevant management systems that
clearly defined the assignment of responsibility and approval process for the futures business
and forex funds business, but also established a comparatively well-developed monitoring
mechanism, aiming to effectively reduce operational risk by strengthening risk control over the
business, decision-making and trading processes.
3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange
rate fluctuations in foreign exchange market could lead to greater market risk in the futures
business and forex funds business. Meanwhile, inability to timely raise sufficient funds to
establish and maintain hedging positions in futures operations, or the forex funds required for
performance in forex funds operations being unable to be credited into account could also
result in loss and default risks.
Control measures: The futures business and forex funds business of the Company shall always
be conducted by adhering to prudent operation principles. For futures business, the futures
transaction volume and application have been determined strictly according to the
requirements of production & operations, and the stop-loss mechanism has been implemented.
Besides, to determine the prepared margin amount which may be required to be
supplemented, the futures risk measuring system has been established to measure and
calculate the margin amount occupied, floating gains and losses, margin amount available and
margin amount required for intended positions. As for forex funds business, a hierarchical
management mechanism has been implemented, whereby the operating unit which has
submitted application for funds business should conduct risk analysis on the conditions and
environment affecting operating profit and loss, evaluate the possible greatest revenue and
loss, and report the greatest acceptable margin ratio or total margin amount, so that the
Company can update operating status of the funds business on a timely basis to ensure proper
funds arrangement before the expiry dates.
Changes in market 1. Profit/loss from futures hedging contracts incurred during the Reporting Period was
price or fair value of RMB3,061,000;
derivatives product 2. Profit/loss from forward forex contracts incurred during the Reporting Period was
The 2016 Annual Report of Midea Group Co., Ltd.
invested during the RMB11,786,000;
Reporting Period: 3. Public quotations in futures market or forward forex quotations announced by Bank of China
specific methods used are used in the analysis of derivatives fair value.
and relevant
assumption and
parameter settings shall
be disclosed for
analysis of fair value of
derivatives
Explanation of
significant changes in
accounting policies and
specific financial
accounting principles in
respect of the No change
Company's derivatives
for the Reporting Period
as compared to the
previous Reporting
Period
The Company's independent directors are of the view that the futures hedging business is an
Special opinions
effective instrument for the Company to eliminate price volatility and implement risk prevention
expressed by
measures through enhanced internal control, thereby improving the operation and
independent directors
management of the Company; the Company's foreign exchange risk management capability
concerning the
can be further improved through the forex funds business, so as to maintain and increase the
Company's derivatives
value of foreign exchange assets and the abovementioned investment in derivatives can help
investment and risk
the Company to fully bring out its competitive advantages. Therefore, it is practicable for the
control
Company to carry out derivatives investment business, and the risks are controllable.
5.5 Use of funds raised
□ Applicable √ N/A
No such cases in the Reporting Period.
6. Sale of Major Assets and Equity Interests
6.1 Sale of major assets
□ Applicable √ N/A
No such cases in the Reporting Period.
The 2016 Annual Report of Midea Group Co., Ltd.
6.2 Sale of major equity interests
□ Applicable √ N/A
7. Analysis of Major Subsidiaries
√ Applicable □ N/A
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
Registered Total Operating Operating Net
Compa Net assets
Business capital assets Revenue profit profit
Company name ny (RMB
scope (RMB'0,00 (RMB (RMB (RMB (RMB
type million)
0) million) million) million) million)
Manufact
Guangdong Midea Kitchen uring of
Subsidi USD7,200.
Appliances Manufacturing Co., home 9,717.38 2,487.48 11,931.11 1,768.18 1,514.15
ary
Ltd. appliance
s
Manufact
uring of
Guangdong Midea Refrigeration Subsidi RMB85,40 27,695.2
air 29,114.45 3,454.02 672.08 617.60
Equipment Co., Ltd. ary 0.00
condition
ers
Manufact
Foshan Shunde Midea Electric uring of
Subsidi USD4,200.
Appliance Manufacturing Co., home 4,922.82 2,075.14 6,658.61 969.56 843.29
ary
Ltd. appliance
s
Manufact
Wuhu Midea Kitchen & Subsidi uring of RMB6,000.
4,818.70 814.13 5,634.01 679.29 679.42
Bathroom Electric Appliances ary water 00
Manufacturing Co., Ltd. heaters
Manufact
Anhui GMCC Precise Subsidi uring of RMB84,21
2,518.43 1,400.22 4,248.47 448.89 393.13
Manufacture Co., Ltd. ary compress 0.5263
ors
Acquisition and disposal of subsidiaries during the Reporting Period
√ Applicable □ N/A
How subsidiary was Impact on overall operation and results
Subsidiary name acquired or disposed (Unit: RMB’000)
during the Reporting Revenue Net profit
The 2016 Annual Report of Midea Group Co., Ltd.
Period
Midea Factoring Co., Ltd. Incorporated 5,454.18 -169.99
Midea Financial Holding (Shenzhen) Co.,
Ditto 77.25 -1,049.46
Ltd.
Shenzhen Qianhai Midea Asset
Ditto 30.56 3,892.48
Management Co., Ltd.
Guangdong Midea Cuchen Consumer
Ditto 41,688.99 444.82
Electric Manufacturing Co., Ltd.
Midea Investment and Development Co.,
Ditto - -49,721.72
Ltd.
Midea Intelligent Home Technology Co.,
Ditto 11,976.00 -1,781.22
Ltd.
Midea Investment (Asia) Co., Ltd. Ditto - 6,828.16
Guangdong Midea Intelligent Technology
Ditto 423.08 -2,133.78
Co., Ltd.
Foshan Shunde Meiying Management
Ditto - -
Service Co., Ltd.
Midea Heating and Ventilation Equipment
Ditto 2,181.81 -3,726.30
Co., Ltd. (in Italy)
Guangdong Midea Lighting Electric
Cancelled - -20.24
Manufacturing Co., Ltd.
Foshan Shunde Meihui Management
Sold - -4,134.03
Service Co., Ltd.
Anhui GMCC Compressor Sales Co., Ltd. Canceled - -397.34
8. Structured Bodies Controlled by the Company
□ Applicable √ N/A
9. Outlook for the Future Development of the Company
9.1 Development strategies of the Company
Setting the strategic vision of “becoming the world's leading technology group in consumer appliances,
heating, ventilating and air conditioning (HVAC), robotics and automation systems”, and the strategic
focuses on \" leading products, efficiency driven, global operations\", our company will deepen the
transformation and build new cost competitive advantage driven by efficiency through technological
innovation, quality improvement, quality Engineering and leading products, as well as ascension of
management efficiency, manufacturing efficiency and asset efficiency. We will focus on global industry
The 2016 Annual Report of Midea Group Co., Ltd.
mergers and acquisitions opportunities and strategic market regional expansion to consolidate the global
operating base; also we will strengthen the industrial layout in the field of robotics and industrial
automation, enhance new industry strategy research and generate new growth points and industrial
platforms.
9.2 Key operation points in Y2017
a. Product-leading as principle, we will build differentiated competitiveness and continuously promote
the transformation and upgrading of existing business, also we will stick to quality stability and promote
quality engineering, improve the construction of research and development system and increase R & D
resources. We will focus on the core product capabilities and continuously enhance the product
competitiveness by professional accumulation and height in the industry.
b. We will continue to build all-factor lean management systems such as Lean Design, Lean Supply
Chain and Lean Manufacturing, and continuously improve manufacturing efficiency and product quality
to build new cost advantages. We will grasp user's needs and enhance user experience to further
promote the implementation of T+3 Made-To-Order model. Based on order demands, we will improve
product mix and channel efficiency, reduce inventory levels, and improve business cycles and cash flow;
c. We will continue to consolidate our global operating base, build an international system and capacity,
rebuild and further optimize the global allocation of resources, and focus on international strategic
market, open up the global IT infrastructure and internal system processes and improve overseas local
manufacturing and local sales business to ensure our stable growth of overseas income; we will do well
in business integration and efficient operation of mergers and acquisitions of Toshiba and other projects
to improve business performance; we will continue to focus on and grasp mergers and acquisitions
opportunities that can elevate our overall brand, technology, channels and global influence to achieve
effective regional expansion, and enhance the global competitive strength.
d. We will grasp the industry expansion opportunities of industrial automation and intelligent
manufacturing. Taking KUKA as a platform, we will continue the layout of industrial robots, commercial
robots, service robots and artificial intelligence, and actively develop key components in the field of
industrial automation.
e. We will continue to promote the transformation of marketing. Aiming at strengthening the terminal
operating service capacity, we will comprehensively promote the optimization and integration of agents
The 2016 Annual Report of Midea Group Co., Ltd.
and functional changes, enhance the long-term sustainable development of channels, seize the core
channels to further extend the chain and online channel size and share, and improve the operating
capacity of Midea’s flagship shops and franchised shops.
f. We will build a \"smart connection, technology-driven\" logistics core competence, throughout the supply
chain to provide series of services in information technology, efficient logistics, finance and supply chain
optimization. We will increase science and technology investment and R & D layout of warehousing
automation, selection robots, automatic loading robot, driverless express vehicle and other core
technology areas, and continuously strengthen the logistics information and data operation capacity.
g. We will follow our “Smart Home + Intelligent Manufacturing” strategy, reform existing commercial and
operating models, strengthen independent research and development and external cooperation, and
provide stable, safe and leading overall solutions for “Smart Home”, so as to explore new growth points.
9.3 Future key capital expenditure plan
To adapt to changes in this industry environment, the Company will emphasize its 2017 investment on
aspects including technology innovation, quality improvement, robots and automatic systems, IT
information process excellence, channel expansion and capability improvement for e-business, as well
as the execution of the overall M-SMART smart home strategy. It will also seek global M&A opportunities,
trying to solidify and increase its global competitiveness. Meanwhile, the Company will strictly control
investment in infrastructure such as land and factories, and non-production operation projects. The
investment fund will mainly derive from self-owned funds of the Company.
9.4 Main risks against future development
a. Risk of macro economy fluctuation
The household and commercial HVAC, refrigerators, washing machines, and small household
appliances sold by the Company are consumer appliances. The market demand for them is affected by
the economic situation and macro control to some extent. If the economy growth or consumer demand
slows down, the growth of the household appliance industry, to which the Company belongs, will slow
down accordingly, and as a result, will affect the product sales of Midea Group.
b. Risks in the fluctuation of production factors
The raw materials required by Midea Group to manufacture its consumer appliances and core
components primarily include different grades of copper, steel, aluminum, and plastics. At present, the
The 2016 Annual Report of Midea Group Co., Ltd.
household appliance manufacturing sector belongs to a labor intensive industry. If the price of raw
materials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water,
electricity, and land) caused by a change to the macroeconomic environment and policy change, or the
cost reduction resulted from lean production and improved efficiency, as well as the sale prices of end
products cannot offset the total effects of cost fluctuations, the Company’s business will be influenced to
some degree.
c. Risk in global asset allocation and overseas market expansion
Internationalization and global operations is a long-term strategic goal of the Company. The Company
has built joint-venture manufacturing bases in many countries around the world. It has also conducted a
series of significant acquisitions to promote new business, enlarge its global market share, expand its
channels and seek greater brand recognition. However, its efforts in global resource integration may not
be able to produce expected synergies; and in overseas market expansion, there are still unpredictable
risks such as local political and economic situations, significant changes in law and regulation systems,
and sharp increases in production costs.
d. Risk in product export and foreign exchange losses caused by exchange rate fluctuation
As Midea carries on with its overseas expansion plan, its export revenue is expected to account for over
50% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects on
the export of the Company, but could also lead to exchange losses and increase its finance costs.
e. Market risks brought by trade barriers
With trade protectionism on the rise around the world, besides the tariff barriers, the non-tariff barriers
among countries have become increasingly distinctive. These can mainly be seen on compulsory safety
certificates, international standards and requirements, and product quality and management systems
certification, energy-saving requirements, the call for increasingly strict environmental protection
requirements, as well as with rigorous requirements for recycling household appliances waste. Trade
protectionism and trade frictions caused by anti-dumping measures implemented by some countries and
regions aggravate the burden in costs and expenses for household appliance enterprises, and have
brought about new challenges to market expansion for enterprises.
The 2016 Annual Report of Midea Group Co., Ltd.
10. Visits Paid to the Company for Purposes of Research, Communication, Interview,
etc.
10.1 In the Reporting Period
√ Applicable □ N/A
Date of visit Way of visit Type of visitor Index to main inquiry information
One-on-one Log Sheet of Investor Relations Activities for 5~29
5~29 January 2016 Institution
meeting January 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 28
28 March~8 April 2016 Ditto Ditto
March~8 April 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 11
11 April~6 May 2016 Ditto Ditto
April~6 May 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 9
9 May~8 June 2016 Ditto Ditto
May~8 June 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 13~29
13~29 June 2016 Ditto Ditto
June 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 5~29
5~29 July 2016 Ditto Ditto
July 2016 on www.cninfo.com.cn
31 August~30 September Log Sheet of Investor Relations Activities for 31
Ditto Ditto
2016 August~30 September 2016 on www.cninfo.com.cn
31 October~18 November Log Sheet of Investor Relations Activities for 31
Ditto Ditto
2016 October~18 November 2016 on www.cninfo.com.cn
Log Sheet of Investor Relations Activities for 6~26
6~26 December 2016 Ditto Ditto
December 2016 on www.cninfo.com.cn
Times of visit
Number of visiting institutions 1,673
Number of visiting individuals
Number of other visitors
Significant undisclosed information disclosed, No
revealed or leaked
The 2016 Annual Report of Midea Group Co., Ltd.
Section V Significant Events
1. Profit Distribution and Converting Capital Reserves into Share Capital for
Common Shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, for
common shareholders in the Reporting Period
□ Applicable √ N/A
Plans (or preliminary plans) for profit distribution and converting capital reserves into share capital for
common shareholders for the recent three years (including the Reporting Period)
Plan for profit distribution for 2014: Based on its total of 4,215,808,472 shares as at 31 December 2014,
the Company distributed a cash dividend of RMB10 (tax inclusive) per 10 shares to all shareholders. The
book closure day was 29 April 2015 and the ex-right & ex-dividend day 30 April 2015.
Plan for profit distribution and converting capital reserves into share capital for 2015: Based on its total of
4,267,391,228 shares, the Company distributed a cash dividend of RMB12 (tax inclusive) per 10 shares
and granted 5 additional shares per 10 shares with its capital reserves to all shareholders. The book
closure day was 5 May 2016 and the ex-right & ex-dividend day 6 May 2016.
Preliminary plan for profit distribution for 2016: Based on its total of 6,465,677,368 existing shares, the
Company is to distribute a cash dividend of RMB10 (tax inclusive) per 10 shares to all shareholders. The
said preliminary plan has been considered and approved by the 20th Meeting of the 2nd Board of the
Company and will later be submitted to a meeting of shareholders for further consideration.
Cash dividend distribution of the Company to common shareholders over the recent three years
(including the Reporting Period)
Unit: RMB
Net profit Ratio to net profit
attributable to attributable to
common common
Cash dividends Ratio of cash
Cash dividends in
Year shareholders in the shareholders in the dividends in other
(tax included) other forms
forms
consolidated consolidated
statement in the statement in the
year year
2016 6,465,677,368.00 14,684,357,000.00 44.03% 0.00 0.00
2015 5,120,869,473.60 12,706,725,000.00 40.30% 0.00 0.00
The 2016 Annual Report of Midea Group Co., Ltd.
2014 4,215,808,472.00 10,502,220,260.00 40.14% 0.00 0.00
The Company made a profit in the Reporting Period and the profit distributable to common shareholders
of the Company (without subsidiaries) was positive, but it did not put forward a preliminary plan for cash
dividend distribution to its common shareholders
□ Applicable √ N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Reserves into Share
Capital for the Reporting Period
√ Applicable □ N/A
Bonus shares for every 10 shares (share)
Dividend for every 10 shares (RMB) (tax
included)
Additional shares converted from capital
reserves for every 10 shares (share)
Total shares as the basis for the preliminary 6,465,677,368
plan for profit distribution (share)
Total cash dividends (RMB) (tax included) 6,465,677,368
Distributable profit (RMB) 13,379,033,000
Percentage of cash dividends in the total 100%
distributed profit (%)
Cash dividend policy
Other
Details about the preliminary plan for profit distribution and converting capital reserves into share capital
As audited by PricewaterhouseCoopers China (LLP), the Company realized a net profit of RMB9,579,463,000 for 2016.
Pursuant to the relevant provisions under the Articles of Association, it provided 10% as statutory surplus reserves,
namely RMB957,946,000. Plus undistributed profit at the beginning of the year of RMB9,878,385,000 and minus the
distributed profit of RMB5,120,869,000, the actual distributable profit would be RMB13,379,033,000.
Preliminary plan for profit distribution for 2016: Based on its total of 6,465,677,368 existing shares, the Company is to
distribute a cash dividend of RMB10.00 (tax inclusive) per 10 shares to all shareholders, resulting in a total cash
dividend payment of RMB6,465,677,368.00. The remaining undistributed profit shall be carried forward for future
distribution.
The preliminary plan shall be submitted to the Company’s 2016 annual meeting of shareholders for further
consideration.
The 2016 Annual Report of Midea Group Co., Ltd.
3. Performance of Undertakings
3.1 Undertakings of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other
commitment makers fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable □ N/A
Underta Type of
Undertaki Undertakin
king undertaki Details of undertaking Term Particulars on the performance
ng g date
giver ng
Controll 1. Midea Holding and He Xiangjian have undertaken as follows:
ing Within 36 months from the listing date of Midea Group's stocks, 36 months from
shareho they will neither transfer or entrust others to manage their the day of Midea
Share 1. This undertaking has expired and there has
lder, directly and indirectly held shares of Midea Group issued prior 2013.03.28 Group’s listing
Undertaki actual lock-up been no violation of this undertaking.
to this issuance, nor sell them to Midea Group. If they break the (2013.09.18-201
ng made controll above undertaking, they will assume all liabilities arising 6.09.18)
in offering er therefrom.
document
2. Midea Holding and He Xiangjian have undertaken as follows:
s or
He Xiangjian, Midea Holding and their controlled enterprises
sharehold Controll
will remain independent from Midea Group in respect of
ing ing
Maintena personnel, finance, assets, business and institutions, in
alternatio shareho
nce of accordance with relevant laws and regulations and regulatory 2. There has been no violation of this
n lder, 2013.03.28 Long-standing
independ documents. They will faithfully fulfill the above undertaking, and undertaking.
document actual
ence assume the corresponding legal liability. If they fail to fulfill their
s controll
obligations and responsibilities conferred by the undertaking,
er
they will bear the corresponding legal liabilities according to
relevant laws, rules, regulations and regulatory documents.
Controll Avoiding 3. In order to avoid possible competition within the industry 2013.03.28 Long-standing 3. There has been no violation of this
The 2016 Annual Report of Midea Group Co., Ltd.
ing competiti between Midea Group and Midea Holding and its controlled undertaking.
shareho on within enterprises as well as He Xiangjian, his immediate family and
lder, the his controlled companies, Midea Holding and He Xiangjian
actual industry have undertaken as follows:
controll (1) None of the entities or individuals mentioned above is or will
er be engaged in the same or similar business as the existing
main business of Midea Group and its controlled companies.
They are not or will not be engaged or participate in such
business that is competitive to the existing main business of
Midea Group and its controlled companies by controlling other
economic entities, institutions or economic organizations;
(2) If Midea Group and its controlled companies expand their
business on the basis of the existing ones to those where the
above mentioned related entities or individuals are already
performing such production and operations, as long as He
Xiangjian is still the actual controller of Midea Group, and Midea
Holding the controlling shareholder, they will agree on solving
the problem of competition within the industry arising therefrom
within a reasonable period;
(3) If Midea Group and its controlled companies expand their
business scope on the basis of the existing ones to those where
the above mentioned related subjects have not gone into
production or operation, as long as He Xiangjian is still the
actual controller of Midea Group, and Midea Holding the
controlling shareholder, they would undertake as not to engage
in competitive business to the new ones of Midea Group and its
controlled companies;
(4) In accordance with effective laws, regulations or other
regulatory documents of People's Republic of China, as long as
The 2016 Annual Report of Midea Group Co., Ltd.
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian the actual controller, they will
not change or terminate this undertaking.
(5) Midea Holding and He Xiangjian shall faithfully fulfill the
above undertaking, and assume the corresponding legal
responsibilities. If they fail to fulfill their obligations and
responsibilities conferred by the undertaking, they would bear
the corresponding legal responsibilities according to relevant
laws, rules, regulations and regulatory documents.
4. In order to regulate matters of related transactions that may
occur in the future between Midea Group and Midea Holding
and its controlled companies as well as He Xiangjian, his
immediate family and his controlled companies, Midea Holding
and He Xiangjian have undertaken as follows:
(1) They will regulate any related transactions with Midea
Group and its controlled companies using their utmost efforts to
Controll
reduce them. For unavoidable related transactions with Midea
ing Regulatio
Group and its controlled companies, including but not limited to
shareho n of
commodity trading, providing services to each other or as 4. There has been no violation of this
lder, related 2013.03.28 Long-standing
agent, they will sign legal normative agreements with Midea undertaking.
actual transactio
Group, and go through approval procedures in accordance with
controll ns
related laws, regulations, rules, other regulatory documents,
er
and relevant provisions of the Articles of Association of Midea
Group. They guarantee to offer fair prices for related
transactions, and fulfill the information disclosure obligations in
respect of the related transactions according to related laws,
regulations, rules, other regulatory documents, and relevant
provisions of the Articles of Association of Midea Group. They
also guarantee not to illegally transfer the funds or profits from
The 2016 Annual Report of Midea Group Co., Ltd.
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
Midea Holding is identified as the controlling shareholder of
Midea Group, and He Xiangjian the actual controller, they shall
not change or terminate this undertaking.
(5) Midea Holding and He Xiangjian will faithfully fulfill the
above undertaking and assume the corresponding legal
liabilities. If they fail to fulfill their obligations and responsibilities
conferred by the undertaking, they will bear the corresponding
legal responsibilities according to relevant laws, rules,
regulations and regulatory documents.
On Midea 5. On 4 January 2001, the Midea Trade Union Committee
Trade signed the \"Equity Transfer Contract\" with five people, namely
Controll
Union He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and
ing
Committe Liang Jieyin, where it transferred all its limited equity of Midea 5. So far, this shareholding transfer has not
shareho
e Group (22. 85%) respectively to those five people. According to brought about any loss caused by any dispute
lder, 2013.03.28 Long-standing
transferri the confirmation letter issued by members of the Midea Trade or potential disputes. There has been no
actual
ng its Union Committee at that time, the equity transfer price was violation of this undertaking.
controll
limited determined after mutual discussion on the basis of their true
er
equity of opinions, therefore there was no dispute or potential dispute.
Midea On 28 June, 2013, Foshan Shunde Beijiao General Union,
The 2016 Annual Report of Midea Group Co., Ltd.
Group superior department of Midea Trade Union Committee, issued a
confirmation letter to the fact that the 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 any
agreement from all staff committee members.
Midea Holding and He Xiangjian, respectively the controlling
shareholder and actual controller of Midea Group Co., Ltd. have
undertaken as follows: For any loss to Midea Group caused by
any dispute or potential dispute arising from the matters of
equity transfer mentioned above, they are willing to assume full
liability for such loss.
Issues
about
Payment
6. Midea Holding and He Xiangjian have undertaken to be liable
of the
for (1) paying such expenses and related expenses on time
Staff
Controll based on the requirements of relevant state departments if
Social
ing Midea Group is required to be liable for the payment of staff 6. So far, the payment of the staff social
Insurance
shareho social insurance, housing provident fund and the payment insurance and the housing provident fund has
and the
lder, required by relevant state authorities prior to this merger, (2) 2013.03.28 Long-standing not brought about any controversy or potential
Housing
actual paying corresponding compensation for all direct and indirect disputes. There has been no violation of this
Provident
controll losses incurred by Midea Group and its subsidiaries due to this undertaking.
Fund
er merger, (3) indemnifying and holding harmless Midea Group
involved
and its subsidiaries in time from such expenses when Midea
in Midea
Group and its subsidiaries are required to pay them in advance.
Group's
Overall
Listing
The 2016 Annual Report of Midea Group Co., Ltd.
7. Undertakings on issues about asset alteration, asset flaw and
house leasing of Midea Group and its subsidiaries
Midea Holding and He Xiangjian have undertaken as follows:
(1) Midea Holding will do its utmost to assist and urge Midea
Group (including its subsidiaries) to complete renaming
procedures of related assets, such as land, housing,
trademarks, patents and stock rights, declared in the related
files of this merger. Midea Holding will be liable for all
Issues compensations of losses caused by issues about renaming
about procedures of related assets mentioned above to Midea Group.
asset (2) Midea Holding shall do its utmost to assist Midea Group
Controll alteration, (including its subsidiaries) to apply for ownership certificates of 7. So far, the issues about asset alteration,
ing asset land and housing or property declared in related files of this asset flaw and house leasing of Midea Group
shareho flaw and merger. and its subsidiaries have not brought about
lder, house (3) Midea Holding shall assist Midea Group (including its 2013.03.28 Long-standing any controversy or potential disputes. There
actual leasing of subsidiaries) to re-apply for corresponding construction has been no violation of this undertaking. And
controll Midea procedures and apply for their ownership certificates for houses Midea Holding shall honor this undertaking
er Group without complete procedures, as happened in the past, to apply before its expiration.
and its for the ownership certificate. If the competent authorities
subsidiari requires Midea Group to dismantle buildings that cannot
es acquire the re-application for real estate registration
procedures, Midea Holding shall do its utmost to provide
assistance and be liable for any related expenses used in
dismantling such buildings by Midea Group (including its
subsidiaries).
(4) Under any circumstances that Midea Group suffers from
losses incurred from no longer using these properties or
presently using the land or house above due to failing to obtain
or collect in time the ownership certificates of the land or house
The 2016 Annual Report of Midea Group Co., Ltd.
above or any losses caused by any other reasons, Midea
Holding shall compensate any loss for these reasons in time
and in full. Midea Holding shall compensate the actual loss
Midea Group suffers from any circumstances above resulting in
penalties subjected to from competent authorities or through
claims from any other third party.
(5) Based on issues of defective house leasing declared in
related files of this merger, Midea Holding shall provide
sufficient compensations for all economic losses incurred by
Midea Group (including its subsidiaries) where the leasehold
relations above become invalid or other disputes occur, which
are caused by rights claims from a third party or by means of an
administrative authority exercising a right and therefore results
in any economic losses due to eviction from rental houses, or
any penalties subjected to by competent government
departments or any recourse from related parties.
(6) Based on the issues of defective land leasing declared in
related files of this merger, when leasehold relations become
invalid caused by defects of land leasing or when other disputes
occur, resulting in any economic losses to Midea Group
(including its subsidiaries) or through any penalties
administered by competent government departments. Likewise
if the lessor cannot compensate for losses caused by such
defective leasing, Midea Holding shall compensate Midea
Group for losses caused by such defective land leasing.
Midea Holding has further undertaken that where a violation of
guarantees and undertakings referred to previously occurs or
such guarantees and undertakings are not consistent with the
reality and Midea Group has suffered any loss therefrom, Midea
The 2016 Annual Report of Midea Group Co., Ltd.
Holding shall compensate in cash or make up for Midea
Group’s loss upon Midea Group’s notice in writing within 30
days when the loss occurs and the loss amount is definite.
