Midea Group Co., Ltd.
The 2020 Annual Report
30 April 2021
Section I Important Statements, Contents and DefinitionsThe Board of Directors, the Supervisory Committee, directors, supervisors and seniormanagement of Midea Group Co., Ltd. (hereinafter referred to as the “Company”)hereby guarantee that the information presented in this report is free of anymisrepresentations, misleading statements or material omissions, and shall togetherbe wholly liable for the truthfulness, accuracy and completeness of its contents.All directors of the Company attended the Board meeting to review this Annual Report.There are no directors, supervisors, or senior management who do not warrant orwho dispute the truthfulness, accuracy and completeness of the contents of thisAnnual Report.The financial statements for 2020 have been audited by PricewaterhouseCoopersZhong Tian LLP and have obtained an unqualified audit report.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company and Ms. ZhongZheng, Director of Finance of the Company, have represented and warranted that thefinancial statements in this report are true and complete.The Board has considered and approved the following dividend payout plan for theyear 2020: based on the 6,916,495,109 shares at the disclosure date of this report (thetotal share capital of 7,047,686,070 shares minus the repurchased 131,190,961 sharesin the repo securities account at that date), it is proposed that the Company shoulddistribute a cash dividend of RMB16 (tax inclusive) per 10 shares to all theshareholders and should not convert capital surplus into share capital. When theprofit distribution plan is implemented, if any change occurs to the total shareseligible for profit distribution, the profit distribution plan shall be based on the totalshares eligible for profit distribution at the book closure date of the profit distribution,and the dividend per share shall be adjusted under an unchanged total distribution
amount.The future plans and some forward-looking statements mentioned in this report shallnot be considered as virtual promises of the Company to investors. Therefore,investors are kindly reminded to pay attention to possible investment risks.This report has been prepared in both Chinese and English. Should there be anydiscrepancies or misunderstandings between the two versions, the Chinese versionshall prevail.
Contents
SECTION I IMPORTANT STATEMENTS, CONTENTS AND DEFINITIONS ...............................SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ..........................................SECTION III BUSINESS PROFILE .............................................................................................SECTION IV PERFORMANCE DISCUSSION AND ANALYSIS ..................................................SECTION V SIGNIFICANT EVENTS ..........................................................................................SECTION VI CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ............SECTION VII INFORMATION ABOUT DIRECTORS, SUPERVISORS, SENIORMANAGEMENT AND EMPLOYEES............................................................................................SECTION VIII CORPORATE GOVERNANCE ............................................................................SECTION IX FINANCIAL REPORT .............................................................................................SECTION X DOCUMENTS AVAILABLE FOR REFERENCE ......................................................
Definitions
Term DefinitionThe “Company”, “Midea”, “Midea Group” or the “Group” Midea Group Co., Ltd.Midea Holding Midea Holding Co., Ltd.TLSC Toshiba Lifestyle Products & Services CorporationKUKA KUKA AktiengesellschaftReporting Period 1 January 2020 to 31 December 2020
Section II Company Profile and Key Financial Results
1. Corporate Information
Stock abbreviation Midea Group Stock code 000333Stock exchange where theshares of the Company arelisted
Shenzhen Stock ExchangeName of the Company inChinese
美的集团股份有限公司Abbr. of the Company name inChinese
美的集团Name of the Company inEnglish (if any)
Midea Group Co., Ltd.Abbr. of the Company name inEnglish (if any)
