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GD MIDEA HOLDING CO., LTD.
ANNUAL REPORT 2010
March 16th
2011
2010 Annual Report
2
TO: Shareholders
Year 2010 was an extremely extraordinary year for GD Midea. Total operation scale of Midea
Group exceeded RMB one hundred billion. As a listed flagship company under the control of
Midea Group that specializes in home appliances, or HVAC (Heating, Ventilation and Air
Conditioning) and home appliances from the global industrial vision, GD Midea realized
annual income of RMB74.56 billion (equivalent to about US$11.3 billion) in 2010, increased
by 58% year-on-year, and realized net profit attributable to the Company’s shareholders of
RMB3.13 billion, increased by 69% year-on-year. Leading position of the Company was
further consolidated and its competitive edge was further demonstrated.
Review
After 20 years of development of the Chinese capital market, great changes have taken place
in GD Midea since its listing 18 year ago. A lot of data shows overall growth of the size,
position in the industry and competitiveness of the Company. Products of the Company
include residential air conditioners, central air-conditioner system, heating & ventilation
equipment, compressor, refrigerator and washing machine, and the Company has five
manufacturing facilities in five regions of China--the south, east, central, southwest and north
of China and manufacturing facilities in Vietnam, and acquired the equity interest of Miraco
in Egypt. GD Midea now has more than 60 regional sales companies within China and
operation teams in nearly 60 countries in five regions of the world, with nearly 60,000 sales
offices in China including more than 10,000 Midea exclusive shops. The Midea Brand ranked
6th
on the ranking list of most valuable brands in China for 2010, with the brand value of
RMB49.7 billion.
―Eleventh Five-year Plan‖ period is the five years that were full of challenges and
opportunities in development history of the global economy and Chinese society and economy,
and was also the five years during which GD Midea implemented its strategic thinking and
strategic layout. GD Midea gradually developed from a major residential air conditioner
manufacturer to one of the industrial leaders coordinating development of HVAC industry and
home appliances industry. In the capital market, GD Midea completed share-trading reform
and public issue of additional shares, and promoted recent private placing of additional shares;
and acquired and merged Little Swan, Royalstar and Hualing. During the five years, revenue,
2010 Annual Report
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net profit and total market value of GD Midea increased respectively by 3.5 times, 8.2 times
and 27.2 times. All such changes were resulted from its practical industrial operation.
We implemented the ―market-oriented, technology-driven and outstanding operation‖ and
improved our overall corporate organizing capability, focusing on product specialization and
operation regionalization.
We adhered to our ―forward-looking strategy‖, and planned long-term development of various
industries by applying strategic thinking and insight, focusing on home appliances and related
diversification.
We insisted on the ―division system‖ as our basic management model, a mechanism of
ongoing improvements with the core of identifying main subjects, clear accountability and
balance of rights and responsibilities.
We carried out ―sales reforms‖ to push transformation of our integral operation pattern,
focusing on being oriented by consumers, flattening and specialization and improving our
efficiency.
Prospect
We expect in the ―Twelfth Five-year Plan‖ period, the global economy and Chinese economy
will continue to grow in spite of setbacks, there will be more opportunities than challenges
and generally we are full of confidence. During 20~30 years in the past, we experienced a
pre-mature stage which is a necessary step in our industrial development. Similarly, home
appliance industry and HVAC industry of China is currently faced with an unprecedented
development opportunity. On one hand, in the world economic history, there has never been
the case that a nation with more than one billion population is in its urbanization and
modernization process, and just this process will undoubtedly result in huge consumption
demands for home appliances. On the other hand, the economy of scale, industrial cluster
effect and other effects in domestic market will provide great support for Chinese enterprises
to enter the international market and meet the challenges. Then how should we plan for
ourselves?
We emphasize common goal and uniform values of the team, and establish customer-oriented
and consumer-oriented modern enterprise organization. Everybody and every department
should create value and performance orientation and work according to the market rules.
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We emphasize continuous reforms and innovations, establish future-oriented enterprise
organization, achieve operation regionalization and product specialization, improve our
matrix operation and management organization structure and innovate our management
concepts and working methods.
We emphasize intangible organizational ability of an enterprise which is the source of
long-term competitive edge and the ability of reflecting the efficiency and effectiveness of an
organization, which should be more rapid, more agile and more effective and have better
quality.
We emphasize business mode innovation and enterprise organization transformation, focusing
on business globalization, efficiency-driven new competitive edge, and structural adjustment
leading to revenue and profit growth.
Year 2011 is the first year of GD Midea’s 12th
5-year plan period. ―Creating another Midea‖
means not only the size expansion but also improvement of the operational efficiency,
globalization depth and value creating structure. We will further make use of our advantages,
and through steady and continuous strategic move of pushing forward technological drive,
outstanding operation and globalization to fulfill our strategic goal of becoming a world-class
home appliance supplier.
We would like to express our sincere thanks to you for your long-term concern and support to
GD Midea, and hope that you will continue to go along with GD Midea and share the
happiness brought to you by our growth.
Board of Directors
GD MIDEA HOLDING CO., LTD.
March 16th
2011
2010 Annual Report
5
The Board of Directors (the ―Board‖), Supervisory Board, Directors, Supervisors and Senior
Executives of the Company guarantee that no false records, misleading statements or material
omissions are contained in this Report, and shall assume joint and several liability for the
authenticity, accuracy and completeness of the contents hereof.
The Directors of the Company have all presented in person at the Board meeting for the
consideration and approval on this Report. None of the Directors, Supervisors and Senior
Executives has made claims that there is no guarantee for or disagreement on the truth,
accuracy and integrity of the contents of this Report.
Ascenda Certified Public Accountants, Ltd. has audited, and issued an unmodified and
unqualified audit report for the Company’s 2009 Financial Statements.
Mr. Fang Hongbo, chairman of the Board and president of the Company; and Mr. Zhao Jun,
responsible person for finance of the Company represent and warrant that financial statements
in this Report are true and complete.
Important
2010 Annual Report
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I. General Information of the Company ........................................................................ 7
II. Summary of Accounting and Business Data ............................................................ 9
III. Changes in Share Capital and Information of Shareholders ................................. 12
IV. Information of Directors, Supervisors, Senior Executives and Employees .......... 18
V. Corporate Governance Structure ............................................................................ 23
VI. Shareholders’ General Meeting ............................................................................ 31
VII. Directors’ Report ................................................................................................. 33
VIII. Supervisors' Report ............................................................................................ 64
IX. Significant Events ................................................................................................. 69
X. Financial Accounting Report .................................................................................. 85
XI. List of Documents Available for Inspection ......................................................... 85
Table of Contents
2010 Annual Report
7
I. General Information of the Company
1. Registered name of the Company in Chinese: 广东美的电器股份有限公司
Registered name of the Company in English: GD MIDEA HOLDING CO., LTD.
2. Legal representative of the Company: Fang Hongbo
3. Secretary of the Board: Li Feide
Authorized Representative in charge of securities affairs: Jiang Peng
Address: Midea Headquarters Building, No.6 Midea Road, Shunde District, Foshan
City, Guangdong Province
Tel: (0757) 26334559; 26338779
Fax: (0757) 26651991
E-mail: [email protected]
4. Registered address and office of the Company: Midea Headquarters Building,
No.6 Midea Road,Shunde District, Foshan City, Guangdong Province
Postal Code: 528311
Website: http://www.midea.com
E-mail address: [email protected]
5. The newspapers for information disclosure: China Securities Journal, Securities Times,
and Shanghai Securities News
Website for publishing the Annual Report: http://www.cninfo.com.cn
Place where Annual Reports are available: Securities Affairs Department of the
Company
6. Stock exchange for listing of the Company’s shares: Shenzhen Stock Exchange
Stock name: Midea Electric Appliance
Stock code: 000527
7. Other Information of the Company
Date of change of registration: September 10th
2010
Place of change of registration: Guangdong Administration of Industry and Commerce
No. of Business License of Corporate Body: 440000000020099
Taxation registration number: 440681190337092
Organization code: 19033709-2
2010 Annual Report
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Name of the CPA engaged by the Company: Ascenda Certified Public Accountants, Ltd.
Office address of the CPA: 401, Level 4, Henghua International Business Center, 26
Yuetan Beijie, Xicheng District, Beijing
2010 Annual Report
9
II. Summary of Accounting and Business Data
1. Main accounting data
Unit: RMB’000
Item 2010 2009 Year-on-Year
Increase/decrease
(%)
2008
Total operating revenue 74,558,886.12 47,278,248.26 57.70 45,313,461.92
Total profit 4,963,170.78 2,752,828.84 80.29 1,755,571.41
Net profit attributable to the
shareholders of the
Company
3,127,097.38 1,847,747.93 69.24 1,025,304.19
Net profit excluding
extraordinary profit and loss
attributed to the
shareholders of the
Company
2,956,398.46 1,821,067.57 62.34 1,134,215.99
Net cash flow from
operating activities
5,445,721.00 2,056,466.98 164.81 3,752,847.69
Item At the end of
2010
At the end of
2009
Year-on-Year
Increase/decrease
(%)
At the end of
2008
Total assets 42,054,037.52 31,657,627.47 32.84 23,383,586.43
Owner’s equity attributable
to the shareholders of the
Company
12,336,337.43 8,906,427.61 38.51 4,749,026.99
Share capital (shares) 3,120,265,276 2,080,176,851 50.00 1,891,069,929
2. Main financial indicators
Financial Indicators 2010 2009 Year-on-Year
Increase/decrease
(%)
2008
Basic EPS (RMB/share) 1.00 0.82 21.95 0.54
Diluted EPS (RMB/share) 1.00 0.82 21.95 0.54
EPS calculated on the basis of the latest 0.92 -- -- --
2010 Annual Report
10
share capital (RMB/share) *Note
Basic EPS after deducting extraordinary
profit and loss (RMB/share)
0.95 0.81 17.28 0.60
Weighted average return on equity (%) 29.54 28.81 0.73 21.04
Weighted average return on equity after
deducting extraordinary profit and loss
(%)
27.93 28.40 -0.47 23.28
Net cash flow per share from operating
activities (RMB/share)
1.75 0.99 76.77 1.98
At the end of
2010
At the end
of 2009
Year-on-Year
Increase/decrease
(%)
At the end
of 2008
Net asset per share attributable to the
shareholders of the Company
(RMB/share)
3.95 4.28 -7.71 2.51
Note: In March 2011, the Company completed non-public issue of 264,082,374 shares to six
investors. Up to the date of disclosing this Annual Report, total share capital of the Company
is 3,384,347,650 shares.
3. Extraordinary profit and loss items and amounts
Unit: RMB’000
Item Amount
Profit and loss from disposal of non-current assets -14,474.99
Governmental subsidies recognized in current profit and loss, except those
closely related to the normal operations of the Company and continuously
granted at certain quotas or quantities according to the State’s policies and
regulations
148,487.63
Profit and loss from change in fair value of trading financial assets/liabilities,
and investment gain or loss from disposal of trading financial assets/liabilities
and financial assets available for sale, except for effective hedging activities
related to the normal operations of the Company
208,285.57
Other net non-operating income or expenditure except above-mentioned items -71,845.75
Other profit items complying with extraordinary profit or loss -9,886.15
Total extraordinary profit or loss 260,566.31
Effect of corporate income tax -19,943.53
2010 Annual Report
11
Effect of minority interests -69,923.86
Total extraordinary profit or loss affecting net profit attributable to ordinary
shareholders of the Company
170,698.92
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12
III. Changes in Share Capital and Information of Shareholders
1. Changes in share capital during the reporting period
Unit: Share At the beginning of
reporting period
Increase/decrease (+,-) during the reporting period At the end of reporting
period
Number of
shares
Percentage
(%)
New
issue
Bonus
issue
Shares converted
from the reserve
Others Sub-total Number of
shares
Percentag
e (%)
I. Shares subject to
trading restrictions
2,401,797 0.12 -2,401,797 -2,401,797 0 0.00
1. State-owned
shares
2. Shares held by
State-owned legal
person
3. Shares held by
other domestic
shareholders
Of which:
Shares held by
domestic
non-State-owned
legal persons
Shares held by
domestic natural
persons
2,401,797 0.12 -2,401,797 -2,401,797 0 0.00
4. shares held by
foreign shareholders
Of which:
Shares held by
overseas legal
persons
Shares held by
overseas natural
persons
II. Shares not
subject to trading
restrictions
2,077,775,054 99.88 1,040,088,425 2,401,797 1,042,490,222 3,120,265,276 100.00
1. RMB ordinary
shares
2,077,775,054 99.88 1,040,088,425 2,401,797 1,042,490,222 3,120,265,276 100.00
2.
Domestically-listed
foreign shares
3. Overseas-listed
foreign shares
4. Others
III. Total Number of
Shares
2,080,176,851 100.00 1,040,088,425 0 1,040,088,425 3,120,265,276 100.00
2. Issue and listing of shares
(i) Issue of shares in previous three years
1) In accordance with the Reply on the Approval of Issue of Additional Shares by GD
Midea Holding Co., Ltd. under the CSRC Permit ([2009] No.668) from China
Securities Regulatory Commission, on July 30th
2009, the Company issued
189,106,922 new shares at an issue price of RMB15.75 per share by way of a priority
2010 Annual Report
13
placement to the existing holders of A-shares on a pro rata basis, combined with
online and offline issues at a fixed price for the remaining portion of the new shares.
The Company raised a total of RMB2,978,434,021.50 from this issue, representing net
proceeds of RMB2,913,149,268.55 after deducting the issue expenses.
With the consent from Shenzhen Stock Exchange, the additional 189,106,922 RMB
ordinary shares issued under the public issue of the Company’s additional shares have
been listed for trading since August 12th
2009.
2) In accordance with the Reply on the Approval of Non-public Issue of Shares by GD
Midea Holding Co., Ltd. under the CSRC Permit ([2011] No.84) from China
Securities Regulatory Commission, the Company issued 264,082,374 shares to six
investors on a non-public basis. Funds raised by issue of A-shares were transferred to
the special fund-raising account of the Company on February 24th
, 2011. The
Company raised a total of RMB4,359,999,994.74 from this non-public issue,
representing net proceeds of RMB4,300,149,994.74 after deducting the issue
expenses.
(ii) Changes in total shares and share capital structure
1) As of the end of this reporting period, the Company had no shares subject to trading
restrictions;
2) Upon approval of shareholders’ general meeting 2009 held on April 12th
2010, the
Company completed implementation of its capital reserve capitalization scheme of
converting five shares into share capital for every 10 shares on May 13th
2010, and
total shares of the Company were increased from 2,080,176,851 shares to
3,120,265,276 shares.
3) On March 11th
, 2011, 264,082,374 shares were issued to six investors by the
Company on a non-public basis were listed, and total shares of the Company were
increased from 3,120,265,276 shares to 3,384,347,650 shares. Change in share
capital structure of the Company is as follows:
Before non-public issue After non-public issue
2010 Annual Report
14
Number of shares Percentage (%) Number of shares Percentage (%) I. Shares subject to
trading restrictions 264,082,374 7.80
1. State-owned
shares
2. Shares held by
State-owned legal
person
27,077,409 0.80
3. Shares held by
other domestic
shareholders
203,634,766 6.01
Of which: Shares held by
domestic
non-State-owned
legal persons
203,634,766 6.01
Shares held by
domestic natural
persons
4. shares held by
foreign shareholders 33,370,199 0.99
Of which: Shares held by
overseas legal
persons
33,370,199 0.99
Shares held by
overseas natural
persons
II. Shares not
subject to trading
restrictions
3,120,265,276 100.00 3,120,265,276 92.20
1. RMB ordinary
shares 3,120,265,276 100.00 3,120,265,276 92.20
2.
Domestically-listed
foreign shares
3. Overseas-listed
foreign shares
III. Total Number
of Shares 3,120,265,276 100.00 3,384,347,650 100.00
(iii) Information of present employee shares
The Company has no employee shares at present.
3. Information of the shareholders and beneficial controlling persons
(1) Shareholding of top ten shareholders and top ten shareholders not subject to trading
restrictions at the end of the reporting period
Unit: Share
Total number of
shareholders at the end
of the reporting period
100,509 shareholders
Shareholding of top ten shareholders
Name of shareholder Type of shareholders Percentage Total Number of Number of
2010 Annual Report
15
(%) of
shareholdi
ng
number of
shares held
shares held
subject to trading
restrictions
pledged or
frozen shares
Midea Group Holding Co., Ltd. Domestic non-State-owned
legal person
42.49% 1,325,701,61
1
0 180,000,000
Foshan Shunde Kailian
Industrial Development Co.,
Ltd.
Domestic non-State-owned
legal person
2.76% 85,967,913 0 0
Dacheng Blue Chip Sustaining
Fund
Domestic non-State-owned
legal person
1.89% 58,897,805 0 0
MERRILL LYNCH
INTERNATIONAL
Foreign shareholder 1.75% 54,589,086 0 0
National Social Security Fund
501 Portfolio
State 1.60% 50,000,000 0 0
Bosera Thematic Sectors
Equity Securities Investment
Fund
Domestic non-State-owned
legal person
1.57% 49,000,000 0 0
National Social Security Fund
102 Portfolio
State 1.51% 47,207,115 0 0
YALE UNIVERSITY Foreign shareholder 1.40% 43,748,870 0 0
Yinhua Core Value Selected
Stock Fund
Domestic non-State-owned
legal person
1.28% 40,000,000 0 0
Penghua Dynamic Growth
Securities Investment Fund
Domestic non-State-owned
legal person
1.04% 32,406,886 0 0
Shareholding of top ten shareholders not subject to trading restrictions
Name of shareholder Number of shares held not subject to
trading restrictions
Midea Group Holding Co., Ltd. 1,325,701,611
Foshan Shunde Kailian Industrial Development Co., Ltd. 85,967,913
Dacheng Blue Chip Sustaining Fund 58,897,805
MERRILL LYNCH INTERNATIONAL 54,589,086
National Social Security Fund 501 Portfolio 50,000,000
Bosera Thematic Sectors Equity Securities Investment
Fund
49,000,000
National Social Security Fund 102 Portfolio 47,207,115
YALE UNIVERSITY 43,748,870
2010 Annual Report
16
Yinhua Core Value Selected Stock Fund 40,000,000
Penghua Dynamic Growth Securities Investment Fund 32,406,886
Description for the connection or acting in concert relationship among the above-mentioned
shareholders:
Of the top ten shareholders of the Company, the beneficial controlling person of Midea Group
Holding Co. Ltd and Foshan Shunde Kailian Industrial Development Co., Ltd. is the same
person and their legal representatives are direct family members, constituting the relationship
of connected party with each other.
(2) Information of the controlling shareholder of the Company
The controlling shareholder of the Company: Midea Group Holding Co. Ltd.
Legal representative: He Xiangjian
Date of establishment: April 7th 2000. The name of this company was changed from Shunde
Meituo Investment Co., Ltd. to Foshan Shunde Meituo Investment Co., Ltd. in July 2003 and
to Foshan Midea Group Holding Co., Ltd. in December 2003, and then to Midea Group
Holding Co. Ltd. in April 2004.
Registered office address: Industrial Avenue, Penglai Road, Beikao Township, Shunde
District, Foshan, Guangdong Province.
Registered capital: RMB one billion
Main business scope: investment in manufacturing, wholesale and retail trade, domestic
commerce, commodity supply and sales (except those items under exclusive operation or
control according to the Chinese governmental policies), computer software and hardware
development, design of industrial products, information technology consultation and service,
providing investment advisory and consultation services for enterprises, and installation,
maintenance and after-sales services of electric household appliances.
During the reporting period, there was no change in the controlling shareholder of the
Company.
(3) Information of the beneficial controlling person of the Company
Mr. He Xiangjian is the beneficial controlling person of the Company. The following diagram
shows the equity holding and control relation between the Company and its beneficial
controlling person as of the end of the reporting period:
2010 Annual Report
17
84%
94.55%
%
30%
0.12% GD Midea Holding Co., Ltd.
Midea Investment Holding Co., Ltd.
Midea Group Holding Co. Ltd. Kailian Industrial Development Co., Ltd.
3.66% 42.49%
70%
He Xiangjian
2010 Annual Report
18
IV. Information of Directors, Supervisors, Senior Executives and
Employees
1. General Information of Directors, Supervisors and Senior Executives
Name Sex Age Position Term of office
Number of
shares held at
the beginning of
the year
Number of
shares held at
the end of the
year
Fang Hongbo Male 44 Chairman of the Board and
President 2010.4—2013.4 0 0
Li Jianwei Male 45 Vice-Chairman of the Board 2010.4—2013.4 0 0
Huang Xiaoming Male 40 Vice-Chairman of the Board 2010.4—2013.4 0 0
Yuan Liqun Female 42 Director 2010.4—2013.4 0 0
Zhao Jun Male 36 Director, responsible person
for finance 2010.4—2013.4 0 0
Li Feide Male 34 Director, Secretary to the
Board 2010.4—2013.4 0 0
Wang Jun Male
53 Independent Director 2010.4—2013.4 0 0
Chen Renbao Male
49 Independent Director
2010.4—2013.4 0 0
Wang Bo Male
49 Independent Director
2010.4—2013.4 0 0
Zeng Qiao Female 38 Convener of the Supervisory
Board meeting 2010.4—2013.4 0 0
Lu Shuping Male
39 Supervisor 2010.4—2013.4 0 0
Li Li
Male
37 Staff and Workers
Representative Supervisor 2010.4—2013.4 0 0
Lu Jianfeng Male
38 Vice-President 2010.8—2013.4 0 0
Cen Jiang Male
38 Vice-President 2010.8—2013.4
Note: The Company currently has not implemented any share incentive scheme. During the reporting
period, none of the directors, the supervisors and senior executives holds any share option or restricted
shares in the Company.
2. Main Work Experience and Positions of the Directors, Supervisors and Senior
Executives
(1) Mr. Fang Hongbo, master’s degree, joined Midea in 1992 and was Vice-President and
2010 Annual Report
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President of the Company, and is currently Chairman of the Board and president of the
Company. Mr. Fang Hongbo is also chairman of Wuxi Little Swan Company Limited under
the Company.
(2) Mr. Li Jianwei, master’s degree, joined Midea in 1994 and was Secretary to the Board of
the Company, and is currently Vice-Chairman of the Board of the Company. Mr. Li Jianwei is
also a Director and Vice-President of Midea Group Holding Co. Ltd.
(3) Mr. Huang Xiaoming, master’s degree, joined Midea in 1996 and was Board Secretary of
the Company, and is currently Vice-Chairman of the Board of the Company. Mr. Huang
Xiaoming is also a Director and Vice-President of Midea Group Holding Co. Ltd.
(4) Ms. Yuan Liqun, master’s degree, joined Midea in 1992 and was Convener of the
Supervisory Board of the Company, and is currently a Director of the Company. Ms. Yuan
Liqun is also a Director and Vice-President of Midea Group Holding Co. Ltd.
(5) Mr. Zhao Jun, master’s degree, joined Midea in 2000 and was Deputy Chief Officer of
Financial Department of the Company, and is currently a Director, responsible person for
finance and Chief Officer of Financial Department of the Company.
(6) Mr. Li Feide, master’s degree, joined Midea in 1999 and was Deputy Head of Strategic
Development Department of the Company, and is currently a Director, Secretary to the Board
and Chief Supervisor of Securities Affairs of the Company.
(7) Mr. Wang Qun, doctor’s degree, Head of Advanced Institute of Social Sciences of Sun
Yat-Sen University, the professor in economics and PhD tutor of Lingnan College in Sun
Yat-Sen University, Vice-Director Commissioner of Liberal Arts’ Academic Committee of
Sun Yat-Sen University, model laborer of Guangzhou, and the President of Guangdong
Province Economical Association. He had conducted academic research in School of
Economics, University of Leicester in the U.K., Fairbank Center of Harvard University and
Sloan School of Management of Massachusetts Institute of Technology in the US. Mr. Wang
owns extensive and insightful research and unique views in transformational economics,
institutional economics, enterprise theory and industrial cluster theory, etc. Since May 2007,
he started to act as an Independent Director of the Company.
(8) Mr. Chen Renbao, doctor’s degree, is currently the associate professor of Finance
Department of Business School in National University of Singapore and a director of
Keywise Capital Management Ltd. in the US. He was the academic director of Chinese
2010 Annual Report
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EMBA program in National University of Singapore, International MBA (IMBA) director of
National University of Singapore and Peking University in China, and the consultant of
education fund investment in National University of Singapore (the amount of fund is 2
billion Singapore dollars). He specializes in the fields of financial management, risk
management and insurance, employee benefit and retirement plan, etc. He now is the
consultant of a number of Chinese and foreign companies, and provides consultation relating
to corporate financial management and financial risk management to a number of large-sized
corporations. He was an Independent Director of the Company since May 2007.
(9) Mr. Wang Bo, postgraduate, is one of the first batch patent attorneys in China who are
qualified to engage in securities business; he is currently the Chairman of Guangzhou
Lawyers Association, Vice-Chairman of Guangdong Lawyers Association, an arbitrator of
Guangzhou Arbitration Commission, a part-time professor of Southwest University of
Political Science & Law, a part-time postgraduate tutor of the Law School of Jinan University,
and a director and senior partner of King Pound Law Firm. He was awarded The Best
Lawyers in China and Ten Best Lawyers in Guangzhou. He was an Independent Director of
the Company since September 2009.
(10) Ms. Zeng Qiao, master's degree, joined Midea in 1999. She acted as the Vice Director of
Audit and Compliance Department of Midea Group Holding Co. Ltd. She is now the
Convener of the Supervisory Board of the Company, and is also the Chief Director of Audit
and Compliance Department of Midea Group Holding Co. Ltd.
(11) Mr. Lu Shuping, master’s degree, joined Midea in 1998. He acted as the Assistant to
President Office Manager of the Company and is currently a Supervisor of the Company. Mr.
Lu Shuping is also the Office Manager of Midea Group Holding Co. Ltd.
(12) Mr. Li Li, master’s degree, joined Midea in 2002. He acted as the Chief Operation
Officer and Chairman of the Supervisory Board of Wuxi Little Swan Company Limited under
the Company and is currently a Supervisor, and Chief Officer of Human Resources
Department, of the Company.
(13) Mr. Lu Jianfeng, master's degree, joined Midea in 1997. He acted as President of
Residential Air-conditioner Domestic Division under the Company. He is now Vice-President
of the Company and President of the China Marketing Headoffice of the Company.
(14) Mr. Cen Jiang, master's degree, joined Midea in 1997. He acted as President of
2010 Annual Report
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Residential Air-conditioner International Division under the Company. He is now
Vice-President of the Company and President of the International Division of the Company.
3. Annual Remuneration of the Directors, Supervisors and Senior Executives
(1) Remuneration decision-making procedures and basis for remuneration of the
directors, supervisors and senior executives
At the 25th
meeting of the sixth Board of Directors of the Company convened on April 29th
2009, the Company approved the Remuneration Management System for Directors,
Supervisors and Senior Executives, pursuant to which the remuneration of the Company’s
directors, supervisors and senior executives shall consist of basic annual salary and
performance-related annual salary. The basic remunerations shall be determined upon the
responsibilities, risks and pressure assumed by the directors, supervisors and senior
executives respectively. The basic annual salary shall be fixed while the performance-related
annual salary shall be linked to the fulfillment ratio of the Company’s profit and the results of
performance target. The remuneration system for directors, supervisors and senior executives
serves the Company’s operation strategies and shall be adjusted correspondingly in response
to change in the operation status of the Company in order to cope with the Company’s needs
for further development. Bases for remuneration adjustment for the Company’s directors,
supervisors and senior executives are: 1) level of salary/wage increment in the industry; 2)
inflation level; 3) profitability of the Company; 4) adjustment to the organizational structure;
and 5) individual adjustment in relation to change in position.
At the 9th
meeting of the sixth Board of Directors of the Company convened on February 18th
2008, the Company considered and approved the Proposal Concerning Adjusting Allowance
Standards for Independent Directors, pursuant to which the allowance standards for the
Independent Directors of the Company have been increased to RMB150,000 (including tax )
per year.
(2) Annual remuneration of existing directors, supervisors and senior executives
(i) Annual remunerations of directors, supervisors and senior executives who received
remuneration from the Company: Name Position Annual remuneration
(RMB’0000) Remarks
Fang Hongbo Chairman of the Board and President
405 -
Zhao Jun Director, and responsible person for finance
75 -
Li Feide Director and Secretary to the 86 -
2010 Annual Report
22
Board Lu Jianfeng Vice-President 288 Appointed in August
2010 Cen Jiang Vice-President 271 Appointed in August
2010 Li Donglai Former Vice-President 170 Resigned in December
2010 Li Li Staff and Workers
Representative Supervisor 81 -
Emolument for each independent director is RMB150,000 (including tax), and all the
expenses required for the independent director to perform his or her responsibilities as
independent director shall be borne by the Company.
(ii) Information of directors, supervisors and senior executives who did not receive
remuneration from the Company
Three directors, namely Mr. Li Jianwei, Mr. Huang Xiaoming, and Ms. Yuan Liqun, and two
supervisors, namely Ms. Zeng Qiao and Mr. Lu Shuping, received remuneration from the
shareholders’ unit, and the Company did not pay them any remuneration.
4. Changes in Directors, Supervisors and Senior Executives during the Reporting Period
(i). During the reporting period, the Company completed election of 7th
Board of Directors
and 7th
Supervisory Board at expiration of their office terms, and the Board of Directors
appointed new senior executives of the Company. Directors of the Board, supervisors of
Supervisory Board, and senior executives of the Company after this election are in
conformity with relevant persons of 6th
Board and 6th
Supervisory Board.
(ii). During the reporting period, upon nomination by Mr. Fang Hongbo, President of the
Company and consideration and approval at 5th
meeting of 7th
Board, Mr. Lu Jiangfeng
and Mr. Cen Jiang were elected vice presidents of the Company.
(iii). During the reporting period, due to work adjustment, Mr. Li Donglai, Vice President of
the Company, tendered his resignation to the Board of Directors of the Company and
resigned from the post of Vice President of the Company.
5. Staff of the Company
The Company had a total of 98,676 employees as at December 31st 2010.
Breakdown by function: Administration personnel, 692; Finance personnel, 802; Sales
personnel, 1,316; Technical personnel, 3,216 and Production personnel, 92,650;
Educational background: Doctors, 30 and masters, 428; University graduates, 7,240; College
graduates, 17,337; Graduates from technical secondary schools, 49,168 and Others, 24,473.
2010 Annual Report
23
V. Governance Structure of the Company
（I）Actual Situations of Corporate Governance of the Company
During the reporting period, in strict accordance with the requirements of the Company Law,
Securities Law, and other related laws and regulations of CSRC, the Company kept improving
its corporate governance structure and pushing forward improvement of its standardized
operation, and its actual conditions of corporate governance structure comply with the
requirements of regulatory documents concerning corporate governance of listed companies
issued by CSRC and Shenzhen Stock Exchange. During the reporting period, the Company
completed the main work as follows to improve its corporate governance and standardized
operation:
1. The Company further strengthened and standardized the reporting and process management
of its internal information, and made more efforts to organize the directors, supervisors and
senior executives of the Company to study relevant laws and regulations. In accordance
with the formulated the Internal Information Confidential System and Internal Reporting
System for Material Information, the Company eliminated and prevented the trading of the
Company’s shares via insider information and short-term trading of the Company’s shares
during sensitive periods. In addition, according to the requirements of the notice issued by
CSRC Guangdong Bureau, the Company, within specified time, reported the insiders
knowing its relevant internal event information to CSRC Guangdong Bureau for record via
the online regulatory information platform information reporting system set up by CSRC
Guangdong Bureau.
2. In accordance with the requirements of the Guidelines on Standardized Operations of the
Companies Listed on the Main Board issued by Shenzhen Stock Exchange, the controlling
shareholder and beneficial controlling person signed the Statement and Commitment of
Controlling Shareholder and Beneficial Controlling Person;
3. To standardize the connected transactions between the Company and Midea Group Finance
Co., Ltd., the Company formulated the Risk Control Regulations for Connected
Transactions between GD Midea Holding Co., Ltd. and Midea Group Finance Co., Ltd., in
2010 Annual Report
24
order to further guarantee security and liquidity of the Company’s Funds Deposited at
Midea Group Finance Co., Ltd. The controlling shareholder of the Company, namely
Midea Group Holding Co. Ltd., issued a letter of commitment to guaranteeing the fund
security when the Company has any financial transactions with Midea Group Finance Co.,
Ltd.
4. As controlling shareholder of the listed company ―Wuxi Little Swan Company Limited‖,
the Company completed sales of its washing machine asset business to Little Swan and
subscribed for the shares issued by Little Swan to the Company, and thus completely
eliminated competition between the Company and Little Swan in washing machine
business.
5. Based on the established internal control system, according to the requirements of Basic
Code on the Corporate Internal Control and actual conditions of the Company, the
Company further strengthened and improved its internal control system, promoted
establishment of its effective internal control and management system centered around risk
management and focusing on internal environment, risk evaluation and control activities,
information and communication, and internal supervision, and thus provided guarantee for
sustainable and healthy development of the Company.
6. Strictly pursuant to the requirements of the laws, regulations, Articles of Association and
Administrative Measures for the Disclosure of Information, the Company strengthened the
management of information disclosure and ensured that the information regarding the
Company was fairly available to all the investors. The Company has formulated the
Accountability System for Material Faults in Information Disclosure made in Annual
Report, in order to strengthen imposing accountability on the person responsible for
disclosing information in the annual reports, improve the quality and transparency of
disclosing information in the annual reports and ensure that the information is disclosed in
a true, accurate, complete and timely manner.
7. The Company continued to improve the investor relations management, designated a
full-time person to be responsible for telephone, fax and e-mail of the Company to contact
the investors, strengthened communication and contacts with all kinds of investors through
road show, reception on the spot, periodic performance reporting meeting and other
channels, and allowed the investors to have full understanding of the Company’s status
2010 Annual Report
25
while observing the information disclosure rules.
The Company executed standardized corporate governance and strengthened its investor
relations, and was fully recognized by the society and investors. In 2010, the Company was
awarded the following main honors:
―Listed Company with Best Investor Relations‖ Award by www.hexun.com;
―Best Board of Directors‖ Award and ―6th
Gold Round Table Awards for the Listed
Companies‖ by Directors & Boards;
―Top 100 Chinese Listed Companies in Market Value Management‖ Award and ―Listed
Company with Most Social Responsibility Sense in Chinese Securities Market in 20 Years‖
by China Center for Market Value Management;
―Top 100 Listed Company’s Value‖ Award and ―Top Ten Management Team of Listed
Companies‖ Award by Securities Times.
―Top 100 Gold Bulls for Listed Company‖ award by China Securities Journal for the ten
consecutive times.
(II) Performance of Duties of Independent Directors
During the reporting period, the independent directors of the Company carefully performed
their obligations and duties of honesty and diligence according to the Articles of Association
and relevant stipulations, and protected interests of the Company and interests of all
shareholders from being infringed. The independent directors actively participated in the
Board meetings of the Company, carefully considered and reviewed the motions proposed at
the meetings and made independent, objective and fair judgments thereon, gave independent
opinions on the matters such as related-party transactions and external guarantee according to
the regulations, and provided many valuable advices and recommendations for the operations
and development of the Company through their respective professional perspectives, thereby
formulating scientific and objective decisions of the Board of Directors while exerting
positive effects on a promising development of the Company.
1. Details of independent directors attending Board meetings
Name of
independent
director
Number of
meetings to be
attended during
Attended in
person
Attended by
proxy Absent
2010 Annual Report
26
the year
Wang Jun 11 11 0 0
Chen Renbao 11 11 0 0
Wang Bo 11 11 0 0
2. Details of independent directors attending meetings of special committees of
the Board
During the reporting period, there were 3 meetings of Audit Committee and 2 meetings of
Nomination Committee; all independent directors who were members of related special
committees attended those special committee meetings.
3. Details of the implementation of the Rules on Responsibilities of
Independent Directors in Preparation of Annual Reports
In the course of auditing and preparation of Annual Report 2010, the independent directors
earnestly performed their responsibilities and obligations. On January 25th
2011, at a meeting
held between the independent directors of the Company and the senior management of the
Company, a report on the production, operations, financial status, annual significant
investments, 5-year strategic plan, non-public issue of A shares, Little Swan asset
restructuring and other significant events of the Company for 2010 was made by the senior
management of the Company to the independent directors of the Company. On the same day,
the independent directors of the Company held a meeting with Mr. Liu Zhiyong and Mr. Zhou
Rongming, certified public accountants auditing the financial statements of the Company for
2010. During the meeting, the independent directors understood in detail the audit team
personnel arrangement, audit plan, the key audit work and audit strategy, and risk evaluation
and judgment, agreed that annual audit was carried out according to existing audit plan. On
March 14th
2011, before Board of the Company reviewed the Annual Report 2010, the
independent directors of the Company held a second meeting with Mr. Liu Zhiyong and Mr.
Zhou Rongming, certified public accountants auditing the financial statements of the
Company for 2010, and asked them the audit progress and other related circumstances,
inquired about significant changes in the relevant financial indicators and reasons for such
changes, reviewed and considered the financial report on which the auditors have given their
2010 Annual Report
27
preliminary view of an unmodified and unqualified opinion. At the same time, the
independent directors read and reviewed the procedures for the Company to hold the annual
report review meeting, and all the resolutions and proposals to be examined at the meeting
and appendices thereto, and then agreed to convene Board meeting of the Company as
scheduled.
4. Objections raised by independent directors in relation to the relevant
matters of the Company
During the reporting period, the independent directors of the Company raised no objections as
to the respective resolutions, proposals and other matters of the Board for the year.
(III) Segregation between the Company and its controlling shareholder in respects of
business, staff, assets, organizational structure and finance
1. With regard to the segregation of business: the Company has a complete business chain
in production and operation, owns an independent and complete procurement and sales
system, operations and self-operating capabilities.
2. With regard to the segregation of personnel: the personnel between the Company and the
controlling shareholder are segregated. The Company is independent in the labour,
personnel and wage management. Each senior executive of the Company receives his or
her salaries and remuneration from the Company, without holding any other executive
position (other than director and supervisor) in the controlling shareholder.
3. With regard to the completeness of assets: the Company has an independent production
system, auxiliary production system and auxiliary facilities, and has industrial property
rights, trademarks, non-patented technologies and other intangible assets.
4. With regard to the independence of organization: the Company has established
independent organizational structure and maintains its independent operation, and has the
right to set up its own affiliate organizations and make decision in personnel appointment
and dismissal, there is no overlapping of personnel appointment with controlling
shareholders.
5. With regard to the independence of finance: the Company and its controlling shareholder
are separated from each other in respect of finance. The Company has established an
independent finance department, and has established independent accounting system and
2010 Annual Report
28
financial management system and opened independent bank accounts. It makes decisions
related with finance by itself and pays taxes in accordance with the laws.
(IV) Establishment and improvement of the internal control system
1. Self-evaluation of internal control
According to the requirements of the statutes such as Company Law ,Securities Law, Rules for
Corporate Governance of Listed Company, Basic Code on the Corporate Internal Control,
and Implementation Guidelines for Corporate Internal Control, the Company kept improving
its corporate governance structure,regulating the relationships between the Company and its
controlling shareholder, enhancing the control of daily related-party transaction, revising and
improving documents for internal control, thereby improving the governance and regulative
operation of the Company. Currently, the Company has established a complete internal
control system and effectively executes this system. Internal control system and relevant rules
of the Company can suit to the management requirements and development demands of the
Company, provide reasonable assurance for preparing true and fair financial statements and
guarantee healthy operation of each business and operation risk control of the Company. The
Company is free from any material defects in terms of the completeness, reasonableness and
effectiveness of its internal control system (For details, please refer to Report of the
Self-evaluation of Internal Control issued by the Company).
2. Board Statement concerning its responsibility for internal control
The Board of the Company thinks that the existing internal control system has already been
basically established and effectively implemented, and the internal control system and its
related institutions are able to meet the management requirements and development needs of
the Company, provide a reasonable assurance for preparing true and fair financial statements
and guarantee healthy operation of each business and operation risk control of the Company
The Board of the Company always attaches importance to establishment and effective
implementation of its internal control system, and will, in accordance with the requirements
of Basic Code on the Corporate Internal Control and Implementation Guidelines for
Corporate Internal Control, further improve its established internal control system, strengthen
the study of the laws and regulations related with internal control, formulate the
implementation scheme, and establish an effectively-operating internal control system
centered around risk management and focusing on internal environment, risk evaluation and
2010 Annual Report
29
control activities, information and communication, and internal supervision, in order to meet
the compliance requirements of the internal and external regulatory departments and further
improve the corporate governance of the Company.
The Board of the Company reviewed and approved the Report of the Self-evaluation of
Internal Control of the Company. Ascenda Certified Public Accountants, Ltd. audited the
effectiveness of the internal control in respect of the financial statements for the year ended
December 31st 2010, and issued Special Attestation Report on Internal Control (Tian Jian
Zheng Xin Shen (2011) Zhuan Zi No.150036).
3. Views of the Company’s independent directors on its self-evaluation of internal
control
As independent directors of the Company, We issue our views on the self-evaluation of the
internal control of the Company as follows:
The internal control management system of the Company has been established, internal
control system is normative, strict, sufficient and effective in respects of internal environment,
target setting, risk responding and control activities, information and communication,
inspection and supervision, and generally complies with the requirements of the related laws,
regulations and regulatory authorities. Internal control activities of the Company have
basically covered all links of operations, and perform sufficient and effective control over key
activities such as the controlled subsidiaries, related party transactions, external guarantee,
fund raising management, significant investment, and information disclosure, thereby
ensuring the smooth operation and management of the Company. We are of the opinion that
the report of the self-evaluation of internal control gave a true and objective view of the actual
conditions of the internal control of the Company.
4. Establishment and operation of internal control system for financial report
The Company strictly executed accounting laws and regulations as well as the uniform
national accounting standards, and strengthened the management on whole process of
preparing financial report and providing it to external parties for analysis and use.
The Company has formulated complete and sound accounting management and internal
control system as well as internal control and management system relating to project
construction, fund settlement, fixed assets, current assets, sales, management of accounts
receivable, financing and guarantees for external parties, asset risk warning, financial review
2010 Annual Report
30
and approval authority process management, futures hedging, exchange capital, financial
checking system, accounting element management, and accounting archives management. For
preparation of its financial report, the Company focused on accounting policies and estimates,
and handling of the transactions and matters having significant effects on the financial report
is subject to review and approval pursuant to the authority and procedures as stipulated in
relevant regulations and system.
With its budget management system established, the Company executes budget control for
purchase, income, cost and expense, and improves its internal control system by taking such
measures as budget drafting, budget execution, budget adjustment and budget supervision, in
order to strictly control non-productive capital expenditures, optimize resource utilization and
improve operation performance and efficiency of the Company.
The Company has formulated various basic accounting systems, established normative
accounts regulation rules, funds, materials and settlement checking regulations, define the
responsible persons and corresponding treatment procedures, and avoid inconsistency of the
accounts with corresponding vouchers, the other related accounts and physical goods. The
financial report has been prepared on the basis of the complete and correct accounting books
and records, which ensures that the contents of the financial report are complete, true and
accurate.
The Company has established the management measures for delivery and disclosure of its
financial reports, and delivers the financial reports to related responsible persons within the
Company and external users in the specified manner and discloses the information in
accordance with the laws.
(V) Establishment and implementation of evaluation and incentive mechanism and
related bonus system for senior executives of the Company during the reporting period
The Company has established performance evaluation system based on the responsibility
system for targets. Performance evaluation for senior executives was carried out by signing
annual objective responsibility evaluation agreement, determining the evaluated indicators
and evaluation manners and correlating the bonus with the evaluation result. During the
reporting period, the Company conducted assessment and evaluation on its senior executives
according to the administrative measures for responsibility system for targets and took into
account the evaluation result in the payment of their annual performance bonus.
2010 Annual Report
31
VI. Shareholders’ General Meeting
During the reporting period, the Company held five shareholders’ general meetings and they
are described as follows:
1. The Company held the first extraordinary general meeting for 2010 on January 25th
2010,
and this meeting examined and approved the Proposal Concerning Changing Auditors of the
Company for 2009. The Company published Announcement of the Resolutions of First
Extraordinary General Meeting for 2010 on the designated newspapers for disclosing
information of the Company: China Securities Journal, Securities Times and Shanghai
Securities News and http://www.cninfo.com.cn on January 26th
2010;
2. The Company held the 2009 Annual General Meeting on April 12th
2010, and this meeting
examined and approved 13 proposals and resolutions including 2009 Directors’ Report. The
Company published its ―Announcement of the Resolutions of 2009 Annual General
Meeting ‖on the designated newspapers for disclosing information of the Company: China
Securities Journal, Securities Times, Shanghai Securities News and http://www.cninfo.com.cn
on April 13th
2010;
3. The Company held the second extraordinary general meeting for 2010 on April 29th
2010,
and this meeting examined and approved Resolution Concerning the Related-Party
Transaction in respect of Signing Financial Service Framework Agreement with Midea Group
Co., Ltd. The Company published its ―Announcement of the Resolutions of Second
Extraordinary General Meeting for 2010‖ on the designated newspapers for disclosing
information of the Company: China Securities Journal, Securities Times, Shanghai Securities
News and http://www.cninfo.com.cn on April 30th
2010;
4. The Company held the third extraordinary general meeting for 2010 on June 14th
2010.
This meeting examined and approved the Resolution Concerning Amending the Articles of
Association of GD Midea Holding Co., Ltd. and Resolution Concerning Providing Guarantee
for Controlled subsidiaries under the Company. The Company published its ―Announcement
of the Resolutions of Third Extraordinary General Meeting for 2009‖ on the designated
newspapers for disclosing information of the Company: China Securities Journal, Securities
Times, Shanghai Securities News and on http://www.cninfo.com.cn on June 18th
2010.
2010 Annual Report
32
5. The Company held the fourth extraordinary general meeting for 2010 on September 17th
2010, and this meeting examined and approved seven resolutions including the Resolution
Concerning the Company Complying with the Conditions for Non-pubic Issue of A Shares.
The Company published its ―Announcement of the Resolutions of Fourth Extraordinary
General Meeting for 2010‖ on the designated newspapers for disclosing information of the
Company: China Securities Journal, Securities Times, Shanghai Securities News and on
http://www.cninfo.com.cn on September 18th
2010.