Shareholders of Midea Group Ningbo Meicheng, Fang Hongbo,
Huang Jian, Cai Qiwu, Yuan Liqun, Huang Xiaoming, Li
36 months from
Jianwei, Zheng Weikang promise that since Midea Group was
Other the day of Midea
Share listed on the Shenzhen Stock Exchange Center, transferring This undertaking has expired and there has
shareho 2013.03.28 Group’s listing
lock-up shares or delegating others to manage their shares with either been no violation of this undertaking.
lders (2013.09.18-201
direct or indirect ownership of Midea Group, issued before this
6.09.18)
time, has been forbidden for 36 months. Midea Group is not
allowed to buy back those shares either.
36 months from
Undertaki
Xiaomi Technology has given an undertaking that it shall not
ngs given the listing date of
Xiaomi transfer the shares that it had subscribed for in this private There has been no violation of this
in time of Private
Technol placement with Midea Group within 36 months from the 2015.06.26 this private undertaking.
IPO or issue
ogy completion date of this offering (26 June 2015, the listing date
refinancin placement, i.e. to
for this offering).
g
26 June 2018
Whether
the
undertaki
Yes
ng is
fulfilled
on time
Specific N/A
The 2016 Annual Report of Midea Group Co., Ltd.
reasons
for failing
to fulfill
any
undertaki
ng and
plan for
the next
step
The 2016 Annual Report of Midea Group Co., Ltd.
3.2 Where any earnings forecast was made for any of the Company’s assets or projects and the
Reporting Period is still within the forecast period, the Company shall explain whether the
performance of the asset or project reaches the earnings forecast and why
□ Applicable √ N/A
4. Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□ Applicable √ N/A
No such cases in the Reporting Period.
5. Explanation of the Board of Directors, the Supervisory Committee and
Independent Directors (If Any) Regarding the \"Non-standard Audit Opinion\" for the
Reporting Period
□ Applicable √ N/A
6. Reason for Changes in Accounting Policies, Accounting Estimates and
Accounting Methods as Compared to the Financial Report for the Prior Year
□ Applicable √ N/A
No such cases in the Reporting Period.
7. Reason for Retrospective Restatement of Major Accounting Errors during the
Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
8. Reason for Changes in Scope of the Consolidated Financial Statements as
Compared to the Financial Report for the Prior Year
√ Applicable □ N/A
For the main subsidiaries included the scope of the consolidated financial statements for the current year,
please refer to Note 5 and Note 6 to the Financial Statements. And the main companies newly
consolidated in the current year are Guangdong Midea Cuchen Consumer Electric Manufacturing Co.,
Ltd., Midea Factoring Co., Ltd., Toshiba Lifestyle Products & Services Corporation, Clivet S.P.A & Clivet
Espaa S.A.U. and Shenzhen Shenzhoutongfu Technology Co., Ltd. (for details, please see “5.1” and
The 2016 Annual Report of Midea Group Co., Ltd.
“a”, “5.2” under Note 5 to the Financial Statements). For the companies deconsolidated in the current
year, please refer to “b”, “5.2” under Note 5 to the Financial Statements.
9. Engagement and Disengagement of CPAs Firm
CPAs firm at present
Name of the domestic CPAs firm PricewaterhouseCoopers China (LLP)
The Company’s payment for the domestic CPAs
firm (RMB’0,000)
Consecutive years of the audit service provided
Two years
by the domestic CPAs firm
Names of the certified public accountants from
Yao Wenping, Huang Meimei
the domestic CPAs firm
Whether the CPAs firm was changed in the current period
□ Yes √ No
Engagement of any CPAs firm for internal control audit, financial advisor or sponsor
√ Applicable □ N/A
The Company appointed PricewaterhouseCoopers China as the internal control auditor for this year. The
remuneration in total paid by the Company to PricewaterhouseCoopers China for its audit of the
Company’s financial report and internal control conditions for 2016 was RMB7.38 million.
In this year, the Company acquired shares of KUKA in cash through tender offer via MECCA, one of the
Company’s wholly-owned foreign subsidiaries, and hired CITIC Securities Co., Ltd. as the financial
advisor for the said transaction. The transaction has been concluded on 6 January 2017 and a financial
advising fee of RMB6 million needs to be paid.
10. Possibility of Listing Suspension and Termination after Disclosure of this Annual
Report
□ Applicable √ N/A
11. Bankruptcy and Reorganization
□ Applicable √ N/A
No such cases in the Reporting Period.
The 2016 Annual Report of Midea Group Co., Ltd.
12. Material Litigation and Arbitration
□ Applicable √ N/A
No such cases in the Reporting Period.
13. Punishments and Rectifications
□ Applicable √ N/A
No such cases in the Reporting Period.
14. Credit Conditions of the Company as well as Its Controlling Shareholder and
Actual Controller
□ Applicable √ N/A
15. Implementation of any Equity Incentive Plan, Employee Stock Ownership Plan or
Other Incentive Measures for Employees
√ Applicable □ N/A
A. Overview of the First Stock Option Incentive Plan
a. The Company convened the 6th Meeting of the 2nd Board of Directors on 24 March 2016, at which the
Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the First
Stock Option Incentive Plan was reviewed and approved. As such, it was agreed to adjust the incentive
receivers and their exercisable stock options for the First Stock Option Incentive Plan due to the
departure, positional changes or low performance appraisals of some incentive receivers. Upon the
adjustments, the number of incentive receivers decreased from 626 to 562, and their unexercised stock
options were also reduced to 58,155,600 (including the unexercised stock options from the first exercise
period).
The Proposal for Matters Related to the Stock Option Exercise for the Second Exercise Period of the
First Stock Option Incentive Plan was also considered and approved. For the exercise conditions that
have grown mature for the second exercise period, a total of 559 incentive receivers who have
ascertained and verified the First Stock Option Incentive Plan have been allowed to exercise 27,185,000
stock options in the second exercise period.
b. On 29 April 2016, the Announcement on the 2015 Annual Profit Distribution and Conversion of Capital
The 2016 Annual Report of Midea Group Co., Ltd.
Reserves into Share Capital was disclosed by the Company, with a decision to distribute a cash dividend
of RMB12.00 and grant 5 additional shares with its capital reserves for every 10 shares to all the
shareholders based on the total of 4,267,391,228 shares of the Company. The book closure date was 5
May 2016 and the ex-right and ex-dividend date was 6 May 2016.
The Company convened the 10th Meeting of the 2nd Board of Directors on 9 May 2016, at which the
Proposal for the Adjustments to the Stock Options and Exercise Price for the First Stock Option Incentive
Plan was reviewed and approved. As the 2015 Annual Profit Distribution and Conversion of Capital
Reserves into Share Capital had been carried out, the unexercised stock options for the First Stock
Option Incentive Plan were increased from 58,155,600 to 87,233,400, the exercise price was revised
from RMB17.72 to RMB11.01 per share, and the exercisable stock options for the second exercise
period were changed from 27,185,000 to 40,777,500.
c. On 26 March 2016, the exercise conditions grew mature for the second exercise period of the First
Stock Option Incentive Plan. Upon examination by the Shenzhen Stock Exchange and the Shenzhen
branch of China Securities Depository and Clearing Co., Ltd., the second exercise period of the First
Stock Option Incentive Plan started on 7 June 2016. In the Reporting Period, 37,639,742 stock options
have been exercised.
B. Overview of the Second Stock Option Incentive Plan
a. The Company convened the 10th Meeting of the 2nd Board of Directors on 9 May 2016, at which the
Proposal for the Adjustments to the Stock Options and Exercise Price for the Second Stock Option
Incentive Plan was reviewed and approved. As the 2015 Annual Profit Distribution and Conversion of
Capital Reserves into Share Capital had been carried out, the stock options for the Second Stock Option
Incentive Plan were increased from 83,790,000 to 125,685,000, and the exercise price was revised from
RMB30.54 to RMB19.56 per share.
b. The Company convened the 13th Meeting of the 2nd Board of Directors on 1 June 2016, at which the
Proposal for the Adjustments to the Incentive Receivers and Their Exercisable Stock Options of the
Second Stock Option Incentive Plan was reviewed and approved. As such, it was agreed to adjust the
incentive receivers and their exercisable stock options for the Second Stock Option Incentive Plan due to
the departure, positional changes or low performance appraisals of some incentive receivers. Upon the
adjustments, the number of incentive receivers decreased from 733 to 639, and their stock options were
The 2016 Annual Report of Midea Group Co., Ltd.
also reduced from 125,685,000 to 108,705,000.
c. On 2 June 2016, the exercise conditions grew mature for the first exercise period of the Second Stock
Option Incentive Plan. Upon examination by the Shenzhen Stock Exchange and the Shenzhen branch of
China Securities Depository and Clearing Co., Ltd., the first exercise period of the Second Stock Option
Incentive Plan started on 28 June 2016. In the Reporting Period, 20,629,995 stock options have been
exercised.
C. Overview of the Third Stock Option Incentive Plan
a. On 25 May 2016, the Third Stock Option Incentive Plan (Draft) and its Abstract of Midea Group Co.,
Ltd. was reviewed and approved at the 12th Meeting of the 2nd Board of Directors, and the incentive
receiver list for the Third Stock Option Incentive Plan (Draft) was examined at the 9th Meeting of the 2nd
Supervisory Committee.
b. On 6 June 2016, the Company convened a third special meeting of shareholders for 2016, at which
the Third Stock Option Incentive Plan (Draft) and its Abstract, the Implementation and Appraisal
Measures for the Third Stock Option Incentive Plan, the Proposal for Asking the Meeting of Shareholders
to Authorize the Board to Handle Mattes Related to the Third Stock Option Incentive Plan and other
relevant proposals were reviewed and approved.
c. In light of the authorization given at the Third Special Meeting of Shareholders for 2016, the Company
convened the 15th Meeting of the 2nd Board of Directors on 28 June 2016, at which the Proposal for the
Adjustments to the Incentive Receiver List and the Number of Granted Stock Options for the Third Stock
Option Incentive Plan, the Proposal for the Determination of the Grant Date for the Third Stock Option
Incentive Plan and the Proposal for the Grant-Related Matters for the Third Stock Option Incentive Plan
were reviewed and approved. As such, the Company agreed to grant 127,290,000 stock options to 929
receivers on 28 June 2016 with the exercise price being RMB21.35 per share.
D. Overview of the First Employee Stock Ownership Plan
The Proposal for the First Core Management and “Midea Group Partner” Stock Ownership Plan and
Adjustments was reviewed and approved at the 6th Meeting of the 2nd Board of Directors on 24 March
2016. As such, the intended receivers for the First Core Management and “Midea Group Partner” Stock
Ownership Plan (the “First Employee Stock Ownership Plan” for short) were revised from 31 to 15, and
the number of shares for every intended receiver should be determined based on how well the
The 2016 Annual Report of Midea Group Co., Ltd.
performance objectives of the Company, its business divisions and operating units for 2015 were
achieved and how much the intended receiver contributed to that. The shares would be granted to the
intended receivers by three installments (40% for the first installment and 30% for the second and third
respectively). The first 70% shares (the first and second installments) granted to the receivers would be
locked up until the final 30% was put under the name of the receivers, and the third installment would not
be subject to lock-up (tradable as soon as they were put under the name of the receivers). That is, all the
shares would be locked up for four years and then unlocked at the same time (when the First Employee
Stock Ownership Plan would be considered to have expired).
At the said board meeting, the First Core Management and “Midea Group Partner” Stock Ownership
Plan (Draft) (Revised) was also reviewed and approved. As per the applicable rules, the administrative
committee for the First Employee Stock Ownership Plan decided to grant a total of 1,962,000 shares to
the intended receivers and nailed down the first installment. After the first installment, the excess shares
and their dividends (if any) would be taken back by the administrative committee for no compensation
and sold before the First Employee Stock Ownership Plan expired. The earnings on the sale would be
used for the repayment of the funds raised through financing and the payment of the accrued interest.
Any earnings left after that would belong to the Company.
E. Overview of the Second Employee Stock Ownership Plan
a. The Proposal for the Second Core Management and “Midea Group Partner” Stock Ownership Plan
(Draft) of Midea Group Co., Ltd. & Its Abstract was considered and approved at the 6th Meeting of the 2nd
Board of Directors on 24 March 2016. As resolved by a meeting of the intended receivers of the Second
Employee Stock Ownership Plan, China International Capital Corporation Limited (CICC) was entrusted
to conduct the “CICC Directional Asset Management Plan for the Second Midea Group Partner Stock
Ownership Plan” with Midea Group shares purchased from the secondary market.
From 13 April 2016 to 26 April 2016, CICC, the stock ownership plan administrator, purchased a total of
2,583,060 Midea Group shares at an average price of RMB30.69/share from the secondary market. The
funds used for the share purchase were sourced from Midea Group’s special fund for the Second
Employee Stock Ownership Plan of RMB80.5 million. As such, the shares needed by the Second
Employee Stock Ownership Plan have been purchased, with a statutory lock-up period from 29 April
2016 to 28 April 2017.
The 2016 Annual Report of Midea Group Co., Ltd.
16. Significant Related-Party Transactions
16.1 Related-party transactions arising from routine operation
√ Applicable □ N/A
Proporti
Obtaina
on in
ble
the total
Approv market Index
Tran Trans- amount
Related Type of Content ed Mode price to the
Pricing s- action s of Over Disclos
transac Relatio the s of the transac of for the disclo
principl actio amount transac approv ure
tion n trans- trans- tion line settlem transac sed
e n (RMB tion of ed line date
party action action (RMB ent tion of inform
price ’0,000) the
’0,000) the ation
same
same
kind
kind
(%)
Controll
Infore ed by
Environ family
ment membe www.
Procure Payme
Technol r of Procure Market 125,50 2016.0 cninfo
ment of - 85,886.7 0.78% No nt after -
ogy Compa ment price 0 3.26 .com.
goods delivery
Group ny’s cn
Co., actual
Ltd. controll
er
Controll
ed by
family
membe www.
Orinko Procure Payme
r of Procure Market 2016.0 cninfo
Plastics ment of - 24,008.2 0.22% 40,000 No nt after -
Compa ment price 3.26 .com.
Group goods delivery
ny’s cn
actual
controll
er
165,50
Total -- -- 109,894.9 -- -- -- -- -- --
Details of any sales return of a
Zero
large amount
Give the actual situation in the The associated amount limit between the Company and the related parties and the
Reporting Period (if any) where a subsidiaries did not exceed the estimated total amounts of routine related-party
forecast had been made for the transactions by type.
The 2016 Annual Report of Midea Group Co., Ltd.
total amounts of routine
related-party transactions by type
to occur in the current period
Reason for any significant
difference between the
N/A
transaction price and the market
reference price (if applicable)
16.2 Related-party transactions regarding purchase or sales of assets or equity interests
□ Applicable √ N/A
No such cases in the Reporting Period.
16.3 Related-party transitions arising from joint investments in external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
16.4 Credits and liabilities with related parties
□ Applicable √ N/A
No such cases in the Reporting Period.
16.5 Other significant related-party transactions
√ Applicable □ N/A
The Proposal for the Related-Party Transaction Regarding Note Discounting for Infore Environment in
2016 and the Proposal for Related-party Transactions Regarding Making Deposits in and Securing
Loans from Shunde Rural Commercial Bank in 2016 were reviewed and approved at the 6th Meeting of
the 2nd Board of Directors held on 24 March 2016 and later at the 2015 Annual Meeting of Shareholders
held on 26 April 2016.
In 2016, Midea Group Finance Co., Ltd., a subsidiary of the Company, provided note discounting
services for Infore Environment Technology Group Co., Ltd. and its subsidiaries, with the total amount of
discounted notes not exceeding RMB1 billion and the interest charged not exceeding RMB20 million.
In 2016, the deposit balance of the Company in Shunde Rural Commercial Bank did not exceed RMB5
billion and neither did the credit balance provided by the bank to the Company exceed RMB3 billion.
The 2016 Annual Report of Midea Group Co., Ltd.
Index to the Announcements about the said related-party transactions disclosed
Title of Announcement Disclosure date Disclosure website
Announcement on the Related-Party Transaction Regarding
2016.03.26 www.cninfo.com.cn
Note Discounting for Infore Environment in 2016
Announcement on Related-party Transactions Regarding
Making Deposits in and Securing Loans from Shunde Rural 2016.03.26 www.cninfo.com.cn
Commercial Bank
17. Significant Contracts and Their Execution
17.1 Trusteeship, contracting and leasing
17.1.1 Trusteeship
□ Applicable √ N/A
No such cases in the Reporting Period.
17.1.2 Contracting
□ Applicable √ N/A
No such cases in the Reporting Period.
17.1.3 Leasing
□ Applicable √ N/A
No such cases in the Reporting Period.
17.2 Major Guarantees
√ Applicable □ N/A
17.2.1 Guarantees provided by the Company
Unit: RMB'0,000
Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries)
Disclosur Actual Guara
Actual
e date of Line of occurrence Term of ntee
guarant Type of Due
Guaranteed party the guarante date guarant for a
ee guarantee or not
guarante e (date of ee related
amount
e line agreement party
The 2016 Annual Report of Midea Group Co., Ltd.
announce signing) or not
ment
2016-3-2 Joint and One
Shanxi Huaxiang Group Co., Ltd. 20,400 0 No No
6 2016-1-28 several liability year
Total actual external
Total external guarantee line
guarantee amount
approved during the Reporting 20,400 6,800
during the Reporting
Period (A1)
Period (A2)
Total actual external
Total approved external
guarantee balance at
guarantee line at the end of the 20,400
the end of the Reporting
Reporting Period (A3)
Period (A4)
Guarantees between the Company and its subsidiaries
Disclosur
Actual Guara
e date of
occurrence Actual ntee
the Line of Term of
date (date guarant Type of Due for a
Guaranteed party guarante guarante guarant
of ee guarantee or not related
e line e ee
agreement amount party
announce
signing) or not
ment
2016-3-2 1,095,80 Joint and One
Midea Group Finance Co., Ltd. 2016-1-1 338,703 No No
6 0 several liability year
2016-3-2
Midea Microcredit Co., Ltd. 60,000 - - Ditto Ditto Ditto Ditto
Foshan Shunde Midea Microcredit 2016-3-2
30,000 - - Ditto Ditto Ditto Ditto
Co., Ltd.
Guangdong Midea Refrigeration 2016-3-2 1,095,10
2016-1-11 237,146 Ditto Ditto Ditto Ditto
Equipment Co., Ltd. 6
Guangdong Midea Kitchen 2016-3-2
718,500 2016-1-12 237,588 Ditto Ditto Ditto Ditto
Appliances Manufacturing Co., Ltd.
Guangdong Witt Vacuum Electronics 2016-3-2
43,600 2016-1-1 350 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Guangdong Midea Heating & 2016-3-2
293,700 2016-4-28 22,562 Ditto Ditto Ditto Ditto
Ventilation Equipment Co., Ltd.
Midea Commercial Air Conditioning
2016-3-2
Equipment Co., Ltd., Guangdong 14,400 - 11,565 Ditto Ditto Ditto Ditto
Province
Guangdong Midea-SIIX Electronics 2016-3-2
12,000 - - Ditto Ditto Ditto Ditto
Co., Ltd.
Guangdong Midea Consumer 2016-3-2 105,500 2016-6-28 1,215 Ditto Ditto Ditto Ditto
The 2016 Annual Report of Midea Group Co., Ltd.
Electric Manufacturing Co., Ltd.
Foshan Shunde Midea Electric 2016-3-2
181,100 2016-1-12 27,235 Ditto Ditto Ditto Ditto
Appliance Manufacturing Co., Ltd.
Guangdong Midea Kitchen &
2016-3-2
Bathroom Appliances Manufacturing 10,000 - 10 Ditto Ditto Ditto Ditto
Co., Ltd.
Foshan Shunde Midea Drinking 2016-3-2
19,300 2016-5-11 10,277 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Foshan Midea Clear Lake Water
2016-3-2
Purification Equipment 9,800 - - Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Guangdong Midea Environment 2016-3-2
223,000 2016-1-12 - Ditto Ditto Ditto Ditto
Appliances Manufacturing Co., Ltd. 6
Foshan Shunde Midea Washing 2016-3-2
448,200 2016-3-29 15,341 Ditto Ditto Ditto Ditto
Appliance Manufacturing Co., Ltd.
Guangdong GMCC Refrigeration 2016-3-2
67,800 2016-4-27 25,981 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Guangdong GMCC Precise 2016-3-2
34,000 2016-1-1 13,358 Ditto Ditto Ditto Ditto
Manufacture Co., Ltd.
2016-3-2
65,700 2016-1-1 54 Ditto Ditto Ditto Ditto
Guangdong Welling Motor Co., Ltd.
Foshan Welling Electronic and 2016-3-2
10,000 2016-1-1 9 Ditto Ditto Ditto Ditto
Electric Appliances Co., Ltd.
Foshan Welling Washer Motor 2016-3-2
118,000 2016-1-1 3,636 Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Ningbo Midea Joint Materials Supply 2016-3-2
66,000 2016-1-1 - Ditto Ditto Ditto Ditto
Co. Ltd.
2016-3-2
21,000 2016-1-1 - Ditto Ditto Ditto Ditto
Foshan Welling Material Co., Ltd.
Guangzhou Kaizhao Trading Co.,
2016-3-2
Ltd. 18,000 - 48 Ditto Ditto Ditto Ditto
Foshan Midea Carrier Refrigeration 2016-3-2
52,400 - - Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Guangdong Midea Group Wuhu 2016-3-2
36,000 - - Ditto Ditto Ditto Ditto
Refrigeration Equipment Co., Ltd.
Wuhu GMCC Air Conditioning 2016-3-2
151,600 2016-1-1 - Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Hefei Midea Refrigerator Co., Ltd. 2016-3-2 43,600 2016-6-21 2,500 Ditto Ditto Ditto Ditto
The 2016 Annual Report of Midea Group Co., Ltd.
2016-3-2
10,000 2016-1-1 71 Ditto Ditto Ditto Ditto
Hubei Midea Refrigerator Co., Ltd.
2016-3-2
52,000 2016-1-1 571 Ditto Ditto Ditto Ditto
Hefei Hualing Co., Ltd.
Guangzhou Midea Hualing 2016-3-2
20,000 2016-1-1 182 Ditto Ditto Ditto Ditto
Refrigerator Equipment Co., Ltd.
Hefei Midea Heating & Ventilation 2016-3-2
7,000 - - Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Hefei Midea-Bosch Air Conditioning 2016-3-2
10,000 - - Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Wuhu Midea Kitchen & Bathroom 2016-3-2
6,000 2016-1-1 3,674 Ditto Ditto Ditto Ditto
Electric Manufacturing Co., Ltd.
Wuhu Midea Washing Appliance 2016-3-2
12,000 - - Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd.
Anhui GMCC Refrigeration 2016-3-2
10,000 2016-1-1 15 Ditto Ditto Ditto Ditto
Equipment Co., Ltd.
Anhui GMCC Precise Manufacture 2016-3-2
24,000 2016-6-23 12,219 Ditto Ditto Ditto Ditto
Co., Ltd.
Welling (Wuhu) Motor Manufacturing 2016-3-2
12,000 2016-3-29 47 Ditto Ditto Ditto Ditto
Co., Ltd.
2016-3-2
Annto Logistics Co., Ltd. 32,000 2016-1-1 10,090 Ditto Ditto Ditto Ditto
Hefei Midea Washing Machine Co., 2016-3-2
40,000 2016-6-28 47,363 Ditto Ditto Ditto Ditto
Ltd.
Jiangsu Midea Cleaning Appliances 2016-3-2
26,800 2016-6-20 9,857 Ditto Ditto Ditto Ditto
Co., Ltd.
Jiangxi Midea Guiya Lighting Co., 2016-3-2
5,500 - - Ditto Ditto Ditto Ditto
Ltd.
Changzhou Welling Motor 2016-3-2
12,000 - Ditto Ditto Ditto Ditto
Manufacturing Co., Ltd. 6 -
2016-3-2 2,436,25
2016-2-1 690,540 Ditto Ditto Ditto Ditto
Midea International Holdings Ltd. 6 6
2016-3-2
Midea International Trading Co., Ltd 70,000 2016-1-4 32,354 Ditto Ditto Ditto Ditto
Midea Electric Investment (BVI) 2016-3-2
27,000 - - Ditto Ditto Ditto Ditto
Limited
Calpore Macao Commercial 2016-3-2
21,300 2016-1-4 - Ditto Ditto Ditto Ditto
Offshore Ltd.
The 2016 Annual Report of Midea Group Co., Ltd.
Welling International Hong Kong 2016-3-2
24,000 - - Ditto Ditto Ditto Ditto
Limited
Main Power Electrical Factory 2016-3-2
46,400 2016-1-6 8,254 Ditto Ditto Ditto Ditto
Limited
Midea Electric Trading (Singapore) 2016-3-2
986,000 2016-1-1 31,825 Ditto Ditto Ditto Ditto
Co. Pte. Ltd.
Midea Consumer Electric (Vietnam) 2016-3-2
21,000 - - Ditto Ditto Ditto Ditto
Co., Ltd.
2016-3-2
Springer Carrier Ltda. Ditto Ditto Ditto Ditto
130,000 2016-6-17 49,980
2016-3-2
Climazon Industrial Ltda. Ditto Ditto Ditto Ditto
2016-3-2
Carrier S.A Ditto Ditto Ditto Ditto
12,000 -
2016-3-2
Carrier Fueguina S.A. Ditto Ditto Ditto Ditto
2016-3-2
Carrier(Chile) S.A. 14,000 - 5,075 Ditto Ditto Ditto Ditto
2016-3-2
Midea Electrics Netherlands B.V. 14,000 - - Ditto Ditto Ditto Ditto
2016-3-2
Midea America Corp. 35,000 - - Ditto Ditto Ditto Ditto
2016-3-2
PT.Midea Planet Indonesia Co., Ltd. 35,000 - - Ditto Ditto Ditto Ditto
MIDEA Scott & English Electronics 2016-3-2
14,000 - - Ditto Ditto Ditto Ditto
Sdn Bhd
2016-3-2
Midea America (Canada) Corp. 7,000 - 3,100 Ditto Ditto Ditto Ditto
2016-3-2
Midea Middle East 36,000 - - Ditto Ditto Ditto Ditto
2016-3-2
Midea Europe GmbH 14,000 - - Ditto Ditto Ditto Ditto
2016-3-2
Midea Italia S.R.L. 14,000 - - Ditto Ditto Ditto Ditto
2016-3-2
Midea México, S. DE R.L. DE C.V. 21,000 - - Ditto Ditto Ditto Ditto
2016-3-2
Orient Household Appliances Ltd. 14,000 - - Ditto Ditto Ditto Ditto
The 2016 Annual Report of Midea Group Co., Ltd.
Toshiba Lifestyle Products & 2016-6-3 1,040,51
- - Ditto Ditto Ditto Ditto
Services Corporation 0
Midea Investment and Development 2016-9-2
195,096 - Ditto Ditto Ditto Ditto
Co., Ltd.
