Wuxi Little Swan Company Limited Annual Report 2018
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WUXI LITTLE SWAN COMPANY LIMITED
ANNUAL REPORT 2018
March 2019 Wuxi Little Swan Company Limited Annual Report 2018
2
Part I Important Notes, Table of Contents and Definitions
The Board of Directors (or the “Board”), the Supervisory Committee as well as the directors,
supervisors and senior management of Wuxi Little Swan Company Limited (hereinafter referred to
as the “Company”) hereby guarantee the factuality, accuracy and completeness of the contents of
this Report and its summary, and shall be jointly and severally liable for any misrepresentations,
misleading statements or material omissions therein.
Mr. Fang Hongbo, Chairman of the Board of the Company, Mr. Sun Yunan, the Company’s Chief
Financial Officer (CFO), and Mr. Xu Yunwei, the Company’s Financial Manager hereby guarantee
that the Financial Statements carried in this Report are factual, accurate and complete.
All the Company’s directors have attended the Board meeting for the review of this Report and its
summary.
Any plans for the future and other forward-looking statements mentioned in this Report and its
summary shall NOT be considered as absolute promises of the Company to investors. Therefore,
investors are reminded to exercise caution when making investment decisions.
As approved by the said Board meeting, the Company has no final dividend plan, either in the form
of cash or stock, for the year 2018.
This Report and its summary have been prepared in both Chinese and English. Should there be any
discrepancies or misunderstandings between the two versions, the Chinese versions shall prevail.
Wuxi Little Swan Company Limited Annual Report 2018
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Table of Contents
Part I Important Notes, Table of Contents and Definitions .................................................................. 2
Part II Corporate Information and Key Financial Information ............................................................ 5
Part III Business Summary .................................................................................................................. 9
Part IV Operating Performance Discussion and Analysis ................................................................. 12
Part V Significant Events ................................................................................................................... 28
Part VI Share Changes and Shareholder Information ........................................................................ 53
Part VII Preferred Shares ................................................................................................................... 60
Part VIII Directors, Supervisors, Senior Management and Staff ....................................................... 61
Part IX Corporate Governance ........................................................................................................... 68
Part X Corporate Bonds ..................................................................................................................... 75
Part XI Financial Statements .............................................................................................................. 76
Part XII Documents Available for Reference .................................................................................... 76Wuxi Little Swan Company Limited Annual Report 2018
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Definitions
Term Definition
“Little Swan”, the “Company” or “we”
Wuxi Little Swan Company Limited and its consolidated subsidiaries, except
where the context otherwise requires
Midea Group Midea Group Co., Ltd.
Titoni Titoni Investments Development Ltd.
Midea Group Finance Midea Group Finance Co., Ltd.
GD Midea Holding GD Midea Holding Co., Ltd.
Hefei Midea Washing Machine Hefei Midea Washing Machine Co., Ltd.
Wuxi Little Swan General Appliance Wuxi Little Swan General Appliance Co., Ltd.
Wuxi FILIN Electronics Wuxi FILIN Electronics Co., Ltd.
CSRC The China Securities Regulatory Commission
The “Reporting Period” or “Current Period” The period from 1 January 2018 to 31 December 2018
RMB, RMB’0,000
Expressed in the Chinese currency of Renminbi, expressed in tens of thousands
of Renminbi Wuxi Little Swan Company Limited Annual Report 2018
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Part II Corporate Information and Key Financial Information
I Corporate Information
Stock name Little Swan, Littleswan-B Stock code 000418, 200418
Stock exchange for stock listing Shenzhen Stock Exchange
Company name in Chinese 无锡小天鹅股份有限公司
Abbr. 小天鹅
Company name in English (if any) Wuxi Little Swan Company Limited
Legal representative Fang Hongbo
Registered address
No. 18, Changjiang Road S., National Hi-tech Development Zone, Wuxi, Jiangsu Province,
P.R.China
Zip code 214028
Office address
No. 18, Changjiang Road S., National Hi-tech Development Zone, Wuxi, Jiangsu Province,
P.R.China
Zip code 214028
Company website http://www.littleswan.com
Email address ir@littleswan.com.cn
II Contact Information
Board Secretary Securities Representative
Name Ms. Zhou Sixiu
Address
No. 18, Changjiang Road S., National Hi-tech
Development Zone, Wuxi, Jiangsu Province, P.R.China
Tel. 0510-81082320
Fax 0510-83720879
Email address ir@littleswan.com.cn
III Media for Information Disclosure and Place where this Report Is Lodged
Newspapers designated by the Company for information disclosure Securities Times, Ta Kung Pao (HK)
Website designated by CSRC for publication of this Report http://www.cninfo.com.cn
Place where this Report is lodged Securities Department of the Company Wuxi Little Swan Company Limited Annual Report 2018
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IV Change to Company Registered Information
Unified social credit code 91320200704046760T
Change to principal activity of the
Company since going public (if any)
No change
Every change of controlling
shareholder since incorporation (if
any)
The Company was incorporated in November 1993 by raising funds from targeted sources,
with Jiangsu Little Swan Group Co., Ltd. as the controlling shareholder. In June 2007, Wuxi
Guolian Development (Group) Co., Ltd. became the controlling shareholder as Jiangsu
Little Swan Group Co., Ltd. transferred the 87,673,341 Little Swan A-shares to it according
to law. In April 2008, GD Midea Holding Co., Ltd. became the controlling shareholder as it
took over, upon agreement, all the Company’s shares held by Wuxi Guolian Development
(Group) Co., Ltd. In September 2013, Midea Group Co., Ltd. became the controlling
shareholder as it merged in GD Midea Holding Co., Ltd. in a stock swap.
V Other Information
The independent audit firm hired by the Company:
Name PricewaterhouseCoopers Zhong Tian LLP
Office address
11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road, Huangpu
District, Shanghai, PRC
Accountants writing signatures Huang Meimei, Zhang Xiaoying
The independent sponsor hired by the Company to exercise constant supervision over the Company in the
Reporting Period:
√Applicable □ Not applicable
Name Office address Representative Period of supervision
Huatai United
Securities Co., Ltd.
25/F, CTS Tower, No.
4011 Shennan Road,
Shenzhen, Guangdong
Bian Jianguang
From 4 August 2006 to the date when all private
shareholders pay off the considerations that have been paid
in advance for them and the restricted shares are unlocked
The independent financial advisor hired by the Company to exercise constant supervision over the Company in
the Reporting Period:
□ Applicable √Not applicable
VI Key Financial Information
Indicate by tick mark whether there is any retrospectively restated datum in the table below.
□ Yes √No
Wuxi Little Swan Company Limited Annual Report 2018
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2018 2017 change 2016
Operating revenue (RMB) 23,636,929,478.33 21,384,699,076.65 10.53% 16,334,914,501.69
Net profit attributable to the listed company’s
shareholders (RMB)
1,862,458,658.29 1,506,412,505.22 23.64% 1,175,054,922.85
Net profit attributable to the listed company’s
shareholders before exceptional items (RMB)
1,822,990,385.73 1,456,953,109.59 25.12% 1,162,942,494.37
Net cash generated from/used in operating
activities (RMB)
2,624,892,821.13 2,015,753,818.30 30.22% 3,896,072,787.38
Basic earnings per share (RMB/share) 2.94 2.38 23.53% 1.86
Diluted earnings per share (RMB/share) 2.94 2.38 23.53% 1.86
Weighted average return on equity (%) 24.42% 23.12% 1.30% 21.14%
31 December 2018 31 December 2017 Change 31 December 2016
Total assets (RMB) 23,561,899,125.85 21,338,421,243.67 10.42% 18,885,986,837.64
Equity attributable to the listed company’s
shareholders (RMB)
8,312,062,507.53 7,047,090,800.97 17.95% 5,983,847,862.72
VII Accounting Data Differences under China’s Accounting Standards for Business
Enterprises (CAS) and International Financial Reporting Standards (IFRS) and Foreign
Accounting Standards
1. Net Profit and Equity under CAS and IFRS
□ Applicable √Not applicable
No difference for the Reporting Period.
2. Net Profit and Equity under CAS and Foreign Accounting Standards
□ Applicable √Not applicable
No difference for the Reporting Period.
VIII Key Financial Information by Quarter
Unit: RMB
Q1 Q2 Q3 Q4
Operating revenue 6,811,940,933.68 5,244,997,352.37 5,359,920,386.18 6,220,070,806.11
Net profit attributable to the listed
company’s shareholders
511,022,240.89 391,024,805.53 445,019,926.40 515,391,685.48
Net profit attributable to the listed
company’s shareholders before exceptional
501,731,839.62 390,059,222.75 427,541,808.27 503,657,515.10Wuxi Little Swan Company Limited Annual Report 2018
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items
Net cash generated from/used in operating
activities
284,655,859.29 -111,426,836.88 112,274,735.02 2,339,389,063.70
Indicate by tick mark whether any of the quarterly financial data in the table above or their summations differs
materially from what have been disclosed in the Company’s quarterly or interim reports.
□ Yes √No
IX Exceptional Gains and Losses
√Applicable □ Not applicable
Unit: RMB
Item 2018 2017 2016 Note
Gain or loss on disposal of non-current assets (inclusive of
impairment allowance write-offs)
13,137,087.29 -975,423.00 -1,833,734.45
Gain or loss on fair-value changes in trading financial assets and
liabilities & investment income from disposal of trading financial
assets and liabilities and available-for-sale financial assets
(exclusive of effective portion of hedges that arise in the
Company’s ordinary course of business)
-7,619,781.97 22,954,813.04
Non-operating income and expense other than the above 44,275,866.72 44,138,356.17 18,160,667.04
Less: Income tax effects 7,474,356.94 12,040,092.19 2,455,096.12
Non-controlling interests effects (net of tax) 2,850,542.54 4,618,258.39 1,759,407.99
Total 39,468,272.56 49,459,395.63 12,112,428.48 --
Explanation of why the Company reclassifies as recurrent an exceptional gain/loss item defined or listed in the
Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the
Public—Exceptional Gain/Loss Items:
□ Applicable √Not applicable
No such cases for the Reporting Period. Wuxi Little Swan Company Limited Annual Report 2018
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Part III Business Summary
I Principal Activity of the Company in the Reporting Period
Wuxi Little Swan Company Limited designs, manufactures and markets washing machines and clothes driers. Its
main products include front-loading washing machines, top-loading washing machines and clothes driers. Little
Swan is the earliest washing machine manufacturer in China. In 1978, China’s first fully-auto washing machine
greeted the world in the Company. And the Company has focused on clothes driers as a new business in the recent
years. The Company is one of the world’s few manufacturers who can produce the full lines of both washing
machines and clothes driers.
The Company has attached great importance to continual investment in research and development, with over 900
R&D personnel. The Company has a sound technological R&D system, including one state-level technological
center and two state-recognized labs. Little Swan Lab is the first washing machine lab in China to pass the UL
North American safety verification and the German VDE verification. Little Swan holds on to independent
innovation and has the internationally advanced frequency-changing, intelligent control, structure design,
industrial design and other core washing technologies. It owns 2 manufacturing bases, one in Wuxi, Jiangsu
Province and the other one in Hefei, Anhui Province, with a total site area of more than 800,000 ㎡ as well as a
combined annual production capacity of over 24 million units.. It also has domestically and internationally
first-class manufacturing equipments and an experienced manufacturing team. The Company’s products are sold
to the domestic market as well as over 160 other countries and regions, with the overseas market accounting for
approximately 20% in the Company’s total sales. In domestic sale, the Company adopts the marketing mode of
“agents+direct sale” and simultaneously develops the online and offline channels. In overseas sale, the Company
focuses on OEM/ODM and attaches importance to its own brands at the same time. The Company adopts a
two-brand strategy (“Little Swan” and “Midea”) and the business under both brands has seen fast and sound
growth in the recent years.
The Company has been focusing on its core businesses and its core strategies of “Advanced Products,
Efficiency-Driven Growth and Global Operations”. According to consumers’ needs, it furthers business
transformation, betters its product mix, and keeps improving product quality. Meanwhile, with efforts in
operational improvement throughout the entire value chain, management efficiency has increased significantly. Wuxi Little Swan Company Limited Annual Report 2018
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All these efforts contribute to the increasing profitability and make the Company one of the most competitive
washing machine manufacturers. According to AVC and customs statistics, the Company boasts a leading
domestic market share, with the highest export volume and value among the country’s washing machine makers.
For the status quo and seasonality of the laundry industry, which is currently at a mature stage, please see the
contents under the subheading “Macro-Environment” of “Part IV Operating Performance Discussion and
Analysis”.
II Significant Changes in Major Assets
1. Significant Changes in Major Assets
Major assets Main reason for significant changes
Equity assets No significant change
Fixed assets No significant change
Intangible assets No significant change
Construction in progress No significant change
2. Major Assets Overseas
□ Applicable √Not applicable
III Core Competitiveness Analysis
Our core competitiveness is demonstrated in the following aspects:
1. Remarkable industry insights and great R&D and innovation strength: We are the sole company in China
that has focused on the washing machine industry since the end of 1970s. Profound knowledge and experience has
been accumulated through the several decades in technology, R&D and innovation, market research, business
operation, etc., which has given us unique judging and foreseeing abilities towards industry and technology
advancements. Through constant input of R&D resources over the years, we have owned leading technological
competitiveness in the industry. We hold on to independent innovation and have the internationally advanced
frequency-changing, intelligent control, structure design, industrial design and other core technologies. We
connect technology, products and customers through medium and long-term technological planning, and have
research talent, talent reserve and development talent for our R&D.
2. Our capability of managing the industrial chain: We keep building a customer-oriented supply chain Wuxi Little Swan Company Limited Annual Report 2018
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management system, have set up an industry-leading cross-enterprise procurement platform with the help of
Midea Group, constantly increase the efficiency of our supply chain and foster a strategic partnership with our
suppliers. In terms of channels, in the domestic first and secondary markets, we mainly work with Suning, Gome
and some other big regional customers; in the tertiary and fourth markets, we combine agent channels, flagship
stores and franchised stores to distribute our products to households. In e-commerce, we continue to enhance
cooperation with major online shopping platforms, expand our own online shopping center and optimize the
supply of products. Overseas, we keep optimizing our global operations, deepening our cooperation with strategic
customers and enhancing the promotion of our own brands. We enjoy a good and long-term cooperation with our
major customers at home and abroad.
3. Our capability to respond to needs of consumers: We have been keeping a watchful eye on market changes,
studying consumers’ needs, and focusing on improvement of the whole process experience of customers in
shopping, product use and after-sales service. Consumers are always looking for professional, intelligent, green
and individualized washing machines. And we satisfy customers’ needs with the spirit of craftsman and provide
them with extremely easy use experience through our innovative solutions of intelligent accurate self-loading,
intelligent roller water cube, intelligent WIFI, cold water washing, silver nano-particle sterilization, allergies
prevention and classified washing. We adopt a two-brand strategy (“Little Swan” and “Midea”) to create
differentiation for the satisfaction of different needs. With a history of four decades, Little Swan is considered a
very reliable brand among consumers, with the slogan of “Whole-hearted Little Swan” being well-known among
them. As for Midea, a comprehensive home appliance brand, its share in the washing machine market keeps rising
with increasing recognition.
4. Our capability of reform and self-improvement: Through years of accumulation, we have developed a
corporate culture of sustained reform and self-improvement. Along with rapid changes in the market and this new
era, we will keep reforming our organizational structure and operating model so as to ensure our capability of
sustainable development. We are the first in the sector to adopt a T+3 order-oriented production and sale system, a
direct delivery system, a shared inventory system, a CDOC system and a product manager system. And in order
for continuing vitality, we keep seeking for creative incentive mechanisms, promoting organizational and cultural
recreation, improving our talent pool and furthering the reform of our operations, which has produced impressive
results.
No material change occurred to the Company’s core competitiveness in the Reporting Period. Wuxi Little Swan Company Limited Annual Report 2018
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Part IV Operating Performance Discussion and Analysis
I Overview
(I) Macro-Environment
In 2018, the global economy generally maintained a recovery trend with individual economies evidently polarized,
and trade and geopolitical frictions intensified. The overall economic situation at home was stable, regulatory
policies for real estate became tightened, prices for raw materials ran high, the exchange rate of Renminbi
fluctuated dramatically, growth in the home appliance market was weak, and the growth rate of the washing
machine industry slowed down.
In 2018, the washing machine sector on domestic market entered a matured development period. Influenced by
macro-economic and real estate policies, consumption end was mainly driven by needs of regeneration and
structural upgrade. Consumption market has been segmented and become high-end oriented, intelligent and
differentiated constantly, clothes dryer products have been growing considerably, and consumption has turned
from popularized to structural consumption. On overseas market, there's a huge development space, and it has
become a must road to speed up globalized production distribution and enlarge expansion on emerging markets.
According to the online industrial data, total sales of washing machines from January to December of 2018 was
60.651 million sets, a year-on-year growth of 2.4%; domestic sales was 45.32 million sets, a year-on-year growth
of 2.7%, export sales was 20.281 million sets, a year-on-year growth of 1.7%.
(II) Analysis of the Core Businesses
In face of the complicated political and economic conditions at home and abroad in 2018, the Company
continuously focused on its core business of washing machines and clothes driers. Closely following its core
strategies of “Advanced Products, Efficiency-Driven Growth and Global Operations”, the Company strove from
endogenous growth driven by product and efficiency improvement. In the Reporting Period, in light of the
industry-wide consumption upgrade and in order for continuous growth, the Company took the initiative to
promote business transformation to actively deal with external changes. It increased medium-and-high-end
offerings in its product mix so as to stay sustainably competitive. For 2018, the Company recorded operating
revenue of RMB23.64 billion, up 10.5% year-on-year; a net profit attributable to the Company as the parent of
RMB1.86 billion, representing a 23.6% growth from 2017; and a 26.2% gross profit margin, 0.9 percentage point Wuxi Little Swan Company Limited Annual Report 2018
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higher than 2017.
The revenue growth was fuelled by the increased unit sales and average selling price as a result of a refined
product mix and greater strength in terms of products. Meanwhile, a larger business scale, higher efficiency and
more investment income boosted profit. The overall operational efficiency has improved significantly thanks to
the Company’s efforts in promoting excellent performance through the value chain, and investment income
increased on the back of more self-owned capital.
(III) Work Done in 2018
1. Constantly increase R&D input, enhance management innovation and improve leadership of products
The Company has been implementing the product leadership strategy, increasing its R&D input and building its
continuous competitiveness for products facing the future. It has been deepening the reform of product managers,
improving business awareness of the R&D team to enable project development idea to focus more on market
needs and consumers' hotspots, constantly improving target rate of corporate planning, concentrating core
resources on building high-end products. It has been substantiating the objective of “studying one generation,
reserving one generating and developing one generation”, and conducting innovation research layout and building
product leadership centering round development of innovative products, study of pioneering platforms, research
of key parts, differentiated layout of selling points and improvement of basic performance. Through structural
optimization of R&D resource allocation and put-through and collaboration of value chain, enlarge launch of new
products, and it has launched star products such as Beverly Qing (Inclining) series revolving washer, Beverly Yi
(Horizontal) series front-loader washing machine and steam ironing-free dryers in succession. Within the
reporting period, our Beverly washing machines won IF Award of Germany, Red Dot Award of Germany, Idea
Award of the United States and International CMF Technical Innovation Award. Our Beverly washing machines
won Red Top Award of China's high-end home appliance, China's Appearance Design Gold Prize, China's Home
Appliance Products and Technical Innovation Results Award. The Company won “Cold Water Washing
Technology Certification” granted by VDE and certification of “25-year Service Life for BLDC Electric Motors”
and “25-year Service Life for CIM Electric Motors”. Within the reporting period, the product competitiveness of
the Company has been enhanced continuously.
2. Domestic sales has been restructured actively to cope with environmental change and has achieved stable
year-on-year growth
For the situation that growth speed of washing machine sector on domestic market has been evidently slowed
down, the Company made a business adjustment actively, deepened the dual-brand strategy, highlighted Little Wuxi Little Swan Company Limited Annual Report 2018
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Swan brand and strengthen Midea brand. As a result, the product structure of Little Swan has been optimized
continuously, and Midea brand has achieved rapid growth. Online and offline operation and brand propaganda has
been conducting for the products to enlarge launch of new products, increase specially supplied models of
products for different channels, further improve product lines, optimize product structure and drive sales growth
continuously. Launch and promotion of
new Beverly products has been
enhanced, which enabled Beverly to
achieve a rapid growth and proportion of
medium and high end products is
improving continuously. Within the
reporting period, the Company realized
domestic sales revenue of RMB16.8
billion, a year-on-year growth of 10.5%.
3. Market expansion is enlarged for domestic sales to drive global operation continuously, and a
considerable year-on-year growth is achieved
Faced with the complicated and volatile political and economic environment of the world and the pressure of
slowing-down growth rate of export market, the Company has been pushing forward its global operating strategy
firmly, exploring new markets and new clients actively, deepening the cooperation with strategic clients and
overseas sales achieves a considerable growth and profit-making capability has been improved continuously. It
has been enhancing the promotion of its own brands, propelling sales of its own brands of Toshiba and improving
its brand recognition and profit-making capability, and its own brands have been developing well. It has been
launching differentiated products continuously for regional markets, enhancing market competitiveness of the
products and expanding the incremental market greatly. It has been exploring global manufacturing distribution
actively and enhancing long-term competitiveness of the Company. Within the reporting period, overseas sales
revenue of the Company achieved RMB4.9 billion, a year-on-year growth of 14.7%.
4. Implement efficiency driving firmly and improve whole value chain excellent operation all-roundly
The Company has been implementing T+3 strategy firmly, pushing forward optimization and improvement of
business processes of plan integration and procurement integration and speeding up circulation to ensure delivery.
It has been optimizing supply layout constantly, improving guaranteed supply capability and response speed for
outsourced parts and driving improvement of its self-manufacturing capability. It has been improving its Wuxi Little Swan Company Limited Annual Report 2018
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whole-process management from design to use, driving lean improvement, manufacturability improvement,
automation input and high-end manufacturing capability robustly and improving lean manufacture level and
efficiency. Centering round the market and oriented by strategy, it has been driving organizational reform,
optimizing its business management process and improving response speed of the organization constantly. Within
the reporting period, operating efficiency of the company has been improved significantly.
II Core Business Analysis
1. Overview
The Company is mainly engaged in washing machines. And this remained the same in the Reporting Period.
Movements of revenue, cost, expense, etc. are as follows:
Unit: RMB
Item 2018 2017
Change Change (%)
Operating revenue 23,636,929,478.33 21,384,699,076.65 2,252,230,401.68 10.53%
Cost of sales 17,444,047,983.81 15,982,893,658.84 1,461,154,324.97 9.14%
Operating profit 2,460,967,201.57 2,048,866,736.50 412,100,465.07 20.11%
Profit before tax 2,479,157,987.43 2,064,694,943.36 414,463,044.07 20.07%
Net profit attributable to the
Company as the parent
1,862,458,658.29 1,506,412,505.22 356,046,153.07 23.64%
2. Revenue and Cost Analysis
(1) Breakdown of Operating Revenue
Unit: RMB
2018 2017
Change (%)
Operating revenue
As % of total
operating revenue (%)
Operating revenue
As % of total
operating revenue (%)
Total 23,636,929,478.33 100% 21,384,699,076.65 100% 10.53%
By operating division
Home appliance
manufacturing
21,692,952,459.61 91.78% 19,469,125,226.23 91.04% 11.42%
Other 1,943,977,018.72 8.22% 1,915,573,850.42 8.96% 1.48%
By product category
Washing machines 21,692,952,459.61 91.78% 19,469,125,226.23 91.04% 11.42%Wuxi Little Swan Company Limited Annual Report 2018
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Other 1,943,977,018.72 8.22% 1,915,573,850.42 8.96% 1.48%
By operating segment
Domestic 18,739,863,208.93 79.28% 17,114,743,424.78 80.03% 9.50%
Overseas 4,897,066,269.40 20.72% 4,269,955,651.87 19.97% 14.68%
(2) Operating Division, Product Category or Operating Segment Contributing over 10% of Operating
Revenue or Operating Profit
Unit: RMB
Operating revenue Cost of sales
Gross profit
margin
YoY change in
operating revenue
YoY change in
cost of sales
YoY change in
gross profit margin
By operating division
Home appliance
manufacturing
21,692,952,459.61 15,584,261,291.42 28.16% 11.42% 9.68% 1.14%
By product category
Washing
machines
21,692,952,459.61 15,584,261,291.42 28.16% 11.42% 9.68% 1.14%
By operating segment
Domestic 16,795,886,190.21 11,369,386,862.61 32.31% 10.51% 9.01% 0.93%
Overseas 4,897,066,269.40 4,214,874,428.86 13.93% 14.68% 11.54% 2.43%
Core business data of the prior year restated according to the changed statistical caliber for the Reporting Period:
□ Applicable √Not applicable
(3) Whether Revenue from Physical Sales Is Higher than Service Revenue
Operating division Item Unit 2018 2017 Change (%)
Home appliance
manufacturing
Unit sales Unit 21,149,599 20,462,099 3.36%
Output Unit 20,485,728 20,393,476 0.45%
Inventory Unit 1,943,645 2,607,516 -25.46%
Any over 30% YoY movements in the data above and why:
□ Applicable √Not applicable
(4) Execution Progress of Major Signed Sales Contracts in the Reporting Period
□ Applicable √Not applicable Wuxi Little Swan Company Limited Annual Report 2018
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(5) Breakdown of Cost of Sales
Unit: RMB
Product category Item
2018 2017
Change
(%)
Cost of sales
As % of total
cost of sales (%)
Cost of sales
As % of total
cost of sales (%)
Washing machines Raw materials 14,301,150,946.52 91.77% 13,209,710,403.74 92.97% -1.20%
Washing machines Labor costs 749,612,619.96 5.28% 632,054,812.65 4.45% 0.83%
Washing machines
Depreciation and
amortization
230,995,508.04 1.63% 201,388,852.45 1.42% 0.21%
Washing machines Energy 90,143,848.38 0.63% 77,018,797.10 0.54% 0.09%
(6) Changes in the Scope of Consolidated Financial Statements for the Reporting Period
□ Yes √No
(7) Major Changes to the Business Scope or Product or Service Range in the Reporting Period
□ Applicable √Not applicable
(8) Major Customers and Suppliers
Major customers:
Total sales to top five customers (RMB) 8,934,801,645.91
Total sales to top five customers as % of total sales of the Reporting Period (%) 41.19%
Total sales to related parties among top five customers as % of total sales of the Reporting Period (%) 17.15%
Information about top five customers:
No. Customer Sales revenue contributed for the Reporting Period (RMB) As % of total sales revenue (%)
1 Customer A 3,720,722,529.54 17.15%
2 Customer B 1,955,803,693.19 9.02%
3 Customer C 2,315,109,756.06 10.67%
4 Customer D 537,825,230.48 2.48%
5 Customer E 405,340,436.64 1.87%
Total -- 8,934,801,645.91 41.19%
Other information about major customers:
√Applicable □ Not applicable
Customer A is the total of partial subsidiaries controlled by controlling shareholders of the Company. Wuxi Little Swan Company Limited Annual Report 2018
18
Main suppliers:
Total purchases from top five suppliers (RMB) 5,139,849,268.19
Total purchases from top five suppliers as % of total purchases of the Reporting Period (%) 35.94%
Total purchases from related parties among top five suppliers as % of total purchases of the
Reporting Period (%)
25.00%
Information about top five suppliers:
No. Supplier
Purchase in the Reporting Period
(RMB)
As % of total purchases (%)
1 Supplier A 3,574,747,992.09 25.00%
2 Supplier B 548,223,395.03 3.83%
3 Supplier C 457,629,616.28 3.20%
4 Supplier D 296,089,306.80 2.07%
5 Supplier E 263,158,957.99 1.84%
Total -- 5,139,849,268.19 35.94%
Other information about major suppliers:
√Applicable □ Not applicable
Supplier A is the total of partial subsidiaries controlled by controlling shareholders of the Company.
3. Expense
Unit: RMB
2018 2017 Change (%) Reason for any significant change
Selling expense 3,351,676,000.52 2,872,849,586.14 16.67%
Administrative expense 181,699,829.11177,543,281.44 2.34%
Finance costs -531,729,710.86 -71,808,982.80 -640.48%
Increase of deposits interest income
and exchange earning
R&D expense 733,045,215.90 550,779,796.27 33.09% Increase of R&D investment
4. R&D Expense
During the Reporting Period, the Company was market-oriented and centered on customers’ needs, intensifying
R&D continuously. The R&D input was mainly for: 1. strengthening R&D and innovation of high-end, intelligent,
and dryers for better competitive edges in the future; 2. strengthening user research continuously, increasing
manufacturability of products and creating continuous cost competitive advantages; 3. expanding the high-end
talent pool. In 2018, the Company’s expenditure on R&D was RMB730 million, representing 7.52% of its audited Wuxi Little Swan Company Limited Annual Report 2018
19
net assets and 3.10% of its revenue in the year.
Details about R&D expense:
2018 2017 Change (%)
Number of R&D personnel 944 887 6.43%
R&D personnel as % of total employees 8.24% 8.70% -0.46%
R&D expense (RMB) 733,045,215.90 550,779,796.27 33.09%
R&D expense as % of operating revenue 3.10% 2.58% 0.52%
Capitalized R&D expense (RMB) 0.00 0.00 0.00%
Capitalized R&D expense as % of total R&D expense 0.00% 0.00% 0.00%
Reasons for any significant YoY change in the percentage of R&D expense in operating revenue:
□ Applicable √Not applicable
Reason for any sharp variation in the percentage of capitalized R&D expense and rationale:
□ Applicable √Not applicable
5. Cash Flows
Unit: RMB
Item 2018 2017 Change (%)
Subtotal of cash generated from operating activities 21,032,314,952.83 17,737,932,301.25 18.57%
Subtotal of cash used in operating activities 18,407,422,131.70 15,722,178,482.95 17.08%
Net cash generated from/used in operating activities 2,624,892,821.13 2,015,753,818.30 30.22%
Subtotal of cash generated from investing activities 17,050,655,473.15 11,517,797,636.35 48.04%
Subtotal of cash used in investing activities 18,779,510,384.29 15,658,505,062.46 19.93%
Net cash generated from/used in investing activities -1,728,854,911.14 -4,140,707,426.11 58.25%
Subtotal of cash generated from financing activities 117,603,683.89 680,166,782.34 -82.71%
Subtotal of cash used in financing activities 714,121,209.86 1,267,750,117.45 -43.67%
Net cash generated from/used in financing activities -596,517,525.97 -587,583,335.11 -1.52%
Net increase in cash and cash equivalents 295,744,885.68 -2,754,200,845.50 110.74%
Explanation of why any of the data above varies significantly:
√Applicable □ Not applicable
The reason for the increase of Net cash flows from operating activities: mainly due to the increase of cash from
selling products and rendering of service.
The reason for the increase of Net cash flows from investing activities: mainly due to the increase of structural
deposits during the Reporting Period. Wuxi Little Swan Company Limited Annual Report 2018
20
Reason for any big difference between the net operating cash flow and the net profit for this Reporting Period
□ Applicable √Not applicable
III Analysis of Non-Core Businesses
□ Applicable √Not applicable
IV Analysis of Assets and Liabilities
1. Significant Changes in Asset Composition
Unit: RMB
31 December 2018 31 December 2017
Change in
percentage
(%)
Reason for any significant
change
Amount
As % of
total assets
Amount
As % of
total assets
Monetary capital 1,926,938,134.40 8.18% 1,588,264,516.05 7.44% 0.74%
Accounts receivable 1,957,583,475.15 8.31% 1,736,724,496.10 8.14% 0.17%
Inventories 1,754,597,149.53 7.45% 1,980,766,196.14 9.28% -1.83%
Investment property 54,776,877.23 0.23% 61,695,825.00 0.29% -0.06%
Fixed assets 1,121,036,700.25 4.76% 1,029,668,355.84 4.83% -0.07%
Construction in
progress
15,486,834.37 0.07% 37,972,252.60 0.18% -0.11%
The equipment was
converted into fixed assets
after being tested
Short-term
borrowings
117,603,683.89 0.50% 81,393,672.34 0.38% 0.12%
Increase of the discounted
undue notes receivable
2. Assets and Liabilities at Fair Value
Unit: RMB
Item Beginning amount
Gain/loss on
fair-value
changes in the
Reporting
Period
Cumulative
fair-value
changes
charged to
equity
Impairm
ent
allowanc
e for the
Reportin
g Period
Purchase
d in the
Reportin
g Period
Sold in the
Reporting Period
Ending
amount
Financial assets
1. Financial assets at fair
value through gains/losses
(exclusive of derivative
5,270,238.03 -5,270,238.03 Wuxi Little Swan Company Limited Annual Report 2018
21
financial assets)
3.Available-for-sale
financial assets
3,792,871,097.60 -57,871,097.60 -3,735,000,000.00 0.00
Total of above 3,798,141,335.63 -63,141,335.63 -3,735,000,000.00 0.00
Financial liabilities 0.00 3,078,878.95 0.00 0.00 0.00 0.00 3,078,878.95
Significant changes to the measurement attributes of the major assets in the Reporting Period:
□ Yes √No
3. Restricted Asset Rights as at the Period-End
As of the end of the Reporting Period, there were no such circumstances where any main assets of the Company
were sealed, distrained, frozen, impawned, pledged or limited in any other way.
V Investments Made
1. Total Investment Amount
Total investment amount of Reporting Period (RMB) Total investment amount of last year (RMB) Change (%)
297,706,394.90 320,566,388.23 -7.13%
2. Major Equity Investments Made in the Reporting Period
□ Applicable √Not applicable
3. Major Non-Equity Investments Ongoing in the Reporting Period
□ Applicable √Not applicable
4. Financial Investments
(1) Securities Investments
□ Applicable √Not applicable
No such cases in the Reporting Period.
(2) Investments in Derivative Financial Instruments
Unit: RMB’0,000
Operator Rela
Rela
Type of Initial
Starting Ending
Beginni
Purchased Sold in Impairm
Ending Proporti
ActuaWuxi Little Swan Company Limited Annual Report 2018
22
tions
hip
with
the
Com
pany
ted-p
arty
trans
actio
n or
not
derivativ
e
investme
nt
amount
date date ng
investme
nt
amount
in the
Reporting
Period
the
Reportin
g Period
ent
provisio
n (if
any)
investm
ent
amount
on of
closing
investm
ent
amount
in the
Compan
y’s
closing
net
assets
l
gain/l
oss in
the
Repor
ting
Perio
d
Bank Not Not
Forward
forex
contract
17,676
10 May
2017
24 May
2019
17,676 19,125 32,313 4,488 0.46% -762
Total 17,676 -- -- 17,676 19,125 32,313 4,488 0.46% -762
Capital source for derivative
investment
All from the Company’s own funds
Lawsuits involved (if
applicable)
N/A
Disclosure date of board
announcement approving
derivative investment (if any)
13 March 2018
Disclosure date of
shareholders’ meeting
announcement approving
derivative investment (if any)
12 April 2018
Analysis of risks and control
measures associated with
derivative investments held in
the Reporting Period
(including but not limited to
market risk, liquidity risk,
credit risk, operational risk,
legal risk, etc.)
The Company has considered and formulated the Management Methods for Forex Trading Business
and the Management Methods for Futures Hedging Business to implement full assessment and
control on its derivative investments, with highlights as follows:
1. About legal risk: The Company's futures and forex trading business are conducted in compliance
with laws and regulations, with clearly defined responsibilities and obligations between the
C om pan y and ag enci es .
Control measures: The Company has designated relevant departments with the responsibility for
enhancing expertise in laws, regulations and market rules, conducting strict examination and
verification of contracts, defining responsibility and obligations, and strengthening compliance
checks, so as to ensure that the Company's derivatives investment and position operations meet the
requirements of the laws and regulations and internal management system of the Company.
2. About operational risk: Risks caused by imperfect internal processes, staff, systems and external
issues may cause the Company to incur losses during the course of its futures and forex trading
bus ines s .
Control measures: The Company has not only developed relevant management systems that clearly
define the assignment of responsibility and approval process for futures and forex trading, but has Wuxi Little Swan Company Limited Annual Report 2018
23
also established a well-developed monitoring mechanism, aimed at effectively reducing operational
risk by strengthening its risk control over the business, decision-making and trading processes.
3. About market Risk: the uncertainty in staple commodity price changes and exchange rate
fluctuations in the foreign exchange market has led to greater market risks existing in the futures
business and the foreign exchange capital business. At the same time, during the operation of
futures, it is unable to raise funds in time to establish and maintain the hedge position, or in terms of
the foreign exchange business, the foreign exchange funds used for performance cannot be paid on
time, which may lead to any loss from such futures operation and any default risk.
