GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 April 2017 00 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 Section I Important Notice, Table of Contents and Paraphrase The Board of Directors, Board of Supervisors, all directors, supervisors and Senior Management Personnel of the Company hereby guarantee that the contents are authentic, accurate and complete, and there are no false records, misleading representations or material omissions in the Annual Report, and shall take all the joint and several legal responsibilities. Dong Mingzhu, the Company's responsible person, Wang Jingdong, responsible person in charge of accounting work and Liao Jianxiong, in-charge person of accounting institution (accounting superintendent) hereby declare and warrant that the financial report in the Report is authentic, accurate and complete. All the directors attended the meeting of the Board of Directors in respect of deliberation of the Report. The Company's profit distribution proposal passed upon deliberation at the meeting of the Board of Directors is set out as below: Based on the total stock capital of 6,015,730,878 of the Company, all directors were distributed a cash dividend of RMB 18 (tax included) per 10 stocks and given 0 bonus share (tax included). Public reserve funds were not used for capitalization. 1 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 Table of Contents Section I Important Notice, Table of Contents and Paraphrase ................................................................ 1 Section II Company Profile and Main Financial Indices ............................................................................ 4 Section III Corporate Business Overview ................................................................................................. 9 Section IV Discussion and Analysis of Business Operation ................................................................... 16 Section V Important Events .................................................................................................................... 48 Section VI Changes in Stock Capital & Information of Shareholders ...................................................... 57 Section VII Related Information of Preferred Stock ................................................................................ 63 Section VIII Directors, Supervisors, Senior Management Personnel and Employees ............................ 64 Section IX Corporate Governance .......................................................................................................... 85 Section X Financial Report ..................................................................................................................... 91 Section XI Index of Documents ............................................................................................................ 234 2 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 Paraphrase Items Means Contents Company, the Company, the enterprise, Means GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI GREE ELECTRIC APPLIANCES or GREE GREE GROUP Means Zhuhai Gree Group Co., Ltd. Finance Company Means Zhuhai Gree Group Finance Company Limited Jinghai Guaranteed Means Hebei Jinghai Guaranteed Investment Co., Ltd. CSRC Means China Securities Regulatory Commission Guangdong Securities Regulatory Bureau Means Guangdong Regulatory Bureau of CSRC Report Period Means the period from 1 January 2016 to 31 December 2016 3 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 Section II Company Profile and Main Financial Indices I. Company information Stock Abbreviation GREE ELECTRIC APPLIANCES Stock Code 000651 Stock Exchange Shenzhen Stock Exchange Name in Chinese 珠海格力电器股份有限公司 Name Abbreviation in 格力电器 Chinese Name in Foreign Language GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI (if any) Name Abbreviation in foreign GREE language (if any) Legal Representative Dong Mingzhu Registered Address Jinji West Road, Qianshan, Zhuhai City, Guangdong Province Post Code of Registered 519070 Address Office Address Jinji West Road, Qianshan, Zhuhai City, Guangdong Province Post Code of Office Address 519070 Website http://www.gree.com.cn Email [email protected] II. Contacts and contact information Board Secretary Securities Affairs Representative Name Wang Jingdong Jinji West Road, Qianshan, Zhuhai Address City, Guangdong Province Tel 0756-8669232 Fax 0756-8622581 Email [email protected] 4 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 III. Information disclosure and place of the report China Securities Journal, Securities Times, Media designated by the Company for information disclosure Shanghai Securities News and Securities Daily Website specified by CSRC for