2016-9-2
Midea Carrier Egypt Miraco S.A.E. 3,252 - Ditto Ditto Ditto Ditto
Total actual guarantee
Total guarantee line for subsidiaries approved amount for subsidiaries
10,554,216 4,435,889
during the Reporting Period (B1) during the Reporting
Period (B2)
Total actual guarantee
Total approved guarantee line for subsidiaries balance for subsidiaries
10,554,216 1,852,795
at the end of the Reporting Period (B3) at the end of the
Reporting Period (B4)
Guarantees between subsidiaries
Disclosure Actual
Guarant
date of the occurrence
Actual ee for a
guarantee Line of date Type of Term of Due or
Guaranteed party guarantee related
line guarantee (date of guarantee guarantee not
amount party or
announce agreement
not
ment signing)
No such cases
Total guarantee amount (total of the above-mentioned three kinds of guarantees)
Total actual guarantee
Total guarantee line approved
amount during the
during the Reporting Period 10,574,616 4,442,689
Reporting Period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total approved guarantee line at
balance at the end of the
the end of the Reporting Period 10,574,616 1,852,795
Reporting Period
(A3+B3+C3)
(A4+B4+C4)
Proportion of the total actual guarantee amount (A4+B4+C4)
30.22%
in net assets of the Company
Of which:
Amount of guarantees provided for shareholders, the actual
controller and their related parties (D)
Amount of debt guarantees provided directly or indirectly for
1,652,566
entities with a liability-to-asset ratio over 70% (E)
Portion of the total guarantee amount in excess of 50% of
net assets (F)
The 2016 Annual Report of Midea Group Co., Ltd.
Total amount of the three kinds of guarantees above
1,652,566
(D+E+F)
Joint responsibilities possibly borne or already borne in the
N/A
Reporting Period for undue guarantees (if any)
Provision of external guarantees in breach of the prescribed
N/A
procedures (if any)
17.2.2 Illegal provision of guarantees for external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
17.3 Entrusted cash management
17.3.1 Entrusted asset management
√ Applicable □ N/A
Unit: RMB'0,000
Whet
Amount
her it Actually
Actual provide
Name is a Com Method Actual received/p
Value of Termi principal d for
of relate Product menc of Projected profit & loss aid
entrusted nation amount impairm
truste d- type ement remune income for the profit/loss
assets date recovered for ent (if
e party date ration period for the
the period applica
transa period
ble)
ction
Bank
financia 2016. 2016. Agreem 127,094.1
Bank No 3,635,890 2,570,607.20 - 127,094.10 127,094.10
l 01.01 12.31 ent
product
Total 3,635,890 -- -- -- 2,570,607.20 - 127,094.10 127,094.10 --
Source of entrusted
All from the Company's own funds
assets
Cumulative amount of
principal and revenue
overdue
Litigation involved (if
N/A
applicable)
Disclosure date of the
2016.03.26
announcement about
The 2016 Annual Report of Midea Group Co., Ltd.
the board’s consent
for the asset
management
entrustment (if any)
Disclosure date of the
announcement about
the general meeting’s
2016.04.27
consent for the asset
management
entrustment (if any)
The Proposal for the Entrustment of the Company’s Own Idle Funds for Management in 2017
Any plan for asset
was considered and approved at the 20th Meeting of the 2nd Board of Directors on 29 March
management
2017. As such, the Board has agreed to entrust its own idle funds not exceeding RMB40 billion in
entrustment in the
total to medium and short-term low-risk investment on a rolling basis. The Proposal awaits further
future
consideration at a meeting of shareholders.
17.3.2 Entrusted loans
□ Applicable √ N/A
No such cases in the Reporting Period.
17.4 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
18. Social Responsibilities
18.1 Targeted measures taken to help people lift themselves out of poverty
√ Applicable □ N/A
18.1.1 Summary of annual targeted poverty alleviation
In 2016, to actively fulfilled its social responsibility and made good use of donations, Midea Group began
the work of targeted poverty alleviation according to the annual poverty alleviation plan to improve the
development of poverty alleviation target. The donation of 2016 was RMB100 million, which will be
coordinated by the Guangdong Poverty Alleviation and Development Office for poverty alleviation work
in the 2,277 relatively poor villages in education, basic medical care and housing security, etc. to support
the relatively poor villages in Guangdong Province and income increase of those living under the poverty
The 2016 Annual Report of Midea Group Co., Ltd.
line.
18.1.2 Follow - up targeted poverty alleviation plan
In order to implement the decision-making arrangements on the poverty alleviation activities of the
Guangdong provincial government and bear the social responsibility of private enterprises, Midea Group
will continue to steadily push forward the work of poverty alleviation in the year 2017 in accordance with
the principle of truth and efficiency.
The annual targeted poverty alleviation work in 2017 will be based on poverty alleviation researches.
Such researches will be made together with Guangdong Poverty Alleviation and Development Office to
get deeply understanding of actual situation in the regions, and a detailed program will be developed to
implement the measures.
Targeted poverty alleviation work will be based on the principle of targeted supports. Those living under
the poverty line will be distinguished and poverty alleviation donation project design will be further
optimized to ensure that the donations will be used for the target people. At the same time we will focus
on improve the ability of target people, adhere to the principle of fairness and justice, and further play the
role of social supervision to be open and transparent.
18.2 Other social responsibilities taken
Whether the listed company and its subsidiaries belong to heavy polluting industries prescribed by the
environmental protection departments of China
□ Yes √ No □ N/A
Whether a social responsibility report is released
√ Yes □ No
Corporate social responsibility report
Social Corporate Standards adopted
Environment-rela
Nature of welfare-related governance-relat
ted information
business information ed information Domestic Foreign
included (yes/no)
included (yes/no) included (yes/no)
Private Yes Yes Yes CASSCSR1.0 G3
More details
1. Certified to ISO14001 Yes
2. Inputs for improvement of employees’ knowledge and 10,600
The 2016 Annual Report of Midea Group Co., Ltd.
skills so that they could have a better career (RMB’0,000)
3. Charity donations (money, goods and professional
2,000
services free of charge) (RMB’0,000)
19. Other Significant Events
√ Applicable □ N/A
A. Overview of Midea Group’s acquisition of TLSC
The Company held the seventh meeting of the second session of the Board of Directors on 30 Mar. 2016
to consider and approve the \"Proposal on Deepening Strategic Cooperation with Toshiba\". As an
initiative of the Midea Group to deepen the strategic cooperative relationship with Toshiba, Midea Group
signed a share transfer agreement with Toshiba to acquire 80.1% stake of Toshiba's main business of
home appliances \"Toshiba Lifestyle Products & Services Corporation (TLSC)\" for about 53.7 billion yen,
and the rest 19.9% stake was retained by Toshiba. At the same time, Midea Group will receive the
Toshiba brand global authorization for 40 years and more than 5,000 patents related to white household
electrical appliance.
Up to 30 Jun. 2016 (the \"closure day\"), our Company has obtained the necessary approvals for the
transaction, including the approval of Japan Fair Trade Commission, a Japanese antitrust regulator, and
the filing of the National Development and Reform Commission. In addition, in accordance with the
Equity Transfer Agreement and the relevant trading agreements, the terms of the equity delivery have
been achieved. Our Company and Toshiba have reached an agreement of the transaction and
completed the signing of the agreement on the date of delivery. The total price of the transaction has
been paid by the Company to Toshiba and related entities, totaling about 51.4 billion yen (about USD
500 million). The total amount of the transaction price is the adjusted amount of basic transaction price
53.7 billion yen in the transaction agreement. Our Company has completed the equity transfer and held
80.1% equity interest of TLSC through Midea International Corporation Company Limited, a subsidiary
of the group.
B. Overview of Midea Group's tender offer to acquire KUKA
The proposals for the tender offer to acquire shares of KUKA Aktiengesellschaft have been considered
and approved at the 11th and 12th meetings of the Second Board as well as the Third Special General
Meeting in 2016. The Company intends to make a cash tender offer of 115 euro/share to acquire KUKA
The 2016 Annual Report of Midea Group Co., Ltd.
shares via its wholly-owned foreign subsidiary MECCA, with the funds needed sourced from syndicated
loans and the Company’s own funds.
On 15 Jun. 2016, the Federal Financial Supervisory Authority of Germany reviewed and approved the
tender offer documents (in German), which were issued by the Company on the following day.
Regarding the opinions of KUKA’s board of supervisors and executive board as to the tender offer, as
well as the Investment Agreement signed between the Company and KUKA, the Company disclosed the
Indicative Announcement of Midea Group Co., Ltd. on Progress on the Tender Offer to Acquire KUKA
Aktiengesellschaft Shares on www.cninfo.com.cn dated 29 Jun. 2016.
As the tender offer period ended on 4 Aug. 2016, holders of 81.04% of KUKA’s outstanding shares had
decided to accept the tender offer. Adding the 13.51% stake that the Company had held in KUKA before
the tender offer, the Company would hold 94.55% in total of KUKA’s outstanding shares provided the
acquisition is successfully completed.
In the case of the delivery conditions approved by the government for the tender offer, our Company
made further announcements of \"Notice on the Progress of Midea Group Co., Ltd.’s Offer to Acquire
KUKA Aktiengesellschaft\" on 11 Aug. 2016, 23 Aug. 2016, 31 Aug. 2016, 8 Sept. 2016, 21 Sept. 2016,
14 Oct. 2016, 15 Oct. 2016, 31 Dec. 2016, and 31 Dec. 2016 in CNINF www.cninfo.com.cn.
The Company completed the transaction on 6 Jan. 2017 after the fulfillment of all statutory
decision-making and approval procedures prior to completion. KUKA AG's 32,233,536 shares have been
transferred to MECCA and MECCA has paid the total transaction price of 3,706,856,640.
20. Significant Events of Subsidiaries
□ Applicable √ N/A
The 2016 Annual Report of Midea Group Co., Ltd.
Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
Before +/- After
Issu
anc Bon
Propo Capitalizatio Prop
e of us
Number rtion n of capital Other Subtotal Number ortio
new shar
(%) reserves n (%)
shar es
es
2,026,343,75 1,013,371,87
47.49 0 0 -2,760,670,365 -1,747,298,490 279,045,260 4.32
1. Restricted shares 0
1.1 Shares held by
0 0 0 0 0 0 0 0 0
the state
1.2 Shares held by
state-owned 0 0 0 0 0 0 0 0 0
corporations
1.3 Shares held by
2,026,343,75 1,013,371,87
other domestic 47.49 0 0 -2,760,670,365 -1,747,298,490 279,045,260 4.32
0
investors
Among which:
Shares held by 1,626,250,00
38.11 0 0 813,125,000 -2,356,875,000 -1,543,750,000 82,500,000 1.28
domestic
corporations
Shares held by
domestic 400,093,750 9.38 0 0 200,246,875 -403,795,365 -203,548,490 196,545,260 3.04
individuals
1.4 Shares held by
0 0 0 0 0 0 0 0 0
foreign investors
Among which:
Shares held by
0 0 0 0 0 0 0 0 0
foreign
corporations
The 2016 Annual Report of Midea Group Co., Ltd.
Shares held by
foreign 0 0 0 0 0 0 0 0 0
individuals
2. Non-restricted 2,240,495,69 1,120,323,73 6,179,721,54 95.6
52.51 0 0 2,818,902,110 3,939,225,849
shares 9 9 8 8
2.1 RMB common 2,240,495,69 1,120,323,73 6,179,721,54 95.6
52.51 0 0 2,818,902,110 3,939,225,849
shares 9 9 8 8
2.2 Domestically
0 0 0 0 0 0 0 0 0
listed foreign shares
2.3 Overseas listed
0 0 0 0 0 0 0 0 0
foreign shares
2.4 Other 0 0 0 0 0 0 0 0 0
4,266,839,44 2,133,695,61 6,458,766,80
3. Total shares 100 0 0 58,231,745 2,191,927,359
9 4
Reasons for the changes in shares
√ Applicable □ N/A
a. Supervisor Ms. Mai Yufen increased her shareholding by 2,300 shares on 17 May 2016.
b. As the 2015 Annual Plan for Profit Distribution & Converting Capital Reserves into Share Capital has
been carried out, and stock option exercise is allowed for stock option incentive plans (Director & Vice
President Mr. Li Feide chose to exercised 750,000 shares on 3 November 2016, and 75% of these
shares, equal to 562,500 shares, were locked up due to his senior management position), the total
shares of the Company have increased from 4,266,839,449 to 6,458,766,808.
c. Ms. Yuan Liqun, a former director, vice president and the former CFO, left the Company on 15 July
2016, and all her holdings of 90,750,000 shares in the Company were locked up for half a year on a
100% basis.
d. During the Reporting Period, a total of 2,956,875,000 shares, locked up before the Company’s IPO,
were unlocked and became tradable from 19 September 2016.
e. Vice President Mr. Zhu Fengtao purchased all together 1,020,400 shares of the Company on 14 and
15 December 2016, and 75% of these shares, equal to 765,300 shares, were locked up due to his senior
management position.
f. Mr. Yin Bitong was hired by the Board as a vice president on 17 December 2016, and 75% of his
shareholding in the Company (2,109,655 shares), equal to 1,582,241 shares, were locked up due to his
The 2016 Annual Report of Midea Group Co., Ltd.
senior management position.
Approval of share changes
□ Applicable √ N/A
Transfer of share ownership
□ Applicable √ N/A
Effects of changes in shares on the basic EPS, diluted EPS, net assets per share attributable to common
shareholders of the Company and other financial indexes over the last year and the last Reporting
Period
□ Applicable √ N/A
Other contents that the Company considers necessary or is required by the securities regulatory
authorities to disclose
□ Applicable √ N/A
1.2 Changes in restricted shares
√ Applicable □ N/A
Unit: share
Opening Unlocked in Increased Closing
Name of Date of
restricted current in current restricted Reason for change
shareholder unlocking
shares period period shares
Midea Holding Co.,
Ltd., Ningbo Maysun
Equity Investment
Partnership (limited
2,731,875,00 Shares locked-up before
partnership), Huang 1,821,250,000 0 0 2016.09.19
0 IPO were unlocked
Jian, Huang
Xiaoming, Li
Jianwei, Cai Qiwu,
Zheng Weikang
Mr. Fang’s shareholding
locked-up before the IPO
were unlocked, and some 135,000,000
of his shareholding was shares were
102,742,86 102,742,86
Fang Hongbo 90,000,000 135,000,000 locked up due to his senior unlocked on
9
management position. 19 September
Currently, he holds 2016
136,990,492 shares in the
Company.
The 2016 Annual Report of Midea Group Co., Ltd.
Ms. Yuan left the Company
on 15 July 2016, and her 90,000,000
90,750,000 shares in the shares were
Yuan Liqun 60,000,000 90,000,000 90,750,000 90,750,000 Company were thus locked unlocked on
up for half a year due to her 19 September
former senior management 2016
position
Ms. Mai purchased 2,300
shares of the Company on
17 May 2016, and a
Mai Yufen 0 0 1,725 1,725 percentage of these shares
were locked up for her
senior management
position
Mr. Li chose to exercise, on
3 November 2016, 750,000
stock options granted to
him as an incentive, and a
Li Feide 0 0 562,500 562,500 -
percentage of these shares
were locked up for his
senior management
position
Mr. Zhu purchased all
together 1,020,400 shares
of the Company on 14 and
15 December 2016, and a
Zhu Fengtao 0 0 765,300 765,300 -
percentage of these shares
were locked up for his
senior management
position
Mr. Yin was hired as a vice
president on 17 December
2016, and a percentage of
Yin Bitong 0 0 1,582,241 1,582,241 his 2,109,655 shares in the -
Company were locked up
for his senior management
position
2,956,875,00 196,404,63 196,404,63
Total 1,971,250,000 -- --
0 5
Note: The plan for profit distribution and converting capital reserves into share capital for 2015 has been carried out. The
Company distributed a cash dividend of RMB12 (tax inclusive) per 10 shares and granted 5 additional shares per 10
shares with its capital reserves to all shareholders. The book closure day was 5 May 2016 and the ex-right & ex-dividend
day 6 May 2016.
The 2016 Annual Report of Midea Group Co., Ltd.
2. Issuance and Listing of Securities
2.1 Securities (excluding preference shares) issued in the Reporting Period
□ Applicable √ N/A
2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset
and liability structures
√ Applicable □ N/A
The total shares of the Company were 4,266,839,449 at the beginning of the Reporting Period. Due to
the profit distribution and conversion of capital reserves into share capital for 2015 as well as the
551,779 exercised incentive stock options before that, the total shares increased to 6,401,086,842. After
that, another 57,679,966 incentive stock options were exercised before the end of the Reporting Period.
As such, the total shares rose to 6,458,766,808 at the end of the Reporting Period.
2.3 Existing staff-held shares
□ Applicable √ N/A
3. Shareholders and Actual Controller
3.1 Total number of shareholders and their shareholdings
Unit: share
Total number of
preference
Total number of
shareholders
common Total number of
Total number with resumed
shareholders at preference
of common voting rights at
the prior shareholders with
shareholders the prior
107,577 month-end 98,402 resumed voting 0
at the end of month-end
before the rights at the
the Reporting before the
disclosure date period-end (if
Period disclosure date
of the annual any) (see note 8)
of the annual
report
report (if any)
(see note 8)
Shareholdings of shareholders with a shareholding percentage over 5% or the top 10 shareholders
Shar Increas Pledged or frozen shares
Total shares Number of Number of
Name of Nature of ehold e/decre
held at the restricted non-restricte Status of Number of
shareholder shareholder ing ase
period-end shares held d shares held shares shares
perce during
The 2016 Annual Report of Midea Group Co., Ltd.
ntage the
(%) Reporti
ng
Period
Domestic
Midea Holding 2,244,375,00 2,244,375,00
non-state-owne 34.75 Pledged 854,955,000
Co., Ltd. 0
d corporation
China Securities State-owned
2.79 180,039,880 180,039,880
Finance Co., Ltd. corporation
Domestic 102,742,86
Fang Hongbo 2.12 136,990,492 34,247,623
individual
Hillhouse Capital
Management Foreign corpor
1.76 113,891,138 113,891,138
Limited－HCM ation
China Fund
Guotai Junan－
CCB－The
Hongkong and Foreign corpor
1.48 95,727,746 95,727,746
Shanghai Banking ation
Corporation
Limited
Domestic
Yuan Liqun 1.41 90,750,000 90,750,000
individual
Domestic
Huang Jian 1.36 88,000,000 88,000,000 Pledged 23,000,000
individual
Tianjin CDH Jiatai
Equity Investment Domestic
Partnership non-state-owne 1.36 87,777,826 87,777,826
(limited d corporation
partnership)
Xiaomi Domestic
Technology Co., non-state-owne 1.28 82,500,000 82,500,000
Ltd. d corporation
Central Huijin
State-owned
Asset 1.22 78,474,900 78,474,900
corporation
Management Ltd.
Strategic investors or general
corporations becoming top-ten
N/A
shareholders due to placing of new
shares (if any) (see note 3)
Related-parties or acting-in-concert N/A
The 2016 Annual Report of Midea Group Co., Ltd.
parties among the shareholders
above
Shareholdings of the top 10 non-restricted shareholders
Number of non-restricted Type of shares
Name of shareholder shares held at the
Type Number
period-end
Midea Holding Co., Ltd. 2,244,375,000 RMB common share 2,244,375,000
China Securities Finance Co., Ltd. 180,039,880 Ditto 180,039,880
Hillhouse Capital Management Limited－HCM
113,891,138 Ditto 113,891,138
China Fund
Guotai Junan－CCB－The Hongkong and
95,727,746 Ditto 95,727,746
Shanghai Banking Corporation Limited
Huang Jian 88,000,000 Ditto 88,000,000
Tianjin CDH Jiatai Equity Investment
87,777,826 Ditto 87,777,826
Partnership (limited partnership)
Central Huijin Asset Management Ltd. 78,474,900 Ditto 78,474,900
He Xiangjian 77,334,548 Ditto 77,334,548
Li Jianwei 73,977,047 Ditto 73,977,047
UBS AG 65,421,047 Ditto 65,421,047
Related-parties or acting-in-concert parties
among the top ten non-restricted shareholders Mr. He Xiangjian and Midea Holding Co., Ltd. are acting-in-concert
and between the top ten non-restricted parties as Mr. He is the controlling shareholder of the latter.
shareholders and the top ten shareholders
Explanation on the top 10 common
shareholders participating in securities margin N/A
trading (if any) (see note 4)
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of the
Company conduct any promissory repurchase during the Reporting Period
□ Yes √ No
No such cases in the Reporting Period.
3.2 Particulars about the controlling shareholder
Legal
Date of
Name of controlling representativ
establishm Credibility code Main business scope
shareholder e / company
ent
principal
Midea Holding Co., Ltd. He Xiangjian 2002-08-05 91440606742998973 Manufacture and commerce investment;
The 2016 Annual Report of Midea Group Co., Ltd.
3 domestic commerce and materials supply
and marketing industry (excluding
state-designated monopoly); CP software
and hardware development; industrial
product design; information technology
consulting services, providing investment
consultant and consulting services;
installation, maintenance and after-sales
service of electric appliances; real estate
intermediary service and forwarding agent
service.
Shareholdings of the
controlling shareholder
in other controlled or
Apart from a direct control over the Company, Midea Holding does not directly control or have
non-controlled listed
shares in other listed companies at home or abroad.
companies at home or
abroad during the
Reporting Period
Change of the controlling shareholder during the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
3.3 Particulars about the actual controller
Name of the actual controller Nationality Right of residence in other countries or regions
The People's Republic
He Xiangjian No
of China
Main occupation and duty Incumbent board chairman of Midea Holding
Used-to-be-holding listed companies Midea Group (000333.SZ ), Welling Holding (00382.HK) and Little Swan (A:
home and abroad in the last 10 years 000418.SZ; B:200418);
Change of the actual controller during the Reporting Period
□ Applicable √ N/A
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company
The 2016 Annual Report of Midea Group Co., Ltd.
He Xiangjian
94.55%
Midea Holding Co., Ltd. 1.2%
34.75%
Midea Group Co., Ltd.
The actual controller controls the Company via trust or other ways of asset management
□ Applicable √ N/A
3.4 Other corporate shareholders with a shareholding percentage above 10%
□ Applicable √ N/A
3.5 Limits on the Company’s shares held by its controlling shareholder, actual controller,
reorganizer and other commitment subjects
□ Applicable √ N/A
The 2016 Annual Report of Midea Group Co., Ltd.
Section VII Preference Shares
□ Applicable √ N/A
No such cases in the Reporting Period.
The 2016 Annual Report of Midea Group Co., Ltd.
Section VIII Information about Directors, Supervisors, Senior
Management and Employees
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
Shares
Shares decreas
Incu
Shares increased ed at Other Shares
mbe Starting Ending
Gen held at the at the the increase/de held at the
Name Office title nt/ Age date of date of
der year-begin Reporting Reporti crease period-end
For tenure tenure
(share) Period ng (share) (share)
mer
(share) Period
(share)
Incu
Fang Chairman and Mal 2018-9-1 136,990,49
mbe 50 2012-8-25 91,326,995 0 0 45,663,497
Hongbo President e 8
nt
He Incu
Mal 2018-9-1
Jianfen Director mbe 50 2012-8-25 0 0 0 0
e
g nt
Incu
Gu Director and Mal 2018-9-1
mbe 54 2014-4-21 0 0 0 0
Yanmin Vice President e
nt
Incu
Director and Mal 2018-9-1
Li Feide mbe 40 2012-8-31 0 750,000 0 0 750,000
Vice President e
nt
Incu
Hu Fem 2018-9-1
Director mbe 47 2012-8-25 0 0 0 0
Xiaoling ale
nt
Wu Incu
Independent Mal 2018-9-1
Shinon mbe 61 2013-3-4 0 0 0 0
Director e
g nt
Incu
Rui Independent Mal 2018-9-1
mbe 50 2015-9-18 0 0 0 0
Meng Director e
nt
Incu
Guo Independent Mal 2018-9-1
mbe 58 2013-3-4 0 0 0 0
Xuejin Director e
nt
Li Independent Incu Mal 38 2013-3-4 2018-9-1 0 0 0 0
The 2016 Annual Report of Midea Group Co., Ltd.
Wenjing Director mbe e
nt
Chairman of
Incu
the Fem 2018-9-1
Liu Min mbe 40 2016-2-1 0 0 0 0
Supervisory ale
nt
Committee
Incu
Zhao Mal 2018-9-1
Supervisor mbe 42 2014-4-21 0 0 0 0
Jun e
nt
Worker-repres Incu
Mai Fem 2018-9-1
entative mbe 33 2016-1-16 0 2,300 0 0 2,300
Yufen ale
Supervisor nt
Incu
Yin Mal 2018-9-1 2,109,65
Vice President mbe 49 2016-12-16 0 0 0 2,109,655
Bitong e 8
nt
Zhu Incu
Mal 2018-9-1 1,020,40
Fengta Vice President mbe 49 2014-4-21 0 0 0 1,020,400
e 8
o nt
Incu
Mal 2018-9-1
Wang Vice President mbe 50 2014-8-18 0 0 0 0
e
Jinliang nt
Incu
Mal 2018-9-1
Hu Vice President mbe 60 2014-8-18 0 0 0 0
e
Ziqiang nt
Xiao Incu
Mal 2018-9-1
Minggu CFO mbe 47 2016-7-16 0 0 0 0
e
ang nt
Incu
Jiang Company Mal 2018-9-1
mbe 44 2013-10-30 125,000 0 31,250 46,875 140,625
Peng Secretary e
nt
Chairman of
Zeng the For Fem 2016-1-3
44 2012-8-25 0 0 0 0
Qiao Supervisory mer ale
Committee
Li Worker-repres
For Fem 2016-1-1
Baoqio entative 36 2014-5-26 0 0 0 0
mer ale
ng Supervisor
For Mal
Xu Hai Director 41 2013-3-4 2016-4-6 0 0 0 0
mer e
Yuan Director, Vice For Fem 48 2012-8-25 2016-7-1 60,500,000 0 0 30,250,000 90,750,000
The 2016 Annual Report of Midea Group Co., Ltd.
Liqun President and mer ale
CFO
Wu Director and For Mal
53 2014-4-21 2017-1-6 0 0 0 0
Wenxin Vice President mer e
151,951,99 3,882,35 231,763,47
Total -- -- -- -- -- -- 31,250 75,960,372
5 5
2. Changes in Directors, Supervisors and Senior Management
Name Office title Type of change Date Reason
Worker-representative
Li Baoqiong Left 2016.01.15 Personal reason
Supervisor
Chairman of the
Zeng Qiao Left 2016.01.31 Personal reason
Supervisory Committee
Xu Hai Director Left 2016.04.06 Personal reason
Director, Vice President
Yuan Liqun Left 2016.07.15 Personal reason
and CFO
Director and Vice
Wu Wenxin Left 2017.01.06 Personal reason
President
3. Brief Biographies
Professional backgrounds, main work experience and current responsibilities in the Company of the
incumbent directors, supervisors and senior management
Mr. Fang Hongbo, holder of a Master's degree, is the Chairman and President of the Company. He
joined Midea in 1992 and previously served as the General Manager of the Midea Air-Conditioning
Business Department, the President of Midea Refrigeration Electric Appliances Group, the Chairman
and President of GD Midea Holding Co., Ltd. Mr. Fang Hongbo is also the Chairman of the Company's
subsidiary, Wuxi Little Swan Co., Ltd.
Mr. He Jianfeng, holder of a Bachelor’s degree, is one of the Company’s directors. He is also the
Chairman and President of Infore Investments Holding Group Co., Ltd.
Mr. Gu Yanmin, holder of a doctoral degree, joined Midea in 2000 and once functioned as Midea Group’s
Planning & Investment Head, Midea Air-Conditioning & Refrigeration Group’s Overseas Strategy &
Development Head, Vice President and Head of Overseas Business Expansion in the Marketing
Department, and Midea Group’s Head of Overseas Strategy. He is currently a director and vice president
The 2016 Annual Report of Midea Group Co., Ltd.
of the Company.