Control Measures: the Company will adhere to the principle of prudent and steady operation to
operate its futures business and foreign exchange fund business. For the futures business, the
Company will strictly determine the business volume according to the needs of production and
operation, apply for the futures trading, and implement the stop-loss mechanism. Besides, the
Company will also establish a futures risk measurement system to calculate the amount of margin
used, the floating profit and loss, the amount of available margin and the needed amount of margin
for establishing the proposed position so as to determine the amount of margin that may be required.
For the foreign exchange fund business, the tiered management mechanism will be implemented. If
a business unit applies for any fund business, it needs to conduct risk analysis on the conditions or
environment that affect the business’s profit and loss, estimate the maximum possible gains and
losses, and report the acceptable margin ratio or the total amount. Meanwhile, the Company needs
to timely update the operation of the fund business and guarantee the funding arrangement before
the due date.
Changes in market prices or
fair value of derivative
investments during the
Reporting Period (fair value
analysis should include
measurement method and
related assumptions and
parameters)
1. The loss from Forex forward contract was RMB7.62 million during the Reporting Period;
2. Public offer in futures market or forward forex quotations announced by the Bank of China are
used in the fair value analysis of the derivative investments.
Significant changes in
accounting policies and
specific accounting principles
adopted for derivative
investments in the Reporting
Period compared to previous
reporting period
No significant changes
Opinion of independent
directors on derivative
investments and risk control
In the opinion of the Company’s independent director, the Company has formulated various
derivative investment systems including Administrative Measures for Foreign Exchange Fund
Business and Administrative Measures for Futures Hedging Business, which can effectively control
the risk of derivative investment; the Company will regard the futures hedging business as an
effective tool to stabilize any price fluctuation by strengthening the internal control, implementing
effective risk prevention measures and improving the operational management; the Company’s
derivative investment business mainly focuses on the export business, which can help the Company Wuxi Little Swan Company Limited Annual Report 2018
24
lock the exchange rate and avoid any exchange rate fluctuation risk. Since there is no speculative
operation and no compliance risk, the Company’s liquidity will not be affected.
5. Use of Funds Raised
□ Applicable √Not applicable
No such cases in the Reporting Period
VI Sale of Major Assets and Equity Interests
1. Sale of Major Assets
□ Applicable √Not applicable
No such cases in the Reporting Period.
2. Sale of Major Equity Interests
□ Applicable √Not applicable
VII Major Subsidiaries
Unit: RMB’0,000
N am e
Relationsh
ip with the
Company
Principal activity
Registered
capital
Total assets Net assets
Operating
revenue
Operating
profit
Net profit
Hefei Midea
Washing Machine
Co., Ltd.
Subsidiary
Washing machine
manufacturing
US$13,552 892,370.11 353,710.21 1,132,894.38 70,732.91 60,720.81
Wuxi FILIN Subsidiary
Electronic
component
manufacturing
US$362.4564 203,769.45 132,082.35 127,046.20 36,022.18 30,798.38
Subsidiaries obtained or disposed in the Reporting Period:
□ Applicable √Not applicable
VIII Structured Bodies Controlled by the Company
□ Applicable √Not applicable Wuxi Little Swan Company Limited Annual Report 2018
25
IX Prospects
(I) Development Trends in the Industry
In 2019, recovery of global economy may be slowed down, there will be a greater uncertainty for trade friction
and geopolitics, China’s economy will turn from a high-speed growth stage to a high-quality development stage,
and its economic growth speed may be gradually slowed down. The kinetic energy for growth of China’s home
appliance sector is undergoing a gradual transformation, and the kinetic energy for traditional growth such as
growth in scale, population dividend and internet dividend is weakened gradually and the incremental dividend is
being transformed to fission of stock. With continuous increase of residents’ revenue, enterprises shall adapt
themselves to and grasp consumption upgrade trend accurately. There will be a trend to combine intelligent life
scenarios in the future, integrate and apply various cutting-edge technologies and provide smart home appliance
with better experience for users. Development and application of new technologies such as IT is restructuring
cooperation modes in the ecosphere of home appliance sector, and making industrial boundary vaguer. Needs of
users are getting more and more personalized, and lean manufacture and smart manufacture are becoming an
inevitable choice for home appliance sector to gain competitive advantage. New products, new services, new
modes and new participants will impact the industrial pattern constantly, and competition will be keener. In
general, on the background that an uncertainty of global economic development is intensified and China is
undergoing a great economic transformation, home appliance sector will face a great challenge, but the change of
development trend of the sector will bring new development opportunities for enterprises.
(II) Development Plan of the Company
In 2019, the Company will stick to its professional development path, focus on main lines of washing machines
and clothes dryers, continue the main strategic axle of “ being led by products, driven by efficiency and going
global”. It will drive business transportation firmly, optimize structure of products, improve proportion of high,
medium and low end products constantly, pursue growth of high quality and ensure continuous growth of revenue
and profit. Centering round the strategic axle of the Company, the following work will mainly be done in 2019:
1. Product leadership
Further increase R&D input, build innovation capability for products continuously, as innovation capability is
core competitiveness to determine future development. Centering round users, improve scientific research
capability for users and improve implementation of CDOC and support differentiated innovation for products.
Improve industrial design and breakthroughs of new techniques, enhance sense of quality and sense of artistic
aesthetic and improve competitiveness of products. Optimize configuration structure of research and development Wuxi Little Swan Company Limited Annual Report 2018
26
resources, and focus more on key models of machines, core technologies, new techniques, clothes dryers and
pioneering research so as to ensure sustainable competitiveness in the future. Enhance talent introduction and
outbound cooperation continuously, drive reform of R&D organization, build a R&D atmosphere based on
business pioneers and arose the vitality of the organization constantly.
2. Efficiency driving
Go on driving digital transformation and achieve whole-process management and application of data with aid of
IOT and so on and drive business and management reform through intelligent operation; greatly push forward lean
manufacturing, automation and intelligence and gradually push forward intelligent manufacturing and improve
manufacturing efficiency and level constantly on the basis of intensifying lean manufacturing and automation
capability; through continuous resource allocation and put-through and coordination of the whole value chain,
respond to market demands rapidly and improve operating efficiency of value chain. Push forward distribution of
global manufacturing capability and deepen resource coordination with Toshiba, and drive organizational reform
and increase response speed for excellent operation of the whole value chain constantly.
3. Global operation
On domestic market, drive transformation of marketing and retail actively, intensify online and offline consistency,
and drive reform of business mode continuously centering round the market and user’s needs. Stick to dual-brand
differentiation strategy, enhance promotion of Beverly, continuously promote news products of high quality and
constantly optimize sales structure of products. Enhance systematic construction of brands, focus on promotion
and diversion and improve brand recognition. On overseas sales market, enhance market expansion further and
develop new clients actively. For the differentiated needs of regional market, intensify market research and
product planning, provide targeted products, and improve market competitiveness rapidly. Focus on Toshiba
brand, and promote development of our own brands.
(III) Key Capital Expenditure Plan for Near Future
To actively adapt to internal and external environment change and satisfy the future development demand of the
Company, the investment focus of the Company in 2019 shall be put on R&D and innovation, intelligent
manufacturing, high-end brand construction, quality improvement, etc. and meanwhile the Company shall actively
promote global layout and promote the global competitiveness of the Company. The Company shall strictly
control non-production operation investment. Investment fund comes from the Company's own fund.
(IV) Main Risks in Future Development
1. Macro risk. Under the influence of uncertainty of world economy, slowdown of domestic economic growth, Wuxi Little Swan Company Limited Annual Report 2018
27
continuous control of real estate and turbulence of political and economical structure, consumption market
recession may continue and the industry may face the risk of insufficient growth power.
2. Market risk. Washing machine industry is a mature and fully competitive industry with many foreign
enterprises and local enterprises involved. Though the Company has strong competition advantage, it still faces
the impact brought by market risks such as intensification of industry competition, continuously upgrading of
consumption structure, the challenge of new comers, and profound adjustment of global industrial pattern and
re-division.
3. Cost risk. If the price of raw materials continues to rise in 2019, cost pressure of the Company shall further
increase to directly affect the profitability of the Company with continuous rise in Labor cost.
4. Exchange rate risk. Since exchange rate fluctuation is very uncertain, though the Company has adopted
certain countermeasures to deal with exchange rate fluctuation risk, exchange rate fluctuation still greatly affect
the profitability of the export sales business of the Company.
5. Policy risk. Overseas non-tariff trade barriers and anti-dumping policy shall also have an impact on the scale
and profit of export sales business of the Company.
X Communications with the Investment Community such as Researches, Inquiries and
Interviews
1. During the Reporting Period
Date
Way of
communication
Type of
communication
party
Index to main information communicated
24 January 2018 to 2
February 2018
Field research Institution
Little Swan A: The Sheet of Interactions with Investors from 24 January
2018 to 2 February 2018 (No. 2018-01) on www.cninfo.com.cn
15 March 2018 to 22
March 2018
Field research Institution
Little Swan A: The Sheet of Interactions with Investors from 15 March
2018 to 22 March 2018 (No. 2018-02) on www.cninfo.com.cn
8 August 2018 to 17
August 2018
Field research Institution
Little Swan A: The Sheet of Interactions with Investors from 8 August
2018 to 17 August 2018 (No. 2018-03) on www.cninfo.com.cn
Times of communications 26
Number of institutions communicated with 110
Number of individuals communicated with 187
Number of other communication parties 0
Tip-offs or leakages of substantial
supposedly-confidential information during
NoneWuxi Little Swan Company Limited Annual Report 2018
28
communications
29
Part V Significant Events
I Profit Distributions to Ordinary Shareholders (in the Form of Cash and/or Stock)
The profit distributions to ordinary shareholders, either in the form of cash or stock, in the past three years
(including the Reporting Period) are summarized as follows:
2018 profit distribution plan: the Company didn’t carry out the 2018 profit distribution plan, with no share
dividend in any form. The plan was reviewed and approved by 6
th
Meeting of the 9
th
Board of Director of the
Company, and intended to be submitted to Annual General Meeting for review.
2018 interim profit distribution plan: based on the total 632,487,764 shares of the Company as of 31 December
2018, a cash dividend of RMB40 (tax inclusive) per 10 shares was distributed to all the shareholders. The plan
was reviewed and approved by 5
th
Meeting of the 9
th
Board of Director of the Company, and intended to be
submitted to Annual General Meeting for review.
2017 profit distribution plan: based on the total 632,487,764 shares of the Company as of 31 December 2017, a
cash dividend of RMB10 (tax inclusive) per 10 shares was distributed to all the shareholders, with no share
dividend in any form. The said plan has been carried out in May 2018.
2016 profit distribution plan: based on the total 632,487,764 shares of the Company as of 31 December 2016, a
cash dividend of RMB7.5 (tax inclusive) per 10 shares was distributed to all the shareholders, with no share
dividend in any form. The said plan has been carried out in May 2017.
Cash dividend for ordinary shareholders in the past three years (including the Reporting Period):
Unit: RMB
Year
Cash dividends
(tax inclusive)
(A)
Net profit attributable to
ordinary shareholders of the
listed company in consolidated
statements for the year (B)
A as % of
B (%)
Cash dividends
in other forms
(such as share
repurchase) (C)
C as %
of B
(%)
Total cash
dividends
(including those in
other forms) (D)
D as %
of B (%)
2018 2,529,951,056.00 1,862,458,658.29 135.84% 0.00 0.00% 2,529,951,056.00 135.84%
2017 632,487,764.00 1,506,412,505.22 41.99% 0.00 0.00% 632,487,764.00 41.99%
2016 474,365,823.00 1,175,054,922.85 40.37% 0.00 0.00% 474,365,823.00 40.37%
Indicate by tick mark whether the Company fails to put forward a cash dividend proposal for the ordinary
shareholders despite the facts that the Company has made profits in the Reporting Period and the profits of the
Company as the parent distributable to the ordinary shareholders are positive.
30
□ Applicable √Not applicable
II Final Dividend Plan for the Reporting Period
Share dividend per 10 shares from retained earnings (share)
0
Cash dividend per 10 shares (RMB) (tax inclusive)
40.00
Share dividend per 10 shares from capital reserves (share)
0
Share base (share)
632,487,764.00
Cash dividends (RMB) (tax inclusive) 2,529,951,056.00
Cash dividends in other forms (such as share repurchase) (RMB) 0.00
Total cash dividends (including those in other forms) (RMB) 2,529,951,056.00
Distributable profit (RMB) 3,235,769,891.68
Total cash dividends (including those in other forms) as % of the total profit distribution 100%
Cash dividend policy
Other
Details about cash and/or share dividend proposal
Given that the Interim Profit Distribution Plan has been reviewed and approved by the 5
th
Meeting of the 9
th
Board of Directors, the
Company distributed a cash dividend of RMB40 (tax inclusive) per 10 shares to all shareholders based on the total 632,487,764
shares of the Company as of 31 December 2018, and the cash dividend reached RMB2,530 million. The Company intended to not
carry out the 2018 profit distribution plan, with no bonus shares or share dividend in any form after comprehensively considering
the financial conditions and subsequent demand of production and operation of the Company.
For 1996 when the Company was listed to now, the Company has accumulatively distributed cash dividend of RMB5,498 million,
and the amount of dividends is 5.33 times of the amount of raised fund. The proportion of cash dividends has exceeded 40% for
seven consecutive years
III Fulfillment of Commitments
1. Commitments of the Company’s Actual Controller, Shareholders, Related Parties and Acquirers, as well
as the Company Itself and other Entities Fulfilled in the Reporting Period or Ongoing at the Period-end
Commitment
Promis
or
Type of
commitme
nt
Details of commitment
Date of
commit
ment
making
Term of
commit
ment
Fulfillm
ent
Commitments
made in share
reform
Contro
lling
shareh
older
Commitm
ent
concernin
g
shareholdi
ng
Where the controlling shareholder Midea Group plans to sell the
Company’s shares released from trading moratorium held by it
via the bid trading system of the Shenzhen Stock Exchange, and
Midea Group decreases over 5% shares within six months since
the first reduction of holdings, Midea Group will disclose an
indicative public announcement on share selling through the
28
February
2008
Long-sta
nding
Ongoing
31
reduction Company two trading days before its first reduction of holdings.
Commitments
made in
acquisition
documents or
shareholding
alteration
documents
Contro
lling
shareh
older
and
actual
control
ler
Commitm
ent of
avoiding
horizontal
competitio
n
1. As for the commitment of avoiding horizontal competition,
Midea Group (the controlling shareholder) and Mr. He Xiangjian
(the actual controller) has promised that, for the period after the
said transaction when the Company’s controlling shareholder and
actual controller remain unchanged, the actual controller Mr. He
Xiangjian, his immediate family, Midea Group and its controlled
other enterprises neither recently nor in the future will engage in
any production or operation activity the same as or similar to the
recently main business of Little Swan or its controlled
enterprises, as well as will neither engage in nor participate in any
competitive business the same as the recently main business of
Little Swan or its controlled enterprises through controlling other
economic entities, institutions, economic organizations. If Little
Swan and its controlled enterprises further developed its scope of
the operation business on the basis of the recently business, and if
the actual controller Mr. He Xiangjian, his immediate family,
Midea Group and its controlled other enterprises had executed
production of that, would solve the corresponding horizontal
competition problems within the reasonable period. If recently
there was no any production or operation, would not engage in
the similar new business that competed with Little Swan and its
controlled enterprises. If there was any situation violated the
above commitments, the profits gained from the business related
to operation were belongs to Little Swan.
1
Decemb
er 2010,
and 6
June
2014
Long-sta
nding
Ongoing
Contro
lling
shareh
older
and
actual
control
ler
Commitm
ent on
regulation
of
related-par
ty
transaction
s
2. The commitment by Midea Group and the actual controller on
the specification of the related-party transaction. Midea Group
(the controlling shareholder) and Mr. He Xiangjian (the actual
controller) has promised that, for the period after the said
transaction when the Company’s controlling shareholder and
actual controller remain unchanged, the actual controller Mr. He
Xiangjian, his immediate family, Midea Group and its controlled
other enterprises will specify and try their best to reduce the
related-party transactions with Little Swan and its controlled
enterprises. If occurred the unavoidable related transactions with
Little Swan and its controlled enterprises, would sign the
normative related-party transactions agreement Little Swan
according to laws and would execute the approval procedure
according to the relevant regulations to ensure the fairness of the
price of the related-party transactions; ensure to execute the
information disclose obligation of related-party transactions
according to the relevant regulations; ensure not to make
advantage of the related-party transactions for illegally
transferring the assets and profits of Little Swan, as well as not to
1
Decemb
er 2010,
and 6
June
2014
Long-sta
nding
Ongoing
32
make advantage of the related-party transactions for harming to
the interests of Little Swan and the shareholders; would not
require Little Swan to offer any more favorable condition
compared with that offered to the independent third party in any
fair trade market transaction; execute the voting debarb obligation
when involved in the voting of the related events of the actual
controller Mr. He Xiangjian, his immediate family, Midea Group
and its controlled other enterprises. If Midea Group and Mr. He
Xiangjian violated the above commitments and promises that led
to the harm for the equity of Little Swan or other shareholders,
Midea Group and Mr. He Xiangjian should take the responsibility
of the corresponding liability for damage.
Contro
lling
shareh
older
and
actual
control
ler
Commitm
ent on
independe
nce
3. As for the commitment on independence, Midea Group and the
actual controller Mr. He Xiangjian has promised that, to further
ensure the independent operation of Little Swan, Mr. He
Xiangjian, Midea Group and its controlled other enterprises
would maintain the mutual independent in terms of personnel,
finance, assets, business and institutions with Little Swan
according to the relevant laws and regulations as well as the
normative documents.
1
Decemb
er 2010,
and 6
June
2014
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Commitm
ent on
related-par
ty deposits
and
borrowing
s
4. As for the commitment on related-party deposits and
borrowings, up to April 8, 2010, the Financial Settlement Center
of Midea Group had settled all internal deposits and borrowings
with Hefei Midea Washing Machine Co., Ltd.; and Midea Group
has promised that there will be no more deposits, borrowings or
other funds flows incurred between the Financial Settlement
Center and Hefei Midea Washing Machine Co., Ltd..
1
Decemb
er 2010
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Commitm
ent on
housing
properties
with no
ownership
certificates
5. The commitment by Midea Group on housing properties with
no ownership certificates of the target company for sale is
detailed as follows. Two pieces of the buildings of Hefei Midea
Washing Machine Co., Ltd. assessed and sold to the Company are
of no ownership certificates—the warehouse for half-finished
products (176 square meters) and the workshop for injection
molding (834 square meters), both located in the old factory on
Hewa Road, Hefei. Midea Group has promised that if loss occurs
due to the said two buildings without ownership certificates in the
asset disposal process in the future, it will assume the loss thus
caused and make compensation to the Company.
1
Decemb
er 2010
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Commitm
ent on
trademark
s
6. The commitment by Midea Group on trademarks is detailed as
follows. (1) Concerning the “Midea” trademark: Upon approval
and implementation of the equity transfer transaction, Midea
Group has promised that it will make sure that Hefei Midea
Washing Machine Co., Ltd. uses the “Midea” trademark in a
1
Decemb
er 2010
The use
right of
the
“Royalst
ar”
Ongoing
33
proper manner. Hefei Midea Washing Machine Co., Ltd. will be
allowed to use the “Midea” trademark with a trademark use fee
not more than that paid by Midea Group (the controlling
shareholder of Midea Group) and its subsidiaries (currently 3‰
of the annual sales income generated by products using the
“Midea” trademark), and upon negotiation and signing of the
“Agreement for Trademark Use”. The related-party transactions
incurred due to the said use of the “Midea” trademark will be
submitted to the decision-making organ of the Company for
approval according to the stipulated procedure. As such, interests
of the Company and its minority shareholders will be
safeguarded. (2) Concerning the “Royalstar” trademark: Midea
Group has signed the “Contract for Trademark Use” with Hefei
Royalstar Group and obtained the ordinary use rights of the
“Royalstar” (both in Chinese and English) trademark. As the
transferor in the transfer transaction of equity interests of
Royalstar Washing Equipment, Midea Group has promised that
within the scope as agreed in the “Contract for Trademark Use”,
if any dispute arises between Hefei Midea Washing Machine Co.,
Ltd. and Hefei Royalstar Group over the former’s execution of
the “Contract for Trademark Use”, Little Swan will not be
involved. If Hefei Midea Washing Machine Co., Ltd. and Little
Swan have to assume any responsibility or loss due to the
aforesaid dispute, Midea Group is willing to take on the
responsibility instead and make compensations to Hefei Midea
Washing Machine Co., Ltd. and Little Swan at full amount.
trademar
k
detailed
in (2)
expired
on 31
March
2013
and was
not
renewed
. And
the other
commit
ment
continue
s.
Contro
lling
shareh
older
Commitm
ent on
social
security
payment
and tax
risks
7. The commitment by Midea Group on social security payment
and tax risks is detailed as follows. Midea Group has promised
that upon the completion of the said equity transfer deal, if Hefei
Midea Washing Machine Co., Ltd. is obliged to take on any
responsibility or pay relevant fares as required by relevant
government authorities due to its social security payment before
the said deal, Midea Group is willing to pay relevant fares for
Hefei Midea Washing Machine Co., Ltd. to relevant government
authorities in a timely manner and assume any other liability. If
any loss thus occurs to Hefei Midea Washing Machine Co., Ltd.
or Little Swan, Midea Group is willing to assume relevant
responsibilities for compensation. Upon the completion of the
said equity transfer deal, if income tax evasion or any other tax
risk is found in Hefei Midea Washing Machine Co., Ltd., Midea
Group is willing to assume relevant legal responsibilities and
risks and pay relevant taxes in a timely manner to relevant
government authorities; and if any loss thus occurs to Little
Swan, Midea Group will assume the corresponding responsibility
1
Decemb
er 2010
Long-sta
nding
Ongoing
34
for compensation.
Contro
lling
shareh
older
Commitm
ent on
capital
safety
8. The commitment by Midea Group on capital safety at the
finance companies of the Company: during the validity period of
the Financial Services Agreement, when Midea Group occurred
emergency situation of payment difficulty at finance companies,
it should adopt the effective measures such as increase the capital
fund of the finance companies according to the actual needs of
solving the payment difficulty to ensure the capital safety of the
Company.
25
February
2019
Effectiv
e for one
year
Ongoing
Commitments
made in time of
asset
restructuring
Actual
control
ler
Declaratio
n and
commitme
nt letter
for the
opinion of
stock
exchange
and share
reduction
plan
1. I agree on this consolidation and combination in principle. 2. I
have not the plan for reducing the equity I hold in Midea Group
and/or Little Swan during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation, and I will not reduce the equity I hold in
Midea Group and/or Little Swan during the period from the date
of this consolidation and combination and resumption of trading
to the date of implementation. 3. This letter of commitment will
have legal binding force on me as of the date of its signing, and I
will assume corresponding compensation liability in case Midea
Group or Little Swan suffers from any loss due to my acting
against my commitment to the contents under this letter of
commitment.
24
October
2018
Long-sta
nding
Ongoing
Actual
control
ler
Commitm
ent letter
for
avoiding
horizontal
competitio
n
1. I, my direct relatives and other enterprises under their control
have not been engaged in, nor will they be engaged in any
production and business activity the same as or similar to current
main businesses of Midea Group and the enterprises under its
control, and I, my direct relatives and other enterprises under
their control will not be engaged in or participate in any
competitive business the same as the main business of the
enterprise nowadays under the control of Midea Group and the
enterprises under its control through any other economic entity,
agency or economic organization. 2. If Midea Group and the
enterprises under its control further expand their business scope
on the basis of their existing business, and I, my direct relatives
and other enterprises under their control have been conducting
production or business operation for it, so long as I am the actual
controller of Midea Group, I, my direct relatives and other
enterprises under their control agree to solve the non-competitive
issue arising out of this within the term specified at that time. 3.
When Midea Group and the enterprises under its control further
expand their business scope on their existing business scope, and
I, my direct relatives and other enterprises under their control
have not conducted production or business operation for it yet, so
long as I am the actual controller of Midea Group, I, my direct
24
October
2018
Long-sta
nding
Ongoing
35
relatives and other enterprises under their control will not be
engaged in such new business competing with Midea Group and
the enterprises under its control. So long as I am recognized as
the actual controller of Midea Group pursuant to effective laws,
regulations and other normative documents of the People’s
Republic of China, I will not change and dissolve my above
commitment.
Actual
control
ler
Commitm
ent letter
for
standardizi
ng and
reducing
related-par
ty
transaction
1. I, my direct relatives and other enterprises under their control
will standardize and endeavor to reduce affiliated party
transactions with Midea Group and the enterprises under its
control. If I, my direct relatives and other enterprises under their
control conduct any affiliated party transaction that cannot be
prevented with Midea Group and the enterprises under its control,
including but not limited to commodity transaction, provision of
services between them or acting as agents to each other, a
standard agreement on the affiliated party transaction will be
signed with Midea Group pursuant to the laws and regulations,
and the approval formalities will be handled pursuant to relevant
laws, regulations, rules and other standard documents as well as
the articles of association of Midea Group, the price of the
affiliated party transaction will be ensured to be fair and the
information disclosure obligations for the affiliated party
transaction will be performed pursuant to relevant laws,
regulations and the articles of association of Midea Group, they
will not transfer the fund or profit of Midea Group illegally by
taking advantage of the affiliated party transaction, and they will
not undermine the benefits of Midea Group and its stockholders
by taking advantage of the affiliated party transaction. 2. I
commit that I will perform the obligation of vote avoidance when
the stockholders’ meeting of Midea Group is voting on any
affiliated party transaction involving I, my direct relatives and
other enterprises under their control. 3. I, my direct relatives and
other enterprises under their control will not require Midea Group
to give them more preferential conditions compared with those
given to any independent third party in any fair transaction on the
market. So long as I am recognized as the actual controller of
Midea Group pursuant to effective laws, regulations and other
normative documents of the People’s Republic of China, I will
not change and dissolve my above commitment. I will perform
the above commitment truthfully and assume corresponding legal
responsibilities. If I do not perform the obligations and
responsibilities in the above commitment, I will assume
corresponding liabilities pursuant to laws, regulations, rules and
other normative documents.
24
October
2018
Long-sta
nding
Ongoing
36
Actual
control
ler
Commitm
ent letter
for
maintainin
g the
independe
nce of the
Company
To further ensure independent operation of Midea Group, I and
the other enterprises under my control will keep independent
from Midea Group in terms of personnel, finance, assets, business
and organization pursuant to relevant laws, regulations and
normative documents. So long as I am recognized as the actual
controller of Midea Group pursuant to effective laws, regulations
and other normative documents of the People’s Republic of
China, I will not change and dissolve my above commitment. I
will perform the above commitment truthfully and assume
corresponding legal responsibilities. If I do not perform the
obligations and responsibilities in the above commitment, I will
assume corresponding liabilities pursuant to laws, regulations,
rules and other normative documents.
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Commitm
ent letter
for
providing
factual,
accurate
and
complete
informatio
n
The Company will provide the information for this consolidation
and combination for the intermediary agency engaged for the
consolidation and combination in time, ensure that the provided
information is true, accurate and complete, there’s not any false
recording, misleading statement or significant omission, and the
Company will assume separate and joint and several legal
liabilities for authenticity, accuracy and completeness for the
provided information. In case of any false recording, misleading
statement or significant omission for the provided information on
the part of the Company and bring any loss for the investors, it
will assume the compensation liability pursuant to the laws.
24
October
2018
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Note for
Punishme
nts and
credit
quality
1. By the date that this letter is issued, the Company has not the
circumstance of initiating an investigation by the judicial organ
on account of its being suspected of committing a crime or that of
initiating an investigation by China Securities Regulatory
Commission on account of its being suspected of violating laws
or regulations. 2. By the date that this letter is issued, in the recent
five years, the Company has not been subject to any
administrative penalty (except for those evidently not related to
securities market), criminal penalty or major civil lawsuit or
arbitration involving economic disputes, nor has it any
circumstance of not repaying its large-sum debt at due time, not
performing its commitment or being subject to the administrative
regulatory measures of China Securities Regulatory Commission
or the disciplinary penalty of the securities exchange, and it has
not other major behavior of breaking promises.
24
October
2018
Long-sta
nding
Ongoing
Contro
lling
shareh
older
Note for
share
holding
reduction
1. The Company has not the plan for reducing the equity it holds
in Little Swan during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation, and the Company will not reduce the
24
October
2018
Long-sta
nding
Ongoing
37
plan
equity it holds in Little Swan during the period from this
consolidation and combination and resumption of trading to the
date of implementation. The equity held by the Company will be
canceled after this consolidation and combination is completed. 2.
This letter of commitment will have legal binding force on the
Company as of the date of its signing, and it will assume
corresponding compensation liability in case Little Swan suffers
from any loss due to the Company’s acting against its
commitment to the contents under this letter of commitment.
Relate
d party
Declaratio
n and
commitme
nt letter
for the
opinion of
stock
exchange
and share
reduction
plan
1. The Company agrees on this consolidation and combination in
principle. 2. The company has not the plan for reducing the equity
its holds in Midea Group during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation, and it will not reduce the equity it holds
in Midea Group during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation. 3. This letter of commitment will have
legal binding force on the Company as of the date of its signing,
and the Company will assume corresponding compensation
liability in case Midea Group suffers from any loss due to the
Company’s acting against its commitment to the contents under
this letter of commitment.
24
October
2018
Long-sta
nding
Ongoing
Relate
d party
Note for
horizontal
competitio
n with
Midea
Group
Co., Ltd.
By the date that this letter is issued, the Company and the
enterprises under it other than Midea Group and the enterprises
under it have not been engaged in any production and business
activity the same as or similar to current main businesses of
Midea Group and the enterprises under its control, nor have they
been engaged in or participate in any competitive business that is
the same as the main businesses of Midea Group and the
enterprises under its control through any other economic entity,
agency or economic organization.
24
October
2018
Long-sta
nding
Ongoing
Relate
d party
Commitm
ent letter
for
standardizi
ng and
reducing
related-par
ty
transaction
1. The Company will standardize and endeavor to reduce
affiliated party transactions with Midea Group and the enterprises
under its control. If the Company conducts any affiliated party
transaction that cannot be prevented with Midea Group and the
enterprises under it, including but not limited to commodity
transaction, provision of services or acting as agents to each
other, they shall sign a standard agreement on the affiliated party
transaction with Midea Group pursuant to the laws and
regulations, and go through the approval formalities pursuant to
relevant laws, regulations, rules and other standard documents as
well as the articles of association of Midea Group, ensure that the
price of the affiliated party transaction is fair, ensure to perform
24
October
2018
Long-sta
nding
Ongoing
38
the information disclosure obligations for the affiliated party
transaction pursuant to relevant laws, regulations and the articles
of association of Midea Group, and ensure that they will not
transfer the fund or profit of Midea Group illegally by taking
advantage of the affiliated party transaction, and they will not
undermine the benefits of Midea Group and its stockholders by
taking advantage of the affiliated party transaction. 2. The
Company commits that it will perform the obligation of vote
avoidance when the stockholders’ meeting of Midea Group is
voting on any affiliated party transaction involving the Company
and other enterprise under its control. 3.The Company and other
enterprises under its control will not require Midea Group to give
them more preferential conditions compared with those given to
any independent third party in any fair transaction on the market.
So long as the Company is recognized as the dominant
stockholder of Midea Group pursuant to effective laws,
regulations and other normative documents of the People’s
Republic of China, the Company will not change and dissolve its
above commitment. The Company will perform the above
commitment truthfully and assume corresponding legal
responsibilities. If it does not perform the obligations and
responsibilities in the above commitment, it will assume
corresponding liabilities pursuant to laws, regulations, rules and
other normative documents.
Relate
d party
Commitm
ent letter
for
maintainin
g the
independe
nce of the
Company
To further ensure independent operation of Midea Group, the
Company and the other enterprises under its control will keep
independent from Midea Group in terms of personnel, finance,
assets, business and organization pursuant to relevant laws,
regulations and normative documents. So long as the Company is
recognized as a dominant stockholder of Midea Group pursuant
to effective laws, regulations and other normative documents of
the People’s Republic of China, it will not change and dissolve its
above commitment. The Company will perform the above
commitment truthfully and assume corresponding legal
responsibilities. If it does not perform the obligations and
responsibilities in the above commitment, it will assume
corresponding liabilities pursuant to laws, regulations, rules and
other normative documents.
24
October
2018
Long-sta
nding
Ongoing
Relate
d party
Note for
violations
of laws
and
regulation
in the
By the date that this letter is issued, in the recent five years, the
Company and its current senior managers have not the
circumstance of being subject to any administrative penalty
(except for those evidently not related to securities market),
criminal penalty or major civil lawsuit or arbitration involving
economic disputes, nor have they the circumstance of initiating
Long-sta
nding
Ongoing
39
recent five
years
an investigation by the judicial organ on account of their being
suspected of committing a crime or that of initiating an
investigation by China Securities Regulatory Commission on
account of their being suspected of violating laws or regulations.
Shareh
older
Note for
shareholdi
ng
reduction
plan
1. The company has not the plan for reducing the equity it holds
in Little Swan during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation, and it will not reduce the equity it holds
in Little Swan during the period from the date of this
consolidation and combination and resumption of trading to the
date of implementation. The equity of Little Swan the Company
holds will be canceled after this consolidation and combination is
completed. 2. This letter of commitment will have legal binding
force on the Company as of the date of its signing, and the
Company will assume corresponding compensation liability in
case Little Swan suffers from any loss due to the Company’s
acting against its commitment to the contents under this letter of
commitment.
24
October
2018
Long-sta
nding
Ongoing
Commitments
made in time of
IPO or
refinancing
Equity incentive
commitments
Other
commitments
made to
minority
shareholders
Fulfilled on time Yes
Specific reasons
for failing to
fulfill
commitments on
time and plans
for next step
(if any)
N/A
2. Where there had been an earnings forecast for an asset or project and the Reporting Period was still
within the forecast period, explain why the forecast has been reached for the Reporting Period.
□ Applicable √Not applicable
40
IV Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□ Applicable √Not applicable
No such cases in the Reporting Period.
V Explanations Given by the Board of Directors, the Supervisory Board and the Independent
Directors (if any) Regarding the Independent Auditor's “Modified Opinion” on the Financial
Statements of the Reporting Period
□ Applicable √Not applicable
VI YoY Changes to Accounting Policies, Estimates and Methods
√Applicable □ Not applicable
Refer to Note V(29) in Part XI for details of changes in accounting policies of the Company during the Reporting
Period.
VII Retrospective Restatements due to Correction of Material Accounting Errors in the
Reporting Period
□ Applicable √Not applicable
No such cases in the Reporting Period.
VIII YoY Changes to the Scope of the Consolidated Financial Statements
□ Applicable √Not applicable
No such cases in the Reporting Period.
IX Engagement and Disengagement of Independent Auditor
Current independent auditor
Name of the domestic independent auditor PricewaterhouseCoopers Zhong Tian LLP
The Company’s payment to the domestic independent auditor (RMB’0,000) 240
How many consecutive years the domestic independent auditor has provided
audit service for the Company
4
Names of the certified public accountants from the domestic independent auditor
writing signatures on the auditor’s report
Huang Meimei and Zhang Xiaoying
41
How many consecutive years the certified public accountants have provided audit
service for the Company
4
Indicate by tick mark whether the independent auditor was changed for the Reporting Period.
□ Yes √No
Independent auditor, financial advisor or sponsor engaged for the audit of internal controls:
□ Applicable √Not applicable
X Possibility of Listing Suspension or Termination after Disclosure of this Report
□ Applicable √Not applicable
XI Insolvency and Reorganization
□ Applicable √Not applicable
No such cases in the Reporting Period.
XII Major Legal Matters
□ Applicable √Not applicable
No such cases in the Reporting Period.
XIII Punishments and Rectifications
□ Applicable √Not applicable
No such cases in the Reporting Period.
XIV Credit Quality of the Company as well as Its Controlling Shareholder and Actual
Controller
□ Applicable √Not applicable
XV Equity Incentive Plans, Employee Stock Ownership Plans or Other Incentive Measures
for Employees
□ Applicable √Not applicable
No such cases in the Reporting Period.
42
XVI Major Related-Party Transactions
1. Continuing Related-Party Transactions
√Applicable □ Not applicable
Refer to XIV Related Parties and Related-party Transactions in Part XI Financial Reports for details of continuing
related-party transactions.
2. Related-Party Transactions Regarding Purchase or Sales of Assets or Equity Interests
□ Applicable √Not applicable
No such cases in the Reporting Period.