2010 Annual Report
33
Ⅶ. Directors' Report
(I)Management Discussion and Analysis
1. Overall Industrial Situation and Environment
(1) Industrial demand grew rapidly
Year 2010 saw industry-wide rapid growth of the air-conditioners, refrigerators and washing
machines industries. According to the statistics, the sales quantities of the products in 2010
recorded about 95 million air-conditioners, an increase of 44% year-on-year; about 70 million
refrigerators, an increase of 22% year-on-year; and nearly 50 million washing machines, an
increase of 29% year-on-year. The rapid growth of these industries was mainly attributed to
the following factors:
——Income and spending power of the residents were continuously growing, but the
overall penetration rate of home appliances was still low, and there was large
consumption potential in the third and the fourth-tier markets
In 2009, China's per capita income exceeded the critical point of US$3,000. According to the
experience of overseas home appliance consumption, China is now in a period of rapid
growth of home appliance consumption. Meanwhile, current quantity of home appliances
owned by consumers in China, especially in rural areas, is still at a low level. According to
statistics, currently the ownership of air-conditioners, refrigerators and washing machines in
rural areas is only 12%, 37% and 50% respectively. Driven by the enormous domestic
demands in nearly 3, 000 districts and counties, 50, 000 towns and 700, 000 administrative
villages, as well as thanks to increased income, decreased home appliance transaction cost,
and improved after-sales services and water & power supply conditions in China, the third
and fourth-tier markets have become a new engine for stimulating rapid growth of the home
appliance market.
——Continuous urbanization, gradually changing consumption views and the demands
for product upgrade have become strong power driving increase of home appliance
consumption
The urbanization rate of China quickly jumped from 20% in 1982 to 46% in 2009. Compared
2010 Annual Report
34
with developed countries with urbanization rate of above 80%, China was still in the stage of
accelerating urbanization. The increased urban population and income, which led to
upgrading of residents’ lifestyle and consumption views, resulted in the shift of concern from
price to brand, quality, energy-saving, comfort and fashionable appearance. After over twenty
years of development, the urban home appliance market entered a period of intensive
upgrading and replacement.
——Global competitiveness of Chinese home appliance products was continuously
enhanced, and there was huge room for increase in the demands in export market
In 2010, home appliance exports showed the momentum of strong growth. Air-conditioners,
refrigerators, washing machines manufactured in China accounted for nearly 85%, 45% and
30% of respective global demands. The competitiveness of Chinese home appliances lies not
only in cost but also in other long-term advantages including huge domestic demands and
scale, complete industry clusters and growing supportive products. In the face of the recovery
and growth of the global economy, Chinese home appliances enterprises, especially the
leading enterprises, speeded up their expansion in the huge markets of developing countries
through effective globalized market disposition and expansion, re-shaped the global brand
image and enhanced brand value to gain long-term competitive edges in the world.
——Continuous promotion by policies for the home appliance industry
The continued implementation of a set of industrial policies related to home appliances drove
the increase of home appliance consumption and the upgrade of industrial structure. The
increase in price ceiling of home appliances going to countryside promoted the further release
of the rural demand for white home appliances. The rise of price ceiling and inclusion of
inverter air-conditioners also provided an opportunity for popularization of relatively
high-end products in rural market, and implementation of new energy efficiency standard and
energy-saving subsidy policies vigorously drove the upgrade of air conditioning products. The
reduced subsidy for fix-frequency air-conditioners may, on one hand resulted in industry-wide
price increase of energy-efficient fixed-frequency air-conditioner industry and on the other
hand, is expected to further accelerate the popularization of inverter air-conditioners. The
nationwide popularization of the ―trade-in‖ policy started in June 2010 would also further
promote the upgrade and replacement of home appliances in the first and second-tier markets.
2010 Annual Report
35
(2) Competition pattern has been changing
After perfect competition for many years in the white home appliance industry, the market is
becoming more mature, the concentration of market shares is gradually improved and the
stability of corporate profitability is enhanced.
The sales of the top two companies in the air-conditioner industry accounted for 50% of the
industry’s total sales. First-line large brands, by relying on their strong brand image, channel
control power, scale, position and quick response to market changes and other advantages,
constantly consolidated and strengthened their leader positions. After industrial integration for
many years, the refrigerator and washing machine industry was still not in perfect competition,
but the brand concentration was gradually increased and the competition pattern and
development trends became clearer day by day. The increased concentration of home
appliance brands advanced the home appliance industry to march in the direction of regulated
competition and healthy development. The focus of competition was shifted from price to
technology, industry chain and services, as well as channel development in the third and
fourth-tier markets. Industrial leaders with multiple competitive edges will occupy higher
market shares and grow at a rate higher than the industry's average.
(3) Product mix continued to upgrade
——Air-conditioner
The implementation of the new energy efficiency standards made energy-efficient air
conditioning products the mainstream of the market. Meanwhile, the popularization of
inverter air-conditioner was accelerated and the market's acceptance of inverter
air-conditioners turned from quantitative accumulation to qualitative change. Besides, after
entering 2010, the emerging of fluorine-free inverter air-conditioner pushed the rapid change
of refrigerant used in air-conditioners to the more eco-friendly R410a refrigerant products.
——Washing machine
In the first and second-tier markets, the washing machine industry was in a period of a
large-scale upgrade and replacement. The extensive application of inverter technology and
continuous emergence of new functional products led to constant increase in the market
shares of high-end products. With increasingly affordable price, the market share increased
2010 Annual Report
36
rapidly. With the introduction of variable frequency dual-drum front-loading washing machine,
the washing machine market showed not only increased technical competition but also
enriched content of high-end washing machine. According to statistics, in 2010, the overall
sales of front-loading washing machines increased by more than 50%, nearly 28 percentage
points higher than the overall level. Sales of front-loading washing machines in major cities
accounted for nearly 30%.
——Refrigerator
In 2010, high-end refrigerators represented by energy-saving and variable frequency,
air-cooled, intelligent, high-capacity and multi-compartment refrigerators were further
popularized. According to the statistics, the sales of single-door refrigerators decreased in
2010; the sales of the double-door refrigerators remained unchanged; and the sales of
side-by-side combination, three-door and multi-door refrigerators rocketed by nearly 70%.
The rapid sales increase of high-end refrigerators became the booster of the entire refrigerator
industry.
2. Summary of Overall Operation and Key Review for 2010
(1) Summary of the Overall Operation
In 2010, the advantage of the portfolio of air conditioning, refrigerator and washing machine
businesses was further highlighted and promoted the rapid growth of sales revenue.
Meanwhile, the continuous optimization of the product mix consisting of inverter
air-conditioners, multi-door refrigerators and front-loading washing machines guaranteed the
continuous increase of the Company's profitability. In 2010, the Company realized an
operating revenue of RMB74.559 billion, an increase of 57.70%. The net profit attributable
to shareholders of the Company increased to RMB3.127 billion. Revenue from the
air-conditioner and components, the refrigerator and components and the washing machine
and components increased by 50.63%, 57.45% and 63.10% respectively to RMB48.259
billion, RMB9.939 billion and RMB9.729 billion. Mainly due to implementation of the
Company's operation strategy of giving priority to scale and increasing market share as well
as the rising costs of main raw materials, the Company's gross profit margin decreased by
5.10 percentage points. The gross profit margin was also affected by the implementation of
preferential prices for energy-efficient products and adjustment of income from main business.
2010 Annual Report
37
In addition, due to the deepened marketing reform for channel integration, the advantage of
the integration of three main businesses---air-conditioners, refrigerators and washing
machines was further brought into play and the Company's ratio of sales expenses to sales
income also dropped substantially.
(2) Key Review for 2010
During the reporting period, the Company continued to deepen organizational reforms,
integrated resource advantages, inspired operation vitality and enhanced operational
efficiency
——Intensively pushed on the improvement of the management organizational structure for
business regionalization and product specialization, continuously carried out thorough
corporation-oriented reform of products, geared to the market demands, defined rights and
responsibilities well, drove decentralization of operation, further inspired the vitality of the
operational entities of various products and comprehensively improved operation efficiency.
——Promoted and improved the integration and sharing of critical resources, established a
refrigeration research institute to strengthen the research and coordination on basic
technologies, common technologies and cutting-edge technologies; founded electronics
company and mold company and strengthened the research and manufacture of key products
to improve professional capacity.
——Deepened the supply chain integration, established a unified business platform and
consolidated the resource coordination and management of bulk raw materials and common
materials to support the Company's mid-long term development and meet business divisions'
demands for operational support.
——Strengthened the value chain integration, and by taking such measures as
interests-bundled assessment of product value chain, coordination and communication,
market pressure and quality pressure transmission, comprehensively improved the operational
efficiency and response to market changes.
Clearly defined structure of industrial development, improved regional industrial layout
and continued to optimize product mix
2010 Annual Report
38
——The six major manufacturing base projects, namely Handan air-conditioner
manufacturing base, Jinzhou refrigerator manufacturing base, Wuhu integral machine and
compressor manufacturing base, South China air-conditioner and refrigerator manufacturing
base and East China central air-conditioner manufacturing base, progressed smoothly. The
Company would establish nine regional manufacturing bases covering five regional markets,
i.e. South China, East China, Central China, Southwest China and North China. The
preliminary industrial layout was established and the scale advantage was gradually
consolidated.
——By focusing on white home appliance and HVAC industry and based on the
consolidation of basic product scale and cost capacity advantage, the Company increased the
marketing input and improvement efforts in the fields of residential D/C inverter
air-conditioners, front-loading washing machines, multi-door refrigerators and side-by-side
combination refrigerators, D/C inverter air-conditioner compressors, large-sized central
air-conditioner systems, multi-connected air-conditioner systems and water heaters through
market orientation, resource input, introduction of talented people and mechanism innovation
in order to further optimize product mix and guarantee the drive for continuous improvement
of the Company's profitability. In 2010, the Company's domestic sales of D/C inverter
air-conditioners accounted for nearly 30%, a year-on-year growth of approximately 100%,
and continued to lead the market; while sales of front-loading washing machines, multi-door
refrigerators and side-by-side combination refrigerators all increased by several times
year-on-year.
Deepened the marketing system reform, speeded up market expansion, provided fine
after-sales services, and gave play to the competitive edge of product mix consisting of
air-conditioners, refrigerators and washing machines
——Further pushed on the operation of domestic sales companies as an entity, established
more than 60 air-conditioner, refrigerator and washing machine sales companies and
continued to segment operation entities.
——Comprehensively promoted the construction of specialized shops and the total number of
specialized shops reached over 10,000.
——Thoroughly pushed on the ―exploring the market in 1000 counties and 10000 towns‖
2010 Annual Report
39
program, vigorously developed town-level markets channels and outlets, and raised the total
number of sales outlets to nearly 60, 000, which effectively enhanced the influence of Midea
brand in county/town-level markets.
——Continued to implement the ―Total Customers' Satisfaction Project‖ with innovative
service philosophy, substantially expanded the coverage of air-conditioner, refrigerator and
washing machine service networks, built reputation of our services in the market through
efficient service mechanism and continuously improved customers' satisfaction with our
products. The service networks of Midea have covered all cities above county level and some
towns and the service responsiveness has been continuously improved. At the ceremony of the
Ministry of Commerce promulgating Three Major Service Standards of the Air-conditioner
Industry and awarding the First Outstanding Model Unit, Midea, by virtue of its sound service
networks, professional service techniques, timely response and other excellent performances,
won the title of First Outstanding Model Unit in Compliance with Three Major Service
Standards of the Air-conditioner Industry. In addition, the Company launched the ―ten-year
free repair‖ campaign for Midea Air-conditioner, Midea Refrigerator and Midea Washing
Machine together, setting a new record of the free repair period in the industry, and has
brought tangible benefits to consumers and promoted the further upgrade of industrial
standards.
Accelerated overseas disposition and steadily pushed on the internationalization process
——Based on the previous refrigerator/washing machine marketing integration, promoted the
integration of domestic sales and export businesses of refrigerators and central air-conditioner
systems, accelerated the construction of a unified overseas sales platform for multiple product
lines, completed the emigration overseas of regional headquarters and established several
national operation entities.
——Intensified channel cooperation, made greater efforts to create self-owned brand brands
and established the joint-venture sales companies in Thailand and Indonesia by drawing on
the experience of joint-venture sales companies in Brazil and Malaysia to directly control the
channels and vigorously promote the Midea brand.
——Continued to deepen the cooperation with strategic customers worldwide. In 2010, the
Company acquired part of the shares of Miraco, a subsidiary of Carrier in Egypt, to promote
2010 Annual Report
40
its business development in the Middle East and Africa.
Promoted technical innovations, increased technical input and ensured the drive of
sustainable development with the “technology-driven” strategy
——Established the refrigeration research institute and consolidated the fundamental, critical
and forward-looking technical researches, joined in the product development of various
business divisions to form a multi-level R&D system with clear hierarchy, well-defined
position and effective incentives, facilitated technical exchanges and synergistic innovations
and established a technical experts committee to carry out researches on variable frequency,
refrigeration, electric control, fluid and air duct, vibration, noise, and application of
engineering materials.
——As to residential air-conditioners, by mastering the 10-130 Hz frequency conversion
technology, Midea developed by itself products using the core technology of 180 degrees sine
wave D/C inverter technology, achieving the objective of ―broader frequency and more
comfortable‖ and firmly occupying the commanding ground of the industry. The Company is
the first company in China that masters the 1 Hz low temperature preheating technology and
has achieved major breakthrough in 0.1W ultralow- power standby technology. With its
inverter air-conditioner obtaining the certification certificate granted by UL, a US-based
authoritative international certification body, the Company became the first one around the
world obtaining UL certificate for fluorine-free inverter air-conditioners. The Company's
―Residential Air-conditioner Energy Efficiency Upgrade‖ project was regarded as national
energy saving and emission reduction key demonstration project and included in the central
government's budget; the ―Key Common Technology Research Project for Energy-saving and
Eco-friendly Air-conditioners‖ was listed in the International Science and Technology
Cooperation Program of the Ministry of Science and Technology. The first Q-HAP solar
air-conditioner developed by Midea by using several cutting-edge technologies including
―Quasi-DC grid technology‖, ―High-efficiency conversion technology‖, ―Adaptive MPPT
technology‖ and ―Preferential use of solar energy technology‖ is technologically advanced in
the world and has passed China’s 3C compulsory certification.
——As to central air-conditioners, Midea, owning the core technologies and providing
high-quality services, became the top central air-conditioner brand in China. Known as
2010 Annual Report
41
―expert in environmental control‖, the Company not only produces energy efficient products
but also provides a wide range of environmental solutions for real estate, rail transit,
communications and other industries. As the first manufacturer in China that possesses both
industry-leading multi-connected air-conditioner system and centrifuge technology, Midea has
developed the DC inverter air-conditioner, which has become one of the most competitive
products in the market and has been widely applied in a variety of key projects, including
service apartments for Shanghai World Expo, the headquarters economy area of Guangzhou
Science City, Beijing–Shanghai High-Speed Railway and over 20 venues and facilities of
Guangzhou Asian Games. With internationally advanced DC inverter technology and
outstanding energy efficient products, Midea central air-conditioner won the ―2010 China
Distinguished Contribution to Energy Saving‖ Award, was granted ―China Top Ten
Enterprises for Distinguished Contribution to Energy Saving for 2010‖ award and became the
only enterprise in the air-conditioner industry that was granted ―China Top Ten Enterprises for
Distinguished Contribution to Energy Saving for 2010‖ award. This is another award received
by Midea in energy-saving technology after Midea obtained the Energy-saving Engineering
In-service Inspection Conformity Certificate for its central air-conditioner system, the first of
its kind in China.
——As to washing machines, Little Swan Company Limited under the Company became a
representative manufacturer of the first group of homemade washing machines receiving the
―International Pure Wool Mark Certification Certificate‖. ―纯臻‖ series of front-loading
washing machines developed by Little Swan Company Limited made breakthroughs in
cleaning technology, with the washability ratio up to 1.25, far higher than the national
standard of 1.03. With eight intelligent innovative systems including the heat balance drying,
TS-Drive variable frequency, cleanness state monitoring system, water mist deep cleaning
system, gravity sensing system, silver ion sterilization system, air cleaning system and
high-efficiency washing, rinsing and self-cleaning technology system, the ―智臻‖ series of
fully intelligent front-loading washing machines provide users with the experience of global
intelligent operation. By employing four core technologies including ―steam wash‖, ―spray
water recirculation‖, ―intelligent drying‖ and ―D-PLUS variable frequency‖ and the
innovative GLC eco-friendly cleaning system, the ―爱尚‖ series of front-loading washing
machines are featured with high energy efficiency, super-low noise, variable water flow and
2010 Annual Report
42
high spin speed, which secured its technological leadership in the front-loading washing
machine industry. The exclusive core technology of ―automatic detergent dispensing device
for washing machines‖ developed by Little Swan has obtained the patent certificate issued by
the State Intellectual Property Office. The automatic dispensing technology is the first of its
kind in China, with all technical indicators reaching the internationally advanced level and
complying with the trend of energy efficient and environmentally friendly development.
——As to refrigerators, Midea refrigerator products passed several international authoritative
certifications, including the U.S. UL safety certification, the EU Energy Star certification and
TUV quality certification. The new high-end series launched by Midea, including European
style ―凡帝罗‖ luxury-door refrigerators, ―凡帝罗‖ side-by-side refrigerators, European style
―凡帝罗‖ 6F multi-function refrigerators, became the leader in the industry by virtue of
innovative ―dual high-moisture system‖ preservation technology, simple European styled
design and diversified and personalized product lines. The ―2010 China Refrigerator Industry
Summit‖ granted to Midea refrigerators the 2010 Low-carbon Contribution Award of the
Refrigerator Industry, the Pioneer Brand in China's High-end Market and the Best-selling
Brand of Home Appliances Going to Countryside. At the 2010 (third) China Annual
Conference of the Refrigerator Industry, Midea refrigerators won nine industrial prizes,
including the 2010 Distinguished Refrigerator Brand in Technological Innovation,
Best-Performance Brand in High-end Refrigerator Markets, Best Energy-saving Technology,
Best Air-Cooling Technology, Best Preservation Technology, and Best Industrial Design.
(3)Operating Results of our Principal Businesses
①Principal businesses by industry/product
Composition of operating revenue and profit by industry Unit: RMB'000
Breakdown by
industry Operating revenue Operating cost
Gross
profit
margin
Year-on-ye
ar increase/
decrease in
operating
revenue (%)
Year-on-year
increase/decr
ease in
operating
cost (%)
Year-on-year
increase/decr
ease in gross
profit margin
(%)
Air-conditioner
and components 48, 259, 281.54 39, 724, 711.24 17.68% 50.63 59.98 -4.81
Refrigerators and
components 9, 939, 276.02 8, 186, 418.78 17.64% 57.45 68.21 -5.27
Washing
machine and components
9, 729, 237.13 8, 047, 537.55
17.29% 63.10 77.60 -6.75
Others 6, 631, 091.43 6, 155, 534.48 123.95 124.21 -0.11
2010 Annual Report
43
7.17%
Total 74, 558, 886.12 62, 114, 202.05
16.69% 57.70 67.99 -5.10
Composition of operating revenue and profit by product Unit: RMB'000
Breakdown by
product
Operating
revenue Operating cost
Gross
profit
margin
Year-on-year
increase/
decrease in
operating
revenue (%)
Year-on-year
increase/
decrease in
operating cost
(%)
Year-on-year
increase/decreas
e in gross profit
margin (%)
Air-conditioner
and
components
48, 259, 281.54 39, 724, 711.24 17.68% 50.63 59.98 -4.81
Refrigerators
and
components
9, 939, 276.02 8, 186, 418.78 17.64% 57.45 68.21 -5.27
Washing
machine and
components
9, 729, 237.13 8, 047, 537.55 17.29% 63.10 77.60 -6.75
② Principal businesses by geographical region Unit: RMB'000
Geographical region Operating revenue Year-on-year increase/decrease in
operating revenue (%)
Domestic market 53, 980, 909.60 60.44%
Overseas market 20, 577, 976.52 50.95%
③ Major suppliers and customers Unit: RMB'000
Item Total amount for the top five Percentage to the annual total (%)
Suppliers 7, 304, 427.45 15.84
Customers 5, 157, 504.92 6.92
2010 Annual Report
44
(4)Items measured at fair value Unit: RMB'000
Item Opening amount
Gain or loss from the change in fair value for the year
Accumulative changes in fair value included in equity interest
Impairment provided for the year
Closing amount
Financial assets:
Of which: 1. Financial assets measured at fair value with fair value changes included in profit and loss for the year
28, 522.34 122, 982.15 15, 033.22 170, 210.20
Of which: derivative financial assets
28, 522.34 122, 982.15 15, 033.22 170, 210.20
2. Financial assets available for sale
312.82 312.82
Sub-total of financial assets
28, 835.16 122, 982.15 15, 033.22 - 170, 523.02
Financial liabilities 73.70 7, 481.43 7, 555.13
Investment real estate
-
Productive living assets
-
Others - Total 28, 908.86 130, 463.58 15, 033.22 - 178, 078.15
2010 Annual Report
45
(5) Analysis of changes in the composition of the Company's assets and expenses during
the reporting period
① Table of changes in assets composition and analysis of reasons for material changes
in assets and liabilities items
Table of assets composition Unit: RMB'000
Table of material changes in major assets and liabilities items Unit: RMB'000
Asset item
At the end of the reporting period Same period last year Increase/decrease
in percentage
(%) Amount Percentage of
total assets Amount
Percentage
of total
assets
Trade
receivables 4, 442, 125.80 10.56% 4, 666, 875.13 14.74% -4.18
Inventory 10, 436, 248.67 24.82% 5, 827, 507.52 18.41% 6.41
Investment real
estate 505, 404.75 1.20% 327, 441.11 1.03% 0.17
Long-term
equity
investment
781, 230.00 1.86% 374, 835.81 1.18% 0.67
Fixed assets 7, 672, 288.74 18.24% 5, 694, 023.84 17.99% 0.26
Construction in
progress 952, 216.43 2.26% 486, 632.30 1.54% 0.73
Short-term
borrowings 728, 562.71 1.73% 539, 688.83 1.70% 0.03
2010 Annual Report
46
Analysis of reasons for the changes:
Mainly due to the floating profits generated under the forward forex contracts held by the
Company, trading financial assets at the end of the reporting period increased by 452.41%
over the beginning of the period;
Mainly due to the increase of prepayments for raw materials and engineering equipment,
prepayments at the end of the reporting period increased by 214.76% over the beginning of
the period;
Mainly due to the enlargement of production and sales scales and the increase of stocks,
stocks at the end of the reporting period increased by 79.09% over the beginning of the
period;
Mainly due to the increase of amortized moulds within one year, other current assets at the
end of the reporting period increased by 115.89% over the beginning of the period;
Mainly due to an increase of long-term equity investment in Miraco in Egypt within the
reporting period, long-term equity investment at the end of the reporting period increased by
Item At the end 2010 At the end of 2009 Percentage of
increase/decrease
Trading financial
assets 150, 165.90
27, 183.74 452.41%
Prepayments 2, 544, 402.55
808, 353.86 214.76%
Inventory 10, 436, 248.67
5, 827, 507.52 79.09%
Other current assets 302, 017.70
139, 893.20 115.89%
Long-term equity
investment 781, 230.00
374, 835.81 108.42%
Investment real estate 505, 404.75
327, 441.11 54.35%
Construction in
progress 952, 216.43
486, 632.30 95.67%
Long-term deferred
expenses 274, 952.82
157, 885.38 74.15%
Notes payable 5, 699, 506.26
2, 986, 246.46 90.86%
2010 Annual Report
47
108.42% over the beginning of the period;
Mainly due to the completion of the construction of the Company's headquarter complex and
the conversion into fixed assets and partial lease of the complex, investment real estate at the
end of the reporting period increased by 54.35% over the beginning of the period;
Mainly due to the construction with self-owned funds of projects invested by funds raised
through non-public offering, the number of projects under construction at the end of the
reporting period increased by 95.67% over the beginning of the period;
Mainly due to the increase of long-term deferred expenses caused by the increase of moulds,
long-term deferred expenses at the end of the reporting period increased by 74.15% over the
beginning of the period;
Mainly due to the increase of sourcing scale and the majority use of notes in settlement, notes
payable at the end of the reporting period increased by 90.86% over the beginning of the
period.
② Explanation of significant changes in expense items Unit: RMB'000
Expense item Reporting period Same period last
year Increase/decrease
Percentage of
change (%)
Management
expenses 2, 663, 128.42 1, 660, 163.89 1, 002, 964.53 60.41%
Finance expenses 464, 055.87 222, 445.77 241, 610.10 108.62%
Analysis of reasons for the changes:
Mainly due to the expansion of scale and the increase of R&D input, management expenses
for the reporting period recorded a year-on-year increase of 60.41%;
Mainly due to the increase in interest expenses due to increased discount on notes and
increase in foreign exchange loss due to exchange rate fluctuations, financial expenses for the
reporting period recorded a year-on-year increase of 108.62%.
(6)Analysis of cash flows during the reporting period Unit: RMB'000
Item Reporting
period
Same period
last year Increase/decrease
Percentage of
change (%)
Net cash flow from
operating activities 5, 445, 721.00 2, 056, 466.98 3, 389, 254.02 164.81%
Net cash flow from -4, 212, 275.77 -1, 112, 635.55 -3, 099, 640.22 278.59%
2010 Annual Report
48
investing activities
Net cash flow from
financing activities 185, 088.15 743, 681.97 -558, 593.82 -75.11%
Analysis of reasons for the changes:
Mainly due to the increase of net profit and the decrease of operating receivables for
accelerated settlement, net cash flow generated from operating activities for the reporting
period recorded a year-on-year increase of 164.81%;
Mainly due to the year-on-year increase of fixed assets investment, net cash outflow from
investing activities for the reporting period recorded a year-on-year increase of 278.59%;
Mainly due to the completion of the Company's non-public offering of securities in the
previous year, net cash flow from financing activities for the reporting period recorded a
year-on-year decrease of 75.11%.
(7)Operating performance of the Company's principal subsidiaries and joint stock
companies Unit: RMB million
2010 Annual Report
49
Note: For information about Wuxi Little Swan Company Limited, a subsidiary in which the
Company has a controlling stake, please refer to its Annual Report 2010.
3. Future Outlook of the Company
(1)Industrial development trend and market forecast
Despite that China is a major producer and consumer of home appliance products, the overall
penetration rate is still relatively low. Benefiting from the implementation of governmental
policies, increase of resident income, urbanization process progress, increased demand for
upgrade and replacement and better export environment, as well as in consideration of the
typical urban and rural dualistic market structure and the lower penetration rate of home
appliances, in China, which is the only country in the world with the consumption demands
Company name
Equity
interest
(%)
Major product or
services
Registered capital
(RMB' 000) Total assets Net assets
Operating
revenue
Operating
profit Net profit
Guangdong Midea
Refrigeration
Equipment Co., Ltd.
80 Air-conditioner
manufacturing RMB854, 000.00 13, 665.36 1, 914.24 32, 867.65 -1, 727.15 521.21
Wuhu Refrigeration
Equipment Co., Ltd. of
Midea Group
80 Air-conditioner
manufacturing US$ 6, 928 3, 070.82 865.61 14, 244.43 572.06 477.01
Wuhan Refrigeration
Equipment Co., Ltd. of
Midea Group
80 Air-conditioner
manufacturing US$ 8, 000 1, 874.58 472.11 8, 670.82 286.83 255.82
Foshan Midea Kailian
Refrigeration
Equipment Co., Ltd.
60 Air-conditioner
manufacturing RMB 200, 000 537.10 246.69 1, 104.28 55.38 41.94
Guangdong Meizi
Refrigeration
Equipment Co., Ltd.
60 Compressor
manufacturing US$ 55, 270 4, 397.54 1, 345.20 8, 699.23 272.13 159.41
Guangdong Meizi
Precision Manufacture
Co., Ltd.
60 Compressor
manufacturing US$ 7, 740 1, 004.45 479.76 2, 692.76 118.76 100.26
Hefei Royalstar
Refrigerator Co., Ltd. 75
Refrigerator
manufacturing US$ 92, 110 3, 472.99 1, 595.77 8, 324.43 793.66 710.76
Guangzhou Hualing Air
Conditioning &
Equipment Co., Ltd.
100 Air-conditioner
manufacturing RMB 437, 575 989.84 655.27 4, 671.51 136.55 124.42
2010 Annual Report
50
exceeding twenty million air-conditioners, refrigerators, washing machines and other white
home appliances, there will be still considerable room for the growth of home appliance
demand in the foreseeable future, with the domestic demand market to grow steadily and the
export of home appliances to become more competitive. Meanwhile, industry integration and
brand concentration will be further enhanced, and industry leaders will capitalize on their
advantages of brand names, management, scale of operation, channels and technical
knowhow to enlarge their room for growth. ―Only the strong will get stronger‖ will be the
inevitable outcome of the competition.
(2)Business development plan for 2011
Adhering to the business philosophy of ―increasing the scale, guaranteeing profitability and
adjusting the product mix‖ and guided by the Company's Twelfth Five-year Plan, the
Company will push for healthy development spanning across all products.
①To advance the establishment of regional manufacturing layout in a large scale and focus on
regionalization of manufacturing layout, multi-product manufacturing synergy and
improvement of manufacturing technology and efficiency to consolidate the Company's
scaled and regionalized low-cost advantage.
②To accelerate the pace of making breakthroughs in new products and technologies, promote
the sales of the Company's key products and cutting-edge products and the development of
scaled growth capacity, and give play to the Company's advantage of product mix and
industry leadership.
③To continue to deepen the reform of marketing mechanism for the domestic market,
advance brand-oriented operation and real operation, strengthen the coordination of resources
in brand, channel, logistics, after-sales service, storage and personnel, segment the operation
entities, improve network construction, increase the input in brand and after-sales services,
improve market coverage and brand effect, and continuously improve the effect of marketing
consolidation of three major businesses.
④To continue to improve the disposition of overseas marketing bodies and manufacturing
bases, expand the overseas marketing network by means of proprietorship and joint venture;
to further decentralize operation and management authority, carry out the real operation of
2010 Annual Report
51
national corporations and stimulate operation vitality; to strengthen the cooperation with
international strategic partners, explore emerging markets and advance the acquisitions or
establishment by joint venture of state-owned factories of strategic emerging markets to
improve the global manufacturing layout.
⑤To deepen the ―technology-driven‖ strategy, strengthen the development of new products
and industrial expansion, and foster strategic products that support future development; to
persist in technical input, advance the rapid breakthrough of core technologies, and take the
leadership in the industry; to continue to improve multi-level technical R&D institutes and
institutional development, implement the project manager responsibility system; to continue
to make greater efforts to introduce professional talents to guarantee the research manpower
of key research platforms.
⑥To improve resource coordination and management consistency and enhance critical
business capabilities and system management quality. To continue to optimize supply chain
management, consolidate resource integration by deepening mechanism adjustment, and build
a supply chain system with competitive edges; to consolidate management fundamentals,
continuously improve basic systems, procedures, rules and standards, and advance
informatization; to strengthen rigid management of product quality and improve quality
management throughout the whole process from product design, technology
commercialization, quality to manufacturing consistency.
(3)Future Capital Expenditure Plan
During the Twelfth Five-year Plan period, the Company will persist in the business
philosophy of ―increasing the scale, guaranteeing profitability and adjusting the product mix‖
and adopt the strategy of ―technology driven, operations excellence, and globalization‖ to
continuously push forward reform and innovation, improve the global layout of
manufacturing bases and the operation of multi-product marketing platform, comprehensively
enhance technical capability and develop into a world-class supplier of white home appliances.
According to the Company's strategic plan for the Twelfth Five-year Plan period, the total
investment expenditure in various businesses for 2011 is expected to be approximately
RMB5.0 billion.
(4)Major Risk Factors Related to the Future Development
2010 Annual Report
52
①Material price fluctuations
Due to the impact of excess liquidity and scarcity of resources, the prices of main raw
materials for production, especially the price of copper as one of the essential raw materials
for refrigerator production, will continue to rise, which causes certain pressure on the
Company's cost management.
Measures to be taken: to further improve supply chain integration and mechanism
establishment, strengthen resource coordination, enhance the strategic partnership with
suppliers of critical resources, take advantage of its scale and reduce purchasing cost; to
rationalize internal cost control process, advance the fine-tuning and consistency management,
and gradually establish the new technology-driven advantage in cost; to increase efforts in
technical research and development and inputs and make bold practices in new materials, new
technologies and new techniques to achieve cost reduction driven by technical development;
to carry out intensive marketing by segmenting markets, channels and products, expand the
base of consumers, increase the market share, and set up barriers to competition; to safely
carry out futures operations for relevant large-volume raw materials and lock in the budgeted
cost through proper participation in futures hedging business; to optimize product mix by
increasing the percentage of high-end and high energy efficiency products to improve
profitability.
②RMB exchange rate fluctuations
The appreciation of the Renminbi has weakened the low-cost advantage and international
competitiveness of home appliance products from China. With China's furtherance of RMB
exchange rate regime reform and enhancement of RMB exchange rate flexibility, the
Renminbi will continue to appreciate, which will result in the risk of foreign exchange loss to
the Company.
Measures to be taken: on the basis of global strategic thinking, to actively carry out overseas
marketing transformation, take national marketing entities as the core of operations to build a
multi-product international marketing platform; to deepen the cooperative relationships with
overseas dealers and core major customers, enhance service ability and maintain stable
growth in orders and customers; to accelerate brand building, improve product quality, speed
up export product mix adjustment against different regional markets and different product
2010 Annual Report
53
types, and improve products' added value and international competitiveness; in addressing
foreign exchange risk, to reinforce dynamic control and information tracking mechanism, and,
to the extent of actual export receivables, to properly use appropriate foreign exchange
financial instruments to prevent and eliminate the risks.
③Trade barriers and technical barriers
As the tariff barriers are lowered, the impact of non-tariff barriers between countries has
become increasingly prominent. Main export areas of home appliances in China have
constantly raised the energy efficiency and environmental protection indexes and harmless
recycling standards for waste home appliances. Non-tariff barriers and trade frictions caused
by anti-dumping measures of some countries and regions have increased the cost burden of
home appliance enterprises and brought new challenges to market expansion.
Measures to be taken: to accelerate technical advancement and product upgrade, reinforce and
improve the levels of core technologies such as inverter, new refrigerant, and new type heat
exchanging technologies; to strengthen quality inspection and control, deepen technical
exchanges and cooperation, and continue to apply for relevant product certifications to meet
the demands of international competition requirement; to speed up the optimization of
overseas dispositions and actively promote inputs in and development of emerging markets,
develop a rational regional layout of manufacturing bases across the globe, and improve the
ratio of self-owned brands overseas.
(II)Investments during the Reporting Period
1. Use of funds raised during the reporting period
Under the CSRC Permit from China Securities Regulatory Commission [2009] No.668, on
July 30th
2009, the Company issued 189,106,922 RMB ordinary shares (A-shares) at an issue
price of RMB15.75 each by way of preferential placement to the existing holders of A-shares
on a pro rata basis, combined with online and offline issues of the remaining portion of the
shares at a fixed price. The Company raised a total of RMB2.978 billion from this issue,
representing net proceeds of RMB2.913 billion after deducting the issue expenses.
The following table shows the use of funds raised by the Company during the reporting
period: Unit: RMB'00 million
2010 Annual Report
54
Total funds raised 29.13 Total raised funds contributed during
the year 1.02
Total raised funds with purpose of use
being changed during the reporting period 0
Total accumulated raised funds
contributed 28.10
Total accumulated raised funds with purpose of use
being changed 0
Percentage of total accumulated raised funds with
purpose of use being changed 0
Committed investment project
Wh
ether a ch
ang
ed p
roject (in
clud
ing
partial ch
ang
e)
To
tal inv
estmen
t com
mitted
to b
e
con
tribu
ted fro
m fu
nd
raising
Ad
justed
total in
vestm
ent
Co
mm
itted co
ntrib
utio
n as at th
e end
of th
e perio
d (1
)
Am
ou
nt co
ntrib
uted
for th
e year
Accu
mu
lated co
ntrib
utio
n as at th
e end
of th
e perio
d (2
)
Differen
ce betw
een accu
mu
lated
con
tribu
tion
and
com
mitted
con
tributio
n as at th
e
end
of th
e perio
d (3
)
＝(2)-(1
)
Pro
gress o
f contrib
utio
n as at th
e end
of th
e perio
d (%
)(4)
＝(2)/(1
)
Th
e date o
n w
hich
the p
roject b
e ready
for in
tend
ed u
se
Ben
eficial result realized
for th
e year
Wh
ether ex
pected
ben
eficial result
was ach
ieved
An
y sig
nifican
t chan
ge in
pro
ject
feasibility
1. Project of acquisition of a 25%
stake in three companies
respectively including Hefei
Royalstar Refrigerator Co., Ltd.
No 1.43 1.43 1.43 0 1.43 0 100 2008.4 N/A N/A No
2. New refrigerator compressor
project No 3.08 3.08 3.08 0 3.08 0 100 2011.11 N/A N/A No
3. Refrigerator technological
upgrading and capacity expansion
project
No 3.39 3.39 3.39 0 3.39 0 100 2009.12 4.26 Yes No
4. Washing machine industrial park
phase II project No 5.41 3.77 3.77 0 3.77 0 100 2009.12 1.43 Yes No
5. Central air-conditioner
technological upgrading and
capacity expansion project
No 4.38 4.38 4.38 0 4.38 0 100 2010.12 4.01 Yes No
6. Residential air-conditioner
Shunde base capacity expansion
project
No 4.41 4.41 4.41 0 4.41 0 100 2009.1 2.27 Yes No
7. IT data center construction
project No 2.08 2.08 2.08 0.92 2.08 0 100 2010.10 N/A N/A No
8. Central research institute
construction project No 2.00 1.59 1.59 0.10 0.55 -1.03 34.89 2011.12 N/A N/A No
9. Supplementary liquidity No 5.00 5.00 5.00 0 5.00 0 100 2009.9 N/A N/A No
10. New residential air-conditioner
Vietnamese base project No 1.68 0 - - - - - - - - -
11. Residential air-conditioner No 2.70 0 - - - - - - - - -
2010 Annual Report
55
Wuhan base capacity expansion
project
Total - 35.56 29.13 29.13 1.02 28.10 -1.03 - - 11.97 - -
Conditions and reasons for not
achieving planned schedule or
expected gains (by particular
project)
①� Affected by factors of development progress and technology assimilation, the new refrigerator
compressor project is expected to be ready for intended use by November 2011; ②by reasons of
equipment sourcing and construction of the central research institute, the central research institute is
expected to be ready for intended use by December 2011.
Explanation for significant change
in project feasibility N/A
Change of place of implementation
for project invested by raised funds N/A
Adjustment of means of
implementation for project invested
by raised funds
N/A
Up-front contribution to and
replacement of project invested by
raised funds
Pursuant to the Audited Report in respect of Financing Projects Contributed in advance by GD Midea Holding
Co., Ltd. with Self-Raised Funds issued by Tianjian Guanghua (Beijing) Certified Public Accountants
Company Limited (Tian Jian Guang Hua Shen (2009) Zhuan Zi No.030021), as at August 22nd 2009, actual
investment contributed in advance in financing projects by the Company with self-raised funds amounted to
RMB1,325,479,600. Resolution Concerning Replacement of Self-Raised Funds Contributed in advance in
Financing Projects with Raised Funds was approved at the 26th meeting of the sixth Board of Directors of the
Company, whereby it was agreed that self-raised funds contributed in advance by the Company in financing
projects be replaced by the current raised funds of RMB1,325,479,600. In particular: ①replacement by raised
funds of RMB143 million for project related to the acquisition of 25% equity interest in each of Hefei
Royalstar Refrigerator Co. Ltd., Hefei Royalstar Washing Machine Manufacture Co., Ltd. and Hefei Royalstar
Midea Electric Appliance Marketing Co. Ltd.;② replacement by raised funds of RMB308 million for the new
refrigerator compressor project; ③ replacement by raised funds of RMB225 million for the washing machine
industrial park phase II project; ④ replacement by raised funds of RMB263 million for the central
air-conditioner technical reform and capacity expansion project; replacement by raised funds of RMB230
million for the residential air-conditioner Shunde base capacity expansion project; ⑤ replacement by raised
funds of RMB111 million for the IT data center construction project; and ⑥ replacement by raised funds of
RMB45 million for the central research institute construction project.
Provisional supplement of liquidity
using idle raised funds N/A
Amount of and reasons for raised
funds balance occurred after
project implementation
N/A
Use and whereabouts of unutilized
raised funds
As at December 31st 2010, an amount of RMB2.810 billion out of the raised funds has been utilized according
to the Letter of Intent in the prospectus, representing 96.46% of the net raised funds of RMB2.913 billion,
with the balance to be contributed in accordance with the successive contribution progress and schedule of the
projects.
Issues or other situations in relation
to the use and disclosure of raised
funds
N/A
2010 Annual Report
56
2. Major projects invested with non-raised funds
For the Company's headquarters complex project, the investment completed and accumulated
investment during the reporting period amounted to RMB423.98 million and RMB794.11
million, respectively. The headquarters complex is expected to commence operation by
September 2010 and will further strengthen the Company's headquarter in the centralized
management over headquarter functions of strategic administration and control, IT support,
fund control, basic technical research and development and cultural leadership etc.
(III)Changes in Accounting Policies and Accounting Estimates or Correction of Previous
Accounting Errors
During the reporting period, there has been no change in accounting policies and estimates or
correction of previous accounting errors.
(IV) Daily Work of the Board of Directors
1. Meetings and Resolutions of the Board during the Reporting Period
Meeting of the Board of
Directors
Date of
Meeting Newspaper for information disclosure
Date of
information
disclosure
The 31st
meeting of the sixth
Board of Directors 2010.01.08
China Securities Journal, Securities
Times, Shanghai Securities News 2010.01.09
The 32nd
meeting of the sixth
Board of Directors 2010.03.15
China Securities Journal, Securities
Times, Shanghai Securities News 2010.03.16
The 33rd
meeting of the sixth
Board of Directors 2010.03.30
China Securities Journal, Securities
Times, Shanghai Securities News 2010.03.31
The 1st meeting of the seventh
Board of Directors 2010.04.12
China Securities Journal, Securities
Times, Shanghai Securities News 2010.04.13
The 2nd
meeting of the seventh
Board of Directors 2010.04.22
China Securities Journal, Securities
Times, Shanghai Securities News 2010.04.23
The 3rd
meeting of the seventh
Board of Directors 2010.04.28
China Securities Journal, Securities
Times, Shanghai Securities News 2010.04.29
The 4th meeting of the seventh
Board of Directors 2010.05.27
China Securities Journal, Securities
Times, Shanghai Securities News 2010.05.28
The 5th meeting of the seventh
Board of Directors 2010.08.27
China Securities Journal, Securities
Times, Shanghai Securities News 2010.08.30
The 6th meeting of the seventh
Board of Directors 2010.10.25
China Securities Journal, Securities
Times, Shanghai Securities News 2010.10.26
The 7th meeting of the seventh
Board of Directors 2010.11.19
China Securities Journal, Securities
Times, Shanghai Securities News 2010.11.22
2010 Annual Report
57
The 8th meeting of the seventh
Board of Directors 2010.12.15
China Securities Journal, Securities
Times, Shanghai Securities News 2010.12.16
2. Execution of General Meeting Resolutions by the Board
(1)According to the profit distribution plan and the plan for capitalization from capital reserve
proposal for 2009 considered and approved at the 2009 Annual General Meeting convened on
April 12th
2010, the Company published the announcement on the implementation of dividend
distribution and capitalization of capital reserves for 2009 on May 7th
2010: based on a total
of 2,080,176,851 outstanding shares as at December 31st 2009, a cash dividend of RMB1.00
(including tax, actually RMB0.90 of cash dividends for individuals, securities investment
funds and qualified foreign institutional investors) will be distributed to all shareholders for
every 10 shares; 5 shares capitalized from capital reserve will also be distributed to all
shareholders for every 10 shares. The date of register was May 12th
2010, and the ex-right and
ex-dividend date and the date on which the distributed shares are recorded into shareholders'
securities accounts was May 13th
2010.
(2)According to the Resolution Concerning the Related-Party Transaction in respect of
Signing Financial Service Framework Agreement with Midea Group Co., Ltd. considered and
approved at the second extraordinary general meeting for 2010 convened on April 29th
2010,
Midea Group Co., Ltd. will procure its subsidiary Midea Group Finance Co., Ltd. (hereinafter
referred to as the ―Finance Company‖) to, according to the requests of the Company and the
subsidiaries under the Company, provide a range of financial services, including but not
limited to funds deposit, providing loans, discount on notes, guarantee and settlement services,
as well as other businesses that the Finance Company may engage in with the approval of
the China Bank Regulatory Commission. In order to regulate the related-party transactions
between the Company and Midea Group Finance Co., Ltd., the Risk Control System for
Related-party Transactions between GD Midea Holding Co., Ltd. and Midea Group Finance
Co., Ltd. was considered and approved at the seventh meeting of the seventh Board of
Directors convened on November 19th
2010 so as to effectively ensure the safety and liquidity
of the Company's deposits at the Finance Company. Meantime, Midea Group Co., Ltd. as the
controlling shareholder, issued to the Company the Letter of Commitment to guarantee
security of funds when the Company has any financial transactions with Midea Group
Finance Co., Ltd.
2010 Annual Report
58
(3) The Resolution Concerning Amending the Articles of Association of GD Midea Holding
Co., Ltd. was considered and approved at the third extraordinary general meeting 2010
convened on June 14th
2010. Due to the implementation of the plan for capitalization from
capital reserve for 2009, the Company's share capital changed. The Company has completed
the amendment to its Articles of Association and change registration with the local
administration of industry and commerce according to the resolution of the general meeting.
(4)According to the Resolution Concerning Compliance of the Company with the Conditions
for Non-public Issue of A Shares considered and approved at the fourth extraordinary general
meeting 2010 convened on September 17th 2010, the Company's Board of Directors, based
on the resolutions and authorization of the general meeting, rapidly initiated the Company's
non-public issuance of A shares. Pursuant to the Reply on the Approval of Non-public Issue
of Shares by GD Midea Holding Co., Ltd. under the CSRC Permit ([2011] No.84) from China
Securities Regulatory Commission, the funds raised by the Company through non-public
issuance of 264,082,374 A shares to 6 investors were transferred to the Company's Special
Fund-Raising Account on February 24th
2011. The Company raised a total of
RMB4,359,999,994.74 from this issue, representing net proceeds of RMB4,300,149,994.74
after deducting the issue expenses. The newly issued shares were listed on March 11th
2011.