Midea GroupLegal representative Fang HongboRegistered address
Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District,
Foshan City, Guangdong Province, ChinaPostal code 528311Business address
Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District,
Foshan City, Guangdong Province, ChinaPostal code 528311Company website http://www.midea.comE-mail IR@midea.com
2. Contact Us
Board Secretary Representative for Securities AffairsName Jiang Peng You MingyangAddress
Midea Headquarters Building, No. 6 MideaAvenue, Beijiao Town, Shunde District,Foshan City, Guangdong Province, China
Avenue, Beijiao Town, Shunde District,Foshan City, Guangdong Province, China
Tel.0757-22607708 0757-23274957Fax0757-26605456E-mailIR@midea.com
3. Information Disclosure and Place Where the Annual Report Is Kept
Newspaper designated by the Company for informationdisclosure
China Securities Journal, Securities Times and ShanghaiSecurities NewsWebsite designated by the China Securities RegulatoryCommission (CSRC) for the publication of the AnnualReport
http://www.cninfo.com.cnPlace where the Annual Report of the Company is kept Company Investor Relations Department
4. Company Registration and Alteration
Organization code 91440606722473344CChanges in main business activitiessince the Company was listed (if any)
NoneChanges of controlling shareholder ofthe Company (if any)
None
5. Other Relevant Information
Accounting firm engaged by the CompanyName of the accounting firm PricewaterhouseCoopers Zhong Tian LLPBusiness address of theaccounting firm
11/F., PricewaterhouseCoopers Center, 2 Corporate Avenue, 202 Hu Bin Road,Huangpu District, Shanghai 200021, PRCName of accountants writingsignatures
Yao Wenping and Qiu XiaoyingSponsor engaged by the Company to continuously perform its supervisory function during the ReportingPeriod
□Applicable √N/A
Financial advisor engaged by the Company to continuously perform its supervisory function during theReporting Period
√Applicable □N/A
Name of the financial
advisor
Business office of the financial advisor
Representative of the
financial advisor
Supervisory period
CITIC Securities Tower, No.8 Zhongxin
3rd Road, Futian District, Shenzhen,
518048, PRC
Wu Renjun, ChenJianjian, Li Haoran, LiChang, Li Wei and Liu
Kun
2019.6.21-2020.12.31
6. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□Yes √No
2020 2019
2020-over-2019
change (%)
2018Operating revenue (RMB'000)
278,216,017
284,221,249 |
2.16%
259,664,820
Net profit attributable to shareholders ofthe Company (RMB'000)
24,211,222
27,222,969 |
12.44%
20,230,779
Net profit attributable to shareholders ofthe Company before non-recurringgains and losses (RMB'000)
22,724,392
24,614,653 |
8.32%
20,058,155
Net cash flows from operating activities(RMB'000)
38,590,404
29,557,117 |
-23.41%
27,861,080
Basic earnings per share (RMB/share) 3.93
3.60
9.17%
3.08
Diluted earnings per share (RMB/share)
3.90
3.58
8.94%
3.05
Weighted average ROE (%)
24.95%
26.43%
-1.48%
25.66%
31 December2020
31 December
2019
Change of 31December 2020over 31 December
2019
31 December
2018Total assets (RMB'000)
360,382,603
301,955,419
360,382,603 |
19.35%
263,701,148
Net assets attributable to shareholdersof the Company (RMB'000)
101,669,163
117,516,260 |
15.59%
83,072,116
Total share capital of the Company on the last trading session before disclosure:
Total share capital of the Company on the last tradingsession before disclosure (share)
7,047,686,070
Fully diluted earnings per share based on the latest share capital above:
Dividend paid to preference shareholders 0
Fully diluted earnings per share based on the latestshare capital above (RMB/share)
3.86
7. Differences in Accounting Data under Domestic and Overseas Accounting
Standards
7.1 Differences in the net profit and net assets disclosed in the financial reports prepared under
China Accounting Standards (CAS) and International Financial Reporting Standards (IFRS)
□Applicable √N/A
No such differences for the Reporting Period.
7.2 Differences in the net profit and net assets disclosed in the financial reports prepared under
CAS and foreign accounting standards
□Applicable √N/A
No such differences for the Reporting Period.