3. Related Transactions Regarding Joint Investments in Third Parties
□ Applicable √Not applicable
No such cases in the Reporting Period.
4. Credits and Liabilities with Related Parties
□ Applicable √Not applicable
No such cases in the Reporting Period.
5. Other Major Related-Party Transactions
(1) About the Financial Service Agreement which Signed with the Midea Group Finance Co., Ltd. of
Related-party Transaction
It was agreed that, the financial company should provide the service of deposit, loan, note discount, guarantee,
settlement, and the series of the financial services that approved by the CBRC according to the requirements of
the Company as well as its subsidiaries. During the one-year validity after date of the validation of the agreement,
the maximum of the deposit balance that the Company and its subsidiaries disposed in the financial company
should not exceed the amount of RMB3 billion per day; and the total amount of credit (including drawing bank
draft, discounting acceptance bill, and loans, etc) that the financial company granted to the Company and its
subsidiaries should not exceed the amount of RMB6 billion per day.
At the period-end, the deposit balance of the Company at financial company was of RMB0.385 billion with no
43
loans.
(2) About Trademark License of Related-party Transactions
①The Company permitted Wuxi Little Swan Refrigeration Equipment Co., Ltd. and its majority-owned
subsidiaries to use trademark of LITTLE SWAN and picture in air conditioner, heating equipment, ventilating
device, heat pump water heater, unified products of air conditioner and hot water, as well as thermal energy saving
equipment; permitted GD Midea Group Co., Ltd. and its controlled subsidiaries to use to use trademark of
LITTLE SWAN and picture in the refrigerators and the freezers; at the same time GD Midea Holding Co., Ltd.
permitted the Company and subsidiaries of the Company to use trademark of Midea in production, sales and ad
campaign of washing machines and dryers. The aforesaid licensing contracts were all contracted with 0.3%
charges of net sales revenue of products with the authorized trademark as trademark license fees, and the
permitting period last from the 1 January 2017 to 31 December 2019.
②The Company permitted Midea Group Co., Ltd. and its majority-owned subsidiaries to use trademark of
Beverly in water heater, water purification equipment and machinery, which was charged with 0.3% charges of net
sales revenue of products with the authorized trademark as trademark license fees, and the permitting period last
from the 1 December 2015 to 31 December 2018. On 6 August 2018, the Proposal on Trademark Licensing and
Connected Transactions was reviewed and approved at the 16
th
Meeting of the 8
th
Board of Directors, and the
Company and Midea Group renewed the Beverly Trademark Licensing Contract. the Company agreed to license
“比佛利” and “BEVERLY” trademarks in a non-exclusive manner to the Midea Group and its majority-owned
subsidiaries, and those “licensed trademarks” could be applied to dishwashers, kitchen range hoods, gas stoves,
disinfection cupboards, water dispensers, water heaters, water purification equipment and machines, washing
water heaters (gas or electric heating), gas stoves, bathroom fixtures, ice machines and equipment, and refrigerator
products. However, the trademark license fee will be calculated at 0.3% of the net sales of various authorized
trademark products in the above license contracts. The license period is from 1 September 2018 to 31 August
2021.
(3) The Company held the 2017 Annual General Meeting on 9 March 2018 which reviewed and approved the
Proposal on Estimating the Amount of the 2018 Daily Related-party Transactions.
(4) The Company held the 16
th
Meeting of the 8
th
Board of Directors on 6 August 2018 which reviewed and
approved the Proposal on the Adjustment of the Amount of 2018 Daily Related-party Transactions.
(5) The Company held the 3
rd
Meeting of the 9
th
Board of Directors on 29 October 2018 which reviewed and
approved the Proposal on the Adjustment of the Amount of 2018 Daily Related-party Transactions.
44
Index to the current announcements about the said related-party transactions disclosed
Title of current announcement Disclosure date Disclosure website
Proposal on Estimating the Amount of the 2018 Daily Related-party Transactions 13 March 2018 www.cninfo.com.cn
Proposal on Trademark Licensing and Related-party Transactions 8 August 2018 www.cninfo.com.cn
Proposal on the Adjustment of the Amount of 2018 Daily Related-party Transactions 8 August 2018 www.cninfo.com.cn
Proposal on the Adjustment of the Amount of 2018 Daily Related-party Transactions
31 December
2018
www.cninfo.com.cn
XVII Major Contracts and Execution thereof
1. Entrustment, Contracting and Leases
(1) Entrustment
□ Applicable √Not applicable
No such cases in the Reporting Period.
(2) Contracting
□ Applicable √Not applicable
No such cases in the Reporting Period.
(3) Leases
□ Applicable √Not applicable
No such cases in the Reporting Period.
2. Major Guarantees
(1) Guarantees
Unit: RMB'0,000
Guarantees provided by the Company and its subsidiaries for external parties (exclusive of those for subsidiaries)
Obligor
Disclosure date of
the guarantee line
announcement
Line of
guarantee
Actual
occurrence
date
Actual
guarantee
amount
Type of
guarantee
Term of
guarantee
Having
expired or
not
Guarantee for a
related party or
not
Total approved line for such guarantees in the
Reporting Period (A1)
0
Total actual amount of such guarantees in the
Reporting Period (A2)
0
Total approved line for such guarantees at the end of 0 Total actual balance of such guarantees at the 0
45
the Reporting Period (A3) end of the Reporting Period (A4)
Guarantees provided by the Company for its subsidiaries
Obligor
Disclosure date of
the guarantee line
announcement
Line of
guarantee
Actual occurrence
date
Actual
guarantee
amount
Type of
guarantee
Term of
guarantee
Having
expired
or not
Guarantee for
a related
party or not
Hefei Midea
Washing
Machine
Co., Ltd.
9 March 2017 125,000 19 April 2017 29.5 Joint-liability 10 months Ye s No
9 March 2017 125,000 19 April 2017 28.12 Joint-liability 10 months Ye s No
9 March 2017 125,000 21 April 2017 275.09 Joint-liability 10 months Ye s No
9 March 2017 125,000 26 July 2017 12,010.46 Joint-liability Half year Ye s No
9 March 2017 125,000 28 November 2017 10,897.83 Joint-liability Half year Ye s No
9 March 2017 125,000 29 November 2017 1,090.72 Joint-liability Half year Ye s No
13 March 2018 130,000 22 January 2018 25.73 Joint-liability 1 month Ye s No
13 March 2018 130,000 12 March 2018 72.73 Joint-liability 2 months Ye s No
13 March 2018 130,000 13 April 2018 274.61 Joint-liability 3 months Ye s No
13 March 2018 130,000 13 April 2018 173.73 Joint-liability 2 months Ye s No
13 March 2018 130,000 15 January 2018 80.33 Joint-liability 14 months No No
13 March 2018 130,000 28 March 2018 268.08 Joint-liability 1 year No No
13 March 2018 130,000 17 April 2018 175.45 Joint-liability 1 year No No
Total approved line for such guarantees in the
Reporting Period (B1)
130,000
Total actual amount of such guarantees in the
Reporting Period (B2)
25,402.38
Total approved line for such guarantees at the
end of the Reporting Period (B3)
130,000
Total actual balance of such guarantees at the end of
the Reporting Period (B4)
523.86
Guarantees provided between subsidiaries
Obligor
Disclosure date of
the guarantee line
announcement
Line of
guarantee
Actual occurrence
date
Actual
guarantee
amount
Type of
guarantee
Term of
guarantee
Having
expired
or not
Guarantee
for a related
party or not
Total approved line for such guarantees in the
Reporting Period (C1)
0
Total actual amount of such guarantees in the
Reporting Period (C2)
0
Total approved line for such guarantees at the
end of the Reporting Period (C3)
0
Total actual balance of such guarantees at the end of
the Reporting Period (C4)
0
Total guarantee amount (total of the three kinds of guarantees above)
Total guarantee line approved in the
Reporting Period (A1+B1+C1)
130,000
Total actual guarantee amount in the Reporting Period
(A2+B2+C2)
25,402.38
Total approved guarantee line at the end of the
Reporting Period (A3+B3+C3)
130,000
Total actual guarantee balance at the end of the
Reporting Period (A4+B4+C4)
523.86
Total actual guarantee amount (A4+B4+C4) as % of the Company’s net assets 0.06%
46
Of which:
Balance of guarantees provided for shareholders, actual controller and their related parties (D) 0
Balance of debt guarantees provided directly or indirectly for obligors with an over 70% debt/asset ratio (E) 0
Amount by which the total guarantee amount exceeds 50% of the Company’s net assets (F) 0
Total of the three amounts above (D+E+F) 0
Joint responsibilities possibly borne in the Reporting Period for undue guarantees (if any) N/A
Provision of external guarantees in breach of the prescribed procedures (if any) N/A
(2) Irregularities in Provision of Guarantees
□ Applicable √Not applicable
No such cases in the Reporting Period.
3. Cash Entrusted to Other Entities for Management
(1) Cash Entrusted for Wealth Management
Unit: RMB’00,000,000
Type Capital resources Amount incurred Outstanding balance Overdue unrevoked amount
Trust financial products Self-owned funds 12.5 0 0
Bank financial products Self-owned funds 24.85 0 0
Total 37.35 0 0
Particulars about high-risk cash entrusted for wealth management with significant single amount or low security
low liquidity and not breakeven
Unit: RMB’00,000,000
Name of
trustee
institutio
n (or
name of
trustee)
Type of
trustee
institutio
n (or
name of
trustee)
Type
of
produc
ts
amoun
t
Capital
resourc
es
Comme
ncemen
t date
Termin
ation
date
Funds
allocat
ion
Method
of
remuner
ation
Annua
l yield
for
referen
ce
Expe
cted
earni
ngs
(if
any)
The
actual
loss/gain
amounts
in the
Reportin
g Period
The actual
withdrawal
of
loss/gain n
the
Reporting
Period
Amou
nt of
provisi
ons for
impair
ment
Lega
l
proc
edur
es or
not
Plan for
entrusted
asset
manage
ment in
the
future or
not
Overvi
ews of
events
and
query
index
(if any
Bank Bank
Trust
plan
12.50
Self-ow
ned
funds
11
January
2017
8 June
2018
Subjec
t to
contra
ct
Annual
yield for
referenc
e subject
to
4.20%
-
5.25%
0.60 0.18
Received
as per
contract
Ye s Ye s
www.c
ninfo.c
om.cn
(Anno
uncem
Comm
on
24.85
Self-ow
ned
12
April
27
July
4.80%
-
0.89 0.43 Ye s Ye s
47
wealth
manag
ement
funds 2017 2018 contract 5.00% ent
No.:
2018-0
7)
Total 37.35 -- -- -- -- -- -- 1.49 0.61 -- -- -- --
Situations where principal can’ t be taken back or other possibilities that result in impairment
□ Applicable √Not applicable
(2) Entrusted Loans
□ Applicable √Not applicable
No such cases in the Reporting Period.
4. Other Major Contracts
□ Applicable √Not applicable
No such cases in the Reporting Period.
XVIII Corporate Social Responsibility (CSR)
1. Measures Taken to Fulfill CSR Commitment
The Company positively executed the social responsibility, paid attention on maintaining the legal equities of each
benefit-related party, insisted to harmonious coexist with each party. The Company positively participated in the
social and public welfare undertakings, paid attention on the environmental protection and positively responded to
the national appeal of energy saving and emission-reduction that made great efforts to contribute to the sustainable
development of the society as well as environment, with the specific work situation as follows:
(1) Safeguarding Legitimate Rights and Interests of Consumers: Being market-oriented, the Company
centered on the customers’ needs and keeps improving quality management to offer products with a quality higher
than the expectation of consumers and an improved user experience. It has a national service
hotline—4008228228— and service number of after-sales Wechat to answer to customers’ questions and
complaints, ensure that they would be satisfied.
(2) Offering Generous Returns to Shareholders. The Company constructed a more perfect corporate
governance structure and formulated a corresponding management system for ensure the shareholders to fully
enjoy each legal interests stipulated by the laws and regulations. In line with the stipulation of the Articles of
48
Association, the Company realized the allocable profit positive, and there were no significant investment plan or
significant cash expenditure events (excluding raise funds investment events). Any within three consecutive years,
the Company allocated the profits in cash accumulatively no less than 30% of the average distributive profits
realized in recent three years. The Company attached great importance to the retribution and had been executing
the cash dividends for recent years.
(3) Constructing Strategic Partnership. The Company positively constructed the strategic partnership with
suppliers and customers, complied with the business rule, paid attention on the communication and cooperation
with each related party, built up interests community with the partners for growing together and sharing
achievements, ensured the interests and relevant equities of the partners and jointly dedicated to maintain the
sustainable healthy development of the industry.
(4) Safeguarding Rights and Interests of Employees. The Company strictly implemented the state laws and
regulations to positively guarantee the legal interests of the staff. Withholding the “people-oriented” spirit, the
Company offered a favorable working and living environment for its staff and built as well as improved the salary
standard and the incentive system, and provided competitive salary reward with improving space. The Company
offered various kinds of training to promote the career development of the staff by the method combined either in
internal or external. It also conducts many leisure activities to enrich employees’ life.
(5) Promoting Energy Saving and Environmental Protection. In strict compliance with the country’s laws and
regulations for environment protection, the Company carried out and promoted the energy conservation and
emission reduction and executed the social responsibility under the low-carbon time through innovation in
management, technology and products. During the progress of produce, the Company realized 100% of the
recycle and the reuse of the industrial water consumption; the Company explored the Accurate Automatic Launch
Detergent Technology, which gained the authentication of the international authority-UK Intertek, and at the same
time received the green leave label of Carbon Footprint that meant the Company be the first enterprise that
received that label in the domestic washing machine industry.
2. Measures Taken for Targeted Poverty Alleviation
□ Applicable √Not applicable
The Company did not engage in targeted poverty alleviation activities during the Reporting Period, nor has it any
such plans for the time being.
49
3. Issues Related to Environmental Protection
Indicate by tick mark whether the Company or any of its subsidiaries is identified as a major polluter by the
environmental protection authorities.
□ Yes √Not
No such cases in the Reporting Period.
The State Environmental Protection Department, the Company still attaches great importance to the
environmental protection management and has carried out the following related works according to applicable
laws:
1. According to the requirements stated in Administrative Measures for the Recording of Emergency Responses
for Sudden Environmental Incidents of Enterprises and Institutions, considering applicable national laws and
regulations, rules and standards for environmental protection and the actual conditions of the unit, Emergency
Plan for Environmental Emergencies was prepared and submitted to the local environmental protection bureau for
records;
2. The Sewage Discharging Permit issued by the local environmental protection bureau was obtained, and the
Environmental Impact Assessment of the Construction Project was prepared by the unit with the qualification of
environmental assessment, and passed the approval and acceptance inspection conducted by the environmental
protection department;
3. Accordingly, the Company has also constructed a sewage treatment station and equipped various waste gas
treatment facilities and dust control facilities etc., and it will also regularly maintain these environmental
protection facilities. As a result, all kinds of environmental protection facilities are working normally, and
agencies with the third-party qualification will be entrusted to conduct inspections on a regular basis. Therefore,
the Company has not discharged any sewage or pollutant beyond the specific standard or limit, and strictly
conformed to relevant requirements put forward by the environmental protection department.
XIX Other Significant Events
On 24 October 2018, the Company announced the major assets restructuring plan. Midea Group intends to issue
A-shares to absorb the Company, which means Midea Group issues shares to all shareholders of the Company
excluding Midea Group and TITONI to exchange all A-shares and B-shares held by those shareholders. The
A-shares and B-shares held by Midea Group and TITONI are not involved in the conversion and these shares will
50
be cancelled after the merger by share swap.
After the completion of the merger by share swap, the Company will terminate the listing and cancel the legal
person qualification. Midea Group or its wholly-owned subsidiaries will inherit and undertake all assets, liabilities,
business, personnel, contracts and all other rights and obligations of the Company. Midea Group will apply for
listing on the main board of the Shenzhen Stock Exchange for all additional A-shares due to the merger by share
swap
The above-mentioned major assets restructuring was reviewed and approved on general meetings of both sides on
21 December 2018 and unconditionally passed by the China Securities Regulatory Commission (CSRC) on 20
February 2019 and examined and approved by CSRC on 12 March 2019. At present, the restructuring is in the
progress (see www.cninfo.com.cn for details). Investors are advised to pay attention to the investment risks.
XX Significant Events of Subsidiaries
□ Applicable √Not applicable
51
Part VI Share Changes and Shareholder Information
I. Share Changes
1. Share Changes
Unit: share
Before Increase/decrease in the Reporting Period (+/-) After
Shares
Percentage
(%)
New
issues
Shares as
dividend
converted
from profit
Shares as
dividend
converted
from capital
reserves
Other Subtotal Shares
Percentage
(%)
1. Restricted shares 2,087,745 0.33% 17,025 17,025 2,104,770 0.33%
1.3 Shares held by other
domestic investors
2,087,745 0.33% 17,025 17,025 2,104,770 0.33%
Among which: Shares held by
domestic legal persons
2,052,720 0.32% 2,052,720 0.32%
Shares held by domestic
natural persons
35,025 0.01% 17,025 17,025 52,050 0.01%
2. Non-restricted shares 630,400,019 99.67% -17,025 -17,025 630,382,994 99.67%
2.1 RMB ordinary shares 439,364,147 69.47% -17,025 -17,025 439,347,122 69.47%
2.2 Domestically listed
foreign shares
191,035,872 30.20% 191,035,872 30.20%
3. Total shares 632,487,764 100.00% 0 0 632,487,764 100.00%
Reasons for share changes:
Reason for changes in shares held by domestic natural persons: based on the confidence in the Company, Mr. Lu
Jianfeng, the Director and General Manager of the Company, purchased 22,700 shares of the Company on 5 July
2018 and accumulatively holds 69,400 shares of the Company. In line with the No.141 regulation stipulated in the
Corporate Law, the amount of shares transferred annually shall not exceed 25% of total shares held of the
Company. Thus the 17,025 shares of increased 22,700 shares were transferred as restricted shares.
Approval of share changes:
□ Applicable √Not applicable
Transfer of share ownership:
52
□ Applicable √Not applicable
Progress on any share repurchase:
□ Applicable √Not applicable
Progress on reducing the repurchased shares by means of centralized bidding:
□ Applicable √Not applicable
Effects of share changes on the basic and diluted earnings per share, equity per share attributable to the
Company’s ordinary shareholders and other financial indicators of the prior year and the prior accounting period,
respectively:
□ Applicable √Not applicable
Other information that the Company considers necessary or is required by the securities regulator to be disclosed:
□ Applicable √Not applicable
2. Changes in Restricted Shares
Unit: share
Name of
shareholder
Amount of
restricted shares at
the Period-begin
Amount of restricted
shares relieved
during the Reporting
Period
Amount of restricted
shares increased
during the Reporting
Period
Amount of
restricted
shares at the
Period-end
Reason for
restriction
Date of dissolution
Lu Jianfeng 35,025 0 17,025 52,050
Locked by
senior
management
Adjust restricted shares and
negotiable shares yearly in
accordance with regulations
stipulated in Corporation Law。
Total 35,025 0 17,025 52,050 -- --
II. Issuance and Listing of Securities
1. Securities (Exclusive of Preferred Shares) Issued in the Reporting Period
□ Applicable √Not applicable
2. Changes to Total Shares, Shareholder Structure and Asset and Liability Structures
□ Applicable √Not applicable
53
3. Existing Staff-Held Shares
□ Applicable √Not applicable
III Shareholders and Actual Controller
1. Shareholders and Their Shareholdings at the Period-End
Unit: share
Number of
ordinary
shareholders
22,531
Number of ordinary
shareholders at the
month-end prior to the
disclosure of this Report
19,710
Number of preferred
shareholders with
resumed voting rights
(if any) (see note 8)
0
Number of preferred shareholders
with resumed voting rights at the
month-end prior to the disclosure
of this Report (if any) (see note 8)
0
5% or greater shareholders or top 10 shareholders
Name of shareholder Nature of shareholder
Sharehol
ding
percenta
ge
Total shares
held at the
period-end
Increase/dec
rease in the
Reporting
Period
Number
of
restricte
d shares
held
Number of
non-restricte
d shares
held
Shares in
pledge or
frozen
Statu
s
Shares
MIDEA GROUP CO., LTD.
Domestic
non-state-owned legal
person
37.78% 238,948,117 0 238,948,117
TITONI INVESTMENTS
DEVELOPMENT LTD.
Foreign legal person 14.89% 94,204,942 0 94,204,942
HONGKONG SECURITIES
CLEANING CO., LTD
Foreign legal person 6.61% 41,830,505 27,638,807 41,830,505
GAOLING FUND,L.P. Foreign legal person 3.74% 23,664,125 0 23,664,125
GREENWOODS CHINA ALPHA
MASTER FUND
Foreign legal person 2.59% 16,371,559 -1,415,509 16,371,559
AGRICULTURAL BANK OF
CHINA- E FUND CONSUMPTION
SECTOR STOCK INVESTMENT
FUND
Domestic
non-state-owned legal
person
1.72% 10,876,259 3,737,924 10,876,259
CENTRAL HUIJIN ASSET
MANAGEMENT CO., LTD.
State-owned legal
person
1.61% 10,156,300 0 10,156,300
BILL & MELINDA GATES
FOUNDATION TRUST
Foreign legal person 1.28% 8,070,506 1,531,732 8,070,506
FINANCE BUREAU OF WUXI
State-owned legal
person
1.21% 7,652,203 -9,401,868 7,652,203
NATIONAL SOCIAL SECURITY Domestic 1.18% 7,470,973 7,470,973 7,470,973
54
FUND PORTFOLIO 406 non-state-owned legal
person
Strategic investor or general legal person becoming a top-10
ordinary shareholder due to rights issue (if any) (see note 3)
None
Related or acting-in-concert parties among the shareholders
above
Midea Group and TITONI Investments Development Ltd. are parties
acting in concert.
Top 10 non-restricted shareholders
Name of shareholder
Non-restricted shares
at the period-end
Shares by type
Type Shares
MIDEA GROUP CO., LTD. 238,948,117 RMB ordinary share 238,948,117
TITONI INVESTMENTS DEVELOPMENT LTD. 94,204,942
Domestically listed
foreign stock
94,204,942
HONGKONG SECURITIES CLEANING CO., LTD 41,830,505 RMB ordinary share 41,830,505
GAOLING FUND,L.P. 23,664,125
Domestically listed
foreign stock
23,664,125
GREENWOODS CHINA ALPHA MASTER FUND 16,371,559
Domestically listed
foreign stock
16,371,559
AGRICULTURAL BANK OF CHINA- E FUND CONSUMPTION
SECTOR STOCK INVESTMENT FUND
10,876,259 RMB ordinary share 10,876,259
CENTRAL HUIJIN ASSET MANAGEMENT CO., LTD. 10,156,300 RMB ordinary share 10,156,300
BILL & MELINDA GATES FOUNDATION TRUST 8,070,506 RMB ordinary share 8,070,506
FINANCE BUREAU OF WUXI 7,652,203 RMB ordinary share 7,652,203
NATIONAL SOCIAL SECURITY FUND PORTFOLIO 406 7,470,973 RMB ordinary share 7,470,973
Related or acting-in-concert parties among top 10 unrestricted public
shareholders, as well as between top 10 unrestricted public shareholders
and top 10 shareholders
Midea Group and TITONI Investments Development Ltd.
are parties acting in concert.
Top 10 ordinary shareholders involved in securities margin trading (if any)
(see note 4)
None
Indicate by tick mark whether any of the top 10 ordinary shareholders or the top 10 unrestricted ordinary
shareholders of the Company conducted any promissory repo during the Reporting Period.
□ Yea √No
No such cases in the Reporting Period.
2. Controlling Shareholder
Name of controlling
shareholder
Legal
representative/pers
Date of
establishment
Unified social credit code Principal activity
55
on in charge
Midea Group Co., Ltd. Fang Hongbo 7 April 2000 91440606722473344C
Consumer appliances and heating
ventilation air conditioner, robots
and automatic systems, and etc.
Controlling shareholder’s
holdings in other listed
companies at home or abroad
in the Reporting Period
The Company’s controlling shareholder is Midea Group Co., Ltd. with the securities code of
000333, refer to information disclosed on www.cninfo.com.cn for details about other listed
companies at home or abroad controlled and shared by the Company in the Reporting Period
Change of the controlling shareholder in the Reporting Period:
□ Applicable √Not applicable
No such cases in the Reporting Period.
3. Actual Controller and Its Acting-in-Concert Parties
Name of actual controller
Relationship with actual
controller
Nationality
Right of residence in other
countries or regions
He Xiangjian Self the People's Republic of China No
Main occupation and duty Current board chairman of Midea Holding and former board chairman of Midea Group
Used-to-be-holding listed companies
home and abroad in the last ten years
Midea Group (000333.SZ), Little Swan (A: 000418.SZ;B:200418), and KUKA AG
(KU2.DE)
Change of the actual controller during the Reporting Period:
□ Applicable √Not applicable
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company:
56
Indicate by tick mark whether the actual controller controls the Company via trust or other ways of asset
management.
□ Applicable √Not applicable
4. Other 10% or Greater Corporate Shareholders
Name of corporate
shareholder
Legal representative /
company principal
Date of establishment Registered capital Business scope
TITONI Xiao Mingguang 7 February 2007 USD50,000 Holding equity interests in Little Swan
5. Limitations on Shareholding Decrease by the Company’s Controlling Shareholder, Actual Controller,
Reorganizer and Other Commitment Makers
□ Applicable √Not applicable
He Xiangjian
Midea Holding Co., Ltd.
Midea Group Co., Ltd.
94.55%
33.20%
Midea Electric Investment (BVI) Limited
TITONI Investments Development Ltd.
Wuxi Little Swan Co., Ltd.
100%
100%
14.89%
37.78%
57
Part VII Preferred Shares
□ Applicable √Not applicable
No preferred shares in the Reporting Period.
58
Part VIII Directors, Supervisors, Senior Management and Staff
I Change in Shareholdings of Directors, Supervisors and Senior Management
Name Office title
Incumbent
/Former
Gender Age Start of tenure End of tenure
Beginnin
g
sharehol
ding
(share)
Increase in
the
Reporting
Period
(share)
Decrease
in the
Reportin
g Period
(share)
Other
increas
e/decre
ase
(share)
Ending
shareh
olding
(share)
Fang Hongbo Chairman of the Board Incumbent Male 51 9 May 2008 24 August 2021 0 0 0 0 0
Lu Jianfeng
General Manager Incumbent Male 45
14 December
2016
24 August 2021 46,700 22,700 0 0 69,400
Director Incumbent Male 45 11 April 2017 24 August 2021 0 0 0 0 0
Xiao
Mingguang
Director Incumbent Male 47 12 January 2010 24 August 2021 0 0 0 0 0
Jiang Peng Director Incumbent Male 45 11 April 2017 24 August 2021 0 0 0 0 0
Zhou Sixiu
Secretary of the Board Incumbent Female 45 10 January 2007 24 August 2021 0 0 0 0 0
Director Incumbent Female 45 21 August 2012 24 August 2021 0 0 0 0 0
Sun Y unan
CFO Incumbent Male 40
24 November
2014
24 August 2021 0 0 0 0 0
Director Incumbent Male 40 26 August 2015 24 August 2021 0 0 0 0 0
Jiang Qingyun Independent director Incumbent Male 54 22 August 2014 24 August 2021 0 0 0 0 0
Tao Xiangnan Independent director Incumbent Male 52 20 April 2015 24 August 2021 0 0 0 0 0
Zhu Heping Independent director Incumbent Male 54 26 August 2015 24 August 2021 0 0 0 0 0
Liu Di
Chairman of
Supervisory
Committee
Incumbent Male 36 11 April 2018 24 August 2021 0 0 0 0 0
Wang Shouhu Supervisor Incumbent Male 37 22 August 2014 24 August 2021 0 0 0 0 0
Xu Pengcheng
Staff representative
supervisor
Incumbent Male 49 5 August 2014 24 August 2021 0 0 0 0 0
Liang Pengfei
Chairman of
Supervisory
Committee
Left Male 41 22 August 2014 11 April 2018 0 0 0 0 0
Total -- -- -- -- -- -- 46,700 22,700 0 0 69,400
59
II Change of Directors, Supervisors and Senior Management
Name Office title Type of change Date of change Reason for change
Liang Pengfei Chairman of Supervisory Committee Left 11 April 2018 Job change
III Biographical Information
Professional backgrounds, major work experience and current duties in the Company of the incumbent directors,
supervisors and senior management:
(1) Mr. Fang Hongbo, born in 1967, holder of a master’s degree, now serves in the Company as the Chairman of
the Board, the Chairman of the Board & President of Midea Group Co., Ltd. and member of Supervisory
Committee in Kuka AG. He once was the Board Chairman and President of GD Midea Holding Co., Ltd., etc.
(2) Mr. Lu Jianfeng, born in 1973, holder of a master’s degree, now serves as the Director and General Manager
of the Company. He once was the Domestic Home A/C President, China Marketing President and Vice President
of GD Midea Holding Co., Ltd., as well as the Environmental Appliances General Manager of Midea Group, etc.
(3) Mr. Xiao Mingguang, born in 1970, is a master’s degree holder. He now serves as a Director of the Company
and a Vice President of Midea Group. He once was the Deputy Director of the Financial Management Department
and the Director of the Operational Management Department of Midea Group, the Director of the Audit and
Supervision Department of GD Midea Holding Co., Ltd., as well as the Chief Financial Officer of Midea Group,
among others.
(4) Jiang Peng, born in 1973, holder of a master’s degree, now serves as Director in the Company, Board
Secretary and Investors Relations Director of Media Group Co., Ltd. He ever acted as the Securities
Representative and Board Secretary of GD Midea Holding Co., Ltd.
(5) Ms. Zhou Sixiu, born in 1973, holder of a master’s degree, now serves as a director and the Board Secretary of
the Company. She once was the Securities Representative of Wuxi Qingfeng Co., Ltd., etc.
(6) Sun Yunan, born in 1978, holder of a master’s degree, now serves as a director and the CFO of the Company.
He ever served as Finance Minister of Automatic Factory of the Company, Refrigerator Career Dept. Factory and
Manager of Accounting and Process Management of Midea Group, etc.
(7) Jiang Qingyun, was born in 1964, doctor degree. He now serves as Independent Director of the Company,
Marketing Director of School of Management Fudan University, and Independent Director of Misho Ecology &
Landscape Co., Ltd. and Galaxy Biomedical Investment Co., Ltd.
(8) Tao Xiangnan was born in 1966, doctor degree. He now serves as Independent Director of the Company,
60
Professor of Business School of MUST.
(9) Zhu Heping was born in 1964, doctor degree. He now serves as Independent Director of the Company,
Accounting Professor of school of business of Jiangnan University, non-professional member of CICPA and
Independent Director of Jiangsu Asia-Pacific Light Alloy Technology Co., Ltd., Jiangsu Baichuan High-tech New
Materials Co., Ltd. and Jiangsu Pengyao Environment Protection Co., Ltd.
(10) Liu Di was born in 1982, bachelor degree. He now serves as the Supervisor, Director of Operations & Human
Resources in the Company. He once worked as the management manager of Midea Group and management
manager of Central Air-conditioning Division in Midea Group.
(11) Wang Shouhu, was born in 1981, bachelor, He now serves as Supervisor Manager of Internal Audit. He ever
acted as Director of Management Audit of Media Daily Appliance Group and Supervision of Integrity officer of
Media Group, etc.
(12) Xu Pengcheng, was born in 1969, bachelor. He now serves as Staff Representative Supervisor and Director of
R&D of the Company. He ever acted as Minister of impeller Development Dept. officer of R&D of Automatic
Washing Machine Company and GM of Hefei Midea Washing Machine Co., Ltd., etc.
Offices held concurrently in shareholding entities:
Name
Shareholding
entity
Office held in the
shareholding entity
Start of tenure End of tenure
Remuneration or
allowance from the
shareholding entity
Fang Hongbo
Midea Group Chairman of the Board 25 August 2012 26 September 2021 Yes
Midea Group President 15 October 2013 26 September 2021 Yes
Xiao Mingguang
Midea Group Vice President 2 December 2015 26 September 2021 Yes
TITONI Director 23 December 2013 No
Notes
N/A
Offices held concurrently in other entities:
Name Other entity
Office held in the
entity
Start of tenure End of tenure
Remuneration or
allowance from the entity
Jiang Qingyun
School of Management
Fudan University
Professor and
Marketing Director
1 August 1998 Yes
Tao Xiangnan MUST Professor 10 January 2018 Yes
Zhu Heping
School of Business of
Jiangnan University
Professor 1 September 2007 Yes
Notes
N/A
Punishments imposed in the recent three years by the securities regulator on the incumbent directors, supervisors
and senior management as well as those who left in the Reporting Period:
61
□ Applicable √Not applicable
IV Remuneration of Directors, Supervisors and Senior Management
Decision-making procedure, determination basis and actual payments of remuneration for directors, supervisors
and senior management:
(1) Decision-making procedure for the remuneration of directors, supervisors and senior management: The
remuneration for senior management is proposed by the Remuneration and Appraisal Committee under the Board
and finalized upon the Board’s approval; and that for directors and supervisors is subject to their positions.
(2) Determining basis for the remuneration of directors, supervisors and senior management: The remuneration of
directors, supervisors and senior management receiving remuneration from the Company consist of the basic
annual salary and performance annual salary. The basic annual salary is decided according to the duties, risks,
pressure and other factors born by the directors, supervisors and senior management, and it stays unchanged;
while the performance annual salary is linked with the profit completion rate and the appraisal results of target
responsibility system of the Company. The remuneration system of the directors, supervisors and senior
management of the Company serves for its operating strategy, which is adjusted according to the changes of
operation situation of the Company so as to adapt to the needs of the further development of the Company. The
adjustment basis for the remuneration of directors, supervisors and senior management of the Company is as
follows: (1) the increase level of remuneration in the same industry; (2) the earnings of the Company; (3) the
adjustment of organization structure; (4) adjustment on positions. The allowances for independent directors are
RMB100, 000 (tax included) per year upon consideration and approval of the shareholders’ meeting, and the
expenses occurred to execute their responsibilities are borne by the Company.
(3) Actual payment for the remuneration of directors, supervisors and senior management: The basic salary of
directors, supervisors and senior management receiving remuneration from the Company is paid monthly; the
allowance for independent directors is paid quarterly.
Remuneration of directors, supervisors and senior management for the Reporting Period
Unit: RMB'0,000
Name Office title Gender Age
Incumbent/For
mer
Total before-tax
remuneration from the
Company
Any remuneration
from related party
Fang Hongbo Chairman of the Board Male 51 Incumbent Ye s
62
Lu Jianfeng Director & General Manager Male 45 Incumbent 375.67
Xiao Mingguang Director Male 48 Incumbent 0 Ye s
Jiang Peng Director Male 45 Incumbent 0 Ye s
Zhou Sixiu Director & Board Secretary Female 45 Incumbent 174.98
Sun Y unan Director & CFO Male 40 Incumbent 326.06
Jiang Qingyun Independent Director Male 54 Incumbent 10
Tao Xiangnan Independent director Male 52 Incumbent 10
Zhu Heping Independent director Male 54 Incumbent 10
Liu Di
Chairman of Supervisory
Committee
Male 36 Incumbent 207.13
Wang Shouhu Supervisor Male 37 Incumbent 63.22
Xu Pengcheng Staff representative supervisor Male 49 Incumbent 301.32
Liang Pengfei
Chairman of Supervisory
Committee
Male 41 Left 16 Ye s
Total -- -- -- -- 1,494.39 --
Equity incentives for directors, supervisors and senior management in the Reporting Period:
□ Applicable √Not applicable
V Employees
1. Number, Functions and Educational Backgrounds of Employees
Number of in-service employees of the Company as the parent 6,535
Number of in-service employees of major subsidiaries 4,924
Total number of in-service employees 11,459
Total number of paid employees in the Reporting Period 13,193
Number of retirees to whom the Company as the parent or its
major subsidiaries need to pay retirement pensions
423
Functions
Function Employees
Production 8,741
Sales 907
Technical 1,423
Financial 165
Administrative 223
Total 11,459
63
Educational backgrounds
Educational background Employees
Master’s degree and above 332
Bachelor’s degree 2,203
College and Technical secondary school 3,150
Middle school and below 5,774
Total 11,459
76%
8%
12%
1%
2%
Production
Technical
Financial Administrative
Sales
Functions
3%
19%
27%
50%
Master and above
Bachelor
Middle
school and
College and
Technical
Secondary School
Educational
background
2. Employee Remuneration Policy
The remuneration of employees is paid on time according to the Company’s Methods for Remuneration
Management. The Company decides its employees’ fixed salaries according to their positions and their floating
wages in line with its operating results. Meanwhile, the Company leans to strategic talent so as to ensure
competitive wages for core personnel. And the remuneration policy will be irregularly adjusted according to
regional differences, the talent supply, employees’ turnover, changes in the industry environment and the
Company’s paying ability.