3. Conclusive Report on Performance of Duties by the Audit Committee under the
Board
Pursuant to the Annual Auditing Procedures of the Audit Committee of the Company, we
hereby conclude on the performance of duties by the Audit Committee in 2010 and the annual
audit works conducted by Ascenda Certified Public Accountants, Ltd. as follows:
(1) Formulating overall audit plan
The Audit Committee, through discussion with the CPA Firm, formulated the overall audit
plan for 2010. Before the on-site auditing by the CPA Firm, the certified public accountants
for annual auditing held a communication meeting with independent directors of the Company,
and submitted the 2010 Financial Statements Audit Plan of Midea Electric Appliance and
relevant materials, in which the staff arrangements for annual auditing, auditing plans, key
audit points, auditing strategies and risk evaluation and judgment were determined.
2010 Annual Report
59
(2) Review of the financial statements of the Company
On January 25th
2011, the Audit Committee convened the 1st meeting of Audit Committee for
2011 at the Company's conference room and mainly reviewed the Company's financial
statements for 2010 at this meeting, made a comparison analysis and discussion on changes in
the respective financial data and indicators in the financial statements of the Company. All
members of the Audit Committee believed that, the financial statements prepared by the
Company were in compliance with the requirements of Accounting Standards for Business
Enterprises, relevant financial figures basically reflected the financial status as well as the
production and operation results and cash flow of the Company for the year ended December
31st 2010, and agreed that the audit work for 2010 was carried out on the basis of such
financial statements.
(3)CPA Firm started on-site auditing, urged by the Audit Committee in writing
During the period of on-site auditing conducted by the audit team of the CPA Firm, the Audit
Committee issued two Letters of Urging for Completion of Audit Work on February 21st 2011
and March 11th
2011 respectively, urging the CPA Firm to complete the audit work pursuant to
the overall work plan, so as to ensure the preparation and disclosure of the Company's annual
reports and related documents, and received the replies from the CPA Firm in response to the
letters thereof.
(4)CPA Firm issued initial audit opinions, and the Audit Committee formed a written opinion
after second review of the financial statements
On March 14th
2011, the CPA Firm issued initial audit opinions on the financial statements in
due course as arranged under the overall audit plan, and the Audit Committee convened the
2nd
meeting of the Audit Committee for 2011 on March 14th
2011, at which it reviewed the
financial statements after issuing of the initial audit opinions, and was of the view that, the
financial statements for 2010 prepared by the Company was in line with the requirements of
Accounting Standards for Business Enterprises, the CPA Firm issued an initial audit report for
the Company's financial statements with unmodified and unqualified opinions, that the
relevant financial figures in the financial statements reflected the financial status as at
December 31st 2010 as well as the production and operating results and cash flow of the
2010 Annual Report
60
Company for the year then ended, thus agreed that the Company's 2010 Annual Report and its
summary were prepared on the basis of such financial statements.
(5) The audit report for 2010 financial statements of the Company was finalized, and the CPA
Firm issued an audit report and other related documents for 2010. Then the Company's audit
work for 2010 was successfully completed.
On March 16th
2010, the CPA Firm completed the final audit report as scheduled under the
overall audit plan, and issued the Explanations Given by Certified Public Accountants
Concerning the Funds of GD Midea Holding Co., Ltd. Occupied by the Controlling
Shareholder and Other Related Parties in accordance with Standard No. 2 for Contents and
Format of Information Disclosure Made by Publicly Listed Companies (Contents and Format
of Annual Report) (as amended in 2007) and other requirements of the Company.
(6) Evaluation opinion of the Audit Committee on the audit work conducted by the CPA Firm
for 2010 and review of relevant resolutions
On the 3rd meeting of the Audit Committee for 2010 convened on March 16th 2011, the
following resolutions were unanimously approved by the members present at the meeting
with the result of 3 votes for consent, 0 vote for objection and 0 vote abstained:
a. Financial Statements Report for 2010 was considered and approved;
b. Full Text and Summary of 2010 Annual Report was considered and approved;
c. Evaluation Opinion on the 2010 Audit Work Performed by the Company's Auditor was
considered and approved.
Ascenda Certified Public Accountants, Ltd. completed its audit services outstandingly for the
Company's financial report for 2010. During the audit process, its auditing staff showed
excellent performance of duties and were meticulous and rigorous about their works. By
virtue of the consciousness, professional dutifulness and performance ability of its service, the
Audit Committee recommended that the Company re-appoint Ascenda Certified Public
Accountants, Ltd. as the Company's auditor for the 2011 financial report.
4. Conclusive Report on Performance of Duties by the Remuneration Committee under
the Board
2010 Annual Report
61
The Remuneration Committee's audit opinion on remunerations of the directors, supervisors
and senior executives during the reporting period:
Upon review on the information disclosed concerning annual remunerations of the directors,
supervisors and senior executives during the reporting period, all members of the
Remuneration Committee held that, the remunerations paid during the reporting period were
complied with the performance appraisal system of the Company established on the basis of
the goal-oriented responsibility system, with the total amount of remunerations including
basic salaries, bonus, subsidies, welfare funds as well as miscellaneous insurance premiums,
public reserve funds and other such payments by the Company, and that such information
gave a true view of the status of remunerations of the Company for the directors, supervisors
and senior executives during the reporting period.
(V) Implementation of the Management Measures for Insiders of Inside Information
In order to regulate management of the Company on its inside information, strengthen the
confidentiality of inside information of the Company and maintain the principle of fair
disclosure, in accordance with relevant laws, regulation and relevant provisions of the Articles
of Association and based on the actual conditions, the Company has formulated the Inside
Information Confidential System and the Internal Reporting System for Material Information,
which defines the scope of inside information, insiders of inside information and their scope,
registration management, confidentiality and relevant responsibilities. The Board of Directors
is the management body of inside information and the Secretary of the Board is the
responsible person for management of inside information. The Company has strengthened the
registration and supervision of insiders of its inside information and standardized the internal
circulating procedure for material information to ensure fair information disclosure and
prevent disclosure of inside information to external parties and occurrence of insider trding.
The Company strictly implemented the Management Measures for Insiders of Inside
Information and relevant policies, and prohibited the insiders from buying or selling the
Company's shares before disclosure of significant sensitive information that will affect the
Company's share price.
Through self-investigation, it is found that in 2010 no insiders bought or sold the Company's
shares by using inside information before the disclosure of significant sensitive information
2010 Annual Report
62
that affects the Company's share price, or were investigated and rectified by regulatory
authorities. It is also not founded that any insiders bought or sold the Company's shares in the
blackout period.
(VI) Profit Distribution Proposal of the Board for current year
As audited by Ascenda Certified Public Accountants, Ltd., the parent company of the
Company realized a net profit for 2010 of RMB1,001,891,930.67. Pursuant to the relevant
provisions under the Articles of Association, RMB100,189,193.07, being 10% of the statutory
surplus reserve was provided, plus undistributed profit at the beginning of the year of
RMB863,770,719.29, and deducting the distributed profit of RMB273,006,988.18, therefore,
the actual distributable profit shall be RMB1,492,466,468.71.
The proposed profit distribution plan for 2010 is as follows: on the basis of a total equity
capital of 3,384,347,650 shares (total shares after the non-public issuance) of the Company
currently, a cash dividend of RMB1.00 (including tax) will be paid for every 10 shares held,
resulting in a total cash payment of RMB 338,434,765.00, and the remaining balances of
RMB1,154,031,703.71 will be kept for distributing in subsequent years.
The proposal shall be submitted to the Company's annual general meeting for 2010 for
consideration.
Details of the Company’s distribution of cash dividends for the previous three years:
Year of
distribution
Cash dividends
amount (including
tax)
Net profit attributable to
shareholders of listed
company in the
combined statements for
the year of distribution
Ratio of distribution to
net profit attributable to
shareholders of listed
company in the
consolidated statements
Distributable
profit for the year
2009 208,017,685.10 1,847,747,930.00 11.00% 798,781,419.71
2008 189,106,922.90 1,025,304,190.00 18.44% 402,984,729.88
2007 504,285,314.40 1,193,466,811.98 42.25% 1,184,874,462.50
Ratio of accumulated cash dividends amount for the
previous three years to net profit for the previous year (%) 65.78%
(VII) Explanations Given by Certified Public Accountants Concerning the Funds of the
Company Occupied by the Controlling Shareholder and Other Related Parties
Ascenda Certified Public Accountants issued the Special Explanations on Funds Occupied by
the Controlling Shareholders and Related Parties of GD Midea Holding Co., Ltd. (ACPA
2010 Annual Report
63
(2011) T No. 150005) concerning the funds occupied by the controlling shareholders and
other related parties of the Company.
(VIII) Special Explanations Given by Independent Directors Concerning Cumulative
and Current Guarantees Provided by the Company to Other Parties and the Company
Executing Zheng Jian Hui [2003] No.56 Document.
As at December 31st 2010, except current operating funds, the controlling shareholder of the
Company neither occupied any funds of the Company nor conducted any occupation of the
funds of the Company that occurred in previous years and accumulated up to December 31st
2010.
The Company has not provided any guarantees to other parties except the controlling
shareholder or provided any guarantees for the shareholders of the Company, their controlled
subsidiaries, their affiliates, other related parties in which the Company holds less than 50%
shares, unincorporated entities or natural persons.
During the reporting period, according to the requirements of controlled subsidiaries in the
Company's consolidated statements for production and operation funds and the requirement
for business development, the Company provided guarantees for a total of 15 companies
including GD Midea Refrigeration Equipment Co., Ltd., a subsidiary of the Company. As at
December 31st 2010, the balance of guarantee was RMB3, 408.41 million, accounting for
27.63% of the Company's net assets. The decision-making and information disclosure
procedures for GD Midea to provide guarantees to controlled subsidiaries comply with
relevant laws, regulations, regulatory documents and relevant provisions under the Articles of
Association, and are legitimate and valid, which, in combination with the guarantee fees
charged to the non-wholly-owned controlled subsidiaries and intensified supervision of the
guarantee funds by GD Midea, will effectively reduce guarantee risks.
We believe that the Company has strictly observed its internal control systems and relevant
provisions of the Notice of China Securities Regulatory Commission Concerning Some Issues
on Regulating the Funds between Listed Companies and Associated Parties and Listed
Companies' Provision of Guaranty to Other Parties, Shares Listing Rules issued by Shenzhen
Stock Exchange, as well as the Articles of Association and the Internal Control System of the
Company, did not have its funds occupied by its related parties and provide guarantees in
2010 Annual Report
64
violation of the related regulations, rules or provisions, controlled the risk of external
guarantees and effectively protected the legal rights and interests of all the shareholders.
VIII. Supervisors’ Report
(I)Work of the Supervisory Board
During the reporting period, nine meetings of Supervisory Board were held. The Supervisory
Board participated in the decision-making of the Company concerning significant issues, and
performed its functions of overseeing and supervision in a serious and standardized manner in
promoting standardized operation of the Company and protecting the rights and interests of
the shareholders. The work of the Supervisory Board during the reporting period is described
as follows:
Meeting of the Supervisory
Board
Date of
meeting Items on the agenda of meeting
The 26th
meeting of the
sixth Supervisory Board 2010.01.08 Resolution Concerning Changing the Company's Auditor for 2009
The 27th
meeting of the
sixth Supervisory Board 2010.03.15
1. Work Report of the Supervisory Board for 2009; 2. Financial
Statements Report for 2009; 3. 2009 Annual Report and its
Summary; 4. Proposal Concerning Profit Distribution and
Capitalization from Capital Reserve for 2009; 5. Resolution
Concerning Ongoing Related Party Transactions for 2010; 6.
Resolution Concerning Guarantee Provided by the Company for
its Controlled Subsidiary; 7. Special Explanations Concerning the
Deposit and Use of the Raised Funds for the Year; 8. Internal
Control Self-Appraisal Report; 9. Resolution Concerning the
Election of the New Supervisory Board; 10. Resolution
Concerning Re-Appointment of CPA Firm
The 28th
meeting of the
sixth Supervisory Board 2010.03.30
1. Resolution Concerning the Election of Ms. Zeng Qiao as
Convener of the Supervisory Board Meetings of the Company; 2.
2010 Annual Report
65
Special Report of GD Midea Holding Co., Ltd. Concerning
Foreign Exchange Derivative Business for 2010; 3. Special Report
of GD Midea Holding Co., Ltd. Concerning Bulk Material
Hedging Business for 2010.
The 1st meeting of the
seventh Supervisory Board 2010.04.12
1. Resolution Concerning the Election of Ms. Zeng Qiao as
Convener of the Supervisory Board Meeting of the Company; 2.
Resolution Concerning Transfer of the Shares of Wuxi Little Swan
Huayin Electrical Appliance Co., Ltd. & Connected Transactions.
The 2nd
meeting of the
seventh Supervisory Board 2010.04.28 First Quarterly Report for 2010
The 3rd
meeting of the
seventh Supervisory Board 2010.05.27
1. Resolution Concerning Guarantee Provided for a Controlled
Subsidiary; 2. Resolution Concerning Amendment to the Articles
of Association
The 4th meeting of the
seventh Supervisory Board 2010.08.27
1. 2010 Interim Report and its Summary; 2. Resolution
Concerning Adjustment of Daily Related-Party Transaction
Amount for 2010; 3. Resolution Concerning the Company
Complies with the Conditions for Non-pubic Issue of A Shares; 4.
Resolution Concerning the Company's Scheme for Issuing A
Shares on Non-public Basis; 5. Proposal Concerning GD Midea
Holding Co., Ltd Issuing A-share on Non-public Basis; 6.
Resolution Concerning the Feasibility Report for the Investment
Project Using Funds Raised through Non-public Issue of A
Shares; 7. Report on the Use of Previously Raised Funds.
The 5th meeting of the
seventh Supervisory Board 2010.10.25 Third Quarterly Report 2010
The 6th meeting of the
seventh Supervisory Board 2010.12.15
1. Resolution Concerning Daily Related-Party Transactions of GD
Midea Holding Co., Ltd. for 2011; 2. Resolution Concerning
Transfer of the Shares of Wuxi Little Swan Huayin Electrical
Appliance Co., Ltd. & Related-Party Transaction
(II)Independent Opinions of the Supervisory Board
2010 Annual Report
66
Pursuant to the Company Law and the Articles of Association of the Company, the
Supervisory Board hereby expresses the following independent opinions in respect of the
Company's relevant matters during the reporting period:
1. The Company's Operations in Compliance with Law
During the reporting period, by attending the general meetings and the Board meetings of the
Company and in accordance with relevant laws, regulations and regulatory documents, the
Supervisory Board performed supervision on the convening and decision-making procedures
of the Board meetings and the General Meeting, execution of the resolutions of the general
meetings by the Board of Directors, and the performance of duties by directors and senior
executives of the Company. The Supervisory Board believes that the Board of Directors
carried out standardized operations pursuant to the Company Law, the Securities Law, the
Articles of Association and other relevant laws and regulations, strictly implemented the
resolutions of the general meetings, seriously performed its responsibilities and exercised its
powers, followed scientific and lawful decision-making procedures, established a
standardized and efficient corporate governance structure with balanced authority and
responsibility, and improved the Company's management systems; the Company established a
sound, rational and effective internal control system to sufficiently ensure the accuracy of
information and integrity of assets and to better protect the interests of small and
medium-sized shareholders and the Company. The directors, managers and other senior
executives of Company dedicated themselves to their posts, worked diligently, dared to
explore, abided by laws and rules, honestly and diligently performed their duties, and has not
engaged in any activities that violate any laws, regulations and the provisions of the Articles
of Association or cause damages to the interests of the Company or its shareholders.
2.Inspection on Financial Matters of the Company
The Company's Supervisory Board examined financial systems and financial status of the
Company in accordance with the law. The Supervisory Board believes that the Company's
Financial Statements for 2010 truly and fairly reflect the financial status and operating results
of the Company, and that the audit report with unmodified and unqualified opinions issued by
Ascenda Certified Public Accountants, Ltd. for the financial statements of the Company for
2010 is objective and fair.
3. Actual investment projects of the Company using the latest raised funds are exactly
2010 Annual Report
67
the same investment projects announced by the Company when raising the funds.
4. During the reporting period, the Company acquired and sold the assets at reasonable
prices, no insider trading was discovered and no damages to the interests of the
Company or losses to the assets of the Company were caused.
5. During the reporting period, there were related party transactions between the
Company and related parties, and such transactions were made on the fair and
reasonable basis and at fair prices. No damages were caused to the interests of the
shareholders being the non-related parties and interests of the listed company.
6. Opinion of the Company's Supervisory Board on the Internal Control Self-Appraisal
Report of the Company
Pursuant to the relevant provisions of the Basic Code on the Corporate Internal Control
jointly promulgated the Ministry of Finance and the China Securities Regulatory Commission
and Guidelines on Standardized Operations of the Companies Listed at Main Board issued by
Shenzhen Stock Exchange, Supervisory Board of the Company expressed its opinions on
internal control self-appraisal conducted by the Company as follows:
(1) Pursuant to the Company Law, the Securities Law, relevant regulations of China Securities
Commission and Shenzhen Stock Exchange, and other relevant laws and regulations of China,
taking into account the industry in which the Company operates as well as the operating mode,
assets structure and characteristics of the Company, the Company established and improved
corresponding internal control systems which ensured the normal implementation of the
Company's business activities and risk control, and guaranteed the security and integrity of
the Company's assets.
(2) The Company established a relatively sound internal organizational structure and the
internal audit department with full and appropriate staff, and thus ensured the sufficient and
effective implementation and supervision of major internal control activities of the Company.
(3) During the reporting period, the Company did not have any circumstances that violated
Guidelines on Standardized Operations of the Companies Listed at Main Board issued by
Shenzhen Stock Exchange and the Basic Code on the Corporate Internal Control of the
Company.
In summary, the Supervisory Board believes that the internal control self-appraisal report of
Company provides an overall, true and accurate presentation of the actual internal control
2010 Annual Report
68
status of the Company.
2010 Annual Report
69
IX. Significant Events
(I)Material litigations and arbitrations
The Company had no material litigation or arbitration during the year.
(II)Bankruptcy or restructuring related matters
There has been no bankruptcy or restructuring related matters occurred during the reporting
period.
(III)Acquisition and disposal of assets
1. On April 28th
2010, the Company, through its overseas wholly-owned subsidiary Midea
Electrics Netherlands B.V., signed an agreement with United Technologies Holdings B.V., a
wholly-owned subsidiary of United Technologies Corporation, and intended to purchase
32.5% of the shares in Miraco (Misr Refrigeration And Air Conditioning Manufacturing Co.)
held by the latter for a consideration of US$57.48 million.
Miraco is a listed company in Cairo Stock Exchange in Egypt and specializes in the
production and sales of household air conditioner, central air conditioner and cold chain
products. It takes the leading position in the Egyptian market of household air conditioner,
light-weight commercial air conditioner and central air conditioner and controls the
high-quality channel in Egypt, so it is a high-quality platform for the promotion and
integration of Midea brands in Africa. By purchasing a portion of Miraco’s shares, Midea
obtained the opportunities to invest in Miraco’s products, brands and markets, so as to help
the Company establish the strategic competitive advantage, expand its African market and
enhance its cost competitiveness in Egypt and neighboring regions.
On October 11th
2010, the Company made a public announcement that the Company
purchased 32.5% of Miraco’s shares and completed the registration of this share transfer.
2. On December 23rd
2009, the Company signed with Wuxi Little Swan Company Limited
(hereinafter referred to as ―Little Swan‖) the Agreement for Share Issue to and Assets
Acquisition from GD Midea Holding Co., Ltd. by Wuxi Little Swan Company Limited,
pursuant to which GD Midea intended to sell shares of US$94,145,000 (hereinafter referred to
as the ―Target Assets‖) directly held by it in Hefei Royalstar Washing Machine Manufacture
Co., Ltd. (hereinafter referred to as ―Royalstar Washing Machine‖), representing a 69.47%
2010 Annual Report
70
shares in Royalstar Washing Machine, to Little Swan, and subscribe for A-shares issued
non-publicly to the Company by Little Swan for a consideration of the Target Assets. Trading
price for the Target Assets was RMB732,100,200, therefore the number of shares required to
be issued to the Company by Little Swan for acquiring the Target Assets was 84,832,004
shares.
On November 10th
2010, CSRC approved that Little Swan carried out major assets
restructuring and issued 84,832,004 shares to the Company for acquiring related assets, and
approved that the Company was exempted from performing its due obligation of making a
general offer resulted from the Company holding the 247,193,729 shares in Little Swan
accounting for 39.08% of Little Swan’s total share capital after the Company’s shareholding
in Little Swan increased by 84,832,004 shares through this share purchase for a consideration
of its assets.
On November 15th
2010, the transfer of 69.47% shares of Royalstar Washing Machine held
by the Company was completed and registered with Hefei Administration for Industry and
Commerce, and the shares were transferred to Little Swan. On December 2nd
2010, the
84,832,004 A-shares issued non-publicly to the Company by Little Swan were listed at
Shenzhen Stock Exchange.
Upon completion of the abovementioned transaction, the horizontal competition will no
longer exist between Little Swan’s existing principal business and that of the Company.
Meanwhile, the abovementioned transaction has effectively facilitated consolidation of the
Company’s washing machine resources, enhanced further integration effects of the
Company’s washing machine assets in purchasing, research and development, logistic and
marketing channels, improved operating efficiencies, and reduced overall operating cost,
thereby enhancing the comprehensive competitiveness and profitability of the Company’s
washing machine business as a whole, which will produce positive effects on financial status
and operating results of the Company in the future.
(IV)Implementation of share incentive plan
The Company did not implement any share incentive plan during the reporting period. For
relevant information, please refer to the Remuneration Committee’s verification opinion on
the implementation of share incentive plan as set out in the Directors’ Report.
(V)Significant related-party transactions
2010 Annual Report
71
1. Related-party transaction relating to day-to-day operations
During the reporting period, the Company maintained related-party transactions in respect of
normal goods purchase/sale with related parties including Guangdong Welling Motor Co., Ltd.
and its subsidiaries, Foshan Wellkey Electrical Material Co., Ltd., Foshan Midea Household
Appliances Co., Ltd., Midea Group Co., Ltd. and its subsidiaries, and Foshan Shunde Century
S&T Development Co., Ltd and its related companies as follows:
Unit: RMB’000
Related party
Sale of goods and provision of
labour service to related party
Purchase of goods and receive labour
service from related party
Transaction
amount
Ratio to
comparable
transaction
amount
Transaction
amount
Ratio to comparable
transaction amount
Foshan Midea Household Appliances Co., Ltd. 58,373.29 0.09 36,967.01 0.06
Guangdong Welling Motor Co., Ltd. 2,446.63 0.00 1,048,611.26 1.60
Welling (Wuhu) Motor Manufacturing Co. Ltd. 929,408.78 1.41
Foshan Welling Electronic and Electric Appliances
Co., Ltd. 965.50 0.00 76,776.94 0.12
Foshan Welling Wash Motor Manufacture Co., Ltd. 20.40 0.00 627,375.60 0.95
Foshan Wellkey Electrical Material Co., Ltd. 688,958.29 1.05
Foshan Shunde Century Tongchuang Plastic
Industry Co., Ltd. 114,532.71 0.15 338,171.16 0.51
Wuhu Century Science & Technology
Development Co., Ltd. 44,991.75 0.06 248,368.08 0.37
Foshan Midea Kitchen-Bath Appliances
Manufacturing Co., Ltd. 3,050.06 0.00
Hefei Century Plastic Mold Science and
Technology Co., Ltd 145,472.01 0.20 220,434.17 0.34
Guangdong Midea Environment Appliances
Manufacturing Co., Ltd. 3,532.54 0.00 1,800.00
2010 Annual Report
72
Huai’an Welling Motor Manufacturing Co. Ltd. 3,812.50 0.01
Guangdong Midea Microwave Oven Manufacturing
Co., Ltd 11,453.64 0.02 - -
Total 388,651.03 0. 53 4,216,871.29 6.41
(1) Explanation on the necessity of related-party transactions
The routine transactions made by the Company with Midea Group Co., Ltd. and its related
parties helped the Company make full use of internal advantageous resources of the group, so
as to ensure stable product quality, reduce product costs and realize the effective allocation of
resources. Therefore, these transactions were quite necessary.
(2) Impact of the related-party transactions on the Company’s independency
Routine related-party transactions in goods purchase or sale carried out during the reporting
period do not have any adverse impacts on the interest and independency of the Company.
The Company will not rely significantly on any related party as a result of entering into
transaction with the related party.
2. Other related party transactions Unit: RMB’000
Name of related corporation Nature of
transaction
Amount incurred
during the year
Midea Group Co., Ltd. and its subsidiaries Receipt of trademark
licensing fees 46,533.91
Midea Group Co., Ltd. and its subsidiaries Rental fees 37,051.42
Midea Group Co., Ltd. and its subsidiaries Transportation
service 270,310.99
3. Deposits in and loans from related party
Pursuant to the Financial Service Framework Agreement signed between the Company and
Midea Group Co, Ltd., Midea Group Finance Co., Ltd. (the ―Finance Company‖) shall,
provide the Company and its subsidiaries with a series of financial services, including money
deposit, loan provision, notes discount, guarantee, settlement service and other services that
Midea Group Finance Co., Ltd. may provide with approval of CBRC.
By December 31st 2010, the balance of the Company’s funds deposited at Midea Group
Finance Co., Ltd. was RMB244.0118 million, and the balance of loan was RMB0.00
Various financial services provided by Midea Group Finance Co., Ltd. to the Company were
2010 Annual Report
73
priced on a fair and reasonable basis, not higher than the fair value in the market or the
standard stipulated by the People’s Bank of China. The maximum daily balance of funds of
the Company deposited at the Finance Company and the maximum daily balance of
outstanding loan granted by the Finance Company to the Company were determined
according to the historic data of deposits and loans between the Company and commercial
banks and the Company’s future business growth plan. The Company’s related party
transactions with Midea Group Finance Co., Ltd. would not affect the independence of the
Company.
In order to standardize the Company’s related party transactions with Midea Group Finance
Co., Ltd., the Company formulated the Risk Control System for Related Party Transactions
between GD Midea Holding Co., Ltd. and Midea Group Finance Co., Ltd., to further
guarantee the security and liquidity of the Company’s deposit at the Finance Company.
Meanwhile, Midea Group Co., Ltd. issued a letter of commitment to the Company to
undertake to guarantee the fund security during the financial transactions between the
Company and Midea Group Finance Co., Ltd.
The information on the risk control of Midea Group Finance Co., Ltd. can be found in the
Explanation on Risk Evaluation of Midea Group Finance Co., Ltd. issued by the Company
and the related review comments issued by the sponsor CITIC Securities Co., Ltd.
4. Related party transaction in respect of acquisition and disposal of assets
To meet the demands of industrial integration and business development, the Company’s
subsidiary Wuxi Little Swan Company Limited signed an agreement with Foshan Welling
Wash Motor Manufacture Co. Ltd. on December 15th
2010, pursuant to which the Company
transferred its 100% of shares of Wuxi Little Swan Company Limited to Foshan Welling
Wash Motor Manufacture Co., Ltd., for a consideration of RMB75 million, which was
determined according to the audited value of net assets and through negotiation between both
parties.
5. During the reporting period, there was no Related-Party Transaction occurring
in joint investment of the Company and related parties.
6. During the reporting period, there was no credit/indebtedness existed between
the Company and the related parties and the Company has provided no
guarantee for any related party.
2010 Annual Report
74
7. During the reporting period, there was no non-operating occupation of the
Company’s funds by existing major shareholder and its subsidiary corporations.
(VI)Major contracts and their performance
1. Escrow, contracting or lease of assets from or to other companies
No significant escrow, contracting or lease of assets to or from other companies was incurred
or subsisting during the reporting period.
2. Significant guarantees
The Company’s guarantees incurred or subsisting during the reporting period are detailed as
follows:
Unit: RMB’0000
The Company’s external guarantees (excluding guarantees provided for its subsidiaries)
Name of guaranteed party
Guarantee line related
announcement issuing
date and No.
Guarantee line
Date of occurrence (agreement
signing date)
Actual guaranteed
amount
Guarantee type
Guarantee period
Whether performanc
e was completed
Guarantee provided
for related party (yes
or no)
None - - - - - - - -
Total line of external guarantees approved during the reporting period (A1)
0.00 Actual amount of external guarantees provided
during the reporting period (A2) 0.00
Total line of external guarantees approved at the end of reporting period (A3)
0.00 Actual amount of external guarantees provided at
the end of reporting period (A4) 0.00
Guarantee provided by the Company for its subsidiaries
Name of guaranteed party
Guaranteed amount
limit announceme
nt issuing date and No.
Guaranteed amount limit
Date of occurrence (agreement
signing date)
Actual guaranteed
amount
Guarantee type
Guarantee period
Whether performanc
e was completed
Guarantee provided
for related party (yes
or no)
Guangdong Midea Refrigeration Equipment Co., Ltd.
Period of disclosure: March 16th and May 28th 2010
Announcement No.:
2010-009
2010-033
224,120.00 2008.01.01 50,707.00 Warranty 2013.12.31 No No
Midea Commercial Air Conditioning Equipment Co., Ltd., Guangdong Province
7,500.00 2008.01.01 1,715.00 Warranty 2013.12.31 No No
GD Midea Heating & Ventilating Equipment Co., Ltd.
65,000.00 2010.01.20 23,949.00 Warranty 2012.01.19 No No
Midea Group Wuhan Refrigeration Equipment Co., Ltd.
60,000.00 2010.09.30 23,000.00 Warranty 2011.09.29 No No
Guangdong Meizhi Refrigeration Equipment Co., Ltd.
8,000.00 2008.01.01 1,169.00 Warranty 2013.12.31 No No
GD Midea Group Wuhu Refrigerating Equipment Co., Ltd.
137,000.00 2010.01.03 55,000.00 Warranty 2011.01.02 No No
Anhui Meizhi Refrigeration Equipment Co., Ltd.
17,000.00 2010.01.14 9,350.00 Warranty 2011.01.13 No No
Hefei Hualing Co., Ltd 126,000.00 2010.03.01 49,470.00 Warranty 2011.02.28 No No
Hefei Midea Royalstar Refrigerator Co,.Ltd.
127,500.00 2010.03.01 79,764.00 Warranty 2011.02.28 No No
Chongqing Midea General Refrigeration Equipment Co, Ltd
18,000.00 2010.04.30 8,935.00 Warranty 2011.04.29 No No
2010 Annual Report
75
Little Swan (Jingzhou) Electric Appliance Co., Ltd.
45,300.00 2010.06.01 9,582.00 Warranty 2010.05.29 No No
China Refrigeration Industry Co., Ltd.
800.00 2010.08.01 800.00 Warranty 2011.02.28 No No
Hefei Midea Material Supply Co., Ltd.
40,000.00 2010.09.01 27,400.00 Warranty 2011.09.01 No No
Total of guaranteed amount limit approved and provided for subsidiaries during the reporting period (B1)
766,633.00 Actual amount of guarantees provided for
subsidiaries during the reporting period (B2) 766,633.00
Total of guaranteed amount limit approved and provided for subsidiaries at the end of reporting period (B3)
340,841.00 Actual amount of guarantees provided for
subsidiaries at the end of reporting period (B4) 340,841.00
Total amount of guarantees provided by the Company (namely total amount of the above two items)
Total amount of guarantees approved during the reporting period (A1+B1)
766,633.00
Actual amount of guarantees provided during the reporting period (A2+B2)
766,633.00
Total amount of guarantees approved at the end of reporting period (A3+B3)
340,841.00 Actual amount of guarantees provided at the end
of reporting period (A4+B4) 340,841.00
Ratio of total guarantee amount (i.e. A4+B4) to the Company's net asset (%) 27.63%
Of which:
Amount of guarantee provided for shareholders, beneficial controlling person and related party (C)
0.00
Amount of guarantee of indebtedness directly or indirectly provided for the guaranteed party with the asset-liability ratio of over 70% (D)
215,959.00
The portion of total guarantee amount in excess of 50% of net asset (E) 0.00
Total of the abovementioned three guarantee amounts (C+D+E) 215,959.00
Explanation on several and joint liability possibly borne for undue guarantee No
3. Entrusted financing and entrusted loans
During the reporting period, no entrusted financing and entrusted loan occurred in the
Company and no entrusted financing and entrusted loan was planned as at the end of the
reporting period.
4. Other material contracts
The Company had no other material contracts during the reporting period.
(VII)Commitment and details on its fulfillment
On November 19th
2010, Midea Group Co., Ltd. issued a letter of commitment to the
Company in order to guarantee the funds security during the financial transactions between
the Company and Midea Group Finance Co., Ltd. The Letter of Commitment is as follows:
To GD Midea Holding Co., Ltd.:
Whereas:
1. Your company has jointly invested with our Company and our subsidiary Guangdong
Welling Motor Co., Ltd. to establish Midea Group Finance Co., Ltd. (hereinafter referred to
as ―Finance Company‖). Our company holds 55% of its shares, your company holds 40% of
its shares and Guangdong Welling Motor Co., Ltd. holds 5% of its shares.
2010 Annual Report
76
2. Your company signed a Financial Service Framework Agreement with our company on
March 30th
2010, pursuant to which it is agreed that our company will urge the Finance
Company to provide your company and your subsidiaries with a series of financial services as
required by your company and your subsidiaries, including but not limited to deposit service,
loan service, discounting service, guarantee service, settlement service and other services
allowed by CBRC to be provided by the Finance Company.
In order to guarantee the legal operation of the Finance Company and guarantee the funds
security of your company during the financial transactions between your company and the
Finance Company, our company, as the controlling shareholder of the Finance Company,
hereby undertakes that:
1. The Finance Company is a corporate group finance company incorporated in accordance
with the Measures on Administration of the Finance Companies under Enterprises Groups,
related laws, regulations and regulatory documents. The Finance Company has worked out
various business rules and procedures, established and perfected its systems related to internal
control, finance and accounting, business risk control and business auditing, etc. Our
company will urge the Finance Company to perform its business activities in accordance with
the regulations and requirements of related laws, regulations and regulatory documents, as
well as the agreements in the Financial Service Framework Agreement signed between our
company and your company in the future, so as to ensure the funds security during the
financial transactions between your company and the Finance Company.
2. Whereas your company is independent from our company in terms of asset, business,
personnel, finance and organizational structure, etc., our company will continue guaranteeing
the independence of your company and fully respecting your company’s autonomy in
management, and allow your company to independently make decisions on the financial
businesses with the Finance Company according to the related regulatory provisions and the
actual needs for business and to perform the internal procedure in accordance with related
laws, regulations and your company’s Articles of Association, and will not interfere with your
company’s decisions.
3. According to the provisions of the Measures on Administration of the Finance Companies
under Enterprises Groups, our company will, when the Finance Company finds it difficult to
make payment, take effective measures including increase of the Finance Company’s share
2010 Annual Report
77
capital, according to the actual needs for overcoming such difficulty, to ensure the security of
funds of your company.
Our company will strictly keep the abovementioned undertaking to guarantee the funds
security of your company during the financial transactions between the Finance Company and
your company.
By the end of reporting period, Midea Group Co., Ltd. committed no act of breaking the
abovementioned undertaking.
(VIII)Details on activities of surveys, communications and interviews received or
conducted in the Company during the reporting period
Reception
Date
Reception
place Reception mode Visitors received
Key discussion topics and
provided information
2010-01-06 Company’s
Office
On-site survey CICC, Goldman Sacks
Discussions were mainly
on ① Operating
conditions and
development strategies of
the Company;
② Current status and
development of the
industry;
Information and report
provided: the Company’s
regular reports, public
announcement and others.
2010-01-07 Company’s
Office
On-site survey F&C Management Ltd (UK)
2010-01-22 Company’s
Office
On-site survey UBS Securities
2010-03-17
Company’s
Office
On-site survey Guotai Junan Securities, E Fund Management,
Da Cheng Fund, Boshi Fund, Penghua Fund,
Lion Fund
2010-03-18 Company’s
Office
On-site survey Everbright Securities
2010-03-19 Company’s
Office
On-site survey Taikang Asset Management
2010-04-16 Company’s
Office
On-site survey Shenyin & Wanguo, Ping An Securities,
Invesco Great Wall, Fullgoal Fund
2010-05-07 Company’s
Office
On-site survey Samsung Securities, Hamon Investment
Group, Swiss Bank, etc.
2010-05-17 Company’s
Office
On-site survey BOC International
2010-05-27 Company’s
Office
On-site survey CITIC Securities, First Capital
2010-06-03 Company’s
Office
On-site survey CICC
2010-06-11 Company’s
Office
On-site survey Morgan Stanley
2010-06-22 Company’s
Office
On-site survey Donghai Securities, Xiangcai Securities
2010-07-07 Company’s
Office
On-site survey Great Wall Securities
2010 Annual Report
78
2010-07-09 Company’s
Office
On-site survey Guangfa Securities
2010-07-22 Company’s
Office
On-site survey Value Partners Fund
2010-07-26 Company’s
Office
On-site survey Alliance Bernstein Hong Kong Fund
2010-08-06 Company’s
Office
On-site survey Essence Securities, Guoxin Securities,
Southern Fund
2010-08-30 Beijing Communication
with investors
Yinhua Fund, China AMC, ICBC Credit
Suisse, CICC, Galaxy Securities, Changsheng
Fund
2010-08-31 Shanghai Communication
with investors
China International, CITIC Securities,
Shenyin & Wanguo, Guotai Junan, Guojin
Securities, HSBC Jintrust Fund
2010-09-01 Shenzhen Communication
with investors
Boshi Fund, Da Cheng Fund, Penghua Fund,
Rongtong Fund, Lion Fund, Southern Fund,
Guoxin Securities, CJIS, China Merchants
Securities
Discussions were mainly
focused on ① Operating
conditions and
development strategies of
the Company;
② Current status and
development of the
industry; ③ Information
on private placement.
Information and report
provided: the Company’s
regular reports, public
announcement and others.
2010-09-03 Company’s
Office
On-site survey Ping An Securities, Changsheng Fund, Beijing
Dingtian Investment Management Company
2010-09-06
Company’s
Office
On-site survey
BEA
2010-09-17
Company’s
Office
On-site survey Penghua Fund, Da Cheng Fund, Yinhua Fund,
China AMC, CICC, Guojin Securities,
Shenzhen Baishan Venture Capital ,
Chongyang Investment, Cinda Securities
2010-10-11 Company’s
Office
On-site survey Haitong Securities
2010-11-01 Company’s
Office
On-site survey Guangfa Securities
2010-11-03 Company’s
Office
On-site survey CJIS, Guoxin Securities, Changjiang
Securities, Great Wall Fund
2010-11-04 Company’s
Office
On-site survey BNP Paribas Capital (Asia Pacific) Limited,
Guoxin Securities
2010-11-09 Company’s
Office
On-site survey Quam Securities
2010 Annual Report
79
2010-11-10
Company’s
Office Telephone
conference
China Life, Franklin Templeton Sealand Fund,
BOC International, Shanghai Jingqi
Investment
2010-11-16 Company’s
Office
On-site survey Credit Suisse Founder
2010-11-17
Company’s
Office
On-site survey Huashang Fund, Guojin Securities, Guotai
AMC
2010-11-18 Company’s
Office
On-site survey MATRIX CAPITAL MANAGEMENT
2010-11-23 Company’s
Office
On-site survey Guoxin Securities, Ping An Asset, First State
Cinda Fund
2010-12-22
Company’s
Office
On-site survey Turiya Advisors,
CITIC International Assets Management
Limited
2010-12-29 Beijing Communication
with investors
ICBC Credit Suisse, China Life, Aviation
Investment, ZRT, Huashang Fund, Taikang
Life, Lion Fund, New China Life, Yale
University, ZEG
(IX)The Company’s performance of its social responsibilities during the reporting
period
The Company has put much emphasis on the needs and benefits of the staff, customers,
environment, society, cooperation partners and shareholders. It insists on a harmonious
relationship and cohabitation with all parties and adheres to the principles of good faith and
commitment. It complies with laws and moral standards and reinforces the communication
and coordination with the interested parties. It also actively bears the social responsibility of
an enterprise and strive to achieve the sustainable development of the society and
environment (details of which can be found in the separately published Social Responsibility
Report).
(X)Other major issues
1. Shareholdings in other listed companies (held for Wuxi Little Swan Company Limited)
Unit: RMB
Stock code Stock name Initial
investment
amount
Percentage of
shareholding
in the
company
Carrying value
as at the end of
the period
Profit and loss
for the reporting
period
Change in owner’s
equity interest for
the reporting period
Accounting
calculation item
Source of
shares
2010 Annual Report
80
400038 Huaxin Hi-tech 100,300.00 0.01% 321,816.00 0.00 0.00 Financial assets
available for sale
Non-public
issue
Total - 100,300.00 - 321,816.00 0.00 0.00 - -
2. The Company’s shareholdings in non-listed financial corporations and companies to
be listed Unit: RMB
Investee held Initial investment
amount
Number of shares
held
Percentage of
shareholding
in the
company
Carrying value
as at the end of
the period
Profit and loss
for the reporting
period
Change in owner’s
equity interest for the
reporting period
Accounting
calculation item
Source of
shares
Golden
Eagle Asset
Management
Co.
20,000,000.00 20,000,000.00 20% 7,242,056.53 -5,589,774.35 -5,589,774.35 Long-term
equity
investment
Established by
way of
promotion
Bank of
Jiangsu Co.,
Ltd.
1,100,000.00 2,202,564.00 - 1,210,000.00 - - Long-term
equity
investment
Non-public
issue
Note: Bank of Jiangsu Co., Ltd. is held by the Company’s controlled subsidiary Wuxi Little
Swan Company Limited
3. Investment in derivatives
① Positions held in derivatives investment as at the end of the reporting period
Unit: RMB’000
Contract type
Contract
amount at the
beginning of
the period
Contract amount
at the end of the
period
Profit and loss for
the reporting
period
Ratio of contract
amount at the end
of the period to the
Company’s net
asset at the end of
the period (%)
Futures hedging
contracts 1,338.60 20,044.30 127,886.60 0.16
Forward forex
contracts 27,110.00 142,610.77 208,285.56 1.16
Total 28,448.60 162,655.07 336,172.16 1.32
Note: Contract amount of positions held at the beginning/end of period represented fair value of the
contracts.
2010 Annual Report
81
②Details of derivatives investment
Risk analysis of positions held in derivatives during the
reporting period and explanation of control measures
(including, inter alia, market risk, liquidity risk, credit risk,
operational risk and legal risk)
For the sake of eliminating the cost risk of the Company’s bulk
purchases of raw materials as a result of significant fluctuations in raw
material prices, the Company carried out hedging business for some
of its copper, aluminium and plastic materials to timely lock in some
of the material costs according to spot market status within the
purchase price range determined under the annual budget to reduce
the uncertainty risk of the Company’s operations caused by spot
market price fluctuations; meanwhile, the Company conducted certain
forex funds businesses by making use of bank financial instruments to
eliminate the risks caused by exchange rate and interest rate
fluctuations, to maintain and increase the value of foreign exchange
assets, reduce foreign exchange liabilities and make a cost lock-in.
The Company has considered and formulated Administrative
Measures for Futures Hedging Business and Administrative Measures
for Forex Funds Business to perform sufficient evaluation and control
against derivatives investment and position risks. Details of which are
described as follows:.
1. Legal risks
The Company’s hedging and forex funds businesses shall be
conducted in compliance with laws and regulations, with clearly
covenanted responsibility and obligation relationship between the
Company and the agencies.
Control measures: the Company designated relevant responsible
departments to enhance learning of laws and regulations and market
rules; stringent examination and verification of contracts; well-defined
responsibility and obligation; strengthen compliance check; and to
ensure that the Company’s derivatives investment and position
operations are in compliance with the requirements of the laws and
regulations and internal management system 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
hedging business and forex funds business.
Control measures: relevant management system of the Company has
clearly defined the functions and responsibility as well as review and
approval process for the hedging business and forex funds business,
established a comparatively well-developed monitoring mechanism,
and effectively reduced operational risk by strengthening risk control
over the business process, decision-making process and trading
process.
3. Market risk
Uncertainties caused by changes in the prices of bulk commodity and
2010 Annual Report
82
in exchange rate in foreign exchange market could lead to greater
market risk in the futures business and forex funds business.
Meanwhile, inability to raise sufficient funds to establish and maintain
hedging positions during the futures hedging operations or the forex
funds required for performance during the forex funds operations
being unable to be credited into account could result in hedging loss
and default risks.
Control measures: the futures hedging business and forex funds
business of the Company shall always be conducted by observing
prudent operation principles while no speculative trading shall be
allowed. As to hedging business, the hedging volume shall be
determined strictly according to the requirement of production &
operations and application for futures transaction shall be made
accordingly. The hedging volume shall in principle not exceed
one-third of the estimated annual demand, and stop-loss mechanism
shall be implemented; to establish futures risk measuring system to
measure and calculate the margin amount occupied, floating gains and
losses, margin amount available and margin amount required for
intended positions to determine the prepared margin amount which
may be required to be supplemented. As to forex funds business, a
hierarchical management mechanism has been implemented whereby
application for funds business is submitted by the operating unit, risk
analysis must be made on the conditions and environment affecting
operating profit and loss, to evaluate the possible greatest revenue and
loss, and report the greatest acceptable margin ratio or total margin
amount. The Company will update operating status of the funds
business on a timely basis to ensure proper funds arrangement before
the expiry dates.
Changes in market price or fair value of derivatives product
invested during the reporting period: specific methods used and
relevant assumption and parameter settings shall be disclosed
for analysis of fair value of derivatives
1. Profit/loss from futures hedging contracts incurred during the
reporting period was RMB127 million;
2. Profit/loss from forward forex contracts incurred during the
reporting period was RMB208 million;
3. Public quotations in futures market or forward forex quotations
announced by Bank of China are used in the analysis of derivatives
fair value.
Explanation of significant changes in accounting policies and
specific financial accounting principles in respect of the
Company’s derivatives for the reporting period as compared to
the previous reporting period
No change
Special opinions expressed by independent directors concerning
the Company’s derivatives investment and risk control
The Company’s independent directors are of the view that the futures
hedging business is an effective instrument for the Company to
eliminate price volatility and implement risk prevention measures
through enhanced internal control, thereby improving the operation
2010 Annual Report
83
and management of the Company; the Company further improves its
foreign exchange risk management capability and maintains and
increases the value of foreign exchange assets through the forex funds
business; and the abovementioned investment in derivatives can help
the Company to exert in full its competitive advantages and therefore
it is practicable for the Company to carry out derivatives investment
business and the risks are controllable.