7.3 Reasons for the differences
□Applicable √N/A
8. Key Financial Results by Quarter
RMB'0002020 Q1 2020 Q2 2020 Q3 2020 Q4Operating revenue58,013,031
81,053,991
77,693,764 |
67,460,463
Net profit attributable toshareholders of the Company
4,810,977
9,117,318
8,090,006 |
5,204,668
Net profit attributable toshareholders of the Companybefore non-recurring gains andlosses
4,816,912
8,640,132
7,158,544 |
3,999,065
Net cash flows from operatingactivities
7,668,597
10,736,894
6,609,144 |
4,542,482
Whether there are any material differences between the financial indicators above or their summationsand those which have been disclosed in the Company’s quarterly or semi-annual reports
□Yes √No
9. Non-recurring Gains and Losses
√Applicable □N/A
RMB'000Item 2020 2019 2018 NoteGain or loss from disposal of non-current assets
-
52,424 |
-131,131
222,204
Except for effectively hedging business related to |
normal business operations of the Company,gain or loss arising from the change in the fair
2,204,165
676,430
-842,408
value of financial assets held for trading,derivative financial assets, financial liabilitiesheld for trading, derivative financial liabilities,other non-current financial assets and available-for-sale financial assets, as well as investmentincome or loss produced from the disposal of
aforesaid financial assets and liabilitiesOther non-operating income and expensesexcept above-mentioned items
1,378,105
the | |
1,347,788
1,091,473
Less: Corporate income tax 765,871
394,095
207,870
Minority interests (after tax) 155,659
12,162
90,775
Total 2,608,316
1,486,830
172,624
--
Explain the reasons if the Company classifies an item as a recurring gain/loss item, which is defined asa non-recurring gain/loss according to the definition in the <Explanatory Announcement No. 1 onInformation Disclosure for Companies Offering Their Securities to the Public—Non-Recurring Gains andLosses>, or is enumerated as a non-recurring gain/loss in the said explanatory announcement
□Applicable √N/A
No such cases for the Reporting Period.
Section III Business Profile
1. Business Scope in the Reporting Period
1.1 Summary of business scope
Midea is a global technology group comprising five major business divisions: the Smart Home BusinessGroup, the Electromechanical Business Group, the HVAC & Building Technologies Division, the Robotics& Automation Division, and the Digital Innovation Business. Midea offers diversified products and services.Specifically, the Smart Home Business Group, as the main operating entity of smart appliances, smarthome and related peripheral industries and ecological chains, undertakes the construction of intelligentscenarios for end users, user operations and data value discovery, and is committed to providing thebest experience of whole-house smart home appliances and service.The Electromechanical BusinessGroup is capable of carrying out professional R&D, production, and sales of high-precision corecomponents such as compressors, motors, chips, industrial control, and cooling modules. It operatesmany brands including GMCC, Welling, MR, TOSHIBA, HICONICS, SUNYE, DORNA, SERVOTRONIX,etc., with its products widely used in home appliances, 3C products, new energy vehicles and industrialautomation, among others. The HVAC & Building Technologies Division is dedicated to providing energy,HVAC, elevator, control and other products, solution packages and services for buildings and publicfacilities. Meanwhile, it actively explores new business models and forms, with an aim to become aleading manufacturer with the related key technologies and manufacturing capability. The Robotics &Automation Division primarily focuses on providing solutions of industrial robotics, automatic logisticssystems, and transmission systems for future factory-related fields, as well as solutions for health care,entertainment, new consumption, etc. The Digital Innovation Business includes new business arising fromthe business model transformation of Midea Group such as intelligent supply chains and IndustrialInternet, which can provide software services, unmanned retail solutions, and production services, amongothers, for the digital transformation of enterprises.With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire YourFuture” as its mission, and “Embrace what’s next - Aspiration、Dedication、Collaboration、Innovation”
as its values, Midea integrates global resources and promotes technological innovation to create a betterlife for over 400 million users, major customers and strategic partners in different areas worldwide everyyear with satisfying products and services. In face of higher requirements for products and services in thedigital Internet era, Midea has upgraded its strategic focus to “Technology Leadership, Direct to Users,Digitization & Intelligence Driven, and Global Impact” in 2020, so as to rebuild Midea in the new era.Midea, a global operating company, has now established a global platform with around 200 subsidiaries,28 R&D centers, 34 major manufacturing bases, and approximately 150,000 employees. Its businesscovers more than 200 countries and regions. Overseas, Midea has 18 R&D centers and 17 majormanufacturing bases in more than ten countries, with around 30,000 employees. 22 currencies are usedby Midea in settlement. In addition, Midea is the majority shareholder of KUKA, a Germany-based world-leading company in robotics and automation, with a stake of approximately 95%.