3. Employee Training Plans
It will decide the training content for employees from different levels and groups according to the post
qualification, and promote the training of entire staff, so as to build a learning organization.
64
4. Labor Outsourcing
□ Applicable √Not applicable
65
Part IX Corporate Governance
I General Information of Corporate Governance
The Company continuously perfected its corporate governance; promote the improvement of its operation and
formulate the corresponding internal control system, prevented and controlled risks and safeguarded the legitimate
rights and interests of the Company and the shareholders in accordance with the requirements of relevant laws and
rules such as Company Law, Securities Law issued by CSRC. The actual situation of the Company’s corporate
governance is in accordance with the requirements of Administrative Rule for Listed Companies issued by CSRC.
For better governance, the Company has formulated the Rules of Procedure for the Board of Directors, the
Supervisory Board, shareholders’ meetings and the specialized committees under the Board of Directors, as well
as the Disclosure of Information Management System, Raise Money Management System, Related Transaction
Management System, Information Source Insider Registration Management System, Internal Report System for
the Major Issues, System of Accountability for Management, the Preliminary Plan Regarding Risk Handling in
Financial Services (Accepting Deposits and Lending) Provided by Midea Group Finance Co., Ltd, etc. During the
Reporting Period, according to applicable laws and regulations and the need arising from its actual operations, the
Company held the 2017 Annual General Meeting on 11 April 2018, at which the Articles of Association had been
revised, further improving its corporate governance mechanism.
In line with the relevant provisions of Company Law, the Articles of Association etc., the Company established a
comparative perfect organization control structure system The Board of Director conducted the resolutions of
general meeting of shareholders, response for the significant decision-making events and general meeting of
stockholders; the Company appointed GM by law, presided over the daily production operation and management,
organized the implementation of resolution of the Board, was responsible for the Board of Directors; the
supervisor of the Company was the supervisory organization for the Company which supervised the behaviors of
the directors, GM and the finance of the Company. The four committees, Strategy Committee, the Remuneration
and Appraisal Committee, Audit Committee, the Nomination Committee were under the Board of Directors. the
Company’s General Meeting of shareholders, Board of Directors, Board of directors and operation managerial
personnel with clear responsibilities and rights, performing their duties, effective checks and balances, scientific
decision-making and coordinate operations, which laid a solid foundation for sustained, stable and healthy
66
development of the Company.
Indicate by tick market whether there is any material incompliance with the regulatory documents issued by the
CSRC governing the governance of listed companies.
□ Yes √No
II The Company’s Independence from Its Controlling Shareholder in Business, Personnel,
Asset, Organization and Financial Affairs
The Company is completely separated from its controlling shareholder in aspects such as business, personnel,
assets, institutions and finance and possesses independent and complete business and self-dependent operating
ability.
1. In respect of business, the Company owned independent and integrated system of R&D, purchasing, production
and sales. Main business of the Company is washing machine that there isn’t any horizontal competition between
the Company and the controlling shareholder. The Company was completely separated from the controlling
shareholder in business.
2.In respect of personnel, in terms of labor, personnel and salary management, the Company and the controlling
shareholder were independent each other, there existed no mixed operation and management between the
Company and the controlling shareholder. Such senior management staff as General Manager, CFO and Board
Secretary did not take any posts in shareholding companies.
3. In respect of assets, the Company’s assets were complete, and there was the clear property right relationship
between the Company and the controlling shareholder.
4. In respect of organization, the Company has set up the organization that was independent from the controlling
shareholder completely, the Board of Directors, the Supervisory Board and internal organization could operate
independently.
5. In respect of financing, the Company owned independent financial department, established independent
accounting system and financial management system, opened independent bank account, paid tax in line with
laws.
III Horizontal Competition
□ Applicable √Not applicable
67
IV Annual and Extraordinary General Meetings Convened during the Reporting Period
1. General Meeting Convened during the Reporting Period
Meeting Type
Investor
participation ratio
Date of the
meeting
Disclosure
date
Index to disclosed information
The 2017 Annual General
Meeting
Annual General
Meeting
59.13% 11 April 2018 12 April 2018
Announcement No. 2018-14
disclosed on www.cninfo.com.cn
The 1
st
Extraordinary
General Meeting of 2018
Extraordinary
General Meeting
63.58% 24 August 2018
25 August
2018
Announcement No. 2018-30
disclosed on www.cninfo.com.cn
The 2
nd
Extraordinary
General Meeting of 2018
Extraordinary
General Meeting
22.34%
21 December
2018
22 December
2018
Announcement No. 2018-58
disclosed on www.cninfo.com.cn
2. Special General Meetings Convened at the Request of Preferred Shareholders with Resumed Voting
Rights
□ Applicable √Not applicable
V Performance of Duty by Independent Directors in the Reporting Period
1. Attendance of Independent Directors at Board Meetings and General Meetings
Attendance of independent directors at board meetings and general meetings
Independent
director
Total number of
board meetings
the independent
director was
eligible to attend
Board
meetings
attended on
site
Board meetings
attended by way
of
telecommunicati
on
Board
meetings
attended
through a
proxy
Board meetings
the independent
director failed to
attend
The independent
director failed to attend
two consecutive board
meetings (yes/no)
General
meetings
attended
Jiang Qingyun 7 2 5 0 0 No 3
Tao Xiangnan 7 2 5 0 0 No 2
Zhu Heping 7 2 5 0 0 No 3
2. Objections Raised by Independent Directors on Matters of the Company
Indicate by tick mark whether any independent directors raised any objections on any matter of the Company.
□ Yes √No
3. Other Information about the Performance of Duty by Independent Directors
Indicate by tick mark whether any suggestions from independent directors were adopted by the Company.
68
√Ye s □ No
Suggestions from independent directors adopted or not adopted by the Company:
During the Reporting Period, the independent directors of the Company in strict accordance with the relevant laws,
regulations and rules of Articles of Association, focus on the operation of the Company, perform their duties
independently and put forward the professional opinions to complete the system of the Company and daily
management decisions , for those events need issued opinions, the independent directors put forward independent
and impartial advice, which play a proper role to improve the company governance mechanism, safeguard the
legitimate rights and interests of the Company and all shareholders.
VI Performance of Duty by Specialized Committees under the Board in the Reporting Period
During the Reporting Period, the performance of the specialized committees under the Board for 2018 in
accordance with the Company Law, Guidelines for Governance of Listed Companies, Articles of Association and
Rules of Procedures for the specialized committees under the Board was as follows:
1.The Audit Committee under the Board convened four meetings, at which reviewed and approved the Annual
Financial Statement Report 2017, Annual Report and Its Abstract 2017, Summary Report of the Audit Committee
on the 2017 Annual Audit Work, Proposal on Engaging the Audit Firm for 2018, First Quarter Report 2018,
Semi-annual Report 2018 and Third Quarter Report 2018.
2. The strategy Committee under the Board convened one meeting, at which reviewed and approved the proposal
on Mid-term Development Plan of the Company (2018-2020);
3.The Remuneration and Appraisal Committee under the Board convened one meeting, at which reviewed and
approved the Proposal on Paying the 2017 Annual Remuneration to the Senior Management;
4. The Nomination Committee under the Board convened two meetings, at which reviewed and approved the
Proposal on General Election of the Board and Nomination of Candidates for Non-independent Directors, the
Proposal on General Election of the Board and Nomination of Candidates for Independent Directors, the Proposal
on Appointment of General Managers, the Proposal on Appointment of CFO and the Proposal on Appointment of
Secretary of the Board.
VII Performance of Duty by the Supervisory Committee
Indicate by tick mark whether the Supervisory Committee found any risk to the Company during its supervision in
the Reporting Period.
69
□ Yes √No
VIII Appraisal of and Incentive for Senior Management
The selection, appraisal and incentive system of the senior management of the Company were implemented
according to relevant regulations of the Company Law and the Articles of Association of the Company. The
Company established examination and evaluation system on the basis of the target responsibility, determine the
evaluation index, evaluation method and evaluation method relate to the assessment results, according to the
annual signing of the Target Responsibility Assessment System Agreement with senior management. During the
Reporting Period, the Company had in accordance with the measures for the management of target responsibility
system exam and the rate the senior management, and had reflected in an annual performance remuneration,
which effectively improved the senior management’ responsibility and work enthusiasm.
IX Internal Control
1. Material Internal Control Weaknesses Identified for the Reporting Period
□ Yes √No
2. Internal Control Self-Evaluation Report
Disclosure date of the internal control self-evaluation report 30 March 2019
Index to the disclosed internal control self-evaluation report
For details about the Internal Control Self-Evaluation Report
2018, see www.cninfo.com.cn, the website designated by the
Shenzhen Stock Exchange for information disclosure.
Evaluated entities’ combined assets as % of consolidated total assets 100.00%
Evaluated entities’ combined operating revenue as % of consolidated
operating revenue
100.00%
Identification standards for internal control weaknesses
Type
Weaknesses in internal control over financial
reporting
Weaknesses in internal control not related to
financial reporting
Nature standard
For details, please refer to “(III) Basis for
internal control appraisal and identification
standards for internal control defects” in Part III
of the Internal Control Self-Evaluation Report
2018 disclosed on www.cninfo.com.cn dated 30
March 2019.
For details, please refer to “(III) Basis for
internal control appraisal and identification
standards for internal control defects” in Part III
of the Internal Control Self-Evaluation Report
2018 disclosed on www.cninfo.com.cn dated 30
March 2019.
Quantitative standard
For details, please refer to “(III) Basis for For details, please refer to “(III) Basis for
70
internal control appraisal and identification
standards for internal control defects” in Part III
of the Internal Control Self-Evaluation Report
2018 disclosed on www.cninfo.com.cn dated 30
March 2019.
internal control appraisal and identification
standards for internal control defects” in Part III
of the Internal Control Self-Evaluation Report
2018 disclosed on www.cninfo.com.cn dated 30
March 2019.
Number of material weaknesses
in internal control over financial
reporting
0
Number of material weaknesses
in internal control not related to
financial reporting
0
Number of serious weaknesses
in internal control over financial
reporting
0
Number of serious weaknesses
in internal control not related to
financial reporting
0
X Independent Auditor’s Report on Internal Control
Opinion paragraph in the independent auditor’s report on internal control
The audit firm for internal control believes that the Company makes valid internal control on financial report in all significant
aspects on 31 December 2018 according to the Basic Rules on Enterprise Internal Control and other relevant stipulations.
Independent auditor’s report on internal
control disclosed or not
Disclosed
Disclosure date 30 March 2019
Index to such report disclosed
For details about the Auditor’s Report on Internal Control 2018, see www.cninfo.com.cn,
the website designated by the Shenzhen Stock Exchange for information disclosure.
Type of the auditor’s opinion Unmodified unqualified opinion
Material weaknesses in internal control
not related to financial reporting
None
Indicate by tick mark whether any modified opinion is expressed in the independent auditor’s report on the
Company’s internal control.
□ Yes √No
Indicate by tick mark whether the independent auditor’s report on the Company’s internal control is consistent
with the internal control self-evaluation report issued by the Company’s Board.
√Ye s □ No
71
Part X Corporate Bonds
Does the Company have any corporate bonds publicly offered on the stock exchange, which were outstanding
before the date of this Report’s approval or were due but could not be redeemed in full?
□ Yes √No
Part XI Financial Report
[English Translation for Reference Only]
Auditor’s Report
PwC ZT Shen Zi (2019) No. 10082
(Page 1 of 5)
To the Shareholders of Wuxi Little Swan Company Limited,
Opinion
What we have audited
We have audited the accompanying financial statements of Wuxi Little Swan Company Limited
(hereinafter “the Company”), which comprise:
? the consolidated and company balance sheets as at 31 December 2018;
? the consolidated and company income statements for the year then ended;
? the consolidated and company cash flow statements for the year then ended;
? the consolidated and company statements of changes in shareholders’ equity for the year
then ended; and
? notes to the financial statements.
Our opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the
consolidated and company’s financial position of the Company as at 31 December 2018, and their
financial performance and cash flows for the year then ended in accordance with the requirements of
Accounting Standards for Business Enterprises (“CASs”).
Basis for Opinion
We conducted our audit in accordance with China Standards on Auditing (“CSAs”). Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
We are independent of the Company in accordance with the Code of Ethics for Professional Accountants
of the Chinese Institute of Certified Public Accountants (“CICPA Code”), and we have fulfilled our other
ethical responsibilities in accordance with the CICPA Code.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
3
PwC ZT Shen Zi (2019) No. 10082
(Page 2 of 5)
Key Audit Matters (cont’d)
The key audit matter identified in our audit is revenue recognition for sales of goods.
Key Audit Matter – Revenue recognition for
sales of goods
How our audit addressed the key audit matter
Revenue recognition for sales of goods
Refer to Note V(23) and Note VII(32).
The Company and its subsidiaries
recognise revenue when it is probable
that future economic benefits will flow
to the entity; when the amount of
revenue can be reliably measured; and
when specific criterias have been met for
each of the activities. In 2018, the
consolidated revenue of the Company
amounted to RMB 23,636,929 thousands
of which 99.62% are revenue from sales
of goods.
We focus on the revenue recognition for
sales of goods.
Our focus on the revenue recognition for
sales of goods is mainly due to a large
number of goods of Little Swan are sold
to large amount of customers in different
sals channels domesticly and abroad.
We performed the following procedures for sales of goods:
We discussed with management of business departments and
financial department of the Company for the process of sales of
goods in different sales channels. We understood and evaluated
the relevant internal controls and performed testing on the
operating effectiveness of key controls.
We examined samples of sales agreements with customers of
different sales channels of the Company. Based on our discussion
with management, our understanding and audit experience of the
sales transactions, we assessed the accounting policy for revenue
recognition for sales of goods.
We performed the following procedures for sales of goods
through different sales channels:
?Performed risk assessment procedures including analysis on the
fluctuations of monthly sales amounts and gross margin;
?Examined supporting documents related to the sales of goods on
sample basis, including sales agreements, sales orders, sales
invoices, transportation documents , receipt notes and settlement
notes from customers;
?Checked supporting documents including receipt notes or
settlement notes from customers for sales of goods recognised
before or after the balance sheet date, so as to evaluate whether
the sales of goods was recorded in the correct period.
Based on the audit procedures performed, we found that the
revenue recognition for sales of goods was consistent with the
accounting policy of the Company.
4
PwC ZT Shen Zi (2019) No. 10082
(Page 3 of 5)
Other Information
Management of the Company is responsible for the other information. The other information comprises all of the
information included in 2018 annual report of the Company other than the financial statements and our auditor’s
report thereon.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report
that fact. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management of the Company is responsible for the preparation and fair presentation of these financial
statements in accordance with the CASs, and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing these financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intend to liquidate the Company or to cease operations, or
have no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether these financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with CSAs will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
5
PwC ZT Shen Zi (2019) No. 10082
(Page 4 of 5)
Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d)
As part of an audit in accordance with CSAs, we exercise professional judgment and maintain professional
scepticism throughout the audit. We also:
? Identify and assess the risks of material misstatement of the financial statements, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
? Obtain an understanding of internal control relevant to the audit in order to design audit procedures that
are appropriate in the circumstances.
? Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates
and related disclosures made by management.
? Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in these financial statements or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company to cease to continue as a going
concern.
? Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
? Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the Company and its subsidiaries
audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that
we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
6
PwC ZT Shen Zi (2019) No. 10082
(Page 5 of 5)
Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d)
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
PricewaterhouseCoopers Zhong Tian LLP Signing CPA Huang Meimei
Shanghai , the People’s Republic of China (Engagement Partner)
28 March 2019 Signing CPA Zhang Xiaoying
7
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
ASSETS Note
31 December 2018
Consolidated
31 December 2017
Consolidated
Current Assets:
Cash at bank and on hand VII(1) 1,926,938,134.40 1,588,264,516.05
Financial assets at fair value through profit or loss VII(2) - 5,270,238.03
Notes and accounts receivables VII(3) 3,019,035,979.14 3,019,917,180.38
Advances to suppliers VII(4) 87,926,863.95 84,346,792.38
Other receivables VII(5) 233,956,205.26 108,168,362.07
Inventories VII(6) 1,754,597,149.53 1,980,766,196.14
Other current assets VII(7) 14,670,897,092.07 12,778,240,745.22
Total current assets 21,693,351,424.35 19,564,974,030.27
Non-current assets:
Available-for-sale financial assets VII(8) 200,000.00 200,000.00
Investment properties VII(9) 54,776,877.23 61,695,825.00
Fixed assets VII(10) 1,121,036,700.25 1,029,668,355.84
Construction in progress VII(11) 15,486,834.37 37,972,252.60
Intangible assets VII(12) 181,939,282.79 187,045,347.27
Long-term prepaid expenses VII(13) 25,540,285.92 22,382,020.52
Deferred tax assets VII(14) 427,278,679.21 407,151,474.64
Other non-current assets VII(15) 42,289,041.73 27,331,937.53
Total non-current assets 1,868,547,701.50 1,773,447,213.40
Total assets 23,561,899,125.85 21,338,421,243.67
8
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED BALANCE SHEET(continued)
AS AT 31 DECEMBER 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
LIABILITIES AND OWNERS' EQUITY Note
31 December 2018
Consolidated
31 December 2017
Consolidated
Current liabilities:
Short-term borrowings VII(16) 117,603,683.89 81,393,672.34
Financial liabilities at fair value through profit or loss VII(17) 3,078,878.95 -
Notes and accounts payables VII(18) 7,979,727,116.02 6,632,830,300.51
Advances from customers VII(19) 2,024,945,754.25 3,065,815,801.93
Employee benefits payable VII(20) 393,998,052.46 349,483,844.76
Taxes payable VII(21) 559,619,230.00 638,017,523.31
Other payables VII(22) 175,263,267.57 228,117,647.54
Other current liabilities VII(23) 2,507,883,253.19 2,107,700,604.61
Total current liabilities 13,762,119,236.33 13,103,359,395.00
Non-current liabilities:
Long-term employee benefits payable VII(24) 9,888,772.71 12,021,620.17
Provisions VII(25) 1,853,074.62 2,253,082.25
Deferred income VII(26) 39,475,933.17 2,489,133.21
Total non-current liabilities 51,217,780.50 16,763,835.63
Total liabilities 13,813,337,016.83 13,120,123,230.63
Owners’ equity:
Share capital VII(27) 632,487,764.00 632,487,764.00
Capital surplus VII(28) 1,330,650,826.13 1,252,947,546.80
Other comprehensive income VII(29) -2,206,100.21 40,496,366.85
Surplus reserve VII(30) 332,594,722.29 332,594,722.29
Retained earnings VII(31) 6,018,535,295.32 4,788,564,401.03
Equity attributable to the owners of the Company 8,312,062,507.53 7,047,090,800.97
Minority interests 1,436,499,601.49 1,171,207,212.07
Total owners’ equity 9,748,562,109.02 8,218,298,013.04
Total liabilities and owners’ equity 23,561,899,125.85 21,338,421,243.67
9
WUXI LITTLE SWAN CO., LTD.
BALANCE SHEET OF THE COMPANY
AS AT 31 DECEMBER 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
ASSETS Note
31 December 2018
Company
31 December 2017
Company
Current Assets:
Cash at bank and on hand 1,054,092,494.27 1,030,061,384.78
Financial assets at fair value through profit or loss - 3,724,810.47
Notes and accounts receivables XVIII(1) 2,612,181,833.04 3,743,536,948.22
Advances to suppliers 61,976,396.93 67,278,861.92
Other receivables XVIII(2) 147,971,734.02 61,886,256.59
Inventories 1,012,418,438.83 1,206,334,183.68
Other current assets 9,410,921,667.01 7,259,605,039.27
Total current assets 14,299,562,564.10 13,372,427,484.93
Non-current assets:
Available-for-sale financial assets 150,000.00 150,000.00
Long-term equity investments XVIII(3) 958,235,041.57 958,235,041.57
Investment properties 4,458,055.96 7,882,440.32
Fixed assets 615,882,736.87 532,803,209.18
Construction in progress 61,980.58 37,321,733.68
Intangible assets 87,210,567.00 89,900,867.32
Long-term prepaid expenses 8,812,163.74 5,905,684.35
Deferred tax assets 264,335,974.30 225,186,332.58
Other non-current assets 28,091,110.19 17,138,349.61
Total non-current assets 1,967,237,630.21 1,874,523,658.61
Total assets 16,266,800,194.31 15,246,951,143.54
10
WUXI LITTLE SWAN CO., LTD.
BALANCE SHEET OF THE COMPANY (continued)
AS AT 31 DECEMBER 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
LIABILITIES AND OWNERS' EQUITY Note
31 December 2018
Company
31 December 2017
Company
Current liabilities:
Short-term borrowings 43,362,419.45 16,806,882.34
Financial liabilities at fair value through profit or loss 1,597,534.54 -
Notes and accounts payables 7,020,284,546.83 6,073,907,942.42
Advances from customers 1,198,597,569.21 1,862,974,982.38
Employee benefits payable 302,942,210.91 268,065,495.23
Taxes payable 347,233,227.80 353,920,883.93
Other payables 124,362,696.11 153,979,505.69
Other current liabilities 1,536,311,047.76 1,336,384,942.60
Total current liabilities 10,574,691,252.61 10,066,040,634.59
Non-current liabilities:
Deferred income 30,000,000.00 -
Total non-current liabilities 30,000,000.00 -
Total liabilities 10,604,691,252.61 10,066,040,634.59
Owners’ equity:
Share capital 632,487,764.00 632,487,764.00
Capital surplus 1,473,906,707.63 1,405,575,239.68
Other comprehensive income - 27,970,054.39
Surplus reserve 319,944,578.39 319,944,578.39
Retained earnings 3,235,769,891.68 2,794,932,872.49
Total owners’ equity 5,662,108,941.70 5,180,910,508.95
Total liabilities and owners’ equity 16,266,800,194.31 15,246,951,143.54
11
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Note
2018
Consolidated
2017
Consolidated
Revenues VII(32), VII(33) 23,636,929,478.33 21,384,699,076.65
Less: Cost of sales VII(32), VII(33) -17,444,047,983.81 -15,982,893,658.84
Taxes and surcharges VII(34) -131,688,531.67 -131,791,477.12
Selling and distribution expenses VII(35) -3,351,676,000.52 -2,872,849,586.14
General and administrative expenses VII(36) -181,699,829.11 -728,323,077.71
Research and development espenses VII(37) -733,045,215.90 -550,779,796.27
Finance income – net VII(38) 531,729,710.86 71,808,982.80
Including: Interest expenses -82,896,711.16 -43,471,999.43
Inter es t im com e 559,310,635.71 195,433,894.48
Asset impairment losses VII(39) -50,403,477.17 -70,595,875.65
Add: Othe income VII(43) 60,261,970.48 53,894,074.25
Investment income VII(41) 119,819,109.77 320,623,463.23
Profit or loss arising from changes in fair value VII(40) -8,349,116.98 5,270,238.03
Gain or loss on disposal of assets VII(42) 13,137,087.29 -975,423.00
Operating profit 2,460,967,201.572,048,866,736.50
Add: Non-operating income VII(44) 20,434,056.10 17,448,715.84
Less: Non-operating expenses VII(45) -2,243,270.24 -1,620,508.98
Total profit 2,479,157,987.432,064,694,943.36
Less: Income tax expenses VII(46) -348,163,057.33 -356,274,657.61
Net profit 2,130,994,930.101,708,420,285.75
Classified by continuity of operations
Net profit from continuing operations 2,130,994,930.101,708,420,285.75
Classified by ownership of the equity
Attributable to owners of the Company 1,862,458,658.291,506,412,505.22
Minority interests 268,536,271.81202,007,780.53
12
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED INCOME STATEMENT (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Note
2018
Consolidated
2017
Consolidated
Other comprehensive income, net of tax -49,181,048.69 -39,345,928.61
Attributable to owners of the Company -42,702,467.06 -30,261,157.76
Other comprehensive income that will be
subsequently reclassified to profit or loss
-42,702,467.06 -30,261,157.76
Including: Changes in fair value of
available-for-sale financial assets
-42,711,851.32 -30,246,066.76
Foreign-currency financial statement
translation difference
9,384.26 -15,091.00
Attributable to minority interests -6,478,581.63-9,084,770.85
Total comprehensive incomes 2,081,813,881.41 1,669,074,357.14
Attributable to owners of the Company 1,819,756,191.23 1,476,151,347.46
Attributable to minority interests 262,057,690.18192,923,009.68
Earnings per share VII(47)
Basic earnings per share 2.94 2.38
Diluted earnings per share 2.94 2.38
Notes thereon are parts of this financial report.
13
WUXI LITTLE SWAN CO., LTD.
INCOME STATEMENT OF THE COMPANY
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Notes
2018
Company
2017
Company
Revenues XVIII(4) 16,944,395,616.24 16,227,944,922.59
Less: Cost of sales XVIII(4) -13,121,978,095.02 -12,576,166,337.97
Taxes and surcharges -81,402,613.76 -87,954,972.46
Selling and distribution expenses -2,226,329,070.34 -1,936,954,187.36
General and administrative expenses -158,402,076.19 -137,576,685.03
Research and development espenses -527,450,385.05 -422,811,623.35
Finance income – net 329,304,681.68 47,870,144.26
Including: Interest expenses -45,997,552.93 -31,346,319.38
Interest imcome 344,593,418.75 121,741,886.89
Asset impairment losses -21,707,777.96 -464,901,476.21
Add: Other income 16,608,877.54 17,697,350.94
Investment income XVIII(5) 67,510,581.99 169,205,446.47
Profit or loss arising from changes in fair value -5,322,345.01 3,724,810.47
Gain or loss on disposal of assets 11,315,132.66 433,848.54
Operating profit 1,226,542,526.78 840,511,240.89
Add: Non-operating income 15,916,328.26 8,471,093.21
Less: Non-operating expenses -1,794,344.87 -1,289,079.79
Total profit 1,240,664,510.17 847,693,254.31
Less: Income tax expenses -167,339,726.98 -186,758,620.94
14
WUXI LITTLE SWAN CO., LTD.
INCOME STATEMENT OF THE COMPANY (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Notes
2018
Company
2017
Company
Net profit 1,073,324,783.19 660,934,633.37
Classified by continuity of operations
Net profit from continuing operations 1,073,324,783.19 660,934,633.37
Other comprehensive income, net of tax -27,970,054.39 -9,545,289.45
Other comprehensive income that will be subsequently
reclassified to profit or loss
-27,970,054.39 -9,545,289.45
Changes in fair value of available-for-sale financial
assets
-27,970,054.39 -9,545,289.45
Total comprehensive income 1,045,354,728.80 651,389,343.92
15
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Note
2018
Consolidated
2017
Consolidated
Cash flows from operating activities
Cash received from sales of goods or rendering of services 20,859,207,120.69 17,558,217,913.33
Refund of taxes and surcharges 40,465,127.34 65,523,277.52
Cash received relating to other operating activities VII(48)(a) 132,642,704.80 114,191,110.40
Sub-total of cash inflows 21,032,314,952.83 17,737,932,301.25
Cash paid for goods and services -15,340,952,680.15 -13,209,347,707.13
Cash paid to and on behalf of employees -1,539,248,887.07 -1,267,020,460.78
Payments of taxes and surcharges -929,676,780.94 -721,750,460.90
Cash paid relating to other operating activities VII(48)(b) -597,543,783.54 -524,059,854.14
Sub-total of cash outflows -18,407,422,131.70 -15,722,178,482.95
Net cash flows from operating activities VII(49)(a) 2,624,892,821.13 2,015,753,818.30
Cash flows from investing activities
Cash received from disposal of investments 16,538,983,636.67 11,100,000,000.00
Cash received from returns on investments 119,819,109.77 320,623,463.24
Net cash received from disposal of fixed assets, intangible
assets and other long-term assets
20,259,391.10 5,269,840.73
Cash received relating to other investing activities VII(48)(c) 371,593,335.61 91,904,332.38
Sub-total of cash inflows 17,050,655,473.15 11,517,797,636.35
Cash paid to acquire fixed assets, intangible assets and other
long-term assets
-279,510,384.29 -209,521,425.79
Cash paid to acquire investments -18,500,000,000.00 -15,448,983,636.67
Sub-total of cash outflows -18,779,510,384.29 -15,658,505,062.46
Net cash flows from investing activities -1,728,854,911.14 -4,140,707,426.11
16
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED CASH FLOW STATEMENT (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Note
2018
Consolidated
2017
Consolidated
Cash flows from financing activities
Cash received from borrowings 117,603,683.89 680,166,782.34
Sub-total of cash inflows 117,603,683.89 680,166,782.34
Cash repayments of borrowings -81,393,672.34 -782,586,174.12
Cash payments for distribution of dividends, profits or
interest expenses
-632,727,537.52 -485,163,943.33
Cash payments relating to other financing activities - -
Sub-total of cash outflows -714,121,209.86 -1,267,750,117.45
Net cash flows from financing activities -596,517,525.97 -587,583,335.11
Effect of foreign exchange rate changes on cash and cash
equivalents -3,775,498.34
-41,663,902.58
Net increase/decrease in cash and cash equivalents 295,744,885.68 -2,754,200,845.50
Add: Cash and cash equivalents at beginning of year 1,417,489,071.71 4,171,689,917.21
Cash and cash equivalents at end of year VII(49)(b) 1,713,233,957.39 1,417,489,071.71
17
WUXI LITTLE SWAN CO., LTD.
CASH FLOW STATEMENT OF THE COMPANY
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items
2018
Company
2017
Company
Cash flows from operating activities
Cash received from sale of goods or rendering of service 14,829,613,631.03 13,498,207,711.94
Cash received relating to other operating activities 82,679,983.70 67,433,518.99
Sub-total of cash inflows 14,912,293,614.73 13,565,641,230.93
Cash paid for goods and services -10,295,617,985.65 -10,552,165,814.20
Cash paid to and on behalf of employees -1,081,444,267.99 -886,884,259.02
Payments of taxes and surcharges -486,238,665.42 -422,322,982.87
Cash paid relating to other operating activities -419,041,419.39 -403,566,550.55
Sub-total of cash outflows -12,282,342,338.45 -12,264,939,606.64
Net cash flows from operating activities 2,629,951,276.28 1,300,701,624.29
Cash flows from investing activities
Cash received from disposal of investments 9,138,160,815.54 6,440,000,000.00
Cash received from returns on investments 67,510,581.99 169,205,446.47
Net cash received from disposal of fixed assets, intangible assets
and other long-term assets
17,643,300.66 3,627,843.72
Cash received relating to other investing activities 223,766,691.78 66,127,555.36
Sub-total of cash inflows 9,447,081,389.97 6,678,960,845.55
Cash paid to acquire fixed assets, intangible assets and other
long-term assets
-184,308,580.76 -106,969,634.65
Cash paid to acquire investments -11,300,000,000.00 -8,678,160,815.54
Cash paid to relating to other investing activities - -
Sub-total of cash outflows -11,484,308,580.76 -8,785,130,450.19
Net cash flows from investing activities -2,037,227,190.79 -2,106,169,604.64
Cash Flows from Financing Activities:
18
WUXI LITTLE SWAN CO., LTD.
CASH FLOW STATEMENT OF THE COMPANY (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items
2018
Company
2017
Company
Cash received from borrowings 43,362,419.45 428,629,992.34
Sub-total of cash inflows 43,362,419.45 428,629,992.34
Cash repayments of borrowings -16,806,882.34 -535,766,203.80
Cash payments for distribution of dividends, profits or interest expenses -631,293,961.64 -480,899,391.48
Sub-total of cash outflows -648,100,843.98 -1,016,665,595.28
Net cash flows from financing activities -604,738,424.53 -588,035,602.94
Effect of foreign exchange rate changes on cash and cash equivalents -3,502,716.40 -14,445,909.84
Net decrease in cash and cash equivalents -15,517,055.44 -1,407,949,493.13
Add: Cash and cash equivalents at beginning of year 945,759,061.62 2,353,708,554.75
Cash and cash equivalents at end of year 930,242,006.18 945,759,061.62
19
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items
Attributable to the owners of the Company
Minority
interests
Total owners’
equity
Share capital Capital surplus
Other comprehensive
income
Surplus
reserves
Retained
earnings
Note VII(27) VII(28) VII(29) VII(30) VII(31)
Balance at 1 January 2018 632,487,764.00 1,252,947,546.80 40,496,366.85 332,594,722.29 4,788,564,401.03 1,171,207,212.07 8,218,298,013.04
Movements for the year ended 31 December 2018 -77,703,279.33 -42,702,467.06 -1,229,970,894.29 265,292,389.42 1,530,264,095.98
Total comprehensive income - - -42,702,467.06 -1,862,458,658.29262,057,690.18 2,081,813,881.41
-Net profit - - - - 1,862,458,658.29 268,536,271.81 2,130,994,930.10
-Other comprehensive income - - -42,702,467.06 - --6,478,581.63-49,181,048.69
Capital contribution and withdrawal by owners - 77,703,279.33 - - - 3,234,699.24 80,937,978.57
-Amount recorded in owners' equity arising
from share-based payment arrangements
-77,703,279.33 - - -3,234,699.2480,937,978.57
-Others - - - - - - -
Profit distribution - - - - -632,487,764.00 - -632,487,764.00
-Profit distribution to equity owners - - - - -632,487,764.00 - -632,487,764.00
Balance at 31 December 2018 632,487,764.00 1,330,650,826.13 -2,206,100.21 332,594,722.29 6,018,535,295.32 1,436,499,601.49 9,748,562,109.02
20
WUXI LITTLE SWAN CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items
Attributable to the owners of the Company
Minority
interests
Total owners’
equity Share capital Capital surplus
Other comprehensive
income
Surplus
reserves
Retained
earnings
Note VII(27) VII(28) VII(29) VII(30) VII(31)
Balance at 1 January 2017 632,487,764.00 1,191,490,133.01 70,757,524.61 332,594,722.29 3,756,517,718.81 975,247,204.68 6,959,095,067.40
Movements for the years ended 31 December 2017 -61,457,413.79 -30,261,157.76 -1,032,046,682.22 195,960,007.39 1,259,202,945.64
Total comprehensive income - - -30,261,157.76 -1,506,412,505.22192,923,009.68 1,669,074,357.14
-Net profit - - - - 1,506,412,505.22 202,007,780.53 1,708,420,285.75
-Other comprehensive income - - -30,261,157.76 - --9,084,770.85-39,345,928.61
Capital contribution and withdrawal byowners - 61,457,413.79 - - - 3,036,997.71 64,494,411.50
-Amount recorded in owners' equity arising
from share-based payment arrangements
- 61,953,091.84 - - - 2,541,319.66 64,494,411.50
-Others - -495,678.05 - - - 495,678.05 -
Profit distribution - - - - -474,365,823.00 - -474,365,823.00
-Profit distribution to equity owners - - - - -474,365,823.00 - -474,365,823.00
Balance at 31 December 2017 632,487,764.00 1,252,947,546.80 40,496,366.85 332,594,722.29 4,788,564,401.03 1,171,207,212.07 8,218,298,013.04
21
WUXI LITTLE SWAN CO., LTD.
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Share capital Capital surplus
Other comprehensive
income
Surplus reserves Retained earnings Total owners’ equity
Balance at 1 January 2018 632,487,764.00 1,405,575,239.68 27,970,054.39 319,944,578.39 2,794,932,872.49 5,180,910,508.95
Movements for the yeasr ended 31 December 2018 - 68,331,467.95 -27,970,054.39 - 440,837,019.19 481,198,432.75
Total comprehensive income - - -27,970,054.39 - 1,073,324,783.19 1,045,354,728.80
- Net profit - - - - 1,073,324,783.19 1,073,324,783.19
- Other comprehensive income - --27,970,054.39- --27,970,054.39
Capital contribution and withdrawal by owners - 68,331,467.95 - - - 68,331,467.95
- Amount recorded in owners' equity arising
from share-based payment arrangements
- 68,331,467.95 - - - 68,331,467.95
Profit distribution - - - - -632,487,764.00 -632,487,764.00
- Profit distribution to equity
owners
- - - - -632,487,764.00 -632,487,764.00
Balance at 31 December 2018 632,487,764.00 1,473,906,707.63 - 319,944,578.39 3,235,769,891.68 5,662,108,941.70
22
WUXI LITTLE SWAN CO., LTD.