Mr. Li Feide, holder of a Master's degree, joined Midea in 1999 and served as the Company Secretary,
the Strategic Operation Head, the Operational Management Head, and the President’s Assistant. He is
now a company director, vice president. and also an executive director of the Hong Kong listed company,
Welling Holding Co., Ltd., which is controlled by the Company.
Ms. Hu Xiaoling, a master's degree graduate, was a Senior Auditor for Arthur Andersen Accounting Firm
and Senior Manager of Direct Investment Department in China International Capital Co., Ltd before she
joined the company. She is now the Managing Director of CDH Investments Management (Hong Kong)
Limited and a director of Midea Group.
Mr. Wu Shinong, holder of a doctoral degree, is Professor and Tutor for doctoral students at the
Management School of Xiamen University. He is also involved as an Independent Director of Midea
Group, and a member of the National Natural Science Foundation of China.
Mr. Rui Meng, holder of a doctoral degree. He is now an independent director of the Company, a
professor of finance and accounting at China Europe International Business School, a chaired professor
of finance in Zhong Kun Group, a doctoral advisor, and concurrently the director of a doctoral program,
the head of the CEIBS Shoushan Wealth Management Research Center, a member of the Risk
Management Committee of the Shanghai Clearing House.
Mr. Guo Xuejin, a master's degree graduate, is the director of Guangdong Kings Law Firm, a member of
the Guangzhou 15th People's Congress, a member of Guangzhou Law Committee of the NPC, the
arbitrator of Guangzhou Arbitrator Committee, an expert consultant of Guangzhou Traffic Committee and
is currently an independent director of Midea Group.
Mr. Li Wenjing, holder of a doctoral degree, is the Director of the Accounting Department, professor and
doctoral supervisor in the Accounting Department of the School of Management at Jinan University, and
at present is an independent director of Midea Group. He also holds concurrent positions including being
a member of the International Exchange Committee & a director of the Branch Society of Financial Costs
under the Accounting Society of China, and a director of Accounting Academy of Guangdong Province.
Ms. Liu Min, a master’s degree graduate, joined Midea in 1998. She used to be the General Manager of
an overseas marketing company under Midea’s Household Air-Conditioning Division and the Chief
Operations Officer of Midea. She is now the Chairman of the Supervisory Committee and the Chief HR
The 2016 Annual Report of Midea Group Co., Ltd.
Officer of Midea.
Mr. Zhao Jun, a master's degree graduate, joined Midea in 2000 and has functioned as the Director and
the CFO of GD Midea Holding Co., Ltd. He is now a Supervisor of the Company, the President’s
Assistant and CFO in Midea Holding Co., Ltd.
Ms. Mai Yufen, a bachelor’s degree graduate, joined Midea in 2007. She served to function as the
Budget Commissioner-General of the Financial Management Department of the Company and is now
the Worker-representative Supervisor of the Company.
Mr. Yin Bitong, a master’s degree graduate, joined Midea in 1999. He used to be a general manager
assistant and the Chief Marketing Officer of Midea’s domestic marketing company for air conditioners, in
addition to being a director and the General Manager of Wuxi Little Swan Co., Ltd. Currently, he is a vice
president and the Household Air Conditioner General Manager of the Company.
Mr. Zhu Fengtao, holder of a doctoral degree, joined Midea in 1993. He once served as the Microwave
Oven General Manager of the Company. He is currently a vice president and the Kitchen Appliances
General Manger of the Company.
Mr. Wang Jinliang, holder of a master’s degree, joined Midea in 1995 and previously worked as the Vice
President of China Marketing in the Company, and was GD Midea Holding’s Vice President and
Marketing Head. He is now a Vice President and the Head of Domestic Marketing in the Company.
Mr. Hu Ziqiang, holder of a doctoral degree, joined Midea in 2012, and has formerly worked for GE and
Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a Vice President and the Chief
of the Central Research Institute of the Company.
Mr. Xiao Mingguang, a master’s degree graduate, joined Midea in 2000. He once served as a vice chief
financial officer and the Chief Operational Officer of Midea Group, as well as the Chief Audit Supervision
Officer and a director of GD Midea Holding Co., Ltd. Currently, he is the CFO of Midea Group, in addition
to being a director of Wuxi Little Swan Company Limited and executive director of Welling Holding
Limited.
Mr. Jiang Peng, holder of a master’s degree, joined Midea in 2007 and used to be the Representative for
Securities Affairs and Company Secretary for GD Midea Holding Co., Ltd. He is now the Secretary of the
Company.
The 2016 Annual Report of Midea Group Co., Ltd.
Posts held in shareholding entities
√ Applicable □ N/A
Beginning Allowance from
Ending date of
Name Shareholding entity Position date of office the shareholding
office term
term entity
Zhao Jun Midea Holding Co., Ltd. Vice President, CFO 2013-01-01 - Yes
Note Mr. Zhao Jun has become a vice president of Midea Holding since 5 January 2016.
Posts held in other entities
√ Applicable □ N/A
Beginning date Ending date of Allowance from
Name Other entity Position
of office term office term the entity
Fang
Wuxi Little Swan Co., Ltd. Board Chairman 2012-08 2018-08 No
Hongbo
He Infore Investments Holding Group Board Chairman,
1995 - Yes
Jianfeng Co., Ltd. President
Li Feide Welling Holding Limited Executive Director 2012-12 No
Non-executive
Belle International Holdings Limited 2005-09 - No
director
Beijing Xiron Book Co., Ltd Director 2010-07 - No
Non-executive -
Baroque Japan Ltd 2013-08 No
Hu Xiaoling director
Non-executive -
Dali Foods Group Co., Ltd. 2015-05 No
director
CDH Investments Management
Managing Director 2002-08 - Yes
(Hong Kong) Limited
Fuyao Glass Industry Group Holding
Director 2011-04 - Yes
Wu Co., Ltd.
Shinong Independent
Xiamen ITG Group Co., Ltd. 2014-06 2017-06 Yes
Director
COSCO SHIPPING Energy Independent 2018-06
2015-06 Yes
Transportation Co., Ltd. Director
Rui Meng
ShangHai Winner Networks Independent 2019-06
2016-06 Yes
Information Technology Co., Ltd. Director
Donlinks International Investment Independent 2017-04
Guo Xuejin 2014-04 Yes
Co., Ltd. Director
Guangzhou Devotion Thermal Independent
2013-12 2019-03 Yes
Li Wenjing Technology Co., Ltd. Director
Guangzhou Longse Technology Co., Independent 2015-11 - Yes
The 2016 Annual Report of Midea Group Co., Ltd.
Ltd. Director
Xiao Wuxi Little Swan Company Limited Director 2010-01 2018-08 No
Mingguang Welling Holding Limited Executive Director 2016-07 No
Punishments imposed in the recent three years by the securities regulators on the incumbent directors,
supervisors and senior management as well as those who left in the Reporting Period
□ Applicable √ N/A
4. Remuneration of Directors, Supervisors and Senior Executives
The following describes the decision-making procedures, grounds on which decisions are made and
actual remuneration payment of directors, supervisors and senior executives.
The decision-making remuneration procedure for directors, supervisors and senior executives: The
remuneration is proposed by the Board Compensation Committee and approved by the Board.
Decisions are made finally after the deliberation of shareholders' meeting.
The remuneration of directors, supervisors and senior executives consist of basic annual payments and
performance-related annual payments according to the Salary Management System for the Directors,
Supervisors and Senior Executives which has been approved by the Company. Basic payment is
determined based on the responsibility, risk and pressure of directors, supervisors and senior executives.
The basic annual payment remains stable. Performance-related annual payment is related to the
completion rate of corporate profit, the assessment result of target responsibility system and the
performance evaluation structure of their own department. The remuneration system for directors,
supervisors and senior executives serves the Company's strategy, and shall be adjusted with the
Company's operating conditions in order to meet the Company’s development requirements. The basis
for adjusting the remuneration of directors, supervisors and senior executives are as follows:
a. Wage growth in the industry
b. Inflation
c. Corporate earnings
d. Organizational structure adjustment
e. Individual adjustment due to a change in position
Remuneration of directors, supervisors and senior executives during the Reporting Period
The 2016 Annual Report of Midea Group Co., Ltd.
Unit: RMB'0,000
Total before-tax Remuneration
Incumbent/ remuneration from related
Name Position Gender Age
Former from the parties of the
Company Company
Board Chairman and
Fang Hongbo Male Incumbent
President
He Jianfeng Director Male 50 Incumbent Yes
Director and Vice
Gu Yanmin Male Incumbent
President
Director and Vice
Li Feide Male Incumbent
President
Hu Xiaoling Director Female 47 Incumbent No
Wu Shinong Independent Director Male 61 Incumbent
Rui Meng Independent Director Male 50 Incumbent
Guo Xuejin Independent Director Male 58 Incumbent
Li Wenjing Independent Director Male 38 Incumbent
Chairman of the
Liu Min Female Incumbent
Supervisory Committee
Zhao Jun Supervisor Male 42 Incumbent Yes
Worker-representative
Mai Yufen Female Incumbent
Supervisor
Yin Bitong Vice President Male 49 Incumbent
Zhu Fengtao Vice President Male 49 Incumbent
Wang Jinliang Vice President Male 50 Incumbent
Hu Ziqiang Vice President Male 60 Incumbent
Xiao Mingguang CFO Male 47 Incumbent
Jiang Peng Company Secretary Male 44 Incumbent
Director, Vice President
Yuan Liqun Female Former
and CFO
Director and Vice
Wu Wenxin Male Former
President
Xu Hai Director Male 41 Former No
Chairman of the
Zeng Qiao Female Former
Supervisory Committee
Worker-representative
Li Baoqiong Female Former
Supervisor
The 2016 Annual Report of Midea Group Co., Ltd.
Total -- -- -- -- 3,719 --
Share incentives for directors, supervisors and senior executives in the Reporting Period
√ Applicable □ N/A
Unit: share
Exercise
price for
Market Restricted
Exercisabl Exercised exercised Restricted Grant price Restricted
price at the shares Unlocked
e share share share shares of the shares
end of the held at the shares in
options for options in options in granted in restricted held at the
Name Office title Reporting beginning the
the the the the shares end of the
Period of the Reporting
Reporting Reporting Reporting Reporting (RMB/shar Reporting
(RMB / Reporting Period
Period Period Period Period e) Period
share) Period
(RMB /
share)
Director, Vice
Li Feide 750,000 750,000 11.01 28.17 0 375,000 0 -
President
Jiang Company
277,500 0 - 28.17 0 277,500 0 -
Peng Secretary
1,027,50
Total -- 750,000 -- -- 0 652,500 0 --
375,000 stock options of Mr. Li Feide were unlocked in the Reporting Period, leaving 375,000 still
Note (if any) in lockup. And 277,500 stock options of Mr. Jiang Peng were unlocked in the Reporting Period,
leaving 367,500 still in lockup.
5. Staff in the Company
5.1 Number, functions and educational backgrounds of the staff
Number of in-service staff of the Company 1,221
Number of in-service staff of main subsidiaries 95,197
Total number of in-service staff 96,418
Total number of staff with remuneration in the period 96,418
Number of retirees to whom the Company or its main
2,116
subsidiaries need to pay retirement pension
Functions
Function Number of staff
Production 82,240
Sales 3,576
The 2016 Annual Report of Midea Group Co., Ltd.
R&D 8,741
Financial 1,080
Administrative
Total 96,418
Educational backgrounds
Educational background Number of staff
Master and doctor 2,177
Bachelor 15,591
College, technical secondary school 44,337
Others 34,313
Total 96,418
Note: The data above have not yet included the global staff of controlled subsidiaries TLSC and KUKA, which are around
30,000.
5.2 Staff remuneration policy
Staff remuneration shall be paid on time according to the Salary Management System. The Company
decides the regular salary of the employees according to the position’s value and evaluation
performances and decides the variable salary according to the Company's and employee’s performance.
The remuneration distribution shows more consideration for strategic talent and ensures the market
competitiveness in the salary of core talent. The Company shall make dynamic adjustments to the staff
remuneration policy according to regional differences, number of employees, staff turnover, environment
changes in the industry and paying ability of the Company.
5.3 Staff training plans
The attendances at training sessions were 481,708 in the Reporting Period, of which 39,250 were
executives, 36,630 technical and sales staff, and 405,828 operating staff.
Main training:
a. Building a pilot Leadership Development Program and the High-Potential Leaders Training system to
facilitate talent management and training. They have carried out 53 talent training programs and trained
2,516 highly skilled managerial staff.
b. The internet occupational E-learning platform, together with “Midea Learning” App (“Meike”) on the
The 2016 Annual Report of Midea Group Co., Ltd.
mobile platform, have become the most significant means of support for the daily training in our business
divisions. The training comprises all managerial employees in Midea Group. An approximate total of
576,800 logins to Midea’s various platforms for training were recorded throughout the year, including
386,700 logins to Midea’s mobile Learning platform and 190,100 logins to the computer E-learning
platform.
c. Facilitating organizational learning by developing 797 internal trainers. The annual teaching time was
10,001 hours. A total of 2,641 courses were designed in the year, including 90 training sessions
conducted by top management, which consisted of 17,500 attendances with 35,000 man-hours, and 260
of those by senior staff with 265,000 man-hours.
d. Continuous training for mid-level and senior managers. 29 trips, equivalent to 578 attendances, were
undertaken by mid-level and senior managers to benchmarking companies, taking up 4,117 man-hours.
A total of 40 lectures on leadership skills for mid-level management were given to 1,082 attendances,
representing 14,824 teaching man-hours. 11 lectures on leadership skills for senior management (25
days) were given to 213 attendances, which consisted of 3,828 man-hours. Meanwhile, courses on
subjects such as leadership skills, business models-related innovation, robots and future technology,
and marketing model reform for top management consisted of 3,168 man-hours in total.
e. Facilitating the training of key technical staff and working team leaders. The total training time was
126,889 hours.
5.4 Labor outsourcing
□ Applicable √ N/A
The 2016 Annual Report of Midea Group Co., Ltd.
Section IX Corporate Governance
1. Basic Situation of Corporate Governance
The Company is constantly improving its corporate governance in strict accordance with the Company
Law, the Securities Law and the relevant regulations of the China Securities Regulatory Commission.
There are four special committees under the Board, namely the Strategy Committee, the Auditing
Committee, the Nomination Committee as well as the Remuneration and Appraisal Committee. They
were designed to provide consultation and advice to the Board and validate the professionalization and
efficiency of discussions and decision-making. The Company has established clear rules of procedure
for its shareholders' general meeting, board of directors, supervisory committee and special committees
under the board, as well as the Work Rules for Company Secretary. It has also established a set of
standard documents including Information Disclosure Management System, Funds Raising
Management System, Connected Transaction Management System, Wealth Management Entrustment
Management System, Insider Registration System, External Guaranty Decision-making System, Foreign
Investment Management System, Management System for Finance Flow with Connected Parties,
Internal Auditing System. The shareholders' meeting, the Board, supervisory committee and operations
management departments have clear authority and responsibility. Each performs its own functions and
maintains its stability effectively. Their scientific decision-making and coordinated operations have laid a
firm foundation for the sustained, healthy and steady development of the Company.
The Company has also launched core management team shareholding plans and equity incentive plans
for core research, quality control, technical, production and management staff, which helps to develop a
sound shareholding structure for the future growth of the Company.
In 2016, the Company won the following honors for its corporate governance:
“The Best Board of Directors” at “The Golden Round Table Awards 2016” presented by the Directors &
Boards magazine; “The Top 100 Golden Bull Listed Companies”, “The Golden Bull Company Secretary”
and “The Golden Bull Business Leader” by the China Securities Journal; “China’s Top Business Leader
Award” by the China Business News; “Global Top 2,000 Listed Companies” by the Forbes; “Global Top
500” by the Fortune; and rated by the Shenzhen Stock Exchange at “A” in information disclosure for the
The 2016 Annual Report of Midea Group Co., Ltd.
year among the companies listed on the main board of the exchange.
Any incompliance with the regulatory documents issued by the CSRC governing the governance of
listed companies
□ Yes √ No
No such cases in the Reporting Period.
2. Independency of businesses, personnel, assets, organizations, and finance which
are separate from the controlling shareholder
The Company is totally autonomous with respect to business, personnel, assets, organizations, and
finance from Midea Holding Co., Ltd., the controlling shareholder of the Company, therefore maintaining
integrity and independency in both business and operations.
2.1 Business independence: The Company has a complete industrial chain for its manufacturing
business, a completely distinct purchase and sales system, and an independent and comprehensive
business operation capability.
2.2 Personnel independence: The Company is completely autonomous from the controlling shareholder
regarding its personnel. The labor, personnel and remuneration management of the company are totally
unrelated. All senior management members received remuneration from the Company except those that
hold only a director’s position in the controlling shareholder.
2.3 Asset integrity: The Company has its own independent production system as well as ancillary
production systems and facilities. Intangible assets such as industrial rights, trademark ownership and
non-patent technology are held by the Company.
2.4 Organization independence: The Company has set up an independent organizational structure
which maintains its independent operation. The Company has the right to appoint or remove any
personnel so there is no overlapping with the controlling shareholder.
2.5 Financial independence: The Company's financial management is independent from the controlling
shareholder. The Company has its own accounting department, accounting system, financial
management system, and bank accounts and independently makes financial decisions and pays its own
taxes according to relevant laws.
The 2016 Annual Report of Midea Group Co., Ltd.
3. Horizontal Competition
□ Applicable √ N/A
4. Annual Meeting of Shareholders and Special Meetings of Shareholders Convened
during the Reporting Period
4.1 Meetings of shareholders convened during the Reporting Period
Investor
Meeting Type participati Convened date Disclosure Date Disclosure Index
on ratio
2016 First Special Announcement No. 2016-007,
Special meeting 44.3249
Meeting of 2016.02.01 2016.02.02 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2015 Annual Announcement No. 2016-036,
Annual meeting 57.7211
Meeting of 2016.04.26 2016.04.27 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2016 Second Announcement No. 2016-045,
Special meeting 47.8323
Special Meeting of 2016.05.11 2016.05.12 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2016 Third Special Announcement No. 2016-068,
Special meeting 52.1499
Meeting of 2016.06.06 2016.06.07 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2016 Fourth Announcement No. 2016-082,
Special meeting 46.3382
Special Meeting of 2016.06.29 2016.06.30 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2016 Fifth Special Announcement No. 2016-106,
Special meeting 46.9205
Meeting of 2016.09.19 2016.09.20 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
2016 Sixth Special Announcement No. 2016-116,
Special meeting 45.9214
Meeting of 2016.11.17 2016.11.18 disclosed on
of shareholders %
Shareholders www.cninfo.com.cn
4.2 Special meetings of shareholders convened at the request of preference shareholders with
resumed voting rights
□ Applicable √ N/A
The 2016 Annual Report of Midea Group Co., Ltd.
5. Performance of Independent Directors during the Reporting Period
5.1 Attendance of independent directors in Board meetings and meetings of shareholders
Attendance of independent directors in Board meetings
Absence for
Presence due Presence by Presence
Independent Presence on Absence two
in the Reporting telecommunicat through a proxy
director site (times) (times) consecutive
Period (times) ion (times) (times)
times
Wu Shinong 15 1 14 0 0 No
Rui Meng 15 1 14 0 0 No
Guo Xuejin 15 1 14 0 0 No
Li Wenjing 15 1 14 0 0 No
Presence of independent directors
in meetings of shareholders (times)
5.2 Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors
□ Yes √ No
No such cases in the Reporting Period.
5.3 Other details about the performance of duties by independent directors
Were there any suggestions from independent directors adopted by the Company
√ Yes □ No
Details about advice of independent directors accepted or not accepted by the Company
During the Reporting Period, independent directors strictly followed related rules, regulations and the
Articles of Association. They focused on the Company operation, carried out their duties independently
and imparted lots of professional advice on perfecting the Company’s systems, daily operations and
decisions. They provided fair advice during the Reporting Period and played an effective role in
improving the Company supervisory systems and protecting the legal rights of the Company and the
shareholders as a whole.
The 2016 Annual Report of Midea Group Co., Ltd.
6. Performance of Duties by Special Committees under the Board during the
Reporting Period
6.1 The Audit Committee under the Board convened four meetings in the Reporting Period, at which the
following proposals were considered and approved: The 2015 Final Account Report, The 2015 Annual
Report & Its Abstract, The Report of the Audit Committee on Concluding and Appraising the 2015
Annual Audit Work, The Proposal for Appointing an Auditor for the 2016 Annual Result, The Proposal for
Appointing an Auditor for the Internal Control in 2016, The Proposal for Writing off Asset Impairment
Provisions, The Report on the First Quarter of 2016, The 2016 Semi-Annual Report and The Report on
the Third Quarter of 2016.
6.2 The Strategy Committee under the Board convened one meeting in the Reporting Period, at which
The Mid-Term Development Planning (2016-2018) was considered and approved.
6.3 The Remuneration and Appraisal Committee under the Board convened one meeting in the
Reporting Period, at which The Proposal for the Payment of Remuneration to Senior Executives for 2015
was considered and approved.
6.4 The Nomination Committee under the Board convened three meetings in the Reporting Period, at
which the following proposals were considered and approved: The Proposal for CFO Appointment, The
Proposal for New Director and The Proposal for Vice President Appointment.
7. Performance of Duties by the Supervisory Committee
Were there any risks to the Company identified by Supervisory Committee when performing its duties
during the Reporting Period
□ Yes √ No
The Supervisory Committee of the Company had no objection to the matters of supervision during the
Reporting Period.
8. Assessment and Incentive Mechanism for the Senior Management
The Company established an appraisal system on the basis of its target-oriented responsibility system
and adopted an appraisal agreement for senior management members, which determines the appraisal
criterion, appraisal method and measures taken based on the appraisal result. During the Reporting
Period, the Company has carried out appraisals of senior management members on the basis of its
target-oriented responsibility system and the appraisal result was reflected in the annual
The 2016 Annual Report of Midea Group Co., Ltd.
performance-based incentive rewards. Meanwhile, the Company promoted the unification of interests
between managers and shareholders through high-level staff and core management teams'
shareholding plans as well as multiple stock option incentive plans, laying a good foundation for the
future growth of the Company.
9. Internal Control
9.1 Serious internal control defects found in the Reporting Period
□ Yes √ No
9.2 Self-evaluation report on internal control
Disclosure date of the internal control self-evaluation report 2017.03.31
For details, please refer to the 2016 Self-Evaluation
Index to the disclosed internal control self-evaluation report Report on Internal Control, which has been disclosed
on www.cninfo.com.cn
Ratio of the total assets of the appraised entities to the
70%
consolidated total assets
Ratio of the operating revenues of the appraised entities to the
70%
consolidated operating revenues
Defect identification standards
Type Financial-report related Non-financial-report related
For details, please refer to “(c) Basis for For details, please refer to “(c) Basis for
internal control evaluation and internal control evaluation and
identification standards for internal control identification standards for internal control
Nature standard defects” under Section III of The 2016 defects” under Section III of The 2016
Self-Evaluation Report on Internal Control Self-Evaluation Report on Internal Control
disclosed on www.cninfo.com.cn dated 31 disclosed on www.cninfo.com.cn dated 31
March 2017. March 2017.
For details, please refer to “(c) Basis for For details, please refer to “(c) Basis for
internal control evaluation and internal control evaluation and
identification standards for internal control identification standards for internal control
Quantitative standard defects” under Section III of The 2016 defects” under Section III of The 2016
Self-Evaluation Report on Internal Control Self-Evaluation Report on Internal Control
disclosed on www.cninfo.com.cn dated 31 disclosed on www.cninfo.com.cn dated 31
March 2017. March 2017.
Number of serious
financial-report-related defects
Number of serious
non-financial-report-related
The 2016 Annual Report of Midea Group Co., Ltd.
defects
Number of important
financial-report-related defects
Number of important
non-financial-report-related
defects
10. Auditor’s Report on Internal Control
√ Applicable □ N/A
Opinion paragraph in the auditor’s report on internal control
The internal control auditor holds the view that on 31 December 2016, Midea Group maintained an effective internal
control of a financial report in all significant aspects based on the General Specifications of Company Internal Control
and relevant specifications.
Auditor’s report on internal
Disclosed on www.cninfo.com.cn
control disclosed or not
Date of disclosing the full text of
the auditor’s report on internal 2017.03.31
control
Index to the disclosed full text of
For details, please refer to the 2016 Auditor’s Report on Internal Control, which has
the auditor’s report on internal
been disclosed on www.cninfo.com.cn
control
Type of the auditor’s opinion Standard unqualified opinion
Serious
non-financial-report-related No
defects
Whether any modified opinions are expressed by the accounting firm in its auditor’s report on the
Company’s internal control
□ Yes √ No
Whether the auditor’s report on the Company’s internal control issued by the accounting firm is
consistent with the self-evaluation report of the Board
√ Yes □ No
The 2016 Annual Report of Midea Group Co., Ltd.
Section X Financial Report
1. Auditor’s report
Type of audit report Standard & unqualified
Signing date of auditor’s report 2017-03-29
Name of Audit PricewaterhouseCoopers China (LLP)
No. of auditor’s report PwC ZT Shen Zi (2017) No. 10080
Names of auditors Yao Wenping, Huang Meimei
Auditor's Report
PwC ZT Shen Zi (2017) No. 10080
To the shareholders of Midea Group Co., Ltd.,
We have audited the accompanying financial statements of Midea Group Co., Ltd. (hereinafter the
“Company”), which comprise the consolidated and company balance sheets as at 31 December
2016, and the consolidated and company income statements, the consolidated and company
statements of changes in shareholders’ equity and the consolidated and company cash flow
statements for the year then ended, and the notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management of the Company is responsible for the preparation and fair presentation of these
financial statements in accordance with the requirements of Accounting Standards for Business
Enterprises, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with China Standards on Auditing. Those standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free from material misstatement.
The 2016 Annual Report of Midea Group Co., Ltd.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, the auditor considers internal control relevant to the
entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated and company’s financial position of the Company as at 31 December 2016, and their
financial performance and cash flows for the year then ended in accordance with the requirements of
Accounting Standards for Business Enterprises.
PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
29 March 2017
The 2016 Annual Report of Midea Group Co., Ltd.
2. Financial Statements
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS
AS AT 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
ASSETS Note 31 December 31 December 31 December 31 December
2016 2015 2016
Consolidated Consolidated Company Company
Current assets
Cash at bank and on hand 4(1) 17,196,070 11,861,977 17,135,480 14,213,747
Deposits with central bank 4(2) 735,183 1,048,045 - -
Deposits with banks and
other financial institutions 4(3) 9,237,865 4,062,807 - -
Derivative financial assets 412,813 158,822 - -
Notes receivable 4(4) 7,427,488 12,889,151 - 727,218
Accounts receivable 4(5) 13,454,511 10,371,718 - -
Advances to suppliers 4(6) 1,587,366 988,625 8,252 8,915
Loans and advances 4(7) 10,273,397 6,608,705 - -
Dividends receivable - - 285,916 290,245
Other receivables 4(5), 18(1) 1,140,133 1,101,339 12,644,592 7,461,039
Inventories 4(8) 15,626,897 10,448,937 - -
Other current assets 4(9) 43,529,597 33,827,580 24,165,141 21,059,789
Total current assets 120,621,320 93,367,706 54,239,381 43,760,953
Non-current assets
Available-for-sale financial
assets 4(10) 5,187,732 3,289,954 28,931 9,000
Long-term receivables 33,868 - - -
Long-term equity
investments 4(11), 18(2) 2,211,732 2,888,274 23,058,980 23,126,546
Investment properties 494,122 150,803 604,881 286,272
Fixed assets 4(12) 21,056,791 18,729,881 984,666 1,107,082
Construction in progress 4(13) 580,729 954,761 467,053 543,588
The 2016 Annual Report of Midea Group Co., Ltd.