3. Items of other comprehensive income
Unit: RMB’000
Item Amount in current
period
Amount in previous
period
1. Gains (losses) arising from financial assets available for
sale -5,128.21
Less: Effects of income tax arising from financial assets
available for sale -769.23
Net amount carried forward from other comprehensive
income in the previous period to profits and losses of the
current period
Sub-total -4,358.98
2. Share of other comprehensive income of investee
company calculated on equity basis
Less: Effects of income tax arising from the share of other
comprehensive income of investee company calculated on
equity basis
Net amount carried forward from other comprehensive
income in the previous period to profits and losses of the
current period
Sub-total
3. Gains (losses) arising from cash flow hedging tools 18,705.70 159,225.79
Less: Effects of income tax arising from cash flow hedging
tools 4,676.42 39,806.44
Net amount carried forward from other comprehensive
income in the previous period to profits and losses of the
current period
Adjusted amount carried forward to initial amount
recognized for hedged items
Sub-total 14,029.27 119,419.35
4. Translation difference arising from foreign exchange
financial statements 30,414.78 -13,096.66
Less: Disposal of net amount of overseas operations carried
forward in the current period
Sub-total 30,414.78 -13,096.66
5. Others
Less: Effect of income tax arising from inclusions in other
2010 Annual Report
84
comprehensive income from others
Net amount carried forward from other comprehensive
income in the previous period to profit and loss in the
current period
Sub-total
Total 44,444.06 101,963.71
(XI)Appointment, dismissal and remuneration of Certified Public Accountants
During the reporting period, upon review and approval at 2009 annual general meeting of the
Company convened on April 12th
2010, Ascenda Certified Public Accountants has been
engaged by the Company to audit the Company’s finance for the year of 2010. In 2010, a
remuneration of RMB3.30 million (with travel expenses being borne by the Company) was
paid to Ascenda Certified Public Accountants by the Company.
(XII)During the reporting period, none of the Company, or its directors, supervisors,
senior executives, shareholders or beneficial controlling persons were investigated by
competent authorities, taken compulsory measure against by judicial organs or
discipline inspection departments, removed to judicial departments or prosecuted for
criminal liabilities, inspected and imposed administrative penalty upon by CSRC,
prohibited from participating in the securities market, punished by other
administrative departments due to having been identified as inappropriate persons or
censured by the stock exchange in public.
2010 Annual Report
85
X. Financial Accounting Report
(I) Audit Report (attached hereinafter)
(II) Accounting Statements (attached hereinafter)
(III) Notes to the Accounting Statements (attached hereinafter)
XI. List of Documents Available for Reference
(I) The original of the Annual Report 2010 of GD Midea Holding Co., Ltd. bearing the
personal signature of the legal representative of the Company;
(II) The financial statements bearing the signature of the legal representative, person in
charge of finance, accounting officer of the Company and sealed;
(III) The original of the audit report bearing the seal of the accountant firm and the
personal signatures of the certified public accountants;
(IV) The originals of all the documents of the Company publicly disclosed in the
designated newspapers for information disclosure and originals of the announcements of
the Company during the reporting period;
(V) The electronic version of the Annual Report 2010 of the Company released on
http://www.cninfo.com.cn.
GD Midea Holding Co., Ltd.
Legal representative: Fang Hongbo
March 16th
2011
Audit Report
on Financial Statements for 2010
Of
GD Midea Holding Co., Ltd.
Tian Jian Zheng Xin Shen (2011) GF Zi No.150008
天天 健健 正正 信信 会会 计计 师师 事事 务务 所所
Ascenda Certified Public Accountants
Audit Report
Tian Jian Zheng Xin Shen (2011) GF Zi No.150008
To: All the Shareholders of GD Mid ea H old in g C o . , L td .
We have audited the financial statements of G D M id ea H ol d i n g Co . , Lt d . (hereinafter
referred to as ―Midea Electric Appliance‖) attached hereinafter, including the consolidated
balance sheet and balance sheet as at December 31st, 2010, the consolidated profit and loss
statement, profit and loss statement, consolidated cash flow statement, cash flow statement,
consolidated statement of changes in equity and statement of changes in equity for the year
ended December 31st, 2010, as well as the notes to these financial statements.
I. Responsibility of Midea Electric Appliance’s Management for the Financial
Statements
Responsibility of Midea Electric Appliance’s Management is to prepare these financial
statements in accordance with the Accounting Standards for Business Enterprises. This
responsibility includes (1) designing, implementing and maintaining internal control relevant
to the preparation of financial statements so that they are free from material misstatement,
whether due to fraud or error; (2) selecting and applying appropriate accounting policies; and
(3) making accounting estimates that are reasonable in the circumstances.
II. Responsibility of Certified Public Accountants
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the Independent Auditing Standards for Chinese
Certified Public Accountants. Those Standards require that we comply with the requirements
of the professional ethics, and plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement.
An audit involves performing the audit procedures to obtain the audit evidence supporting the
amounts and disclosures in the financial statements. These audit procedures selected depend
on judgment of the certified public accountants, including the assessment of the risk of
material misstatement in the financial statements, whether due to fraud or error. When making
those risk assessments, we gave due consideration to the internal control relevant to the
preparation of financial statements to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
internal control. An audit also includes evaluating the appropriateness of the accounting
policies used and the reasonableness of accounting estimates made by the management, as
well as evaluating the overall presentation of the financial statement.
We believe that the audit evidences we have obtained are sufficient and appropriate to provide
a basis for our audit opinion.
III. Audit Opinion
In our opinion, the financial statements of Midea Electric Appliance have been prepared in
accordance with the requirements of the Accounting Standards for Business Enterprises, and
give a true and fair view of financial position of Midea Electric Appliance as at December 31st
2010 and its profit and cash flows for the year then ended.
Chinese Certified Public Accountant
Ascenda Certified Public Accountants, Ltd. Liu Zhiyong
Beijing, China
Chinese Certified Public Accountant
Zhou Rongming
Date: March 16th
, 2011
Consolidated Balance Sheet December 31
st, 2010
Prepared by GD Midea Holding Co., Ltd. Unit: RMB’000
Assets Note Amount
at the End of the Year
Amount
at Beginning of the Year
Current Assets:
Monetary fund V(i) 5,802,686.28 3,855,082.14
Trading financial assets V(ii) 150,165.90 27,183.74
Notes receivable V(iii) 3,871,019.54 5,448,452.41
Accounts receivables V(iv) 4,442,125.80 4,666,875.13
Prepayments V(v) 2,544,402.55 808,353.86
Interests receivable -- --
Share dividends receivable -- --
Other receivables V(vi) 468,132.71 358,630.98
Inventories V(vii) 10,436,248.67 5,872,507.52
Non-current assets due within one
year
-- --
Other current assets V(viii) 302,017.70 139,893.20
Total of current assets 28,016,799.15 21,131,978.98
Non-current assets:
Financial assets available for sale V(ix) 312.82 312.82
Held-to-maturity investment -- --
Long-term receivables -- --
Long-term equity investment V(xi) 781,230.00 374,835.81
Investment real estate V(xii) 505,404.75 327,441.11
Fixed assets V(xiii) 7,672,288.74 5,694,023.84
Construction in progress V(xiv) 952,216.43 486,632.30
Engineering materials -- --
Liquidation of fixed assets -- --
Intangible assets V(xv) 1,552,462.52 1,220,852.49
Development expenditures -- --
Goodwill V(xvi) 1,473,527.23 1,473,527.23
Long-term deferred expenses V(xvii) 274,952.82 157,885.38
Deferred income tax assets V(xviii) 824,843.06 790,137.51
Other non-current assets -- --
Total of non-current assets 14,037,238.37 10,525,648.49
Total of assets 42,054,037.52 31,657,627.47 Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Consolidated Balance Sheet (Continued) December 31
st, 2010
Prepared by GD Midea Holding Co., Ltd. Unit: RMB’000
Liabilities and Shareholder’s Equity Note Amount
at the End of the Year
Amount
at Beginning of the Year
Current Liabilities:
Short-term borrowings V(xx) 728,562.71 539,688.83
Trading financial liabilities V(xxi) 7,555.13 73.70
Notes payable V(xxii) 5,699,506.26 2,986,246.46
Accounts payable V(xxiii) 11,023,051.19 9,216,013.20
Account received in advance V(xxiv) 1,793,679.54 1,007,256.20
Wages payable V(xxv) 791,907.27 559,148.50
Taxes Payable V(xxvi) (417,208.53) 182,866.99
Interests payable -- --
Dividends payable V(xxvii) 3,305.61 3,553.83
Other payables V(xxviii) 337,014.68 323,047.84
Non-current liabilities due within
one year
-- --
Other current liabilities V(xxix) 5,220,744.41 4,041,527.90
Total of current liabilities 25,188,118.27 18,859,423.45
Non-current liabilities
Long-term loan V(xxx) 393,809.39 --
Bonds payable -- --
Long-term accounts payable -- --
Special accounts payable -- --
Estimated liabilities V(xxxi) 18,487.80 11,213.50
Deferred income tax liability V(xviii) 62,900.36 55,437.23
Other non-current liabilities 8,024.86 3,679.00
Total of non-current liabilities 483,222.41 70,329.73
Total of liabilities 25,671,340.68 18,929,753.18
Shareholder’s equity:
Share capital V(xxxii) 3,120,265.28 2,080,176.85
Capital reserve V(xxxiii) 2,092,101.33 2,651,774.43
Less: treasury stock -- --
Special reserve -- --
Surplus reserve V(xxxiv) 741,469.17 676,479.87
Undistributed profit V(xxxv) 6,367,622.21 3,513,531.80
Difference due to currency conversion
from balance sheet in foreign currency
14,879.44 (15,535.34)
Total of equities attributable to the
parent company owner
12,336,337.43 8,906,427.61
Minority interest 4,046,359.41 3,821,446.58
Total owners’ equity 16,382,696.84 12,727,874.29
Total of liabilities and owner’s equity 42,054,037.52 31,657,627.47 Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Consolidated Profit and Loss Statement
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Items Note Amount for Current
Year
Amount for
Previous Year
I. Total operating revenue 74,558,886.12 47,278,248.26
Of which: Operating revenue V(xxxvi) 74,558,886.12 47,278,248.26
II. Total operating costs 72,254,549.86 44,817,751.52
Of which: operating costs V(xxxvi) 62,114,202.05 36,975,215.84
Business tax and surcharge V(xxxvii) 85,789.38 60,565.82
Sales expenses V(xxxviii) 6,943,427.31 5,730,733.32
Management expenses V(xxxix) 2,663,128.42 1,660,163.89
Financial expenses V(xl) 464,055.87 222,445.77
Asset impairment losses V(xli) (16,053.17) 168,626.88
Plus: Incomes from change of fair value (―-‖ sign
indicates deficit)
V(xlii) 118,069.08 27,126.91
Investment income V(xliii) 134,312.45 32,124.94
Of which: Gains on investment in the
associates and joint ventures
51,219.27 9,463.52
III. Operating profit (―-‖ sign indicates deficit) 2,556,717.79 2,519,748.59
Plus: non-operating income V(xliv) 2,570,296.44 396,422.37
Less: non-operating expenditures V(xlv) 163,843.45 163,342.12
Of which: losses from disposal of non-current
assets
42,755.05 133,940.77
IV. Gross profits 4,963,170.78 2,752,828.84
Less: Income tax expense V(xlvi) 919,932.16 238,962.59
V. Net profit 4,043,238.62 2,513,866.25
Of which: Net profit realized before acquisition
by the acquiring company
-- --
Net profit attributable to shareholders of parent
company
3,127,097.38 1,847,747.93
Profit and loss of minority shareholders 916,141.24 666,118.32
VI. Earnings per share:
(i) Basic earnings per share V(xlvi) 1.00 0.82
(ii) Diluted earnings per share V(xlvii) 1.00 0.82
VII. Other comprehensive income V(xlviii) 44,444.06 101,963.71
VIII. Total comprehensive income 4,087,682.68 2,615,829.96
Total comprehensive income attributable to
owners of parent company
3,172,112.84 1,951,491.09
Total comprehensive income attributable to
minority shareholders
915,569.84 664,338.87
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Consolidated Cash Flow Statement For the Year Ended December 31
st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Items Note Amount for Current
Year
Amount for Previous
Year
I. Cash flows from operating activities: - -
Cash received from sales of goods and provision of labor
services
35,659,917.64 27,394,118.51
Refunds of taxes received 1,507,128.01 444,467.35
Other cash received relating to operating activities V(xlix) 3,063,219.20 567,171.56
Sub-total of cash inflows from operating activities 40,230,264.85 28,405,757.42
Cash paid for goods and services 20,778,842.57 17,022,905.47
Cash paid to and on behalf of employees 3,404,597.74 1,926,291.77
Taxes paid 2,276,786.07 1,794,101.67
Other cash paid relating to operating activities V(xlix) 8,324,317.47 5,605,991.53
Sub-total of cash outflows from operating activities 34,784,543.85 26,349,290.44
Net cash flows from operating activities 5,445,721.00 2,056,466.98
II. Cash flows from investing activities:
Cash received from recouping the investment -- 14,408.53
Cash received from Investment incomes 108,056.38 46,982.12
Net cash received from disposal of fixed assets, intangible assets,
and other long-term assets
32,321.05 159,050.93
Net cash received from disposal of subsidiaries and other
operating units
17,695.84 38,631.45
Other cash received relating to investing activities -- --
Sub-total of cash inflows from investing activities 158,073.27 259,073.03
Cash paid to acquire fixed assets, intangible assets and other
long-term assets
3,937,180.37 1,123,105.38
Cash paid for making investments -- 20,334.68
Net cash paid to acquire the subsidiaries and other business units 433,168.67 228,268.52
Other cash paid relating to investing activities -- --
Sub-total of cash outflows from investing activities 4,370,349.04 1,371,708.58
Net cash flows from investing activities (4,212,275.77) (1,112,635.55)
III. Cash flows from financing activities:
Cash received from absorbing investment 51,985.72 3,266,901.28
Of which: Cash received from subsidiaries absorbing investments
of minority shareholders
51,985.72 353,752.03
Proceeds from borrowings 3,000,754.54 2,664,237.00
Other proceeds relating to financing activities -- --
Sub-total of cash inflow from financing activities 3,052,740.26 5,931,138.28
Cash repayments of amounts borrowed 2,418,071.28 4,484,863.35
Cash payments for distribution of dividends or profits or interest
expenses
449,580.83 702,592.96
Of which: share dividends and profits paid by subsidiaries to
minority shareholders
201,226.43 437,818.71
Other cash payments relating to financing activities -- --
Sub-total of cash outflows from financing activities 2,867,652.11 5,187,456.31
Net cash flows from financing activities 185,088.15 743,681.97
IV. Effect of Foreign Exchange Rate Changes on Cash and Cash
Equivalents
-- --
V. Net Increase in Cash and Cash Equivalents 1,418,533.38 1,687,513.40
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Consolidated Statement of Changes in Shareholders’ Equity
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun Head of accounting department: He Xiaoming
Item
Amount for Current Year
Shareholders’ Equity attributable to the owners of parent company
Minority interests Total owners’ equity
Share capital Capital reserve Less: Treasury
stock Special reserve Surplus reserve Undistributed Profit Others
I. Balance at end of previous year 2,080,176.85 2,651,774.43 -- -- 676,479.87 3,513,531.80 (15,535.34) 3,821,446.68 12,727,874.29
Plus: Change in accounting policy -- -- -- -- -- -- -- -- --
Correction of previous accounting errors -- -- -- -- -- -- -- -- --
Others -- -- -- -- -- -- -- -- --
II. Balance at beginning of current year 2,080,176.85 2,651,774.43 -- -- 676,479.87 3,513,531.80 (15,535.34) 3,821,446.68 12,727,874.29
III. Increased or decreased amount in current year 1,040,088.43 (559,673.10) -- -- 64,989.30 2,854,090.41 30,414.78 224,912.73 3,654,822.55
(i). Net profit -- -- -- -- -- 3,127,097.38 -- 916,141.24 4,043,238.62
(ii). Other comprehensive income -- 14,600.67 30,414.78 (571.40) 44,444.05
Subtotal of (i) and (ii) above -- 14,600.67 -- -- -- 3,127,097.38 30,414.78 915,569.84 4,087,682.67
(iii). Owners’ contributed and decreased capital -- -- -- -- -- -- -- 51,965.35 51,965.35
1. Owners’ capital contribution 51,965.35 51,965.35
2. Amount of share-based payment recognized in owners' equity -- --
3. Others --
(iv). Profit distribution -- -- -- -- 64,989.30 (273,006.97) -- (201,226.43) (409,244.10)
1. Appropriations to surplus reserve 64,989.30 (64,989.30) --
2, Appropriations to ordinary risk reserve --
3. Distribution to owners (208,017.67) (201,226.43) (409,244.10)
4. Others --
(v). Internal carryover in owners' equity 1,040,088.43 (574,273.77) -- -- -- -- -- (541,396.03) (75,581.37)
1. Capitalization of capital reserves 1,040,088.43 (1,040,088.43) --
2. Capitalization of surplus reserves --
3. Making up for losses with surplus reserve --
4. Others 465,814.66 (541,396.03) (75,581.37)
(vi) Special reserve -- -- -- -- -- -- -- -- --
1. Amount appropriated during the year --
2. Amount used during the year --
IV. Balance at end of the year 3,120,265.28 2,092,101.33 -- -- 741,469.17 6,367,622.21 14,879.44 4,046,359.41 16,382,696.84
Consolidated Statement of Changes in Shareholders’ Equity (Continued)
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun Head of accounting department: He Xiaoming
Item
Amount for Previous year
Shareholders’ equity attributable to the owners of parent company
Minority interest Total owners’ equity
Share capital Capital reserve Less: Treasury
stock Special reserve Surplus reserve Undistributed Profit Others
I. Balance at end of previous year 1,891,069.93 180,628.47 -- -- 607,154.95 1,924,215.79 (2,438.68) 2,691,874.70 7,292,505.16
Plus: Change in accounting policy -- -- -- -- -- -- -- --
Correction of previous accounting errors -- -- -- -- -- -- -- -- --
Others -- -- -- -- -- -- -- -- --
II. Balance at beginning of current year 1,891,069.93 180,628.47 -- -- 607,154.95 1,924,215.79 (2,438.68) 2,691,874.70 7,292,505.16
III. Increased or decreased amount in current year 189,106.92 2,471,145.96 -- -- 69,324.92 1,589,316.01 (13,096.66) 1,129,571.98 5,435,369.13
(i). Net profit -- -- -- -- -- 1,847,747.93 -- 666,118.33 2,513,866.26
(ii). Other comprehensive income -- 116,839.82 -- -- -- -- (13,096.66) (1,779.45) 101,963.71
Subtotal of (i) and (ii) above -- 116,839.82 -- -- -- 1,847,747.93 (13,096.66) 664,338.88 2,615,829.97
(iii). Owners’ contributed and decreased capital 189,106.92 2,723,800.67 -- -- -- -- -- 331,248.91 3,244,156.50
1. Owners’ capital contribution 189,106.92 2,724,042.35 -- -- -- -- -- 328,651.23 3,241,800.50
2. Amount of share-based payment recognized in owners' equity -- -- -- -- -- -- -- -- --
3. Others -- (241.68) -- -- -- -- -- 2,597.68 2,356.00
(iv). Profit distribution -- -- -- -- 69,324.92 (258,431.92) -- (218,365.29) (407,472.29)
1. Appropriations to surplus reserve -- -- -- -- 69,324.92 (69,324.92) -- -- --
2, Appropriations to ordinary risk reserve -- -- -- -- -- -- -- -- --
3. Distribution to owners -- -- -- -- -- (189,107.00) -- (218,365.29) (407,472.29)
4. Others -- -- -- -- -- -- -- -- --
(v). Internal carryover in owners' equity -- (369,494.53) -- -- -- -- -- 352,349.48 (17,145.05)
1. Capitalization of capital reserves -- -- -- -- -- -- -- -- --
2. Capitalization of surplus reserves -- -- -- -- -- -- -- -- --
3. Making up for losses with surplus reserve -- -- -- -- -- -- -- -- --
4. Others -- (369,494.53) -- -- -- -- -- 352,349.48 (17,145.05)
(vi) Special reserve -- -- -- -- -- -- -- -- --
1. Amount appropriated during the year -- -- -- -- -- -- -- -- --
2. Amount used during the year -- -- -- -- -- -- -- -- --
IV. Balance at end of the year 2,080,176.85 2,651,774.43 -- -- 676,479.87 3,513,531.80 (15,535.34) 3,821,446.68 12,727,874.29
Balance Sheet of Parent Company December 31
st, 2010
Prepared by GD Midea Holding Co., Ltd. Unit: RMB’000
Assets Note Amount at the End of
the Year
Amount at the
Beginning of the Year
Current Assets:
Monetary fund 3,196,327.02 2,890,287.96
Trading financial assets -- --
Notes receivable 2,310,211.77 4,843,952.67
Accounts receivable XIV(i) 21,078.35 270,755.24
Prepayments XIV(ii) 737,563.18 359,600.40
Interests receivable -- --
Share dividends receivable -- --
Other receivables XIV(iii) 1,426,987.76 1,392,177.85
Inventories 854,437.03 791,911.64
Non-current assets due within one
year
-- --
Other current assets 49,114.77 2,709.66
Total of current assets 8,595,719.88 10,551,395.42
Non-current assets:
Financial assets available for sale -- --
Held-to-maturity investment -- --
Long-term receivables -- --
Long-term equity investment XIV(iv) 6,788,323.47 5,881,365.21
Investment real estate 1,205,996.27 908,823.42
Fixed assets 742,401.83 91,130.97
Construction in progress 5,025.02 386,530.74
Engineering materials -- --
Liquidation of fixed assets -- --
Intangible assets 147,206.74 169,468.06
Development expenditures -- --
Goodwill -- --
Long-term deferred expenses 56,810.80 23,959.13
Deferred income tax assets 561.25 141.15
Other non-current assets -- --
Total of non-current assets 8,946,325.38 7,461,418.68
Total of assets 17,542,045.26 18,012,814.10 Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Balance Sheet of Parent Company (Continued) December 31
st, 2010
Prepared by GD Midea Holding Co., Ltd. Unit: RMB’000
Liabilities and Shareholder’s Equity Note Amount at the End of the
Year
Amount at the Beginning of the
Year
Current Liabilities:
Short-term borrowings -- 143,365.29
Trading financial liabilities -- --
Notes payable 4,941,308.34 2,978,012.38
Accounts payable 387,171.10 905,878.16
Account received in advance 540,476.10 613,394.40
Wages payable -- --
Taxes Payable 97,124.82 (6,767.27)
Interests payable -- --
Dividends payable 585.91 585.91
Other payables 4,168,495.24 6,784,041.41
Non-current liabilities due
within one year
-- --
Other current liabilities -- --
Total of current liabilities: 10,135,161.51 11,418,510.28
Non-current liabilities
Long-term loan -- --
Bonds payable -- --
Long-term accounts payable -- --
Special accounts payable -- --
Estimated liabilities -- --
Deferred income tax liability 5,011.07 334.65
Other non-current liabilities -- --
Total of non-current liabilities 5,011.07 334.65
Total of liabilities 10,140,172.58 11,418,844.93
Shareholders’ equity:
Share capital 3,120,265.28 2,080,176.85
Capital reserve 2,004,262.72 3,030,321.88
Less: treasury stock -- --
Special reserve -- --
Surplus reserve 684,689.02 619,699.72
Undistributed profit 1,592,655.66 863,770,72
Total owners’ equity 7,401,872.68 6,593,969.17
Total of liabilities and owners’
equity
17,542,045.26 18,012,814.10
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Profit and Loss Statement of Parent Company
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Items Note Amount for
Current Year
Amount for
Previous Year
I. Operating revenue XIV(v) 10,765,861.01 2,720,194.20
Less: Operating cost XIV(v) 10,132,465.66 2,379,373.57
Business tax and surcharge 31,382.55 24,944.76
Sales expenses - -
Management expenses 449,519.20 238,482.79
Financial expenses (79,411.23) 11,483.48
Asset impairment losses 247.25 393.71
Plus: Gains on change of fair value - -
Investment income XIV(vi) 860,922.39 594,181.47
Of which: Gains on investment in the
associates and joint ventures
(4,209.14) (2,685.06)
II. Operating profit 1,092,579.97 659,697.36
Plus: Non-operating income 15,058.13 7,393.84
Less: Non-operating expenditures 9,694.10 9,182.90
Of which: Losses from disposal of non-current
assets
- -
III. Gross profits 1,097,944.00 657,908.30
Less: Income tax expense 96,052.07 8,015.32
IV. Net profit 1,001,891.93 649,892.98
V. Other comprehensive income 14,029.27 1,003.95
VI. Total comprehensive income 1,015,921.20 650,896.93
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Cash Flow Statement of Parent Company For the Year Ended December 31
st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Items Note Amount for Current Year Amount for Previous
Year
I. Cash flow from operating activities:
Cash received from sales of goods and provision of labor
services
8,301,724.02 1,757,419.55
Refunds of taxes received - -
Other cash received relating to operating activities 862,619.02 3,646,290.49
Sub-total of cash inflow from operating activities 9,164,343.04 5,403,710.04
Cash paid for goods and services 4,802,546.34 1,585,521.57
Cash paid to and on behalf of employees 57,036.30 50,146.79
Taxes paid 44,182.90 38,280.07
Other cash paid relating to operating activities 3,514,002.34 1,454,204.69
Sub-total of cash outflow from operating activities 8,417,767.88 3,128,153.12
Net cash flow from operating activities 746,575.16 2,275,556.92
II. Cash flow from investing activities:
Cash received upon recovery of investment - -
Cash received from investment incomes 766,464.12 674,531.51
Net cash received from disposal of fixed assets, intangible assets,
and other long-term assets
- -
Net cash received from disposal of subsidiaries and other
operating units
- -
Other cash received relating to investing activities - -
Sub-total of cash inflow from investing activities 766,464.12 674,531.51
Cash paid to acquire fixed assets, intangible assets and other
long-term assets
482,187.40 242,636.41
Cash paid for making investments - 20,334.68
Net cash paid to acquire the subsidiaries and other business units 812,500.00 2,069,852.38
Other cash paid relating to investing activities - -
Sub-total of cash outflow from investing activities 1,294,687.40 2,332,823.47
Net cash flow from investing activities (528,223.28) (1,658,291.96)
III. Cash flow from financing activities:
Cash received from absorbing investment - 2,913,149.27
Proceeds from borrowings - 1,545,160.12
Other proceeds relating to financing activities - -
Sub-total of cash inflow from financing activities - 4,458,309.39
Cash repayments of amounts borrowed 143,365.29 3,066,784.83
Cash payments for distribution of dividends or profits or interest
expenses
209,129.02 230,523.28
Other cash payments relating to financing activities - -
Sub-total of cash outflow from financing activities 352,494.31 3,297,308.11
Net cash flow from financing activities (352,494.31) 1,161,001.28
IV. Effect of Foreign Exchange Rate Changes on Cash and Cash
Equivalents
- -
V. Net Increase in Cash and Cash Equivalents (134,142.43) 1,778,266.24
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Statement of Changes in Shareholders’ Equity of Parent Company
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun
Head of accounting department: He Xiaoming
Item
Amount for Current Year
Share capital Capital reserve Less: Treasury stock Special reserve Surplus reserve Undistributed Profit Total shareholder’s equity
I. Balance at end of previous year 2,080,176.85 3,030,321.88 -- -- 619,699.72 863,770.72 6,593,969.17
Plus: Changes in accounting policy -- -- -- -- -- -- --
Correction of previous accounting errors -- -- -- -- -- -- --
Others -- -- -- -- -- -- --
II. Balance at beginning of current year 2,080,176.85 3,030,321.88 -- -- 619,699.72 863,770.72 6,593,969.17
III. Increased or decreased amount in current year 1,040,088.43 (1,026,059.16) -- -- 64,989.30 728,884.94 807,903.51
(i). Net profit -- -- -- -- -- 1,001,891.93 1,001,891.93
(ii). Other comprehensive income -- 14,029.27 -- -- -- -- 14,029.27
Subtotal of (i) and (ii) above -- 14,029.27 -- -- -- 1,001,891.93 1,015,921.20
(iii). Owners’ contributed and decreased capital -- -- -- -- -- -- --
1. Owners’ capital contribution -- -- -- -- --
2. Amount of share-based payment recognized in owners' equity -- -- -- -- --
3. Others -- -- -- -- --
(iv). Profit distribution -- -- -- -- 64,989.30 (273,006.99) (208,017.69)
1. Appropriations to surplus reserve -- -- 64,989.30 (64,989.30) --
2, Appropriations to ordinary risk reserve -- -- -- -- --
3. Distribution to owners -- -- -- (208,017.69) (208,017.69)
4. Others -- -- -- -- -- -- --
(v). Internal carryover in owners' equity 1,040,088.43 (1,040,088.43) -- -- -- -- --
1. Capitalization of capital reserves 1,040,088.43 (1,040,088.43) -- -- --
2. Capitalization of surplus reserves -- -- -- -- --
3. Making up for losses with surplus reserve -- -- -- -- -- -- --
4. Others -- -- -- -- -- -- --
(vi) Special reserve -- -- -- -- -- -- --
1. Amount appropriated during the year -- -- -- -- -- -- --
2. Amount used during the year -- -- -- -- -- -- --
IV. Balance at end of the year 3,120,265.28 2,004,262.72 -- -- 684,689.02 1,592,655.66 7,401,872.68
Statement of Changes in Shareholders’ Equity of Parent Company (Continued)
For the Year Ended December 31st 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
Legal Representative: Fang Hongbo Person in charge of accounting: Zhao Jun Head of accounting department: He Xiaoming
Item
Amount for Previous year
Share capital Capital reserve Less: Treasury stock Special reserve Surplus reserve Undistributed Profit Total shareholder’s
equity
I. Balance at end of previous year 1,891,069.93 305,419.04 - - 550,374.80 472,309.65 3,219,173.42
Plus: Changes in accounting policy - - - - - - -
Correction of previous accounting errors - - - - - - -
Others - - - - - - -
II. Balance at beginning of current year 1,891,069.93 305,419.04 - - 5,503,74.80 472,309.65 3,219,173.42
III. Increased or decreased amount in current year 189,106.92 2,724,902.84 - - 69,324.92 391,461.07 3,374,795.75
(i). Net profit - - - - - 649,892.98 649,892.98
(ii). Other comprehensive income - 1,003.95 - - - - 1,003.95
Subtotal of (i) and (ii) above - 1,003.95 - - - 649,892.98 650,896.93
(iii). Owners’ contributed and decreased capital 189,106.92 2,723,898.89 - - - - 2,913,005.81
1. Owners’ capital contribution 189,106.92 2,724,042.35 - - - - 2,913,149.27
2. Amount of share-based payment recognized in owners' equity - - - - - - --
3. Others - (143.46) - - - - (143.46)
(iv). Profit distribution - - - - 69,324.92 (258,431.91) (189,106.99)
1. Appropriations to surplus reserve - - - - 69,324.92 (69,324.92) 0.00
2, Appropriations to ordinary risk reserve - - - - - 0.00
3. Distribution to owners - - - - - (189,106.99) (189,106.99)
4. Others - - - - - - -
(v). Internal carryover in owners' equity - - - - - - -
1. Capitalization of capital reserves - - - - - - -
2. Capitalization of surplus reserves - - - - - - -
3. Making up for losses with surplus reserve - - - - - - -
4. Others - - - - - - -
(vi) Special reserve - - - - - - -
1. Amount appropriated during the year - - - - - - -
2. Amount used during the year - - - - - - -
IV. Balance at end of the year 2,080,176.85 3,030,321.88 - - 619,699.72 863,770.72 6,593,969.17
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GD Midea Holding Co., Ltd.
Notes to the Financial Statements
For the Year 2010
Prepared by: GD Midea Holding Co., Ltd. Unit: RMB’000
I. Profile of the Company
GD Midea Holding Co., Ltd. (hereinafter referred to as ―the Company‖) is a company with limited
liabilities restructured on 10 August 1992 on the basis of original Guangdong Midea Electric Appliance
Enterprises Group; on 7 September 1993, the Company completed its initial public offering and its shares
were listed in the stock market.
Registration No. of the Company’s Business License for an Enterprise as a Legal Person is
440000000020099.
Registered office and head office address: No.6 Midea Road, Beikao Township, Shunde District, Foshan,
Guangdong Province
The legal representative is Mr. Fang Hongbo and the controlling shareholder is Midea Group Co., Ltd. and
the ultimate controller is Mr. He Xiangjian.
As at 31 December 2010, the registered capital and total share capital of the Company amounted to
RMB3,120,265.276.
The Company is engaged in the household electric appliance manufacturing with the major products
including air-conditioners, air-conditioner compressors, refrigerators and washing machines etc.
The business scope of the Company covers manufacturing and sales of home electric appliances, electric
motors, communication equipment and components; relevant technical consultation services for
above-mentioned products, fabrication of the moulds and equipment for its own use, hotel management,
advertising agency; sales of metal wares and AC power supply hardwares, electronic products, metal
materials, building materials, chemical products (excluding hazardous chemicals), mechanical equipment
and general merchandise; export of self-produced products and related technologies of the Company and its
member companies; production and processing of metallic products and plastic products; import of the raw
materials, auxiliary materials, machines, equipment, instruments, parts, components and parts and relevant
technologies required for technical research; processing with incoming materials,and three forms of OEM
and compensation trades of the Company (which is governed by Official Document [99] Wai Jing Mao
Zheng Shen Han Zi No.528, and business items subject to approval pursuant to related laws and regulations
are not included in the above-mentioned items).
II. Principal accounting policies, accounting estimates and previous errors of the Company
(i) Basis for preparation of financial statements
The Company operates on the basis of going concern and the actual transactions and issues, recognizes and
measures the financial data in line with Accounting Standards for Business Enterprises—Basic Standards,
the other specific accounting standards, the application guide and interpretations of these standards, and
based thereon, these financial statements are prepared. Estimates and assumptions are required to prepare
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the financial statements complying with the Accounting Standards for Business Enterprises and such
estimates and assumptions will affect the disclosure of the assets, liabilities and contingent liabilities on the
date of financial statements as well as the revenue and expenses during the reporting period.
(ii) Statement of compliance with Accounting Standards for Business Enterprises
The financial statements prepared by the Company are in compliance with the requirements under the
Accounting Standards for Business Enterprises which give a true presentation of the Company’s financial
status as at 31 December 2010 and operating results and cash flow for 2010.
(iii) Fiscal year
The Company adopts the calendar fiscal year that starts on 1 January and ends on 31 December.
(iv) Currency denomination
The Company adopts RMB as its denominated currency.
(v) Accounting treatment for merger of enterprises under the same control and not under the same
control
1. Merger of enterprises under the same control
For merger of enterprises under the same control, the assets and liabilities acquired by the merging party in
the merger of enterprises are recorded on the basis of their carrying value in the merged party on the merger
date. If there is any difference between the carrying value of net assets acquired by merging party and the
carrying value of merger consideration (or the total amount of par value of the issued shares) paid by the
merging party, capital reserve is adjusted; if the capital reserve is insufficient for offsetting, the retained
earnings will be adjusted accordingly.
2. Merger of enterprises not under the same control
For merger of enterprises not under the same control, the merger costs are the fair value of the assets paid
by the acquiring party, liabilities incurred to or borne by the acquiring party, and the equity securities issued
by the acquiring party for obtaining the control power over the acquired party on the acquisition date.
For the merger of enterprises after several times of exchanges and transactions, the relevant accounting
treatment is carried out respectively according to particular financial statements and consolidated financial
statements.
(1) In individual financial statements, the sum of the carrying value of the acquired party's equity held
before the date of acquisition and the investment cost added on the date of acquisition is regarded as the
initial investment cost of this investment; if the acquired party's equity held before the date of acquisition
involves other comprehensive income, in the disposal of this investment, other comprehensive income
related to it (for example, the changes in the fair value of financial assets available for sale are recorded into
the capital reserves, the same below) is carried over into current investment income.
(2) In the consolidated financial statements, the acquired party's equity held before the date of acquisition is
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re-measured at the fair value of such equity on the date of acquisition and the difference between the fair
value and the carrying value is recorded in the current investment income; if the acquired party's equity held
before the date of acquisition involves other comprehensive income, other comprehensive income related to
it is carried over into current investment income.
Intermediary fees for audit, legal service, evaluation, consultation services and other relevant management
expenses incurred to the acquiring party for the enterprises mergers are recorded into the current profit and
loss when they are incurred; transaction costs of equity securities or debt securities issued by the acquiring
party as the consideration for the merger are recorded into the initial recognized amount of the equity
securities or debt securities.
Where the merger cost exceeds the portion of fair value of the identifiable net assets of the party acquired
by the acquiring party, the difference is recognized as goodwill. The Company will implement impairment
test at the end of each year for the goodwill arising from enterprise merger whether impairment symptoms
exist or not. Where the merger cost is less than the interest acquired by the acquiring party in the fair value
of the identifiable net assets of the acquired party and this case still exists after re-check, the difference is
recognized directly in the current profit and loss.
(vi) Preparation of consolidated financial statements
The Company includes the subsidiaries in which the Company owns actual control right and the entities
with special purposes, into the scope of consolidated financial statements.
The consolidated financial statements of the Company are prepared according to the requirements of the
Accounting Standards for Business Enterprises No. 33 – Consolidated Financial Statements and relevant
regulations and rules, and all significant internal transactions and accounts in the scope of merger have been
offset while merger is implemented. The part in the owners’ equity of subsidiaries not belonging to the
parent company is separately presented as minority interests under the item ―shareholders’ equity‖ in the
consolidated financial statements.
If the accounting policy or accounting period used by subsidiaries is different with that of the Company,
necessary modification will be made to the financial statements of the subsidiaries according to the
accounting policy or accounting period of the Company.
For any subsidiary acquired in the enterprise merger not under the same control, some financial statements
are adjusted on the basis of the fair value of identifiable net assets on the acquisition date when
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consolidated financial statements are prepared; for any subsidiary acquired in the enterprise merger under
the same control, the reporting subject formed after the merger is deemed as an integral whole existing from
the start of implementation of control by the ultimate controlling party during the preparation of financial
statements, and the beginning balance of the consolidated balance sheet and relevant items on comparable
financial statements is adjusted.
(vii) Recognition criteria of cash and cash equivalents
In the preparation of the Company’s cash flow statement, cash refers to cash on hand and deposits that are
available for payment at any time; cash equivalents refer to short-term investments with high liquidity that
are readily converted into cash with known amount and are subject to a low risk of change in value.
(viii) Conversions of foreign currency transaction and foreign currency financial statements
1. Foreign currency transaction
As for the Company’s foreign currency transaction, the amount in the foreign currency is converted into
RMB at the spot exchange rate announced on the transaction date. On the balance sheet date, the monetary
items in foreign currency are converted into RMB at the spot exchange rate. The difference arising from
such conversion into RMB is recorded into the profits and losses of the current period except the exchange
difference of foreign currency borrowings and interests eligible for capitalization which shall be capitalized.
The foreign currency non-monetary items measured at the historical cost are still converted at the spot
exchange rate announced on the transaction date, whose amount in the denominated currency is not
changed.
2. Conversion of foreign currency financial statements
The financial statements of overseas operating entities within the scope of consolidation (including
domestic subsidiaries, joint ventures, associated corporations and branch organizations of which the
denominated currency is different from that of the Company) are converted by the Company into RMB
financial statements for preparation and reporting.
The asset and liability items in the balance sheet are converted at the spot exchange rate on the balance
sheet date. Among the owners’ equity items, except the ―undistributed profits‖ item, all the other items are
converted into RMB at the spot exchange rate at the time when they are incurred. The revenue and expense
items in the profit and loss statements are converted into RMB at the spot exchange rate at the time when
they are incurred or at an exchange rate which is determined through a systematic and reasonable method
and is approximate to the spot exchange rate announced on the transaction date. The difference arising from
such conversion of foreign currency financial statements is presented separately under the owners’ equity
item in the balance sheet. The items in the cash flow statements are converted at the spot exchange rate
105
announced on the transaction date.
(ix) Financial instruments
1. Classification, recognition and measurement of financial instrument
The Company’s financial assets include financial assets that are measured at their fair values and besides of
which the change is recorded into the profits and losses of the current period; account receivables (see Note
II (x) for further details) and financial assets available for sale. Classification of financial assets depends
upon the Company’s and its subsidiaries’ intention and capability of holding the financial assets.
The Company’ financial liabilities include financial liabilities that are measured at their fair values and of
which the change is recorded into the profits and losses of the current period as well, and other financial
liabilities.
(1) Financial assets that are measured at their fair values and of which the change is recorded into the
profits and losses of the current period as well
These financial assets include trading financial assets and financial assets which are directly designated to
be measured at their fair values and of which the change is recorded into the profits and losses of the current
period as well. Their values are initially recognized at their fair values at the time when they are acquired,
and the relevant transaction cost is recorded as incurred into the profits and losses of the current period. The
declared but unpaid cash dividend or the due but unpaid bond interest included in the paid amount is
separately recognized as accounts receivable. The interest or cash dividend from financial assets held by the
Company is recognized as investment income. On the balance sheet date, the change in the fair value of
such financial assets is recorded in the profits and losses of the current period. When disposing off such
financial assets, the difference between the fair value of such financial assets and their initial amount is
recognized as the investment income; meanwhile, the profits and losses due to change in fair value are
adjusted.
(2) Financial assets available for sale
These financial assets refer to the non-derivative financial assets designated to be available for sale when
they are initially recognized, namely the financial assets that are not determined by the Company as the
financial assets, loans and receivables which are measured at their fair values and of which the change is
recorded into the profits and losses of the current period as well.
The initial amount of the Company’s financial assets available for sale is recognized to be the sum of the
fair value at the time when they are acquired and the relevant transaction cost. The declared but unpaid cash
dividend or the due but unpaid bond interest included in the paid amount is separately recognized as
accounts receivable. The interest or cash dividend from financial assets available for sale held by the
Company is recognized as investment income. On the balance sheet date, the financial assets available for
sale are measured at their fair values, of which the change is recorded into the ―capital reserve—other
capital reserves‖.
106
When the financial assets available for sale are disposed, the differences between the amount received from
such disposal and the carrying value of such financial assets are recorded into investment income.
Accordingly, the corresponding disposed portion in the accumulated amount of the changes in fair value
originally directly recorded into the owners’ equity is transferred out and recorded into the investment
income.
(3) Financial liabilities that are measured at their fair values and of which the change is recorded into the
profits and losses of the current period as well
These financial assets refer to trading financial liabilities and those financial liabilities that are directly
designated to be measured at their fair values and of which the change is recorded into the profits and losses
of the current period as well, including: 1) Financial liabilities undertaken for repurchase in the near future;
2) financial liabilities that are directly designated to be measured at their fair values and of which the
change is recorded into the profits and losses of the current period based upon risk management or strategic
investment needs as well; 3) derivative instruments that are not effective hedging instrument.
Such financial liabilities held by the Company are priced at their fair value; besides, the possible transaction
costs when settling such financial liabilities are not deducted. If measuring of these financial liabilities at
fair value is not suitable, the Company measures such financial liabilities at the amortized cost.
(4) Other financial liabilities
The other financial liabilities of the Company refer to the financial liabilities other than the financial
liabilities that are measured at their fair values and of which the change is recorded into the profits and
losses of the current period as well, and mainly include bonds issued by corporations, accounts payable and
long-term accounts payable arising from purchase of commodities. Initial amounts of the other financial
liabilities are recognized as the sum of their fair values and the relevant transaction cost and then are
measured on the basis of the amortized costs.
The Company possesses financial guarantee contracts for other financial liabilities that are not measured at
fair value and the change thereof is recorded in the current profit and loss, and their initial amount is
recognized as the sum of the fair values and the relevant transaction costs. After initial measurement, they
are measured on the basis of the higher of the amount decided according to Accounting Standards for
Business Enterprises No.13 – Contingencies and the amount remaining after calculating the accumulative
amortized amount according to Accounting Standards for Business Enterprises No.14 – Revenue.
2. Recognition of the fair value of financial instruments
Where there is an active market for a financial instrument, its fair value is determined according to the
quoted price in this active market. Where there is no active market for a financial instrument, value
appraisal techniques is adopted to determine its fair value. The value appraisal techniques include referring
to the prices adopted by the parties who are familiar with the condition, in the latest market transaction
upon their own free will, referring to the current fair value obtained of other financial instruments of the
same essential nature, and discounted free cash flow. When adopting value appraisal techniques, the
107
Company adopts, if possible, all the market parameters and does not adopt those parameters that relate to
the Company and particular subsidiaries.
3. Impairment test on financial assets and provision for impairment
On the balance sheet date, the Company carries out an inspection on the carrying amount of the financial
assets other than those measured at their fair values and of which the change is recorded into the profits and
losses of the current period as well.
Where the fair value of the financial assets available for sale drops significantly and continuously, the
impairment loss is calculated and recognized on the basis of the remaining amount of its initial investment
cost after deducting the recovered principal, amortized amount and the current fair value from such initial
investment cost; and when a provision is made for the impairment loss, the accumulative losses arising
from the decrease in the fair value which was directly included in the owners’ equity are also transferred out
and recorded into the ―asset impairment loss‖.
(x) Receivables
The receivables (including account receivables and other receivables) are initially recognized at the contract
or agreement price. In case that the debtor goes bankrupt and the receivables cannot be collected according
to the legal liquidation procedures. or the debtor dies and he has neither heritage for repaying the debt nor
any inheritor to undertake the obligations and thus the receivables cannot be collected really; or the debtor
fails to pay the liability when due, such receivables are treated as bad debt with approval according to
legal procedures.
When the Company collects the receivables, the difference between the obtained amount and the carrying
value of the receivables recorded into the profits and losses of the current period.
1. Receivables that have significant single amount and provision for bad debts is
made for a single item
Criteria or amount standards
for significant single amounts
Accounts receivable with a single amount of RMB5 million or above
and other receivables with a single amount of RMB500,000 are
determined by the Company as accounts receivable with significant
single amounts.