STATEMENT OF CHANGES IN EQUITY OF THE COMPANY (continued)
FOR THE YEAR ENDED 31 December 2018
(All amounts in Renminbi yuan unless otherwise stated)
[English Translation for Reference Only]
Items Share capital Capital surplus
Other comprehensive
income
Surplus reserves Retained earnings Total owners’ equity
Balance at 1 January 2017 632,487,764.00 1,350,656,531.65 37,515,343.84 319,944,578.39 2,608,364,062.12 4,948,968,280.00
Movements for the ended 31 December 2017 - 54,918,708.03 -9,545,289.45 - 186,568,810.37 231,942,228.95
Total comprehensive income - --9,545,289.45-660,934,633.37651,389,343.92
- Net profit - - - - 660,934,633.37 660,934,633.37
- Other comprehensive income - --9,545,289.45 - --9,545,289.45
Capital contribution and withdrawal by owners - 54,918,708.03 - - - 54,918,708.03
- Amount recorded in owners' equity arising
from share-based payment arrangements
- 54,918,708.03 - - - 54,918,708.03
Profit distribution - - - - -474,365,823.00 -474,365,823.00
- Profit distribution to equity owners - - - - -474,365,823.00 -474,365,823.00
Balance at 31 December 2017 632,487,764.00 1,405,575,239.68 27,970,054.39 319,944,578.39 2,794,932,872.49 5,180,910,508.95
23
III. Company profile
Wuxi Little Swan Co., Ltd. (hereinafter “the Company") was formerly a SOE founded and reorganized as a
private placement limited liability company by the approval of Jiangsu Provincial Commission for Economic
Restructuring (SuTiGaiSheng (1993) No.253 Document) on 29th Nov,1993. As approved by Jiangsu Provincial
Government ((1996) No.52 Document), Securities Regulatory Commission under State Council (ZhengWeiFa
(1996) No.14 Document) and Shenzhen Securities and Exchange Commission (ShenZhengBanhan (1996) No.4
Document), the Company publicly issued 70 million RMB foreign shares (B-shares) in China, after which the
Company’s share capital came to RMB 310 million.
In March 1997, as approved by China Securities Regulatory Commission (ZhengJianFaZi (1997) No.54
Document and ZhengJianFaZi (1997) No.55 Document, the Company publicly issued 60 million RMB common
shares (including 90 million staff shares). The public offerings raised 720.83 million RMB yuan and the
A-shares were formally listed at Shenzhen Stock Exchange in Mar, 1997. The abbreviation for A-shares is
“Little Swan A". A-share code is 000418.
On 20 July 2006, the Company’s proposal on reformation of segregated stocks was approved by relevant
shareholders’ meeting. To gain liquidity for the restricted stocks of the Company, the holders of the restricted
stocks of the Company agreed to pay the following consideration: based on the stock registration as of 4 August
2006, the Company issued bonus shares on 7 August 2006 at the ratio of 2.5 shares to every 10 A-shares to
liquidated A-share holders which went public on the same day. After this bonus issue, the total number of shares
of the Company remained unchanged with corresponding changes in the composition of share holdings.
Pursuant to the resolution at the Annual General Meeting on 9 May 2008, programme of transference from
capital surplus to share capital at the ratio of 10 shares to 5 shares was approved. Additional 182,551,920 shares
were allotted at par from the capital surplus of the Company. As a result, the total shares of the Company
increased to 547,655,760 from 365,103,840.
In accordance to the resolution of the 4th section of the 6th board meeting and the 1st temporary shareholders
meeting in 2010, as well as Document ZhengJianXuKe (2010) No. 1577 “The approval of significant assets
reorganization of Wuxi Little Swan Co., Ltd. and stock offering with assets purchase to Guangdong Midea
Electric Appliances Co., Ltd.” issued by China Securities Regulatory Commission, a placement in A share was
completed in which additional 84,832,000 shares were issued to Guangdong Midea Electric Appliances Co., Ltd.
(Midea Electric Appliances), while 69.47% equity interest of Hefei Midea Washing Machine Limited (formerly
as Hefei Royal star Washing Machine Manufacture Limited) was acquired. Through the non-public offering of
24
A share, the Company’s capital share increased by RMB 84,832,000.
On 18 September 2013, Midea Group Co., Ltd. (the Group) combined the Company’s former controlling
shareholder Midea Electric Appliances through shares exchanges according to Document ZhengJianXuKe (2013)
No. 1014 “The approval of the merger of Guangdong Midea Electric Appliances Co., Ltd. to Midea Group Co.,
Ltd.” issued by China Securities Regulatory Commission. After the consolidation by merger, the equity interest
held by Midea Electric Appliances previously was held by the Company and its subsidiaries and registration
procedures for shares transfer were completed by 31 December, 2013. Thus, the Company and its subsidiaries
became the first major shareholder of the Company.
As of 31 December 2018, the total share capital of the Company amounted to 632,487,764, 0.33% of which are
2,087,745 A shares with restriction of trading, 69.47% of which are 439,364,147 A shares without restriction of
trading, and 30.20% of which are 191,035,872 B shares without restriction of trading.
The address of the Company’s registered office and the headquarters office address is No.18 Changjiang South
Road, National High-tech Industrial Development Zone, Wuxi, Jiangsu Province.
The Company is engaged in the industry of household electric appliances, the approved scope of business of
which includes manufacture, sales and after-sales service of household electric appliances, industrial ceramic
products, environmental-friendly dry cleaning equipment, washing apparatus for typical machines, processing
equipment and fittings. The Company provides laundry service, machining; exports and imports, or be agent for
a variety of products and technologies (excluding unauthorized or forbidden products and technologies for
operation according to state regulations for enterprises). It also provides appliance technical services, certified
outsourcing services (operated with a valid qualification certificate) and invests in financial instruments with
surplus funds.
The financial statements were authorized for issue by the board of directors of the Company on 28 March 2019.
Subsidiaries included in the scope of consolidation are listed in Note IX.
IV. Basis for the preparation of financial statements
(1) Basis of preparation
The Company and its subsidiaries prepared the financial statements with the Basic Standard of the Accounting
Standards for Business Enterprises, accounting policies and other regulations (hereafter referred to as “the
Accounting Standard for Business Enterprises” or “CAS”) issued by the Ministry of Finance on and after 15
February 2006, and No. 15 Listing Rules on Disclosure Information for Public Business Entities – preparation of
financial statements issued by China Securities Regulatory Commission.
25
(2) Going concern
The financial report is prepared on the Group’s ability to continue as a going concern.
V. Summary of significant accounting policies and accounting estimates
The Company and its subsidiaries determine the accounting policies and accounting estimates based on the
operation of business, which mainly reflected in the revenue recognition policies (note V (23)).
The critical judgements of the Company and its subsidiaries in determining the critical accounting policies are
stated in note V (28).
(1) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the year ended 31 December 2018 are in compliance with the
Accounting Standards for Business Enterprises, and truly and completely present the financial position of the
Company and its subsidiaries and the Company as of 31 December 2018 and the operating results, cash flows
and other information of the Company and its subsidiaries and the Company for the year then ended.
(2) Accounting year
The Company’s accounting year starts on 1st January and ends on 31st December.
(3) Operating Cycle
Operating cycle is the time between the acquisition of an asset for production and the final cash or cash
equivalent realization from the acquisition. The Company’s operating cycle amounted to 12 months.
(4) Recording currency
The Company’s recording currency is Renminbi (RMB). The recording currency of the Company’s subsidiaries
is determined based on the primary economic environment in which they operate, and the recording currency of
Little Swan International (Singapore) Limited is US dollar. The financial statements are presented in RMB.
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the absorbing party in a business combination are measured at
the carrying amount, or, at the carrying amount of obtained assets and liabilities (including goodwill arising
from combination of the ultimate controlling party and its absorbed entity) on consolidated financial statements
wherein the absorbed party has been acquired by the ultimate controlling party from a third party in previous
period. The difference between the carrying amount of the net assets obtained from the combination and the
carrying amount of the consideration paid for the combination is treated as an adjustment to capital surplus
(share premium). If the capital surplus (share premium) is not sufficient to absorb the difference, the remaining
26
balance is adjusted against retained earnings. Costs directly attributable to the combination are included in profit
or loss in the period in which they are incurred. Transaction costs associated with the issue of equity or debt
securities for the business combination are included in the initially recognized amounts of the equity or debt
securities.
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the acquirer in a business combination are
measured at fair value at the acquisition date. Where the cost of the combination exceeds the acquirer’s interest
in the fair value of the acquirer’s identifiable net assets, the difference is recognised as goodwill; where the cost
of combination is lower than the acquirer’s interest in the fair value of the acquirer’s identifiable net assets, the
difference is recognised in profit or loss for the current period. Costs directly attributable to the combination are
included in profit or loss in the period in which they are incurred. Transaction costs associated with the issue of
equity or debt securities for the business combination are included in the initially recognised amounts of the
equity or debt securities.
(6) Basis for preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company and all of its subsidiaries.
Subsidiaries are consolidated from the date on which the Company and its subsidiaries obtains control and are
de-consolidated from the date that such control ceases. For a subsidiary that is acquired in a business combination
involving enterprises under common control, it is included in the consolidated financial statements from the date
when it, together with the Company, comes under common control of the ultimate controlling party. The portion
of the net profits realised before the combination date is presented separately in the consolidated income
statement.
In preparing the consolidated financial statements, where the accounting policies and the accounting periods of the
Company and subsidiaries are inconsistent, the financial statements of the subsidiaries are adjusted in accordance
with the accounting policies and the accounting period of the Company. For subsidiaries acquired from business
combinations involving enterprises not under common control, the individual financial statements of the
subsidiaries are adjusted based on the fair value of the identifiable net assets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in the consolidated financial
statements. The portion of a subsidiary’s equity and the portion of a subsidiary’s net profits, losses and
comprehensive income for the period not attributable to the Company are recognised as minority interests and
presented separately in the consolidated financial statements within equity, net profits and total comprehensive
27
income respectively. Unrealised gain or loss from selling assets to subsidiaries fully offsets the net income
attributable to equity holders of the Company. Unrealised gain or loss from purchasing assets from subsidiaries
offsets the net income attributable to equity holders of the company and attributable to the minority interest by the
distribution proportion regarding the Company and the subsidiary. Unrealised gain or loss from transaction
between subsidiaries offsets the net income attributable to equity holders of the Company and attributable to the
minority interest by the distribution proportion regarding the Company and the selling side of the subsidiaries.
If different recognition perspectives for the same transaction arise within different accounting identities setup,
there is adjustment for the transaction from the Group’s perspective.
(7) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn on demand, and short-term
and highly liquid investments that are readily convertible to known amounts of cash and are subject to an
insignificant risk of changes in value.
(8) Foreign currency
(a) Foreign currency transaction
Foreign currency transactions are translated into RMB using the exchange rates prevailing at the dates of the
transactions.
On the balance sheet date, monetary items denominated in foreign currencies are translated into RMB using the
spot exchange rates on the balance sheet date. Exchange differences arising from these translations are
recognised in profit or loss for the current period, except for those attributable to foreign currency borrowings
that have been taken out specifically for the acquisition or construction of qualifying assets, which are
capitalised as part of the cost of those assets. Non-monetary items denominated in foreign currencies that are
measured at historical costs are translated at the balance sheet date using the spot exchange rates at the date of
the transactions. The effect of exchange rate changes on cash is presented separately in the cash flow statement.
(b) Foreign currency financial statements translations
Carrying amount of assets and liabilities with oversea operating entities are translated into RMB at the spot
exchange rate on the balance sheet date. Items in Consolidated Statement of Changes in Equity are translated
into RMB using the spot exchange rate at the date of the transactions, except for the retained earnings. Incomes
and expenses items, which are oversea operating, are translated into RMB using the spot exchange rate at the
date of the transactions. The translation differences of foreign currency transactions are presented in other
comprehensive income. Cash flow items, which are oversea operating, are translated into RMB using the spot
28
exchange rate at the date of the cash in or cash out. The effect of exchange rate changes on cash is presented
separately in the cash flow statement.
(9) Financial instruments
(a) Financial assets
(i) Classification
Financial assets are classified into the following categories at initial recognition: financial assets at fair value
through profit or loss, loan and receivables and available-for-sale financial assets. The classification of financial
assets depends on the Group’s intention and ability to hold the financial assets.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are derivatives – forward foreign exchange contract.
Loan and receivables
Loan and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are designated to be available for sale
upon initial recognition and financial assets not classified in any other categories. Available-for-sale financial
assets are included in other current assets if they are intended to be disposed by management within 1 year
(including 1 year) from balance sheet date.
(ii) Recognition and measurement
Financial assets are recognized at fair value on the balance sheet when the Company and its subsidiaries
becomes a party to the contractual provisions of the financial instrument. Transaction costs that are attributable
to the acquisition of the financial assets at fair value through profits or losses are included in profit or loss in the
period in which they are incurred, and transaction costs that are attributable to the acquisition of other financial
assets are included in their initially recognized amounts.
Financial assets at fair value through profit or loss and available-for-sale financial assets are subsequently
measured at fair value. Investments in equity instruments are measured at cost when they do not have a quoted
market price in an active market and whose fair value cannot be reliably measured. Loan and receivables and
held-to-maturity investments are measured at amortised cost using the effective interest method.
Gains or losses arising from change in fair value of financial assets at fair value through profit or loss are
recognized in profit and loss of the current period as profit or loss from changes in fair value. Interests or cash
29
dividends yield during asset holding period and gains and losses arising from asset disposal are recognized in the
current period profit and loss.
Gains or losses arising from change in fair value of available-for-sale financial assets are recognized directly in
equity, except for impairment losses and foreign exchange gains and losses arising from translation of monetary
financial assets. When such financial assets are derecognized, the cumulative gains or losses previously
recognized directly into equity are recycled into profit or loss for the current period. Interests on
available-for-sale investments in debt instruments calculated using the effective interest method during the
period in which such investments are held and cash dividends declared by the investee on available-for-sale
investments in equity instruments are recognized as investment income, which is recognized in profits or losses
for the period.
(iii) Impairment of financial assets
Except for financial assets at fair value through profit or loss, the Company and its subsidiaries assesses the
carrying amount of financial assets at each balance sheet date. If there is objective evidence that the financial
asset is impaired, an impairment loss is provided for.
The objective evidence are matters that occur after the financial assets been recognised, affect its estimated
future cash flow and could be measured accurately by the Group.
The objective evidence, of which provided for available-for-sale equity instruments being impaired, includes an
investment in an equity instrument with serious or prolonged decline. The Company and its subsidiaries assesses
available-for-sale equity instruments at each balance sheet date. If the fair value of equity instruments is lower
than its initial investment cost of more than 50% (including 50%), or lower than its initial investment costs and
the duration of such circumstances lasts for more than 1 year ( including 1 year), it indicates that the equity
instruments are impaired. If the fair value of equity instruments is less than its initial investment cost of more
than 20% (including 20%) to 50% (not including 50%), the Company and its subsidiaries will consider other
relevant factors such as ratios of price fluctuation to judge that whether equity instruments are impaired. The
Company and its subsidiaries measured the initial investment cost of available-for-sale equity instruments using
the weighted average method.
When an impairment loss on a financial asset carried at amortized cost has been incurred, the amount of loss is
measured at the difference between the asset’s carrying amount and the present value of estimated future cash
flows (excluding future credit losses that have not been incurred). If there is objective evidence that the value of
the financial asset recovered and the recovery is related objectively to an event occurring after the impairment
30
was recognized, the previously recognized impairment loss is reversed and the amount of reversal is recognized
in profits or losses.
When an impairment loss on available-for-sale financial assets incurred, the cumulative losses arising from the
decline in fair value that had been recognized directly in equity are transferred out from equity and into
impairment loss. For an investment in debt instrument classified as available-for-sale on which impairment
losses have been recognized, if, in a subsequent period, its fair value increases and the increase can be
objectively related to an event occurring after the impairment loss was recognized in profit or loss, the
previously recognized impairment loss is reversed into profit or loss for the current period. For an investment in
an equity instrument classified as available-for-sale on which impairment losses have been recognized, the
increase in its fair value in a subsequent period is recognized directly in equity.
If an impairment loss incurred on a financial asset carried at amortized cost, the amount of loss is measured as
the difference between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return for a similar financial asset and cannot be revert in the subsequent
periods.
(iv) Derecognition of financial assets
Financial assets are derecognised when: i) the contractual rights to receive the cash flows from the financial
assets have expired; or ii) substantial risks and rewards of ownership of the financial assets have been
transferred; or iii) the control over the financial asset has been waived even if the Company and its subsidiaries
does not transfer or retain nearly all of the risks and rewards relating to the ownership of a financial asset.
On derecognition of a financial asset, the difference between the carrying amount and the aggregate of
consideration received and the accumulative amount of the changes of fair value originally recorded in the
owner’s equity is recognised in the profit or loss.
(b) Financial liabilities
Financial liabilities are classified into the following categories at initial recognition: the financial liabilities at
fair value through profit or loss and other financial liabilities. The financial liabilities in the Company and its
subsidiaries mainly comprise of other financial liabilities, including short-term borrowings, notes payables,
accounts payables, dividends payables, other payables and other current liabilities, which are recognised initially
at fair value and measured subsequently at amortized cost using the effective interest method.
Borrowings are recognised initially at fair value, net of transaction costs incurred, and subsequently carried at
amortized costs using the effective interest method.
31
Other financial liabilities are classified as current liabilities if they mature within one year (one year included);
others are classified as non-current liabilities; non-current liabilities due for repayment within one year since the
balance sheet date are classified as current portion of non-current liabilities.
A financial liability (or a part of financial liability) is derecognised when and only when the obligation specified
in the contract is discharged or cancelled. The difference between the carrying amount of a financial liability (or
a part of financial liability) extinguished and the consideration paid is recognised in profit or loss.
(c) Determination of the fair value of the financial instruments
The fair value of a financial instrument that is traded in an active market is determined at the quoted price in the
active market. The fair value of a financial instrument for which the market is not active is determined by using
a valuation technique. In the process of valuation, the Company and its subsidiaries uses valuation techniques
that are appropriate in the circumstances and for which sufficient data and other supporting information are
available while selecting inputs that are consistent with the characteristics of the asset or liability that market
participants would take into account in a transaction for the asset or liability. The use of relevant observable
inputs is maximized while that of unobservable inputs is minimized. Unobservable inputs shall be used to the
extent that the relevant observable inputs are unavailable.
(10) Receivables
Receivables comprise notes receivables, accounts receivables, interests receivables and other receivables.
Accounts receivables arising from sale of goods or rendering of services are initially recognised at fair value of
the contractual payments from the buyers or service recipients.
(a) Receivables with amounts that are individually significant and subject to separate assessment for
provision for bad debts
Criteria for recognition of individually significant
receivables
The amount of account receivable individually accounts for over 10%
(including 10%) of total amount of accounts receivable on balance sheet date or
is individually more than RMB 10,000,000 (including RMB 10,000,000); the
amount of other receivable individually accounts for over 10% (including 10%)
of total amount of other receivable on balance sheet date or is individually
more than RMB 5,000,000 (including RMB 5,000,000).
Accrual for receivables with amounts that are
individually significant are subject to separate
assessment for impairment
Receivables with amounts that are individually significant are subject to
separate assessment for impairment. If there exists objective evidence that the
Company and its subsidiaries will not be able to collect the amount under the
32
original terms, a provision for bad debts of that receivable is made at the
difference between its carrying amount and the present value of estimated
future cash flows.
The provision for impairment of the receivables that are individually significant
is established at the difference between the carrying amount of the receivable
and the present value of estimated future cash flows.
(b) Receivables that are subject to provision for bad debts on the grouping basis
Provision for bad debts
Grouping upon aging basis
Accounts receivables and other receivables with amounts that are not
individually significant and those receivables that have been individually
assessed for impairment and have not been found impaired are classified into
certain groupings based on their credit risk characteristics. Provision for bad
debts is determined based on the historical loss experience for groupings of
receivables with similar credit risk characteristics, taking into consideration of
the current circumstances.
A provision for impairment of the receivables is made based on the aging of receivables at the following
percentage:
Aging Provision as a percentage of accounts receivable Provision as a percentage of other receivables
Within 1 year 5.00% 5.00%
Between 1 and 2 years 10.00% 10.00%
Between 2 and 3 years 30.00% 30.00%
Between 3 and 4 years 50.00% 50.00%
Between 4 and 5 years 50.00% 50.00%
Over 5 years 100.00% 100.00%
Notes receivables of the Company and its subsidiaries are all bank’s acceptance bills. The Company regard these
acceptance bills from banks are at low credit risk level, thus no bad debt provision is necessary to be accrued.
Interest receivables of the Company and its subsidiaries are all interest from bank deposits with low credit risk
level, thus no bad debt provision on the grouping basis is necessary to be accrued.
(c) Accounts receivables with an insignificant single amount but for which the bad debt provision is
made independently
Recognition criteria
Receivables that are not individually significant are subject to separate impairment
assessment if there is objective evidence that the Company and its subsidiaries will not be
able to collect the full amounts according to the original terms.
Recognition method The provision for impairment of the receivables is established at the difference between
33
the carrying amount of the receivables and the present value of estimated future cash
flows.
(11) Inventory
(a) Classification
Inventories include raw materials, work in progress, finished goods and turnover materials, and are presented at
the lower of cost and net realizable value.
(b) Determination of cost
Cost is determined on the weighted average method. The cost of finished goods and work in progress comprises
raw materials, direct labour and an allocation of all production overhead expenditures incurred based on normal
operating capacity.
(c) The determination of net realizable value and the method of provisions for impairment of inventories
Provisions for declines in the value of inventories are determined at the carrying value of the inventories net of
their net realizable value. Net realizable value is determined based on the estimated selling price in the ordinary
course of business, less the estimated costs to completion and estimated costs necessary to make the sale and
relevant taxes.
(d) The Company and its sudsidiaries adopt the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Turnover materials include low value consumables and packaging materials, which are expensed when issued.
(12) Long-term equity investments
Long-term equity investments include the Company’s long-term equity investments in its subsidiaries.
Subsidiaries are all entities over which the Company is able to control.
Investments in subsidiaries are measured using the cost method in the Company’s financial statements, and
adjusted by using the equity method when preparing the consolidated financial statements.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-term equity investments
acquired through a business combination involving enterprises under common control, the investment cost shall
be the absorbing party’s share of the carrying amount of owners’ equity of the party being absorbed at the
combination date; for long-term equity investment acquired through a business combination involving enterprises
not under common control, the investment cost shall be the combination cost.
For long-term equity investments acquired not through a business combination: for long-term equity investment
34
acquired by payment in cash, the initial investment cost shall be the purchase price actually paid; for long-term
equity investment acquired by issuing equity securities, the initial investment cost shall be the fair value of the
equity securities.
(b) Subsequent measurement and recognition of related profits and losses
For long-term equity investments accounted for using the cost method, they are measured at the initial investment
costs, and cash dividends or profits distribution declared by the investees are recognised as investment income in
profits or losses.
For long-term equity investments accounted for using the equity method, where the initial investment cost of a
long-term equity investment exceeds the Group’s share of the fair value of the investee’s identifiable net assets at
the acquisition date, the long-term equity investment is measured at the initial investment cost; where the initial
investment cost is less than the share of the Company and its subsidiaries of the fair value of the investee’s
identifiable net assets at the acquisition date, the difference is included in profits or losses and the cost of the
long-term equity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Company and its subsidiaries
recognize the investment income according to its share of net profit or loss of the investee. The Company and its
subsidiaries discontinue recognizing its share of net losses of an investee after the carrying amount of the
long-term equity investment together with any long-term interests that, in substance, form part of the investor’s
net investment in the investee are reduced to zero. However, if the Company and its subsidiaries have obligations
for additional losses and the criteria with respect to recognition of provisions under the accounting standards on
contingencies are satisfied, the Company and its subsidiaries continue recognizing the investment losses and the
provisions. For changes in owners’ equity of the investee other than those arising from its net profit or loss,other
comprehensive income and profit distribution, the Company and its subsidiaries record its proportionate share
directly into capital surplus, provided that the proportion of the Company and its subsidiaries of shareholding in
the investee remains unchanged. The carrying amount of the investment is reduced by the share of the Company
and its subsidiaries of the profit distribution or cash dividends declared by an investee. The unrealized profits or
losses arising from the intra-group transactions amongst the Company, its subsidiaries and its investees are
eliminated in proportion to the equity of the Company and its subsidiaries interest in the investees, and then based
on which the investment gains or losses are recognised. For the loss on the intra-group transaction amongst the
Company, its subsidiaries and its investees attributable to asset impairment, any unrealized loss is not eliminated.
(c) Basis for determine existence of control, joint control or significant influence over investees
35
Control is the power to govern the financial and operating policies of the investee so as to obtain benefits from its
operating activities. Joint control is the contractually agreed sharing of control over an economic activity, and
exists only when the strategic financial and operating decisions relating to the activity require the unanimous
consent of the parties sharing control.
Significant influence is the power to participate in the financial and operating policy decisions of the investee, but
is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amount of long-term equity investments in subsidiaries is reduced to the recoverable amount when the
recoverable amount is less than the carrying amount (Note V(18)).
(13) Investment properties
Investment properties, including land use rights that have already been leased out and buildings that are held for the
purpose of leasing, are measured initially at cost. Subsequent expenditures incurred in relation to an investment
property are included in the cost of the investment property when it is probable that the associated economic benefits
will flow to the Company and its subsidiaries and their costs can be reliably measured; otherwise, the expenditures
are recognised in profit or loss in the period in which they are incurred.
The Company and its subsidiaries adopt the cost model for subsequent measurement of investment properties,
which are depreciated or amortized using the straight-line method to allocate the cost of the assets to their estimated
residual values over their estimated useful lives.. The estimated useful lives, the estimated net residual values that
are expressed as a percentage of cost and the annual depreciation (amortisation) rates of investment properties are as
follows:
Items Estimate Useful Lives Estimated residual value
Annual Depreciation
(amortization) Rates
Buildings
20-35 years 5.00% 2.71%-4.75%
Land Use Rights
50 years
-
2.00%
When an investment property is transferred to owner-occupied properties, it is reclassified as fixed asset or
intangible asset at the date of the transfer. When an owner-occupied property is transferred out for earning rentals or
for capital appreciation, the fixed asset or intangible asset is reclassified as investment properties at its carrying
amount at the date of the transfer.
The investment property’s estimated useful life, net residual value and depreciation (amortization) method applied
are reviewed and adjusted as appropriate at each year-end. An investment property is derecognised on disposal or
36
when the investment property is permanently withdrawn from use and no future economic benefits are expected
from its disposal. The net amount of proceeds from sale, transfer, retirement or damage of an investment property
after its carrying amount and related taxes and expenses is recognised in profit or loss for the current period.
The carrying amount of an investment property is reduced to the recoverable amount if the recoverable amount
is below the carrying amount (Note V(18)).
(14) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, machinery and equipment, motor vehicles and office equipment, etc. Fixed
assets are recognized when it is probable that the related economic benefits will flow to the Company and its
subsidiaries and the costs can be reliably measured. Fixed assets purchased or constructed by the Company and
its subsidiaries are initially measured at cost at the acquisition date. Subsequent expenditures incurred for fixed
assets are included in the cost of the fixed assets when it is probable that the associated economic benefits will
flow to the Company and its subsidiaries and the related costs can be reliably measured. The carrying amount of
the replaced part is derecognised. All the other subsequent expenditures are recognized in profit or loss in the
period in which they are incurred.
(b) Depreciation method
Depreciation is calculated on the straight-line method to write off the cost of each asset to its residual values
over its estimated useful lives. For fixed asset subject to impairment, depreciation is calculated via writing off
the asset’s carrying amount net of impairment over its useful life in subsequent periods.
Estimated useful life Estimated residual value Annual depreciation rate
Buildings
Straight-line method
20-35 years
5.00% 2.71%-4.75%
Machinery and equipment
Straight-line method
10-15 years
5.00% 6.33%-9.50%
Motor vehicles
Straight-line method
5 years
5.00% 19.00%
Office equipment
Straight-line method
3-5 years
5.00% 19.00%-31.67%
The estimated useful life, estimated residual value and depreciation method of fixed assets are reviewed at the end
of each year and adjusted appropriately.
(c) The carrying amount of fixed assets is reduced to the recoverable amount when the recoverable
amount is less than the carrying amount (Note V(18)).
(d) Disposal
A fixed asset is derecognized on disposal or when no future economic benefits are expected from its use or
37
disposal. The amount of proceeds on sale, transfer, retirement or damage of a fixed asset net of its carrying
amount and related taxes and expenses is recognized in profit or loss.
(15) Construction in progress
Construction in progress is measured at its actual costs, which includes construction costs, installation costs,
borrowing costs capitalized and other costs necessary to bring construction in progress ready for their intended
use. Construction in progress is transferred to fixed assets when the assets are ready for their intended use, and
depreciation is charged starting from the following month. The carrying amount of construction in progress is
reduced to the recoverable amount when the recoverable amount is less than the carrying amount.
(16) Intangible assets
Intangible assets include land use rights, non-patented technology and computer soft wares, which initially
recognized at cost.
(a) Land use rights
A land use right granted by government with an infinite useful life would not be amortized whilst it incurs no
acquisition cost. Other land use rights are amortized on the straight-line basis over 50 years. If the acquisition
costs of land use rights and the buildings located thereon cannot be reliably allocated between the land use rights
and the buildings, all of the acquisition costs are recognised as fixed assets.
(b) Non-patented technology
Non-patented technology are amortized on the straight-line basis over the shorter of their useful life/benefit
period stipulated in the agreement or contract and the legal age.
(c) Computer softwares
Computer softwares purchased by the Company and its subsidiaries are initially measured at cost, which are
amortized on the straight-line over their approved useful period of 3-5 years.
(d) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisation method is performed at
each year-end, with adjustment made as appropriate.
(e) Research and development
The expenditure on an internal research and development project is classified into expenditure on the research
phase and expenditure on the development phase based on its nature and whether there is material uncertainty
that the research and development activities can form an intangible asset at end of the project.
38
Expenditure for investigation, evaluation and selection of production process researches is recognised in profit
or loss in the period in which it is incurred. Expenditure on the designation, assessment of the final utilization of
the production process before mass production, is capitalised only if all of the following conditions are satisfied:
? development of the production process has been fully demonstrated by the technical team;
? management has approved the budget of production development;
? existed market research analysis suggests that the products produced by the new production technology are
able to be promoted;
? adequate technical, financial and other resources to complete the development and subsequent mass
production and the ability to use or sell the intangible asset; and
? the expenditure attributable to the intangible asset during its development phase can be reliably measured.
Other development expenditures that do not meet the conditions above are recognised in profit or loss in the
period in which they are incurred. Development costs previously recognised as expenses are not recognised as
an asset in a subsequent period. Capitalised expenditure on the development phase is presented as development
costs in the balance sheet and transferred to intangible assets at the date that the asset is ready for its intended
use.
(f) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when the recoverable amount is
less than the carrying amount (Note V (18)).
(17) Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets held under operating
leases, and other expenditures that have been incurred but should be recognised as expenses over more than one
year in the current and subsequent periods. Long-term prepaid expenses are amortized on the straight-line basis
over the expected beneficial period and are presented at actual expenditure net of accumulated amortisation.
(18) Impairment of long-term assets
Fixed assets, intangible assets with finite useful lives, investment properties measured using the cost model,
long-term prepaid expense, other non-current assets and long-term equity investments in subsidiaries are tested
for impairment if there is any indication that an asset may be impaired at the balance date. Intangible assets
which are not yet ready to use should be tested at least annually for impairment, irrespective of whether there is
any indication that it may be impaired. If the result of the impairment test indicates that the recoverable amount
of the asset is less than its carrying amount, a provision for impairment and an impairment loss are recognised
39
for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is
the higher of an asset’s fair value less costs to sell and the present value of the future cash flows expected to be
derived from the asset. Provision for asset impairment is determined and recognised on the individual asset basis.
If it is not possible to estimate the recoverable amount of an individual asset, the recoverable amount of a group
of assets to which the asset belongs is determined. A group of assets is the smallest identifiable group of assets
that is able to generate independent cash inflows.
Intangible assets with infinite useful lives are tested at least annually for impairment, irrespective of whether
there is any indication that it may be impaired. Once the above asset impairment loss is recognised, it will not be
reversed for the value recovered in the subsequent periods.
(19) Employee benefits
(a) Short-term employee benefits
Short-term employee benefits mainly include wages or salaries, bonus, allowances and subsidies, staff welfare,
medical insurance, work injury insurance, maternity insurance, housing funds, and union running costs and
employee education costs. The employee benefits are recognised in the accounting period in which the service
has been rendered by the employees, and as costs of assets or expenses to whichever the employee service is
attributable.
(b) Pension obligations
The Company and its subsidiaries operate various post-employment schemes, including both defined benefit and
defined contribution pension plans. A defined contribution plan is a pension plan under which the Company and
its subsidiaries pay fixed contributions into a separate entity then the Company and its subsidiaries have no legal
or constructive obligations to pay further contributions. The current and past service cost of the defined benefit
plan, recognised in the income statement in employee benefit expense. The net interest cost is calculated by
applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets.
This cost is included in employee benefit expense in the income statement. Actuarial gains and losses arising
from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other
comprehensive income in the period in which they arise. In the reporting period, The Company and its
subsidiaries’ pension obligations mainly include the basic endowment insurance and unemployment insurance;
both belong to the defined contribution plan.
Pension insurance
Employees of the Company and its subsidiaries participate in the social pension insurance organized by the local
40
labour and social security departments. The Company and its subsidiaries pay pension insurance premium to the
pension insurance agency with the local provision of social pension insurance base pay and proportional
monthly. When the employee is retired, the local labour and social security departments have the responsibility
to pay the basic pension insurance to retired employees. Calculated under the local provision mentioned above,
the basic pension insurance to be paid are then recognized in the accounting period in which the service has been
rendered by the employees and into profits and losses or costs of relevant assets.
(c) Termination benefits
Termination benefits are payable when employment is terminated by the Company and its subsidiaries before
the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these
benefits. the Company and its subsidiaries recognises termination benefits into current period profits and losses
at the earlier of the following dates, when the Company and its subsidiaries can no longer withdraw the offer of
those benefits and when the entity recognises costs related to restructuring.
(d) Retirement benefits
The Company and its subsidiaries provide termination benefits to employees who accept voluntary redundancy
in exchange for these benefits. Termination benefits are the payments of wages or salaries and social insurance
for the employees who accept termination plan before the normal retire age. The termination benefits plan
covers the period from the starting date of termination benefit plan to the normal retire age. When the
Company and its subsidiaries terminates the employment relationship with employees before the end of the
employment contract, a provision for termination benefits for the compensation arising from termination of the
employment relationship with employees to the retire age is recognised with a corresponding change to profit or
loss. The difference from change of actuarial assumptions and adjustment on benefit is recognised in the current
profits and losses.
Retirement benefits falling due within a year are reclassified as current liabilities.
(20) Dividend distribution
Cash dividends distribution is recognised as a liability in the period in which it is approved by the annual
shareholders’ meeting.
(21) Provisions
Provisions for product warranties, onerous contracts etc. are recognised when the Company and its subsidiaries
has a present obligation, it is probable that an outflow of economic benefits will be required to settle the
obligation, and the amount of the obligation can be measured reliably.
41
A provision is initially measured at the best estimate of the expenditure required to settle the related present
obligation. Factors surrounding a contingency, such as the risks, uncertainties and the time value of money, are
taken into account as a whole in reaching the best estimate of a provision. Where the effect of the time value of
money is material, the best estimate is determined by discounting the related future cash outflows. The increase
in the discounted amount of the provision arising from passage of time is recognised as interest expense.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflect the current best
estimate.
The provisions expected to be settled within one year since the balance sheet date are classified as current
liabilities.
(22) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employees as consideration for
equity instruments of the entity or by incurring liabilities for amounts based on the equity instruments. Equity
instruments include equity instruments of the Company, its parent company or other accounting entities of the
Group. Share-based payments are divided into equity-settled and cash-settled payments. The Group’s stock
option plan is the equity-settled share-based payment in exchange of employees' services and is measured at the
fair value of the equity instruments at grant date. The equity instruments are exercisable after services in vesting
period are completed or specified performance conditions are met. In the vesting period, the services obtained in
current period are included in relevant cost and expenses at the fair value of the equity instruments at grant date
based on the best estimate of the number of exercisable equity instruments, and capital surplus is increased
accordingly. If the subsequent information indicates the number of exercisable equity instruments differs from
the previous estimate, an adjustment is made and, on the exercise date, the estimate is revised to equal the
number of actual vested equity instruments. On the exercise date, the recognised amount calculated based on the
number of exercised equity instruments is transferred into share capital.