Intangible assets 4(14) 6,868,538 3,392,402 236,083 248,482
Goodwill 4(15) 5,730,995 2,393,066 - -
Long-term prepaid expenses 625,971 781,359 46,090 57,393
Deferred income tax assets 4(16) 3,030,383 2,223,999 62,711 7,961
Other non-current assets 4(9) 4,158,530 669,730 3,342,000 -
Total non-current assets 49,979,391 35,474,229 28,831,395 25,386,324
TOTAL ASSETS 170,600,711 128,841,935 83,070,776 69,147,277
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)
AS AT 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
LIABILITIES AND
SHAREHOLDERS' EQUITY Note 31 December 31 December 31 December 31 December
2016 2015 2016
Consolidated Consolidated Company Company
Current liabilities
Short-term borrowings 4(19) 3,024,426 3,920,933 - 1,290,000
Customer deposits and
deposits from banks and
other financial institutions 36,708 52,000 - -
Derivative financial liabilities 89,838 33,377 - 22,671
Financial assets sold under
repurchase agreements - 651,784 - -
Notes payable 4(20) 18,484,939 17,078,520 - -
Accounts payable 4(21) 25,356,960 17,448,684 - 9,403
Advances from customers 4(22) 10,252,375 5,616,361 - -
Employee benefits payable 4(23) 3,154,387 2,229,332 199,842 13,411
Taxes payable 4(24) 2,364,446 1,607,181 103,848 52,656
Interest payable 21,343 9,343 76,776 200,090
Dividends payable 105,641 118,851 - -
Other payables 4(25) 1,571,422 1,139,306 54,461,578 45,166,453
Current portion of non-current
liabilities 158,545 - - -
Other current liabilities 4(26) 24,562,970 22,098,177 140,264 5,106
Total current liabilities 89,184,000 72,003,849 54,982,308 46,759,790
Non-current liabilities
Long-term borrowings 4(27) 2,254,348 90,061 - -
Debentures payable 4(28) 4,818,769 - - -
Long-term payable 366,881 - - -
Payables for specific projects 2,405 500 - -
The 2016 Annual Report of Midea Group Co., Ltd.
Provisions 325,217 38,893 - 3,800
Deferred revenue 502,316 479,352 - -
Long-term employee benefits
payable 4(29) 1,449,954 - - -
Deferred income tax liabilities 4(16) 1,831,973 40,464 - -
Other non-current liabilities 888,152 157,194 - -
Total non-current liabilities 12,440,015 806,464 - 3,800
Total liabilities 101,624,015 72,810,313 54,982,308 46,763,590
Shareholders' equity
Share capital 4(30) 6,458,767 4,266,839 6,458,767 4,266,839
Capital surplus 4(31) 13,596,569 14,511,190 5,455,268 6,370,934
Other comprehensive income 4(32) 13,125 (1,071,151) (9,069) 21,006
General reserve 148,602 118,624 - -
Surplus reserve 4(33) 2,804,469 1,846,523 2,804,469 1,846,523
Undistributed profits 4(34) 38,105,391 29,529,827 13,379,033 9,878,385
Total equity attributable to
shareholders of the parent
company 61,126,923 49,201,852 28,088,468 22,383,687
Minority interests 7,849,773 6,829,770 - -
Total shareholders' equity 68,976,696 56,031,622 28,088,468 22,383,687
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 170,600,711 128,841,935 83,070,776 69,147,277
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
2016 2015 2016
Item Note Consolidated Consolidated Company Company
1. Total revenue 159,841,701 139,347,124 1,193,744 862,376
4(35),
Including: Operating revenue 18(3) 159,044,041 138,441,226 1,193,744 862,376
Interest income 4(36) 789,414 900,161 - -
Fee and commission income 8,246 5,737 - -
Less: Cost of sales 4(35) (115,615,437) (102,662,818) (38,713) (24,369)
Interest expenses 4(36) (439,607) (561,514) - -
Fee and commission expenses (2,839) (2,247) - -
Taxes and surcharges 4(37) (1,077,119) (911,330) (29,741) (16,613)
Selling and distribution expenses 4(38) (17,678,451) (14,799,769) - -
General and administrative
expenses 4(39) (9,620,777) (7,441,755) (718,487) (494,159)
Finance income/(expenses) 4(40) 1,005,979 (138,932) (740,586) (835,211)
Asset impairment (loss)/reversal 4(41) (380,812) (4,766) (475)
Add: Gains/(losses) on changes
in fair value 4(42) 117,376 81,611 22,618 (22,618)
4(43),
Investment income 18(4) 1,285,961 2,011,269 9,853,358 7,107,452
Including: Share of profit of
associates and a joint
venture 165,904 420,744 247,016 273,974
2. Operating profit 17,435,975 14,916,873 9,541,718 6,577,609
Add: Non-operating income 4(44) 1,819,009 1,707,039 58,027 111,749
Including: Gains on disposal of
non-current assets 60,789 53,084 11,533 52,963
Less: Non-operating expenses 4(45) (340,381) (572,558) (4,099) (87,691)
The 2016 Annual Report of Midea Group Co., Ltd.
Including: Losses on disposal of
non-current assets (172,663) (287,167) (1,960) (77,897)
3. Total profit 18,914,603 16,051,354 9,595,646 6,601,667
Less: Income tax expenses 4(46) (3,052,691) (2,426,699) (16,183) (34,353)
4. Net profit 15,861,912 13,624,655 9,579,463 6,567,314
Attributable to shareholders of the parent
company 14,684,357 12,706,725 9,579,463 6,567,314
Minority interests 1,177,555 917,930 - -
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT'D)
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
2016 2015 2016 2015
Item Note Consolidated Consolidated Company Company
5. Other comprehensive income net of tax 1,188,215 (469,463) (30,075) 21,006
Attributable to shareholders of the parent
company 1,084,276 (296,852) (30,075) 21,006
(1) Other comprehensive income items
which will not be reclassified
subsequently to profit or loss 82,223 - - -
1)Remeasurements of
post-employment benefit
obligations 82,223 - - -
(2) Other comprehensive income items
which will be reclassified subsequently
to profit or loss 1,002,053 (296,852) (30,075) 21,006
1)Share of the other comprehensive
income of the investee accounted for
using equity method which will be
reclassified subsequently to profit
and loss (73,811) 39,924 (30,075) 21,006
2)Changes in fair value of
available-for-sale financial assets 231,672 159,887 - -
3)Effective portion of cash flow hedging
gains or losses 199,356 74,392 - -
4)Translation of foreign currency
financial statements 644,836 (571,055) - -
Attributable to minority shareholders 103,939 (172,611) - -
6. Total comprehensive income 17,050,127 13,155,192 9,549,388 6,588,320
Attributable to shareholders of the parent
company 15,768,633 12,409,873 9,549,388 6,588,320
Attributable to minority shareholders 1,281,494 745,319 - -
The 2016 Annual Report of Midea Group Co., Ltd.
7. Earnings per share (restated)
Basic earnings per share (RMB Yuan) 4(47) 2.29 2.00 N/A N/A
Diluted earnings per share (RMB Yuan) 4(47) 2.28 1.99 N/A N/A
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
2016 2015 2016 2015
Item Note Consolidated Consolidated Company Company
1. Cash flows from operating activities
Cash received from sales of goods or rendering of
services 153,324,273 125,902,444 - -
Net increase in customer deposits and deposits
from banks and other financial institutions - 44,506 - -
Net decrease in deposits with central bank 286,915 313,636 - -
Cash received from interest, fee and commission 783,936 905,898 - -
Refund of taxes and surcharges 5,124,402 3,900,819 - -
Cash received relating to other operating activities 4(48)(a) 3,139,286 3,210,987 11,327,292 3,683,989
Sub-total of cash inflows 162,658,812 134,278,290 11,327,292 3,683,989
Cash paid for goods and services (89,440,654) (71,733,220) - -
Net increase in loans and advances (3,785,600) (63,624) - -
Net decrease in customer deposits and deposits
from banks and other financial institutions (15,292) - -
Cash paid for interest, fee and commission (442,446) (563,760) - -
Cash paid to and on behalf of employees (11,652,740) (10,493,582) (28,966) (150,458)
Payments of taxes and surcharges (8,824,342) (8,323,884) (57,284) (27,659)
Cash paid relating to other operating activities 4(48)(b) (21,802,729) (16,335,966) (5,370,055) (248,526)
Sub-total of cash outflows (135,963,803) (107,514,036) (5,456,305) (426,643)
Net cash flows from operating activities 4(48)(c) 26,695,009 26,764,254 5,870,987 3,257,346
2. Cash flows from investing activities
Cash received from disposal of investments 73,905,220 42,061,959 37,846,031 30,722,557
Cash received from returns on investments 1,954,049 2,088,899 10,003,516 7,247,990
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets 191,159 548,009 111 107,314
Net cash received from disposal of subsidiaries and
other business units 272,899 - - -
Cash received relating to other investing activities - 42,269 - -
The 2016 Annual Report of Midea Group Co., Ltd.
Sub-total of cash inflows 76,323,327 44,741,136 47,849,658 38,077,861
Cash paid to acquire fixed assets, intangible assets
and other long-term assets (2,323,430) (3,130,932) (297,767) (623,193)
Cash paid to acquire investments (90,880,725) (59,315,666) (44,445,211) (37,061,751)
Net cash paid to acquire subsidiaries and other
business units 4(48)(d) (2,900,256) (283,731) - -
Sub-total of cash outflows (96,104,411) (62,730,329) (44,742,978) (37,684,944)
Net cash flows from investing activities (19,781,084) (17,989,193) 3,106,680 392,917
3. Cash flows from financing activities
Cash received from capital contributions 814,845 1,701,630 782,252 1,648,190
Including: Cash received from capital contributions
by minority shareholders of subsidiaries 32,593 53,440 - -
Cash received from borrowings 32,422,027 24,515,274 1,800,000 1,290,000
Cash received from issuing short-term financing
bonds 1,999,500 - 1,999,500 -
Cash received relating to other financing activities - 166,715 - -
Sub-total of cash inflows 35,236,372 26,383,619 4,581,752 2,938,190
Cash repayments of borrowings (26,961,143) (29,352,243) (3,090,000) (500,000)
Cash payments for short-term financing bonds (1,999,500) - (1,999,500) -
Cash payments for repurchase of shares - (999,998) - (999,998)
Cash payments for interest expenses and
distribution of dividends or profits (6,046,355) (4,908,031) (6,540,012) (5,723,163)
Including: Cash payments for dividends or profit to
minority shareholders of subsidiaries (563,320) (552,545) - -
Cash payments relating to other financing activities (69,462) - - -
Sub-total of cash outflows (35,076,460) (35,260,272) (11,629,512) (7,223,161)
Net cash flows from financing activities 159,912 (8,876,653) (7,047,760) (4,284,971)
4. Effect of foreign exchange rate changes on cash
and cash equivalents 252,576 16,669 - -
5. Net increase/(decrease) in cash and cash equivalents 7,326,413 (84,923) 1,929,907 (634,708)
Add: Cash and cash equivalents at beginning of
year 5,187,317 5,272,240 6,245,008 6,879,716
The 2016 Annual Report of Midea Group Co., Ltd.
6. Cash and cash equivalents at end of year 12,513,730 5,187,317 8,174,915 6,245,008
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Attributable to shareholders of the parent company Total
Minority
Other shareholders'
interest
Share comprehensive equity
Capital General Surplus Undistributed
Item capital surplus income reserve reserve profits
Balance at 1 January 2015 4,215,808 13,024,883 (774,299) - 1,189,791 21,814,316 6,260,955 45,731,454
Movements for the year ended 31
December 2015
Total comprehensive income
Net profit - - - - - 12,706,725 917,930 13,624,655
Other comprehensive income net
of tax - - (296,852) - - - (172,611) (469,463)
Total comprehensive income - - (296,852) - - 12,706,725 745,319 13,155,192
Capital contribution and withdrawal
by shareholders
Capital contribution by
shareholders 80,623 1,667,248 - - - - 244,910 1,992,781
Business combinations - - - - - - 106,106 106,106
The 2016 Annual Report of Midea Group Co., Ltd.
Share-based payment included in
shareholders' equity - 237,613 - - - - 49,752 287,365
Repurchase of shares (29,592) (970,406) - - - - - (999,998)
Profit distribution
Appropriation to general reserve - - - 118,624 - (118,624) - -
Appropriation to surplus reserve - - - - 656,732 (656,732) - -
Profit distribution to shareholders - - - - - (4,215,808) (577,272) (4,793,080)
Others - 551,852 - - - (50) - 551,802
Balance at 31 December 2015 4,266,839 14,511,190 (1,071,151) 118,624 1,846,523 29,529,827 6,829,770 56,031,622
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (CONT'D)
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Attributable to shareholders of the parent company Total
Other Minority shareholders'
Share comprehensive interest equity
Capital General Surplus Undistributed
Item capital surplus income reserve reserve profits
Balance at 1 January 2016 4,266,839 14,511,190 (1,071,151) 118,624 1,846,523 29,529,827 6,829,770 56,031,622
Movements for the year ended 31
December 2016
Total comprehensive income
Net profit - - - - - 14,684,357 1,177,555 15,861,912
Other comprehensive income net
of tax - - 1,084,276 - - - 103,939 1,188,215
Total comprehensive income - - 1,084,276 - - 14,684,357 1,281,494 17,050,127
Capital contribution and withdrawal
by shareholders
Capital contribution by
shareholders 58,232 1,007,110 - - - - 32,593 1,097,935
Business combinations - - - - - - 339,543 339,543
The 2016 Annual Report of Midea Group Co., Ltd.
Share-based payment included in
shareholders' equity - 228,634 - - - - 72,957 301,591
Profit distribution
Appropriation to general reserve - - - 29,978 (29,978) - -
Appropriation to surplus reserve - - - 957,946 (957,946) - -
Profit distribution to shareholders - - - - - (5,120,869) (550,321) (5,671,190)
Capital addition from capital
surplus 2,133,696 (2,133,696) - - - - - -
Others - (16,669) - - - - (156,263) (172,932)
Balance at 31 December 2016 6,458,767 13,596,569 13,125 148,602 2,804,469 38,105,391 7,849,773 68,976,696
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
Total
Other
Share Capital comprehensive Undistributed shareholders'
Item capital surplus income Surplus reserve profits equity
Balance at 1 January 2015 4,215,808 5,356,080 - 1,189,791 7,282,924 18,044,603
Movements for the year ended 31 December 2015
Total comprehensive income
Net profit - - - - 6,567,314 6,567,314
Other comprehensive income net of tax - - 21,006 - - 21,006
Total comprehensive income - - 21,006 - 6,567,314 6,588,320
Capital contribution and withdrawal by shareholders
Capital contribution by shareholders 80,623 1,667,248 - - - 1,747,871
Share-based payment included in shareholders' equity - 320,856 - - - 320,856
Repurchase of shares (29,592) (970,406) - - - (999,998)
Profit distribution
Appropriation to surplus reserve - - - 656,732 (656,732) -
Profit distribution to shareholders - - - - (4,215,808) (4,215,808)
Merger of subsidiaries - - - - 900,687 900,687
Others - (2,844) - - - (2,844)
Balance at 31 December 2015 4,266,839 6,370,934 21,006 1,846,523 9,878,385 22,383,687
Balance at 1 January 2016 4,266,839 6,370,934 21,006 1,846,523 9,878,385 22,383,687
Movements for the year ended 31 December 2016
Total comprehensive income
Net profit - - - - 9,579,463 9,579,463
Other comprehensive income net of tax - - (30,075) - - (30,075)
Total comprehensive income - - (30,075) - 9,579,463 9,549,388
Capital contribution and withdrawal by shareholders
The 2016 Annual Report of Midea Group Co., Ltd.
Capital contribution by shareholders 58,232 1,007,110 - - - 1,065,342
Share-based payment included in shareholders' equity - 210,663 - - - 210,663
Profit distribution
Appropriation to surplus reserve - - - 957,946 (957,946) -
Profit distribution to shareholders - - - - (5,120,869) (5,120,869)
Transfer from capital surplus to share capital 2,133,696 (2,133,696) - - - -
Others - 257 - - -
Balance at 31 December 2016 6,458,767 5,455,268 (9,069) 2,804,469 13,379,033 28,088,468
The accompanying notes form an integral part of these financial statements.
Legal representative: Principal in charge of accounting function: Head of accounting department:
Fang Hongbo Xiao Mingguang Chen Lihong
The 2016 Annual Report of Midea Group Co., Ltd.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2016
(All amounts in RMB'000 Yuan unless otherwise stated)
[English translation for reference only]
1 General information
The operational activities of Midea Group Co. Ltd. (hereinafter referred to as the “Company”) and its
subsidiaries (collectively referred to as the “Group”) are principally engaged in the manufacturing
and sale of household electrical appliances, motors and related components and rendering of
logistics services. Other operations includes sale, wholesale and processing of raw materials of
household electrical appliances and financial business, which includes customer deposits,
interbank lending, consumption credit , buyer’s credit and finance lease.
The Company was promoted and set up by the Council of Trade Unions of GD Midea Group Co.
Ltd., and was registered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April
2000, with its headquarters located in Shunde District, Foshan. On 31 December 2011, the
Company was transformed into a limited liability company. On 29 July 2013, the Company was
approved to acquire additional interests in Guangdong Midea Electric Co., Ltd. (广东美的电器股份
有 限 公 司 ), a subsidiary listed on Shenzhen Stock Exchange. On 18 September 2013, the
Company’s shares became listed on Shenzhen Stock Exchange through share issuance and share
exchange.
As at 31 December 2016, the Company's registered capital is RMB6,458,766,808 and the total
number of shares in issue is 6,458,766,808, of which 279,045,260 shares are restricted tradable
shares and 6,179,721,548 shares are unrestricted tradable shares.
The detailed information of major subsidiaries included in the consolidation scope in the current
year is set out in Note 5 and 6. Entities newly included in the consolidation scope in the current year
include Guangdong Midea Cuchen Home Appliances Manufacturing Co.,ltd, Midea Business
Factoring Co.,ltd, Toshiba Lifestyle Products & Services Corporation (hereinafter referred to as
“TLSC”), Clivet S.P.A with its subsidiaries and Clivet Espaa S.A.U. (hereinafter referred to as
“Clivet”), and Shenzhen Shenzhou Payment Tech Co., Ltd. (please refer to Note 5(1) and 5(2)(a) for
details). The detailed information of subsidiaries no longer included in the consolidation scope in
the current year is set out in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directors on 29
March 2017.
2 Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on the features
of production and operation, mainly including the recognition method of provision for bad debts of
accounts receivable (Note 2(10)), valuation method of inventory (Note 2(12)), depreciation of fixed
assets and amortisation of intangible assets (Note (15) and (18)), and recognition time of revenue
(Note 2(27)).
Critical judgements applied by the Group in determining significant accounting policies are set out
in Note 2(32).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard for Business
Enterprises - Basic Standard, and the specific accounting standards and other relevant regulations
issued by the Ministry of Finance on 15 February 2006 and in subsequent periods (hereafter
collectively referred to as the “Accounting Standards for Business Enterprises” or “CAS”) and the
disclosure requirements in the Preparation Convention of Information Disclosure by Companies
Offering Securities to the Public No.15 – General Rules on Financial Reporting issued by the China
The 2016 Annual Report of Midea Group Co., Ltd.
Securities Regulatory Commission.
The financial statements are prepared on a going concern basis.
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the year ended 31 December 2016 are in compliance
with the Accounting Standards for Business Enterprises, and truly and completely present the
financial position of the consolidated and the Company as at 31 December 2016 and their financial
performance, cash flows and other information for the year then ended.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Recording currency
The recording currency of the Company is the Renminbi (“RMB”) and the financial statements are
presented in RMB. The Company and its subsidiaries determine their recording currency based on
the valuation and settlement currency of their respective main operating revenues and expenses.
As the recording currency of some of the Company's subsidiaries is not RMB, the Company
translates the foreign currency financial statements of such subsidiaries in the preparation of
financial statements (Note 2(8)(b)).
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the absorbing party in a business combination
are measured at the carrying amount. The difference between the carrying amount of the net
assets obtained from the combination and the carrying amount of the consideration paid for the
combination is treated as an adjustment to capital surplus (share premium). If the capital surplus
(share premium) is not sufficient to absorb the difference, the remaining balance is adjusted against
retained earnings. Costs directly attributable to the combination are included in profit or loss in the
period in which they are incurred. Transaction costs associated with the issue of equity or debt
securities for the business combination are included in the initially recognised amounts of the equity
or debt securities.
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the acquirer in a business
combination are measured at fair value at the acquisition dates. Where the cost of the combination
exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the
difference is recognised as goodwill; where the cost of combination is lower than the acquirer’s
interest in the fair value of the acquiree’s identifiable net assets, the difference is recognised in
profit or loss for the current period. Costs directly attributable to the combination are included in
profit or loss in the period in which they are incurred. Transaction costs associated with the issue of
equity or debt securities for the business combination are included in the initially recognised
amounts of the equity or debt securities.
For business combinations achieved by stages involving enterprises not under common control,
previously-held equity in the acquiree is remeasured at its fair value at the acquisition dates, and
the difference between its fair value and carrying amount is included in investment income for the
current period in consolidated financial statements. Where the previously-held equity in the
acquiree involves other comprehensive income under equity method and shareholders’ equity
changes other than those arising from the net profit or loss, other comprehensive income and profit
distribution, the related other comprehensive income and other shareholders' equity changes are
transferred into income for the current period to which the acquisition dates belongs, excluding
those arising from changes in the investee's remeasurements of net liability or net asset related to
the defined benefit plan. The excess of the sum of fair value of the previously-held equity and fair
value of the consideration paid at the acquisition dates over share of fair value of identifiable net
assets acquired from the subsidiary is recognised as goodwill.
The 2016 Annual Report of Midea Group Co., Ltd.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company and all of
its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are
de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a
business combination involving enterprises under common control, it is included in the consolidated
financial statements from the date when it, together with the Company, comes under common
control of the ultimate controlling party. The portion of the net profits realised before the combination
date is presented separately in the consolidated income statement.
In preparing the consolidated financial statements, where the accounting policies and the
accounting periods of the Company and subsidiaries are inconsistent, the financial statements of
the subsidiaries are adjusted in accordance with the accounting policies and the accounting period
of the Company. For subsidiaries acquired from business combinations involving enterprises not
under common control, the individual financial statements of the subsidiaries are adjusted based on
the fair value of the identifiable net assets at the acquisition dates.
All significant intra-group balances, transactions and unrealised profits are eliminated in the
consolidated financial statements. The portion of subsidiaries’ equity and the portion of a
subsidiaries’ net profits and losses and comprehensive incomes for the period not attributable to
Company are recognised as minority interests and presented separately in the consolidated
financial statements under equity, net profits and total comprehensive income respectively.
Unrealised profits and losses resulting from the sale of assets by the Company to its subsidiaries
are fully eliminated against net profit attributable to shareholders of the parent company. Unrealised
profits and losses resulting from the sale of assets by a subsidiary to the Company are eliminated
and allocated between net profit attributable to shareholders of the parent and minority interests in
accordance with the allocation proportion of the parent in the subsidiary.
Unrealised profits and losses resulting from the sale of assets by one subsidiary to another are
eliminated and allocated between net profit attributable to shareholders of the parent and minority
interests in accordance with the allocation proportion of the parent in the subsidiary. Unrealised
profits and losses resulting from the sale of assets by one subsidiary to another are eliminated and
allocated between net profit attributable to shareholders of the parent and minority interests in
accordance with the allocation proportion of the parent in the subsidiary. If the accounting treatment
of a transaction which considers the Group as an accounting entity is different from that considers
the Company or its subsidiaries as an accounting entity, it is adjusted from the perspective of the
Group.
(7) Recognition criteria of cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand,
and short-term and highly liquid investments that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
(8) Foreign currency translation
(a) Foreign currency transaction
Foreign currency transactions are translated into RMB using the exchange rates prevailing at the
dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translated into
RMB using the spot exchange rates on the balance sheet date. Exchange differences arising from
these translations are recognised in profit or loss for the current period, except for those attributable
to foreign currency borrowings that have been taken out specifically for the acquisition or
construction of qualifying assets, which are capitalised as part of the cost of those assets.
Non-monetary items denominated in foreign currencies that are measured at historical costs are
translated at the balance sheet date using the spot exchange rates at the date of the transactions.
The 2016 Annual Report of Midea Group Co., Ltd.
The effect of exchange rate changes on cash is presented separately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated at the spot
exchange rates on the balance sheet date. Among the shareholders’ equity items, the items other
than “undistributed profits” are translated at the spot exchange rates of the transaction dates. The
income and expense items in the income statements of overseas operations are translated at the
spot exchange rates of the transaction dates. The differences arising from the above translation are
presented in other comprehensive income. The cash flows of overseas operations are translated at
the spot exchange rates on the dates of the cash flows. The effect of exchange rate changes on
cash is presented separately in the cash flow statement.
(9) Financial instruments
(a) Financial assets
(i) Classification of financial assets
Financial assets are classified into the following categories at initial recognition: financial assets at
fair value through profit or loss, loans and receivables and available-for-sale financial assets. The
classification of financial assets depends on the Group’s intention and ability to hold the financial
assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for the purpose of
selling in the short term and Derivative financial instruments.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market, including cash at bank and on hand, deposits with central bank,
deposits with banks and other financial institutions, loans and advances, interest receivable,
dividends receivable, accounts receivable and structural deposits with banks.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are either designated in
this category or not classified in any of the other categories at initial recognition. Available-for-sale
financial assets are included in other current assets – wealth management products on the balance
sheet if management intends to dispose of them within 12 months after the balance sheet date,
while those are included in other non-current assets – wealth management products if management
intends to dispose of them over 12 months after the balance sheet date.
(ii) Derivative financial instruments
The derivative financial instruments held or issued by the Group are mainly used in controlling risk
exposures. Derivative financial instruments are initially recognised at fair value on the day when
derivatives transaction contract was signed, and subsequently measured at fair value. The
derivative financial instruments are recorded as assets when they have a positive fair value and as
liabilities when they have a negative fair value.
The recognition of changes in fair value of derivative financial instruments depends on whether
such derivative financial instruments are designated as hedging instruments and meet
requirements for hedging instruments, and depends on the nature of hedged items in this case. For
derivative financial instruments that are not designated as hedging instruments and fail to meet
requirements on hedging instruments, including those held for the purpose of providing hedging
against specific risks in interest rate and foreign exchange but not conforming with requirements of
hedge accounting, the changes in fair value are recorded in gains or losses arising from changes in
fair value in the consolidated income statement.
The 2016 Annual Report of Midea Group Co., Ltd.
At the inception of the transaction, the Group officially designates the hedging relations between
hedging instruments and hedged items and documents the hedging relations, risk management
objectives and hedging strategies. The Group also makes written assessment of the effectiveness
of hedging instruments in offsetting changes in the fair value or cash flow of hedged items. These
criteria should be met before hedging accounting is determined as applicable to such hedges.
Cash flow hedge
Cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a
particular risk associated with a recognised asset or liability (such as all or some future interest
payments on variable rate debt) or a highly probable forecast transaction that could ultimately affect
the profit or loss.