Provision method for single
significant amounts and single
provision of bad debts
On the balance sheet date, except the receivables between the parent
company and its subsidiary and between different subsidiaries or
receivables proven to be not impaired by conclusive evidences for
which provision is not made for bad debts, the Company conducts
independent impairment tests for the receivables with significant single
amounts. For the receivables which have shown impairment according
to the separate test, the impairment loss was recognized as the
difference between the present value of future cash flow and its
carrying value and provision for bad debt is made for the loss. For the
receivables that have shown no impairment according to the separate
test, they are, together with the receivables with insignificant single
108
amounts and the combinations of receivables, classified into some
combinations by similar credit risk characteristics, and then the
Company calculates and determine the impairment loss according to a
proportion of the balance of such combinations of receivables on the
balance sheet date and provision for bad debt is made accordingly.
2. Receivables for which provision of bad debts is made by combination
Basis for determining the combinations:
Name of combination Basis
Combination 1: Age combination
For the receivables with insignificant single amounts, the
Company deducts from such receivables the amount that is
obviously different in its collection according to conclusive
evidence and thus is tested separately for impairment, and then
adopt age as a characteristic of credit risk for combination and
determines the provision percentage for bad debts with different
ages according to the actual loss rate.
Combination 2: Receivables
within the scope of consolidated
statements Receivables within the scope of consolidated statements
Method for making provision for bad debts by combination:
Name of combination Method of making provision
Combination 1: Age combination Aging analysis method
Combination 2: Receivables
within the scope of consolidated
statements
For receivables that have shown no impairment after testing, no
provision is made for bad debt.
For combinations for which provision is made for bad debts by using aging analysis method
Age
Provision for bad debts for
accounts receivable (percentage
of the accounts receivable)
Provision for bad debts for other
receivables (percentage of the
receivables)
Within 1 year (inclusive, the
same below) 5% 5%
1-2 years 10% 10%
2-3 years 30% 30%
3-5 years 50% 50%
Over 5 years 100% 100%
3. Accounts receivable with insignificant single amounts for which provision is made for bad debt
separately
Reason for making provision of
bad debt separately
Conclusive evidence shows that an obvious difference exists in the
collection of the accounts receivable
109
Method of making provision
for bad debts
The provision for bad debt is made on the basis of the difference
between the present value of future cash flow of the accounts
receivable and their carrying value; as to other receivables (including
notes receivable, prepayment, interests receivable and long-term
receivable), provision for bad debt is made on the difference between
the present value of their future cash flow and their carrying value.
(xi) Inventories
1. Classification of inventories
Inventories refer to finished products or merchandise held by the Company for sale in the ordinary course
of its operation, or products in process or the materials to be consumed in the production process or during
rendering of labor services, and mainly include raw materials, entrusted processing materials, low-value
consumables, products in process and merchandise in stock.
2. Pricing of dispatched inventories
When obtaining inventories, the inventories are measured at initial cost, including the purchasing cost,
processing cost and other cost. When obtaining inventories, they are priced at standard cost during routine
accounting and at the end of the period, the same is adjusted to actual cost; when dispatching, various
inventories, they are priced in the weighed average method. For packing materials and low-value
consumables, the one-time amortization method is used.
3. Basis for recognizing the net realizable value of inventories and making
provision for inventories impairment
On the balance sheet date, the inventories are measured according to the cost or the net realizable value,
whichever is lower. At the year end, on the basis of overall checking on the inventories, for the inventories
that have been washed out or outdated in all or part, or whose sale price is lower than cost thus leading to
that the cost of inventories is higher than net realizable value, the provision for inventories impairment is
made. The provision for inventories impairment is made on the basis of the difference between the cost of a
single (or category of) inventory and its net realizable value. For finished products, merchandise or
materials to be sold etc. that are directly for sales, during the normal production and operation process, the
net realizable value is determined on the basis of the estimated sales price less estimated sales expenses and
relevant taxes and fees; for the materials needing further processing, during normal course of production
and operation, the net realizable value is determined on the basis of the estimated sales price of the finished
products less the estimated production cost, estimated sales expenses and relevant taxes and fees. Where on
the balance sheet date, the price of a part of an inventory item is agreed in the contracts while no price is
agreed for other parts of the same, then its net realizable values are determined separately. Where an
inventory is related with the product series that have similar purpose or final use and are produced and sold
in the same area and it is difficult to distinguish it from the other items of such a product series for price
estimation, consolidated provision is made. For the inventories of a large quantity and with a low unit price,
the provision is made according to inventory category.
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4. Inventory taking system
The Company adopts the perpetual inventory system for taking its inventories, whereby the Company
checks the inventories on a regular basis and any profit and loss arising therefrom is recorded into the
profits and losses of the current period.
(xii) Long-term equity investment
The Company’s long-term equity investments include investment in subsidiaries, investment in associated
corporations and other long-term equity investments.
1. Determination of initial investment cost
The Company’s investment in subsidiaries is measured at the initial investment cost; for initial
measurement for the long-term equity investment formed in the merger of controlling enterprises, please
see Note II.(v)—Accounting treatment for merger of enterprises under the same control and not under the
same control. If there are additional investments or disinvestments, the cost of the long-term equity
investment is adjusted.
Long-term equity investment of the Company which has joint control or significant influence over the
invested entity and long-term equity investment which has no joint control or has significant influence on
the invested entity and also has no quoted price in the active market and its fair value cannot be reliably
measured are measured at the initial investment cost.
2. Subsequent measurement and recognition of profit and loss
The Company adopts the cost method for the subsequent measurement of its investment in subsidiaries with
adjustments made according to the equity method in the preparation of the consolidated financial statements.
Except for the actual price paid when obtaining the investment or the declared but undistributed cash
dividends or profits included in the consideration, the dividends or profits for distribution declared by the
invested entity are recognized as the investment income.
The Company adopts the equity method for the subsequent measurement of its long-term equity investment
of the Company that does joint control or significant influence over the invested entity. If the initial
investment cost is more than the fair value shares of the identifiable net assets in the invested entity that the
Company shall enjoy, the initial investment cost of such long term equity investment will not be adjusted;
otherwise, the difference is recorded into the profits and losses of the current period, while the cost of such
investment is also adjusted. After obtaining a long-term equity investment, the Company, in accordance
with the attributable share of the realized net profits or losses of the invested entity, recognizes the
investment profits or losses and adjusts the carrying value of the long-term equity investment. The
Company, in the light of the profits or cash dividends for distribution declared by the invested entity,
calculates the proportion it shall obtain, and reduces the carrying value of the long-term equity investment
correspondingly.
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As to long-term equity investment that has no joint control or does not have significant influences on the
invested entity, and has no price quoted in the active market and its fair value cannot be reliably measured,
the Company adopts the cost method for subsequent measurement.
3. Basis for determination of joint control and significant influence over the invested entity
The term ―joint control‖ refers to the joint control over an economic activity in accordance with the
contracts and agreements, which does not exist unless the important financial and operating decisions
related with such an economic activity is subject to the consent of all the investing parties sharing the
control power. Where an investing enterprise and other parties perform joint control over an invested entity,
the invested entity is their joint venture. The term ―significant influence‖ refers to having the power to
participate in making decisions on the financial and operating policies of an enterprise but having no ability
to control or together with other parties jointly control formulation of these policies. Where an investing
enterprise is able to have significant influence on an invested entity, the invested entity is its associated
corporation.
4. Impairment test method and provision for impairment
On the balance sheet date, if there were signs of impairment of the long-term equity investment as a result
of market price dropping or the operating result of the invested entity deteriorates, the recoverable amount
of such long-term equity investment is the higher of the fair value of such investment less disposal expenses
and the present value of the expected future cash flow of such investment. When the recoverable amount is
lower than the carrying value, the carrying value is reduced to the recoverable amount and the reduction is
recognized as asset impairment loss and recorded into the profits and losses of the current period. The
corresponding provision for asset impairment is made and such a provision is not reversed in the
subsequent years.
(xiii) Investment real estates
The Company’s investment real estates include land use rights which have already been rented and
buildings which have already been rented.
The Company’s investment real estates are initially measured at their cost. The cost of a purchased
investment real estate includes the purchase price, relevant taxes, and other expenses that are directly
attributable to the asset. The cost of a self-built investment real estate is formed by the necessary expenses
for building the asset so that it is in the planned state for use.
Cost method is used for subsequent measurement for the Company’s investment real estates; the
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depreciation or amortization is made on the basis of their expected useful life and residual value ratio. The
expected service life, net residual value rate and annual depreciation (amortization) rates are presented as
follows:
Type Expected useful life (year)
Expected residual
value rate (%)
Annual depreciation
(amortization) rate (%)
Land use right 50 － 2
Buildings 20-35 5 4.75-2.71
When the purpose of an investment real estate is changed to use by the Company itself, since the date of
such a change, the investment real estate will be converted into fixed assets or intangible assets. When the
purpose of a real estate for use by the Company itself is changed to a real estate for obtaining rental or value
addition, since the date of such a change, the Company will convert the fixed assets or intangible assets to
investment real estate. When such transfer occurs, the carrying value before the conversion is recorded as
the value credited after the conversion.
On the balance sheet date, if the recoverable amount of the investment real estate is lower than the carrying
value, the carrying value of assets is reduced to the recoverable amount and the reduction is recognized as
an asset impairment loss and recorded into the profits and losses of the current period, while the provision
for asset impairment is also made. The impairment loss of an investment real estate, once recognized, is not
reversed in the subsequent accounting periods.
If an investment real estate is disposed or if it is put out of use permanently and no economic benefit will be
obtained from the disposal according to the estimation, the recognition for it as an investment real estate is
terminated. Any disposal incomes arising from the sale, transfer, scrapping or destroy of an investment real
estate is recorded into the profits and losses of the current period after deducting its carrying value and the
relevant taxes.
(xiv) Fixed assets
1. Recognition of fixed assets
―Fixed assets‖ refer to tangible assets to which economic benefits pertinent are likely to flow into the
enterprise and the cost of which can be measured reliably, that are held for the sake of producing
commodities, rendering labour service, renting or business management with a useful life of more than one
fiscal year.
2. Depreciation methods for different types of fixed assets
Except for the fixed assets that are still in use with full depreciation provided already, the Company
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provides for annual depreciation on all fixed assets; the depreciation method adopted is the straight-line
method.
The Company, based on the nature and use of fixed assets, decides the useful life and expected net residual
value. At the end of the year, the Company reviews the useful life, expected net residual value and
depreciation method, and makes corresponding adjustment if there is any difference.
The type, expected useful life and expected net residual value and annual depreciation rates of fixed assets
of the Company are as follows:
Asset type Expected useful life
(years)
Expected net residual value
(%)
Annual depreciation rate
(%)
Buildings and houses 20-35 5 4.75-2.71
Machinery and
equipment 10-15 5 9.50-6.33
Transport tools 5 5 19.00
Electronic device and
others 3-5 5 31.67-19.00
3. Impairment test methods for and provision for impairment in value of fixed assets
On the balance sheet date, a fixed asset is measured at the lower of the carrying value and the recoverable
amount. If the recoverable amount of the fixed asset is lower than the carrying value, the carrying value is
reduced to the recoverable amount and such reduction is recognized as an asset impairment loss and
recorded into the profits and losses of the current period, while the provision for asset impairment is also
made. The impairment loss on a fixed asset, once recognized, is not reversed in the subsequent accounting
periods.
4. Other explanations
The initial measurement of the Company’s fixed assets is made at their cost. The cost of a purchased fixed
asset consists of the purchase price, the relevant taxes such as value-added tax and import tariffs, and other
expenses that may be directly attributed to the fixed assets incurred before bringing the fixed assets to the
expected conditions for use. The cost of a self-built fixed asset is formed by the necessary expenses
incurred for bringing the asset to the expected conditions for use. The value of a fixed asset invested by the
investor is entered into the accounting book in accordance with the value as stipulated in the investment
contract or agreement, or at their fair value if their value as stipulated in the contract or agreement is unfair
value. The value of fixed assets leased through finance leases is entered into the account book at the lower
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of the fair value of the leased asset and the present value of the minimum lease payments on the lease
beginning date. If the payment for a fixed asset is delayed beyond the normal credit conditions and it is of
financing nature in effect, the cost of the fixed asset is recognized based on the present value of the
purchase price. The difference between the actual payment and the present value of the purchase price is
included in the current profits and losses within the credit period, unless it is capitalized.
Where a fixed asset is disposed of or it is expected to be unable to generate any economic benefits through
use or disposal, the recognition for it as a fixed asset is terminated. Any disposal incomes arising from the
sale, transfer, scrapping or destroy of a fixed asset is recorded into the profits and losses of the current
period after deducting its carrying value and the relevant taxes.
(xv) Construction in progress
The Company’s self-built construction in progress is calculated according to their actual costs and the actual
costs consist of necessary expenditures incurred before the asset is built into the expected state for use.
For a fixed asset which has reached the expected state for use but for which the final accounting upon
completion has not been done, its cost is determined according to the estimated value and accrual
depreciation is made. After the final accounting upon completion is completed, the original estimated value
is adjust according to the actual cost, however, the amount of depreciation originally provided is not
adjusted.
On the balance sheet date, the Company’s construction in progress is measured at the lower of the carrying
value and the recoverable amount. Provision for impairment of a single construction in progress is made on
the basis of the difference between its recoverable amount and its carrying value, which is recorded into the
profits and losses of the current period, while the provision for asset impairment is made correspondingly.
The impairment loss on the construction in progress, once recognized, is not reversed in the subsequent
accounting periods.
(xvi) Borrowing costs
Where the borrowing costs incurred to the Company can be directly attributable to the acquisition and
construction or production of assets eligible for capitalization, it is capitalized and recorded into the costs of
relevant assets; other borrowing costs are recognized as expenses on the basis of the actual amount incurred
when they are incurred, and are recorded into the profits and losses of the current period. Assets eligible for
capitalization refer to the fixed assets, investment real estates, inventories and other assets, of which the
acquisition and construction or production may take quite a long time to get ready for its intended use or for
sale.
The borrowing costs are not capitalized unless they meet all the following requirements: (1) the asset
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disbursements have already been incurred, which include the cash, transferred non-cash assets or interest
bearing debts paid for the acquisition and construction or production of assets eligible for capitalization; (2)
the borrowing costs have already been incurred; (3) the acquisition and construction or production activities
that are necessary to prepare the asset for its intended use or sale have already started.
During the period of capitalization, as for specifically borrowed loans for the acquisition and construction
or production of assets eligible for capitalization, the amount to be capitalized in each accounting period is
determined in light of the actual interest expense incurred of the specially borrowed loan in the current
period minus the income of interests earned on the unused borrowed loans as a deposit in the bank or as a
temporary investment. Where a general borrowing is used for the acquisition and construction or production
of assets eligible for capitalization, the amount of interests to be capitalized for the general borrowing is
calculated and determined by multiplying the weighted average of the difference between the accumulative
asset expenditures and the asset expenditure of the specially borrowed loans by the capitalization rate of the
general borrowing used. The capitalization rate is calculated and determined in light of the weighted
average interest rate of the general borrowing. The amount of interest capitalized does not exceed the actual
amount of incurred interest of the relevant borrowings in the current period.
Where the acquisition and construction or production of an asset eligible for capitalization is interrupted
abnormally and the interruption period lasts for more than 3 months, the capitalization of the borrowing
costs is suspended. The borrowing costs incurred during such period are recognized as expenses, and are
recorded into the profits and losses of the current period, till the acquisition and construction or production
of the asset restarted. If the interruption is a necessary step for making such an asset ready for the intended
use or sale, the capitalization of the borrowing costs shall continue.
When acquisition and construction or production of an asset eligible for capitalization is in such progress
that such an asset is ready for the intended use or sale, the capitalization of the borrowing costs is ceased.
(xvii) Intangible asset and development expenditures
Intangible asset refers to the identifiable non-monetary assets possessed or controlled by the Company
which have no physical shape, mainly including land use right and non-patent technologies, etc.
The intangible assets are initially measured at their costs. The actual cost of outsourcing intangible assets is
determined on the basis the actual price paid and the relevant expenses. The cost invested in intangible
assets by investors is determined according to the value as stipulated in the investment contract or
agreement, or at their fair value if unfair value is stipulated in the contract or agreement.
The useful life of intangible assets is analyzed and judged by the Company when they are acquired, and the
assets are classified into intangible assets with limited useful life and indefinite useful life.
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Intangible assets with limited useful life are amortized using the straight-line method over its useful life,
and the useful life and amortization method of the intangible assets are reviewed at the end of the year, and
if their costs are different from the originally estimated amount, adjustment is made correspondingly.
Amortization method for intangible assets with limited useful life is as follows:
Type Useful life (year) Amortization method Remark
Land use right Beneficial period Straight-line method
Non-patent
technologies Period specified in the contract or
beneficial period Straight-line method
Intangible assets with indefinite useful life are not amortized. The Company checks the useful life of
intangible assets with indefinite useful life during each accounting period. Where there is conclusive
evidence to prove that an intangible asset has limited useful life, the Company estimates its useful life, and
it is amortized in the straight-line method. The basis for determining the indefinite useful life of an
intangible asset with indefinite useful life, the procedures for rechecking its useful life during each
accounting period and the result of impairment test on such intangible asset are presented.
On the balance sheet date, the Company’s intangible assets are measured at the lower of the carrying value
and the recoverable amount. Provision for intangible assets impairment charge is calculated at the
difference between the recoverable amount and the carrying value, and the corresponding assets impairment
loss is recorded into the profits and losses of the current period. The impairment loss on intangible assets,
once recognized, is not reversed in the subsequent accounting periods.
Research refers to the creative and planned investigation to acquire and understand new scientific or
technological knowledge.
Development refers to the application of research achievements and other knowledge to a certain plan or
design, prior to the commercial production or use, so as to produce any new material, device and product,
or substantially improved material, device and product.
The research expenditures for internal research and development projects are recorded into the profits and
losses of the current period in which they are incurred; the development expenditures for internal research
and development projects are recorded into the profits and losses of the current period in which they are
incurred, unless they are recognized as intangible assets when they satisfy all the following conditions: (1)
it is feasible technically to finish intangible assets for use or sale; (2) it is intended to finish and use or sell
the intangible assets; (3) the usefulness of methods for intangible assets to generate economic benefits is
proved, including being able to prove that there is a potential market for the products manufactured by
applying the intangible assets or there is a potential market for the intangible assets itself or the intangible
assets will be used internally; (4) it is able to finish the development of the intangible assets, and able to use
or sell the intangible assets, with the support of sufficient technologies, financial resources and other
resources; (5) the development expenditures attributable to the intangible assets can be reliably measured.
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The development expenditures which have been recorded into the profits and losses of the previous period
are not recognized as an asset in the subsequent periods. The capitalized development expenditures are
stated in the balance sheet as development expenditures, and are recognized as intangible assets from the
date on which the project has been brought to the expected conditions for use.
(xviii) Goodwill
Goodwill refers to the difference between the merge costs of the enterprises not under the same control and
the shares of fair value of the identifiable net asset of the invested entity or the acquired party that should be
enjoyed on the acquisition date or purchase date.
The goodwill relating to subsidiaries is separately stated in the financial statements, and the goodwill
relating to associated corporations and joint ventures is included in the carrying value of long-term equity
investment.
The goodwill separately stated in the financial statements is tested for impairment at the end of each year. In
the impairment test, the carrying value of goodwill is amortized to the beneficial asset group or asset group
combination according to the synergistic effect of enterprise merger.
(xix) Long-term deferred expenses
The Company’s long-term deferred expenses refer to various expenses that have been paid and of which the
beneficial period is over one year (exclusive), mainly including mould expenses and technology access fees.
In long-term deferred expenses, the expenses of large-sized moulds are amortized over the expected useful
life starting in the month when they are incurred; the technology access fees and service expenses arising
out of the use of technologies owned by foreign companies are amortized over the period licensed for use
starting in the month when they are incurred; other expenses, mainly including management network,
management software and their ancillary fees, are amortized over their beneficial periods. Expenses which
have a definite beneficial period are averagely amortized over the beneficial period; expenses which have
no beneficial period are amortized in equal annual portion over a period of 5 years.
On the balance sheet date, the Company checks the capability of the respective long-term deferred expenses
bringing expected future economic benefits to it. Where the estimated recoverable amount of a long-term
deferred expense is less than its carrying value or that it cannot benefit the subsequent accounting periods,
the amortization period is shortened or the amortized value of this item is fully recorded into the profits and
losses of the current period.
(xx) Estimated liabilities
Where an obligation relating to contingencies and satisfying the following conditions is incurred to the
Company, such obligation is recognized as an estimated liability in the balance sheet:
(1) The obligation is a current obligation undertaken by the Company;
(2) It is very likely that the performance of such obligation will cause the outflow of economic benefits
from the Company;
(3) The amount of such obligation can be measured reliably.
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The estimated liability is initially measured according to the best estimated value required for performance
of the current obligation, and relevant risks, uncertainties and monetary time value and other factors relating
to the contingencies are generally considered. If the influence of monetary time value is significant, the best
estimated amount is recognized after discounting of relevant cash outflow in the future. The Company
checks the carrying value of the estimated liability on the balance sheet date and modifies the carrying
value to reflect the best estimated amount. The increase in amount of carrying value of the estimated
liability caused due to time elapse is recognized as interest expenses.
(xxi) Employee compensation
Employee compensation refers to all kinds of remunerations and other relevant expenditures paid by the
Company in exchange of the services provided by its employees, mainly including wages, salaries, bonuses,
allowances and subsidies, welfare expenses for the employees, social insurance and housing provident fund,
labour union expenditures, employee education expenses, non-monetary welfare, compensations for the
employees dismissal and other expenditures related with services provided by the employees.
(1) Compensations for the employees dismissal
If the Company cancels the labour relationship with any employee prior to the expiration of the relevant
labour contract or brings forward any compensation proposal for the purpose of encouraging the employee
to accept a layoff, and that where the Company has formulated a formal plan on the cancellation of labour
relationship or has brought forward a proposal on voluntary layoff and will execute it soon, and that the
Company is unable to unilaterally withdraw the plan on the cancellation of labour relationship or the layoff
proposal, the Company recognizes the estimated liabilities caused due to the compensation for the
cancellation of labour relationship with the employee, and record them into the profits and losses of the
current period.
(2) Other forms of employee compensation
During the accounting period in which an employee provides services to the Company, the Company
recognizes the compensation payable as liabilities, which, except for the compensations for the employee
dismissal, are recorded into the corresponding product costs, service costs, asset costs and the profits and
losses of the current period, depending on the subjects for which the employee provides services.
(xxii) Revenue
1. Sale of goods
The revenue from sale of goods is recognized in accordance with the received or receivable price from the
buyer as stipulated in the contract or agreement only when all the following conditions are met:
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1) The significant risks and rewards related with ownership of the goods have been transferred to the buyer;
2) Neither continuous management right that usually relates with the ownership is maintained nor effective
control over the sold goods is retained;
3) The amount of revenue can be measured reliably;
4) The relevant economic benefits are likely to flow into the Company;
5) The relevant costs incurred or to be incurred can be measured reliably.
If the collection of the price as stipulated in the contract or agreement is deferred and if it has the financing
nature, the revenue incurred by the sale of goods is recognized at the fair value of the receivable price as
stipulated in the contract or agreement.
2. Provision of labour service
The revenue from the repairing and installation services and other services provided by the Company to its
customers is recognized upon completion of the labour service.
3. Abalienation of right of assets
The revenue from abalienation of right of assets is recognized when the relevant economic benefits are
likely to flow into the Company and that the amount of revenue can be measured reliably. The amount of
royalty revenue is measured and determined in accordance with the period and method of charging as
stipulated in the relevant contract or agreement.
(xxiii) Governmental subsidies
Governmental subsidies refer to the monetary or non-monetary assets obtained by an enterprise from the
government without compensation, excluding the capital invested by the government as the owner of the
enterprise.
If a governmental subsidy is a monetary asset, it is measured at the amount received or receivable. If a
governmental subsidy is a non-monetary asset, it is measured at its fair value. If its fair value cannot be
obtained reliably, it is measured at its nominal amount (RMB1).
The governmental subsidies pertinent to assets are recognized as deferred income, equally distributed
within the useful lives of the relevant assets, and included in the profits and losses of the current period. But
the governmental subsidies measured at their nominal amounts are directly included in the profits and
losses of the current period.
The governmental subsidies pertinent to incomes used for compensating the related future expenses or
losses of the Company are recognized as deferred income and shall included in the current profits and
losses during the period when the relevant expenses are recognized; those used for compensating the related
expenses or losses incurred to the Company are directly included in the profits and losses of the current
period.
If it is necessary to refund any governmental subsidy which has been recognized, and if there is the deferred
income concerned, the carrying balance of the deferred income is offset against, but the excessive part is
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included in the profits and losses of the current period; if there is no deferred income concerned, it is
directly included in the profits and losses of the current period.
(xxiv) Deferred income tax assets/Deferred income tax liabilities
The Company’s income taxes are accounted for using the balance sheet liability approach. Where there is
difference between the carrying value of the assets or liabilities and its tax base, the deferred income tax
assets or the deferred income tax liabilities are determined as provided.
On the balance sheet date, the current income tax liabilities (or assets) incurred in the current period or prior
periods are measured at the expected payable (refundable) amount of income taxes according to the tax law;
the deferred income tax assets and deferred income tax liabilities are measured at the tax rate applicable in
the period during which the assets are expected to be taken back or the liabilities are expected to be repaid.
The Company recognizes the deferred income tax assets to the extent of the amount of the taxable income
which the Company is most likely to obtain from which its deductible temporary difference, deductible loss
and the taxes can be deducted. If no definite estimation can be made as to the amount of taxable income
which can be possibly obtained during the expected period of reversal of the deductible temporary
difference, the deferred income tax assets pertinent to the deductible temporary difference are not
recognized. The deferred income tax liabilities arising from the taxable temporary differences related to the
investments in the subsidiaries, associated corporations and joint ventures are recognized. However, those
that can concurrently meet the requirement that time of the reversal of temporary differences can be
controlled and that the temporary differences are unlikely to be reversed in the expected future, are not
recognized; as to the deferred income tax assets arising from the deductible temporary differences related to
the investments in the subsidiaries, associated corporations and joint ventures, such deductible temporary
differences are recognized where they are likely to be reversed in the foreseeable future, that is to say, a
definite plan is established for the disposal of such investments in the foreseeable future and that in addition
to the sufficient amount of taxable income it is expected to obtain sufficient investment income that may be
used for deducting the deductible temporary differences during the disposal of such investments.
On the balance sheet date, the carrying value of the deferred income tax assets is re-measured. Except the
income taxes arising from corporate merger or any transaction or event directly recognized as the owners’
equity, the current income tax and deferred income tax are included by the Company into the profits and
losses of the current period as income tax expenses or incomes.
(xxv) Leases
The leasing business in which the Company is involved is operating leases.
(1) The Company as the lessor
The rents from operating leases are recorded in the profits and losses of the current period by using the
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straight-line method over each period of the lease term. The initial direct costs incurred are included into the
profits and losses of the current period.
(2) The Company as the lessee
The rents from operating leases are recorded in the relevant asset costs or profits and losses of the current
period by using the straight-line method over each period of the lease term. The initial direct costs incurred
are included into the profits and losses of the current period.
(xxvi) Hedging
The Company’s hedged items are its major raw materials, for which futures contracts have been adopted as
the hedging instrument.
1. Recognition of hedging
The cash flow hedging of raw materials carried out by the Company is recognized as a hedging if it satisfies
all the following conditions:
(1) At the commencement of the hedging, the Company formally specified the hedging relationship (namely
the relationship between the hedging instrument and the hedged item) and prepared a formal written
document on the hedging relationship, risk management objectives and the hedging strategies. The
document at least specifies such contents as hedging instrument, the hedged item, the nature of the hedged
risk and the method for the effectiveness assessment of the hedging, etc. The hedging must be relevant to
the designated specific identifiable risk, and will ultimately affect the profits and losses of the Company;
(2) The hedging is expected to be highly effective and meet the risk management strategies, which are
determined for the hedging relationship by the Company at the very beginning;
(3) For cash flow hedging of an expected transaction, the expected transaction is likely to occur and must
make the Company exposed to the risk of changes in cash flow, which will ultimately affect the profits and
losses;
(4) The effectiveness of hedging can be reliably measured;
(5) The Company shall continuously evaluate the effectiveness of hedging and ensure that the hedging is
highly effective in the accounting period in which the hedging relationship is specified.
2. Measurement of hedging
The hedging instrument is measured at its fair value as at the signing date of the hedging contract and is
subsequently measured at its fair value. Hedging instrument of which fair value is positive is recognized as
other current assets, and hedging instrument of which fair value is negative is recognized as other current
liabilities. Where a cash flow hedging meets the conditions for adopting the hedging accounting method, it
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is dealt with in accordance with the following provisions:
(1) In the profit or loss from the hedging instrument, the portion that is effective hedging is recognized as
the owners’ equity directly and is presented as a separate item. The amount of this effective hedging portion
is confirmed in accordance with the lower of the accumulative profit or loss of the hedging instrument as of
the commencement of hedging or the accumulative amount of changes in the present value of the estimated
future cash flow of the hedged item as of the commencement of the hedging.
(2) In the profit or loss of the hedging instrument, the portion that is ineffective hedging (namely the other
profit or loss after deducting the portion directly recognized as the owners’ equity) is recorded in the profits
and losses of the current period.
(3) The relevant profit or loss directly recognized as the owners’ equity originally is transferred out in the
same period in which the financial asset or financial liability affects the profit or loss of the Company and is
recorded into the profits and losses of the current period. However, when all or partial net loss expected by
the Company to be directly recognized in the owners’ equity originally cannot be made up in the future
accounting period, the portion which cannot be made up is transferred out and is recorded into the profits
and losses of the current period.
3. Recognition of fair value of hedging instruments
Where there is an active market for a hedging instrument, its fair value is recognized by reference to the
quotation in the active market. The quotation in an active market refers to the prices obtained from stock
exchanges, brokers, guilds, pricing service institutions, etc., and such prices shall represent market
transaction prices actually occurring in fair transactions.
Where there is no active market for a hedging instrument, value appraisal techniques are adopted by the
Company to determine its fair value. The value appraisal techniques include the prices adopted by the
parties, who are familiar with the condition, in the latest market transaction upon their own free will, the
current fair value obtained by referring to other financial instruments of the same essential nature, the cash
flow discount method and option pricing model, etc.
4. Evaluation of the hedging effectiveness
The Company adopts the ratio analysis method to evaluate the effectiveness of its hedging instruments,
whereby the effectiveness of hedging will be determined through comparison of the change ratio of fair
value or cash flow of the hedging instruments and hedged items caused by the hedged risk. Upon
satisfaction with the following two conditions concurrently, a hedging is recognized as being highly
effective:
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1) At the beginning and in subsequent periods of a hedging, the hedging is expected to be highly effective in
offsetting the changes in the fair value or cash flows caused by the hedged risk during the specified periods;
2) The hedging’s actual offset results are within a range of 80%-125%.
(xxvii) Segment reporting
The Company’s operating segments are determined on the basis of internal organizational structure,
management requirements and internal reporting system. The Company’s operating segments refer to the
component that satisfies the following conditions concurrently:
(1) The component can generate income and incur expenses in the day-to-day operations;
(2) The management can perform regular appraisal against the operating results of the component to make
decisions about resources allocation and performance appraisal therefore;
(3) Relevant accounting information of the component such as financial status, operating results and cash
flows can be obtained.
The Company’s reporting segments are determined on the basis of its operating segments among which any
price transfer is determined by reference to market price and that the assets and relevant expenses shared by
the respective segments are allocated among the different segments proportional to revenue.
(xxviii) Changes in accounting policies and accounting estimates
1. Changes in accounting policies
There were no changes in the accounting policies during the reporting period.
2. Changes in accounting estimates
There were no changes in the accounting estimates during the reporting period.
(xxix) Correction of previous accounting errors
There has been no correction of previous accounting errors during the reporting period.
III. Taxation
The main taxable items of the Company and its subsidiaries are presented as follows:
1. Turnover tax and surtax
Category of tax Tax base Tax rate Remark
Value-added tax Revenue from sales of
products or labour services 17%
Business tax Business revenue 5%
Urban maintenance and
construction surcharge
Amount of value-added tax or
business tax 5%, 7%
Educational surcharge Amount of value-added tax or
business tax 3%
2. Enterprise income tax
124
Company name Tax rate Remarks
The Company 25% (1), (2)
Guangdong Meizhi Refrigeration Equipment Co., Ltd. 15% (3)
Guangdong Meizhi Precise Manufacture Co., Ltd. 15% (4)
Guangdong Midea Commercial Air Conditioning Equipment
Co., Ltd. 15% (5)
Guangdong Midea Refrigeration Equipment Co., Ltd. 15% (6)
Midea Group Wuhan Refrigeration Equipment Co, Ltd. 11% (7)
Hefei Royalstar Refrigerator Co., Ltd. 12.5% (8)
Hefei Royalstar Washing Machine Manufacture Co., Ltd. 15% (9)
Chongqing Midea General Refrigeration Equipment Co., Ltd. 12.5% (10)
Midea Group Wuhu Refrigeration Equipment Co., Ltd 15% (11)
Hefei Hualing Co., Ltd. 15% (11)
Anhui Meizhi Refrigeration Equipment Co., Ltd. 25% (1), (2)
Guangzhou Hualing Air-Conditioning & Equipment Co., Ltd. 25% (1), (2)
China Refrigeration Industry Co., Ltd. 25% (1), (2)
Little Swan (Jingzhou) Electric Appliance Co., Ltd. 25% (1), (2)
Wuxi Little Swan Company Limited 15% (12)
Wuxi Little Swan General Appliance Co., Ltd. 15% (13)
Wuxi Filin Electronics Co., Ltd. 15% (14)
(1) Each corporate entity of the Company and its subsidiaries served as independent taxpayer after approval
by Local Taxation Bureau of Shunde District, Foshan City with the Shun Di Shui Fa (1999) No.072
document since 1998.
(2) According to the Enterprise Income Tax Law of the People’s Republic of China promulgated on 16
March 2007, the Regulations on Implementation of Enterprise Income Tax Law of the PRC promulgated on
November 28th, 2007 and the successive Guo Fa [2007] No.39 Notice of the State Council on the
Implementation of the Enterprise Income Tax Transitional Preferential Policy as well as Cai Shui [2008]
No.21 Circular on Issues concerning the Implementation of the State Council’s Enterprise Income Tax
Transitional Preferential Policy issued by the Ministry of Finance and the State Administration of Taxation,
except the preferential tax rate approved, the Company and its subsidiaries made provisions for the income
tax at the rate of 25% from January 1st, 2008.
(3) On December 16th, 2008, Guangdong Midea Refrigeration Equipment Co., Ltd., the Company’s
controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech Enterprise
Certificate with a validity period of three years. During the current year, the provision for the income tax
was made at the rate of 15%.
(4) On November 10th, 2009, Guangdong Meizhi Precise Manufacture Co., Ltd., the Company’s
controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech Enterprise
Certificate with a validity period of three years. During the current year, the provision for the income tax
was made at the rate of 15%.
125
(5) On December 29th
, 2008, Guangdong Midea Commercial Air Conditioning Equipment Co., Ltd., the
Company’s controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech
Enterprise Certificate with a validity period of three years. During the current year, the provision for the
income tax was made at the rate of 15%.
(6) On December 16th, 2008, Guangdong Midea Refrigeration Equipment Co., Ltd., the Company’s
controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech Enterprise
Certificate with a validity period of three years. During the current year, the provision for the income tax
was made at the rate of 15%.
(7) Midea Group Wuhan Refrigerating Equipment Co., Ltd., a foreign invested production-type enterprise
located at Economic and Technical Development Zone of Wuhan City, enjoys 100% tax exemption for the
first two years of operation and 50% tax reduction for the subsequent three years. The current year was its
fourth profit-making year in which the provision for the income tax was made at the rate of 11% according
to the tax rate policy of Wuhan City for transition period for ―united enterprise income tax‖.
On December 30th, 2008, Midea Group Wuhan Refrigerating Equipment Co., Ltd., the Company’s
controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech Enterprise
Certificate with a validity period of three years.
(8) Hefei Royalstar Refrigerator Co., Ltd., a foreign invested production-type enterprise, enjoys 100% tax
exemption for the first two years of operation and 50% tax reduction for the subsequent three years. This
year was its fourth profit-making year in which the provision for the income tax was made at the rate of
12.5%.
On December 29th, 2008, Hefei Royalstar Refrigerator Co., Ltd., the Company’s controlled subsidiary, was
accredited as a high-tech enterprise and was awarded High-Tech Enterprise Certificate with a validity
period of three years.
(9) On November 19th, 2008, Hefei Royalstar Washing Machine Manufacture Co., Ltd. was accredited as a
high-tech enterprise. The provision for income tax for the year was made at the rate of 15%.
(10) Chongqing Midea General Refrigeration Equipment Co., Ltd. was a foreign invested production-type
enterprise and enjoys 100% tax exemption for the first two years of operation and 50% tax reduction for the
subsequent three years. This year was its fifth profit-making year where the provision for the income tax
was made at the rate of 12.5%.
On December 30th, 2008, Chongqing Midea General Refrigeration Equipment Co., Ltd., the Company’s
controlled subsidiary, was accredited as a high-tech enterprise and was awarded High-Tech Enterprise
Certificate with a validity period of three years.
(11) On December 29th, 2008, both Hefei Hualing Co., Ltd. and Midea Group Wuhu Refrigeration
Equipment Co., Ltd were accredited high-tech enterprises and were awarded High-Tech Enterprise
Certificate with a validity period of three years. The provision for income tax for the year was made at the
rate of 15%.
(12) On March 4th, 2009, Wuxi Little Swan Company Limited was accredited as a high-tech enterprise and
was awarded High-Tech Enterprise Certificate with a validity period of three years. The provision for
income tax for the year was made at the rate of 15%.
(13) On March 4th, 2009, Wuxi Little Swan General Appliance Co., Ltd. under Wuxi Little Swan Company
126
Limited was accredited as a high-tech enterprise and was awarded High-Tech Enterprise Certificate with a
validity period of three years. The provision for income tax for the year was made at the rate of 15%.
(14) In May 2009, Wuxi Filin Electronics Co., Ltd. under Wuxi Little Swan Company Limited was
accredited as a high-tech enterprise and was awarded High-Tech Enterprise Certificate with a validity
period of three years. The provision for income tax for the year was made at the rate of 15%.
Pursuant to relevant requirements, a high-tech enterprise is subject to the tax rate of 15% within three years
after it is accredited as a high-tech enterprise (including the year 2008). According to the Notice of the State
Council on the Implementation of the Enterprise Income Tax Transitional Preferential Policy, those
enterprises enjoying low tax rates or regular tax reduction and exemption treatments including 100% tax
exemption for the first two years of operation and 50% tax reduction for the subsequent three years,
continue to enjoy those benefits until the periods expire in accordance with the treatment measures and
terms regulated by the previous income tax laws, administrative regulations and relevant documents after
the implementation of new tax law.
3. Property tax
Property tax is calculated at a tax rate of 1.2% on the tax base of 70% of the original value of a real property
or at a tax rate of 12% on the tax base of rental income.
4. Individual income tax
Individual income tax of employees and individual income tax contained in the cash dividends allocated to
public shares are withheld by the Company.
IV. Enterprise Merger and Consolidated Financial Statements (Amount unit: RMB’000)
(i) Subsidiaries
1. Subsidiaries acquired through merger of enterprises under the same control
Name of subsidiary Type of
subsidiary
Place of
registration
Business
nature
Registered
capital
Legal
representative
Main business
scope
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd
Controlled
subsidiary
Wuhu City Manufacturing
of air
conditioner
US$ 6,928.00 Fang Hongbo Manufacturing and
sales of electrical
appliances
Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd.
Controlled
subsidiary
Foshan City Manufacturing
of air
conditioner
RMB660,000.0
0
Fang Hongbo Manufacturing and
sales of
commercial air
conditioners
Midea Group Wuhan Refrigeration
Equipment Co, Ltd.
Controlled
subsidiary
Wuhan City Manufacturing
of air
conditioner
US$ 8,000.00 Fang Hongbo Manufacturing and
sales of
refrigeration
equipment
Hefei Royalstar Refrigerator Co.,
Ltd.
Controlled
subsidiary
Hefei City Refrigerator
manufacturing
US$92,109.87 Wang
Jianguo
Manufacturing and
sales of electrical
appliances
Hefei Royalstar Washing Machine
Manufacture Co., Ltd.
Controlled
subsidiary
Hefei City Manufacturing
of wash
machine
US$135,520.00 Fang Hongbo Manufacturing and
sales of electrical
appliances
Hefei Royalstar and Midea Electric
Appliance Marketing Co., Ltd.
Controlled
subsidiary
Hefei City Sales of
refrigerator
and wash
machine
RMB5,000.00 Fang Hongbo Sales of electrical
appliances
Hefei Hualing Co., Ltd. Controlled
subsidiary
Hefei City Refrigerator
manufacturing
RMB91,200.00 Wang
Jianguo
Manufacturing and
sales of electrical
127
appliances
Guangzhou Hualing
Air-Conditioning Equipment Co.,
Ltd.
Controlled
subsidiary
Guangzhou
City
Manufacturing
of air
conditioner
RMB437,575.60 Lu Jianfeng Manufacturing and
sales of electrical
appliances
China Refrigeration Industry Co.,
Ltd.
Subsidiary
under
controlled
subsidiary
Guangzhou
City
Refrigerator
manufacturing
US$10,000.00 Wang
Jianguo
Manufacturing and
sales of electrical
appliances
Chongqing Midea General
Refrigeration Equipment Co., Ltd.
Controlled
subsidiary
Chongqing
City
Manufacturing
of air
conditioner
US$12,500.00 Fang Hongbo Manufacturing and
sales of
commercial air
conditioners
Midea Group Refrigerator
Manufacture (Hefei) Co., Ltd.
Controlled
subsidiary
Hefei City Refrigerator
manufacturing
RMB30,000.00 Fang Hongbo Manufacturing and
sales of electrical
appliances
(Continued)
Name of subsidiary
Percentage of
shareholding %
Percentage of
voting
rights %
Actual amount
of capital
contribution at
end of the year
Balance of other
items essentially
constituting net
investment in
subsidiary
Whether
consolidated
Direct Indirect
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd
73.00 7.00 80.00 377,030.09 - Yes
Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd.
73.00 7.00 80.00 706,043.17 - Yes
Midea Group Wuhan Refrigeration
Equipment Co, Ltd.
73.00 7.00 80.00 79,504.33 - Yes
Hefei Royalstar Refrigerator Co.,
Ltd.
75.00 - 75.00 414,685.93 - Yes
Hefei Royalstar Washing Machine
Manufacture Co., Ltd.
5.53 100.00 100.00 950,671.00 - Yes
Hefei Royalstar and Midea Electric
Appliance Marketing Co., Ltd.
75.00 - 75.00 14,468.53 - Yes
Hefei Hualing Co., Ltd. 75.00 25.00 100.00 118,195.11 - Yes
Guangzhou Hualing
Air-Conditioning Equipment Co.,
Ltd.
90.00 10.00 100.00 151,939.19 - Yes
China Refrigeration Industry Co.,
Ltd.
- 95.00 95.00 70,846.46 - Yes
Chongqing Midea General
Refrigeration Equipment Co., Ltd.
30.00 25.00 55.00 65,814.66 - Yes
Midea Group Refrigerator
Manufacture (Hefei) Co., Ltd.
55.00 - 55.00 16,500.00 - Yes
(Continued)
Name of subsidiary Type of enterprise Organization code Minority interest
Amount in minority
interest used to
offset profit/loss of
minority
shareholders
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd
Limited liability
company
70490853-5 173,122.22 -
Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd.
Limited liability
company
71482086-0 233,093.03 -
Midea Group Wuhan Refrigeration
Equipment Co, Ltd.
Limited liability
company
75817991-3 94,421.48 -
Hefei Royalstar Refrigerator Co.,
Ltd.
Limited liability
company
14906759-6 398,941.56 -
Hefei Royalstar Washing Machine
Manufacture Co., Ltd.
Limited liability
company
14906761-7 - -
Hefei Royalstar and Midea Electric
Appliance Marketing Co., Ltd.
Limited liability
company
77110982-1 305,45 -
128
Hefei Hualing Co., Ltd. Limited liability
company
61031550-1 - -
Guangzhou Hualing
Air-Conditioning Equipment Co.,
Ltd.
Limited liability
company
61878680-X - -
China Refrigeration Industry Co.,
Ltd.
Limited liability
company
61841272-8 4,153.43 -
Chongqing Midea General
Refrigeration Equipment Co., Ltd.
Limited liability
company
76268641-6 80,182.44 -
Midea Group Refrigerator
Manufacture (Hefei) Co., Ltd.
Limited liability
company
78305580-8 13,500.00 -
2. Subsidiaries acquired through merger of enterprises not under the same control
Name of subsidiary Type of
subsidiary
Place of
registration
Business
nature
Registered capital Legal
representative
Main business
scope
Guangdong Meizhi Refrigeration
Equipment Co., Ltd.
Controlled
subsidiary
Foshan City Refrigerator
manufacturing
US$55,270.00 Fang Hongbo Manufacturing
and installation
of compressors
Wuhu Lexiang Electrical
Appliances Company Limited
Subsidiary of
controlled
subsidiary
Wuhu City Manufacturing
of air
conditioner
RMB20,000.00 Fang Hongbo Manufacturing
of home
appliances
Wuxi Little Swan Company
Limited
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of electrical
and
mechanical
appliances
RMB547,655.76 Fang Hongbo Manufacturing
and sales of
electrical and
mechanical
appliances
Jiangsu Little Swan Sales
&Marketing Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of home
appliances
RMB419,500.00 - Sales of home
appliances
Wuxi Filin Electronics Co., Ltd. Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of electronic
products
US$3,624.60 Chai Xinjian Development
and
manufacturing
of new
electronic parts
and devices
Wuxi Little Swan Import and
Export Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of electrical
and
mechanical
appliances
RMB65,000.00 Chai Xinjian Import and
export of
electrical and
mechanical
products
Wuxi Little Swan Huayin
Electrical Appliance Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of electrical
and
mechanical
appliances
US$6,000.00 Chai Xinjian Manufacturing
of home
appliance
motors
Wuxi Little Swan Washing
Machinery Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of home
appliances
US$6,000.00 Chai Xinjian manufacturing
of commercial
washing
machine and
drying machine
Wuxi Meitian Refrigerator
Marketing Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of home
appliances
US$4,000.00 - sales of
refrigerators
Wuxi Little Swan General
Appliance Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of home
appliances
RMB28,000.00 Chai Xinjian manufacturing
of commercial
washing
machine and
drying machine
Wuxi Little Swan Driving
&Control Technology
Development Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuxi City Manufacturing
of electrical
and
mechanical
appliances
RMB5,000.00 Chai Xinjian Manufacturing
and sales of
electrical
appliances
Little Swan(Jingzhou) Sanjin
Electric Co.