(b) Determination of the fair value of equity instruments
The Company and its subsidiaries determines the fair value of stock options using option pricing model, which
is Black - Scholes option pricing model.
(c) Basis for determining best estimate of exercisable equity instruments
At the end of each reporting period, the Company and its subsidiaries revises its estimates of the number of
options that are expected to vest based on the non-marketing performance and service conditions. On the
42
exercise date, the final number of estimated exercisable equity instruments is consistent with the number of
exercised equity instruments.
(d) Accounting treatment related to the exercise of stock options
When the options are exercised on the exercise date, capital and capital surplus are recognized at the same time,
carried forward to capital surplus recognized in the vesting period.
(23) Revenue
The amount of revenue is determined in accordance with the fair value of the consideration received or
receivable for the sale of goods and services in the ordinary course of the Company and its subsidiaries’
activities. Revenue is shown net of discounts and returns.
Revenue is recognized when the economic benefits associated with the transaction will flow to the Group, the
relevant revenue can be reliably measured and specific revenue recognition criteria have been met for each of
the Group’s activities as described below:
(a) Sales of goods
The Company and its subsidiaries is engaged in manufacturing and sales of washing machine. Revenue from
sales of goods is recognized when the goods are delivered, significant risks and rewards of ownership of the
goods are transferred to the customers, the Company retains neither continuing managerial involvement to the
degree usually associated with the ownership nor effective control over the goods sold, relevant consideration or
the documents which grant the right to receive the relevant consideration has been received, and related costs
can be measured reliably.
During the reporting period,the Company and its subsidiaries sales goods mainly through distributors,
large-scale chain supermarkets and e-business platform. Revenue is recognized when products accepted by
dealers, chain supermarkets and third-party e-business platform. As for self-operation e-business website,
revenue is recognized when products accepted by ultimate customers. The risks of damage or price fluctuation
of products as well as the rights to sell are transferred to distributors, large-scale chain supermarkets and
third-party e-business platform when the products are accepted. Revenue from the sale of goods via the Group’s
e-business platform is recognized when products are delivered and accepted by the ultimate customer. Revenue
from export sale is recognized when terms under the contract as follows are met: the products’ shipment from
customs is cleared, the products are then passed over to the ship rail, bill of lading is acquired by the buyer.
The Company and its subsidiaries is engaged in sales of materials. Revenue from sales of materials is
recognized when the materials are delivered, significant risks and rewards of ownership of the materials are
43
transferred to the customers, the Company and its subsidiaries retains neither continuing managerial
involvement to the degree usually associated with the ownership nor effective control over the materials sold,
relevant consideration or the documents which grant the right to receive the relevant consideration has been
received, and related costs can be measured reliably.
(b) Transfer of assets use rights
Interest income is determined by using the effective interest method, based on the length of time for which the
cash of the Company and its subsidiaries is used by others.
Income from an operating lease is recognised on a straight-line basis over the period of the lease.
(24) Government Grants
Government grants are the monetary asset or non-monetary asset that the Company and its subsidiaries receives
from the government for free, including tax refund, financial subsidies, etc.
(a) Accounting policies and judgement basis upon government grants related to assets
A government grant is recognized when the conditions attached to it can be complied with and the government
grant can be received. For a government grant in the form of transfer of monetary assets, the grant is measured at
the amount received or receivable. For a government grant in the form of transfer of nonmonetary assets, the grant
is measured at its fair value. A government grant is measured at notional amount wherein its fair value cannot be
reliably measured.
The government grants related to assets are referred to as government grants that are obtained and utilized by the
Company and its subsidiaries for the procurement, construction, or establishment of long-term assets in other
manners. The government grants related to assets are recognized as deferred income and amortize them in profit or
loss in a reasonable and systematic manner within the useful lives of related assets.
(b) Accounting policies and judgement basis upon government grants related to incomes
Government grants related to income are government grants not related to assets. Government grants related to
income that compensate the future costs, expenses or losses are recorded as deferred income and recognised in
profit or loss, or deducted against related costs, expenses or losses in reporting the related expenses; government
grants related to income that compensate the incurred costs, expenses or losses are recognised in profit or loss, or
deducted against related costs, expenses or losses directly in current period.
The Company and its subsidiaries applies the presentation method consistently to the similar government grants in
the financial statements.
44
Government grants that are related to ordinary activities are included in operating profit, otherwise, they are
recorded in non-operating income or expenses.
(25) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities are calculated and recognised based on the differences arising
between the tax bases of assets and liabilities and their carrying amounts (temporary differences). Deferred tax
asset is recognised for the deductible losses that can be carried forward to subsequent years for deduction of the
taxable profit in accordance with the tax laws. No deferred tax asset or deferred tax liability is recognised for the
temporary differences resulting from the initial recognition of assets or liabilities due to a transaction other than
a business combination, which affects neither accounting profit nor taxable profit (or deductible loss). At the
balance sheet date, deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected
to apply to the period when the asset is realised or the liability is settled.
Deferred tax assets are only recognised for deductible temporary differences, deductible losses and tax credits to
the extent that it is probable that taxable profit will be available in the future against which the deductible
temporary differences, deductible losses and tax credits can be utilised.
Deferred tax liabilities are recognized for temporary differences arising from investments in subsidiaries, unless
the Company is able to control the timing of the reversal of the temporary difference, and it is probable that the
temporary difference will not reverse in the foreseeable future. When it is probable that the temporary
differences arising from investments in subsidiaries will be reversed in the foreseeable future and that the
taxable profit will be available in the future against which the temporary differences can be utilized, the
corresponding deferred tax assets are recognized.
Deferred tax assets and liabilities are offset when:
? The deferred taxes are relate to the same tax payer within the Company and its subsidiaries and the same
taxation authority, and;
? That tax payer has a legally enforceable right to offset current tax assets against current tax liabilities
(26) Leases
A lease that transfers substantially all the risks and rewards incidental to ownership of an asset is a finance lease.
An operating lease is a lease other than a finance lease.
Lease payments under an operating lease are recognised on a straight-line basis over the period of the lease, and
are either capitalised as part of the cost of related assets, or charged as an expense for the current period.
Rental income from an operating lease is recognised on a straight-line basis over the period of the lease.
45
(27) Segment information
The Company and its subsidiaries identify operating segments based on the internal organisation structure,
management requirements and the internal reporting system, and discloses segment information of reportable
segments determined on the basis of operating segments.
An operating segment is a component of the Company and its subsidiaries that satisfies all of the following
conditions:
(a) the component is able to earn revenues and incur expenses from its ordinary activities.
(b) whose operating results are regularly reviewed by the Group’s management to make decisions about
resources to be allocated to the segment and to assess its performance.
(c) for which the information on financial position, operating results and cash flows is available to the Group.
If two or more operating segments have similar economic characteristics, and satisfy certain conditions, they are
aggregated into a single operating segment.
(28) Critical accounting estimates and judgements
The Company and its subsidiaries continually evaluates the critical accounting estimates and key judgements
applied based on historical experience and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. The critical accounting estimates and key assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
accounting year are outlined below:
Income taxes
The Company and its subsidiaries is subject to income taxes in numerous jurisdictions. There are some
transactions and events for which the ultimate tax determination is uncertain during the ordinary course of
business. Significant judgement is required from The Company and its subsidiaries in determining the provision
for income taxes in each of these jurisdictions. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in
the period in which such determination is made.
(29) Significant changes in accounting policies
In 2018, the Ministry of Finance issued the Circular on the Amendment to the Formats of Corporate Financial
Statements for the Year of 2018 (Cai Kuai [2018] 15). The financial statements are prepared in accordance with
the above circular with restating comparative figures of 2017 and impacts are as follows:
(a) The impact on the consolidated balance sheet and income statement
46
(b) The impact on the Company balance sheet and income statement
The nature and the reasons of the
changes in accounting
The line items affected The amounts affected
31 December 2017 1 January 2017
The Company and its subsidiaries
grouped accounts receivable and notes
receivable as notes and accounts
receivables.
Notes receivable Decrease 1,283,192,684.28 Decrease 1,297,609,202.29
Accounts receivable Decrease 1,736,724,496.10 Decrease 1,465,654,497.90
Notes and accounts
receivables
Increase 3,019,917,180.38 Increase 2,763,263,700.19
The Company and its subsidiaries
grouped interests receivable and other
receivables as other receivables.
Interests receivable Decrease 60,943,907.98 Decrease 26,755,807.07
Other receivables Increase 60,943,907.98 Increase 26,755,807.07
The Company and its subsidiaries
grouped notes payable and accounts
payable as notes and accounts
payables.
Notes payable Decrease 2,805,804,600.41 Decrease 2,620,549,815.47
Accounts payable Decrease 3,827,025,700.10 Decrease 3,335,089,672.06
Notes and accounts
payables
Increase 6,632,830,300.51 Increase 5,955,639,487.53
The Company and its subsidiaries
grouped dividends payable and other
payables as other payables.
Dividends payable Decrease 6,996,784.06 Decrease 7,150,684.06
Other payables Increase 6,996,784.06 Increase 7,150,684.06
The nature and the reasons of the changes in accounting policies The line items affected The amounts affected
31 December 2017
The Company and its subsidiaries separately listed research and
development expenses in research and development which
originally included in general and administrative expense.
General and administrative expenses Decrease 550,779,796.27
Research and development expenses Increase 550,779,796.27
The content and caused of the changes
in accounting policies
The line items affected The amounts affected
31 December 2017 1 January 2017
The Company grouped accounts
receivable and notes receivable as
accounts and notes receivables.
Notes receivable Decrease 938,342,347.95 Decrease 1,088,559,252.21
Accounts receivable Decrease 2,805,194,600.27 Decrease 2,310,254,576.98
Notes and accounts
receivables
Increase 3,743,536,948.22 Increase 3,398,813,829.19
The Company grouped interests
receivables and other receivables as
Interests receivable Decrease 32,913,208.23 Decrease 18,798,031.69
Other receivables Increase 32,913,208.23 Increase 18,798,031.69
47
VI. Taxation
(1) The main catagories and rates of taxes applicable to the Company and its subsidiaries are set out
belows:
category Tax base Tax rate
Value-added tax
Taxable value added amount (Tax payable is calculated using the
taxable sales amount multiplied by the applicable tax rate less
deductible V AT input of the current period) 17%, 16%, 11%, 10% or 5%
City maintenance and
construction tax
The payment amount of V AT
7% or 5%
Enterprise income tax Taxable income 15%, 17% or 25%
Pursuant to the 'Circular on Adjustment of Tax Rate of Value Added Tax' (Cai Shui [2018] 32) jointly issued by
the Ministry of Finance and the State Administration of Taxation, the applicable tax rate of revenue arising from
VAT taxable sales or imported goods of the Company and its subsidiaries, is 16% and 10% from 1 May 2018,
while it was 17% and 11% before then.
(2) Tax preferences
According to Enterprise income tax law of the People’s Republic of China, Article 28, the Company and its
three subsidiaries, Hefei Midea Washing Machine Limited, Wuxi Little Swan GE Limited and Wuxi Filin
Electronics Limited, shall be subject to the corporate income tax at the reduced rate of 15% (2017: 25% subject
other receivables.
The Company grouped accounts payable
and notes payable as notes and accounts
payables.
Notes payable Decrease 1,678,546,630.26 Decrease 1,508,017,904.49
Accounts payable Decrease 4,395,361,312.16 Decrease 3,913,090,507.89
Notes and accounts payables Increase 6,073,907,942.42 Increase 5,421,108,412.38
The Company grouped dividends
payable and other payables as other
payables.
Dividends payable Decrease 6,996,784.06 Decrease 7,150,684.06
Other payables Increase 6,996,784.06 Increase 7,150,684.06
The content and caused of the changes
in accounting policies
The accounts affected The amounts affected
31 December 2017
The Company and its subsidiaries separately listed research
and development expenses in research and development
which originally included in general and administrative
expenses.
General and administrative expenses Decrease 422,811,623.35
Research and development expenses Increase 422,811,623.35
48
to Hefei Midea Washing Machine Limited, and 15% subject to the Company, Wuxi Little Swan GE Limited and
Wuxi Filin Electronics Limited).
In October 2018, the Company gained the certificate of ‘High-tech Enterprises’, which was issued by Jiangsu
Science and Technology Department, Jiangsu Finance Department, Jiangsu State Administration of Taxation and
Jiangsu Local Taxation Bureau. The Certificate Number is GR201832001394. Term of validity for this
Certificate is three years, from 2018 to 2021.
In October 2018, the Company’s subsidiary Wuxi Little Swan GE Limited gained the certificate of' High-tech
Enterprises, which was issued by Jiangsu Science and Technology Department, Jiangsu Finance Department,
Jiangsu State Administration of Taxation and Jiangsu Local Taxation Bureau. The Certificate Number is
GR201832001100. Term of validity for this Certificate is three years, from 2018 to 2021.
In October 2018, the Company‘s subsidiary Wuxi Filin Electronics Limited gained the certificate of 'High-tech
Enterprises‘, which was issued by Jiangsu Science and Technology Department, Jiangsu Finance Department,
Jiangsu State Administration of Taxation and Jiangsu Local Taxation Bureau. The Certificate Number is
GR201832001053. Term of validity for this Certificate is three years, from 2018 to 2021.
In July 2018, the Company’s subsidiary Hefei Midea Washing Machine Limited gained the certificate of
High-tech Enterprised, which was issued by Anhui Science and Technology Department, Anhui Finance
Department, Anhui State Administration of Taxation and Anhui Local Taxation Bureau. The Certificate Number
is GR201834000882. Term of validity for this Certificate is three years, from 2018 to 2021.
The Company‘s subsidiary Little Swan International (Singapore) Limited is subject to the corporate income tax
at the rate of 17%.
Upon article 1 of the Notice of the Ministry of Finance and the State Administration on Value Added Tax
Policies Applicable to Software Products (Cai Shui [2011] No.100), after levying a value-added-tax on the salef
of self-developed software products and services of the Company’s subsidiary Wuxi Filin Electronics Co., Ltd.
at the statutory tax rate of 17%, the tax rebate policy will be imposed on the part of the tax that exceeds 3% of
the actual value-added-tax. Wuxi Filin Electronics Co., Ltd. recorded the VAT return obtained in 2018 in other
income.
VII. Notes to the consolidated financial statements
(1) Cash at bank and on hand
31 December 2018 31 December 2017
Cash at bank 1,713,233,957.39 1,417,489,071.71
49
Other cash balances 213,704,177.01 170,775,444.34
Total 1,926,938,134.40 1,588,264,516.05
Including: cash deposited overseas 473,362.45 503,115.69
As at 31 December 2018, the other cash balances comprises: deposit for bank acceptance bills of RMB
209,695,725.87 and deposit for letter of credit of RMB 4,008,451.14 (31 December 2017: deposit for bank
acceptance bills of RMB 166,791,807.67 and deposit for forward foreign exchange agreement t of RMB
3,983,636.67).
(2) Financial assets at fair value through profit or loss
31 December 2018 31 December 2017
Forward foreign exchange contract - 5,270,238.03
(3) Notes and accounts receivables
31 December 2018 31 December 2017
Notes receivable(a) 1,061,452,503.99 1,283,192,684.28
Accounts receivable(b)
1,957,583,475.15 1,736,724,496.10
Total 3,019,035,979.14 3,019,917,180.38
(4) Notes receivable
(5) Notes receivable classified by nature
31 December 2018 31 December 2017
Bank acceptance notes 1,061,452,503.99 1,283,192,684.28
Less: Provision for bad debts - -
1,061,452,503.99 1,283,192,684.28
As at 31 December 2018 and 31 December 2017, there is no trade acceptance receivable. The Company and its
subsidiaries do not recognize impairment risk of the bank acceptance notes, whereupon no bad debt provision is
accrued.
As at 31 December 2018 and 31 December 2017, there is no pledged notes receivable.
(i) As at 31 December 2018, notes receivable that have been endorsed or discounted but not yet expired
are as follows:
Items 31 December 2018 31 December 2017
Derecognised Not derecognised Derecognised Not derecognised
Bank acceptance notes 2,120,713,069.32 117,603,683.89 1,971,348,872.35 81,393,672.34
50
(a) Accounts receivable
(i) Accounts receivable classified by nature:
Category
31 December 2018
Cost Bad debt provision
Carrying amount
Amount % Amount % of provision
Debtors grouped by
credit risk
2,060,614,184.36 100.00% 103,030,709.21 5.00% 1,957,583,475.15
Category
31 December 2017
Cost Bad debt provision
Carrying amount
Amount % Amount % of provision
Debtors grouped by
credit risk
1,828,131,048.42 100.00% 91,406,552.32 5.00% 1,736,724,496.10
Accounts receivable individually significant for which bad debt provision was assessed individually.
□Applicable √Not applicable
Accounts receivable adopting aging analysis method for bad debt provision:
√Applicable □ Not applicable
Aging
31 December 2018
Accounts receivable Bad debt provision % of provision Carrying amount
Within 1 year 2,060,614,184.36 103,030,709.21 5.00% 1,957,583,475.15
Total 2,060,614,184.36 103,030,709.21 5.00% 1,957,583,475.15
Aging
31 December 2017
Accounts receivable Bad debt provision % of provision Carrying amount
Within 1 year 1,828,131,048.42 91,406,552.32 5.00% 1,736,724,496.10
Total 1,828,131,048.42 91,406,552.32 5.00% 1,736,724,496.10
As at 31 December 2018 and 2017, there were no material accounts receivable which were past due.
(ii) Accounts receivable withdraw, reversed or collected during the reporting period
During the year ended 31 December 2018, the net movement of provision for accounts receivable was RMB
11,624,156.89(2017: RMB 14,262,415.59). There were no provision or reverse of provision for individual
significant accounts receivable.
(iii) Accounts receivable written-off during the reporting period
There were no accounts receivable written-off during the reporting period.
51
(iv) Top 5 of accounts receivable by customers
Amounts Bad debt provision % of total balance
Total amount of the top 5 accounts receivable
by customers
1,363,473,357.41 68,173,667.87 66.17%
(v) Accounts receivable derecognised due to the transfer of financial assets
Derecognised Loss on derecognised
Accounts receivables transferred 1,774,993,166.61 39,049,849.67
For the year ended 31 December 2018, accounts receivable transferred to the financial institutions without
recourse amounted to RMB 1,774,993,166.61(2017: RMB 1,396,967,895.11), of which loss on derecognised
amounted to RMB 39,049,849.67 (2017: RMB 27,699,357.90).
(6) Advances to Suppliers
(a) Aging analysis of advances to suppliers:
Aging
31 December 2018 31 December 2017
Balance % of total balance Balance % of total balance
Within 1 year 80,853,628.49 91.96% 79,671,655.89 94.46%
1 to 2 years 6,127,811.51 6.97% 4,675,136.49 5.54%
2 to 3 years 945,423.95 1.08% - 0.00%
Total 87,926,863.95 100.00% 84,346,792.38 100.00%
Escalation for advances to suppliers aging over 1 year with significant amount for which the standards stipulated
by the contract has not yet been reached:
As at 31 December 2018, the balance of advance to suppliers with aging over one year amounts to RMB
7,073,235.46 (31 December 2017: RMB 4,675,136.49, mainly comprising the prepayments for goods for which
the standards stipulated by the contract has not yet been reached)
(b) Top 5 prepayment by suppliers
31 December 2018 % of total balance
Total amount of the top 5 by suppliers 26,964,664.78 30.67%
(7) Other receivables
Item
31 December 2018 31 December 2017
Interests receivable(a) 213,514,910.10 60,943,907.98
Other receivables(b) 20,441,295.16 47,224,454.09
Total 233,956,205.26 108,168,362.07
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(a) Interests receivable
31 December 2018 31 December 2017
Structured deposit interest 212,259,520.55 60,096,246.58
Bank deposit interest 1,255,389.55 847,661.40
Total 213,514,910.10 60,943,907.98
(b) Other receivables
(i) Other receivables by category:
Category
31 December 2018
Cost Bad debt provision
Carrying amount
Amount % Amount % of provision
Debtors grouped by credit risk 22,751,048.67 100.00% 2,309,753.51 10.15% 20,441,295.16
Category
31 December 2017
Cost Bad debt provision
Carrying amount
Amount % Amount % of provision
Debtors grouped by credit risk 50,575,167.17 100.00% 3,350,713.08 6.63% 47,224,454.09
Other receivable individually significant for which bad debt provision was assessed individually.
□ Applicable √Not applicable
Other receivable adopting aging analysis method for bad debt provision:
√Applicable □ Not applicable
Aging
31 December 2018
Other receivables Bad debt provision % of provision Carrying amount
Within 1 year 19,629,757.67 981,487.87 5.00% 18,648,269.80
1 to 2 years 1,191,195.66 119,119.57 10.00% 1,072,076.09
2 to 3 years 594,008.00 178,202.40 30.00% 415,805.60
3 to 5 years 610,287.34 305,143.67 50.00% 305,143.67
Over 5 years 725,800.00 725,800.00 100.00% -
Total 22,751,048.67 2,309,753.51 10.15% 20,441,295.16
Aging
31 December 2017
Other receivables Bad debt provision % of provision Carrying amount
Within 1 year 47,645,755.48 2,381,754.37 5.00% 45,264,001.11
1 to 2 years 1,435,667.86 143,566.79 10.00% 1,292,101.07
2 to 3 years 721,400.00 216,420.00 30.00% 504,980.00
3 to 5 years 326,743.83 163,371.92 50.00% 163,371.91
53
Over 5 years 445,600.00 445,600.00 100.00% -
Total 50,575,167.17 3,350,713.08 6.63% 47,224,454.09
As at 31 December 2018 and 31 December 2017, there were no material other receivables which were past due.
Other receivables adopting balance percentage method for bad debt provision:
□ Applicable √Not applicable
Other receivables adopting other method for bad debt provision:
□ Applicable √Not applicable
(ii) Other receivables withdraw, reversed or collected during the reporting period
During the year ended 31 December 2018, provision for other receivables was RMB 0.00 (2017: RMB
1,737,268.30), reverse of provision for other receivables was RMB 1,040,959.57 (2017: RMB 0.00). There were
no provision or reverse of provision for individual significant other receivables.
(iii) Other receivables written-off during the reporting period
There were no other receivable written-off during the reporting period.
(iv) Other receivables classified by nature
Nature of other receivables 31 December 2018 31 December 2017
Deposit in third-party payment service
accounts
17,125,330.26 44,740,888.28
Loan to employees 1,945,069.60 2,875,802.98
Deposits 3,680,648.81 2,515,443.83
Others - 443,032.08
Less: Bad debt provision -2,309,753.51 -3,350,713.08
Total 20,441,295.16 47,224,454.09
(v) Top 5 of other receivables by customers
Name of the entities Nature of other receivables
31 December
2018
Aging
% of total
balance
Bad debt
provision
Alipay (China) Network
Technology Co., Ltd
Deposit in third-party
payment service accounts
10,531,076.19 Within 1 year 46.29% 526,553.81
Shenzhen Midea Payment
Technology Co., Ltd
Deposit in third-party
payment service accounts
6,214,698.76 Within 1 year 27.32% 310,734.94
Wuxi China Resources Gas Co.,
Ltd.
Deposits 820,800.00
2 to 3 years and
over 5 years
3.61% 754,300.00
Shanghai Fengsha Industrial
Development Co., Ltd.
Deposits 601,161.48 Within 1 year 2.64% 30,058.07
54
Wuxi Hi-Tech Logistics Center Co.,
Ltd.
Deposits 461,700.00 1 to 2 years 2.03% 46,170.00
Total 18,629,436.43 81.89% 1,667,816.82
(vi) Inventory
(vii) Category of inventory
31 December 2018 31 December 2017
Cost
Provision for
decline in the value
Carrying amount Cost
Provision for
written-down
Carrying amount
Raw materials 34,069,010.35 1,345,523.57 32,723,486.78 35,127,847.81 570,442.41 34,557,405.40
Work in process 12,809,798.58 - 12,809,798.58 14,237,995.55 - 14,237,995.55
Finished goods 1,762,014,570.00 52,950,705.83 1,709,063,864.17 1,995,530,607.75 63,559,812.56 1,931,970,795.19
Total 1,808,893,378.93 54,296,229.40 1,754,597,149.53 2,044,896,451.11 64,130,254.97 1,980,766,196.14
(viii)Provision for written-down of inventory
31 December 2017
Increase Decrease
31 December 2018
Withdrawal Other
Reverse or
written-off
Other
Raw materials 570,442.41 775,081.16 - - - 1,345,523.57
Finished goods 63,559,812.56 38,210,901.92 - 48,820,008.65 - 52,950,705.83
Total 64,130,254.97 38,985,983.08 - 48,820,008.65 - 54,296,229.40
Provisions for inventories are provided to write down the carrying amount to net realizable value when the net
realizable value is lower.
(ix) Other current assets
31 December 2018 31 December 2017
Financial products - 3,792,871,097.59
Structured deposits 14,350,000,000.00 8,650,000,000.00
Input tax to be authenticated or deducted 258,471,417.82 283,158,673.31
Others 62,425,674.25 52,210,974.32
Total 14,670,897,092.07 12,778,240,745.22
As at 31 December 2018, there were no carrying amount of financial products (As at 31 December 2017, the
carrying value of financial products measured by fair value amounted to RMB 3,792,871,097.59, with principal
amounted to RMB 3,735,000,000.00, and accumulated fair value changes recognised in other comprehensive
income amounted to RMB 57,871,097.59).
55
(8) Available-for-sale financial assets
31 December 2018 31 December 2017
Cost Impairment
Carrying
amount
Cost Impairmen Carrying amount
Available-for-sale equity
instruments:
- measured at cost 300,300.00 -100,300.00 200,000.00
300,300.00 -100,300.00 200,000.00
Total 300,300.00 -100,300.00 200,000.00
300,300.00 -100,300.00 200,000.00
(9) Investment Properties
(a) Investment properties measured at cost method
Buildings Land use rights To t a l
Cost
31 December 2017 88,189,256.96 22,949,959.07 111,139,216.03
Disposal - -5,637,235.60 -5,637,235.60
31 December 2018 88,189,256.96 17,312,723.47 105,501,980.43
Accumulative depreciation and amortization
31 December 2017 29,852,095.86 7,015,229.88 36,867,325.74
Increase 3,496,869.71 355,238.27 3,852,107.98
Decrease - -2,570,395.81 -2,570,395.81
31 December 2018 33,348,965.57 4,800,072.34 38,149,037.91
Impairment
31 December 2017 12,576,065.29 - 12,576,065.29
31 December 2018 12,576,065.29 - 12,576,065.29
Carrying amount
31 December 2018 42,264,226.10 12,512,651.13 54,776,877.23
31 December 2017 45,761,095.81 15,934,729.19 61,695,825.00
Depreciation and amortization charge for 2018 amounted to RMB 3,852,107.98(2017: RMB 3,159,078.25).
(10) Fixed assets
Item 31 December 2018 31 December 2017
Fixed assets 1,121,036,700.25 1,029,668,355.84
Total 1,121,036,700.25 1,029,668,355.84
Buildings
Machinery
and equipment
Motor
vehicles
Office
equipment and
fixtures
Total
56
Cost
31 December 2017 735,906,249.69 1,053,086,342.85 28,536,914.16 139,927,818.59 1,957,457,325.29
Add: Purchase 1,430,047.57 119,414,858.09 3,765,661.04 70,498,700.80 195,109,267.50
Transferred from construction
in progress
- 56,308,998.02 - - 56,308,998.02
Disposal or Scrap -1,008,386.77 -27,113,119.16 -1,116,017.58 -4,181,305.68 -33,418,829.19
31 December 2018 736,327,910.49 1,201,697,079.80 31,186,557.62 206,245,213.71 2,175,456,761.62
Accumulative depreciation
31 December 2017 227,391,811.31 556,756,002.40 23,111,726.15 99,321,819.31 906,581,359.17
Withdrawal 31,236,631.09 93,294,070.63 1,457,899.56 29,171,559.04 155,160,160.32
Disposal or Scrap -714,568.61 -19,058,117.52 -998,555.80 - 3,884,873.39 - 24,656,115.32
31 December 2018 257,913,873.79 630,991,955.51 23,571,069.91 124,608,504.96 1,037,085,404.17
Depreciation reverses
31 December 2017 3,918,452.47 17,168,643.32 30,622.40 89,892.09 21,207,610.28
Increase - 834,296.77 - - 834,296.77
Decrease - -4,659,934.69 -19,389.79 -27,925.37 -4,707,249.85
31 December 2018 3,918,452.47 13,343,005.40 11,232.61 61,966.72 17,334,657.20
Carrying amount
31 December 2018 474,495,584.23 557,362,118.89 7,604,255.10 81,574,742.03 1,121,036,700.25
31 December 2017 504,595,985.91 479,161,697.13 5,394,565.61 40,516,107.19 1,029,668,355.84
Depreciation charges for 2018 amounted to RMB 155,160,160.32 (2017: RMB 129,563,779.26). The amount of
depreciation recognized in cost of sales, selling and distribution expenses, general and administrative expenses,
research and development expense are RMB 128,757,777.56, RMB 651,154.64, RMB 17,680,722.02 and RMB
8,070,506.10 respectively. (2017: The amount of depreciation recognized in cost of sales, selling expense and
operating expense are RMB 107,567,993.75, RMB 686,769.30, RMB 16,099,405.48 and RMB 5,209,610.73
respectively).
(11) Construction in progress
31 December 2018 31 December 2017
Cost
Provision for
impairment loss
Carrying amount Cost
Provision for
impairment loss
Carrying amount
Automatic-stamping
drum cabinet rivet line
- - - 37,167,679.63 - 37,167,679.63
Filin’s research and 15,424,853.79 - 15,424,853.79 - - -
57
development
workshop
Others 61,980.58 - 61,980.58 804,572.97 - 804,572.97
Total 15,486,834.37 - 15,486,834.37 37,972,252.60 - 37,972,252.60
58
(a) Changes in major construction-in-progress
Project Budget
31 December
2017
Addition
Transferred into
fixed assets
Other decrease
31 December
2018
% of total budget
Completed
progress
Funding
sources
Automatic -stamping
drum cabinet rivet
line
40,331,385.00 37,167,679.63 3,163,705.45 -40,331,385.08 - - 100.00% 100.00% Equity fund
Filin’s research and
development
workshop
42,978,000.00 - 15,424,853.79 - - 15,424,853.79 35.89% 35.89% Equity fund
Others 1,285,600.00 804,572.97 15,235,020.55 -15,977,612.94 - 61,980.58 4.82% 4.82% Equity fund
Total 84,594,985.00 37,972,252.60 33,823,579.79 -56,308,998.02 - 15,486,834.37
59
(12) Intangible assets
Land use right Non-patented technology Others Total
Cost
31 December 2017 242,666,890.39 - 1,395,014.56 244,061,904.95
Addition 134,462.17 - - 134,462.17
31 December 2018 242,801,352.56 - 1,395,014.56 244,196,367.12
Accumulated amortization
31 December 2017 55,621,543.12 - 1,395,014.56 57,016,557.68
Addition 5,240,526.65 - - 5,240,526.65
31 December 2018 60,862,069.77 - 1,395,014.56 62,257,084.33
Depreciation reveres
31 December 2017 - - - -
31 December 2018 - - - -
Carrying amount
31 December 2018 181,939,282.79 - - 181,939,282.79
31 December 2017 187,045,347.27 - - 187,045,347.27
In 2018, the amortization of intangible assets amounted to RMB 5,240,526.65 (2017: RMB 5,238,138.88).
(13) Long-term prepaid expenses
Item 31 December 2017 Addition Amortization Other decrease 31 December 2018
Leasehold
improvement cost
21,318,606.65 13,830,928.17 -10,681,425.73 - 24,468,109.09
Others 1,063,413.87 681,886.78 -673,123.82 - 1,072,176.83
Total 22,382,020.52 14,512,814.95 -11,354,549.55 - 25,540,285.92
(14) Deferred income tax assets and deferred income tax liabilities
(a) Deferred income tax assets without taking into consideration of the offsetting of balances
Item
31 December 2018 31 December 2017
Deductible temporary
difference
Deferred income tax
assets
Deductible temporary
difference
Deferred income tax
assets
Provision for impairment of assets 168,756,876.40 25,313,531.46 171,883,829.48 25,782,574.43
Unrealized profit of inter-group
transaction 108,282,747.85 16,242,412.18 107,345,624.86 16,101,843.74
Other current liabilities 2,507,882,899.91 376,182,434.99 2,107,686,604.61 370,746,106.98
Others 63,602,003.32 9,540,300.58 26,614,332.30 3,992,149.84
Total 2,848,524,527.48 427,278,679.21 2,413,530,391.25 416,622,674.99
60
Deferred income tax assets details
Item
31 December 2018 31 December 2017
Expected to reverse within 1 year (including 1 year) 418,531,140.33 412,971,858.44
Expected to reverse after 1 year 8,747,538.88 3,650,816.54
Total 427,278,679.21 416,622,674.98
(b) Deferred tax liabilities without taking into consideration the offsetting of balances
Item
31 December 2018 31 December 2017
Taxable Temporary
difference
Deferred tax
liabilities
Taxable Temporary
difference
Deferred tax
liabilities
Fair value change of financial assets through profit or loss - - 5,270,238.03 790,535.70
Fair value change of available-for-sale financial assets - - 57,871,097.59 8,680,664.64
Total - - 63,141,335.62 9,471,200.34
Deferred tax liabilities details
Item
31 December 2018 31 December 2017
Expected to reverse within 1 year (including 1 year)
- 9,471,200.34
Expected to reverse after 1 year
- -
Total - 9,471,200.34
(c) Net amounts of deferred income tax assets and liabilities taking into consideration the offsetting of
balances are set out as follows:
Item
31 December 2018
Netting amount
31 December 2018
Deferred income tax
assets or liabilities, net
31 December 2017
Netting amount
31 December 2017
Deferred income tax
assets or liabilities, net
Deferred income tax assets - 427,278,679.21 9,471,200.34 407,151,474.64
Deferred income tax liabilities - - 9,471,200.34 -
(d) List of unrecognized deferred income tax assets
Item 31 December 2018 31 December 2017
Deductible temporary difference 27,143,434.02 27,153,908.99
Deductible tax losses 70,134,184.44 81,636,690.06
Total 97,277,618.46 108,790,599.05
(e) Deductible losses of unrecognized deferred income tax assets will due the following years
Years 31 December 2018 31 December 2017
2018 - 16,300,604.68
2019 49,620,940.42 49,620,940.42
2020 9,576,983.63 9,576,983.63
61
2021 5,618,761.45 5,618,761.45
2022 519,399.88 519,399.88
2023 4,798,099.06 -
Total 70,134,184.44 81,636,690.06
(15) Other non-current assets
Item 31 December 2018 31 December 2017
Prepayment for equipment 42,289,041.73 27,331,937.53
(16) Short-term borrowings
Category 31 December 2018 31 December 2017
Discounted notes receivable financing 117,603,683.89 81,393,672.34
Factoring of accounts receivable - -
Total 117,603,683.89 81,393,672.34
(17) Financial liabilities measured at fair value through profit or loss
Category 31 December 2018 31 December 2017
Forward foreign exchange contract 3,078,878.95 -
(18) Notes and accounts payables
Item 31 December 2018 31 December 2017
Notes payable(a) 4,191,102,993.34 2,805,804,600.41
Accounts payable(b)
3,788,624,122.68 3,827,025,700.10
Total
7,979,727,116.02 6,632,830,300.51
(a) Notes payable
(i) List of notes payable
Item 31 December 2018 31 December 2017
Bank acceptance bill
4,191,102,993.34 2,805,804,600.41
At the end of the year, there was no balance of notes payable that had not been paid.