The effective portion of changes in the fair value of hedging instruments that are designated and
qualify as cash flow hedges is recognised in other comprehensive income in current year and
accumulated in equity in the “other comprehensive income”. The ineffective portion is recognised
immediately in the profit or loss.
Amounts accumulated in equity are reclassified to the profit or loss in the same periods when the
hedged item affects the profit or loss.
When a hedging instrument expires or is sold, or the hedge designation is revoked or when a hedge
no longer meets the criteria for hedge accounting, any cumulative gain or loss on the hedging
instrument existing in equity at that time remains in equity and is reclassified to the profit or loss
when the forecast transaction ultimately occurs. When a forecast transaction is no longer expected
to occur, the cumulative gain or loss existing in equity is immediately transferred to the profit or loss.
(iii) Recognition and measurement
Financial assets are recognised at fair value on the balance sheet when the Group becomes a party
to the contractual provisions of the financial instrument. In the case of financial assets at fair value
through profit or loss, the related transaction costs incurred at the time of acquisition are recognised
in profit or loss for the current period. For other financial assets, transaction costs that are
attributable to the acquisition of the financial assets are included in their initially recognised
amounts.
Financial assets at fair value through profit or loss and available-for-sale financial assets are
subsequently measured at fair value. Investments in equity instruments are measured at cost when
they do not have a quoted market price in an active market and whose fair value cannot be reliably
measured. Receivables and held-to-maturity investments are measured at amortised cost using the
effective interest method.
Gains or losses arising from change in the fair value of financial assets at fair value through profit or
loss are recognised in profit or loss. Interests and cash dividends received during the period in
which such financial assets are held, as well as the gains or losses arising from disposal of these
assets are recognised in profit or loss for the current period.
Gains or losses arising from change in fair value of available-for-sale financial assets are
recognised directly in equity, except for impairment losses and foreign exchange gains and losses
arising from translation of monetary financial assets. When such financial assets are derecognised,
the cumulative gains or losses previously recognised directly into equity are recycled into profit or
loss for the current period. Interests on available-for-sale investments in debt instruments
calculated using the effective interest method during the period in which such investments are held
and cash dividends declared by the investee on available-for-sale investments in equity instruments
are recognised as investment income, which is recognised in profit or loss for the period.
(iv) Impairment of financial assets
The Group assesses the carrying amounts of financial assets other than those at fair value through
profit or loss at each balance sheet date. If there is objective evidence that a financial asset is
impaired, an impairment loss is provided for.
The 2016 Annual Report of Midea Group Co., Ltd.
Objective evidence indicating impairment of financial assets refers to the matter that actually occurs
after the initial recognition of financial assets, it will affect estimated future cash flows of financial
assets, and its impact can be reliably measured.
Objective evidence indicating impairment of available-for-sale investments in equity instruments
includes a significant or prolonged decline in the fair value of an investment in an equity instrument.
The Group reviews available-for-sale investments in equity instruments on an individual basis at the
balance sheet date. If the fair value of an equity instrument investment at the balance sheet date is
lower than 50% (inclusive) of its initial cost for more than 12 months (inclusive), it indicates that the
impairment has occurred. If the fair value at the balance sheet date is lower than 20% (inclusive)
but no more than 50%, the Group considers other relevant factors, such as price fluctuation rate, to
determine whether an impairment of equity instrument investment occurs. The Group calculates the
initial investment cost of available-for-sale equity instruments by using weighted average method.
When an impairment loss on a financial asset carried at amortised cost has occurred, the amount of
loss is provided for at the difference between the asset’s carrying amount and the present value of
its estimated future cash flows (excluding future credit losses that have not been incurred). If there
is objective evidence that the value of the financial asset recovered and the recovery is related
objectively to an event occurring after the impairment was recognised, the previously recognised
impairment loss is reversed and the amount of reversal is recognised in profit or loss.
If an impairment loss on available-for-sale financial assets measured at fair value incurs, the
cumulative losses arising from the decline in fair value that had been recognised directly in
shareholders' equity are transferred out from equity and into impairment loss. For an investment in
debt instrument classified as available-for-sale on which impairment losses have been recognised,
if, in a subsequent period, its fair value increases and the increase can be objectively related to an
event occurring after the impairment loss was recognised in profit or loss, the previously recognised
impairment loss is reversed into profit or loss for the current period. For an investment in an equity
instrument classified as available-for-sale on which impairment losses have been recognised, the
increase in its fair value in a subsequent period is recognised directly in equity.
If an impairment loss on an available-for-sale financial asset measured at cost incurs, the amount of
loss is measured at the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the current market rate of return for a similar financial
asset. The previously recognised impairment loss will not be reversed in subsequent periods.
Please refer to Note 2(10) for accounting policies related to impairment of receivables.
(v) Derecognition of financial assets
A financial asset is derecognised when any of the below criteria is met: (1) the contractual rights to
receive the cash flows from the financial asset expire; (2) the financial asset has been transferred
and the Group transfers substantially all the risks and rewards of ownership of the financial asset to
the transferee; or (3) the financial asset has been transferred and the Group has not retained
control of the financial asset, although the Group neither transfers nor retains substantially all the
risks and rewards of ownership of the financial asset.
On derecognition of a financial asset, the difference between the carrying amount and the sum of
the consideration received and the cumulative changes in fair value that had been recognised
directly in equity, is recognised in profit or loss.
(b) Financial liabilities
Financial liabilities are classified into two categories at initial recognition: financial liabilities at fair
value through profit or loss and other financial liabilities. The Group's financial liabilities include
derivative financial liabilities, accounts payable, notes payable, borrowings, customer deposits and
deposits from banks and other financial institutions, financial assets sold under repurchase
agreements and interest payable.
Payables comprise accounts payable, other payables and other current liabilities, and are
recognised at fair value at initial recognition. Payables are subsequently measured at amortised
The 2016 Annual Report of Midea Group Co., Ltd.
cost using the effective interest method.
Borrowings and debentures payable are recognised initially at fair value, net of transaction costs
incurred, and subsequently measured at amortised cost using the effective interest method.
Other financial liabilities with maturities no more than one year are classified as current liabilities.
Other financial liabilities with maturities over one year but are due within one year (inclusive) since
the balance sheet date are classified as the current portion of non-current liabilities. Others are
classified as non-current liabilities.
A financial liability (or a part of a financial liability) is derecognised when all or part of the obligation
is extinguished. The difference between the carrying amount of the financial liability or the
derecognised part of the financial liability and the consideration paid is recognised in profit or loss.
(c) Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined at the quoted
price in the active market. The fair value of a financial instrument that is not traded in an active
market is determined by using a valuation technique. In valuation, the Group uses a valuation
technique that is applicable in the current situation and supported by adequate available data and
other information, selects inputs with the same characteristics as those of assets or liabilities
considered in relevant trade of assets or liabilities by market participants, and maximises the use of
relevant observable inputs. The Group uses unobservable inputs when relevant observable inputs
are not available or feasible.
(10) Provision for bad debts of receivables
Receivables comprise accounts receivable and other receivables. Accounts receivable arising from
sales of goods or rendering of services are initially recognised at fair value of the contractual
payments from the buyers or service recipients.
(a) Receivables with amounts that are individually significant and subject to separate assessment for
provision for bad debts
Receivables with amounts that are individually significant are subject to separate assessment for
impairment. If there exists objective evidence that the Group will not be able to collect the amount
under the original terms, a provision for impairment of that receivable is made.
The judgement standard for individually significant amount is an individual amount exceeding
RMB5,000,000 for accounts receivable and RMB500,000 for other receivables.
The Group makes provision for bad debts for those individually significant amounts based on the
amount by which the present value of the future cash flows expected to be derived from the
receivable is below its carrying amount.
(b) Accounts receivable and other receivables that are subject to provision for bad debts on the
grouping basis
Receivables with amounts that are not individually significant and those receivables that have been
individually assessed for impairment and have not been found impaired are classified into certain
groupings based on their credit risk characteristics. The provision for bad debts is determined
based on the historical loss experience for the groupings of receivables with similar credit risk
characteristics, taking into consideration of the current circumstances.
The Group assesses the recovery risk of receivables based on the characteristics of different
regions.
The Company's subsidiaries in Mainland China classify the credit risk groupings by taking the
ageing of receivables as the risk characteristics and determine different provision ratios based on
business features.
The 2016 Annual Report of Midea Group Co., Ltd.
Within 6 6 months
months to 1 year 1 to 2 years 2 to 3 years 3 to 5 years Over 5 years
Air-conditioner motors
and related
components 5% 5% 10% 30% 50% 100%
Refrigerator motors and
related components 5% 5% 10% 30% 50% 100%
Washing machine
motors and related
components 5% 5% 10% 30% 50% 100%
Small household
appliances 5% 5% 10% 30% 50% 100%
Logistics and transport 0% 5% 10% 30% 50% 100%
Motor 0% 5% 10% 30% 50% 100%
Others 5% 5% 10% 30% 50% 100%
The Company's subsidiaries in Japan classify the credit risk groupings by taking the overdue of
receivables as the risk characteristics and make bad debts provision using percentage-of-balance
method with reference to the average percentage of bad debts during last three years. For the
receivables that are overdue, they make bad debts provision on an individual basis.
The Company's subsidiaries in Hong Kong, Macau, Singapore and Italy make bad debts provision
for receivables on an individual basis.
The Company's subsidiaries in Brazil make no bad debts provision for receivables with the ageing
within 1 year and adopt 100% provision ratio for those with the ageing over 1 year.
(c) Accounts receivable and other receivables with amounts that are not individually significant but
subject to separate assessment for provision for bad debts
The reason for making separate assessment for provision for bad debts is that there exists
objective evidence that the Group will not be able to collect the amount under the original terms of
the receivable.
The provision for bad debts is determined based on the amount by which the present value of the
future cash flows expected to be derived from the receivable is below its carrying amount.
(d) When the Group transfers the accounts receivable to the financial institutions without recourse, the
difference between the proceeds received from the transaction and their carrying amounts and the
related taxes is recognised in profit or loss for the current period.
(11) Provision for bad debts of loans and advances
Provision of the loans and advances is made based on the five-level classification, details are as
follows.
The Group assesses the carrying amounts of the loans and advances at each balance sheet date.
If there is objective evidences that the loans and advances are impaired, provision will be made at
the difference between the carrying amount and the present value of its estimated future cash flows
(excluding future credit losses that have not been incurred). Loans and advances that have not
been individually assessed for impairment are classified into certain groupings based on their credit
risk characteristics. The provision for bad debts is determined based on the historical loss
experience for the groupings of loans and advances with similar credit risk characteristics, and take
the current circumstances into consideration.
(12) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low value consumables, work
The 2016 Annual Report of Midea Group Co., Ltd.
in progress, finished goods, etc., are measured at the lower of cost and net realisable value.
(b) Costing of inventories
Cost is determined using the first-in first-out method when issued. The cost of goods in stfinished
goods and work in progress comprises raw materials, direct labour and systematically allocated
production overhead based on the normal production capacity.
(c) Basis for determining net realisable values of inventories and method for making provision for
decline in the value of inventories
Inventories are initially measured at cost. The cost of inventories comprises purchase cost,
processing cost and other expenditures to bring the inventories to current site and condition.
On the balance sheet date, inventories are measured at the lower of cost and net realisable value.
Net realisable value is determined based on the estimated selling price in the ordinary course of
business, less the estimated costs to completion and estimated costs necessary to make the sale
and related taxes.
Provision for decline in the value of inventories is determined at the excess amount of the cost as
calculated based on the classification of inventories over their net realisable value, and are
recognised in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of related assets
or in profit or loss for the current period.
(13) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in its
subsidiaries, and the Group’s long-term equity investments in its associates and joint venture.
Subsidiaries are the investees over which the Company is able to exercise control. A joint venture is
a joint arrangement which is structured through a separate vehicle over which the Group has joint
control together with other parties and only has rights to the net assets of the arrangement based
on legal forms, contractual terms and other facts and circumstances. Associates are the investees
that the Group has significant influence on their financial and operating policies.
Investments in subsidiaries are presented in the Company’s financial statements using the cost
method, and are adjusted to the equity method when preparing the consolidated financial
statements. Investments in a joint venture and associates are accounted for using the equity
method.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-term equity
investments acquired through a business combination involving enterprises under common control,
the investment cost shall be the absorbing party’s share of the carrying amount of shareholders’
equity of the party being absorbed at the combination date; for long-term equity investment
acquired through a business combination involving enterprises not under common control, the
investment cost shall be the combination cost.
For business combinations achieved by stages involving enterprises not under common control, the
initial investment cost accounted for using the cost method is the sum of carrying amount of
previously-held equity investment and additional investment cost. For previously-held equity
The 2016 Annual Report of Midea Group Co., Ltd.
accounted for using the equity method, the accounting treatment of related other comprehensive
income from disposal of the equity is carried out on a same basis with the investee's direct disposal
of related assets or liabilities. Shareholders' equity, which is recognised due to changes in
investee’s shareholders’ equity other than those arising from the net profit or loss, other
comprehensive income and profit distribution, is accordingly transferred into profit or loss in the
period in which the investment is disposed.
For investment in previously-held equity accounted for using the recognition and measurement
standards of financial instruments, the initial investment cost accounted for using the cost method is
the sum of carrying amount of previously-held equity investment and additional investment cost.
For long-term equity investments acquired not through a business combination: for long-term equity
investment acquired by payment in cash, the initial investment cost shall be the purchase price
actually paid; for long-term equity investments acquired by issuing equity securities, the initial
investment cost shall be the fair value of the equity securities issued.
(b) Subsequent measurement and recognition of related profit and loss
For long-term equity investments accounted for using the cost method, they are measured at the
initial investment costs, and cash dividends or profit distribution declared by the investees are
recognised as investment income in profit or loss.
For long-term equity investments accounted for using the equity method, where the initial
investment cost of a long-term equity investment exceeds the Group’s share of the fair value of the
investee’s identifiable net assets at the acquisition dates, the long-term equity investment is
measured at the initial investment cost; where the initial investment cost is less than the Group’s
share of the fair value of the investee’s identifiable net assets at the acquisition dates, the difference
is included in profit or loss and the cost of the long-term equity investment is adjusted upwards
accordingly.
For long-term equity investments accounted for using the equity method, the Group recognises the
investment income according to its share of net profit or loss of the investee. The Group
discontinues recognising its share of net losses of an investee after the carrying amount of the
long-term equity investment together with any long-term interests that, in substance, form part of
the investor’s net investment in the investee are reduced to zero. However, if the Group has
obligations for additional losses and the criteria with respect to recognition of provisions under the
accounting standards on contingencies are satisfied, the Group continues recognising the
investment losses and the provisions. The changes in the shareholders’ equity of the investee other
than those arising from the net profit or loss, other comprehensive income and profit distribution,
are recognised in the Group’s equity and the carrying amounts of the long-term equity investment
are adjusted accordingly. The carrying amount of the investment is reduced by the Group’s share of
the profit distribution or cash dividends declared by an investee. The unrealised profits or losses
arising from the intra-group transactions amongst the Group and its investees are eliminated in
proportion to the Group’s equity interest in the investees, and then based on which the investment
gains or losses are recognised. For the loss on the intra-group transaction amongst the Group and
its investees attributable to asset impairment, any unrealised loss is not eliminated.
(c) Basis for determining existence of control, jointly control or significant influence over investees
Control is the power to govern an investee and obtain variable returns from participating the
investee's activities, and the ability to utilise the power of an investee to affect its returns.
Joint control is the contractually agreed sharing of control over an arrangement, and relevant
economic activity can be arranged upon the unanimous approval of the Group and other
participants sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisions of the
investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
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The carrying amounts of long-term equity investments in subsidiaries, joint venture and associates
are reduced to the recoverable amounts when the recoverable amounts are below their carrying
amounts (Note 2(20)).
(14) Investment properties
Investment properties, including land use rights that have already been leased out, buildings that
are held for the purpose of leasing and buildings that are being constructed or developed for future
use for leasing, are measured initially at cost. Subsequent expenditures incurred in relation to an
investment property are included in the cost of the investment property when it is probable that the
associated economic benefits will flow to the Group and their costs can be reliably measured;
otherwise, the expenditures are recognised in profit or loss in the period in which they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties. Buildings
and land use rights are depreciated or amortised to their estimated net residual values over their
estimated useful lives. The estimated useful lives, the estimated net residual values that are
expressed as a percentage of cost and the annual depreciation (amortisation) rates of investment
properties are as follows:
Estimated useful Estimated net Annual depreciation
lives residual value (amortisation) rates
Buildings 20 to 40 years 5% 2.38% to 4.75%
Land use rights 40 to 50 years - 2% to 2.5%
When an investment property is transferred to owner-occupied properties, it is reclassified as fixed
asset or intangible asset at the date of the transfer. When an owner-occupied property is
transferred out for earning rentals or for capital appreciation, the fixed asset or intangible asset is
reclassified as investment properties at its carrying amount at the date of the transfer. At the time of
transfer, the property is recognised based on the carrying amount before transfer.
The investment properties' estimated useful lives, the estimated net residual values and the
depreciation (amortisation) methods applied are reviewed and adjusted as appropriate at each
year-end.
An investment property is derecognised on disposal or when the investment property is
permanently withdrawn from use and no future economic benefits are expected from its disposal.
The net amount of proceeds from sale, transfer, retirement or damage of an investment property
after deducting its carrying amount and related taxes and expenses is recognised in profit or loss
for the current period.
(15) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, land with permanent ownership, machinery and equipment, motor
vehicles, computers and electronic equipment and office equipment.
Fixed assets are recognised when it is probable that the related economic benefits will flow to the
Group and the costs can be reliably measured. The initial cost of purchased fixed assets include
purchase price, related taxes and expenditures that are attributable to the assets incurred before
the assets are ready for their intended use. The initial cost of self-constructed fixed assets is
determined based on Note 2(16).
Subsequent expenditures incurred for fixed assets are included in the cost of fixed assets when it is
probable that the associated economic benefits will flow to the Group and the related cost can be
reliably measured. The carrying amount of the replaced part is derecognised. All the other
subsequent expenditures are recognised in profit or loss in the period in which they are incurred.
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(b) Depreciation methods of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets to their
estimated residual values over their estimated useful lives. For the fixed assets that have been
provided for impairment loss, the related depreciation charge is prospectively determined based
upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated residual values expressed as a percentage of cost and
the annual depreciation rates of the Group's fixed assets are as follows:
Estimated useful Estimated net Annual
Classes lives residual value depreciation rates
Buildings 20 to 60 years 0% to 10% 5% to 1.5%
Machinery and equipment 3 to 18 years 0% to 10% 33.3% to 5.0%
Motor vehicles 2 to 20 years 0% to 10% 50% to 4.5%
Electronic equipment and other
equipment 2 to 20 years 0% to 10% 50% to 4.5%
Land with permanent ownership Permanent Not applicable Not applicable
The estimated useful lives and the estimated net residual values of the Group's fixed assets and the
depreciation methods applied to the assets are reviewed, and adjusted as appropriate at each
year-end.
(c) Basis for identification of fixed assets held under finance leases and related measurement
A lease that in substance transfers substantially all the risks and rewards incidental to ownership of
an asset is a finance lease. The leased asset is recognised at the lower of the fair value of the
leased asset and the present value of the minimum lease payments. The difference between the
recorded amount of the leased asset and the minimum lease payments is accounted for as
unrecognised finance charge.
Fixed assets held under a finance lease is depreciated on a basis consistent with the depreciation
policy adopted for fixed assets that are self-owned. When a leased asset can be reasonably
determined that its ownership will be transferred at the end of the lease term, it is depreciated
over the period of expected use; otherwise, the leased asset is depreciated over the shorter period
of the lease term and the period of expected use.
(d) The carrying amount of a fixed asset is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(20)).
(e) Disposal of fixed assets
A fixed asset is derecognised on disposal or when no future economic benefits are expected from
its use or disposal. The amount of proceeds from disposals on sale, transfer, retirement or damage
of a fixed asset net of its carrying amount and related taxes and expenses is recognised in profit or
loss for the current period.
(16) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction costs,
installation costs, borrowing costs that are eligible for capitalisation and other costs necessary to
bring the fixed assets ready for their intended use. Construction in progress is transferred to fixed
assets when the assets are ready for their intended use, and depreciation begins from the following
month. The carrying amount of construction in progress is reduced to the recoverable amount when
the recoverable amount is below the carrying amount (Note 2(20)).
(17) Borrowing costs
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The borrowing costs that are directly attributable to the acquisition and construction of a fixed asset
that needs a substantially long period of time for its intended use commence to be capitalised and
recorded as part of the cost of the asset when expenditures for the asset and borrowing costs have
been incurred, and the activities relating to the acquisition and construction that are necessary to
prepare the asset for its intended use have commenced. The capitalisation of borrowing costs
ceases when the asset under acquisition or construction becomes ready for its intended use and
the borrowing costs incurred thereafter are recognised in profit or loss for the current period.
Capitalisation of borrowing costs is suspended during periods in which the acquisition or
construction of a fixed asset is interrupted abnormally and the interruption lasts for more than 3
months, until the acquisition or construction is resumed.
For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifying for
capitalisation, the amount of borrowing costs eligible for capitalisation is determined by deducting
any interest income earned from depositing the unused specific borrowings in the banks or any
investment income arising on the temporary investment of those borrowings during the
capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed asset qualifying for
capitalisation, the amount of borrowing costs eligible for capitalisation is determined by applying the
weighted average effective interest rate of general borrowings, to the weighted average of the
excess amount of cumulative expenditures on the asset over the amount of specific borrowings.
The effective interest rate is the rate at which the estimated future cash flows during the period of
expected duration of the borrowings or applicable shorter period are discounted to the initial
amount of the borrowings.
(18) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademark rights,
trademark use rights and others, and are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period of 40 to 50
years. If the acquisition costs of the land use rights and the buildings located thereon cannot be
reasonably allocated between the land use rights and the buildings, all of the acquisition costs are
recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the period as
stipulated by contracts or the beneficial period.
(c) Trademark rights
The trademark rights is measured at cost when acquired and is amortized over the estimated useful
life of 30 years. The cost of trademark rights obtained in the business combinations involving
enterprises not under common control is measured at fair value.
(d) Trademark use rights
The trademark use rights is measured at cost when acquired. The cost of trademark use rights
obtained in the business combinations involving enterprises not under common control is measured
at fair value, and is amortized over the estimated useful life of 40 years.
(e) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisation method is
performed at each year-end, with adjustment made as appropriate.
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(f) Research and development (“R&D”)
Expenditure on an internal research and development project is classified into expenditure on the
research phase and expenditure on the development phase based on its nature and whether there
is material uncertainty that the research and development activities can form an intangible asset at
end of the project.
Expenditure on the planned investigation, evaluation and selection for the research of production
processes or products is categorised as expenditure on the research phase, and it is recognised in
profit or loss when it is incurred. Expenditure on design and test for the final application of the
development of production processes or products before mass production is categorised as
expenditure on the development phase, which is capitalised only if all of the following conditions are
satisfied:
The development of production processes or products has been fully justified by technical
team;
The budget on the development of production processes or products has been approved by the
management;
There is market research analysis that demonstrates the product produced by the production
process or product has the ability of marketing;
There are sufficient technical and financial resources to support the development of production
processes or products and subsequent mass production; and
Expenditure attributable to the development of production processes or products can be
reliably measured.
Other development expenditures that do not meet the conditions above are recognised in profit or
loss when they are incurred. Development costs previously recognised as expenses are not
recognised as an asset in subsequent period. Capitalised expenditure on the development phase is
presented as development costs in the balance sheet and transferred to intangible assets at the
date that the asset is ready for its intended use.
(g) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(20)).
(19) Long-term deferred expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets held under
operating leases, and other expenditures that have been incurred but should be recognised as
expenses over more than one year in the current and subsequent periods. Long-term prepaid
expenses are amortised on the straight-line basis over the expected beneficial period and are
presented at actual expenditure net of accumulated amortisation.
(20) Impairment of long-term assets
Fixed assets, construction in progress, intangible assets with finite useful lives, investment
properties measured using the cost model and long-term equity investments in subsidiaries, a joint
venture and associates are tested for impairment if there is any indication that the assets may be
impaired at the balance sheet date. Intangible assets not ready for their intended use and land with
permanent ownership are tested at least annually for impairment, irrespective of whether there is
any indication that it may be impaired. If the result of the impairment test indicates that the
recoverable amount of an asset is less than its carrying amount, a provision for impairment and an
impairment loss are recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and the present value of the future cash flows expected to be derived from the asset. Provision for
asset impairment is determined and recognised on the individual asset basis. If it is not possible to
estimate the recoverable amount of an individual asset, the recoverable amount of a group of
assets to which the asset belongs is determined. A group of assets is the smallest group of assets
that is able to generate independent cash inflows.
The 2016 Annual Report of Midea Group Co., Ltd.
Goodwill that is separately presented in the financial statements is tested at least annually for
impairment, irrespective of whether there is any indication that it may be impaired. In conducting the
test, the carrying value of goodwill is allocated to the related asset groups or groups of asset groups
which are expected to benefit from the synergies of the business combination. If the result of the
test indicates that the recoverable amount of an asset group or group of asset groups, including the
allocated goodwill, is lower than its carrying amount, the corresponding impairment loss is
recognised. The impairment loss is first deducted from the carrying amount of goodwill that is
allocated to the asset group or group of asset groups, and then deducted from the carrying amounts
of other assets within the asset groups or groups of asset groups in proportion to the carrying
amounts of assets other than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the value recovered
in the subsequent periods.
(21) Employee benefits
Employee benefits include short-term employee benefits, post-employment benefits, termination
benefits and other long-term employee benefits provided in various forms of consideration in
exchange for service rendered by employees or compensations for the termination of employment
relationship.
(a) Short-term employee benefits
Short-term employee benefits include employee wages or salaries, bonus, allowances and
subsidies, staff welfare, premiums or contributions on medical insurance, work injury insurance and
maternity insurance, housing funds, union running costs and employee education costs, and
short-term paid absences. The employee benefit liabilities are recognised in the accounting period
in which the service is rendered by the employees, with a corresponding charge to the profit or loss
for the current period or the cost of relevant assets. Non-monetary benefits are measured at their
fair value.
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans or defined
benefit plans. Defined contribution plans are post-employment benefit plans under which the Group
pays fixed contributions into a separate fund and will have no obligation to pay further contributions;
and defined benefit plans are post-employment benefit plans other than defined contribution plans.
During the reporting period, the Group's defined contribution plans mainly include basic pensions
and unemployment insurance, while the defined benefit plans are that TLSC, the Group’s
subsidiaries, provides supplemental retirement benefits beyond the national regulatory insurance
system.
Basic pensions
Employees of the Group participate in the defined basic pension insurance plan set up and
administered by local labour and social protection authorities. Basic pensions are provided for
monthly according to stipulated bases and proportions to local labour and social security institutions.
When employees retire, the relevant local authorities are obliged to pay the basic pensions to them.
The amounts based on the above calculations are recognised as liabilities in the accounting period
in which the service has been rendered by the employees, with a corresponding charge to the profit
or loss for the current period or the cost of relevant assets.
Supplemental retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans is the
present value of the defined benefit obligation at the end of the reporting period less the fair value of
plan assets. The defined benefit obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defined benefit obligation is determined
by discounting the estimated future cash outflows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the benefits will be paid, and that have terms
The 2016 Annual Report of Midea Group Co., Ltd.
to maturity approximating to the terms of the related pension obligation. The charges related to the
supplemental retirement benefits (including current service costs, past-service costs and gains or
losses on settlement) and net interest costs are recognised in the statement of profit or loss or
included in the cost of an asset, and the changes of remeasurement in net liabilities or net assets
arising from the benefit plan are charged or credited to equity in other comprehensive.