1.2 Position in home appliance industry
Midea ranks No. 229 on the 18th Forbes Global 2000 list released in May 2020, moving up 24 placescompared to last year. In addition, it ranks No. 307 on the 2020 Fortune Global 500 list, moving up 5places from the year before and marking its fifth year on the list; and ranks No. 35 on the 2020 FortuneChina 500 list, the highest-ranking among the home appliance industry in the country for six consecutiveyears. Meanwhile, Midea takes the lead among domestic home appliance makers by ranking No. 33 onthe 2021 Brand Finance Tech 100 list released by Brand Finance, a British brand assessment institution.Also, Midea ranks No. 33 on the 2020 BrandZ? Top 100 Most Valuable Chinese Brands list, with itsbrand value up 26%. Midea has been given excellent credit ratings by the three major international creditrating agencies, Standard & Poor’s, Fitch Ratings and Moody’s. The ratings are in a leading positionamong home appliance manufacturers worldwide as well as among Chinese non-state-ownedenterprises.Midea’s major home appliances all took up a larger share in the domestic market in 2020. Its core productcategory, residential air-conditioners, in particular, saw a much bigger share in all channels, with thelargest online market share of nearly 36% and an offline market share of over 33%.
The table below shows the offline market shares and rankings of the Company’s primary home applianceproducts (by retail sales) in 2020:
Product categoryMarket shareRankingResidential air conditioners 33.8% 2Laundry appliances 26.4% 2
Refrigerators 12.5% 2Rice cookers 44.7% 1Electric pressure cookers 45.1% 1Induction cookers
48.8% 1Electric radiators 47.7% 1Water dispensers 40.9% 1
Blenders
35.6% 2Microwave ovens 44.4% 2
Electric ovens 37.4% 2
Electric fans 37.9% 1Electric kettles
39.6% 1Electric water heaters
18% 3Dishwashers
10.2% 3Range hoods 8.8% 3Midea’s online retail sales during 2020 exceeded RMB86 billion, up by over 25% YoY and accounting forover 45% of its domestic sales. Midea boasts the largest online market share among home appliancemakers in China. During the business peak period of “Double 11” in 2020, Midea products recorded totalonline sales of more than RMB11.3 billion. Midea remains the best-selling home appliance manufactureron the three major e-commerce channels—Tmall, JD, and Suning—for eight consecutive years.The table below shows the online market shares and rankings of the Company’s primary home applianceproducts (by retail sales) in 2020:
Product categoryMarket shareRankingResidential air conditioners 35.9% 1
Laundry appliances 33.6% 2
Refrigerators 17.2% 2Rice cookers 30.6% 1Electric pressure cookers 42.4% 1
Induction cookers 51.5% 1Electric radiators
21.8% 1Water dispensers
22.4% 1Water purifiers 14% 1Microwave ovens
49% 1Electric ovens
24.1% 1Electric fans
22.1% 1Electric kettles
30.6% 1Electric water heaters 31.9% 1
Gas water heaters
18.3% 2Dishwashers 26.7% 2
Gas stoves 13.2% 2Range hoods 17% 3
Blenders
11.9% 3
2. Significant Changes in the Main Assets
2.1 Significant changes in the main assets
Main assetsReasons for any significant changeLong-term equity investmentsUp 3.96% YoYFixed assets Up 2.65% YoYIntangible assets Down 0.40% YoYConstruction in progress Up 23.66% YoY
Financial assets held for trading
Up 2493.10% YoY, primarily driven by
structured depositsDerivative financial assets
Up 113% YoY, primarily driven by
the reclassification of investments in |
changes in the fair value of derivative financial |
instrumentsReceivables financing
Up 83.75% YoY, primarily driven by
receivable measured at fair valueLoans and advances Up 51.52% YoY, primarily driven by changes in the financial businessOther current assets
Down 49.12% YoY, primarily driven by the reclassification
an increase in accounts receivable and notesof investments in
structural depositsOther non-current financial assets Up 92.04% YoY, primarily driven by an increase in investments
2.2 Main assets overseas
□Applicable √N/A
3. Core Competitiveness Analysis
3.1 As one of the leaders among the global household appliance makers and a dominator in the
major appliance sectors, Midea Group provides high-quality, one-stop home solutions through itswide product range, complete with full specifications.As a white goods and HVAC enterprise with a whole industrial chain and full product line, Midea Grouphas developed a complete industrial chain combining R&D, manufacturing and sales of core componentsand finished products, supported by an industry-leading R&D center and manufacturing technologies ofcore components (such as compressors, electrical controls, magnetrons and controllers), and ultimatelybased on its powerful capabilities in logistics and services. Midea owns top brands of household applianceand HVAC in China. Its dominance in the major appliance and HVAC markets means that it can providea wide range of competitive product sets. It also means internal synergies in brand awareness, pricenegotiation as a whole, customer needs research and R&D investments. Compatibility, coordination andinteraction among household appliances have become increasingly important since smart home isgaining popularity. With a full product line, Midea has had a head start in providing a combined andcompatible smart home platform with integrated home solutions for customers.