(b) Accounts payable
(i) List of accounts payable
Item 31 December 2018 31 December 2017
Material 3,764,255,584.19 3,803,318,504.56
Others
24,368,538.49 23,707,195.54
Total
3,788,624,122.68 3,827,025,700.10
62
(ii) Significant accounts payable over one year
Item 31 December 2018 Reason for over one year
Material 63,380,565.96 Contract expiration has not yet come
(19) Advances from customers
(a) List of advances from customers
Item 31 December 2018 31 December 2017
Advance from customers 2,024,945,754.25 3,065,815,801.93
(b) Significant advance from customers over one year
Item 31 December 2018 Unpaid/ Un-carry-over reason
Advances from customers 46,186,596.00 The project is under processing
(20) Payroll liabilities
(a) List of payroll liabilities
Item 31 December 2017 Increase Decrease 31 December 2018
Short-term employee benefit payable 320,914,272.91 1,406,570,521.27 1,365,853,624.87 361,631,169.31
Defined contribution plans payable 25,775,609.10 157,623,201.37 155,289,142.90 28,109,667.57
Termination benefits payable 2,793,962.75 19,569,372.13 18,106,119.30 4,257,215.58
Total 349,483,844.76 1,583,763,094.77 1,539,248,887.07 393,998,052.46
(b) List of short-term employee benefit payable
Item 31 December 2017 Increase Decrease 31 December 2018
1. Salary, bonus, allowance and subsidies 282,471,135.34 1,133,051,079.16 -1,103,115,048.01 312,407,166.49
2. Employee welfare 8,331,772.70 111,046,934.96 -102,603,405.22 16,775,302.44
3. Social insurance 12,297,766.43 79,830,229.04 -79,069,435.09 13,058,560.38
-Medical insurance 9,960,643.80 64,608,271.86 -63,686,148.12 10,882,767.54
-Employment injury insurance 1,540,246.23 9,755,337.33 -10,047,203.66 1,248,379.90
-Maternity insurance 796,876.40 5,466,619.85 -5,336,083.31 927,412.94
4. Housing fund 8,897,498.05 58,896,031.56 -57,798,721.93 9,994,807.68
5. Labor union funds and employee
education fee
8,916,100.39 23,746,246.55 -23,267,014.62 9,395,332.32
Total 320,914,272.91 1,406,570,521.27 -1,365,853,624.87 361,631,169.31
As at 31 December 2018, there were no overdue balance. The balance will be settled in 2019.
(c) Defined contribution plans
Item 31 December 2017 Increase Decrease 31 December 2018
Pension 24,835,787.74 153,613,574.46 -151,247,819.45 27,201,542.75
63
Unemployment insurance 939,821.36 4,009,626.91 -4,041,323.45 908,124.82
Total 25,775,609.10 157,623,201.37 -155,289,142.90 28,109,667.57
(d) Termination benefits payable
Item 31 December 2018 31 December 2017
Early retirement benefits payable 1,972,215.58 2,793,962.75
Other termination benefits (i) 2,285,000.00 -
Total 4,257,215.58 2,793,962.75
(21) Taxes payable
Item 31 December 2018 31 December 2017
Corporate income tax 480,480,551.80 538,655,891.42
VAT 19,278,303.67 43,514,198.41
City maintenance and construction tax 5,060,335.36 10,431,895.61
Education surcharge 3,924,525.26 7,895,593.79
Others 50,875,513.91 37,519,944.08
Total 559,619,230.00 638,017,523.31
(22) Other payables
Item 31 December 2018 31 December 2017
Dividends payable(a) 9,049,503.92 6,996,784.06
Other payables(b) 166,213,763.65 221,120,863.48
Total 175,263,267.57 228,117,647.54
(a) Dividends payable
Item 31 December 2018 31 December 2017
Dividends to ordinary shareholders 9,049,503.92 6,996,784.06
Total 9,049,503.92 6,996,784.06
(b) Other payables
(i) Other payables listed by nature
Item 31 December 2018 31 December 2017
Payment for equipment 71,641,381.04 119,000,776.50
Payment for moulds 36,862,309.04 66,898,435.10
Energy efficiency rebate - 6,140,000.00
Collection 7,145,046.77 5,278,489.39
Advances 1,928,571.35 3,831,550.67
Deposits 28,032,371.55 3,027,766.49
64
Others 20,604,083.90 16,943,845.33
Total 166,213,763.65 221,120,863.48
(ii) Significant other payables over one year
Item 31 December 2018 Unpaid/ Un-carry-over reason
Payment for equipment 21,250,955.36 Contracts expiration has not yet come
Payment for moulds 19,631,685.97 Contracts expiration has not yet come
Total 40,882,641.33 --
(23) Other current liabilities
Item 31 December 2018 31 December 2017
Accrued sale rebate 1,328,293,712.38 1,190,189,575.45
Accrued maintenance and installation costs 439,653,805.88 312,536,901.29
Accrued sales promotion fees 363,905,275.39 276,458,030.09
Accrued transportation fee 209,300,910.12 169,965,392.33
Accrued household electrical appliances
recycling fund
- 15,637,977.00
Accrued trademark royalty charges 2,804,104.70 -
Others 163,925,444.72 142,912,728.45
Total 2,507,883,253.19 2,107,700,604.61
(24) Long-term employee benefits payable
Item 31 December 2018 31 December 2017
Early retirement benefits payable 11,860,988.29 14,815,582.92
Less：Payable within one year -1,972,215.58 -2,793,962.75
Total 9,888,772.71 12,021,620.17
The employee benefits payable within one year are included in employee benefits payable.
(25) Provisions
Item 31 December 2018 31 December 2017 Causes
Quality guarantee deposits 1,853,074.62 2,253,082.25 Quality guarantee deposits
Total 1,853,074.62 2,253,082.25 --
(26) Deferred income
Item 31 December 2017 Addition Decrease 31 December 2018 Causes
Deferred income-
related to assets/income
2,489,133.21 37,640,000.00 653,200.04 39,475,933.17 Related to assets/income
Total 2,489,133.21 37,640,000.00 653,200.04 39,475,933.17 --
65
(27) Share capital
31 December
2017
Increase/decrease (+/-)
31 December
2018
New shares
issued
Bonus
shares
Shares transferred
from capital surplus
Others Subtotal
The sum of shares 632,487,764.00 - - - - - 632,487,764.00
(28) Capital surplus
Item 31 December 2017 Increase Decrease 31 December 2018
Share premium 1,055,182,718.57 - - 1,055,182,718.57
Other capital surplus 197,764,828.23 77,703,279.33 - 275,468,107.56
-Share options (a) 163,325,332.37 77,703,279.33 - 241,028,611.70
-Others 34,439,495.86 - - 34,439,495.86
Total 1,252,947,546.80 77,703,279.33 - 1,330,650,826.13
Item 31 December 2016 Increase Decrease 31 December 2017
Share premium 1,055,182,718.57 - - 1,055,182,718.57
Other capital surplus 136,307,414.44 61,953,091.84 -495,678.05 197,764,828.23
-Share options (a) 101,372,240.53 61,953,091.84 - 163,325,332.37
-Others (b) 34,935,173.91 - -495,678.05 34,439,495.86
Total 1,191,490,133.01 61,953,091.84 -495,678.05 1,252,947,546.80
(a) In 2018, the equity incentive increased the capital reserve of RMB 77,703,279.33 (2017: RMB
61,953,091.84 )., which is the corresponding capital reserve of the Midea Group granted to the employees of the
Company and its subsidiaries.
(29) Other comprehensive income
Item
31 December
2017
Increase/decrease in the year
31 December
2018
Amount
for the
year
before
tax
Less: previously
recognized in
other comprehensive
income transferred to
profit or loss
this year
Less: Income
tax expense
Attributable to
the Company’s
owners
after tax
Attributable to
the minority
interest after
tax
Items that may be
subsequently reclassified
into profits or losses
40,496,366.85 - -57,871,097.59 8,680,664.64 -42,702,467.06 -6,478,581.63 -2,206,100.21
-change in fair value of
available-for-sale
42,711,851.32 - -57,871,097.59 8,680,664.64 -42,711,851.32 -6,478,581.63 -
66
financial assets
-currency translation
differences
-2,215,484.47 - - - 9,384.26 - -2,206,100.21
Total 40,496,366.85 - -57,871,097.59 8,680,664.64 -42,702,467.06 -6,478,581.63 -2,206,100.21
Item
31 December
2016
Increase/decrease in the year
31 December
2017
Amount for the
year before tax
Less: previously
recognized in
other
comprehensive
income
transferred to
profit or loss
this year
Less: Income
tax expense
Attributable to
the Company’s
owners
after tax
Attributable to
the minority
interest after
tax
Items that may be
subsequently reclassified
into profits or losses
70,757,524.61 57,856,006.59 -104,142,671.24 6,940,736.04 -30,261,157.76 -9,084,770.85 40,496,366.85
-change in fair value of
available-for-sale
financial assets
72,957,918.08 57,871,097.59 -104,142,671.24 6,940,736.04 -30,246,066.76 -9,084,770.85 42,711,851.32
-currency translation
differences
-2,200,393.47 -15,091.00 - - -15,091.00 - -2,215,484.47
Total 70,757,524.61 57,856,006.59 -104,142,671.24 6,940,736.04 -30,261,157.76 -9,084,770.85 40,496,366.85
(30) Surplus reserve
Item 31 December 2017 Increase Decrease 31 December 2018
Statutory surplus reserves 332,594,722.29 - - 332,594,722.29
In accordance with the Company Law of the PRC, the Company’s Articles of Association, 10% of net profit
should be made to the statutory surplus reserve, after offsetting accumulated losses from prior years, unless the
accumulated statutory surplus reserve reaches 50% of the share capital. Statutory surplus reserve can be used to
make up losses or to increase share capital. At the end of 2018 and 2017, there is no appropriation to the statutory
surplus reserve as the Company’s accumulated statutory surplus reserve has already reached 50% of the share
capital.
(31) Retained earnings
Item Year ended 31 December 2018 Year ended 31 December 2017
67
31 December 2017 4,788,564,401.03 3,756,517,718.81
Add: Profit distribution to equity owners 1,862,458,658.29 1,506,412,505.22
Less: Statutory surplus reserve - -
Dividends to ordinary shareholders -632,487,764.00 -474,365,823.00
31 December 2018 6,018,535,295.32 4,788,564,401.03
Pursuant to the resolution of general meeting of shareholders on 11 April 2018, cash dividends of RMB
632,487,764.00 (RMB 1.00 per share) was paid based on the issued shares of 632,487,764.
Pursuant to the resolution of board of directors on 14 March 2019, proposal of paying cash dividends of RMB
2,529,951,056.00 (RMB 4.00 per share) based on the issued shares of 632,487,764 has been put forward and yet
to be approved by the general meeting of shareholders. (Note XVII(1))
During the year ended 31 December 2018, statutory surplus reserve of RMB 42,182,749.72 was made from
retained earnings of the Company’s subsidiary Hefei Midea Washing Machine Co., Ltd (2017: RMB
29,747,735.36).
(32) Revenue and cost of sales
Item
Year ended 31 December 2018 Year ended 31 December 2017
Sales revenue Cost of sales Sales revenue Cost of sales
Main operations 21,692,952,459.61 15,584,261,291.42 19,469,125,226.23 14,208,417,615.09
Other operations 1,943,977,018.72 1,859,786,692.39 1,915,573,850.42 1,774,476,043.75
Total 23,636,929,478.33 17,444,047,983.81 21,384,699,076.65 15,982,893,658.84
(33) Other operating income and expenses
Item
Year ended 31 December 2018 Year ended 31 December 2017
Other operating
income
Other operating
expenses
Other operating
income
Other operating
expenses
Sales of materials 1,854,340,946.23 1,833,374,789.87 1,851,646,327.57 1,750,661,648.85
Others 89,636,072.49 26,411,902.52 63,927,522.85 23,814,394.90
Total
1,943,977,018.72 1,859,786,692.39 1,915,573,850.42 1,774,476,043.75
(34) Taxes and surcharges
Item Year ended 31 December 2018 Year ended 31 December 2017
City maintenance and construction tax 61,328,450.84 60,374,588.37
Education surcharge 47,779,483.67 46,074,508.07
Other 22,580,597.16 25,342,380.68
Total 131,688,531.67131,791,477.12
68
(35) Selling and distribution expenses
Item Year ended 31 December 2018 Year ended 31 December 2017
Selling and distribution expenses 3,351,676,000.52 2,872,849,586.14
In 2018, selling and distribution expenses mainly include promotion expenses, transportation and storage
expenses, employee wages and benefits, maintenance and installation expenses and after-sales service expenses,
which accounts for over 90% of the total selling expenses (2017: over 90%).
(36) General and administrative expenses
Item Year ended 31 December 2018 Year ended 31 December 2017
General and administrative expenses 181,699,829.11 177,543,281.44
In 2018 , general and administrative expenses mainly include employee wages and benefits as well as depreciation
and amortization costs, which account for over 80% of general and administrative expenses (2017: over 80%).
(37) Research and development expenses
Item Year ended 31 December 2018 Year ended 31 December 2017
Research and development expenses 733,045,215.90 550,779,796.27
(38) Finance income - net
Item Year ended 31 December 2018 Year ended 31 December 2017
Interest expenses -82,506,900.84 -43,471,999.43
Interest income 559,310,635.71 195,433,894.48
Exchange gain/loss 65,268,526.38 -70,731,617.24
Other financial expenses -10,342,550.39 -9,421,295.01
Total 531,729,710.86 71,808,982.80
(39) Asset impairment losses
Item Year ended 31 December 2018 Year ended 31 December 2017
Provision for bad debts 10,583,197.32 15,999,683.89
Provision for inventory 38,985,983.08 48,820,008.65
Provision for fixed assets 834,296.77 5,776,183.11
Total 50,403,477.17 70,595,875.65
(40) Profit or loss arising from changes in fair value
Item Year ended 31 December 2018 Year ended 31 December 2017
Forward foreign exchange contract -8,349,116.98 5,270,238.03
(41) Investment Income
Item Year ended 31 December 2018 Year ended 31 December 2017
69
Income from available-for-sale financial assets 119,089,774.76 302,938,888.22
Income from disposal of financial assets at fair
value through profit or loss
729,335.01 17,684,575.01
Total 119,819,109.77 320,623,463.23
There is no significant restriction on the remittance of investment income to the Company and its subsidiaries
(42) Gain or loss on disposal of assets
Item
Year ended 31
December 2018
Year ended 31
December 2017
Non-recurring gain or loss
Gain or loss on disposal of fixed assets 13,137,087.29 -975,423.00 13,137,087.29
(43) Other income
Item
Year ended 31
December 2018
Year ended 31
December 2017
Asset-related/Income-related
Other income related to assets/income 60,261,970.48 53,894,074.25 Asset-related/Income-related
(44) Non-operating income
Item Year ended 31 December 2018 Year ended 31 December 2017 Non-recurring gain or loss
Non-operating income 20,434,056.10 17,448,715.84 20,434,056.10
(45) Non-operating expenses
Item Year ended 31 December 2018 Year ended 31 December 2017 Non-recurring gain or loss
External donation 80,000.00 693,420.00 80,000.00
Others 2,163,270.24 927,088.98 2,163,270.24
Total 2,243,270.24 1,620,508.98 2,243,270.24
(46) Income tax expenses
(a) Income tax expenses
Item Year ended 31 December 2018 Year ended 31 December 2017
Current income tax 359,609,597.25 456,606,366.97
Deferred income tax -11,446,539.92 -100,331,709.36
Total 348,163,057.33 356,274,657.61
(b) Reconciliation
Item
Year ended
31 December 2018
Year ended
31 December 2017
Total profit 2,479,157,987.43 2,064,694,943.36
Income tax expenses calculated at applicable tax rates 371,389,738.85 365,838,075.61
70
Adjusted income tax of prior year 2,283,020.72 1,708,054.23
Effect of change in the tax rates - -1,454,532.93
Costs, expenses and losses not deductible for tax purposes 12,686,245.00 10,783,709.89
Utilisation of previously unrecognised deductable temporary differences - -640.51
Item
Year ended
31 December 2018
Year ended
31 December 2017
Deductable temporary differences and tax losses for which no deferred tax
asset was recognised
1,192,552.76 129,991.32
Plus deduction for research and development expenses -39,388,500.00 -20,730,000.00
Income tax expense 348,163,057.33 356,274,657.61
(47) Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the consolidated net profit attributable to shareholders of the
Company by the weighted average number of ordinary shares in issue:
Item
Year ended
31 December 2018
Year ended
31 December 2017
Consolidated net profit attributable to shareholders of the Company
1,862,458,658.29 1,506,412,505.22
Weighted average number of ordinary shares in issue
632,487,764.00 632,487,764.00
Basic earnings per share
2.94 2.38
(b) Diluted earnings per share
Diluted earnings per share is calculated by dividing the consolidated net profit attributable to shareholders of the
Company adjusted based on the dilutive potential ordinary shares by the adjusted weighted average number of
ordinary shares in issue. There were no dilutive potential ordinary shares in 2018 (2017: nil). Therefore, diluted
earnings per share equal to basic earnings per share.
(48) Notes to consolidated cash flow statement
(a) Cash received relating to other operating activities
Item Year ended 31 December 2018 Year ended 31 December 2017
Interest income 35,049,629.64 66,042,642.09
Others 97,593,075.16 48,148,468.31
Total 132,642,704.80114,191,110.40
(b) Cash paid relating to other operating activities
Item Year ended 31 December 2018 Year ended 31 December 2017
71
Expenses 471,126,854.52 405,943,801.31
Others 126,416,929.02 118,116,052.83
Total 597,543,783.54 524,059,854.14
(c) Cash received relating to other investing activities
Item Year ended 31 December 2018 Year ended 31 December 2017
Interest income of structured deposits 371,593,335.61 91,904,332.38
(49) Supplementary information of cash flow statements
(a) Supplementary information of cash flow statements
Year ended 31 December 2018 Year ended 31 December 2017
1. Reconciliation of net profit to cash flows from operating
activities:
Net profit 2,130,994,930.10 1,708,420,285.75
Add：Provision for asset impairment 50,403,477.17 70,595,875.65
Depreciation of fixed assets and amortization of
investment properties
175,607,344.50 143,088,037.37
Gains/Losses on disposal of fixed assets, intangible assets
and other long-term assets
-13,137,087.29 975,423.00
Gains/Losses on the changes in fair value 8,349,116.98 -5,270,238.03
Financial income, net -517,679,233.62 -76,642,204.57
Investment income -119,819,109.77 -320,623,463.23
Increase in deferred income tax assets -11,446,539.92 -100,331,709.36
Amortization of deferred incomes 36,986,799.96 -453,200.04
Increase/Decrease of inventory 187,183,063.53 -304,748,260.10
Increase/Decrease in operating receivables 27,565,918.69 -339,961,965.35
Increase in operating payables 588,946,162.23 1,176,210,825.71
Share-based payments 80,937,978.57 64,494,411.50
Net cash flows from operating activities 2,624,892,821.13 2,015,753,818.30
2. Significant investing and financing activities that do not
involve cash receipts and payments
- -
3. Movement in cash and cash equivalents :
Cash at the end of the year 1,713,233,957.39 1,417,489,071.71
Less: Cash at the beginning of the year 1,417,489,071.71 4,171,689,917.21
Net increase/decrease in cash and cash equivalents 295,744,885.68 -2,754,200,845.50
72
(b) Cash and cash equivalents
31 December 2018 31 December 2017
Cash 1,713,233,957.39 1,417,489,071.71
Including: Cash at hand - -
C as h on bank 1,713,233,957.39 1,417,489,071.71
Ending balance of cash 1,713,233,957.39 1,417,489,071.71
(50) Foreign currency monetary items
(a) Foreign currency monetary items
31 December 2018
Item Foreign currency balance Exchange rate RMB balance
Cash at bank & on hand 372,285,919.55
-USD 52,271,646.47 6.8632 358,750,764.05
-EUR 1,724,816.88 7.8473 13,535,155.50
Accounts receivable, notes receivable and other receivables 916,488,166.34
-USD 121,923,285.68 6.8632 836,783,894.27
-EUR 10,153,918.28 7.8473 79,680,842.92
-JPY 378,500.00 0.0619 23,429.15
Accounts payable, notes payable and other payables 14,479,409.75
-USD 1,159,427.84 6.8632 7,957,385.15
-EUR 803,295.34 7.8473 6,303,699.52
-JPY 3,527,061.00 0.0619 218,325.08
Monetary items listed above are referred to as currencies other than RMB (which is different from the foreign
currency items designated in Notes XI(1)(a)).
(b) Explanation of oversea operating entities, including important oversea operating entities, should
disclose the principal places of business, the bookkeeping base currency and the reason of selection, and the
causes if the bookkeeping base currency changes.
□Applicable √Not applicable
VIII. Changes in consolidation scope
In 2018, there is no change in the Group’s consolidation scope.
73
IX. Equity interests in other entities
(1) Equity interests in subsidiaries
(a) Components of the Company and its subsidiaries
Name
Place of
business
Place of
registration
Principle
activities
% of ownership
interest
Acquired by
Directly Indirectly
Wuxi Little Swan General Electric
Appliances Co. , Ltd. Wuxi Wuxi
Manufacture
100.00%
Establishment or
Investment
Wuxi Filin Electronics Co. , Ltd.
Wuxi Wuxi Manufacture 73.00%
Establishment or
Investment
Jiangsu Little Swan Marketing and Sales
Co. , Ltd.
Wuxi Wuxi Marketing 99.54% 0.09%
Establishment or
Investment
Wuxi Little Swan Import & Export Co. ,
Ltd.
Wuxi Wuxi
Import and
export
88.46%
Establishment or
Investment
Little Swan International (Singapore) Co.,
Ltd.
Singapore Singapore Investing 100.00%
Establishment or
Investment
Little Swan (Jing Zhou) Sanjin Electronic
Appliances Limited
Jingzhou Jingzhou Manufacture 100.00%
Business merger under
common control
Hefei Midea Washing Machine Co., Ltd. Hefei Hefei Manufacture 69.47%
Business merger under
common control
(b) Subsidiaries with significant minority interests
Name
% of shares held by
minority shareholders
Minority interests in
the year
Dividends declared to
minority shareholders
Minority interests at
31 December 2017
Wuxi Filin Electronics Co. , Ltd. 27.00% 83,155,625.65 - 356,622,343.58
Hefei Midea Washing Machine Co., Ltd. 30.53% 185,325,283.81 - 1,079,821,895.62
74
(c) The main financial information of significant not wholly owned subsidiary
Name 31 December 2018 31 December 2017
Current assets
Non-current
assets
Total assets Current liabilities
Non-current
liabilities
Total liabilities Current assets
Non-current
assets
Total assets Current liabilities
Non-current
liabilities
Total liabilities
Wuxi Filin
Electronics
Co. , Ltd.
1,954,812,978.39 82,881,486.70 2,037,694,465.09 716,818,370.34 52,600.00 716,870,970.34 1,596,854,617.31 64,932,264.88 1,661,786,882.19 654,497,661.11 155,800.00654,653,461.11
Hefei Midea
Washing
Machine
Limited.
8,189,539,097.62 734,162,005.26 8,923,701,102.88 5,368,318,150.5918,280,895.39 5,386,599,045.98 7,918,309,471.76 742,917,514.76 8,661,226,986.52 5,702,514,412.6413,146,938.825,715,661,351.46
Name
Year ended 31 December 2018 Year ended 31 December 2017
Sales
Net profit
Total comprehensive income
Net cash flow from operating
activities
Sales Net profit
Total comprehensive
income
Net cash flow from
operating activites
Wuxi Filin Electronics
Co. , Ltd.
1,270,462,021.79 307,983,798.72 307,983,798.72 37,472,051.26 1,144,987,638.37 263,982,689.50 263,982,689.50 -12,535,534.97
Hefei Midea Washing
Machine Limited.
11,328,943,815.47 607,208,143.34 585,987,764.77 -57,117,295.99 9,379,833,276.67 428,209,807.98 400,076,520.10 750,894,134.08
75
(2) Interests in associate or joint ventures
There is no interests in associates or joint ventures occurred in the year ended of 2018.
X. Segment reporting
Sales, expenses, assets and liabilities of the Company and its subsidiaries are primarily attributable to
manufacturing and sales of washing machines and related products. No segment information of the Company and
its subsidiaries is presented considering the internal organization and management structure, the system of internal
financial reporting to key management personnel, and similar business nature among various subsidiaries in the
Group.
The domestic and overseas sales transaction and non-current assets excluding financial assets and deferred tax
asset are as follows:
(a) Sales transactions
31 December 2018 31 December 2017
China 18,739,863,208.93 17,114,743,424.78
Other countries 4,897,066,269.40 4,269,955,651.87
Total
23,636,929,478.33 21,384,699,076.65
(b) Non-current assets
31 December 2018 31 December 2017
China 1,441,069,022.29 1,366,095,738.76
Other countries --
Total
1,441,069,022.29 1,366,095,738.76
XI. Risk related to financial instruments
The Company and its subsidiaries' activities are exposed to a variety of financial risks: market risk (primarily
foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Company and its subsidiaries'
overall risk management program focuses on the unpredictability of financial markets and seeks to minimize
potential adverse effects on the Company and its subsidiaries' financial performance.
(1) Market risk
(a) Foreign exchange risk
The Company and its subsidiaries' major operations are carried out in Mainland China and majority of its
transactions are denominated in RMB. The Company and its subsidiaries’ recognized assets and liabilities
nominated in foreign currencies and future foreign currency transactions (mostly USD) are exposed to foreign
76
exchange risk. Financial department in the Group’s headquarter is in charge of monitoring foreign currency
transactions and the scale of foreign currency assets and liabilities of the Company and its subsidiaries, thus
minimize the exposure to foreign exchange risk. Therefore, the Company and its subsidiaries may enter into
foreign exchange agreement or currency swap contract to hedge foreign exchange risk. In the year ended 2018
and 2017, foreign exchange agreement was signed by the Company and its subsidiaries to hedge foreign
exchange risk .
The following table presents the structure analysis of the Company and its subsidiaries’ financial assets and
financial liabilities by currencies as at 31 December 2018 and 31 December 2017:
Item
31 December 2018
USD Other Total
Financial assets denominated in foreign currency
Cash at bank and on hand 358,277,401.60 13,535,155.50 371,812,557.10
Accounts receivables and notes receivables
836,356,788.62 79,704,272.07 916,061,060.69
Other receivables
427,105.65 - 427,105.65
Total 1,195,061,295.87 93,239,427.57 1,288,300,723.44
Financial liabilities denominated in foreign currency
-- -
Accounts payables and notes payables 7,957,385.15 2,701,958.96 10,659,344.11
Other payables - 3,820,065.64 3,820,065.64
Total 7,957,385.15 6,522,024.60 14,479,409.75
Item
31 December 2017
USD Other Total
Financial assets denominated in foreign currency
Cash at bank and in hand 191,071,173.12 14,916,914.11 205,988,087.23
Accounts receivables and notes receivables
531,578,236.13 76,367,051.71 607,945,287.84
Total
722,649,409.25 91,283,965.82 813,933,375.07
Financial liabilities denominated in foreign currency
Accounts payables and notes payables
36,668,878.79 6,033,971.28 42,702,850.07
Other payables
- 37,060,925.00 37,060,925.00
Total
36,668,878.79 43,094,896.28 79,763,775.07
As at 31 December 2018, if the RMB had strengthened/weakened by 5% against the USD while all other variables
had been held constant, the Company and its subsidiaries’ net profit for the year would have been approximately
RMB 50,470,000, (as at 31 December 2017: approximately RMB 29,150,000) lower/higher for various financial
assets and liabilities denominated in USD.
(b) Interest rate risk
77
As at 31 December 2018 and 31 December 2017, there is no any short-term or long-term interest bearing
borrowings issued at floating rates in the Company and its subsidiaries. The Company and its subsidiaries expect
that there is no significant interest rate risk.
(2) Credit risk
Credit risk is managed on a group basis. Credit risk mainly arises from cash at bank, accounts receivables, other
receivables, notes receivables, other current assets-structured deposits and financial products, etc.
The Company and its subsidiaries expect that there is no significant credit risk associated with cash at bank and
structured deposits since they are deposited at state-owned banks and other medium or large size listed banks.
Management does not expect that there will be any significant losses from non-performance by these
counterparties.
The Company and its subsidiaries authorized commercial bank, trust company, asset management company and
other financial agencies to conduct short-term investment finance, such as bank financial products, trust plan of
trust company and assets management plan of assets management company, whose investment orientations are
mainly on financial instruments with high market credit rating among banks in China as well as fine liquidity and
trust product assets management plan with estimated earnings, including but not limited to commercial bank’s
financial products, which have low risk, stable return and an investment period within one year. The Company and
its subsidiaries' idle funds which are authorized to finance won’t be invested in stock and its derivative products,
securities investment funds, entrusted financial products aimed at security investment and other investment related
to securities.
In addition, the Company and its subsidiaries have policies to limit the credit exposure on accounts receivables,
other receivables and notes receivables. The Company and its subsidiaries assess the credit quality of and sets
credit limits on its customers by taking into account their financial position, the availability of guarantee from
third parties, their credit history and other factors such as current market conditions. The credit history of the
customers is regularly monitored by the Group. In respect of customers with a poor credit history, the Company
and its subsidiaries will use written payment reminders, or shorten or cancel credit periods, to ensure the overall
credit risk of the Company and its subsidiaries is limited to a controllable extent. There are no significant expired
receivables at 31 December 2018 (2017: Nil).
(3) Liquidity risk
Cash flow forecasting is performed by the Company and its subsidiaries and aggregated by the Group’s finance
department in its headquarters. The Group’s finance department in headquarter monitors rolling forecasts on the
78
Company and its subsidiaries’ short-term and long-term liquidity requirements to ensure it has sufficient cash and
securities that are readily convertible to cash to meet operational needs.
The financial liabilities of the Company and its subsidiaries at the balance sheet date are analysed by their
maturity date below at their undiscounted contractual cash flows:
Item
31 December 2018
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings
117,603,683.89 - - - 117,603,683.89
Notes and accounts payables
7,979,727,116.02 - - - 7,979,727,116.02
Other current liabilities
2,507,883,253.19 - - - 2,507,883,253.19
Other payables
175,263,267.57 - - - 175,263,267.57
Provisions
1,853,074.62 - - - 1,853,074.62
Total
10,782,330,395.29 - - - 10,782,330,395.29
Item
31 December 2017
Within 1 year 1 to 2 years 2 to 5 years Over 5 years Total
Short-term borrowings 81,393,672.34 - - - 81,393,672.34
Notes and accounts payables
6,632,830,300.51 - - - 6,632,830,300.51
Other current liabilities
2,107,700,604.61 --- 2,107,700,604.61
Other payables
228,117,647.54 --- 228,117,647.54
Provisions
2,253,082.25 --- 2,253,082.25
Total
9,052,295,307.25 --- 9,052,295,307.25
XII. Fair value disclosure
(1) Closing balance of assets and liabilities measured at fair value
Based on the lowest level input that is significant to the fair value measurement in its entirety, the fair value
hierarchy has the following levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the assets or liabilities that are not based on observable market data (that is,unobservable
inputs).
The fair value of a financial instrument that is traded in an active market is determined at e quoted price in the
active market. The fair value of a financial instrument for which the market is not active is determined by using a
valuation technique. Valuation techniques include cash flow discount model and market comparable company
model. The input of valuation techniques mainly include risk free rate, expected exchange rate, estimated annual
79
yield, etc.
Item
31 December 2018
Level 1 Level 2 Level 3 Total
Assets measured at fair value on a continuous basis
Financial liabilities at fair value through profit or loss –
forward foreign exchange contract
- -3,078,878.95 - -3,078,878.95
Available-for-sale financial assets-financial products - - - -
Item
31 December 2017
Level 1 Level 2 Level 3 Total
Assets measured at fair value on a continuous basis
Available-for-sale financial assets-financial products -5,270,238.03 - 5,270,238.03
Available-for-sale financial assets-financial products 3,792,871,097.59 3,792,871,097.59
(2) Valuation technique and qualitative and quantitative information of significant parameter used by
instruments measured at fair value by Level 2 and Level 3 on a continuous basis
As at 31 December 2018, the Company and its subsidiaries’ financial assets measured at fair value by Level 2 are
forward exchange agreement. The fair value is determined by observable forward exchange rate in current market.
As at 31 December 2018, the Company and its subsidiaries don’t hold financial assets measured at fair value by
Level 3. At 31 December 2017, the Company and its subsidiaries’ financial assets measured at fair value by Level
3 are financial products of floating income and unprotected principles, which fair value is determined via
valuation techniques by the Group.
(3)Reasons of conversion among levels and policies of determining conversion date of instruments
measured at fair value on a continuous basis
The Company and its subsidiaries consider the date of events leading the conversion between different levels as
the conversion recognizing date. In 2018, there was no conversion between Level 1 and Level 2.
(4) The movement of financial assets measured at fair value by Level 3
Item Financial product investments
1 January 2018 3,792,871,097.59
Purchase -
Disposal -3,735,000,000.00
Total gains in current year -57,871,097.59
- attributable to profit or loss -57,871,097.59
- attributable to other comprehensive income -
80
31 December 2018 -
Item Financial product investments
1 January 2017 5,994,142,671.24
Purchase 4,745,000,000.00
Disposal -6,900,000,000.00
Total gains in current year -46,271,573.65
- attributable to profit or loss -104,142,671.24
- attributable to other comprehensive income 57,871,097.59
31 December 2017 3,792,871,097.59
The relevant information of financial assets measured at fair value by Level 3 are below:
Item
Fair value at 31
December 2018
Valuation
technique
Non-observable
Input
Range
Relationship
with fair value
Observable/
unobservable
Available-for-sale financial assets
- Financial
products
-
Discount
cash flow
Estimated annual
yield
4.20%-5.25%
Moves in the
same direction
unobservable
Item
Fair value at 31
December 2017
Valuation
technique
Non-observable
Input
Range
Relationship
with fair value
Observable/
unobservable
Available-for-sale financial assets
- Financial
products
3,792,871,097.59
Discount
cash flow
Estimated annual
yield
4.20%-5.25%
Moves in the
same direction
unobservable
(5) Financial assets and liabilities not measured at fair value
Financial assets and liabilities measured at amortized cost mainly include: notes receivables, accounts receivables,
other current assets-structured deposits, other receivables, notes payables, accounts payables, other payables and
other current liabilities.
Available-for-sale financial assets measured in cost model are investments on shares of unlisted companies, which
have no quoted price in the active market and the range of reasonable estimation of their fair value is relatively
wide and probabilities used to determine the estimation cannot be ascertained reasonably. Therefore, the fair
values cannot be measured reliably.
81
The carrying amount of financial assets and liabilities not measured at fair value is a reasonable approximation of their
fair value at 31 December 2018 and 31 December 2017.
XIII. Capital management
The Company and its subsidiaries’ objectives of managing capital policies are to safeguard the Company and its
subsidiaries’ ability to continue operating, in order to provide returns for shareholders and benefits for other
stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Company and its subsidiaries may adjust the amount of
dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The Company and its subsidiaries is not subject to external mandatory capital requirements, and monitors capital
on the basis of gearing ratios.
Item 31 December 2018 31 December 2017
Gearing ratios 58.63% 61.49%
XIV. Related parties and related party transactions
(1) Parent company of the Company
Name Place of registration Nature of business Registered Capital
% of share
holding
% of voting
rights
Midea Group
Co., Ltd.
Foshan, Guangdong
Manufacture and sales of household
appliances and fittings, robot and robotization
system, financial service, etc.
6,663,030,506.00 52.67% 52.67%
(2) Registered capital and changes in registered capital of the parent company
Name 31 December 2017 Increase Decrease 31 December 2018
Midea Group Co., Ltd 6,561,053,319.00 103,679,021.00 1,701,834.00 6,663,030,506.00
(3) The percentage of shareholding and voting rights in the Company held by the parent
Name
31 December 2018 31 December 2017
% of share holding % of voting right % of share holding % of voting right
Midea Group Co., Ltd. 52.67% 52.67% 52.67% 52.67%
(4) Subsidiaries of the Company
For the detailed information of subsidiaries, please refer to Note IX.
82
(5) Associates and joint ventures of the Company
Up to 31 December 2018, there is no associate or joint venture of the Company and its subsidiaries.
(6) Other related parties
Name Relationship with the Company and its subsidiaries
Ningbo Midea United Supply Limited Controlled by controlling shareholders of the Company
Ningbo Meimei Garden Appliance service Limited Controlled by controlling shareholders of the Company
Midea E-business Limited Controlled by controlling shareholders of the Company
Zhejiang Meizhi Compressor Limited Controlled by controlling shareholders of the Company
Guangdong Midea Hicks Electronics Limited Controlled by controlling shareholders of the Company
Guangdong Midea Precision Mold Technology Co., Ltd. Controlled by controlling shareholders of the Company
Midea Wisdom Household Technology Co., Ltd. Controlled by controlling shareholders of the Company
Hefei Hualing Co., Ltd. Controlled by controlling shareholders of the Company
Wuhu Midea Household Appliances Manufacture Limited Controlled by controlling shareholders of the Company
Midea Appliance (Singapore)Trading Limited Controlled by controlling shareholders of the Company
MIDEA SCOTT & ENGLISH ELECTRONICS SDN BHD Controlled by controlling shareholders of the Company
MIDEA CONSUMER ELECTRIC (VIETNAM) CO., LTD Controlled by controlling shareholders of the Company
PT. MIDEA PLANET INDONESIA Controlled by controlling shareholders of the Company
ORIENT HOUSEHOLD APPLIANCCES LTD. Controlled by controlling shareholders of the Company
Hefei Midea Materials Supply Co., Ltd. Controlled by controlling shareholders of the Company
Guangdong Midea Consumer Electric Manufacturing Co., Ltd. Controlled by controlling shareholders of the Company
Guangdong Midea Refrigeration Equipment Limited Controlled by controlling shareholders of the Company
Guangdong Midea Group Wuhu Refrigeration Equipment Co., Ltd. Controlled by controlling shareholders of the Company
Hubei Midea Refrigerator Limited Controlled by controlling shareholders of the Company
Hefei Midea Refrigerator Co., Ltd. Controlled by controlling shareholders of the Company
Guangdong Midea Environmental Equipment Limited Controlled by controlling shareholders of the Company
Midea Group Finance Co., Ltd.