(c) Termination benefits
The Group provides compensation for terminating the employment relationship with employees
before the end of the employment contracts or as an offer to encourage employees to accept
voluntary redundancy before the end of the employment contracts. The Group recognises a liability
arising from compensation for termination of the employment relationship with employees, with a
corresponding charge to profit or loss at the earlier of the following dates: 1) when the Group cannot
unilaterally withdraw the offer of termination benefits because of an employment termination plan or
a curtailment proposal; 2) when the Group recognises costs or expenses related to the restructuring
that involves the payment of termination benefits.
Early retirement benefits
The Group offers early retirement benefits to those employees who accept early retirement
arrangements. The early retirement benefits refer to the salaries and social security contributions to
be paid to and for the employees who accept voluntary retirement before the normal retirement
date prescribed by the State, as approved by the management. The Group pays early retirement
benefits to those early retired employees from the early retirement date until normal retirement date.
The Group accounts for the early retirement benefits in accordance with the treatment of
termination benefits, in which the salaries and social security contributions to be paid to and for the
early retired employees from the off-duty date to the normal retirement date are recognised as
liabilities with a corresponding charge to the profit or loss for the current period. The differences
arising from the changes in the respective actuarial assumptions of the early retirement benefits
and the adjustments of benefit standards are recognised in profit or loss in the period in which they
occur.
The termination benefits expected to be paid within one year since the balance sheet date are
classified as current liabilities.
(22) Financial assets sold under repurchase agreements
Assets sold under agreements to repurchase at a specific future date are not derecognised from
the balance sheet. The corresponding proceeds are recognised on the balance sheet under
“Repurchase agreements”. The difference between the sale price and the repurchase price is
treated as interest expense and is accrued over the life of the agreement using the effective interest
method.
(23) General reserve
General reserve is the reserve appropriated from undistributed profits to cover part of unidentified
potential losses, on the basis of the estimated potential risk value of risk assets assessed by the
standardised approach, which is deducted from recognised provision for impairment losses on
loans. Risk assets include loans and advances, available-for-sale financial assets, long-term equity
investments, deposits with banks and other financial institutions and other receivables of subsidiary
engaged in financial business.
(24) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved by the
shareholders’ meeting.
(25) Provisions
Provisions for product warranties, onerous contracts etc. are recognised when the Group has a
present obligation, it is probable that an outflow of economic benefits will be required to settle the
obligation, and the amount of the obligation can be measured reliably.
The 2016 Annual Report of Midea Group Co., Ltd.
A provision is initially measured at the best estimate of the expenditure required to settle the related
present obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time
value of money, are taken into account as a whole in reaching the best estimate of a provision.
Where the effect of the time value of money is material, the best estimate is determined by
discounting the related future cash outflows. The increase in the discounted amount of the provision
arising from passage of time is recognised as interest expense.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect
the current best estimate.
(26) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employees as
consideration for equity instruments of the entity or by incurring liabilities for amounts based on the
equity instruments. Equity instruments include equity instruments of the Company, its parent
company or other accounting entities of the Group. Share-based payments are divided into
equity-settled and cash-settled payments. The Group’s share-based payments are equity-settled
payments.
Equity-settled share-based payment
The Group’s share option plan is the equity-settled share-based payment in exchange of
employees' services and is measured at the fair value of the equity instruments at grant date. The
equity instruments are exercisable after services in vesting period are completed or specified
performance conditions are met. In the vesting period, the services obtained in current period are
included in relevant cost and expenses at the fair value of the equity instruments at grant date
based on the best estimate of the number of exercisable equity instruments, and capital surplus is
increased accordingly. If the subsequent information indicates the number of exercisable equity
instruments differs from the previous estimate, an adjustment is made and, on the exercise date,
the estimate is revised to equal the number of actual vested equity instruments. On the exercise
date, the recognised amount calculated based on the number of exercised equity instruments is
transferred into share capital.
(b) Determination of the fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which is Black -
Scholes option pricing model.
(c) Basis for determining best estimate of exercisable equity instruments
At the end of each reporting period, the group revises its estimates of the number of options that are
expected to vest based on the non-marketing performance and service conditions. On the exercise
date, the final number of estimated exercisable equity instruments is consistent with the number of
exercised equity instruments.
(d) Accounting treatment related to the exercise of share options
When the options are exercised, the company issues new shares. The proceeds received net of
any directly attributable transaction costs are credited to share capital (and share premium). At the
same time, capital surplus recognised in the vesting period are carried forward to share premium.
(27) Revenue
The amount of revenue is determined in accordance with the fair value of the consideration
received or receivable for the sales of goods and services in the ordinary course of the Group’s
activities. Revenue is shown net of discounts, rebates and returns.
Revenue is recognised when the economic benefits associated with the transaction will flow to the
The 2016 Annual Report of Midea Group Co., Ltd.
Group, the related revenue can be reliably measured, and the specific revenue recognition criteria
have been met for each type of the Group’s activities as described below:
(a) Sales of goods
The Group are principally engaged in the manufacturing and sales of home appliances and
mechanical and electrical products (namely large household appliances, small household
appliances and motors).
Revenue from domestic sales is recognised when 1) the goods are delivered to buyers by the
Group pursuant to contracts; 2) the amount of revenue is confirmed; 3) payments for goods are
collected or receipts are acquired; and 4) the related economic benefits will flow to the Group; and
the related costs can be measured reliably. Upon confirming the acceptance, the buyer has the right
to sell the products at its discretion and takes the risks of any price fluctuations and obsolescence
and loss of the products.
Revenue from overseas sales is recognised when 1) the goods have left the port and obtain the bill
of lading pursuant to contracts; 2) the amount of revenue is confirmed; 3) payments for goods are
collected or obtain related receipts; and 4) the related economic benefits will flow to the Group and
the related costs can be measured reliably.
(b) Rendering of services
Revenue from transportation service, storage service, distribution service and installation service
as provided by the Group is recognised when the services are completed.
(c) Interest income
Interest income from financial instruments is calculated by effective interest method and recognised
in profit or loss for the current period. Interest income comprises premiums or discounts, or the
amortisation based on effective rates of other difference between the initial carrying amount and the
due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financial asset or
liability and the interest income or expense based on effective rates. Actual interest rate is the rate
at which the estimated future cash flows during the period of expected duration of the financial
instruments or applicable shorter period are discounted to the current carrying amount of the
financial instruments. When calculating the effective interest rate, the Group estimates cash flows
by considering all contractual terms of the financial instrument (e.g. early repayment options, similar
options, etc.), but without considering future credit losses. The calculation includes all fees and
interest paid or received that are an integral part of the effective interest rate, transaction costs, and
all other premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is used for
discounting estimated future cash flow when measuring the impairment loss.
(d) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e) Rental income
Rental income from investment prosperities is recognised in the income statement on a straight-line
basis over the lease period.
(f) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when the service is
provided. The Group defers the initial charge income or commitment fee income arising from the
forming or acquisition of financial assets as the adjustment to effective interest rate. If the loans are
The 2016 Annual Report of Midea Group Co., Ltd.
not lent when the loan commitment period is expired, related charges are recognised as fee and
commission income.
(28) Government grants
Government grants are transfers of monetary or non-monetary assets from the government to the
Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied with and the
government grant can be received. For a government grant in the form of transfer of monetary
assets, the grant is measured at the amount received or receivable. For a government grant in the
form of transfer of non-monetary assets, it is measured at fair value; if the fair value is not reliably
determinable, the grant is measured at nominal amount.
Government grants related to assets are grants that are acquired by an enterprise and used for
acquisition, construction or forming long-term assets in other ways. Government grants related to
income are government grants other than government grants related to assets.
A government grant related to an asset is recognised as deferred income, and evenly amortised to
profit or loss over the useful life of the related asset. Government grants measured at nominal
amounts are recognised immediately in profit or loss for the current period.
For government grants related to income, where the grant is a compensation for related expenses
or losses to be incurred by the Group in the subsequent periods, the grant is recognised as
deferred income, and included in profit or loss over the periods in which the related costs are
recognised; where the grant is a compensation for related expenses or losses already incurred by
the Group, the grant is recognised immediately in profit or loss for the current period.
(29) Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities are calculated and recognised based
on the differences arising between the tax bases of assets and liabilities and their carrying amounts
(temporary differences). Deferred income tax asset is recognised for the tax losses that can be
carried forward to subsequent years for deduction of the taxable profit in accordance with the tax
laws. No deferred t income tax liability is recognised for a temporary difference arising from the
initial recognition of goodwill. No deferred income tax asset or deferred income tax liability is
recognised for the temporary differences resulting from the initial recognition of assets or liabilities
due to a transaction other than a business combination, which affects neither accounting profit nor
taxable profit (or tax loss). At the balance sheet date, deferred income tax assets and deferred
income tax liabilities are measured at the tax rates that are expected to apply to the period when the
asset is realised or the liability is settled.
Deferred income tax assets are only recognised for deductible temporary differences, tax losses
and tax credits to the extent that it is probable that taxable profit will be available in the future
against which the deductible temporary differences, tax losses and tax credits can be utilised.
Deferred income tax liabilities are recognised for temporary differences arising from investments in
subsidiaries, associates and a joint venture, except where the Group is able to control the timing of
reversal of the temporary difference, and it is probable that the temporary difference will not reverse
in the foreseeable future. When it is probable that the temporary differences arising from
investments in subsidiaries, associates and a joint venture will be reversed in the foreseeable future
and that the taxable profit will be available in the future against which the temporary differences can
be utilised, the corresponding deferred income tax assets are recognised.
Deferred income tax assets and liabilities are offset when:
The deferred income taxes are related to the same tax payer within the Group and the same
taxation authority; and,
That tax payer within the Group has a legally enforceable right to offset current tax assets
against current tax liabilities.
The 2016 Annual Report of Midea Group Co., Ltd.
(30) Leases
(a) Operating lease
Rental expenses for assets held under operating leases are recognised as the cost of relevant
assets or expenses on a straight-line basis over the lease period. Contingent rentals are recognised
as profit and loss for the current period when incurred.
Fixed assets leased out under operating leases, other than investment prosperities (Note 2(14)),
are depreciated in accordance with the depreciation policy stated in Note 2(15)(b) and provided for
impairment loss in accordance with the policy stated in Note 2(20). Rental income from operating
leases is recognised as revenue on a straight-line basis over the lease period. Initial direct costs in
large amount arising from assets leased out under operating leases are capitalised when incurred
and recognised as profit and loss for the current period over the lease period on a same basis with
revenue recognition; initial direct costs in small amount are directly recognised as profit and loss for
the current period. Contingent rentals are recognised as profit and loss for the current period when
incurred.
(b) Finance lease
The leased asset is recognised at the lower of the fair value of the leased asset and the present
value of the minimum lease payments. The difference between the recorded amount of the leased
asset and the minimum lease payments is accounted for as unrecognised finance charge and is
amortised using the effective interest method over the period of the lease. A long-term payable is
recorded at the amount equal to the minimum lease payments less the unrecognised finance
charge.
(31) Segment information
The Group identifies operating segments based on the internal organisation structure, management
requirements and internal reporting system, and discloses segment information of reportable
segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the following conditions: (1)
the component is able to earn revenue and incur expenses from its ordinary activities; (2) whose
operating results are regularly reviewed by the Group’s management to make decisions about
resources to be allocated to the segment and to assess its performance, and (3) for which the
information on financial position, operating results and cash flows is available to the Group. If two or
more operating segments have similar economic characteristics and satisfy certain conditions, they
are aggregated into one single operating segment.
(32) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgements applied
based on historical experience and other factors, including expectations of future events that are
believed to be reasonable.
(a) Critical accounting estimates and key assumptions
The critical accounting estimates and key assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next accounting year
are outlined below:
(i) The fair value assessment and recognition of goodwill related to the business combination not
under common control
For business combination not under common control (Note 5(1)(a)), the Group shall allocate the
cost of acquisition to identified assets and liabilities based on their fair values at the date of
acquisition. The excess of the consideration transferred over share of fair value of identifiable net
assets acquired from the acquiree is recognised as goodwill. The Group needs to make critical
The 2016 Annual Report of Midea Group Co., Ltd.
judgements in identifying the identifiable assets and liabilities, and evaluation of fair value, including
sales growth rate, gross margin and discount rate, etc. The estimation of fair value is based on the
information available at the acquisition date and on expectations and assumptions that have been
deemed reasonable by management. Such judgements could materially impact the calculation of
goodwill and amortisation charges of identified assets in subsequent periods. Determining the
estimated useful lives of intangible assets acquired also requires critical judgement.
(ii) Provision for impairment of goodwill
The Group tests annually goodwill for impairment. The recoverable amount of asset groups
inclusive of goodwill is the present value of the future cash flows expected to be derived from them.
These calculations require use of estimates (Note 2(20)).
If management revises the gross margin that is used in the calculation of the future cash flows of
asset groups, and the revised gross margin is lower than the one currently used, the Group would
need to recognise further impairment against goodwill.
If management revises the pre-tax discount rate applied to the discounted cash flows, and the
revised pre-tax discount rate is higher than the one currently applied, the Group would need to
recognise further impairment against goodwill.
If the actual gross margin/pre-tax discount rate is higher/lower than management’s estimates, the
impairment loss of goodwill previously provided for is not allowed to be reversed by the Group.
(iii) Provisions for sales rebates, installation expenses and maintenance expenses.
The relevant expenditures, including sales rebates to the buyers, product installation expenses and
maintenance expenses during the warranty period, are accrued when the Group recognises
revenue from sales of products. The provision of sales rebates is to deduct revenue. The provisions
for such expenditures involve management's judgements and estimates, the key factors mainly
include the buyers' completion of agreed performance indicators, the unit historical and expected
installation costs of products, the expected claim rate for maintenance, market conditions and the
stock level kept in sale channel. The estimation basis is reviewed on an on-going basis and revised
where appropriate. When the actual outcome or expectation in the future is different from the
original estimate, such differences will impact the carrying amount of the provisions and the
provision amount charged/reversed in the period in which such estimate has been changed.
(iv) Income taxes
The Group is subject to income taxes in numerous jurisdictions. There are many transactions and
events for which the ultimate tax determination is uncertain during the ordinary course of business.
Significant judgement is required from the Group in determining the provision for income taxes in
each of these jurisdictions. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred
income tax provisions in the period in which such determination is made.
(v) Fair value of financial instruments
The fair value of a financial instrument that is not traded in an active market is determined by using
a valuation technique. Valuation techniques include discounted cash flow model analysis, etc. The
Group makes estimates in terms of future cash flow, credit risk, market volatility and correlation for
valuation. These estimates are uncertain and changes in them will impact the fair value of financial
instruments.
3 Taxation
(1) Main tax category and rate
Category Tax base Tax rate
The 2016 Annual Report of Midea Group Co., Ltd.
5%, 15%, 16.5%,
17%, 25%,
20%-31.4%, 31.5%
Corporate income tax (a) Levied based on taxable income or 34%
Taxable value-added amount (Tax payable is
calculated using the taxable sales amount
multiplied by the applicable tax rate less 5%, 6%, 11% or
Value-added tax (VAT) (b) deductible VAT input of the current period) 17%
City maintenance and
construction tax The amount of VAT paid 5% or 7%
Educational surcharge The amount of VAT paid 3% or 5%
Local education surcharge The amount of VAT paid 2%
Price-based property is subject to a 1.2% tax
rate after a 30% cut in the original price of
property. Rental-based is subject to 12%
Property tax tax rate for the rental income. 1.2% or 12%
(a) Notes to the corporate income tax rate of the principal tax payers with different tax rates
(a-1) The following subsidiaries of the Company are subject to a corporate income tax rate of 15% in
2016 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate.
No. of the Certificate of the Effective
Name of tax payer High-tech Enterprise Dates of issuance period
Jiangxi Midea Guiya lighting Co., Ltd. GR201436000009 9 April 2014 3 years
Wuhu Midea Kitchen & Bathroom Electric
Manufacturing Co., Ltd. GF201434000129 2 July 2014 3 years
Hefei Midea Washing Machine Co., Ltd. GR201434000147 2 July 2014 3 years
Welling (Wuhu) Motor Manufacturing Co.,
Ltd. GR201434000371 2 July 2014 3 years
Jiangsu Midea Cleaning Appliance
Company Limited GF201432000806 5 August 2014 3 years
Handan Midea Refrigeration Equipment
Co., Ltd. GR201413000242 19 September 2014 3 years
Chongqing Midea General Refrigeration
Equipment Co., Ltd. GF201451100044 14 October 2014 3 years
Guangdong Midea Refrigeration
Equipment Co., Ltd. GR201444000965 10 October 2014 3 years
Guangzhou Hualing Refrigeration
Equipment Co., Ltd. GR201444000463 10 October 2014 3 years
Guangdong GMCC Refrigeration
Equipment Co., Ltd. GR201444000397 10 October 2014 3 years
Guangdong Witt Vacuum Electronics
Manufacturing Co., Ltd. GR201444000159 10 October 2014 3 years
Foshan Shunde Midea Washing Appliance
Manufacturing Co., Ltd. GR201444001324 10 October 2014 3 years
Foshan Welling Washer Motor
Manufacturing Co., Ltd. GR201444000608 10 October 2014 3 years
Guangdong Welling Motor Manufacturing
Co., Ltd. GR201444000268 10 October 2014 3 years
Midea Group Wuhan Refrigeration
Equipment Co., Ltd. GR201442000091 14 October 2014 3 years
Hubei Midea Refrigerator Co., Ltd. GF201442000015 14 October 2014 3 years
Wuhu Meizhi Air-Conditioning Equipment
Co., Ltd. GR201434001064 21 October 2014 3 years
(a-1) The following subsidiaries of the Company are subject to corporate income tax at the rate of 15% in
The 2016 Annual Report of Midea Group Co., Ltd.
2016 as they qualified as high-tech enterprises and obtained the High-tech Enterprise Certificate.
(Cont'd)
No. of the Certificate of the Effective
Name of tax payer High-tech Enterprise Dates of issuance period
Hefei Midea Refrigerator
Co., Ltd. GR201434001001 21 October 2014 3 years
Hefei Hualing Co., Ltd. GR201434000715 21 October 2014 3 years
Annto Logistics Company Limited GF201534000356 19 June 2015 3 years
Wuxi Filin Electronics Co., Ltd. GR201532000917 6 July 2015 3 years
Wuxi Little Swan General Appliance Co.,
Ltd. GR201532000557 6 July 2015 3 years
Wuxi Little Swan Company Limited GR201532000606 6 July 2015 3 years
Guangdong Midea Kitchen Appliances 30 September
Manufacturing Co., Ltd. GR201544000202 2015 3 years
Foshan Shunde Midea Electric Appliance
Manufacturing Co., Ltd. GR201544001470 10 October 2015 3 years
Anhui GMCC Precision Manufacturing
Co., Ltd. GR201534000785 15 October 2015 3 years
Guangdong Midea Heating & Ventilation
Equipment Co., Ltd. GF201544000292 20 October 2015 3 years
Hefei Midea Heating & Ventilation
Equipment Co., Ltd. GR201634000207 21 October 2016 3 years
Guangdong Midea Environmental Electric
Appliance Manufacturing Co., Ltd. GR201644002286 30 November 2016 3 years
Guangzhou Midea Hualing Refrigerator
Co., Ltd. GR201644002925 30 November 2016 3 years
Foshan Shunde Midea Electric
Technology Co., Ltd. GR201644000358 30 November 2016 3 years
Foshan Shunde century Tongchuang
Technology Co., Ltd. GR201644000331 30 November 2016 3 years
Anhui GMCC Refrigeration Equipment
Co., Ltd. GR201634000994 5 December 2016 3 years
Huaian Weiling Motor Manufacturing Co.,
Ltd. GF201632004278 30 November 2016 3 years
(a-2) The application for corporate income tax preferential treatment of Chongqing Midea Refrigeration
Equipment Co., Ltd., the Company's subsidiary, was approved by the State Administration of
Taxation of Chongqing Economical and Technological Development Zone on 3 June 2014. The
subsidiary is subject to corporate income tax at the rate of 15% in 2016.
(a-3) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) and (a-2) are
subject to corporate income tax at the rate of 25%.
(a-4) Calpore Macao Commercial Offshore Limited, the Company's subsidiary in Macau, is exempted
from income supplement tax for profits gained from its offshore business pursuant to Article 12 in
Chapter 2 of Decree-Law No. 58/99/M issued by Macao Special Administrative Region on 13
October 1999.
(a-5) In August 2008, Midea Electric Appliance (Singapore) Co., Ltd., the Company's subsidiary, was
awarded with the Certificate of Honor for Development and Expansion (NO.587) by the Singapore
Economic Development Board, which approves that qualified income exceeding a certain amount
is subject to corporate income tax at the rate of 5% while the unqualified income is subject to the
corporate income tax at the rate of 17%. Midea Electric Appliance (Singapore) Co., Ltd. and Little
Swan International (Singapore) Co., Ltd., the Company's subsidiary, is subject to corporate income
tax at the rate of 17%.
(a-6) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate of 16.5%.
Such subsidiaries include Midea International Trade Co., Ltd., Midea International Co., Ltd., Midea
Appliance Investment (Hong Kong) Ltd., Gold Emperor Enterprises Ltd., Chairing Holding Ltd.,
The 2016 Annual Report of Midea Group Co., Ltd.
Century Carrier Household Air-conditioning Co., Ltd., Midea Refrigeration (Hong Kong) Ltd.,
Welling Holding Limited (Hong Kong), Welling International Hong Kong Ltd (HK), and Midea
Investment (Asia) Co., Ltd.
(a-7) The Company's subsidiaries in BVI and Cayman Islands are exempted from corporate income tax.
Such subsidiaries include Mecca International (BVI) Limited, Titoni Investments Development Ltd.,
Midea Holdings (BVI) Ltd., Midea Electric Investment (BVI) Limited, Welling Holding (BVI) Ltd.,
Midea Holding (Cayman Islands) Ltd. and Midea Investment Development Ltd.
(a-8) Springer Carrier Ltda., the Company's subsidiaries in Brazil, is subject to Brazil corporate income
tax at the rate of 34%.
(a-9) TLSC, the Company's subsidiaries in Japan, is subject to Japan corporate income tax at the rate of
31.5%.
(a-10) Clivet, the Company's subsidiaries in Italy, is subject to Italy corporate income tax at the rate
between 20% and 31.4%.
(b) Notes to the value-added tax rate of the principal tax payers with different tax rates
(b-1) According to The Notice for the Full Implementation of Transformation from business tax to
value-added tax pilot (tax[2016]36) and the relevant provisions issued by Ministry of Finance and
the State Administration of Taxation, since 1 May 2016, revenue from rental service, real estate
management service, financial service, consulting service and logistics service of the Company
and its subsidiaries are subject to value-added tax, while these service are subject to business tax
at the rate of 5% before 1 May 2016.
(b-2) Sales of goods and provision of repairs and replacement service from certain subsidiaries of the
Company are subject to value-added tax at the rate of 17%.
(b-3) Rental service on real estate and distribution service provided by the Company and certain
subsidiaries are subject to value-added tax at the rate of 11%.
(b-4) Financial service, consulting service and storage service provided by the Company and certain
subsidiaries are subject to value-added tax at the rate of 6%.
(b-5) Rental revenue of Hefei Midea Refrigerator Co., Ltd., which is a subsidiary of the Company, is
subject to easy levy of value-added tax at the rate of 5%.
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
31 December 2016 31 December 2015
Cash on hand 2,315 2,915
Cash at bank (a) 16,151,724 11,437,417
Other cash balances (b) 1,042,031 421,645
17,196,070 11,861,977
Including: Cash abroad (including Hong
Kong, Macau, Singapore,
Japan, Italy and Brazil, etc.) 4,234,153 2,204,425
(a) As at 31 December 2016, cash at bank includes fixed deposits with the term of over three months,
amounting to RMB9,136,346,000 (31 December 2015: RMB9,001,934,000).
(b) Other cash balances mainly includes security deposits, bank acceptance note and letter of credit.
The 2016 Annual Report of Midea Group Co., Ltd.
(2) Cash due from the Central Bank
31 December 2016 31 December 2015
Statutory reserve with the Central Bank (a) 677,011 963,926
Surplus reserve with the Central Bank 58,172 84,119
735,183 1,048,045
(a) Statutory reserve with the Central Bank represents the statutory reserve deposited in People’s
Bank of China by the financial enterprise in accordance with relevant regulations, which are
calculated at 7% and 5% for eligible RMB deposits and foreign currency deposits, respectively, and
are not available for use in the the Group’s daily operations.
(3) Deposits with banks and other financial institutions
31 December 2016 31 December 2015
Financial enterprises' deposits with
domestic banks 9,237,865 4,062,807
As at 31 December 2016, deposits with banks and other financial institutions include time deposits
with the term of over three months, amounting to RMB3,800,000,000 (31 December 2015:
RMB1,400,000,000).
(4) Notes receivable
31 December 2016 31 December 2015
Bank acceptance notes 7,427,488 12,889,151
(a) As at 31 December 2016, the Group's notes receivable that are not mature but have been
endorsed to other parties, or that have been discounted are as follows:
Derecognised Recognised
Bank acceptance notes 21,601,475 -
(5) Receivables
(a) Accounts receivable
31 December 2016 31 December 2015
Accounts receivable 14,198,320 10,978,218
Less: Provision for bad debts (743,809) (606,500)
13,454,511 10,371,718
The ageing of other receivables is analysed as follows:
The 2016 Annual Report of Midea Group Co., Ltd.
31 December 2016 31 December 2015
Within 1 year 13,603,125 10,728,566
1 to 2 years 462,845 104,495
2 to 3 years 66,756 88,558
3 to 5 years 45,212 49,487
Over 5 years 20,382 7,112
14,198,320 10,978,218
As at 31 December 2016, the Group has no overdue accounts receivable with significant amount.
Accounts receivable are analysed by categories as follows:
31 December 2016 31 December 2015
Ending balance Provision for bad debts Ending balance Provision for bad debts
% of total % of total
Amount balance Amount Ratio Amount balance Amount Ratio
With amounts that
are individually
significant and that
the related provision
for bad debts is
provided on the
individual basis 35,363 0.25% 9,108 25.76% - - - -
That the related
provision for bad
debts is provided on
the age grouping
basis 13,931,404 98.12% 729,848 5.24% 10,961,426 99.85% 593,762 5.42%
With amounts that
are not individually
significant but the
related provision for
bad debts is
provided on the
individual basis 231,553 1.63% 4,853 2.10% 16,792 0.15% 12,738 75.86%
14,198,320 100.00% 743,809 5.24% 10,978,218 100.00% 606,500 5.52%
Accounts receivable that the related provision for bad debts is provided on grouping basis using the
ageing analysis method are analysed as follows:
31 December 2016 31 December 2015
Ending balance Provision for bad debts Ending balance Provision for bad debts
Amount Amount Ratio Amount Amount Ratio
Within 1 year 13,353,944 431,907 3.23% 10,718,211 403,660 3.77%
1 to 2 years 445,165 198,277 44.54% 102,186 76,371 74.74%
2 to 3 years 66,701 40,686 61.00% 84,473 63,191 74.81%
3 to 5 years 45,212 38,596 85.37% 49,444 43,428 87.83%
Over 5 years 20,382 20,382 100.00% 7,112 7,112 100.00%
13,931,404 729,848 5.24% 10,961,426 593,762 5.42%
The provision for bad debts reversed in the current year is RMB58,148,000.