release of the Annual Report http://www.cninfo.com.cn Place where the Annual Report is available for inspection Securities Legal Affairs Department of the Company IV. Alteration of registration Organization code 91440400192548256N Changes (if any) in the main business since listing of the Company No change Changes (if any) in the controlling shareholders No change V. Other related information Accounting firm engaged by the Company Name of the Accounting Firm Union Power Certified Public Accountants (Special General Partnership) Office Address No. 169 Donghu Road, Wuchang District, Wuhan City Names of Accountants as Signatories Wang Bing, He Li Sponsor engaged by the Company to perform continuous supervision during the Report Period □ Applicable √ Not applicable Financial adviser engaged by the Company to perform continuous supervision during the Report Period □ Applicable √ Not applicable VI. Main accounting data and financial indices Whether the Company will retroactively adjust and restate the accounting data of previous years because of changes on the accounting policy and correction of accounting errors, etc. □ Yes √ No Increase/ Decrease over 2016 2015 2014 the previous year Operating Revenue (Yuan) 108,302,565,293.70 97,745,137,194.16 10.80% 137,750,358,395.70 Net profit attributable to shareholders of listed Company 15,420,964,990.94 12,532,442,817.66 23.05% 14,155,167,229.36 (Yuan) Net profit attributable to shareholders of listed Company 15,600,520,445.21 12,313,582,570.49 26.69% 14,144,950,462.04 less non-recurring gains and 5 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 losses (Yuan) Net cash flow generated from 14,859,952,106.92 44,378,381,827.68 -66.52% 18,939,165,507.73 operating activities (Yuan) Basic earnings per share 2.56 2.08 23.08% 2.35 (Yuan per Share) Diluted earnings per share 2.56 2.08 23.08% 2.35 (Yuan per Share) Weighted average return on net 30.41% 27.31% 3.10% 35.23% assets Increase/ Decrease over At the end of 2016 At the end of 2015 At the end of 2014 the previous year Total asset (Yuan) 182,369,705,049.35 161,698,016,315.06 12.78% 156,230,948,479.88 Net asset attributable to shareholders of listed Company 53,863,951,278.13 47,521,376,091.77 13.35% 44,152,654,824.68 (Yuan) VII. Accounting Data Differences under Domestic and Foreign Accounting Standards 1. Differences in net profit and net assets in the financial report disclosed under international accounting standards and that disclosed under domestic accounting standards □ Applicable √ Not applicable There was no difference in net profit and net assets in the financial report disclosed under international accounting standards and that disclosed under domestic accounting standards during the Report Period. 2. Differences in net profit and net assets in the financial report disclosed under overseas accounting standards and that disclosed under domestic accounting standards □ Applicable √ Not applicable There was no difference in net profit and net assets in the financial report disclosed under overseas accounting standards and that disclosed under domestic accounting standards during the Report Period. VIII. Quarter-based Main Financial Indicators Unit: Yuan Quarter 1 Quarter 2 Quarter 3 Quarter 4 Operating incomes 24,640,675,696.66 24,542,144,380.03 33,245,891,313.38 25,873,853,903.63 Net profit attributable to 3,159,816,132.99 3,242,653,852.65 4,826,589,275.21 4,191,905,730.09 shareholders of listed company 6 GREE ELECTRIC APPLIANCES, INC. OF ZHUHAI Annual Report 2016 Net profit attributable to shareholders of listed 3,133,470,823.80 3,920,819,811.65 4,700,144,150.16 3,846,085,659.60 companies after deduction of non-recurring profit and loss Net cash flows from operating 6,117,619,903.98 5,337,251,013.81 2,707,392,718.78 697,688,470.35 activities Whether major differences exist between the above financial indicators or their sum and those in the disclosed quarterly report and semi-annual report □ Yes √ No IX. Non-recurring Profit and Loss Items and Amounts √ Applicable □ Not applicable Unit: Yuan Item Amount in 2016 Amount in 2015 Amount in 2014 Description Profit and loss Gains and losses from disposal of non-current from disposal of assets (including the provision for asset -12,245,120.40 -8,078,976.10 -13,604,321.23 fixed/intangible impairment write-off part) assets Financial Governmental subsidies recorded into the rewards, current gains and losses (excluding the technological governmental subsidies closely relating to the innovation 960,287,886.56 1,160,736,574.04 681,875,856.67 business of the enterprise and enjoyed by a subsidies and fixed quota or a fixed amount in accordance development with the state policies) project grants, etc. Gains and losses of the fair value change of