Subsidiary of
controlled
Jingzhou
City
Manufacturing
of home
RMB11,070.20 Chai Xinjian manufacturing
of washing
129
subsidiary appliances machine
Little Swan International
(Singapore) Co., Ltd.
Subsidiary of
controlled
subsidiary
Singapore Investment US$5,000.00 - Investment
Little Swan(Jingzhou) Electrical
Appliance Co., Ltd.
Controlled
subsidiary
Jingzhou Manufacturing
of home
appliances
RMB50,000.00 Fang Hongbo Manufacturing
of refrigerators
(Continued)
Name of subsidiary
Percentage of
shareholding %
Percentage of
voting
rights %
Actual amount
of capital
contribution at
end of the year
Balance of other
items essentially
constituting net
investment in
subsidiary
Whether
consolidated
Direct Indirect
Guangdong Meizhi Refrigeration
Equipment Co., Ltd.
60.00 - 60.00 89,787.77 - Yes
Wuhu Lexiang Electrical Appliances
Company Limited
- 80.00 100.00 33,801.46 - Yes
Wuxi Little Swan Company Limited 34.20 4.88 39.08 2,562,984.38 - Yes
Jiangsu Little Swan Sales
&Marketing Co., Ltd.,
- 38.94 99.64 417,550.00 - Yes
Wuxi Filin Electronics Co., Ltd., - 55.53 73.00 19,620.00 - Yes
Wuxi Little Swan Import and Export
Co., Ltd.,
- 34.64 88.64 57,500.00 - Yes
Wuxi Little Swan Huayin Electrical
Appliance Co., Ltd.,
- 39.08 100.00 48,763.60 - Yes
Wuxi Little Swan Schulthess
Washing Machinery Co., Ltd.,
- 22.24 75.00 37,259.60 - Yes
Wuxi Meitian Refrigerator
Marketing Co., Ltd.,
- 39.08 100.00 24,840.00 - Yes
Wuxi Little Swan General Appliance
Co., Ltd.,
- 27.36 70.00 19,600.00 - Yes
Wuxi Little Swan Driving & Control
Technology Development Co.,
Ltd.,
- 39.08 100.00 4,500.00 - Yes
Little Swan(Jingzhou) Sanjin
Electric Co.
- 39.08 100.00 11,869.40 - Yes
Little Swan International
(Singapore) Co., Ltd.
- 39.08 100.00 33,113.50 - Yes
Little Swan(Jingzhou) Electrical
Appliance Co., Ltd.,
51.00 49.00 100.00 63,239.03 - Yes
(Continued)
Name of subsidiary Type of enterprise Organization code Minority interest Amount in minority
interest used to
offset profit/loss of
minority
shareholders
Guangdong Meizhi Refrigertion
Equipment Co., Ltd.
Limited liability
company
61741137-9 538,79.05 -
Wuhu Lexiang Electrical
Appliances Company Limited
Limited liability
company
73003225-8 - -
Wuxi Little Swan Company
Limited
Limited liability
company
70404676-0 1,824,183.53 -
Jiangsu Little Swan Sales
&Marketing Co., Ltd.,
Limited liability
company
73330538-9 - -
Wuxi Filin Electronics Co., Ltd., Limited liability
company
74815875-6 - -
Wuxi Little Swan Impot and Export Limited liability 13600714-8 - -
130
Co., Ltd., company
Wuxi Little Swan Huayin Electrical
Appliance Co., Ltd.,
Limited liability
company
60792297-6 - -
Wuxi Little Swan Schulthess
Washing Machinery Co., Ltd.,
Limited liability
company
60792331-1 - -
Wuxi Meitian Refrigerator
Marketing Co., Ltd.,
Limited liability
company
14075418-9 - -
Wuxi Little Swan General
Appliance Co., Ltd.,
Limited liability
company
76355342-0 36,158.10 -
Wuxi Little Swan Driving &
Control Technology Development
Co., Ltd.,
Limited liability
company
795385396-6 284.00 -
Little Swan(Jingzhou) Sanjin
Electric Co.
Limited liability
company
72614223-5 -
Little Swan International
(Singapore) Co., Ltd.
Limited liability
company
- -
Little Swan(Jingzhou) Electrical
Appliance Co., Ltd.,
Limited liability
company
70696333-5 - -
3. Other subsidiaries
Name of subsidiary Type of
subsidiary
Place of
registration
Business
nature
Registered capital Legal
representative
Main business
scope
Guangdong Midea Refrigeration
Equipment Co., Ltd.
Controlled
subsidiary
Foshan City Manufacturing
of air
conditioner
RMB854,000.00 Fang Hongbo Manufacturing
and sales of
Refrigeration
Equipment
Guangdong Meizhi Precise
Manufacture Co., Ltd.
Controlled
subsidiary
Foshan City Manufacturing
of compressor
US$7,740.00 Fang Hongbo Manufacturing
and sales of
compressor
Foshan Midea Material Supply
Co., Ltd.
Controlled
subsidiary
Foshan City Purchase and
sales of
materials
RMB60,000.00 Cai Qiwu Processing and
sales of metal
materials
Midea Appliance(BVI) Co., Ltd. Controlled
subsidiary
British
Virgin
Islands
Investment US$33,000.00 - Import and
export trade,
and overseas
investment
Midea Refrigeration (Hong Kong)
Co., Ltd.
Subsidiary of
controlled
subsidiary
Hong Kong Investment
and trading
HKD10.00 - Import and
export trade
Guangdong Midea Building
Control Technology Co., Ltd.
Controlled
subsidiary
Foshan City IT technology
R&D
RMB18,000.00 Deng Yiwei Manufacturing,
sales and
consultation of
IT products
Foshan Midea Air Conditioner
Industrial Investment Co., Ltd.
Controlled
subsidiary
Foshan City Investment RMB23,200.00 Fang Hongbo Investing in
manufacturing
of air
conditioners
GD Midea Heating & Ventilation
Equipment Co., Ltd.
Controlled
subsidiary
Foshan City Manufacturing
and
installation of
air
conditioners
RMB100,000.00 Fang Hongbo Manufacturing
and installation
of air
conditioners,
and other
heating &
ventilation
equipment
Beijing Midea Commercial
Air-conditioner Sales Co., Ltd.
Subsidiary of
controlled
subsidiary
Beijing City Sales of air
conditioners
RMB3,000.00 Wang Feng Sales of central
air conditioners
Guangdong Midea Group Wuhu
Property Construction and
Management Co., Ltd.
Controlled
subsidiary
Wuhu City Property
management
RMB20,000.00 Fang Hongbo Investment in
and
management
of industrial
buildings
Foshan Shunde Bowen Investment Controlled Foshan City Industrial RMB10,000.00 Li Feide Industrial
131
Co., Ltd. subsidiary investment investment
Guangdong Midea Automatic
Control Technology Co., Ltd.,
Subsidiary of
controlled
subsidiary
Guangzhou
City
IT product
sales
RMB5,000.00 Deng Yiwei R&D and sales
of IT products
Titoni Investments Development
Ltd
Subsidiary of
controlled
subsidiary
Hong Kong Industrial
investment
US$10.00 - Industrial
investment
Midea Air conditioner (US) Co.,
Ltd.
Subsidiary of
controlled
subsidiary
Miami Sales of air
conditioners
US$10.00 - Not restricted
Midea America (Canada) Co.,
Ltd. Subsidiary of
controlled
subsidiary
Markham Sales of air
conditioners
CAD0.10 - Import and
export trade
Midea Europe Co., Ltd. Subsidiary of
controlled
subsidiary
Dusseldorf Sales of air
conditioners
EUR250.00 - Import and
export trade
Midea Air conditioner (Middle
East) Co., Ltd. Subsidiary of
controlled
subsidiary
Dubai Sales of air
conditioners
AED1,000.00 - Import and
export trade
Midea Air conditioner (Italy)
Co., Ltd. Subsidiary of
controlled
subsidiary
Milan Sales of air
conditioners
EUR99.00 - Import and
export trade
Midea Refrigerating Equipment
(Vietnam) Co., Ltd. Subsidiary of
controlled
subsidiary
Bencat Manufacturing
of air
conditioners
US$8,000.00 - Manufacturing
of home
appliances
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
Controlled
subsidiary
Hefei Compressor
manufacturing
RMB325,000.00 Fang Hongbo Manufacturing
and sales of
compressors
Hefei Midea Wash Machine
Manufacture Co., Ltd.
Subsidiary of
controlled
subsidiary
Hefei Manufacturing
of wash
machines
RMB20,000.00 Fang Hongbo Manufacturing
and sales of
electrical
products
Midea Electric Appliance
(Singapore) Trading Co., Ltd.
Subsidiary of
controlled
subsidiary
Singapore Sales of air
conditioners
SGD700.00 - Import and
export trade
Foshan Midea Carrier
Refrigeration Equipment Co., Ltd.
Subsidiary of
controlled
subsidiary
Foshan City Manufacturing
of air
conditioners
RMB200,000.00 Fang Hongbo Manufacturing
of home air
conditioners and
light-duty
commercial air
conditioners
Midea Air-conditioning (France)
Co., Ltd.
Subsidiary of
controlled
subsidiary
Paris Sales of air
conditioners
EUR100.00 - Import and
export trade
Midea Air-conditioning (Spain)
Co., Ltd.
Subsidiary of
controlled
subsidiary
Madrid Sales of air
conditioners
EUR3.01 - Import and
export trade
Midea Air-conditioning (Mexico)
Co., Ltd.
Subsidiary of
controlled
subsidiary
Mexico City Sales of air
conditioners
MXP3.04 - Import and
export trade
Handan Midea Refrigeration
Equipment Co., Ltd.
Subsidiary of
controlled
subsidiary
Handan
City
Sales of air
conditioners
RMB80,000.00 Fang Hongbo Manufacturing
and sales of
refrigeration
equipment
Wuhu Meizhi Air-conditioning
Equipment Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuhu City Manufacturing
of air
conditioners
RMB100,000.00 Fang Hongbo Manufacturing
and sales of
refrigeration
equipment
Hefei Midea Materials Supply Co.,
Ltd.
Controlled
subsidiary
Hefei City Purchase and
sales of
materials
RMB130,000.00 Cai Qiwu Processing and
sales of metal
materials
Midea Electric Appliance
(Holland) Co., Ltd.
Subsidiary of
controlled
subsidiary
Amsterdam Sales of air
conditioners
EUR20.000 - Import and
export trade
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
Controlled
subsidiary
Guangzhou
City
Manufacturing
of air
RMB200,000.00 Fang Hongbo Manufacturing
and sales of
132
conditioners electrical
products
Guangzhou Midea Hualing
Refrigeration Equipment Co., Ltd.
Subsidiary of
controlled
subsidiary
Guangzhou
City
Refrigerator
manufacturing
RMB200,000.00 Fang Hongbo Manufacturing
and sales of
refrigeration
equipment
Anhui Meizhi Compressor Co.,
Ltd.
Controlled
subsidiary
Hefei City Compressor
manufacturing
RMB50,000.00 Fang Hongbo Manufacturing
and sales of
compressors
Hefei Midea Heating & Ventilation
Equipment Co., Ltd.
Controlled
subsidiary
Hefei City Manufacturing
of air
conditioners
RMB150,000.00 Fang Hongbo Manufacturing
and sales of
commercial air
conditioners
Anhui Meizhi Precise Manufacture
Co., Ltd.
Subsidiary of
controlled
subsidiary
Wuhu City RMB300,000.00 Fang Hongbo Manufacturing
and sales of
compressors
(Continued)
Name of subsidiary
Percentage of
shareholding %
Percentage of
voting
rights %
Actual amount
of capital
contribution at
end of the year
Balance of other
items essentially
constituting net
investment in
subsidiary
Whether
consolidated
Direct Indirect
Guangdong Midea Refrigeration
Equipment Co., Ltd.
73.00 7.00 80.00 819,091.81 - Yes
Guangdong Meizhi Precise
Manufacture Co., Ltd.
60.00 - 60.00 38,437.80 - Yes
Foshan Midea Material Supply Co.,
Ltd.
90.00 10.00 100.00 60,000.00 - Yes
Midea Appliance(BVI) Co., Ltd. 100.00 - 100.00 236,542.62 - Yes
Midea Refrigerating(Hong Kong)
Co., Ltd.
- 100.00 100.00 10.64 - Yes
Guangdong Midea Building
Control Technology Co., Ltd.
90.00 10.00 100.00 18,000.00 - Yes
Foshan Midea Air Conditioner
Industrial Investment Co., Ltd.
100.00 - 100.00 36,061.94 - Yes
Guangdong Midea Heating &
Ventilation Equipment Co., Ltd.
90.00 10.00 100.00 100,000.00 - Yes
Beijing Midea Commercial
Air-conditioner Sales Co., Ltd.
- 80.00 100.00 3,000.00 - Yes
Guangdong Midea Group Wuhu
Property Construction and
Management Co., Ltd.
80.00 20.00 100.00 20,000.00 - Yes
Foshan Shunde Bowen Investment
Co., Ltd.
100.00 - 100.00 10,000.00 - Yes
Guangdong Midea Automatic
Control Technology Co., Ltd.
- 100.00 100.00 5,000.00 - Yes
Titoni Investments Development Ltd - 100.00 100.00 77.13 - Yes
Midea Air conditioner (US) Co.,
Ltd.
- 100.00 100.00 82.80 - Yes
Midea America (Canada) Co., Ltd. - 100.00 100.00 CAD0.10 - Yes
Midea Europe Co., Ltd. - 100.00 100.00 EUR250.00 - Yes
Midea Air conditioner (Middle
East) Co., Ltd. - 100.00 100.00 AED1,000.00 - Yes
Midea Air conditioner (Italy) Co.,
Ltd. - 100.00 100.00 EUR99.00 - Yes
Midea Refrigerating Equipment
(Vietnam) Co., Ltd. - 100.00 100.00 US$8,528.00 - Yes
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
95.00 - 95.00 308,750.00 - Yes
Hefei Midea Wash Machine
Manufacture Co., Ltd.
- 100.00 100.00 20,000.00 - Yes
Midea Electrical Appliance
(Singapore) Trading Co., Ltd.
- 100.00 100.00 SGD700.00 - Yes
133
Foshan Midea-Carrier Refrigerating
Equipment Co., Ltd.
60.00 - 60.00 120,000.00 - Yes
Midea Air-conditioning (France)
Co., Ltd.
- 100.00 100.00 EUR100.00 - Yes
Midea Air-conditioning (Spain)
Co., Ltd.
- 100.00 100.00 EUR3.01 - Yes
Midea Air-conditioning (Mexico)
Co., Ltd.
- 100.00 100.00 MXP3.04 - Yes
Handan Midea Refrigeration
Equipment Co., Ltd.
- 80.00 100.00 80,000.00 - Yes
Wuhu Meizhi Air-conditioning
Equipment Co., Ltd.
- 100.00 100.00 100,000.00 - Yes
Hefei Midea Materials Supply Co.,
Ltd.
90.00 100.00 100.00 130,000.00 - Yes
Midea Electric Appliance (Holland)
Co., Ltd.
- 100.00 100.00 EUR20.00 - Yes
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
75.00 100.00 100.00 200,000.00 - Yes
Guangzhou Midea Hualing
Refrigeration Equipment Co., Ltd.
- 100.00 100.00 200,000.00 - Yes
Anhui Meizhi Compressor Co., Ltd. 95.00 100.00 100.00 50,000.00 - Yes
Hefei Midea Heating & Ventilation
Equipment Co., Ltd.
90.00 100.00 100.00 150,000.00 - Yes
Anhui Meizhi Precise Manufacture
Co., Ltd.
95.00 100.00 100.00 300,000.00 - Yes
(Continued)
Name of subsidiary Type of enterprise Organization code Minority interests Amount in minority
interests used to
offset profit/loss of
minority
shareholders
Guangdong Midea Refrigeration
Equipment Co., Ltd.
Limited liability
company
72547107-X 381,721.64 -
Guangdong Meizhi Precise
Manufacture Co., Ltd.
Limited liability
company
76157878-X 191,903.38 -
Foshan Midea Material Supply Co.,
Ltd.
Limited liability
company
77309451-2 - -
Midea Appliance(BVI) Co., Ltd. Limited liability
company
- - -
Midea Refrigerating(Hong Kong)
Co., Ltd.
Limited liability
company
- - -
Guangdong Midea Building
Control Technology Co., Ltd.
Limited liability
company
77621415-3 - -
Foshan Midea Air Conditioner
Industrial Investment Co., Ltd.
Limited liability
company
72648929-8 - -
GD Midea Heating & Ventilating
Equipment Co., Ltd.
Limited liability
company
78115339-1 - -
Beijing Midea Commercial
Air-conditioner Sales Co., Ltd.
Limited liability
company
78170833-4 - -
Wuhu Property Construction and
Management Co., Ltd. Under
Limited liability
company
71996411-8 - -
Foshan Shunde Bowen Investment
Co., Ltd.
Limited liability
company
79779564-7 - -
Guangdong Midea Automatic Limited liability 66403372-9 - -
134
Control Technology Co., Ltd., company
Titoni Investments Development
Ltd
Limited liability
company
- - -
Midea Air conditioner (US) Co.,
Ltd.
Limited liability
company
- - -
Midea America (Canada) Co.,
Ltd. Limited liability
company
- - -
Midea Europe Co., Ltd. Limited liability
company
- - -
Midea Air conditioner (Middle
East) Co., Ltd. Limited liability
company
- - -
Midea Air conditioner (Italy) Co.,
Ltd. Limited liability
company
- - -
Midea Refrigerating Equipment
(Vietnam) Co., Ltd. Limited liability
company
- - -
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
Limited liability
company
67094034-1 14,075.53 -
Hefei Midea Wash Machine
Manufacture Co., Ltd.
Limited liability
company
67423819-7 - -
Midea Electric Appliance
(Singapore) Trading Co., Ltd.
Limited liability
company
- - -
Foshan Midea-Carrier Refrigeration
Equipment Co., Ltd.
Limited liability
company
67711187-X 98,676.66 -
Midea Air-conditioning (France)
Co., Ltd.
Limited liability
company
- - -
Midea Air-conditioning (Spain)
Co., Ltd.
Limited liability
company
- - -
Midea Air-conditioning (Mexico)
Co., Ltd.
Limited liability
company
- - -
Handan Midea Refrigerating
Equipment Co., Ltd.
Limited liability
company
67468889-2 - -
Wuhu Meizhi Air-conditioning
Equipment Co., Ltd.
Limited liability
company
55458322-8 - -
Hefei Midea Materials Supply Co.,
Ltd.
Limited liability
company
55183611-1 - -
Midea Electric Appliance (Holland)
Co., Ltd.
Limited liability
company
- - -
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
Limited liability
company
55665899-1 - -
Guangzhou Midea Hualing
Refrigeration Equipment Co., Ltd.
Limited liability
company
55665902-X - -
Anhui Meizhi Compressor Co., Ltd. Limited liability
company
55783543-5 - -
Hefei Midea Heating & Ventilation
Equipment Co., Ltd.
Limited liability
company
56341004-6 - -
Anhui Meizhi Precise Manufacture
Co., Ltd.
Limited liability
company
56342212-7 - -
(ii) Changes in scope of consolidation during the reporting period
Companies newly included in the scope of consolidation
Name of company Reason for
change
Net assets at the end
of the year
Net profit for the year Remarks
Wuhu Meizhi Air-conditioning
Equipment Co., Ltd.
Newly
established
66,764.38 (33,235.62)
Hefei Midea Materials Supply Co.,
Ltd.
Newly
established
195,581.46 65,581.46
Midea Electric Appliance (Holland)
Co., Ltd.
Newly
established
274,368.91 7,879.22
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
Newly
established
186,783.43 (13,348.94)
Guangzhou Midea Hualing
Refrigeration Equipment Co., Ltd.
Newly
established
199,584.90 (563.42)
135
Anhui Meizhi Compressor Co., Ltd. Newly
established
49,526.80 (473.72)
Hefei Midea Heating & Ventilation
Equipment Co., Ltd.
Newly
established
149,630.06 (369.94)
Little Swan International
(Singapore) Co., Ltd.
Newly
established
33,065.20 (49.35)
Anhui Meizhi Precise Manufacture
Co., Ltd.
Newly
established
299,839.56 (238.19)
(1) In April 2010, Guangzhou Midea Hualing Air-conditioning Equipment Co., Ltd., a controlled subsidiary
of the Company, made a contribution of RMB100 million to establish Wuhu Meizhi Air-conditioning
Equipment Co., Ltd. with the registered capital of RMB100 million;
(2) In March 2010, Hefei Midea Materials Supply Co., Ltd. was established with a registered capital of
RMB130 million, jointly funded by the Company and Foshan Midea Material Supply Co., Ltd. The
Company contributed RMB117 million, accounting for 90% of the registered capital, while Foshan Midea
Material Supply Co., Ltd. contributed RMB13 million, accounting for 10% of the registered capital;
(3) In March 2010, Midea Electrical Appliance (Singapore) Trading Co., Ltd., a controlled subsidiary of
the Company, made a contribution of RMB183,180 to establish Midea Electric Appliance (Holland) Co.,
Ltd.;
(4) In June 2010, Guangzhou Midea Hualing Refrigerator Co., Ltd. was established with a registered capital
of RMB200 million, jointly funded by the Company and Midea Electrical Appliance (Singapore) Trading
Co., Ltd. The Company contributed RMB150 million, accounting for 75% of the registered capital, while
Midea Electrical Appliance (Singapore) Trading Co., Ltd. contributed US$7,367,970, equivalent to
RMB50,132,370, accounting for 25% of the registered capital;
(5) In June 2010, Guangzhou Midea Hualing Refrigeration Equipment Co., Ltd. was established with a
registered capital of RMB200 million, jointly funded by the Company’s controlled subsidiary, Guangzhou
Midea Hualing Air-conditioning Equipment Co., Ltd. and Midea Electrical Appliance (Singapore) Trading
Co., Ltd. Guangzhou Midea Hualing Air-conditioning Equipment Co., Ltd. contributed RMB150 million,
accounting for 75% of the registered capital, while Midea Electrical Appliance (Singapore) Trading Co.,
Ltd. contributed US$7.4 million, equivalent to RMB50,148,320, accounting for 25% of the registered
capital;
(6) In September 2010, Anhui Meizhi Compressor Co., Ltd. was established with a registered capital of
RMB50 million, jointly funded by the Company and Midea Electrical Appliance (Singapore) Trading Co.,
Ltd. The Company contributed RMB47.5 million, accounting for 95% of the registered capital, while Midea
Electrical Appliance (Singapore) Trading Co., Ltd. contributed US$374,930, equivalent to RMB2,500,520,
accounting for 5% of the registered capital;
(7) In October 2010, Hefei Midea Heating & Ventilation Equipment Co., Ltd. was established with a
registered capital of RMB150 million, jointly funded by the Company and Foshan Midea Air Conditioner
136
Industrial Investment Co., Ltd. The Company contributed RMB135 million, accounting for 90% of the
registered capital, while Foshan Midea Air Conditioner Industrial Investment Co., Ltd. contributed RMB15
million, accounting for 10% of the registered capital.
(8) In October 2010, Anhui Meizhi Precise Manufacture Co., Ltd. was established with a registered capital
of RMB300 million, jointly funded by the Company and Midea Electrical Appliance (Singapore) Trading
Co., Ltd. The Company contributed RMB285 million, accounting for 95% of the registered capital, while
Midea Electrical Appliance (Singapore) Trading Co., Ltd. contributed US$2,264,300, equivalent to
RMB15,077,750, accounting for 5% of the registered capital.
(iii) Exchange rate for the conversion of major statement items of overseas operating entities
The exchange rate for the conversion of major financial statement items of the overseas operating entities
included in the consolidated financial statements for the reporting period: for the conversion of the asset and
liability items on the Balance Sheet, the spot exchange rate on the Balance Sheet date was used, i.e.
US$1=RMB6.6227; for the conversion of the owners’ equity items (except the undistributed profit item),
the spot exchange rate announced on the occurrence date was used; and for the conversion of the profit and
loss statement and cash flow statement, the spot exchange rate announced on the occurrence date was used,
i.e. US$1=RMB6.7668.
V. Notes to Major Items on the Consolidated Financial Statements
(i) Monetary funds
Item Book balance at the end of the year Book balance at the beginning of the year
Original
currency
Exchange
rate
RMB
equivalent
Original
currency
Exchange
rate
RMB
equivalent
Cash RMB 395.97 1.0000 395.97 555.64 1.0000 555.64
US$ - 6.6227 - 5.46 6.8282 37.28
JPY 4,593.68 0.0813 373.47 3,443.21 0.0738 254.11
HKD - 0.8509 - 1,364.37 0.8805 1,201.33
VND 236,132.95 0.0003 70.84 - - -
Subtotal 840.28 2,048.36
Bank deposit RMB 3,750,007.43 1.0000 3,750,007.43 2,318,202.27 1.0000 2,318,202.27
US$ 102,000.36 6.6227 675,517.76 49,102.87 6.8282 335,284.22
JPY 1.77 0.0813 0.14 10,501.76 0.0738 775.03
HKD 594.21 0.8509 505.61 1,038.74 0.8805 914.61
EUR 7,244.69 8.8065 63,800.35 4,371.82 9.7971 42,831.16
VND 85,199,916.35 0.0003 25,559.97 - - -
SGD 54.97 5.1119 281.01 - - -
Subtotal 4,515,672.27 2,698,007.29
Other monetary
fund
RMB 1,286,173.73 1.0000 1,286,173.73 1,155,026.49 1.0000 1,155,026.49
Total 5,802,686.28 3,855,082.14
There has been no frozen amount or amount which probably could not be collected for the reporting period.
As at December 31st, 2010, amount of the Company’s cash deposited at Midea Group Finance Co., Ltd. was
RMB244,011,830.00, which is a part of the Company’s bank deposit.
137
Balance of other monetary funds as at year end mainly was comprised of margin deposit for bank
acceptance bills.
(ii) Trading financial assets
Item Fair value at the end of the year Fair value at the beginning of the year
Derivative financial instruments 150,165.90 27,183.74
Balance of derivative financial instruments as at year end represented the gains from changes in fair value
incurred by unsettled foreign exchange contracts.
Balance of derivative financial instruments at the end of the reporting period was significantly increased
over the beginning of the year mainly due to increase of the transaction volume.
(iii) Notes receivable
Type of notes Book balance at the end of the year Book balance at the beginning of the
year
Bank acceptance bills 3,871,019.54 5,448,452.41
Balance of notes receivable as at year end for the reporting period increased significantly from the balance
as at the beginning of the year, mainly due to the increase in notes settlement for the year.
As at 31 December 2009, the Company’s endorsed outstanding notes amounted to RMB9,059,302,790.
(iv) Accounts receivable
(1) Accounts receivable are listed by type as below:
Type Book balance at the end of the year
Book balance Provision for bad debts Net amount
Amount Percentage % Amount Percentage %
Accounts receivable with significant single
amounts and provision made for bad debts
for each single account receivable
- - - - -
Accounts receivable with provision made
for bad debts for combination of accounts
receivable
Combination 1: aging combination 4,687,947.77 100.00 245,821.97 5.24 4,442,125.80
Combination 2: accounts receivable within
the scope of consolidated statements
- - - - -
Subtotal 4,687,947.77 100.00 245,821.97 5.24 4,442,125.80
Accounts receivable with insignificant
single amounts but provision made for bad
debts for each single account receivable
- - - - -
Total 4,687,947.77 100.00 245,821.97 5.24 4,442,125.80
Type Book balance at the beginning of the year
Book balance Provision for bad debts Net amount
Amount Percentage % Amount Percentage %
Accounts receivable with significant single - - - - -
138
amounts and provision made for bad debts
for each single account receivable
Accounts receivable with provision made
for bad debts for combination of accounts
receivable
Combination 1: aging combination 5,183,720.17 100.00 516,845.04 9.97 4,666,875.13
Combination 2: accounts receivable within
the scope of consolidated statements
- - - - -
Subtotal 5,183,720.17 100.00 516,845.04 9.97 4,666,875.13
Accounts receivable with insignificant
single amounts but provision made for bad
debts for each single account receivable
- - - - -
Total 5,183,720.17 100.00 516,845.04 9.97 4,666,875.13
Of which, amounts in foreign currency are listed as below
Item Book balance at the end of the year Book balance at the beginning of the year
Original
currency
Exchange
rate
RMB
equivalent
Original
currency
Exchange
rate
RMB
equivalent
US$ 468,132.53 6.6227 3,100,301.30 308,748.61 6.8282 2,108,197.25
JPY 1,893,235.63 0.0813 153,920.06 84,240.00 0.0738 6,216.91
EUR 20,473.56 8.8065 180,300.43 4,612.57 9.7971 45,189.81
VND 154,354,062.42 0.0003 46,306.22 - - -
Total 3,480,828.01 2,159,603.97
Accounts receivable in the combinations for which provision for bad debt is made by using age
analysis method:
Aging structure Book balance at the end of the year
Amount Percentage % Provision for bad
debts
Net amount
Less than 1 year
(inclusive. The
same below)
4,660,436.07 99.41 235,881.33 4,424,554.74
1~2 years 14,471.84 0.31 1,604.38 12,867.46
2~3 years 6,505.60 0.14 1,806.53 4,699.07
More than 3 years 6,534.26 0.14 6,529.73 4.53
Total 4,687,947.77 100.00 245,821.97 4,442,125.80
Aging structure Book balance at the beginning of the year
Amount Percentage % Provision for bad
debts
Net amount
Less than 1 year
(inclusive. The
same below)
4,903,336.11 94.59 248,293.96 4,655,042.15
1~2 years 41,492.35 0.80 30,187.90 11,304.45
2~3 years 49,769.42 0.96 49,313.44 455.98
More than 3 years 189,122.29 3.65 189,049.74 72.55
Total 5,183,720.17 100.00 516,845.04 4,666,875.13
(2) Accounts receivable actually written off for the year
Type of accounts receivable Reason Amount
139
Payment for goods sales The customer is already closed down or
the payment cannot be collected
243,515.38
(3) Balance of accounts receivable for the reporting period did not include amounts due from
shareholders holding 5% (inclusive) or more of the shares conferring voting rights in the Company; details
on accounts receivable of related parties and the percentage of total accounts receivable made up by them
are described in Note VII (iii).
(4) Top five customers in respects of amount of accounts receivable as at year end are listed as
below：
(v) Prepayments
(1) Prepayments are listed by age as below:
Aging Book balance at
the end of the
year
Percentage (%) Book balance at
the beginning
of the year
Percentage (%)
Less than one year 2,544,402.55 100.00 808,353.86 100.00
(2) Balance of the prepayments at the end of the reporting period was significantly increased over the
balance at the beginning of the year mainly due to increased prepayments for the materials and
engineering equipment.
(3) Top five companies with the largest prepayment amount at year end are listed as below:
Name of company Relationship
with the
Company
Book balance
at the end of
the year
Percentage of
total
prepayment
(%)
Time of
prepayment
Reason for
unsettlement
Angang Steel Company Limited Non-related
party
469,836.31 18.47 Less than one
year
Material
expenses not
settled
Beijing Zhongtian Riyue Advertising
Co., Ltd.
Non-related
party
111,067.00 4.37 Less than one
year
Ad expense
not settled
Anhui Baosteel Steel Distribution
Co., Ltd.
Non-related
party
110,998.42 4.36 Less than one
year
Material
expenses not
settled
Zhenjiang Chi Mei Chemical Co.,
Ltd.
Non-related
party
101,015.28 3.97 Less than one
year
Material
expenses not
settled
Name of customer Relationship with
the Company
Amount at the end
of the year
Aging Percentage of total
accounts receivable
(%)
First Non-related party 382,458.74 Less than 1 year 8.16
Second Non-related party 359,570.37 Less than 1 year 7.67
Third Non-related party 215,513.69 Less than 1 year 4.60
Fourth Non-related party 166,640.15 Less than 1 year 3.55
Fifth Non-related party 154,783.40 Less than 1 year 3.30
Total 1,278,966.35 27.28
140
Wuhu Economic and Technical
Development Zone Finance Bureau
Non-related
party
90,082.23 3.53 Less than one
year
Land cost not
settled
Total 882,999.24 34.70
(4) Balance of prepayments for the reporting period did not include amounts due from shareholders
holding 5% (inclusive) or more of the shares conferring voting rights in the Company or other
related parties of the Company.
(vi) Other receivables
(1) Other receivables by type are listed as below:
Type Book balance at the end of the year
Book balance Provision for bad debts Net amount
Amount Percentage % Amount Percentage %
Other receivable with significant single
amounts and provision made for bad
debts for each single other receivable
- - - - -
Other receivable with provision made
for bad debts for combination of other
receivables
Combination 1: aging combination 483,196.74 100.00 15,064.03 3.12 468,132.71
Combination 2: other receivables within
the scope of consolidated statements
- - - - -
Subtotal 483,196.74 100.00 15,064.03 3.12 468,132.71
Other receivable with insignificant
single amounts but provision made for
bad debts for each single account
receivable
- - - - -
Total 483,196.74 100.00 15,064.03 3.12 468,132.71
Type Book balance at the beginning of the year
Book balance Provision for bad debts
Amount Percentage % Amount Percentage % Net amount
Other receivable with significant single
amounts and provision made for bad
debts for each single other receivable
- - - - -
Other receivable with provision made
for bad debts for combination of other
receivables
Combination 1: aging combination 461,868.21 100.00 103,237.23 22.35 358,630.98
Combination 2: other receivables within
the scope of consolidated statements
- - - - -
Subtotal 461,868.21 100.00 103,237.23 22.35 358,630.98
Other receivable with insignificant
single amounts but provision made for
bad debts for each single account
receivable
- - - - -
Total 461,868.21 100.00 103,237.23 22.35 358,630.98
Other receivables in the combinations for which provision for bad debt is made by using age analysis
method:
Aging structure Book balance at the end of the year
Book balance Percentage % Provision for bad
debts
Net amount
Less than 1 year 459,638.55 95.12 5,326.34 454,312.21
141
(inclusive)
1 to 2 years 5,256.71 1.09 525.67 4,731.04
2 to 3 years 7,130.22 1.48 1,426.04 5,704.18
More than 3 years 11,171.25 2.31 7,785.97 3,385.28
Total 483,196.73 100.00 15,064.02 468,132.71
Aging structure Book balance at the beginning of the year
Book balance Percentage % Provision for bad
debts
Net amount
Less than 1 year
(inclusive)
332,682.71 72.03 2,662.62 330,020.09
1 to 2 years 32,718.97 7.08 14,342.98 18,375.99
2 to 3 years 10,739.04 2.33 6,063.89 4,675.15
More than 3 years 85,727.49 18.56 80,167.74 5,559.75
Total 461,868.21 100.00 103,237.23 358,630.98
(2) Other receivables actually written off during the year:
Type of receivables Reason Amount
Current accounts The unit is already closed down or the
receivables cannot be collected
86,693.42
(3) Balance of the other receivables for the reporting period did not include the amounts due from
shareholders holding 5% (inclusive) or more of the shares conferring voting rights in the Company
or other related parties of the Company.
(4) Balance of other receivables due from the top five customers are listed as below:
Name of company Content of
payment
Relationship
with the
Company
Amount at the
end of the year
Aging Percentage
to total other
receivables
(%)
Shunde Finance Bureau Export tax rebate Non-related
party
327,489.29 Less than one
year
67.78
Hefei Economic and Technical
Development Zone, State
Administration of Taxation
Export tax rebate Non-related
party
18,715.60 Less than one
year
3.87
Wuxi Little Swan Porcelain Co.,
Ltd.
Share transfer Non-related
party
4,790.44 2~3 years 0.99
Guangzhou Baiyun District State
Administration of Taxation Export
Rebate Section
Export tax rebate Non-related
party
11,343.79 Less than one
year
2.35
Foshan Shunde District Land and
Real Estate Exchange Center
Margin Non-related
party
6,000.00 Less than one
year
1.24
Total 368,339.12 76.23
(vii) Inventories
(1) Inventories are listed by type as below:
Type of
inventory
Book balance at the end of the year Book balance at the beginning of the year
Amount Provision for
price falling
Carrying value Amount Provision for
price falling
Carrying value
Raw
materials
2,149,206.27 4,476.69 2,144,729.58 1,355,879.17 31,276.60 1,324,602.57
Entrusted
processing
materials
184,678.51 - 184,678.51 31,185.06 - 31,185.06
Consumables
with low
65,828.92 - 65,828.92 5,144.83 815.49 4,329.34
142
value
Products in
process
571,149.40 532.79 570,616.61 322,823.03 72.50 322,750.53
Merchandise
in stock
7,498,700.39 28,305.34 7,470,395.05 4,170,870.01 26,229.99 4,144,640.02
Total 10,469,563.49 33,314,248.67 10,436,248.67 5,885,902.10 58,394.58 5,827,507.52
(2) Balance of the inventories at the end of the reporting period was significantly increased by 77.88%
over the balance at the beginning of the year mainly due to increased inventories resulted from growth
of production capacity and sales volume.
(3) Changes in the provisions for respective inventory price falling:
Type of
inventory
Book balance at
the beginning of
the year
Provision for
the year
Decrease for the year Book balance at the end of the year
Reversed Written-off
Raw materials 31,276.60 1,074.34 25,348.20 2,526.04 4,476.70
Consumables at
low value
815.49 - - 815.49 -
Work in
progress
72.50 460.28 - 532.78
Merchandise in
stock
26,229.99 3,482.79 552.86 854.58 28,305.34
Total 58,394.58 5,017.41 25,901.06 4,196.11 33,314.82
(4) Basis for making provision for inventory price falling and reversal of the provision
Type of inventory Basis for provision for
inventory price falling
Reason for reversal of
provision for inventory price
falling in current year
Percentage of the reversed
amount in current year in the
balance of this inventory at
the year end
Raw materials Measured at the lower of cost
and net realizable value
Cost was lower than net
realizable value
0.24%
Merchandise in stock Measured at the lower of cost
and net realizable value
Cost was lower than net
realizable value
0.01%
(viii) Other current assets
Item Book balance at the end of the year Book balance at the beginning of
the year
Deferred expenses 252,902.93 137,183.54
Hedging Instruments 20,044.30 1,338.60
Hedge margin 29,070.47 1,371.06
Total 302,017.70 139,893.20
Hedge margin refers to open positions margin of futures contracts purchased by the Company for the
purpose of eliminating the risk of raw materials price fluctuations. Hedging instruments of
RMB20,044,300 . 00 represented floating gains/losses from such futures contracts. As at 31 December 2010,
the Company had futures contracts for its positions amounted to RMB202,162,300.00.
Balance of other current assets at year end was increased significantly over the balance at the beginning of
the year, mainly due to the increase of the moulds amortized within one year under the deferred expense
143
item.
(ix) Financial assets available for sale
Item Fair value at the end of the year Fair value at the beginning of the
year
Financial assets available for sale 312.82 312.82
Less: provision for impairment of
Financial assets available for sale
- -
Net amount 312.82 312.82
Financial assets available for sale are the shares held by Wuxi Little Swan Company Limited, a controlled
subsidiary of the Company.
(x) Investment in associated corporations
Information of main associated corporations of the Company is provided as follows:
Name of
invested party
Percentage of
shareholding %
Percentage
of voting
right %
Total assets
at the end of
the year
Total
liabilities at
the end of
the year
Total net
assets at the
end of the
year
Total
operating
revenue for
the year
Net profit for
the year
Midea Group
Finance Co.,
Ltd.
40.00 40.00 1,115,647.60 612,196.03 503,451.58 11,313.62 3,451.58
Golden Engle
Asset
Management
Co. Ltd
20.00 20.00 63,262.98 27,052.70 36,210.28 70,277.36 （28,189.06）
Malaysia Joint
Venture(SEE)
51.00 51.00 63,109.72 62,502.00 607.72 104,773.30 （7,204.39）
Midea Do
Brasil AR
Condicionado
S.A. (Brazil)
40.00 40.00 723,337.05 574,926.77 148,410.28 850,691.65 82,143.70
Guangzhou
Attend
Logistics Co.,
Ltd.
20.00 20.00 35,672.50 17,033.57 18,638.93 31,690.00 （266.29）
BSW
Household
Appliances
Co., Ltd.
40.00 40.00 524,802.11 266,778.78 258,023.33 871,496.32 17,592.72
PT. MIDEA
PLANET
INDONESIA
51.00 51.00 34,943.78 29,149.73 5,794.05 13,825.62 （7,727.60）
MIDEA
ELECTRIC
TRADING
THAILAND
CO LTD
49.00 49.00 10,993.34 283.04 10,710.29 - （282.50）
Misr
Refrigeration
And Air
Conditioning
Manufacturing
Co.
32.50 32.50 864,327.56 296,323.85 568,003.71 1,463,902.54 186,458.21
1 Since the Company has no decision-making power and actual control over the financial and operating
affairs of Malaysia Joint Venture, this joint venture was not included in the scope of consolidated
financial statements for the year.
2 During the reporting period, Midea Electric Appliance (Singapore) Trading Co., Ltd., a controlled
subsidiary of the Company, established MIDEA ELECTRIC TRADING THAILAND CO LTD;
144
3 During the reporting period, Midea Electric Appliance (Singapore) Trading Co., Ltd., a controlled
subsidiary of the Company, established PT.MIDEA PLANET INDONESIA. Since the Company has no
decision-making power and actual control over the financial and operating affairs of PT.MIDEA
PLANET INDONESIA, PT.MIDEA PLANET INDONESIA was not included in the scope of
consolidated financial statements for the year.
4 During the reporting period, Midea Electric Appliance (Holland) Co., Ltd., a controlled subsidiary of
the Company, signed share transfer agreement with United Technology Holdings Co., Ltd. to accept the
32.50% shares held by the latter in Misr Refrigeration And Air Conditioning Manufacturing Co., which
were transferred to the former according to this agreement for a consideration of US$57,480,000.00.
(xi) Long-term equity investment
Long-term equity investments are listed by item as below:
Name of invested party Measurement
Method
Initial amount
of investment
Book balance
at the
beginning of
the year
Increase/decrease
in current year
Book balance at
the end of the
year
Midea Group Finance Co., Ltd. Equity method 200,000.00 200,000.00 1,380.63 201,380.63
Golden Engle Asset
Management Co. Ltd
Equity method 20,000.00 12,831.83 （5,589.77） 7,242.06
Malaysia Joint Venture(SEE) Equity method 7,186.32 7,186.32 （6,876.38） 309.94
Midea Do Brasil AR
Condicionado S.A. (Brazil)
Equity method 5,778.21 5,778.21 52,735.99 58,514.20
Guangzhou Attend Logistics
Co., Ltd.
Equity method 2,000.00 3,781.04 （53.26） 3,727.78
Wuxi Indesit Home Appliances
Co., Ltd
Equity method 33,768.12 19,857.90 （19,857.90） -
BSW Household Appliances
Co., Ltd.
Equity method 97,482.66 118,100.51 （14,891.18） 103,209.33
Jiangsu Commercial Bank Co.,
Ltd
Cost method 1,100.00 1,100.00 110.00 1,210.00
(Malaysia) Midaqi Little Swan
Industry Co., Ltd
Cost method 4,224.74 4,224.74 4,224.74
Jingzhou City Commercial
Bank
Cost method 5,000.00 5,000.00 5,000.00
Inner Mongolia Baotou
Department Store Co Ltd
Cost method 50.00 50.00 50.00
Suzhou People’s Department
Store Co., Ltd
Cost method 150.00 150.00 150.00
Hengtai Insurance Brokers Co.,
Ltd
Cost method 1,000.00 1,000.00 1,000.00
PT. MIDEA PLANET
INDONESIA
Equity method 6,755.15 - 2,456.82 2,456.82
MIDEA ELECTRIC
TRADING THAILAND CO
LTD
Equity method 5,282.32 - 5,248.05 5,248.05
Misr Refrigeration And Air
Conditioning Manufacturing
Co.
Equity method 380,880.56 - 391,731.19 391,731.19
Total 770,658.08 379,060.55 406,394.19 785,454.74
(Continued)
Name of invested party Percentage of
shareholding %
Percentage of
voting right %
Provision for
impairment
Amount of
impairment
provision for the
year
Cash dividends
for the year
145
Midea Group Finance Co., Ltd. 40 40 - - -
Golden Engle Asset
Management Co. Ltd
20 20 - - -
Malaysia Joint Venture(SEE) 51 51 - - -
Midea Do Brasil AR
Condicionado S.A. (Brazil)
40 40 - - -
Guangzhou Attend Logistics
Co., Ltd.
20 20 - - -
Wuxi Indesit Home Appliances
Co., Ltd
30 30 - - -
BSW Household Appliances
Co., Ltd.
40 40 - - -
Jiangsu Commercial Bank Co.,
Ltd
- - - - -
(Malaysia) Midaqi Little Swan
Industry Co., Ltd
- - 4,224.74 - -
Jingzhou City Commercial
Bank
- - - - -
Inner Mongolia Baotou
Department Store Co Ltd
- - - - -
Suzhou People’s Department
Store Co., Ltd
- - - - 25.00
Hengtai Insurance Brokers Co.,
Ltd
- - - - 10.00
PT. MIDEA PLANET
INDONESIA
51 51 -
MIDEA ELECTIC TRADING
THAILAND CO., LTD.
49 49 - - -
Misr Refrigeration and Air
Conditioning Manufacturing
Co.
32.5 32.5 - - -
Total 4,224.74 - 35.00
Balance of long-term equity investment at year end increased by 107.21% over the balance at the beginning
of the year, mainly due to the capital contribution made to Misr Refrigeration and Air Conditioning
Manufacturing Co.
(xii) Investment real estates
(1) Changes in investment real estates adopting the cost measurement model for the year:
Item Book balance at the
beginning of the
year
Increase for the year Decrease for the
year
Book balance at the
end of the year
Total original value
of investment real
estates
485,259.21 204,677.44 1,053.91 688,882.74
Buildings 405,143.05 193,739.08 1,053.91 597,828.22
Land use right 80,116.16 10,938.36 - 91,054.52
Total accumulated
amortization of
investment real
estates
157,818.10 25,925.89 266.00 183,477.99
Buildings 141,292.04 24,216.14 266.00 165,242.18
Land use right 16,526.06 1,709.75 18,235.81
Total accumulated
amount of
impairment
provision for
investment real
estates
- - - -
Buildings - - - -
Land use right - - - -
Total carrying value 327,441.11 178,751.55 787.91 505,404.75
146
of investment real
estates
Buildings 263,851.01 169,522.93 787.91 432,586.03
Land use right 63,590.10 9,228.62 - 72,818.72
(2) Depreciation and amortization provided for the year amounted to RMB25,925,900. Decrease for
the year was due to the transfer of investment real estates into fixed assets and disposal of some of
the investment real estates.