Controlled by controlling shareholders of the Company
Foshan Midea Micro Filter Equipment Manufacture Co., Ltd
Controlled by controlling shareholders of the Company
Ningbo Andhra Logistics Co., Ltd.
Controlled by controlling shareholders of the Company
Wuhu Midea Kitchen Electrical Appliance Manufacture Co., Ltd.
Controlled by controlling shareholders of the Company
Guangdong Midea White Household Appliance Technology Innovation
Center Co., Ltd.
Controlled by controlling shareholders of the Company
Foshan Midea Clear Lake Water Purification Equipment Manufacturing
Co., Ltd.
Controlled by controlling shareholders of the Company
83
Name Relationship with the Company and its subsidiaries
Wuhu Welling Motor Sales Co., Ltd. Controlled by controlling shareholders of the Company
Huai‘an Weiling motor manufacture Limited Controlled by controlling shareholders of the Company
Midea Welling Motor Technology (Shanghai) Co., Ltd Controlled by controlling shareholders of the Company
Shenzhen Midea Payment Technology Co., Ltd Controlled by controlling shareholders of the Company
Andhra Logistics Corporation Controlled by controlling shareholders of the Company
TOSHIBA LIFESTYLE
PRODUCTS&SERVICES CORPORATION
Controlled by controlling shareholders of the Company
TOSHIBA Household Appliances Manufacturing (Nanhai) Limited Controlled by controlling shareholders of the Company
Midea Group Wuhan Refrigerator Equipment Manufacturing Co., Ltd Controlled by controlling shareholders of the Company
MIDEA MIDDLE EAST Controlled by controlling shareholders of the Company
Wuhu Midea Kitchen and Bath Appliances Manufacturing Co., Ltd Controlled by controlling shareholders of the Company
Guangzhou Hualing Refrigeration Equipment Co., Ltd Controlled by controlling shareholders of the Company
MIDEA AUSTRALIA PTY LTD Controlled by controlling shareholders of the Company
CARRIER MIDEA INDIA PRIV ATE LIMITED Controlled by controlling shareholders of the Company
MIDEA ELECTRIC TRADING (THAILAND) CO., LTD. Controlled by controlling shareholders of the Company
Guangdong Midea Logistics Corporation Household Technology Co.,
Ltd.
Controlled by controlling shareholders of the Company
Guangdong Midea Intelligent Robot Co., Ltd. Controlled by controlling shareholders of the Company
Shenzhen Digital Intelligence Scene Location Technology Co., Ltd. Controlled by controlling shareholders of the Company
Jiangsu Midea Cleaning Electrical Appliances Co., Ltd Controlled by controlling shareholders of the Company
Guangdong Midea Kitchen Electrical Appliances Manufacture Co., Ltd Controlled by controlling shareholders of the Company
Hefei Midea Intelligent Technology Co., Ltd Controlled by controlling shareholders of the Company
Guangdong Midea HV AC Equipment Co., Ltd Controlled by controlling shareholders of the Company
TOSHIBA THAILAND CO., LTD. Controlled by controlling shareholders of the Company
Shenzhen Meiyun Zhishu Technology Co., Ltd Controlled by controlling shareholders of the Company
(7) Related party transactions
(a) Sale/Purchase of goods and services received/offered
Purchase of goods and services received
Related parties Nature of transaction
Year ended
31 December 2018
Approved amounts of
transaction
If it exceeds
the approved
amounts
Year ended
31 December 2017
Ningbo Midea United Supply Limited Materials purchase 2,243,834,039.35 2,900,000,000.00 No 1,920,029,601.88
Huai‘an Weiling motor manufacture
Limited /Wuhu Welling Motor Sales
Electric engines
1,178,655,099.43 1,410,000,000.00 No 1,098,835,770.95
84
Co., Ltd. purchase
Ningbo Andhra Logistics Co., Ltd./
Andhra Logistics Co., Ltd.
Storage & logistics 878,081,150.57 1,100,000,000.00 No 837,227,988.48
Ningbo Meimei Garden Appliance
service Limited
After-sales service 379,003,539.88 395,000,000.00 No293,939,774.67
Midea E-business Limited
Sales promotion
services
75,565,262.80 125,000,000.00 No61,748,388.77
TOSHIBA Household Appliances
Manufacturing (Nanhai) Co., Ltd.
Finished goods &
fittings purchase
59,805,391.38 280,000,000.00 No 70,704,350.52
Midea Group and its subsidiaries
Purchase of mould,
equipment and
services
34,381,517.25 35,000,000.00 No15,799,723.28
Related parties
Nature of
transaction
Year ended
31 December
2018
Approved
amounts of
transaction
If it exceeds
the approved
amounts
Year ended31
December 2017
Zhejiang Meizhi Compressor Limited
Compressor
and materials
24,285,999.42 25,000,000.00 No15,491,263.90
Guangdong Midea Hicks Electronics Limited /
Ningbo Midea United Supply Limited / Midea
Wisdom Household Technology Co., Ltd.
Chip & Wifi
Modules
purchase
20,489,862.85 65,000,000.00.00 No65,627,097.94
Guangdong Midea Precision Mold Technology
Co., Ltd.
Mould
purchase
13,296,082.4125,000,000.00 -
Total 4,907,397,945.34 6,360,000,000.00 4,379,403,960.39
The pricing policies of related party transactions are agreed price.
Sales of goods and services provided
Related parties Nature of transaction
Year ended
31 December
2018
Approved
amounts of
transaction
If it exceeds
the approved
amounts
Year ended
31 December 2017
Midea Appliance (Singapore)Trading
Limited
Sales of washing
machines and materials
3,460,780,406.39 4,250,000,000.00 No 3,116,834,684.53
MIDEA SCOTT & ENGLISH
ELECTRONICS SDN BHD
Sales of washing
machines
83,452,679.45100,000,000.00 No 62,099,832.07
PT. MIDEA PLANET INDONESIA
Sales of washing
machines
59,709,719.0960,000,000.00 No 26,916,420.25
85
TOSHIBA LIFESTYLE
PRODUCTS&SERVICES
CORPORATION./ Ningbo Andhra
Logistics Co., Ltd./ Andhra Logistics Co.
Ltd/ MIDEA MIDDLE EAST/ Midea
E-business Limited/ Jiangsu Midea
Cleaning Electrical Appliances Co., Ltd/
Hefei Midea Materials Supply Co., Ltd./
Hubei Midea Refrigerator Limited/
Guangdong Midea Kitchen Electrical
Appliances Manufacture Co., Ltd./ Hefei
Hualing Co., Ltd./ Guangdong Midea
Refrigeration Equipment Limited/ Hefei
Midea Refrigerator Co., Ltd.
Sales of washing
machines, fittings and
materials
25,615,644.9830,000,000.00 No 55,957,699.37
Guangdong Midea Logistics Corporation
Household Technology Co., Ltd.
Sales of washing
machine
31,639,088.33 80,000,000.00 No -
Ningbo Meimei Garden Appliance
Service Limited
Sales of fittings 29,566,764.22 25,000,000.00 Yes 36,411,806.80
TOSHIBA Household Appliances
Manufacturing (Nanhai) Limited
Sales of materials 18,360,315.5825,000,000.00 No 7,356,261.09
ORIENT HOUSEHOLD APPLIANCES
LT D .
Sales of washing
machines
17,224,629.81 40,000,000.00
No 25,439,421.52
MIDEA CONSUMER ELECTRIC
(VIETNAM) CO., LTD.
Sales of materials 16,073,292.5050,000,000.00 No 21,427,084.19
TOSHIBA THAILAND CO., LTD.
Sales of washing
machines, fittings and
materials
7,866,753.4140,000,000.00 No -
Midea Group Wuhan Refrigeration
Equipment Co., Ltd
Sales of washing
machines
- N/A N/A 223,179.49
Wuhu Midea Kitchen and Bath
Appliances Manufacturing Co., Ltd
Sales of washing
machines
- N/A N/A 123,307.69
Guangzhou Hualing Refrigeration
Equipment Limited
Sales of washing
machines
- N/A N/A 37,094.02
Midea Group Co., Ltd Sales of materials - N/A N/A 19,999.98
Ningbo Midea United Supply Limited Sales of materials - N/A N/A 15,250.64
MIDEA AUSTRALIA PTY LTD
Sales of washing
machines
- N/A N/A 3,805.46
Total 3,750,289,293.76 4,700,000,000.00 3,352,865,847.10
The pricing policies of related party transactions are agreed price.
(b) Lease
Lessee Type of assets
Rental income of
2018
Approved amounts
of transaction
If it exceeds the
approved amounts
Rental income of 2017
86
Hefei Hualing Co., Ltd. House property 12,610,818.72 15,000,000.00 No 13,446,746.44
Total 12,610,818.72 15,000,000.00 13,446,746.44
(c) Asset transfer and debt restructuring
Related parties Related-party Transactions
Year ended
31 December 2018
Approved
amount of
transaction
If it exceeds
the approved
amount
Year ended
31 December 2017
Midea Group Co., Ltd. Trademark royalty charges 22,114,503.89
Charged by 0.3%
of net sales
No
16,863,306.72
Guangdong Midea Group Wuhu
Refrigeration Equipment Co., Ltd.
Trademark royalty charges 6,402,802.20 5,262,362.33
Hubei Midea Refrigerator Limited Trademark royalty charges 1,775,276.70 1,042,287.60
Midea Group Co., Ltd Other 18,867.92 N/A N/A -
TOSHIBA Household Appliances
Manufacturing (Nanhai) Limited
Other 17,367.48 N/A N/A -
Hefei Midea Refrigerator Co., Ltd. Equipments purchase - N/A N/A 301,886.79
Total 30,328,818.19 23,469,843.44
In the above-mentioned related party transactions (a), the amount of related transactions actually exceeded the
approved amount in 2018 is RMB 4,566,764.22, which is less than 0.5% (RMB 35,235,454.00) attributable to
shareholders' equity of the parent company in 2017, so it is not necessary to perform the Board of Directors'
deliberation to approve.
(d) Remuneration of key management
Item Year ended 31 December 2018 Year ended 31 December 2017
Remuneration of key management 14,943,921.53 13,709,700.00
(e) Transaction with Midea Group Finance Co., Ltd.
As at 31 December 2018, the Company and its subsidiaries’ Cash at bank deposited in Midea Group Finance Co.,
Ltd. amounted to RMB 385,392,637.66 (as at 31 December 2017: RMB 281,627,638.87). During the year ended
31 December 2018, interest income of cash at bank mentioned above was RMB 5,528,855.24 (2017: RMB
8,435,527.09).
As at 31 December 2018, the Company and its subsidiaries’ bank acceptance notes accepted by Midea Group
Finance Co., Ltd. amounted to RMB 4,193,914,501.21 (as at 31 December 2017, RMB 2,016,401,054.99). During
the year ended 31 December 2018, commission charges of the bank acceptance notes mentioned above amounted
to RMB 4,084,352.41 (2017: RMB 1,567,491.73).
As at 31 December 2018, the Company and subsidiaries discounted RMB 2,068,013,368.85 from Midea Group
Finance Co., Ltd. with bank acceptance notes, the balance of bank acceptance notes not overdue is RMB
87
708,451,603.24. (2017: nil)
(8) Receivables from and payables to related parties
(a) Receivables from related parties
Name of item Related parties
31 December 2018 31 December 2017
Cost
Bad debt
provision
Carrying
amount
Bad debt
provision
Notes and accounts
receivables
Midea Appliance (Singapore)Trading
Limited
676,841,305.74 33,842,065.29 589,756,109.51 29,487,805.48
Notes and accounts
receivables
PT. MIDEA PLANET INDONESIA 36,337,130.53 1,816,856.53 9,792,445.24 489,622.26
Notes and accounts
receivables
MIDEA SCOTT & ENGLISH
ELECTRONICS SDN BHD
7,125,006.05 356,250.30 7,962,102.83 398,105.14
Notes and accounts
receivables
TOSHIBA Household Appliances
Manufacturing (Nanhai) Limited
5,715,120.00 285,756.00 - -
Notes and accounts
receivables
ORIENT HOUSEHOLD APPLIANCES
LT D .
4,353,139.77 217,656.99 2,078,970.94 103,948.55
Name of item Related parties
31 December 2018 31 December 2017
Cost
Bad debt
provision
Carrying
amount
Bad debt
provision
Notes and accounts
receivables
MIDEA MIDDLE EAST 2,943,655.90 147,182.80 - -
Notes and accounts
receivables
TOSHIBA THAILAND CO., LTD. 2,557,401.07 127,870.05 - -
Notes and accounts
receivables
Guangdong Midea Logistics Corporation
Household Technology Co., Ltd.
305,144.00 15,257.20 - -
Notes and accounts
receivables
Midea Consumer Electric (Vietnam) Co.,
Ltd.
1,081.37 54.07 11,868,764.19 593,438.21
Notes and accounts
receivables
Andhra Logistics Corporation - - 52,895.00 2,644.75
Notes and accounts
receivables
Ningbo Meimei Garden Appliance service
Limited
- - 4,748,685.08 237,434.25
Notes and accounts
receivables
Midea E-business Limited - - 125,900.58 6,295.03
Notes and accounts
receivables
Toshiba Lifestyle Products&Services
Corporation
- - 8,103,283.44 405,164.17
Total 736,178,984.43 36,808,949.23 634,489,156.81 31,724,457.84
88
Name of item Related parties
31 December 2018 31 December 2017
Cost
Bad debt
provision
Carrying
amount
Bad debt
provision
Other receivables Shenzhen Midea Payment Technology Co., Ltd 6,214,698.76 310,734.94 10,520,299.96 526,015.00
Total 6,214,698.76 310,734.94 10,520,299.96 526,015.00
Prepayment Midea E-business Limited 4,057,571.45 - 3,354,919.77 -
Prepayment
Shenzhen Digital Intelligence Scene Location
Technology Co., Ltd.
4,054,358.79 - - -
Prepayment Guangdong Midea Intelligent Robot Co., Ltd. 1,650,153.90 - - -
Prepayment
Guangdong Midea Environmental Equipment
Limited
80,850.00 - - -
Prepayment Ningbo Midea United Supply Limited - - 7,407,695.59 -
Prepayment
Guangdong Midea Precision Mold Technology
Co., Ltd.
- - 309,840.00 -
Total 9,842,934.14 - 11,072,455.36 -
(b) Payables to related parties
Name of item Related parties 31 December 2018 31 December 2017
Notes and accounts payables Wuhu Welling Motor Sales Co., Ltd. 149,150,109.62 146,551,812.62
Notes and accounts payables Ningbo Midea United Supply Limited 50,216,557.56 7,300,152.98
Notes and accounts payables TOSHIBA Household Appliances Manufacturing
(Nanhai) Limited
26,474,228.17 38,171,577.41
Notes and accounts payables Guangdong Midea Precision Mold Technology Co., Ltd. 6,194,945.99 5,995,300.00
Notes and accounts payables Zhejiang Meizhi Compressor Limited 3,591,972.45 5,500,676.15
Notes and accounts payables Ningbo Meimei Garden Appliance service Limited 1,416,510.52 51,350.00
Notes and accounts payables Foshan Midea Clear Lake Water Purification Equipment
Manufacturing Co., Ltd.
51,175.80 88,452.00
Notes and accounts payables Wuhu Midea Household Appliances Manufacture Limited 32,403.45 6,800.00
Notes and accounts payables Shenzhen Meiyun Zhishu Technology Co., Ltd 20,740.00 -
Notes and accounts payables Guangdong Midea Intelligent Robot Co., Ltd. 8,338.11 -
Notes and accounts payables Foshan Midea Micro Filter Equipment Manufacture Co.,
Ltd
3,500.00 -
Notes and accounts payables Midea Wisdom Household Technology Co., Ltd. - 1,216,403.00
Notes and accounts payables Ningbo Andhra Technology Limited - 68.38
Notes and accounts payables Guangdong Midea Environmental Equipment Limited - 13,951.00
Total 237,160,481.67 204,896,543.54
89
Name of item Related parties 31 December 2018 31 December 2017
Other payables Hefei Midea Refrigerator Co., Ltd. 1,010,000.00 -
Other payables Guangdong Midea Intelligent Robot Co., Ltd. 461,500.00 -
Other payables Guangdong Midea Refrigeration Equipment Limited 215,251.80 351,404.33
Other payables Ningbo Meimei Garden Appliance service Limited 4,602.99 -
Other payables Guangdong Midea HV AC Equipment Co., Ltd 1,707.59 -
Other payables Guangdong Midea Precision Mold Technology Co., Ltd. - 100,000.00
Other payables Guangdong Midea Consumer Electric Manufacturing Co., Ltd. - 61,458.90
Other payables Midea Welling Motor Technology (Shanghai) Co., Ltd - 90,387.26
Total 1,693,062.38 603,250.49
Other current liabilities Midea Group Co., Ltd 2,804,104.70 -
Total 2,804,104.70 -
Advances from customers Midea Appliance (Singapore)Trading Limited 37,286,761.09 -
Advances from customers MIDEA SCOTT & ENGLISH ELECTRONICS SDN BHD 1,420,475.87 22,283.28
Advances from customers Andhra Logistics Corporation 345,530.98 290,804.69
Advances from customers Midea E-business Limited 7,741.42 -
Advances from customers Guangdong Midea HV AC Equipment Co., Ltd 6,320.00 -
Advances from customers TOSHIBA Household Appliances Manufacturing (Nanhai) Limited 3,060.00 2,726,081.57
Advances from customers CARRIER MIDEA INDIA PRIV ATE LIMITED 2,139.26 1,206.21
Advances from customers Ningbo Meimei Garden Appliances Service Limited - 607,507.13
Advances from customers Hubei Midea Refrigerator Limited - 104,580.00
Advances from customers MIDEA ELECTRIC TRADING (THAILAND) CO., LTD. - 535.80
Total 39,072,028.62 3,752,998.68
XV. Share-based payment
(1) Summary
Upon the authorisation of 2017 Annual General Meeting of Midea Group, 33rd meeting of the 2nd term of Board
of Midea Group on 23rd April 2018 has passed the equity options incentive plan (The 5th Incentive Plan), the
Restricted Stocks Incentive Plan. 54,520,000 shares of equity options are being granted to 1,330 objects and
22,150,000 shares of restricted stocks are being granted to 343 objects on 7th May 2018. As at 31 December 2018,
the 1st Equity Options Incentive Plan grants 6,760,000 shares of equity options to 30 objects, the 2nd Equity
Options Incentive Plan grants 5,810,000 shares of equity options to 35 objects, the 3rd Equity Options Incentive
Plan grants 7,650,000 shares of equity options to 57 objects, the 4th Equity Options Incentive Plan grants
7,100,000 shares of equity options to 112 objects, the 5th Equity Options Incentive Plan grants 4,280,000 shares
90
of equity options to 112 objectives, the 1st Restricted Stocks Incentive Plan grants 1,530,000 shares of restricted
stocks to 9 objects, the 1st Restricted Reserve Stock Incentive Pan grants 540,000 shares of restricted stocks to 5
objects, the 2nd Restricted Stocks Incentive Plan grants 1,400,000 shares of restricted stocks to 22 objects.
(2) Impact of share-based payment transactions on financial position and financial performance.
The total stock option expenses recognised in 2018 were RMB 80,937,978.57 (2017: RMB 64,494,411.50). As at
31 December 2018, the balance relating to the option incentive plan and provided for in capital surplus was RMB
241,028,611.70 (31 December 2017: RMB 163,325,332.37 ).
XVI. Commitment and contingency
(1) Significant commitments
As at 31 December 2018, no significant commitments shall be disclosed.
(2) Contingency
As at 31 December 2018, no significant contingency shall be disclosed.
XVII. Events after balance sheet date
(1) Profit distribution after balance sheet date
According to the resolution of the Board on 14 March, 2019, the Board propose to distribute RMB
2,529,951,056.00 and it has not been recognized as a liability in the financial statement ended 31 December 2018
(Note VII(31)). This proposal is still subject to be approved by the Annual General Meeting.
Amount
Proposed dividends 2,529,951,056.00
91
(2) According to the Proposal of Examination and Approval of Midea Group Co., Ltd issues convertible A shares in
and Wuxi Little Swan Co., Ltd. and its abstract, which approved on the 2nd meeting of the 3rd term of Board of
Directors held by Midea Group Co., Ltd. and the 2nd meeting of the 9th Board of Directors held by Wuxi Little
Swan Co., Ltd. on 23rd October, Midea Group Co., Ltd plan to issue convertible A shares in order to merge Wuxi
Little Swan Co., Ltd. The merger mentioned above is a significant assets reorganization matter of Wuxi Little Swan
Co., Ltd. and was approved by Annual General Meeting of both transaction parties on 21st December 2018. On
20th February 2019 China Securities Regulatory Commission approved the merger with no conditions .On 12rd
March 2019, the Company received The Approval of Midea Group Co., Ltd. to Acquire Wuxi Little Swan Co., Ltd.
issued by the China Securities Regulatory Commission (Security Permit License [2019] No. 352).
XVIII. Notes to the material items in financial statements
(1) Notes and accounts receivables
31 December 2018 31 December 2017
Notes receivable(a) 589,229,066.42 938,342,347.95
Accounts receivable(b) 2,022,952,766.62 2,805,194,600.27
Total 2,612,181,833.04 3,743,536,948.22
(a) Notes receivable
(i) Notes receivable classified by nature
31 December 2018 31 December 2017
Bank acceptance notes 589,229,066.42 938,342,347.95
Less: Provision for bad debts - -
589,229,066.42 938,342,347.95
As at 31 December 2018 and 31 December 2017, there is no trade acceptance receivable. The Company and its
subsidiaries do not recognize impairment risk of the bank acceptance notes, whereupon no bad debt provision is
accrued.
As at 31 December 2018 and 31 December 2017, there is no pledged notes receivable.
(ii) As at 31 December 2018, notes receivable that have been endorsed or discounted but not yet expired
are as follows:
Items Derecognised Not derecognised
Bank acceptance notes 1,651,107,320.91 43,362,419.45
92
(b) Accounts receivable
(i) Accounts receivable classified by nature:
Category
31 December 2018
Cost Bad debt provision
Carrying amount
Amount % of proportion Amount % of proportion
Debtors with significant balance
assessed individually
772,744,242.82 37.00% - 0.00% 772,744,242.82
Debtors grouped by credit risk 1,316,008,972.41 63.00% 65,800,448.61 5.00% 1,250,208,523.80
Total 2,088,753,215.23 100.00% 65,800,448.61 3.15% 2,022,952,766.62
Category
31 December 2017
Cost Bad debt provision
Carrying amount
Amount % of proportion Amount % of proportion
Debtors with significant balance
assessed individually
1,434,934,642.83 49.87% - - 1,434,934,642.83
Debtors grouped by credit risk 1,442,378,902.57 50.13% 72,118,945.13 5.00% 1,370,259,957.44
Total 2,877,313,545.40 100.00% 72,118,945.13 2.51% 2,805,194,600.27
As all debtors of accounts receivable with amounts that are individually significant are subsidiaries of the Company,
the Company is convinced that impairment risks do not exist, thus no provision for bad debt was accrued.
Accounts receivable individually significant for which bad debt provision was assessed individually.
□Applicable √Not applicable
Accounts receivable adopting aging analysis method for bad debt provision:
√Applicable □ Not applicable
Aging
31 December 2018
Account receivable Bad debt provision % of proportion Carrying amount
Within 1 year 1,316,008,972.41 65,800,448.61 5.00% 1,250,208,523.80
Aging
31 December 2017
Account receivable Bad debt provision % of proportion Carrying amount
Within 1 year 1,442,378,902.57 72,118,945.13 5.00% 1,370,259,957.44
As at 31 December 2018 and 2017, there were no material accounts receivable which were past due.
Accounts receivable adopting balance percentage method for bad debt provision:
□ Applicable √Not applicable
Accounts receivable adopting other method for bad debt provision:
□ Applicable √Not applicable
93
(ii) Accounts receivable withdraw, reversed or collected during the reporting period
During the year ended 31 December 2018, the movement of provision for accounts receivable was RMB 0.00
(2017: RMB 16,965,109.32), the movement of reverse for accounts receivable was RMB 6,318,496.52 (2017:
RMB 0.00). There were no provision or reverse of provision for individual significant other receivables.
(iii) Accounts receivable written-off during the reporting period
There were no accounts receivable written-off during the reporting period
(iv) Top 5 of accounts receivable by customers
Name Amounts Bad debt provision % of total balance
Total amount of the top 5 accounts receivable by customers 1,689,987,667.22 46,562,091.81 80.91%
(v) Accounts receivable derecognised due to the transfer of financial assets
For the year ended 31 December 2018, accounts receivable derecognised due to the transfer of financial assets
amounted to RMB 1,240,899,216.24 (2017: 1,035,937,017.93), of which loss on derecognised amounted to RMB
27,229,782.76 (2017: 20,478,740.36).
Derecognised Loss on derecognised
Accounts receivables transferred 1,240,899,216.24 27,299,782.76
(2) Other receivables
项目
31 December 2018 31 December 2017
Interests receivable(a) 136,241,903.00 32,913,208.23
Other receivables(b) 11,729,831.02 28,973,048.36
Total 147,971,734.02 61,886,256.59
(a) Interests receivable
31 December 2018 31 December 2017
Structured deposit interest 135,314,452.05 32,402,684.93
Bank deposit interest 927,450.95 510,523.30
Total 136,241,903.00 32,913,208.23
(b) Other receivables classified by nature:
Category
31 December 2018
Other receivables Bad debt provision
Carrying
amount
Amount % of proportion Amount % of proportion
Debtors with significant balance
assessed individually
76,069,797.28 85.74% 75,456,666.50 99.19% 613,130.78
94
Debtors grouped by credit risk 12,648,032.55 14.26% 1,531,332.31 12.11% 11,116,700.24
Total 88,717,829.83 100.00% 76,987,998.81 86.78% 11,729,831.02
Category
31 December 2017
Other receivables Bad debt provision
Carrying
amount
Amount % of proportion Amount % of proportion
Debtors with significant balance
assessed individually 76,278,456.92 71.55% 75,455,666.50 98.92% 822,790.42
Debtors grouped by credit risk 30,323,298.25 28.45% 2,173,040.31 7.17% 28,150,257.94
Total 106,601,755.17 100.00% 77,628,706.81 72.82% 28,973,048.36
Other receivables with single significant amount and withdrawal bad debt provision separately at end of period.
√Applicable □ Not applicable
Other receivables (by company)
31 December 2018
Other
receivables
Bad debt
provision
% of
proportion
Carrying
amount
Reason of
provision
Jiangsu Littleswan Marketing and Sales Co.,Ltd. 74,295,013.55 74,295,013.55 100% - Uncollectible
Wuxi Little Swan Import & Export Co. , Ltd 1,161,652.95 1,161,652.95 100% - Uncollectible
Wuxi Little Swan General Electric Appliances
Co., Ltd 343,160.00 - - 343,160.00
--
Hefei Midea Washing Machine Co., Ltd. 269,970.78 - - 269,970.78
--
Total 76,069,797.28 75,456,666.50 99.19% 613,130.78
Other receivables (by company)
31 December 2017
Other
receivables
Bad debt
provision
% of
proportion
Carrying
amount
Reason of
provision
Jiangsu Littleswan Marketing and Sales Co.,Ltd. 74,294,013.55 74,294,013.55 100% - Uncollectible
Wuxi Little Swan Import & Export Co. , Ltd 1,161,652.95 1,161,652.95 100% - Uncollectible
Wuxi Little Swan General Eletric Appliances Co., Ltd 416,186.85 - - 416,186.85 --
Little Swan International (Singapore) Limited 326,710.00 - - 326,710.00 --
Hefei Midea Washing Machine Co., Ltd. 79,893.57 - - 79,893.57 --
Total 76,278,456.92 75,455,666.50 822,790.42
95
In the groups, other accounts receivable adopting aging analysis method to withdraw bad debt provision:
√Applicable □ Not applicable
Aging
31 December 2018
Other receivable Bad debt provision Withdrawal proportion Carrying amount
Within 1 year 10,712,250.89 535,612.54 5.00% 10,176,638.35
1 to 2 years 615,773.66 61,577.37 10.00% 554,196.29
2 to 3 years 443,808.00 133,142.40 30.00% 310,665.60
3 to 5 years 150,400.00 75,200.00 50.00% 75,200.00
Above 5 years 725,800.00 725,800.00 100.00% -
Total 12,648,032.55 1,531,332.31 12.11% 11,116,700.24
Aging
31 December 2017
Other receivables Bad debt provision Withdrawal proportion Carrying amount
Within 1 year 28,569,790.25 1,428,489.51 5.00% 27,141,300.74
1 to 2 years 747,308.00 74,730.80 10.00% 672,577.20
2 to 3 years 280,400.00 84,120.00 30.00% 196,280.00
3 to 5 years 280,200.00 140,100.00 50.00% 140,100.00
Above 5 years 445,600.00 445,600.00 100.00% -
Total 30,323,298.25 2,173,040.31 7.17% 28,150,257.94
Other receivables adopting balance percentage method for bad debt provision:
□ Applicable √Not applicable
Other receivables adopting other method for bad debt provision:
□ Applicable √Not applicable
(i) Other receivables withdraw, reversed or collected during the reporting period
During the year ended 31 December 2018, the movement of provision for other receivables was RMB 0.00 (2017:
1,067,780.73), the movement of reverse for other receivables was RMB 640,708.00 (2017: RMB 0.00). There
were no provision or reverse of provision for individual significant other receivable
(ii) Other receivables written-off during the reporting period
There were no other receivables written-off during the reporting period.
(iv) Other receivables classified by nature
Nature of other receivables 31 December 2018 31 December 2017
Deposit in escrow accounts 8,728,779.85 26,047,303.64
Current accounts with subsidiaries 76,069,797.28 76,278,456.92
96
Deposits 2,458,861.48 1,404,000.00
Loans to employees 1,460,391.22 2,439,630.53
Others - 432,364.08
Less：Bad debt provision -76,987,998.81 -77,628,706.81
Total 11,729,831.0228,973,048.36
(V) The top five other receivables classified by debtor at period-end
Name of the entity
Nature of other
receivables
31 December
2018
Aging
% of total other
receivables
Bad debt provision
31 December 2018
Jiangsu Littleswan Marketing and
Sales Co.,Ltd.
Inter-company
receivables
74,295,013.55 Over 5 years 83.74% 74,295,013.55
Alipay (China) Network
Technology Co., Ltd.
Advance & temporary
payments deposit in
escrow accounts
4,902,786.89 Within 1 year 5.53% 245,139.34
Shenzhen Midea Payment
Technology Co., Ltd.
Advance & temporary
payments deposit in
escrow accounts
3,591,395.61 Within 1 year 4.05% 179,569.78
Wuxi Little Swan Import & Export
Co. , Ltd
Inter-company
receivables
1,161,652.95 Within 1 year 1.31% 1,161,652.95
Wuxi China Resources Gas Co.,
Ltd.
Deposits 820,800.00
2 to 3 years
and Over 5
years
0.93% 754,300.00
Total 84,771,649.0095.55% 76,635,675.62
(3) Long-term equity investments
Items
31 December 2018 31 December 2017
Cost
Impairment
provision
Carrying amount Cost
Impairment
provision
Carrying amount
Investment in
ubsidiaries
1,433,285,041.57 475,050,000.00 958,235,041.57 1,433,285,041.57 475,050,000.00 958,235,041.57
(a) Investment in subsidiaries
Name of subsidiaries
Balance at
31 December 2017
Addition Decrease
Balance at
31 December 2018
Impairment
provision
Balance of
impairment
provision
97
Wuxi Little Swan Import &
Export Co. , Ltd
57,500,000.00 - - 57,500,000.00 - 57,500,000.00
Jiangsu Little Swan Marketing
and Sales Co. , Ltd.
417,550,000.00 - - 417,550,000.00 - 417,550,000.00
Wuxi Filin Electronics Co. , Ltd. 25,660,308.10 - - 25,660,308.10 - -
Wuxi Little Swan General Electric
Appliances Co. , Ltd.
89,062,000.00 - - 89,062,000.00 - -
Little Swan (Jing Zhou) Sanjin
Electronic Appliances Limited.
11,869,431.12 - - 11,869,431.12 - -
Little Swan International
(Singapore) Limited.
681,050.00 - - 681,050.00 - -
Hefei Midea Washing Machine
Limited.
830,962,252.35 - - 830,962,252.35 - -
Total 1,433,285,041.57 - - 1,433,285,041.57 475,050,000.00
As at 31 December 2018, the Company provided credit guarantee for Hefei Midea Washing Machine Limited
amounted to RMB 254,023,800.00 (as at 31 December 2017: 291,079,100.00 ).
(4) Revenue and cost of sales
Item
Year ended 31 December 2018 Year ended 31 December 2017
Income Cost of sales Income Cost of sales
Operating income 15,800,363,329.03 12,020,471,056.12 14,990,965,216.20 11,403,214,393.83
Other operating income 1,144,032,287.21 1,101,507,038.90 1,236,979,706.39 1,172,951,944.14
Total 16,944,395,616.24 13,121,978,095.02 16,227,944,922.59 12,576,166,337.97
Other operating income and expenses:
Item
Year ended 31 December 2018 Year ended 31 December 2017
Other operating income
Other operating
expenses
Other operating
income
Other operating
expenses
Sale of raw materials
1,081,267,586.73 1,078,027,383.04 1,188,798,326.56 1,144,979,820.00
Others 62,764,700.4823,479,655.86 48,181,379.83 27,972,124.14
Total
1,144,032,287.21 1,101,507,038.90 1,236,979,706.39 1,172,951,944.14
(5) Investment income
Item Year ended 31 December 2018 Year ended 31 December 2017
Income from available-for-sale financial assets 66,012,797.02 154,998,651.47
Income from disposal of financial assets measured at fair
value through profits or losses
1,497,784.97 14,206,795.00
Total 67,510,581.99169,205,446.47
98
There is no significant restriction on the remittance of investment income to the Company and its subsidiaries.
XIX. Supplementary information
(1) Non-recurring profit or loss
Item Year ended 31 December 2018 Year ended 31 December 2017
Net gain/loss on disposal of non-current assets 13,137,087.29 -975,423.00
Holding-period return on fianancial assets at fair value through
profit or loss
-7,619,781.97 22,954,813.04
Item Year ended 31 December 2018 Year ended 31 December 2017
Other non-operating income and loss other than items above 44,275,866.72 44,138,356.17
Less: Effect of income tax -7,474,356.94 -12,040,092.19
Effect of minority interest -2,850,542.54 -4,618,258.39
Total 39,468,272.56 49,459,395.63
Under requirements in Explanatory announcement No. 1 on information disclosure by companies offering
securities to the public – non-recurring profits or losses [2008] from CSRC, non-recurring profits or losses refer to
those arises from transactions and events that are not directly relevant to ordinary activities, or that are relevant to
ordinary activities, but are extraordinary and not expected to recur frequently that would have an influence on
users of financial statements making economic decisions on the financial performance and profitability of an
enterprise.
(2) Return on equity and earnings per share
Profit of the year
Weighted average
return on equity(%)
Earnings per share
Basic earnings per share
(RMB yuan per share)
Diluted earnings per share
(RMB yuan per share)
Net profit attributable to ordinary shareholders of
the Company
24.42% 2.94 2.94
Net profit attributable to owners of the Company,
excluding non-recurring profit or loss
23.90% 2.88 2.88
99
Part XII Documents Available for Reference
I This Annual Report carrying the signature of the legal representative;
II The financial statements signed and sealed by the legal representative, the CFO and the Financial Manager for
this Report;
III The original Auditor’s Report signed and sealed by the CPAs, as well as sealed by the CPAs firm; and
IV The originals of all the Company’s documents and announcements which were disclosed on Securities Time
and Ta Kung Pao (HK) during this Reporting Period.
Wuxi Little Swan Company Limited
Legal Representative: Fang Hongbo
3 0 M ar ch 20 19