The accounts receivable as written off by the Group in the current year are arising from transactions
with third parties and there's no written-off accounts receivable with amounts that are individually
significant.
The 2016 Annual Report of Midea Group Co., Ltd.
As at 31 December 2016, the top 5 accounts receivable assembled by debtors are analysed as
follows:
Amount Provision for bad debts % of total balance
Total balance of top 5 accounts receivable 1,772,348 85,401 12%
(b) Other receivables
31 December 2016 31 December 2015
Other receivables 1,168,005 1,161,880
Less: Provision for bad debts (27,872) (60,541)
1,140,133 1,101,339
Other receivables mainly include current accounts, petty cash to staff and deposits.
The ageing of other receivables is analysed as follows:
31 December 2016 31 December 2015
Within 1 year 1,106,995 1,123,870
1 to 2 years 49,445 7,723
2 to 3 years 7,263 8,912
3 to 5 years 4,302 21,375
1,168,005 1,161,880
Other receivables are analysed by categories as follows:
31 December 2016 31 December 2015
Ending balance Provision for bad debts Ending balance Provision for bad debts
% of total % of total
Amount balance Amount Ratio Amount balance Amount Ratio
With amounts that
are individually
significant and that
the related provision
for bad debts is
provided on the
individual basis 49,922 4.27% - 0.00% 13,486 1.16% 1,329 9.85%
That the related
provision for bad
debts is provided on
the age grouping
basis 1,112,996 95.29% 26,781 2.41% 1,148,394 98.84% 59,212 5.16%
With amounts that
are not individually
significant but the
related provision for
bad debts is
provided on the
individual basis 5,087 0.44% 1,091 21.45% - - - -
1,168,005 100.00% 27,872 2.39% 1,161,880 100.00% 60,541 5.21%
As at 31 December 2016, other receivables with amounts that are individually significant and that
the related provision for bad debts is provided on the individual basis are analysed as follows:
The 2016 Annual Report of Midea Group Co., Ltd.
Provision
Ending for bad
balance debts Ratio Reason
China Securities Depository and Receivables related to
Clearing Corporation Limited share options without
Shenzhen Branch 49,922 - 0% bad debt risks
The provision for bad debts reversed in the current year is RMB44,539,000.
Other receivables as written off by the Group in the current year are arising from transactions with
third parties and there's no written-off other receivables with amounts that are individually
significant.
As at 31 December 2016, the top 5 other receivables assembled by debtors are analysed as
follows:
Amount Provision for bad debts % of total balance
Total balance of top 5 other
receivables 215,504 2,055 18%
As at 31 December 2016, the Group' has no significant government grants recognised at amounts
receivable.
(6) Advances to suppliers
31 December 2016 31 December 2015
Advances paid for raw materials and others 1,587,366 988,625
(a) The ageing of advances to suppliers is analysed below:
31 December 2016 31 December 2015
% of total % of total
Amount balance Amount balance
Within 1 year 1,492,532 94.02% 937,986 94.88%
1 to 2 years 73,736 4.65% 29,852 3.02%
2 to 3 years 14,907 0.94% 7,739 0.78%
Over 3 years 6,191 0.39% 13,048 1.32%
1,587,366 100.00% 988,625 100.00%
As at 31 December 2016, advances to suppliers over 1 year with a carrying amount of
RMB94,834,000 (31 December 2015: RMB50,639,000) are mainly unsettled advances paid for raw
materials.
As at 31 December 2016, the top five balances of advances to suppliers assembled by debtors are
summarised as follows:
Amount % of total balance
The 2016 Annual Report of Midea Group Co., Ltd.
Total balance of top 5 advances to suppliers 361,735 23%
(7) Loans and advances
(a) Financial enterprises' loans and advances analysed to individual and corporation are as follows:
31 December 2016 31 December 2015
Loans and advances to individuals 417,793 304,230
Loans and advances to corporations 9,995,466 6,323,429
Including: Loans 2,652,425 3,689,104
Discounted bills 7,343,041 2,634,325
10,413,259 6,627,659
Less: Loan impairment provision (Note4(17)) (139,862) (18,954)
10,273,397 6,608,705
(b) Financial enterprises' loans and advances analysed by type of collateral held or other credit
enhancements are as follows:
31 December 2016 31 December 2015
Unsecured loans 230,097 134,280
Guaranteed loans 524,537 2,306,902
Secured loans by monetary assets 9,658,625 4,186,477
10,413,259 6,627,659
Less: Loan impairment provision
(Note 4(17)) (139,862) (18,954)
10,273,397 6,608,705
(8) Inventories
(a) Inventories are classified as follows:
31 December 2016 31 December 2015
Provision for Provision for
decline in decline in the
Ending the value of Carrying Ending value of Carrying
balance inventories amount balance inventories amount
Finished goods 11,943,779 (191,147) 11,752,632 8,233,608 (116,047) 8,117,561
Raw materials 2,851,998 (11,237) 2,840,761 1,648,630 (15,030) 1,633,600
Work in
progress 792,664 - 792,664 504,454 (742) 503,712
Consigned
processing
materials 235,633 - 235,633 194,009 (149) 193,860
Low value
consumables 5,207 - 5,207 204 - 204
15,829,281 (202,384) 15,626,897 10,580,905 (131,968) 10,448,937
(b) Provision for decline in the value of inventories is analysed as follows:
The 2016 Annual Report of Midea Group Co., Ltd.
31 Increase in Decrease in Differences on
December current year current year translation of foreign December
Reversal or currency financial
2015 Provision write-off statements
Finished goods 116,047 304,801 (231,801) 2,100 191,147
Raw materials 15,030 57,681 (62,758) 1,284 11,237
Work in progress 742 2,540 (3,282) - -
Consigned
processing
materials 149 - (149) - -
131,968 365,022 (297,990) 3,384 202,384
(c) Provision for decline in the value of inventories are as follows:
Reason for the write-off of
Specific determination basis of net provision for decline in the value of
realisable value inventories in current year
Stated at the lower of cost and net
Finished goods realisable value Sales
Stated at the lower of cost and net
Raw materials realisable value Requisition for production
(9) Other current assets
31 December 2016 31 December 2015
Wealth management products (a) 26,267,067 18,236,831
Structural deposits and swap deposits 14,442,697 12,436,000
Deductible input VAT 1,876,967 1,818,591
Prepaid expenses 467,916 740,354
Others 474,950 595,804
43,529,597 33,827,580
(a) As at 31 December 2016, wealth management products with floating earnings due within one year
are presented as other current assets, mainly including principal non-guaranteed products of
RMB26,267,067,000 (31 December 2015: RMB18,136,831,000 and principal guaranteed products
of RMB100,000,000) (Note 16(1)).
(b) As at 31 December 2016, wealth management products and assets management plan due more
than one year amounting to RMB3,842,000,000 are presented as other non-current assets (31
December 2015: nil).
(10) Available-for-sale financial assets
31 December 2016 31 December 2015
Measured at fair value
- Available-for-sale equity instruments (a) 3,518,693 1,862,444
Measured at cost
- Available-for-sale equity instruments (b) 1,669,039 1,427,510
5,187,732 3,289,954
The 2016 Annual Report of Midea Group Co., Ltd.
(a) As at 31 December 2016, the cost of available-for-sale financial assets measured at fair value is
RMB2,956,118,000, mainly includes stock investment of KUKA Aktiengesellschaft ( hereinafter
referred to as KUKA Group).
(b) The available-for-sale financial assets measured at cost mainly include the unlisted equity
investments held by the Group, which do not have a quoted market price in an active market and
whose fair value cannot be reliably measured as the range of fair value reasonable estimates is
large and probabilities for determining these estimates cannot be reasonably determined. The
Group has no plan to dispose these investments.
(11) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2016 31 December 2015
Investment in associates 2,211,732 2,510,138
Investments in a joint venture - 378,136
Less: Provision for impairment of long-term
equity investments - -
2,211,732 2,888,274
The 2016 Annual Report of Midea Group Co., Ltd.
Current year movement
Adjustments of Cash Ending
31 Share of net other Other dividends Provision 31 balance of
December Increase in Decrease in profit using the comprehensive changes or profits for December provision for
2015 Investment Investment equity method income in equity declared impairment Others 2016 impairment
Associates -
Foshan Shunde
Rural Commercial
Bank Co., Ltd. 1,515,228 - - 208,385 (41,433) - (104,464) - - 1,577,716 -
Misr Refrigeration
And Air
Conditioning
Manufacturing Co. 316,506 - - (138,533) (32,357) - (8,173) - 9,439 146,882 -
Shanxi Huaxiang
Group Co., Ltd. 280,274 - (296,524) 16,250 - - - - - - -
Hefei Royalstar
Motor Co., Ltd 100,330 - - 2,245 - - - - - 102,575 -
Others 297,800 32,700 (12,137) (1,926) (21) 134 (2,000) - 70,009 384,559 -
Joint venture -
Wanjiang Financial
Leasing Co., Ltd. 378,136 - (425,219) 79,483 - - (32,400) - - - -
2,888,274 32,700 (733,880) 165,904 (73,811) 134 (147,037) - 79,448 2,211,732 -
The 2016 Annual Report of Midea Group Co., Ltd.
(12) Fixed assets
Electronic
equipment
Machinery and Motor and other
Buildings Land equipment vehicles equipment Total
Cost
31 December 2015 14,807,945 - 13,987,827 461,966 2,355,860 31,613,598
Increase in current year
Purchase 435,935 113,459 1,209,019 62,265 388,096 2,208,774
Transfers from construction
in progress 213,704 - 338,473 344,168 15,038 911,383
Increase in business
combinations 473,642 748,381 1,475,353 24,314 63,112 2,784,802
Transfer from investment
prosperities 7,389 - - - - 7,389
Others 5,182 - - 42 4,064 9,288
Decrease in current year
Disposal and retirement (361,192) - (477,523) (83,043) (159,725) (1,081,483)
Transfer to investment
properties (424,148) - - - - (424,148)
Others (6) - (5,968) - - (5,974)
Differences on translation of
foreign currency financial
statements 57,486 (21,507) 143,214 (1,918) 10,323 187,598
31 December 2016 15,215,937 840,333 16,670,395 807,794 2,676,768 36,211,227
Accumulated depreciation
31 December 2015 4,150,347 - 6,691,015 324,228 1,702,719 12,868,309
Increase in current year
Depreciation charged 959,445 - 1,430,738 82,962 425,392 2,898,537
Others 7,286 - - 39 1,196 8,521
Decrease in current year
Disposal and retirement (204,512) - (265,926) (43,344) (113,892) (627,674)
Others (74,466) - (992) - - (75,458)
Differences on translation of
foreign currency financial
statements 16,132 - 39,714 520 7,068 63,434
31 December 2016 4,854,232 - 7,894,549 364,405 2,022,483 15,135,669
Provision for impairment loss
31 December 2015 3,918 - 11,165 65 260 15,408
Increase in current year
Provision - - 4,654 - - 4,654
Decrease in current year
Disposal and retirement - - (1,210) (29) (153) (1,392)
Differences on translation of
foreign currency financial
statements - - 97 - -
31 December 2016 3,918 - 14,706 36 107 18,767
Carrying amount
31 December 2016 10,357,787 840,333 8,761,140 443,353 654,178 21,056,791
31 December 2015 10,653,680 - 7,285,647 137,673 652,881 18,729,881
The 2016 Annual Report of Midea Group Co., Ltd.
(a) In 2016, the depreciation of fixed assets amounted to RMB2,898,537,000 (2015:
RMB2,216,179,000) and is included in income statement.
(b) As at 31 December 2016, the Company is still in the course of obtaining the ownership certificate
for the fixed asset with a carrying amount of RMB740,297,000.
(C) Fixed assets held under finance leases
As at 31 December 2016, the fixed assets with a carrying amount of RMB277,634,000 (a cost of
RMB309,234,000) are held under finance leases. The analysis is as follows:
Differences on translation
Accumulated of foreign currency
31 December 2016 cost depreciation financial statements Carrying amount
Machinery and
equipment 309,234 (33,967) 2,367 277,634
The 2016 Annual Report of Midea Group Co., Ltd.
(13) Construction in progress
(a) Movement of significant projects of construction in progress
Transfer to Accumulative Including:
fixed amount of borrowing
Increase in assets in capitalised costs
31 December current current Other 31 December borrowing capitalised in Capitalisation Source of
Name of project 2015 year year decreases 2016 costs current year rate funds
Ending balance Ending balance
Meizhi Compressor Internal
Project 100,377 10,679 (106,996) - 4,060 - - - resource
Compressor (Anhui) Internal
Project 32,811 899 (31,761) - 1,949 - - - resource
Guiyang Meian
Project 37,689 21,758 (59,447) - - 3,859 618 6% Loans
Guangdong Welling
construction in Internal
progress 18,708 28,129 (18,708) - 28,129 - - - resource
Midea 5th Industrial
Zone Dormitory Internal
Project 120,276 27,747 (148,023) - - - - - resource
Internal
Innovation project 311,160 123,013 - - 434,173 - - - resource
Loans/
Internal
Other projects 333,740 328,856 (546,448) (3,730) 112,418 1,799 - - resource
954,761 541,081 (911,383) (3,730) 580,729 5,658
As at 31 December 2016, there's no provision for impairment of construction in progress with the ending balance consistent with the carrying amount; and
the cost of construction in progress matches the budget amount. The projects are carried out on schedule.
The 2016 Annual Report of Midea Group Co., Ltd.
(14) Intangible assets
Land use Non-patent Trademark Trademark
rights technology Patents rights use rights Others Total
Cost
31 December 2015 3,845,232 169,867 - - - 60,086 4,075,185
Increase in current year
Purchase 59,965 83,766 17,076 182,454 - 23,098 366,359
Increase in business
combinations 130 31,852 160,109 379,836 2,560,329 330,514 3,462,770
Others - 17,925 - - - 4,683 22,608
Decrease in current year -
Disposal (84,252) (72,468) - - - (2,615) (159,335)
Transfer to investment
properties (6,774) - - - - - (6,774)
Others - (16,650) - - - (17,925) (34,575)
Differences on translation of
foreign currency financial
statements 215 6,814 (232) (6,268) 1,294 (603) 1,220
31 December 2016 3,814,516 221,106 176,953 556,022 2,561,623 397,238 7,727,458
Accumulated amortisation
31 December 2015 544,852 115,412 - - - 22,519 682,783
Increase in current year
Amortisation charged 113,533 31,125 11,005 2,123 35,420 14,449 207,655
Others - 772 - - - - 772
Decrease in current year
Disposal (18,747) (24,081) - - - (76) (42,904)
Others (1,064) (2,696) - - - (772) (4,532)
Differences on translation of
foreign currency financial
statements 212 7,771 - - 1,098 - 9,081
31 December 2016 638,786 128,303 11,005 2,123 36,518 36,120 852,855
Provision for impairment loss
31 December 2015 - - - - - - -
Increase in current year
Provision - 6,065 - - - - 6,065
Decrease in current year
Disposal - - - - - - -
31 December 2016 - 6,065 - - - - 6,065
Carrying amount
31 December 2016 3,175,730 86,738 165,948 553,899 2,525,105 361,118 6,868,538
31 December 2015 3,300,380 54,455 - - - 37,567 3,392,402
(a) In 2016, the amortisation of intangible assets amounted to RMB207,655,000 (2015:
RMB95,495,000) and is included in income statement.
(b) As at 31 December 2016, there isn’t in course of obtaining the title certificates for land use rights
(31 December 2015: a carrying amount of RMB20,694,000 and a cost of RMB21,594,000).
(15) Goodwill
The goodwill allocated to the asset groups is summarised by operating segments as follows:
The 2016 Annual Report of Midea Group Co., Ltd.
Difference
on
translation of
foreign
currency
31 December Increase in financial 31 December
2015 current year statements Others
Wuxi Little Swan Company Limited 1,361,306 - - - 1,361,306
Clivet Co., Ltd. - 507,092 (8,368) - 498,724
Carrier S.A. Co., Ltd 472,813 - 141,915 - 614,728
TLSC - 2,919,081 (221,791) - 2,697,290
Others 558,947 - - - 558,947
2,393,066 3,426,173 (88,244) - 5,730,995
Increase of goodwill in the current year arises from consolidation of Clivet and TLSC (note 5(1)).
(a) Impairment
On 31 December 2016, the Group carried out tests for impairment of goodwill. The recoverable
amount of goodwill asset groups is calculated using the estimated cash flows determined according
to the five-year budget approved by management. The cash flows beyond the five-year period are
calculated based on the estimated growth rates. The weighted average growth rates applied by
management are consistent with the industry estimates, and do not exceed the long-term average
growth rates of each product. Management determines budgeted gross margin based on past
experience and forecast on future market development. The discount rates used by management
are the pre-tax interest rates that are able to reflect the risks specific to the related asset groups.
The management analysed the recoverable amount of each asset group based on such estimates
and believed that no provision for impairment of goodwill was required.
(16) Deferred income tax assets and deferred income tax liabilities
(a) Deferred income tax assets without taking into consideration the offsetting of balances
31 December 2016 31 December 2015
Deductible Deductible
temporary Deferred temporary
differences and income tax differences and Deferred income
deductible losses assets deductible losses tax assets
Deductible losses 763,015 223,187 632,957 173,145
Provision for asset impairments 1,099,118 224,302 637,300 107,608
Employee benefits payable 344,391 69,092 177,487 30,015
Other current liabilities 12,548,142 2,210,590 9,996,930 1,711,198
Others 1,423,137 303,212 1,194,030 202,033
16,177,803 3,030,383 12,638,704 2,223,999
Including:
Expected to be reversed within
one year (inclusive) 2,810,571 1,704,162
Expected to be reversed after
one year 219,812 519,837
3,030,383 2,223,999
The 2016 Annual Report of Midea Group Co., Ltd.
(b) Deferred income tax liabilities without taking into consideration the offsetting of balances
31 December 2016 31 December 2015
Taxable Deferred Taxable Deferred
temporary income tax temporary income tax
differences liabilities differences liabilities
Changes in fair value 7,587 1,071 221,255 33,329
Business combinations not
under common control 5,514,103 1,708,006 - -
Others 423,030 122,896 44,102 7,135
5,944,720 1,831,973 265,357 40,464
Including:
Expected to be reversed within
one year (inclusive) 217,645 16,192
Expected to be reversed after
one year 1,614,328 24,272
1,831,973 40,464
(c) Deductible temporary differences and tax losses that are not recognised as deferred income tax
assets are analysed as follows:
31 December 2016 31 December 2015
Deductible temporary differences 44,577 97,124
Deductible losses 721,720 547,021
766,297 644,145
(d) Deductible losses that are not recognised as deferred t income tax assets will expire in the
following years:
Year 31 December 2016 31 December 2015
2016 - 13,183
2017 58 42,450
2018 16,303 61,360
2019 65,975 138,662
2020 33,293 291,366
2021 and subsequent years 606,091 -
721,720 547,021
(e) As at 31 December 2016, there's no significant offset item in deferred income tax assets and
liabilities.
(17) Details of provision for asset impairments
Differences
on translation
of foreign
Increase in currency
31 December current financial 31 December
2015 year Decrease in current year statements
The 2016 Annual Report of Midea Group Co., Ltd.
Reversal Write-off
Provision for bad debts 685,995 383,499 (121,641) (77,059) 40,749 911,543
Including: Provision for
bad debts
of accounts
receivable 606,500 228,521 (58,148) (73,901) 40,837 743,809
Provision for
loans and
advances 18,954 139,862 (18,954) - - 139,862
Provision for
bad debts
of other
receivables 60,541 15,116 (44,539) (3,158) (88) 27,872
Provision for decline in
the value of
inventories 131,968 365,022 (256,787) (41,203) 3,384 202,384
Provision for
impairment of
available-for-sale
financial assets 100 - - - -
Provision for
impairment of fixed
assets 15,408 4,654 - (1,392) 97 18,767
Provision for
impairment of
intangible assets - 6,065 - - - 6,065
Provision for
impairment of
investment properties 12,576 - - - - 12,576
846,047 759,240 (378,428) (119,654) 44,230 1,151,435
(18) Assets with ownership or use right restricted
As at 31 December 2016, details of assets with restricted ownership are as follows:
31 December 2016 31 December 2015
Cash at bank and on hand 10,178,377 9,421,586
Deposits with central bank 677,011 963,926
Deposits with banks and other financial
institutions 3,800,000 1,400,000
Notes receivable - 4,889,884
14,655,388 16,675,396
(19) Short-term borrowings
31 December 2016 31 December 2015
Unsecured borrowings 2,498,727 2,795,967
Guaranteed borrowings (a) 525,699 1,124,966
3,024,426 3,920,933
(a) As at 31 December 2016, the annual interest rate range of short-term borrowings is 1.77% to 9.38% (31
December 2015: 1% to 8%).
(20) Notes payable
The 2016 Annual Report of Midea Group Co., Ltd.
31 December 2016 31 December 2015
Bank acceptance notes 18,484,939 17,078,520
(21) Accounts payable
31 December 2016 31 December 2015
Accounts payable for materials 21,453,740 15,521,933
Others 3,903,220 1,926,751
25,356,960 17,448,684
(a) As at 31 December 2016, accounts payable with ageing over 1 year with a carrying amount of
RMB849,693,000 (31 December 2015: RMB821,705,000) are mainly unsettled accounts payable
for materials.
(22) Advances from customers
31 December 2016 31 December 2015
Advances on sales 10,252,375 5,616,361
(a) As at 31 December 2016, accounts payable with ageing over 1 year with a carrying amount of
RMB165,010,000 (31 December 2015: RMB64,267,000) are mainly unsettled advances on sales.
(23) Employee benefits payable
31 December 2016 31 December 2015
Short-term employee benefits (a) 3,064,520 2,114,196
Others 89,867 115,136
3,154,387 2,229,332
(a) Short-term employee benefits
31
December Increase in Decrease in December
2015 current year current year
Wages and salaries,
bonus, allowances
and subsidies 1,951,015 9,580,569 (8,811,405) 2,720,179
Staff welfare 87,873 751,309 (580,924) 258,258
Social security
contributions 13,989 598,842 (595,090) 17,741
Including: Medical
insurance 12,725 541,128 (537,987) 15,866
Work injury
insurance 1,039 36,914 (36,316) 1,637
Maternity 225 20,800 (20,787)
The 2016 Annual Report of Midea Group Co., Ltd.
insurance
Housing funds 15,284 242,287 (236,254) 21,317
Labour union funds and
employee education
funds 17,918 84,253 (82,141) 20,030
Other employee
expenses 28,117 368,246 (369,368) 26,995
2,114,196 11,625,506 (10,675,182) 3,064,520
(24) Taxes payable
31 December 2016 31 December 2015
Corporate income tax payable 1,656,482 1,188,759
VAT payable 348,991 140,083
Others 358,973 278,339
2,364,446 1,607,181
(25) Other payables
(a) Other payables are mainly deposit and security deposit payable, reimbursed logistics expense,
manufacturing equipment expense and refund for energy-saving and beneficial to people.
(b) As at 31 December 2016, accounts payable with ageing over 1 year with a carrying amount of
RMB484,749,000 (31 December 2015: RMB244,788,000) are mainly deposit and security deposit
payable, which are unsettled for related projects that are uncompleted.
(26) Other current liabilities
31 December 2016 31 December 2015
Accrued sales rebate 16,201,044 13,765,370
Accrued installation and maintenance
expenses 4,164,399 4,587,651
Accrued sales promotion expenses 985,665 828,535
Accrued transportation expenses 576,821 487,859
Others 2,635,041 2,428,762
24,562,970 22,098,177
(27) Long-term borrowings
31 December 2016 31 December 2015
Guaranteed borrowings (a) 2,251,703 83,778
Unsecured borrowings 2,645 6,283
2,254,348 90,061
(a) As at 31 December 2016, bank borrowings of RMB71,560,000 (31 December 2015:
RMB83,778,000) was guaranteed by the directors of Company’s subsidiaries. Interest is payable
every month and the principal are due for repayment in August 2018.
The 2016 Annual Report of Midea Group Co., Ltd.
(b) As at 31 December 2016, the annual interest rate range of the long-term borrowings is 0.4% to
5.5% (31 December 2015: 2.09% to 4.5%).
The 2016 Annual Report of Midea Group Co., Ltd.
(28) Debentures payable
Amortization of
Name of the Issued in Interest accrued discount and Exchange gains Repaid in
debentures current year Issuance costs on par value premium or loss and current year
Differences on
translation of foreign
31 December currency financial 31 December
2015 statements
USD
Guaranteed
Medium Term
Note - 4,605,510 (43,369) 67,274 8,596 248,032 - 4,818,769
Related information is as follows:
Name of the debentures Par Value Issuance date Maturity Issuance amount
USD Guaranteed Medium Term Note 4,605,510 3 June 2016 3 years 4,605,510
(a) Midea Investment Development Co., Ltd, the subsidiary of the Company, issued corporate debenture with total amount of USD700,000,000 and duration of
3 years on 3 June 2016. Interest of the debenture is paid on a semi-annual basis and calculated by the simple interest method, and the interest rate is
2.375% annually. The debenture is guaranteed by the Company.
The 2016 Annual Report of Midea Group Co., Ltd.
(29) Long-term employee benefits payable
31 December 2016
Supplemental retirement benefit (a) 1,418,921
Others 31,033
1,449,954
(a) Supplemental retirement benefit
TLSC, a subsidiary of the Group, operates a defined-benefit plan. The defined-benefit plan
includes a plan of one-off retirement allowance payment in the form of final salary, and a retirement
pension scheme in the form of a life - long guaranteed pension. The level of benefits provided
depends on members’ length of service and their salary in the final years leading up to retirement,
with proper adjustments by factors such as inflation rate. The due payment for one-off retirement
allowance plan is from TLSC’s owned funds, while that for retirement pension plan is from
trustee-administered funds.
The defined benefit obligation is calculated on the balance sheet date using the projected unit
credit method, by Sumitomo Mitsui Bank, the external independent actuary firm.
(i) Defined-benefit liabilities of the Group:
31 December 2016
Defined-benefit obligation 1,716,280
Less: Fair value of planned assets (297,359)
Defined-benefit liabilities 1,418,921
(ii) The movement in the defined benefit liability is as follows:
Present
value of Fair value of Net liabilities
Defined-benefit planned (net assets) of
obligation assets Defined-benefit plan
30 June 2016 2,021,212 (307,751) 1,713,461
The charges recorded in the
statement of profit or loss
-Current service cost 44,157 - 44,157
-Interest expense/(income) 2,205 (417) 1,788
Remeasurements:
-Actuarial gain (99,504) - (99,504)
-Return on plan assets, excluding
amounts included in interest income - 17,281 17,281
The 2016 Annual Report of Midea Group Co., Ltd.
Others
-Employer contributions - (85,751) (85,751)
-Benefit payments (100,828) 55,896 (44,932)
Differences on translation of foreign
currency financial statements (150,962) 23,383 (127,579)
31 December 2016 1,716,280 (297,359) 1,418,921
(iii) The significant actuarial assumptions were as follows:
31 December 2016
Discount rate 0.381%-0.711%
Inflation rate 1.02%
Salary growth rate 1.5%-7.3%
Pension growth rate 0.627%-8.708%
The sensitivity analysis of the principal actuarial assumptions used by the group to establish the
(iv) present value of the benefit obligation is as follows:
Impact on defined benefit obligation
Change in