(3) The increase in investment real estates of the Company is due to that headquarters office building
of the Company was completed and put into use, of which some are leased to the other companies
under Midea Group Co., Ltd.
(4) The recoverable amount of the Company’s investment real estates for the year was not lower than
the carrying value, thus no provision for impairment in value was required.
(xiii) Fixed assets
The breakdown of and changes in fixed assets and accumulated depreciation are set out below:
Item Book balance at the
beginning of the year
Increase for the year Decrease for
the year
Book balance at the end of
the year
I. Total original value
of fixed assets
8,519,687.98 2,808,827.25 236,508.14 11,092,007.09
1. Buildings 3,335,967.36 744,971.07 39,906.70 4,041,031.73
2. Machinery and
equipment
4,401,995.18 1,539,876.21 116,481.63 5,825,389.76
3. Transport equipment 124,339.46 50,514.06 17,080.54 157,772.98
4. Electronic
equipment and others
657,385.98 473,465.91 63,039.27 1,067,812.62
Increase
for the
year
Depreciation
made for the
year
II. Total accumulated
depreciation
2,805,963.50 - 748,733.02 153,498.86 3,401,197.66
1. Buildings 697,863.21 150,950.22 11,971.40 836,842.03
2. Machinery and
equipment
1,714,674.56 429,842.02 75,033.88 2,069,482.70
3. Transport equipment 66,164.90 19,754.64 15,022.25 70,897.29
4. Electronic
equipment and others
327,260.83 148,186.14 51,471.33 423,975.64
III. Total net value of
fixed assets
5,713,724.48 2,060,094.23 83,009.28 7,690,809.43
1. Buildings 2,638,104.15 594,020.85 27,935.30 3,204,189.70
2. Machinery and
equipment
2,687,320.62 1,110,034.19 41,447.75 3,755,907.06
3. Transport equipment 58,174.56 30,759.42 2,058.29 86,875.69
4. Electronic
equipment and others
330,125.15 325,279.77 11,567.94 643,836.98
IV. Total impairment
provision for fixed
assets
19,700.64 3,123.38 4,303.33 18,520.69
1. Buildings 12,576.07 - 123.38 12,452.69
2. Machinery and
equipment
7,079.06 2,160.73 4,103.43 5,136.36
3. Transport equipment 2.24 - 2.24 -
4. Electronic
equipment and others
43.27 962.65 74.28 931.64
V. Total net amount of
fixed assets
5,694,023.84 2,056,970.85 78,705.95 7,672,288.74
147
1. Buildings 2,625,528.08 594,020.85 27,811.92 3,191,737.01
2. Machinery and
equipment
2,680,241.56 1,107,873.46 37,344.32 3,750,770.70
3. Transport equipment 58,172.32 30,759.42 2,056.05 86,875.69
4. Electronic
equipment and others
330,081.88 324,317.12 11,493.66 642,905.34
Depreciation of fixed assets for the year amounted to RMB748,733,010.
Original price of construction in progress transferred into fixed assets for the year was RMB1,285,311,470.
Decrease in fixed assets for the year was mainly due to the disposal of some fixed assets.
The 30.19% increase in fixed assets of the Company at the year end over that at the year beginning is due to
that headquarters office building of the Company is transferred into fixed assets.
(xiv) Construction in progress
(1) Construction in progress is listed by project as below:
Project Book balance at the end of the year Book balance at the beginning of the year
Amount Provision
for
impairment
Net
carrying
amount
Amount Provision for
impairment
Net carrying
amount
Phase III of Hefei
Refrigerator &
Washer Industrial
Park
- - - 14,410.07 - 14,410.07
Lingang Industrial
Zone Project
35,152.57 - 35,152.5
7
2,823.90 - 2,823.90
Refrigeration R&D
Building
46,185.75 - 46,185.7
5
158.62 - 158.62
Meizhi Compressor
Project
33,070.87 - 33,070.8
7
1,122.00 - 1,122.00
Head office
building
5,025.02 - 5,025.02 387,505.74 - 387,505.74
Expansion project
of Hefei Hualing
Refrigerator
32,147.67 - 32,147.6
7
30,227.21 - 30,227.21
Little Swan
Industrial Park
5,624.58 - 5,624.58 23,101.82 - 23,101.82
Residential
air-conditioner
(Wuhu) project
200,371.43 - 200,371.
43
- - -
Residential
air-conditioner
(Nansha) project
52,693.40 - 52,693.4
0
- - -
Central AC (Hefei)
project
2,520.00 - 2,520.00 - - -
Refrigerator
(Nansha) project
80,566.48 - 80,566.4
8
- - -
Refrigerator
(Jingzhou) project
197,548.82 - 197,548.
82
- - -
Other projects 261,309.84 - 261,309.
84
27,282.94 - 27,282.94
Total 952,216.43 - 952,216.
43
486,632.30 - 486,632.30
Other projects mainly comprised new real estate projects and air-conditioner technical reform projects.
(2) Basic information and quantity change of major projects in progress:
Project Phase III of
Hefei
Refrigerator &
Lingang
Industrial Zone
Project
Refrigeration
R&D Building
Meizhi
Compressor
Project
Residential
air-conditioner
(Wuhu) project
Residential
air-conditioner
(Nansha)
Central AC
(Hefei) project
148
Washer
Industrial Park
project
Source of funds Self-financing Self-financing Self-financing Self-financing
and raised
funds
Self-financing
and raised
funds
Self-financing
and raised
funds
Self-financing
and raised
funds
Book balance at
the beginning of
the year
14,410.07 2,823.90 158.62 1,122.00 - - -
(Of which:
interest
capitalized)
- - - - - - -
Increase for the
year
2.48 35,072.67 46,226.94 433,573.59 200,371.43 52,693.40 2,520.00
(Of which:
interest
capitalized)
- - - - - -
Amount
transferred into
fixed assets
during the year
14,412.55 2,744.00 199.81 401,624.72 -
(Of which:
interest
capitalized)
- - - - - - -
Other decrease - - -
Book balance at
the end of the
year
0.00 35,152.57 46,185.75 33,070.87 200,371.43 52,693.40 2,520.00
(Of which:
interest
capitalized)
- - - - - - -
(Continued)
Project Head office
building
Expansion of
Hefei Hualing
Refrigerator
Little Swan
Industrial
Park
Refrigerator
(Nansha)
project
Refrigerator
(Jingzhou)
project
Other projects Total
Source of funds Self-financing Self-financing Self-financing Self-financing,
and raised
funds
Self-financing,
and raised funds
Self-financing
Book balance
at the
beginning of
the year
387,505.74 30,227.21 23,101.82 - - 27,282.94 486,632.30
(Of which:
interest
capitalized)
- - - - - - -
Increase for the
year
282,248.23 33,575.67 20,923.91 80,566.48 197,548.83 368,646.67 1,753,970.30
(Of which:
interest
capitalized)
- - - - - - -
Amount
transferred into
fixed assets
during the year
663,753.95 30,534.71 37,639.37 - - 134,402.36 1,285,311.47
(Of which:
interest
capitalized)
- - - - - - -
Other decrease 975.00 1,120.50 761.77 - - 217.43 3,074.70
Book balance
at the end of
the year
5,025.02 32,147.67 5,624.59 80,566.48 197,548.83 261,309.82 952,216.43
(Of which:
interest
capitalized)
- - - - - - -
149
(3) The balance of construction in progress at the end of the reporting period was increased by 95.67%
over that at the year beginning due to that the Company’s own funds were invested in the prior
stage of its investment projects using the funds raised through non-public issue.
(4)The recoverable amount of the Company’s construction in progress at the year end was not lower
than the carrying value, thus no provision for impairment in value was required.
(xv) Intangible assets
Item Book balance at the
beginning of the year
Increase for the
year
Decrease for the
year
Book balance at the end of
the year
I. Original value of
intangible assets:
1,373,697.66 387,255.44 21,631.37 1,739,321.73
1. Land use right 1,322,000.09 376,998.52 10,938.36 1,688,060.25
2. Non-patented
technologies
49,482.15 - - 49,482.15
3. Others 2,215.42 10,256.92 10,639.01 1,779.33
II. Accumulated
amortization:
152,845.17 34,615.67 601.63 186,859.21
1. Land use right 114,325.96 27,293.58 - 141,619.54
2. Non-patented
technologies
37,516.82 6,884.65 - 44,401.47
3. Others 1,002.39 437,44 601.63 838.20
III. Impairment provision
for intangible assets:
- - - -
1. Land use right - - - -
2. Non-patented
technologies
- - - -
3. Others - - - -
IV.Net amount of
intangible assets:
1,220,852.49 352,639.77 21,029.74 1,552,462.52
1. Land use right 1,207,674.13 349,704.94 10,938.36 1,546,440.71
2. Non-patented
technologies
11,965.33 (6,884.65) - 5,080.68
3. Others 1,213.03 9,819.48 10,091.38 941.13
Amortization for the year amounted to RMB34,615,670. The recoverable amount of the Company’s
intangible assets for the year was not lower than the carrying value, thus no provision for impairment in
value was required.
(xvi) Goodwill
Name of invested party Book balance at the
beginning of the
year
Increase for
the year
Decrease for the
year
Book balance at
the end of the year
Provision for
impairment
at the end of
the year
Wuhu Lexiang
Electrical Appliance
Company Limited
4,817.20 - - 4,817.20 -
Meizhi Refrigeration
Equipment Co., Ltd.,
Guangdong Province
13,732.33 - - 13,732.33 -
Wuhu Refrigeration
Equipment Co., Ltd.
Under Midea Group of
Guangdong Province
46,787.54 - - 46,787.54 -
Guangdong Midea
Refrigeration
Equipment Co., Ltd.
11,436.08 - - 11,436.08 -
Midea Group Wuhu
Refrigeration
Equipment Co., Ltd.
10,160.73 - - 10,160.73 -
Midea Commercial 4,107.14 - - 4,107.14 -
150
Air Conditioning
Equipment Co., Ltd.,
Guangdong Province
Hefei Royalstar
Refrigerator Co., Ltd.
5,259.68 - - 5,259.68 -
Hefei Royalstar and
Midea Electric
Appliance Marketing
Co., Ltd.
7,710.02 - - 7,710.02 -
Hefei Royalstar
Washing Machine
Manufacture Co., Ltd.
34,373.76 - - 34,373.76 -
Chongqing Midea
General Refrigeration
Equipment Co, Ltd.
8,210.30 - - 8,210.30 -
Wuxi Little Swan
Company Limited
1,326,932.45 - - 1,326,932.45 -
Total 1,473,527.23 - - 1,473,527.23 -
There has been no impairment of value of the asset groups or the combination of asset groups
corresponding to the carrying value of the goodwill stated above after measurement, thus no impairment
provision for goodwill was required.
(xvii) Long-term deferred expenses
Item Book balance at
the beginning of
the year
Increase for the
year
Amortization
for the year
Other decrease
for year
Book balance at the end
of the year
Mould expenses 91,228.43 144,991.41 79,867.10 3,095.53 153,257.21
Technology
access fees
13,697.28 - 8,368.80 5,328.48
Others 52,959.67 110,863.64 47,456.18 116,367.13
Total 157,885.38 255,855.05 135,692.08 3,095.53 274,952.82
The balance of long-term deferred expenses at the end of the reporting period was increased by 74.15%
over that at the year beginning mainly due to the mould increase.
(xviii) Deferred income tax assets and deferred income tax liabilities
Deferred income tax assets and deferred income tax liabilities recognized by the Company:
Item Book balance at the end of the year Book balance at the beginning of the year
For offsetting
temporary difference
Deferred income tax
assets
For offsetting
temporary difference
Deferred income tax
assets
Deferred income tax
incurred for making up
losses
89,740.27 22,435.07 120,698.37 27,978.85
Deferred income tax
incurred from provision
for asset impairment
loss
202,955.78 35,386.99 520,097.85 76,521.97
Deferred income tax
incurred from
compensations for the
cancellation of labour
relationship
140,266.93 25,983.83 170,167.52 34,299.51
Deferred income tax
incurred from accrued
Expenses
4,615,874.43 727,436.92 4,014,367.06 628,838.06
Deferred income tax
incurred from internal
unrealized profit
26,371.00 6,686.98 113,945.76 19,067.80
Deferred income tax 18,487.80 2,864.84 1,682.03 1,682.03
151
incurred from estimated
liabilities
Other 21,169.89 4,048.43 11,661.95 1,749.29
Total 5,114,866.10 824,843.06 4,952,620.54 790,137.51
Item Book balance at the end of the year Book balance at the beginning of the year
Temporary differen
ce
Deferred income ta
x liabilities
Temporary difference Deferred income tax
liabilities
Changes in fair value 369,595.68 62,900.36 227,921.52 55,437.23
(xix) Provision for asset impairment
Item Book balance at
the beginning of
the year
Increase for the
year
Decrease for the year Book balance at the
end of the year Reversed Written-off
I. Provision for bad
debts
620,082.27 87,608.27 116,595.73 330,208.81 260,886.00
II. Provision for
inventory price
falling
58,394.58 5,017.41 25,901.06 4,196.11 33,314.82
III. Provision for
impairment of
long-term equity
investment
4,224.74 - - - 4,224.74
IV. Provision for
impairment of fixed
assets
19,700.64 3,123.38 - 4,303.33 18,520.69
Total 702,402.23 95,749.06 142,496.79 338,708.25 316,946.25
(xx) Short-term borrowings
Borrowing category Book balance at the end of the year Book balance at the beginning of the year
Credit loans 66,227.00 51,366.20
Pledged loans 9,039.36 -
Guaranteed loans 106,192.32 1,000.00
Trade finance 547,104.03 487,322.63
Total 728,562.71 539,688.83
Wuxi Little Swan Company Limited, a controlled subsidiary of the Company, pledged a security of
RMB9.343 million for bank finance to obtain a short-term borrowing of RMB9,039,360.
Midea Appliance (BVI) Co., Ltd., a controlled subsidiary of the Company, pledged a standby letter of credit
to obtain a short-term borrowing of US$16 million from HSBC.
The Company and its controlled subsidiaries pledged the ―Midea‖ trademark right valued at
RMB1,850,000,000 and facilities and land valued at RMB975,575,000 to obtain a trade finance of
RMB54,180,000 from Bank of China Limited Foshan Branch. The Company’s wholly-owned subsidiary
pledged the facilities and land located at Hefei Hualing Industrial Park valued at RMB102,060,000 to
obtain a trade finance of RMB17,080,000 from Industrial and Commercial Bank of China Limited Hefei
Huitong Branch.
Balance of short-term borrowing at year end for the reporting period increased by 35.00% from the balance
at the beginning of the year, mainly due to increase in secured borrowings.
152
(xxi) Trading financial liabilities
Item Book balance at the end of the
year
Book balance at the beginning of
the year
Derivative financial instrument 7,555.13 73.70
Book balance of trading financial liabilities at year end represented the loss from changes in fair value as a
result of the forward exchange contract used by the Company for avoiding the risk of exchange rate
fluctuations.
(xxii)Notes payable
Item Book balance at the end of the year Book balance at the beginning of the
year
Banker’s acceptance bill 5,699,506.26 2,986,246.46
The balance of notes payable at the end of the reporting period was increased by 90.86% over that at the
year beginning mainly due to the increase of purchased goods and of settlements by bills.
(xxiii)Accounts payable
Item Book balance at the end of the year Book balance at the beginning of the
year
Accounts payable 11,023,051.19 9,216,013.20
Balance of accounts payable of the reporting period at year end did not include amounts due to the
shareholder holding 5% (inclusive) or more of the shares conferring voting rights in the Company; for
details of accounts payable to other related parties, please refer to Note VII (iii).
(xxiv) Accounts received in advance
Item Book balance at the end of the year Book balance at the beginning of the
year
Accounts received in advance 1,793,679.54 1,007,256.20
During the reporting period, balance of accounts received in advance at the year end did not include
amounts received in advance from the shareholders holding 5% (inclusive) or more of the shares conferring
voting rights in the Company.
As at December 31st 2010, there had been no large amount received in advance with aging of one year or
above in the balance of amounts received in advance at year end.
Balance of the accounts received in advance at the end of the reporting period increased by 78.08% over
the balance at the beginning of the year, mainly due to increase in the prepayments made by purchasers.
(xxv)Wages payable
Item Book balance at the
beginning of the year
Increase for the year Decrease for the year Book balance at the
end of the year
Wages, bonus, allowance
and subsidy
351,490.25 3,036,204.54 2,778,714.94 608,979.85
153
Employee welfare 40,662.80 301,905.37 329,671.31 12,896.86
Social insurance cost 14,390.42 210,414.18 210,241.34 14,563.26
Medical insurance cost 4,426.89 48,520.63 49,957.64 2,989.88
Basic endowment
insurance cost
8,701.34 141,324.48 141,015.96 9,009.86
Unemployment
insurance cost
720.81 10,559.54 10,389.57 890,78
Employment injury
insurance cost
434.49 6,933.55 6,635.05 732.99
Birth insurance cost 106.89 3,075.97 2,243.11 939.75
Housing providend fund 6,229.81 35,093.88 34,444.30 6,879.39
Labor union expenditures
and employee education
expenses
11,663.43 16,059.95 14,491.81 13,231.57
Compensation for
cancellation of labor
relationship with
employees
134,711.79 9,769.54 22,536.92 121,944.41
Others - 27,848.36 14,436.43 13,411.93
Total 559,148.50 3,637,295.82 3,404,537.05 791,907.27
During the reporting period, the balance of wages payable at the end of the year increased by 41.63% over
that at the beginning of the year mainly due to the labor cost increase.
(xxvi) Taxes payable
Tax Item Book balance at the end of the
year
Book balance at the beginning of
the year
Value-added tax (1,289,257.38) (354,815.74)
Business tax 14,250.46 3,938.42
Enterprise income tax 805,403.05 504,732.78
Urban maintenance and construction tax 5,418.71 4,991.86
Property tax 8,727.65 3,330.25
Land use tax payable 1,465.90 4,892.11
Individual income tax 29,907.33 8,170.27
Education surcharge 3,314.78 2,800.19
Others 3,560.97 4,826.85
Total (417,208.53) 182,866.99
During the reporting period, the balance of taxes payable at the end of the year was significantly decreased
over that at the beginning of the year mainly due to the increase in the input VAT.
(xxvii) Dividends payable
Type Book balance at the end
of the year
Book balance at the
beginning of the year
Reason for not paying the dividends
after 1 year from due date
Shareholders of the
Company
585.91 585.91 Dividend unpaid in previous year
Shareholders of the
subsidiaries
2,719.70 2,967.92 Dividend unpaid by subsidiaries
Total 3,305.61 3,553.83
(xxviii) Other payables
Item Book balance at the end of the year Book balance at the beginning of the
year
154
Other payables 337,014.68 323,047.84
Balance of other payables at year end during the reporting period did not include amounts payable to the
shareholders holding 5% (inclusive) or more of the shares conferring voting rights in the Company; for
details of other payables due to other related parties, please refer to Note VII (iii).
As at December 31st, 2010, there had been no large amount of the other payable aging one year or above in
the balance of other payables at year end.
(xxix) Other current liabilities
Item Book balance at the end of the year Book balance at the beginning of the year
Accrued expenses
- sales promotion fees 376,251.72 216,835.12
- utilities 67,904.79 33,930.23
- sales rebates 2,388,045.17 2,160,236.40
-installation and maintenance fee 1,697,796.59 1,039,535.38
- rental 29,725.75 13,896.97
- technology royalties 32,203.75 152,997.02
-shipping expense 232,048.65 137,880.01
- others 396,767.99 286,216.77
Hedging instrument - -
Total 5,220,744.41 4,041,527.90
Sales rebate is calculated in accordance with the relevant sales agreement signed with the customer at the
expected payable amount; installation and maintenance fees are calculated according to the volume of
products sold and the installation and maintenance fees for every single product; technology royalties are
calculated as stipulated in the agreement as a certain percentage of the sales revenue.
(xxx) Long-term loans
Loan Category Book balance at the end of the
year
Book balance at the beginning of
the year
Guaranteed loans 393,809.39 -
Midea Electrical Appliance (Singapore) Trading Co., Ltd., a controlled subsidiary of the Company obtained
a long-term loan of US$30 million from Industrial and Commercial Bank of China Limited Singapore
Branch by means of guarantee in the form of standby letter of credit. Midea Electrical Appliance (BVI)
Trading Co., Ltd., a controlled subsidiary of the Company, by means of guarantee in the form of standby
letter of credit, obtained a long-term loan of US$19,400,000.00 from Agricultural Bank of China and
obtained a long-term loan of US$10,400,000.00 from China Construction Bank Seoul Branch.
(xxxi) Estimated liabilities
Item Book balance at the
beginning of the year
Increase for the
year
Decrease for the
year
Book balance at the end of
the year
Quality risk 11,213.50 11,886.55 4,612.25 18,487.80
155
(xxxii) Share capital
Item
Book balance at the
beginning of the year
Increase/decrease for the year Book balance at the end of
the year
Quantity Percentage % Shares
converted
from capital
reserve
New
issue
Others Subtotal Quantity Percentage %
I. Shares subject to
trading restrictions
2,401.79 0.12 - - (2,401.79) (2,401.79) - -
1. State-owned
shares
- - - - - - - -
2. Shares held by
state-owned legal
person
- - - - - - - -
3. Shares held by
other domestic
shareholders
2,401.79 0.12 - - (2,401.79) (2,401.79) - -
Of which:
Shares held by
domestic legal
persons
- - - - - - - -
Shares held by
domestic natural
persons
2,401.79 0.12 - - (2,401.79) (2,401.79) - -
4. Shares held by
foreign shareholders
- - - - - - - -
Of which
Shares held by
overseas legal
persons
- - - - - - - -
Shares held by
overseas natural
persons
- - - - - - - -
II. Shares not subject
to trading
restrictions
2,077,775.06 99.88 1,040,088.43 - 2,401.79 1,042,490.22 3,120,265.28 100.00
1. RMB ordinary
shares
2,077,775.06 99.88 1,040,088.43 - 2,401.79 1,042,490.22 3,120,265.28 100.00
2.
Domestically-listed
foreign shares
- - - - - - - -
3. Overseas -listed
foreign shares
- - - - - - - -
4. others - - - - - - - -
III. Total number of
shares
2,080,176.85 100.00 1,040,088.43 - - 1,040,088.43 3,120,265.28 100.00
In accordance with a resolution of the Company’s 2009 Annual General Meeting, the Company
appropriated 10% of net profit of its parent company for 2009 to its statutory capital reserve, and a cash
dividend of RMB1.00 was paid for every 10 shares. On the basis of a total equity capital of 2,080,176,851
shares at the end of 2009, Capitalization from the capital reserve was implemented on the basis of 5 shares
converted into share capital for every 10 shares held by each shareholder, with a par value of RMB1 each,
resulting in a total increased share capital of RMB 1,040,088,425.00. After this conversion, registered
capital of the Company was RMB 3,120,265,276.00, which has been reviewed and examined by Ascenda
Certified Public Accountants, Ltd. by Capital Verification Report Tian Jian Zheng Xin Yan (2010) Zong Zi
No.150003.
(xxxiii) Capital reserves
Item Book balance at the Increase for the year Decrease for the Book balance at the
156
beginning of the
year
year end of the year
Share premium 2,651,774.43 374,565.40 1,040,088.43 1,986,251.40
Other capital
reserve
- 105,849.93 - 105,849.93
Total 2,651,774.43 480,415.33 1,040,088.43 2,092,101.33
Decrease in capital reserves for the reporting period was mainly due to the profit distribution scheme of the
Company for 2009, namely 5 shares of capital reserve converted into share capital for every 10 shares held
by each shareholder. Increase in the capital reserve was mainly due to reversal of the affected amount of
Wuxi Little Swan Company Limited, the controlling shareholder of the Company for the years before asset
restructuring and the amount affected due to the change in the owners’ equity of the subsidiaries.
(xxxiv) Surplus reserves
Item Book balance at the
beginning of the
year
Increase for the year Decrease for the
year
Book balance at the end of
the year
Statutory surplus
reserve
647,461.66 64,989.30 - 712,450.96
Discretionary
surplus reserve
29,018.21 - - 29,018.21
Total 676,479.87 64,989.30 - 741,469.17
The increase in the surplus reserve during the year was due to appropriation of 10% of net profit of the
parent company for 2009 to the statutory surplus reserve.
(xxxv) Undistributed profits
Item Amount for the year Amount for the previous year
Undistributed profit at the end of previous
year
3,513,531.80 1,924,215.79
Plus: Changes in accounting policy - -
Correction of previous accounting
errors
- -
Undistributed profit at the beginning of the
year
3,513,531.80 1,924,215.79
Plus: Net profit for the year 3,127,097.38 1,847,747.92
Others -
Distributable profit 6,640,629.18 3,771,963.71
Less: Appropriation to statutory surplus
reserve
64,989.30 69,324.92
Appropriation to discretionary
surplus reserve
- -
Ordinary share dividend payable 208,017.67 189,106.99
Ordinary share dividend converted
into share capital
- -
Undistributed profit at the end of the year 6,367,622.21 3,513,531.80
According to Profit Distribution Plan for 2009, the Company appropriated 10% of the net profit of the
parent company for 2009 to its statutory capital reserve, and distributed cash dividends on the basis of other
profits available for distribution to shareholders at the year end in the proportion of RMB1.00 (including tax)
cash for every 10 shares. Total amount of distributed cash dividend was RMB208,017,670.
Above-mentioned dividends have been paid during the year.
(xxxvi) Total operating revenue and cost
(1) Breakdown of operating revenue and operating cost is set out below:
Item Amount incurred during the current
year
Amount incurred during the
previous year
157
Operating revenue 74,558,886.12 47,278,248.26
Of which: operating revenue from
main business
67,927,794.69 44,317,233.56
Operating revenue
from other business
6,631,091.43 2,961,014.70
Operating cost 62,114,202.05 36,975,215.84
Of which: operating cost for main
business
55,958,667.57 34,229,840.48
Operating cost from
other business
6,155,534.48 2,745,375.36
(2) 57.43% increase of the operating revenue for the reporting period over previous year was
mainly due to sales increase during the year.
(3) Items are listed by product or business as below:
Category of product
or business
Amount incurred during the current year Amount incurred during the previous year
Operating revenue Operating cost Operating revenue Operating cost
Main business
Air conditioner and
components
48,259,281.54 39,724,711.24 32,039,215.02 24,831,666.15
Refrigerator and
components
9,939,276.02 8,186,418.78 6,312,695.66 4,866,858.70
Washing machine
and components
9,729,237.13 8,047,537.55 5,965,322.88 4,531,315.63
Subtotal 67,927,794.69 55,958,667.57 44,317,233.56 34,229,840.48
Other business
Material sales 6,419,039.28 6,030,860.57 2,848,762.45 2,701,776.41
Trademark licensing
fee
46,533.91 - 34,803.56 -
Rental and others 165,518.24 124,673.91 77,448.69 43,598.95
Subtotal 6,631,091.43 6,155,534.48 2,961,014.70 2,745,375.36
Total 74,558,886.12 62,114,202.05 47,278,248.26 36,975,215.84
(4) Principal operating businesses are listed by geographical region as below:
Region Amount incurred during the current year Amount incurred during the previous year
Operating revenue Operating cost Operating revenue Operating cost
China 53,980,909.60 44,078,162.60 33,645,709.86 25,909,868.17
Other countries 20,577,976.52 18,036,039.45 13,632,538.40 11,065,347.67
Total 74,558,886.12 62,114,202.05 47,278,248.26 36,975,215.84
(5) Operating revenue from top five customers and their proportion of total operating revenue:
Item Amount incurred during the current
year
Percentage of total operating
revenue of the Company (%)
First 1,215,630.41 1.63
Second 1,096,818.04 1.47
Third 1,005,433.24 1.35
Fourth 967,284.09 1.30
Fifth 872,339.14 1.18
Total 5,157,504.92 6.93
(xxxvii) Business taxes and surcharge
Tax Item Amount incurred during the current
year
Amount incurred during the
previous year
Business tax 25,528.06 22,187.56
Urban maintenance and
construction tax
35,509.80 22,213.95
Education surcharge 17,825.86 11,601.46
Others 6,925.66 4,562.85
Total 85,789.38 60,565.82
158
(xxxviii) Sales expenses
Item Amount incurred during the current
year
Amount incurred during the previous
year
Sales expenses 6,943,427.31 5,730,733.32
(xxxix) Management expenses
Item Amount incurred during the current
year
Amount incurred during the
previous year
Management expense 2,663,128.42 1,660,163.89
Management expenses for the reporting period increased by 60.41% as compared to the previous year,
mainly due to the size expansion and increased management resource and R&D expenses of the Company
(xl) Financial expenses
Item Amount incurred during the current
year
Amount incurred during the
previous year
Interest expenses 263,340.20 134,203.18
Less: interest income 97,114.81 33,708.84
Plus: exchange loss 230,519.44 96,059.33
Plus: others 67,311.04 25,892.10
Total 464,055.87 222,445.77
Financial expenses for the reporting period increased by 108.62% over the previous year, mainly due to the
increase in interest expenses and foreign exchange loss resulted from increased notes discount during the
reporting period.
(xli) Asset impairment loss
Item Amount incurred during the current
year
Amount incurred during the
previous year
Loss on bad debts (4,929.85) 168,970.45
Loss on inventory price falling (14,246.69) (19,364.73)
Loss from impairment of fixed asset 3,123.37 19,021.16
Total (16,053.17) 168,626.88
Asset impairment loss for the reporting period decreased significantly over the previous year, mainly due to
the decrease in provisions for bad debts resulted from decreased accounts receivable of the Company at
year end.
(xlii) Gains on changes in fair value
Source of income from change in fair
value
Amount incurred during the current
year
Amount incurred during the previous
year
Trading financial assets 118,069.08 27,126.91
Of which: gains on change in fair value
of derivative financial instruments
118,069.08 27,126.91
Derivative financial instruments represented the profits/losses from changes in fair value as a result of the
forward foreign exchange contract used by the Company for the purpose of avoiding the risk of exchange
rate fluctuations.
Gains on changes in fair value for the reporting period significantly increased over the previous year,
mainly due to the increase in floating profit of trading financial assets.
(xliii) Investment income
(1) Investment income are listed by source as below:
Source of investment income Amount incurred during the
current year
Amount incurred during the
previous year
Long-term equity investment income measured using
equity method
51,219.27 9,463.52
Long-term equity investment income measured using
cost method
35.00 99.50
159
Investment income obtained from disposal of
Long-term equity investment
(7,158.30) 2,592.47
Investment income obtained from disposal of financial
assets available for sales
- 14,823.74
Investment income obtained from disposal of trading
financial assets
90,216.48 5,145.71
Total 134,312.45 32,124.94
(2) Long-term equity investment income measured under cost method:
Name of invested party Amount incurred during the current
year
Amount incurred during the previous
year
Jingzhou City Commercial Bank 35.00 99.50
(3) Long-term equity investment income measured under equity method:
Name of invested parties Amount incurred during
the current year
Amount incurred
during the previous
year
Golden Engle Asset Management Co. Ltd (5,589.77) (2,685.06)
Midea Group Finance Co., Ltd. 1,380.63 -
Malaysia Joint Venture(SEE) (5,892.80) -
Midea Do Brasil AR Condicionado S.A. (Brazil) 46,914.47 -
PT. MIDEA PLANET INDONESIA (4,139.21) -
MIDEA ELECTRIC TRADING THALAND CO LTD. (138.43) -
Misr Refrigeration and Air Conditioning Manufacturing
Co.
10,850.63 -
Unrealized profit arising from downstream sales between
the Company and the associated corporations
849.91 -
Investment income from the subsidiaries of Wuxi Little
Swan Company Limited
6,983.84 12,148.58
Total 51,219.27 9,463.52
(4) Significant restriction on the remittance of investment income
There has been no significant restriction on the remittance of investment income during the
reporting period.
(xliv) Non-operating revenue
Item Amount incurred
during the
current year
Amount
incurred during
the previous
year
Amount included in
current extraordinary
profit and loss
Total gain from disposal of non-current assets 28,280.06 102,107.60 28,280.06
Of which: gain from disposal of fixed assets 28,280.06 102,107.60 28,280.06
Gain from disposal of intangible
assets
- - -
Income from claim reimbursement 5,944.95 12,674.48 5,944.95
Income from penalties and fines 10,999.19 12,513.63 10,999.19
160
Governmental subsidies 2,499,461.28 251,284.54 148,487.63
Gain from debt restructuring 10.48 1,715.31 10.48
Other revenues 25,600.48 16,126.81 25,600.48
Total 2,570,296.44 396,422.37 219,322.79
The breakdown of government subsidies is set out below:
Item Amount
incurred during
the current year
Amount incurred
during the
previous year
Remark
Financial subsidy 2,350,973.65 228,986.41 Mainly comprising governmental subsidies obtained
pursuant to Notice on the Implementation of
Energy-saving Products Huimin Project (Cai Jian)
[2009] No.213 issued by the Ministry of Finance
Financial discount interest - 240.10 -
Other 148,487.63 22,058.03 -
Total 2,499,461.28 251,284.54
Non-operating revenue for the reporting period increased significantly over the previous year, mainly due to
the increase in government subsidies obtained and gains from disposal of non-current assets.
(xlv) Non-operating expenditure
Item Amount incurred during
the current year
Amount incurred during
the previous year
Amount included in
current extraordinary
profit and loss
Total losses from disposal of non-current
assets
42,755.05 133,940.77 42,755.05
Of which: loss from disposal of fixed
assets
42,755.05 133,940.77 42,755.05
loss from disposal of intangible
assets
- 441.83 -
Donations expenditures 109,040.80 7,387.03 109,040.80
Penalties and fines expenditures 1,695.55 8,672.92 1,695.55
Other expenditures 10,352.05 13,341.40 3,664.50
Total 163,843.45 163,342.12 157,155.91
(xlvi) Income tax expense
Item Amount incurred during the current
year
Amount incurred during the
previous year
Current income tax calculated as
per the tax law and relevant
provisions
978,068.23 616,457.81
Reconciliation of deferred income
tax
(58,136.07) (377,495.22)
Total 919,932.16 238,962.59
161
(xlvii) Calculation process for basic earnings per share and diluted earnings per share
Earnings per share calculated by the Company in accordance with the requirements of the Compilation
Rules for Information Disclosures by Companies that Offer Securities to the Public No.9: Calculation and
Disclosure of Return on Equity and Earnings per Share (Revision 2010) (―CSRC Bulletin [2010] No.2‖)
and Explanatory Bulletin of Information Disclosures by Companies that Offer Securities to the Public No.1
——Extraordinary profits and losses (2008) (―CSRC Bulletin [2008] No.43‖) issued by CSRC are as
follows:
1. Calculation results
Item Amount for the year Amount for the previous year
Basic EPS Diluted EPS Basic EPS Diluted EPS
Net profit attributable to ordinary
shareholders of the Company (I)
1.00 1.00 0.82 0.82
Net profit attributable to ordinary
shareholders of the Company after
deducting extraordinary profit and loss
(II)
0.95 0.95 0.81 0.81
2. Calculation process for earnings per share
Item No. Amount for the year Amount for previous
year
Net profit attributable to ordinary
shareholders of the Company
1 3,127,097.38 1,891,901.83
Extraordinary profit and loss attributable to
ordinary shareholders of the Company after
deducting effects of income tax
2 170,698.92 26,244.50
Net profit attributable to ordinary
shareholders of the Company after deducting
extraordinary profit and loss
3=1-2 2,956,398.46 1,865,657.33
Total number of shares at the beginning of
the year
4 2,080,178.85 1,891,069.93
Number of shares increased for the reporting
period due to capitalization of capital reserve
or dividend distribution
5 1,040,088.43 1,040,088.43
Number of shares increased from new share
issue or debt-to-equity swap
6 - 189,106.92
6 - -
6 - -
Number of months from the next month after
shares increase upon new share issue or
debt-to-equity swap to the end of the year
7 - 4.00
7 - -
7 - -
Number of shares decreased due to buy-back
for the reporting period
8 - -
Number of months from the next month after
shares decrease to the end of the reporting
9 - -
162
period
Number of reverse split shares for the
reporting period
10 - -
Number of months within the reporting
period
11 12.00 12.00
Weighted average number of outstanding
ordinary shares (I)
12=4+5+6×7÷11-8×9÷11-10 3,120,265.28 2,300,801.71
Weighted average number of outstanding
ordinary shares adjusted upon merger of the
enterprises under the same control (II)
13 3,120,265.28 2,300,801.71
Basic EPS (I) 14=1÷12 1.00 0.82
Basic EPS (II) 15=3÷12 0.95 0.81
Interest of dilutive potential ordinary share
recognized as expenses
16 - -
Income tax rate 17 - -
Conversion expense 18 - -
Number of shares increased from conversion
or exercise of convertible corporate bonds,
warrants or share options
19 - -
Diluted EPS (I) 20=[1+(16-18) ×(1-17) ]
÷(12+19)
1.00 0.82
Diluted EPS (II) 21=[3+(16-18) ×(1-17) ]
÷(13+19)
0.95 0.81
1) Basic earnings per share (Basic EPS)
Basic earnings per share=P0÷S
S= S0＋S1＋Si×Mi÷M0– Sj×Mj÷M0-Sk
Where, P0 is net profit attributable to shareholders holding ordinary shares or net profit attributable to
shareholders holding ordinary shares after deducting extraordinary profits and losses; S is the weighted
average number of outstanding ordinary shares; S0 is the total number of shares at the beginning of the
period; S1 is the number of shares increased due to the transfer of capital reserve into share capital or
distribution of share dividends during the reporting period; Si is the number of shares increased due to
new shares issue or debt-to-equity swap during the reporting period; Sj is the number of shares
decreased due to stock repurchase during the reporting period; Sk is the number of reverse split during
the reporting period; M0 is the number of months for the reporting period; Mi is the number of months
from the next month of the share increase to the end of the reporting period; Mj is the number of
months from the next month of the share decrease to the end of the reporting period.
2) Diluted earnings per share (Diluted EPS)
Diluted earnings per share=P1/(S0＋S1＋Si×Mi÷M0–Sj×Mj÷M0–Sk+weighted average amount of
ordinary shares increased due to warrant, share options and convertible bond)
Where, P1 is net profit attributable to shareholders holding ordinary shares or net profit attributable to
shareholders holding ordinary shares after deducting extraordinary profits and losses, adjusted
according to Accounting Standards for Business Enterprises and the relevant provisions after taking
into consideration the effect of dilutive potential ordinary shares. When calculating the diluted earnings
163
per share, the Company took into consideration the effect of all dilutive potential ordinary shares on
the net profit attributable to shareholders holding ordinary shares or net profit attributable to
shareholders holding ordinary shares after deducting extraordinary profits and losses and the weighted
average number of shares, and the dilutive potential ordinary shares is recorded into the diluted
earnings per share based on the extent of dilution according to the sequential order from the big to
small, until the diluted earnings per share is minimized.
(xlviii) Other comprehensive income
Item Amount incurred during
the current year
Amount incurred during
the previous year
1. Gain (loss) arising from financial assets available for sales - (5,128.21)
Less: Effects of income tax arising from financial assets
available for sales
- (769.23)
Net amount carried forward from other comprehensive
income in the previous period to the profit and loss of the
current period
- -
Subtotal - (4,358.98)
2. Shares of other comprehensive income of invested company
calculated on equity basis
- -
Less: Effects of income tax arising from the shares of other
comprehensive income of the invested company calculated
on equity basis
- -
Net amount carried forward from other comprehensive
income in the previous period to the profit and loss of the
current period
- -
Subtotal - -
3. Gain (loss) arising from cash flow hedging instruments 18,705.70 159,225.79
Less: Effects of income tax arising from the cash flow hedging
instruments
4,676.42 39,806.44
Net amount carried forward from other comprehensive
income in the previous period to the profit and loss of the
current period
-
Adjusted amount carried forward to initial amount
recognized for hedged items
-
Subtotal 14,029.27 119,419.35
4. Conversion difference arising from foreign currency financial
statements
30,414.78 (13,096.66)
Less: Disposal of net amount of overseas operations carried
forward in the current period
- -
Subtotal 30,414.78 (13,096.66)
5. Other items -
Less: Effects of income tax arising from including the other
items in other comprehensive income
- -
Net amount carried forward from other comprehensive
income in the previous period to the profit and loss of the
current period
- -
Subtotal - -
Total 44,444.06 101,963.71
164
(xlix) Notes to the items on the cash flow statement
1. Other cash received relating to operating activities
Item Amount incurred during
the current year
Amount incurred
during the previous
year
Trademark licensing fee received 46,533.91 34,803.56
Property rental received 27,736.29 72,334.09
Governmental subsidies received 2,637,680.86 106,734.92
Interest income 97,114.81 33,708.79
Income from claim reimbursement and penalties and fines 16,174.32 26,067.65
Current accounts 61,902.61 81,971.09
Net increase/decrease of margin - 117,754.63
Other revenues 176,076.40 93,796.83
Total 3,063,219.20 567,171.56
2. Other cash paid relating to operating activities
Item Amount incurred during
the current year
Amount incurred
during the previous
year
Cash paid for management expenses 1,528,320.55 863,709.26
Cash paid for sales expenses 5,954,665.12 4,638,268.51
Current accounts 192,174.65 31,616.12
Margin 440,181.49 -
Other expenditures 208,978.66 72,397.64
Total 8,324,317.47 5,605,991.53
The net increase/decrease in margin deposit of the Company is the difference between the balance
RMB1,035,763,280 of margin deposit of banker’s acceptance bill and balance RMB595,581,790 at the
beginning of the year. As the use of margin deposit of banker’s acceptance bills is restricted, it could not be
deemed as cash and cash equivalents on the cash flow statement, and the difference between the margin
deposit at year end and that at the beginning of the year is presented as ―other cash paid relating to
operating activities‖. Meanwhile, this amount was also deducted from the balance of ―cash and cash
equivalents‖ on the cash flow statement.
(l) Supplementary information to the cash flow statement
(1) Reconciliation of net profit to cash flow from operating activities under the indirect method
Supplementary information Amount incurred during
the current year
Amount incurred during
the previous year
1. Reconciliation of net profit to cash flow from operating
activities
Net profit 4,043,238.62 2,513,866.25
165
Plus: Provision for asset impairment (16,053.17) 168,626.88
Depreciation of fixed assets and investment real
estates
774,658.91 653,118.15
Amortization of intangible assets 34,615.67 33,745.39
Amortization of long-term deferred expenses 135,692.08 160,108.19
Losses arising from disposal of fixed assets, intangible
assets and other long-term assets
14,474.99 29,065.78
Losses arising from scrapping of fixed assets 7,290.91 1,883.73
Losses arising from changes in fair value (118,069.08) (27,126.91)
Financial expenses 40,088.49 75,531.26
Loss on investment (134,312.45) (32,124.94)
Decrease in deferred income tax assets (34,705.55) (385,391.33)
Increase in deferred income tax liabilities 3,121.36 1,376.54
Decrease in inventories (4,608,741.15) (694,725.42)
(Continued)
Supplementary information Amount incurred during
the current year
Amount incurred during
the previous year
Decrease in operating receivables 733,347.31 (5,809,143.37)
Increase in operating payables 3,682,956.06 3,449,039.31
Others 888,118.00 1,915,617.47
Net cash flow from operating activities 5,445,721.00 2,056,466.98
2. Significant investment and financing activities not
involving cash receipts or payments
Capitalization of debts - -
Convertible corporate bonds due within one year - -
Fixed assets acquired under finance lease - -
3. Net changes in cash and cash equivalents
Cash balance at the year end 4,670,133.74 3,259,500.35
Less: Cash balance at the beginning of the year 3,251,600.36 1,571,986.95
Plus: Balance of cash equivalents at the year end - -
Less: Balance of cash equivalents at the beginning of the
year
- -
Net increase in cash and cash equivalents 1,418,533.38 1,687,513.40
(2) Cash and cash equivalents
Item Amount incurred during
the current year
Amount incurred during
the previous year
I. Cash 4,670,133.74 3,259,500.35
Of which: Cash in treasury 840.28 2,048.36
Bank deposits readily available for payment 4,515,672.27 2,698,007.29
Other monetary funds readily available for payment 153,621.19 559,444.70
Deposit in the central bank available for payment - -
Amount due from banks - -
166
Call loans to banks - -
II. Cash equivalents - -
Of which: Bond investment maturing within 3 months - -
III. Balance of cash and cash equivalents at the end of the
year
4,670,133.74 3,259,500.35
Of which: Cash and cash equivalents subject to restrictions
on use by the parent company or subsidiaries under the
Group
- -
(li) Segment reporting
(1) Factors taken into consideration by the Company to determine the reporting segments and types of
product and labour service under the reporting segments
The Company’s reporting segments are business units offering different products and labour
services. The segments are managed individually as their need for technologies and market
strategies varies among each other.
The Company has 4 reporting segments: air-conditioner and component segment, refrigerator and
component segment, washing machine and component segment, and others segment. The
air-conditioner and component segment mainly comprises production and sale of residential
air-conditioners, commercial air-conditioners and their components. The refrigerator and
component segment mainly comprises production and sale of refrigerator products and their
components. The washing machine and component segment mainly comprises production and sale
of washing machine products and their components. The others segment mainly comprises
ancillary businesses such as supply of materials.
(2) Information regarding profits (losses) and assets and liabilities of the respective reporting
segments are listed as below:
Item Amount incurred during the current year
Air-conditioner and
components
Refrigerator and
components
Washing machine and
component
I. Operating revenue 52,806,130.80 10,811,243.10 11,281,660.42
Of which: external trading
revenue
52,659,137.26 10,406,049.80 11,107,682.68
Inter-segment
trading revenue
146,993.54 405,193.30 173,977.74
II. Operating expenses 52,244,067.29 9,974,590.47 10,631,533.25
III. Operating profit (loss) 562,063.51 836,652.63 650,127.17
167
IV. Total assets 25,988,784.01 6,286,215.40 8,128,790.86
V. Total liabilities 17,354,352.88 3,913,196.93 4,523,657.03
(Continued)
Item Amount incurred during the current year
Others Offset Total
I. Operating revenue 13,817,912,68 14,158,060.88 74,558,886.12
Of which: external trading
revenue
386,016.38 -- 74,558,886.12
Inter-segment
trading revenue
13,431,896.30 14,158,060.88 0.00
II. Operating expenses 13,589,021.21 14,184,662.36 72,254,549.86
III. Operating profit (loss) 228,891.47 (26,601.48) 2,304,336.26
IV. Total assets 14,413,587.88 12,763,340.63 42,054,037.52
V. Total liabilities 6,436,791.65 6,556,657.81 25,671,340.68
(Continued)
Item Amount incurred during the current year
Air-conditioner and
components
Refrigerator and
components
Washing machine and
components
I. Operating revenue 33,760,588.91 6,552,527.06 6,219,563.56
Of which: external trading
revenue
33,757,170.11 6,552,527.06 6,204,378.57
Inter-segment
trading revenue
3,418.80 -- 15,184.99
II. Operating expenses 32,201,972.05 6,044,349.56 5,775,420.72
III. Operating profit (loss) 1,558,616.86 508,177.50 444,142.84
IV. Total assets 18,464,947.43 4,805,073.20 5,557,364.26
V. Total liabilities 12,341,324.05 2,934,615.94 2,771,174.43
(Continued)
Item Amount incurred during the previous year
Others Offset Total
I. Operating revenue 6,994,813.19 6,249,244.46 47,278,248.26
Of which: external trading
revenue
764,172.52 -- 47,278,248.26
Inter-segment
trading revenue
6,230,640.67 6,249,244.46 --
II. Operating expenses 7,036,815.96 6,240.806.77 44,817,715.52
III. Operating profit (loss) (42,002.77) 8,437.69 2,460,496.74
IV. Total assets 12,195,808.65 9,365,566.07 31,657,627.47
V. Total liabilities 4,984,061.02 4,101,422.26 18,929,753.18
168
Accounting policy for the Company’s respective operating segments is the same as the accounting policy as
described in ―Principal accounting policies and accounting estimates‖.
(3) Regional information
Region Amount incurred during the current year Amount incurred during the previous year
External trading
revenue
Non-current assets External trading
revenue
Non-current assets
China 53,980,909.60 12,617,704.87 33,645.709.86 9,698,775.82
Other countries 20,577,976.52 594,377.62 13,632,538.40 36,422.35
Total 74,558.886.12 13,212,082.49 47,278,248.26 9,735,198.17
VI. Accounting Treatment for Asset Securitization
As at 31st December 2010, the Company had no accounting treatment for asset securitization that must be
disclosed.
VII. Related Party Relationship and Their Transactions
(i) Related party relationship
1. Parent company of the Company
Name of Parent
Company
Type Place of
registration
Legal
representative
Business
nature
Registered
capital
Organization
code
Percentage of
Parent
Company’s
Shareholding
Percentage of
voting
rights %
Midea Group
Co., Ltd.
Private Shunde,
Foshan City
He
Xiangjian
Investment 1,000,000.00 19033709-2 42.49% 42.49%
2. Subsidiaries of the Company
Further details on the subsidiaries are contained in (i) Subsidiaries under Note IV ―Enterprise Merger
and Consolidated Financial Statements‖.
3. Joint ventures and associated corporations of the Company
Further details on the associated corporations are contained in Note V (x)-Investment in associated
corporations.
4. Other related parties of the Company
Name of enterprise Organization code Relationship with the Company
Foshan Wellkey Electrical Material Co., Ltd. 73310489-4 Controlled by immediate family of
ultimate controlling shareholder of the
Company
Foshan Shunde Century Tongchuang Plastic
Industry Co., Ltd.
79462671-7 Controlled by immediate family of
ultimate controlling shareholder of the
Company
Wuhu Century Science & Technology
Development Co., Ltd.
75096265-5 Controlled by immediate family of
ultimate controlling shareholder of the
169
Company
Guangdong Midea Environment Appliances
Manufacturing Co., Ltd.
75561454-5 Controlled by controlling shareholder of
the Company
Guangdong Midea Microwave Oven
Manufacturing Co., Ltd.
72119558-1 Controlled by controlling shareholder of
the Company
Foshan Midea Kitchen-Bath Appliances
Manufacturing Co., Ltd.
72878213-X Controlled by controlling shareholder of
the Company
Hefei Century Plastic Mold Science and
Technology Co., Ltd.
66293360-0 Controlled by immediate family of
ultimate controlling shareholder of the
Company
Foshan Midea Domestic Electric Co., Ltd. 19034176-1 Significantly influenced by the
controlling shareholder of the Company
Foshan Weishang Technology Industry
Development Group Co., Ltd.
70785538-7 Significantly influenced by the
controlling shareholder of the Company
Guangdong Welling Motor Manufacturing
Co., Ltd.
61762395-3 Controlled by controlling shareholder of
the Company
Welling (Wuhu) Motor Manufacturing Co.,
Ltd.
71396943-6 Controlled by controlling shareholder of
the Company
Foshan Welling Electronic and Electric
Appliances Co., Ltd.
72875518-2 Controlled by controlling shareholder of
the Company
Foshan Welling Wash Motor Manufacturing
Co., Ltd.
70787084-3 Controlled by controlling shareholder of
the Company
Foshan Midea Daily Household Electric
Appliance Group Co., Ltd.
70807992-2 Controlled by controlling shareholder of
the Company
Wuhu Annto Logistics Company Limited 71992943-5 Controlled by controlling shareholder of
the Company
Midea Group Finance Co., Ltd. 55912326-3 Controlled by controlling shareholder of
the Company
Huaian Welling Motor Manufacturing Co.,
Ltd.
-- Controlled by controlling shareholder of
the Company
Guangdong Ganey Precision Machinery Co.,
Ltd.
-- Controlled by controlling shareholder of
the Company
MIDEA DO BRAZIL -- Associated corporation of the Company
(ii) Related party transactions
1. Sale of goods
Name of related party Transaction Amount incurred during
the current year
Amount incurred during
the previous year Pricing policy
Amount % of total
sales
Amount % of total
sales
Foshan Midea Domestic Electric
Co., Ltd.
Sales 58,373.29 0.09 26,891.86 0.07 Market price
Foshan Shunde Century
Tongchuang Plastic Industry Co.,
Ltd.
Sales 114,532.71 0.15 15,624.30 0.03 Market price
Wuhu Century Science &
Technology Development Co., Ltd.
Sales 44,991.45 0.06 13,322.40 0.03 Market price
Guangdong Midea Environment
Appliances Manufacturing Co., Ltd.
Sales 3,532.54 -- 1,906.34 -- Market price
Guangdong Midea Microwave
Oven Manufacturing Co., Ltd.
Sales 11,453.64 0.02 3,622.99 0.01 Market price
170
Foshan Midea Kitchen-Bath
Appliances Manufacturing Co., Ltd.
Sales 3,050.06 -- 6,290.23 0.01 Market price
Guangdong Welling Motor
Manufacturing Co., Ltd.
Sales 965.50 -- 1,900.02 -- Market price
Hefei Century Plastic Mold Science
and Technology Co., Ltd.
Sales 145,472.01 0.20 57,955.66 0.12 Market price
Foshan Welling Motor
Manufacturing Co., Ltd.
Sales 2,446.63 -- 1,431.11 -- Market price
Foshan Welling Wash Motor
Manufacturing Co., Ltd.
Sales 20.40 -- -- -- Market price
Huaian Welling Motor
Manufacturing Co., Ltd.
Sales 3,812.50 0.01 -- -- Market price
MIDEA DO BRAZIL Sales 257,402.78 0.35 -- -- Market price
Total 646,053.81 0.88 12,944.91 0.27
The Company sold steel and aluminium to Foshan Midea Domestic Electric Co., Ltd. at prices determined
by the two parties through negotiation based upon the market price and the payment was made by way of
bank drafts and transfers.
The Company sold materials to Foshan Shunde Century Tongchuang Plastic Industry Co., Ltd., Wuhu
Century Science & Technology Development Co., Ltd. and Hefei Century Plastic Mold Science and
Technology Co., Ltd at prices determined by the two parties through negotiation based upon the market
price and the payment was made by way of bank drafts and transfers.
The Company sold materials to Guangdong Midea Environment Appliances Manufacturing Co., Ltd.,
Guangdong Midea Microwave Oven Manufacturing Co., Ltd, Foshan Midea Kitchen-Bath Appliances
Manufacturing Co., Ltd., Foshan Welling Electronic and Electric Appliances Co., Ltd., Guangdong Welling
Motor Co., Ltd., Huaian Welling Motor Co., Ltd. and Foshan Welling Wash Motor Manufacture Co., Ltd.
at prices determined by the two parties through negotiation based upon the market price and the payment
was made by way of bank drafts and transfers.
The Company sold air conditioners and other products to MIDEA DO BRAZIL at the prices determined by
the two parties through negotiation based upon the market price and the payment was made by way of bank
drafts and transfers.
2. Purchase of goods
Name of related party Transaction Amount incurred during
the current year
Amount incurred during
the previous year Pricing policy
Amount % of total
purchases
Amount % of total
purchases
Foshan Midea Domestic Electric Purchase 36,967.01 0.06 27,354.95 0.11 Market price
171
Co., Ltd.
Guangdong Welling Motor
Manufacturing Co., Ltd.
Purchase 1,048,611.26 1.60 631.127.84 2.57 Market price
Welling (Wuhu) Motor
Manufacturing Co., Ltd.
Purchase 929,408.78 1.41 553,942.97 2.26 Market price
Foshan Welling Electronic and
Electric Appliances Co., Ltd.
Purchase 76,776.94 0.12 39,576.78 0.16 Market price
Foshan Welling Wash Motor
Manufacturing Co., Ltd.
Purchase 627,375.60 0.95 352,399.57 1.44 Market price
Foshan Wellkey Electrical
Material Co., Ltd.
Purchase 688,958.29 1.05 357,429.68 1.46 Market price
Foshan Shunde Century
Tongchuang Plastic Industry Co.,
Ltd.
Purchase 338,171.16 0.51 242,283.75 0.99 Cost plus
pricing
Wuhu Century Science &
Technology Development Co.,
Ltd.
Purchase 248,368.08 0.37 173,197.72 0.71 Cost plus
pricing
Guangdong Midea Domestic
Electric Appliances Manufacturing
Co., Ltd.
Purchase -- -- 3,239.27 0.01 Market price
Guangdong Midea Microwave
Oven Manufacturing Co., Ltd.
Purchase -- -- 9,277.71 0.04 Market price
Foshan Midea Kitchen-Bath
Appliances Manufacturing Co.,
Ltd.
Purchase -- -- 21,679.55 0.09 Market price
Guangdong Midea Environment
Appliances Manufacturing Co.,
Ltd.
Purchase 1,800.00 -- -- -- Market price
Hefei Century Plastic Mold
Science and Technology Co., Ltd.
Purchase 220,434.17 0.34 118,762.81 0.48 Cost plus
pricing
Total 4,216,871.29 6.41 2,530,272.60 10.32
Some materials of the Company were purchased from Foshan Midea Domestic Electric Co., Ltd. at prices
determined according to the market price and the payment was made by way of bank drafts and transfers.
Some motors used by the Company for production of air-conditioners were purchased from Guangdong
Welling Motor Manufacturing Co. Ltd. and Wuhu Welling Motor Manufacturing Co. Ltd., while some
washing motors were purchased from Foshan Welling Wash Motor Manufacturing Co., Ltd. The price for
purchasing motors for air-conditioners was determined according to the market price; while the price for
purchasing washing motor was determined according to the market price not deviated from third party
prices. Payments were made by way of bank drafts and transfers.
Some components used by the Company for production of air-conditioners were purchased from Foshan
Welling Electronics and Electric Appliances Co., Ltd at prices determined according to the market price and
the payment was made by way of bank drafts and transfers.
Some enameled wires used by the Company for production of compressors were purchased from Foshan
172
Wellkey Electrical Material Co., Ltd. at prices determined according to the market price not deviated from
third party prices. Payments were made by way of bank drafts and transfers.
Some plastic parts used by the Company for production of air-conditioners were purchased from Foshan
Shunde Century Tongchuang Plastic Industry Co., Ltd., Wuhu Century Science & Technology Development
Co., Ltd. and Hefei Century Plastic Mold Science and Technology Co., Ltd at prices determined according
to the material cost plus 8% as verified by the Company and the payment was made by way of bank drafts
and transfers.
Some promotional products of the Company were purchased from Guangdong Midea Environment
Appliances Manufacturing Co., Ltd. at prices generally determined according to the market price and the
final sales prices were determined with reference to the batch quantity and terms of payment. But under the
same conditions, the transaction price or terms shall not deviate from those for the same kind of goods
supplied by a third party. Payments were made by way of bank drafts and transfers.
3. Related party guarantee
(1) Acceptance of guarantee
Name of companies Amount incurred during the current
year
Amount incurred during the
previous year
Guarantee Amount Guarantee Amount
Midea Group Co., Ltd. Notes and trade
financing
4,973,000.00 Notes and trade
financing, and
borrowing
3,737,320.00
Foshan Weishang Technology
Industry Development Group Co.,
Ltd.
Notes and trade
financing
107,970.00 Bank borrowings 400,000.00
Foshan Shunde Comax Electric
Appliance Co., Ltd.
Notes financing -- Borrowing and
Notes
244,000.00
Total 5,080,970.00 4,381,320.00
(2) Provision of guarantee
Name of companies Amount incurred during the current
year
Amount incurred during the
previous year
Guarantee Amount Guarantee Amount
Guangdong Midea Refrigeration
Equipment Co., Ltd.
Notes and trade
financing
2,401,196.00 Notes and trade
financing
1,357,920.00
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd.
Notes financing 1,070,000.00 Trade financing 710,000.00
Midea Group Wuhan
Refrigeration Equipment Co., Ltd.
Notes financing 830,000.00 Notes financing 91,630.00
Guangdong Midea Commercial
Air-conditioning Equipment Co.,
Ltd.
Notes and trade
financing
95,880.00 Trade financing 203,460.00
173
Guangdong Midea Heating &
Ventilation Equipment Co., Ltd.
Notes and trade
financing
297,386.00 - -
Guangdong Meizhi Refrigeration
Equipment Co., Ltd.
Trade financing 288,116.00 - -
Guangdong Meizhi Precise
Manufacture Co., Ltd.
Trade financing 24,344.00 - -
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
Notes and trade
financing
200,284.00 Notes and trade
financing, and
borrowing
68,680.00
Hefei Hualing Co., Ltd. Notes and trade
financing
691,222.00 Notes and trade
financing, and
borrowing
1,096,000.00
Hefei Royalstar Refrigerator Co.,
Ltd.
Notes financing 981,190.00 Notes and
borrowing
669,400.00
Hefei Midea Material Supply Co.,
Ltd.
Notes financing 274,000.00 - -
Little Swan (Jingzhou) Electric
Appliance Co., Ltd.
Notes and trade
financing
129,846.00 - -
China Refrigeration Industry Co.,
Ltd.
Notes financing 61,200.00 - -
Chongqing Midea General
Refrigeration Equipment Co., Ltd.
Notes financing 102,130.00 Notes financing 80,640.00
Hefei Royalstar Washing Machine
Manufacture Co., Ltd.
Notes and trade
financing
219,534.00 Notes and trade
financing, and
borrowing
371,610.00
Total 7,666,328.00 4,649,340.00
4. Establishment of companies jointly by the Company and related parties
On April 23rd
, 2009, the Company signed Capital Contribution Agreement for Establishing Midea
Group Finance Co., Ltd. with Midea Group Co., Ltd. and Guangdong Welling Motor Co., Ltd. In
accordance with this agreement, the Company, Midea Group Co., Ltd. and Guangdong Welling Motor
Co., Ltd. jointly made contributions to establish Midea Group Finance Co., Ltd. with registered capital
of RMB 500 million. Midea Group Co., Ltd. contributed RMB 275 million, accounting for 55% of the
registered capital; the Company contributed RMB 200 million, accounting for 40% of the registered
capital; and Guangdong Welling Motor Co., Ltd. contributed RMB 25 million, accounting for 5% of
the registered capital.
On July 9th
, 2009, Midea Group Finance Co., Ltd. received approval of CBRC (Yin Jian Fu [2007]
No.217) to approve establishment of Midea Group Finance Co., Ltd. On July 1st, 2010, Midea Group
Finance Co., Ltd. received approval of CBRC (Yin Jian Fu [2007] No.273) to approve commencement
of operation of Midea Group Finance Co., Ltd..
5. Share transfer
On December 15th, 2010, the 8
th meeting of the seventh Board of Directors of the Company considered
174
and approved the Resolution Concerning the Related-party Transaction---- Transferring the Shares of
Wuxi Little Swan Huayin Electric Appliance Co., Ltd. Wuxi Little Swan Company Limited transferred
100% shares of Wuxi Little Swan Huayin Electric Appliance Co., Ltd held by it to Foshan Welling
Washing Motor Manufacture Co., Ltd. for a consideration of RMB75 million, which was agreed by
both parties by referring to unaudited net asset value as of June 2010.
6. Other related party transactions
Name of related party Transaction Amount
incurred during
the current year
Amount incurred
during the
previous year
Pricing policy Remarks
Midea Group Co., Ltd, and its
other subsidiaries
Trademark
licensing fee
46,533.91 34,803.56 Agreed price 1）
Midea Group Co., Ltd, and its
other subsidiaries
Lease expense 37,051.42 39,488.87 Agreed price 2）
Midea Group Co., Ltd, and its
other subsidiaries
Transportation
service
270,310.99 218,890.26 Market price 3）
1) According to the trademark right licensing agreements entered into by the Company and Foshan
Midea Daily Household Electric Appliance Group Co., Ltd. (hereinafter referred to as the ―Daily
Electric Group‖) as well as other subsidiaries under Midea Group Co., Ltd., the Company shall
charge a trademark licensing fee calculated at 0.3% of the companies’ relevant sales revenue in
respect of the utilization of the Company’s ―Midea‖ brand trademark by such companies in selling
their products.
2) According to the property leasing contracts entered into by the Company and the Daily Electric
Group as well as other subsidiaries under the Midea Group, such companies shall pay property
rentals and management fees to the Company at agreed prices for their use of the Company’s
properties.
3) Some transportation and storage service of the Company were provided by Midea Group Co., Ltd.
and its other subsidiaries at prices determined according to the market price. In particular, the
service prices have been arrived at after taking into account of the quantities, distance and timing.
However, the transaction price or terms under the same conditions shall not deviate from that
offered to third party in respect of the same services. Payments were made by way of bank drafts
and transfers.
(iii) Balance of current accounts with related parties
1. Accounts receivable due from the related parties
Name of related party Item Book balance at the end of
the year
Book balance at the beginning of
the year
Amount Provision for
bad debts
Amount Provision for
bad debts
Accounts
receivable
175
Foshan Welling Electronic and
Electric Appliances Co., Ltd.
- - 1,142.78 57.14
Guangdong Midea Environment
Appliances Manufacturing Co., Ltd.
- - 1,537.63 76.88
Foshan Midea Kitchen-Bath
Appliances Manufacturing Co., Ltd.
- - 2,228.47 111.42
Guangdong Midea Microwave Oven
Manufacturing Co., Ltd.
- - 1,002.27 50.11
Huaian Welling Motor Manufacturing
Co., Ltd.
3,015.50 150.78 - -
Subtotal 3,015.50 150.78 5,911.15 295.55
Prepayments
Wuhu Annto Logistics Company
Limited
- - 6,157.35 -
Foshan Midea Kitchen-Bath
Appliances Manufacturing Co., Ltd.
- - 1,311.56 -
Subtotal - - 7,468.91 -
2. Accounts payable to the related parties
Name of related party Item Book balance at the
end of the year
Book balance at the
beginning of the year
Accounts
payable
Foshan Midea Domestic Electric Co., Ltd. 2,157.84 5,210.03
Guangdong Welling Motor Manufacturing Co., Ltd. 265,074.89 207,363.74
Foshan Welling Wash Motor Manufacturing Co.,
Ltd.
70,200.50 129,467.80
Foshan Welling Electronic and Electric Appliances
Co., Ltd.
21,181.64 12,621.55
Welling (Wuhu) Motor Manufacturing Co., Ltd. 127,642.03 74,325.18
Wuhu Century Science & Technology Development
Co., Ltd.
5,804.78 26,790.28
Foshan Shunde Century Tongchuang Plastic
Industry Co., Ltd.
78,291.50 74,181.21
Guangdong Ganey Precision Machinery Co., Ltd. 1,039.67 -
Wuhu Annto Logistics Company Limited 2,189.92 -
Guangdong Midea Environment Appliances
Manufacturing Co., Ltd.
1,120.77 -
Hefei Century Plastic Mold Science and
Technology Co., Ltd.
20,876.35 33,588.33
Foshan Wellkey Electrical Material Co., Ltd. 75,078.35 33,181.98
Subtotal 670,658.24 596,730.10
Other payables
Foshan Midea Domestic Electric Co., Ltd. 101,119.49 -
Hualing (Guangzhou) Electric Appliance Co., Ltd. - 3,285.90
Wuhu Annto Logistics Company Limited 7,208.40 -
176
Subtotal 108,327.89 3,285.90
3. Deposit of monetary funds
Name of related party Item name Book balance at the end
of the year
Book balance at the
beginning of the year
Midea Group Finance
Co., Ltd.
Deposit of monetary
funds
244,011.83 -
VIII. Share-based Payment
As at December 31st, 2010, the Company had no share-based payments that shall be disclosed.
IX. Contingencies
1.Contingent liabilities caused by pending litigation or arbitration and their financial impact
In January 2006, Guangzhou Xinyun Mechanical & Electronic Evaporator Co., Ltd. charged against China
Refrigeration Industry Co., Ltd., a subsidiary of the Company, with arrears owed by it, demanding it to pay
the arrears and accrued interest thereof of RMB17 million. China Refrigeration Industry Co., Ltd.
counterclaimed Guangzhou Xinyun Mechanical & Electronic Evaporator Co., Ltd., for payment for goods
of RMB1.95 million.
As at December 31st, 2010, the case was still in litigation process.
2.Contingent liabilities caused by guarantees provided for other entities’ indebtedness and
financial impacts thereof
Breakdown of balance of guarantees provided by the Company for its subsidiaries as at December 31st,
2010 is listed below:
Name of guaranteed parties Guarantees Amount Remarks
Guangdong Midea Refrigeration Equipment
Co., Ltd.
Notes and trade financing 507,070.00
Guangdong Midea Group Wuhu Refrigeration
Equipment Co, Ltd.
Notes financing 550,000.00
Midea Group Wuhan Refrigeration
Equipment Co, Ltd.
Notes financing 230,000.00
Guangdong Midea Commercial Air
Conditioning Equipment Co., Ltd.
Notes and trade financing 17,150.00
Guangdong Midea Heating & Ventilation
Equipment Co., Ltd.
Notes and trade financing 239,490.00
Guangdong Meizhi Refrigeration Equipment
Co., Ltd.
Notes financing 11,690.00
Anhui Meizhi Refrigeration Equipment Co.,
Ltd.
Notes and trade financing 93,500.00
Hefei Hualing Co., Ltd. Notes and trade financing 494,700.00
177
Hefei Royalstar Refrigerator Co., Ltd. Notes financing 797,640.00
Hefei Midea Material Supply Co., Ltd. Notes financing 274,000.00
Little Swan (Jingzhou) Electric Appliance
Co., Ltd.
Notes and trade financing 95,820.00
China Refrigeration Industry Co., Ltd. Notes financing 8,000.00
Chongqing Midea General Refrigeration
Equipment Co., Ltd.
Notes financing 89,350.00
Total 3,408,410.00
Save for the abovementioned contingencies, as at December 31st, 2010 the Company had no other
significant contingencies that should be disclosed but were not disclosed.
X. Significant Commitments
As at December 31st, 2010, the Company had no significant commitments that should be disclosed but were
not disclosed.
XI. Post Balance Sheet Events
Pursuant to the resolution approved at the 11th meeting of the seventh Board of Directors of the Company,
the Company proposed to appropriate 10% of the parent company’s net profit for 2010 to statutory capital
reserve, and distribute cash dividends with other profits available for distribution to shareholders at the end
of 2010 in the proportion of RMB1.00 (including tax) cash for every 10 shares.
Save for the abovementioned post balance sheet events, up to March 16th, 2011 the Company had no other
significant post balance sheet events that should be disclosed but were not disclosed
XII. Other important events
On August 27th 2010, the 5
th meeting of the seventh Board of the Company considered and approved
non-pubic issuing of A shares. According to the proposal for non-pubic issuing of A shares, the Company
proposed to issue not more than 350,000,000 A shares to not more than 10 institutions. On September 17th
2010, the 4th extraordinary general meeting of the Company considered and approved the matters related to
the non-pubic issue of A shares.
On December 20th, 2010, Issuance Examination Committee of China Securities Regulatory Commission
examined Midea Electric Appliance’s application for non-public issuing of A shares. According to the result
of this examination, Midea Electric Appliance’s application for non-public issue of A shares was approved.
On January 18th
, 2011, the Company received the Reply on the Approval of Non-public Issue of Shares by
GD Midea Holding Co., Ltd. under the CSRC Permit ([2011] No.84) from China Securities Regulatory
Commission.
On February 24th 2011, the Company received capital of RMB4,359,999,990 contributed by not more
than ten targetted investors including Penghua Fund Management Co., Ltd., and net amount of funds raised
was RMB4,300,149,990 after deducting the underwriting expense, sponsoring expense and other related
178
expenses, such that the registered capital increased by RMB 264,082,370. The balance of RMB
4,036,067,620 was transferred to capital reserve.
XIII. Comparative data
Opening amount for the reporting period has been properly adjusted in accordance with the provisions of
Accounting Standards for Business Enterprises.
XIV. Notes to Major Items on the Financial Statements of Parent Company
(i) Accounts receivable
Accounts receivable are listed by type as below:
Type Book balance at the end of the year
Book balance Percentage % Provision for bad
debts
Carrying value
Accounts receivable with significant
single amounts and provision made
for bad debts for each single account
receivable
- - - -
Accounts receivable with provision
made for bad debts for combination
of accounts receivable
Combination 1: aging combination - -
Combination 2: accounts receivable
within the scope of consolidated
statements
21,078.35 100.00 21,078.35
Subtotal 21,078.35 100.00 21,078.35
Accounts receivable with
insignificant single amounts but
provision made for bad debts for
each single account receivable
- - - -
Total 21,078.35 100.00 - 21,078.35
Type Book balance at the beginning of the year
Book balance Percentage % Provision for bad
debts
Carrying value
Accounts receivable with significant
single amounts
- - - -
Accounts receivable with provision
made for bad debts for combination
of accounts receivable
Combination 1: aging combination 12,720.20 4.69 203.59 12,516.61
Combination 2: accounts receivable
within the scope of consolidated
statements
258,238.63 95.31 - 258,238.63
Subtotal 270,958.83 100.00 203.59 270,755.24
Accounts receivable with
insignificant single amounts but
provision made for bad debts for
each single account receivable
- - - -
Total 270,958.83 100.00 203.59 270,755.24
179
Accounts receivable for which provision for bad debts was made by aging analysis method:
Aging structure Book balance at the end of the year
Amount Percentage % Provision for bad
debts
Net amount
Less than 1 year 21,078.35 100.00 - 21,078.35
Aging structure Book balance at the beginning of the year
Amount Percentage % Provision for bad
debts
Net amount
Less than 1 year 270,958.83 100.00 203.59 270,755.24
(ii) Prepayments
Aging structure Book balance at the
end of the year
Percentage % Book balance at the
beginning of the
year
Percentage %
Less than 1 year 737,563.18 100.00 359,600.40 100.00
(iii) Other receivables
(1) Other receivables are listed by type as below:
Type Book balance at the end of the year
Book balance Percentage % Provision for bad
debts
Carrying value
Other receivables with significant
single amounts and provision made
for bad debts for each single other
receivable
- - - -
Other receivables with provision
made for bad debts for combination
of other receivables
Combination 1: aging combination 13,570.24 0.95 811.85 12,758.39
Combination 2: other receivables
within the scope of consolidated
statements
1,414,229.37 99.05 - 1,414,229.37
Subtotal 1,427,799.61 100.00 811.85 1,426,987.76
Accounts receivable with
insignificant single amounts but
provision made for bad debts for
each single account receivable
- - - -
Total 1,427,799.61 100.00 811.85 1,426,987.76
Type Book balance at the beginning of the year
Book balance Percentage % Provision for bad
debts
Book balance
180
Other receivables with significant
single amounts and provision made
for bad debts for each single other
receivable
- - - -
Other receivables with provision
made for bad debts for combination
of other receivables
Combination 1: aging combination 24,319.83 1.75 361.00 23,958.83
Combination 2: accounts receivable
within the scope of consolidated
statements
1,368,219.02 98.25 - 1,368,219.02
Subtotal 1,392,538.85 100.00 361.00 1,392,177.85
Other receivables with insignificant
single amounts but provision made
for bad debts for each single other
receivable
- - - -
Total 1,392,538.85 100.00 361.00 1,392,177.85
Other receivables for which provision for bad debts was made by aging analysis method:
Aging structure Book balance at the end of the year
Book balance Percentage % Provision for bad
debts
Carrying value
Less than 1 year 1,426,855.19 99.93 631.29 1,426,223.90
1~2 years 944.42 0.07 180.56 763.86
2~3 years - - - -
More than 3 years - - - -
Total 1,427,799.61 100.00 811.85 1,426,987.76
Aging structure Book balance at the beginning of the year
Book balance Percentage % Provision for bad
debts
Book balance
Less than 1 year 1,391,640.63 99.94 271.18 1,391,369.45
1~2 years 898.22 0.06 89.82 808.40
2~3 years - - - -
More than 3 years - - - -
Total 1,392,538.85 100.00 361.00 1,392,177.85
(iv) Long-term equity investment
Long-term equity investments are listed by item as below:
Invested companies Accounting
method
Initial
investment
cost
Book balance
at the
beginning of
the year
Increase/decrease
for the year
Book balance
at the end of
the year
Guangdong Midea Refrigeration
Equipment Co., Ltd.
Cost method 641,920.00 641,920.00 641,920.00
Guangdong Midea Group Wuhu
Refrigeration Equipment Co, Ltd.
Cost method 339,074.28 339,074.28 - 339,074.28
Midea Group Wuhan
Refrigeration Equipment Co, Ltd.
Cost method 60,508.23 60,508.23 - 60,508.23
181
Guangdong Midea Commercial
Air Conditioning Equipment Co.,
Ltd.
Cost method 569,430.35 569,430.35 569,430.35
Guangdong Midea Heating &
Ventilation Equipment Co., Ltd.
Cost method 90,000.00 90,000.00 90,000.00
Guangdong Meizhi Refrigeration
Equipment Co., Ltd.
Cost method 89,787.77 89,787.77 - 89,787.77
Guangdong Meizhi Precise
Manufacture Co., Ltd.
Cost method 38,437.80 38,437.80 - 38,437.80
Hefei Royalstar Refrigerator Co.,
Ltd.
Cost method 414,685.93 414,685.93 414,685.93
Hefei Royalstar and Midea
Electric Appliance Marketing
Co., Ltd.
Cost method 14,468.53 14,468.53 - 14,468.53
Hefei Royalstar Washing
Machine Manufacture Co., Ltd.
Cost method 701,887.59 701,887.59 （633,432.79） 68,454.80
Foshan Midea Material Supply
Co., Ltd.
Cost method 54,000.00 54,000.00 - 54,000.00
Midea Electric Investment (BVI)
Limited
Cost method 236,542.62 236,542.62 - 236,542.62
Foshan Midea Air-conditioning
Industrial Investment Co., Ltd.
Cost method 36,061.94 36,061.94 - 36,061.94
Midea Wuhu Property
Construction and Management
Co., Ltd.
Cost method 16,000.00 16,000.00 - 16,000.00
Guangdong Midea Building
Control Technology Co., Ltd.
Cost method 16,200.00 16,200.00 - 16,200.00
Foshan Shunde Bowen
Investment Co., Ltd.
Cost method 10,000.00 10,000.00 - 10,000.00
Foshan Midea Carrier
Refrigeration Equipment Co.,
Ltd.
Cost method 42,000.00 42,000.00 78,000.00 120,000.00
Chongqing Midea General
Refrigeration Equipment Co.,
Ltd.
Cost method 31,420.56 31,420.56 - 31,420.56
Midea Group (Hefei) Refrigerator
Co., Ltd.
Cost method 16,500.00 16,500.00 - 16,500.00
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
Cost method 308,750.00 308,750.00 - 308,750.00
Hefei Hualing Co., Ltd. Cost method 88,646.33 88,646.33 - 88,646.33
Guangzhou Hualing
Air-conditioning Equipment Co.,
Ltd.
Cost method 136,745.27 136,745.27 - 136,745.27
Wuxi Little Swan Company
Limited
Cost method 1,685,227.14 1,685,227.14 732,100.19 2,417,327.33
Little Swan (Jingzhou) Electric
Appliance Co., Ltd.
Cost method 30,239.03 30,239.03 30,239.03
Hefei Midea Material Supply Co.,
Ltd.
117,000.00 - 117,000.00 117,000.00
182
(Continued)
Invested companies Accounting
method
Initial
investment
cost
Book balance
at the
beginning of
the year
Increase/decrease
for the year
Book balance
at the end of
the year
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
Cost method 150,000.00 - 150,000.00 150,000.00
Anhui Meizhi Compressor Co.,
Ltd.
Cost method 47,500.00 - 47,500.00 47,500.00
Anhui Meizhi Precise
Manufacture Co., Ltd.
Cost method 285,000.00 - 285,000.00 285,000.00
Hefei Midea Heating &
Ventilation Equipment Co., Ltd.
Cost method 135,000.00 - 135,000.00 135,000.00
Golden Eagle Asset Management
Co. Ltd.
Equity
method
20,000.00 12,831.84 （5,589.77） 7,242.07
Midea Group Finance Co., Ltd. Equity
method
200,000.00 200,000.00 1,380.63 201,380.63
Total 6,623,033.37 5,881,365.21 906,958.26 6,788,323.47
(Continued)
Invested companies Shareholding
percentage
(%)
Voting rights
percentage
(%)
Provision for
impairment
Provision for
impairment for
the year
Cash dividend
for the year
Guangdong Midea Refrigeration
Equipment Co., Ltd.
73.00 80.00 - - 168,140.76
Guangdong Midea Group Wuhu
Refrigeration Equipment Co, Ltd.
73.00 80.00 - - 68,409.61
Midea Group Wuhan
Refrigeration Equipment Co, Ltd.
73.00 80.00 - - 67,838.83
Guangdong Midea Commercial
Air Conditioning Equipment Co.,
Ltd.
73.00 80.00 - - 171,743.79
Guangdong Midea Heating &
Ventilation Equipment Co., Ltd.
90.00 100.00 - -
Guangdong Meizhi Refrigeration
Equipment Co., Ltd.
60.00 60.00 - -
Guangdong Meizhi Precise
Manufacture Co., Ltd.
60.00 60.00 - -
Hefei Royalstar Refrigerator Co.,
Ltd.
75.00 75.00 - - 205,587.10
Hefei Royalstar and Midea
Electric Appliance Marketing
Co., Ltd.
75.00 75.00 - -
Hefei Royalstar Washing
Machine Manufacture Co., Ltd.
75.00 100.00 - -
183
Foshan Midea Material Supply
Co., Ltd.
90.00 100.00 - - 32,401.97
Midea Electric Investment (BVI)
Limited
100.00 100.00 - -
Foshan Midea Air-conditioning
Industrial Investment Co., Ltd.
100.00 100.00 - -
Midea Wuhu Property
Construction and Management
Co., Ltd.
80.00 100.00 - - 1,250.75
Guangdong Midea Building
Control Technology Co., Ltd.
90.00 100.00 - -
Foshan Shunde Bowen
Investment Co., Ltd.
100.00 100.00 - -
Foshan Midea Carrier
Refrigeration Equipment Co.,
Ltd.
60.00 60.00 - -
Chongqing Midea General
Refrigeration Equipment Co.,
Ltd.
30.00 55.00 - - 1,500.00
Midea Group (Hefei) Refrigerator
Co., Ltd.
55.00 55.00 - -
Anhui Meizhi Refrigeration
Equipment Co., Ltd.
95.00 95.00 - -
Hefei Hualing Co., Ltd. 75.00 100.00 - - 49,591.30
Guangzhou Hualing
Air-conditioning Equipment Co.,
Ltd.
90.00 100.00 - -
Wuxi Little Swan Company
Limited
34.20 39.08 - -
Little Swan (Jingzhou) Electric
Appliance Co., Ltd.
51.00 100.00 - -
Hefei Midea Material Supply Co.,
Ltd.
90.00 100.00 - -
Guangzhou Midea Hualing
Refrigerator Co., Ltd.
75.00 100.00 - -
Anhui Meizhi Compressor Co.,
Ltd.
95.00 100.00
Anhui Meizhi Precise
Manufacture Co., Ltd.
95.00 100.00
Hefei Midea Heating &
Ventilation Equipment Co., Ltd.
90.00 100.00
Golden Eagle Asset Management
Co. Ltd.
20.00 20.00
Midea Group Finance Co., Ltd. 40.00 40.00
Total - - 766,464.11
(v) Operating revenue and cost
184
Item
Amount incurred during the current
year
Amount incurred during the previous
year
Operating revenue Operating cost Operating
revenue
Operating cost
Sales of materials 10,213,930.92 10,010,35.94 2,189,810.86 2,155,002.06
Trademark licensing fee 327,270.86 - 240,429.01 -
Rental and others 224,659.23 122,149.72 289,954.33 224,371.51
Total 10,765,861.01 10,132,465.66 2,720,194.20 2,379,373.57
Rental revenue comprises property rent and property management fee; rental cost represents
investment real estates depreciation costs.
(vi) Investment income
(1) Investment incomes by source are listed as below:
Item
Amount incurred
during the current
year
Amount incurred
during the previous
year
Long-term equity investment income measured using cost
method
865,131.53 595,075.01
Long-term equity investment income measured using equity
method （4,209.14） （2,685.06）
Investment income obtained from disposal of trading financial
assets
- 1,791.52
Total 860,922.39 594,181.47
(2) Long-term equity investment income measured using cost method:
Name of invested company Amount incurred during
the current year
Amount incurred
during the previous
year
Guangdong Meizhi Refrigeration Equipment Co., Ltd. - 89,992.52
Guangdong Meizhi Precise Manufacture Co., Ltd. - 65,993.06
Midea Group Wuhan Refrigeration Equipment Co, Ltd. 67,838.83 42,906.87
Guangdong Midea Commercial Air Conditioning Equipment
Co., Ltd.
171,743.79 158,047.88
Guangdong Midea Refrigeration Equipment Co., Ltd. 168,140.76 93,586.68
Guangdong Midea Group Wuhu Refrigeration Equipment Co,
Ltd.
68,409.61 47,344.78
Foshan Midea Air-conditioning Industrial Investment Co., Ltd. - 10,424.56
Hefei Hualing Co., Ltd. 49,591.30 29,906.33
Hefei Royalstar Refrigerator Co., Ltd. 205,587.10 55,372.33
Chongqing Midea General Refrigeration Equipment Co., Ltd. 1,500.00 1,500.00
Midea Wuhu Property Construction and Management Co., Ltd. 1,250.75 -
Foshan Midea Material Supply Co., Ltd. 32,401.97 -
Hefei Royalstar Washing Machine Manufacture Co., Ltd.* 98,667.42 -
Total 865,131.53 595,075.01
185
* Income from share exchange resulted from issuing of additional shares by Wuxi Little Swan Company
Limited, controlled subsidiary of the Company to the Company to purchase 69.47% shares in Hefei
Royalstar Washing Machine Manufacture Co., Ltd.
(3) Long-term equity investment income measured using equity method:
Name of invested party Amount incurred during the current
year
Amount incurred during the previous
year
Golden Eagle Asset Management Co., Ltd. （5,589.77） （2,685.06）
Midea Group Finance Co., Ltd. 1,380.63
Total （4,209.14） （2,685.06）
(vii) Supplementary information for the cash flow statement
Supplementary Information Amount incurred
during the current
year
Amount incurred
during the previous
year
1. Reconciliation of net profit to cash flow from operating
activities:
Net profit 1,001,891.93 649,892.98
Plus: Provision for asset impairment 247.25 393,71
Depreciation of fixed assets and investment real estate 101,417.25 75,612.76
Amortized intangible assets 3,392.33 4,778.73
Amortized long-term deferred expenses 25,549.52 17,396.48
Losses from disposal of fixed assets, intangible assets
and other long-term assets
- 2.75
Losses from scrapping of fixed assets - 0.00
Losses from changes in fair value - 0.00
Financial expenses 47,919.00 41,416.29
Investment loss （860,922.39） （594,181.47）
Decrease in deferred income tax assets （420.10） （98.43）
Increase in deferred income tax liabilities - 334.65
Inventory decrease （62,525.38） （791,911.64）
Decrease in operating receivable items 2.358,033.73 2,872,149.56
Increase in operating payable items （1,868,007.99） 633.11
Others - （862.55）
Net cash flow from operating activities 746,575.16 2,275,556.92
Continued
Supplementary Information Amount incurred
during the current
year
Amount incurred
during the previous
year
2. Significant investing and financing activities that do not
involve cash receipts and payments:
Debts converted into capital - -
Convertible corporate bonds due within one year - -
Fixed assets acquired under finance lease - -
3. Changes in cash and cash equivalent:
Cash balance at the end of the year 2,160,563.74 2,294,706.18
Less: cash balance at the beginning of the year 2,294,706.18 516,439.94
Plus: cash equivalent balance at the end of the year - -
Less: cash equivalent balance at the beginning of the year - -
Net increase in cash and cash equivalents （134,142.44） 1,778,266.24
XV. Supplementary Information
(i) List of extraordinary profits and losses for the current period
186
Pursuant to CSRC Bulletin [2008] No.43 in respect of the provisions of Explanatory Bulletin of Information
Disclosures by Companies that Offer Securities to the Public No.1 ——Extraordinary profits and losses
(2008), the Company’s extraordinary profits and losses for 2009 are as follows:
Item Amount incurred
during the current
year
Amount incurred during
the previous year
1. Income arising from disposal of non-current assets, including the
portion written-off for which provision for asset impairment loss
has been mde
（14,474.99） （31,833.17）
2. Tax rebate, deduction or exemption with approval exceeding the
authority or without official approval
- -
3. Governmental subsidies recognized in the current profits and
losses (except those which have close relations with the Company’s
business and granted continuously at a certain standard amount and
quantities as specified under the State’s policies)
148,487.63 59,128.19
4. Capital appropriation fee charged from non-financial enterprises
included in the current profits and losses
- -
5. Income arising from that investment cost acquiring subsidiary,
associated corporation and joint venture is less than the gains
arising from the fair value of the invested party’s identifiable net
assets attributable to the Company when acquiring the investment
- -
6. Profit or loss from exchange of non-monetary assets - -
7. Profits or losses from entrusted investment or assets management - -
8. Various provisions for asset impairment loss made by virtue of
force majeure such as natural disasters
-
9. Profit and loss from debts restructuring - 1,570.84
10. Corporate restructuring expenses, such as employee relocation
expenditure and merger costs
- 0.00
11. Profit and loss in excess of the fair value resulted from the
transactions of which the transaction price is obviously unfair
- -
12. Current net profit of the subsidiary from the beginning of the
year to the merger date arising from merger of the enterprises under
the same control
- -
13. Profit or loss arising from the contingencies not related to the
Company’s normal business operations
- -
14. Profits or losses from changes in fair value arising from the
trading financial assets and trading financial liabilities held and
investment income obtained from disposal of trading financial
assets, trading financial liabilities and the financial assets available
for sale except the effective hedging business related to the
Company’s normal business operations
208,285.57 45,076.84
15. Reversal of impairment provision for accounts receivable for
which separate impairment test has been made
- -
16. Profits or losses obtained from external entrusted loans - -
17. Gains arising from changes in fair value of investment real
estate for which the fair value model has been adopted for
subsequent measurement
- -
18. Impacts on current profits and losses resulted from one-off
adjustment made to current profits and losses in accordance with the
requirements under taxation and accounting laws and regulations
- -
19. Trustee fee revenue from fiduciary operations - -
20. Other non-operating incomes than above-mentioned items （71,845.75） 12,058.09
21. Other profit items that comply with the definition of
extraordinary profits and losses （9,886.15） （3,529.40）
Gross profit affected 260,566.31 82,471.39
Less: income tax 19,943.53 4,133.95
Net profit affected 240,622.78 78,337.44
Minority shareholders’ profits and losses affected 69,923.86 51,657.09
Net profit affected attributable to the ordinary shareholders of the
parent company
170,698.92 26,680.35
Net profit attributable to ordinary shareholders of the parent
company after deducting the extraordinary profits and losses
2,956,398.47 1,821,067.57
187
(ii) Return on equity and earnings per share
Return on equity (ROE) and earnings per share (EPS) calculated by the Company in compliance with the
requirements of the Compilation Rules for Information Disclosures by Companies that Offer Securities to
the Public No.9: Calculation and Disclosure of Return on Equity and Earnings per Share (Revision 2010)
(―CSRC Bulletin [2010] No.2‖) and Explanatory Bulletin of Information Disclosures by Companies that
Offer Securities to the Public No.1 ——Extraordinary profits and losses (2008) (―CSRC Bulletin [2008]
No.43‖) issued by CSRC are as follows:
Profit for the reporting period Figure for the year
Weighted average
ROE
Earnings per share
Basic
EPS
Diluted
EPS
Net profit attributable to the Company's ordinary shareholders 29.54% 1.00 1.00
Net profit attributable to the Company's ordinary shareholders after deducting
extraordinary profits and losses
27.93% 0.95 0.95
Profit for the reporting period Figure for the previous year
Weighted average
ROE
Earnings per share
Basic
EPS
Diluted
EPS
Net profit attributable to the Company's ordinary shareholders 28.81% 0.82 0.82
Net profit attributable to the Company's ordinary shareholders after deducting
extraordinary profits and losses
28.40% 0.81 0.81
XVI. Approval of Financial Statements
These financial statements have been approved by the Board of the Company by a resolution dated March
16th 2011.
These financial statements shall be submitted to the general meeting for review and consideration in
accordance with the Company’s Articles of Association.
Legal representative: Fang Hongbo
Person in charge of accounting functions: Zhao Jun
Head of the accounting department: He Xiaoming
GD Midea Holding Co., Ltd.
March 16th 2011