3.2 Global R&D resource integration capabilities, adherence to the strategy of “Technology
Leadership”, as well as continuing lead in R&D and technical innovationThe Group is focused on building a competitive, multi-layered global R&D system centering on userexperience and product functions, which represents world-class R&D input and strength. With nearlyRMB45 billion invested in R&D over the past five years, the Group has set up a total of 28 researchcenters in 11 countries to gradually build up a “2+4+N” global R&D network and gain the advantage ofscale in this respect. Domestically, Midea Global Innovation Center in Shunde District, Foshan City andMidea Global Innovation Center in Shanghai are the cores of Midea’s R&D arm. Overseas, with MideaAmerica Research Center, Midea Germany Research Center, Midea Japan Research Center and MideaMilan Design Center as the cores, Midea makes use of the regional technological advantages, integratesglobal R&D resources, and builds these facilities into complementary regional R&D centers. Followingthe strategy of “Technology Leadership”, it attracts more professional talent and builds an organic globalR&D network. It has over 15,000 R&D employees and over 500 foreign senior experts. While establishingits own research centers around the world, Midea also works on constructing an open platform ofinnovative ecosystems. The Group cooperates with domestic and foreign scientific research institutions,such as Massachusetts Institute of Technology, University of California, Berkeley, University of Illinois atUrbana-Champaign, Stanford University, Purdue University, University of Maryland, The University ofSheffield, Polytechnic University of Milan, Tsinghua University, Shanghai Jiao Tong University, ZhejiangUniversity, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’an Jiaotong University,Huazhong University of Science and Technology and South China University of Technology, in order toestablish joint labs for deepening technological cooperation. The Group also carries out strategiccooperation with tech giants such as BASF and Honeywell to build a global innovation ecosystem. TheGroup’s long-term focus on building technology, marketing, design, product and open innovation systems,building a cutting-edge research system and building reserves in technology for mid/long term, hasprovided a solid foundation for the Group to maintain technical superiority across the globe.
3.3 Stronger Global Impact fueled by Midea’s continual global resource allocation and
investments, globally-advanced manufacturing capabilities and advantage of scaleThe success of a series of global acquisitions and new business expansion moves has further solidifiedMidea’s global operations and leading advantages in robotics and automation. With the world’s leading
production capacity and experience, and a wide variety of products as well as its production bases allover the world, the Group has been able to expand rapidly into the emerging overseas markets and isbecoming a stronger competitor in those mature overseas markets. The Group is one of the biggestmanufacturers in the world for many product categories, which gives it competitive edges in efficiencyimproving and cost reducing that its overseas competitors are unable to replicate. Overseas sales of theGroup accounts for more than 40% of the total sales revenue. Its products have been exported to over200 countries and regions, and it owns 17 overseas manufacturing bases and 24 overseas operatingagencies. Midea’s global operations system has been further improved through the reform of internationalbusiness organizations towards diverse business models. It also increases investments in overseasbusiness operations, focuses on the needs of local customers and enhances product competitiveness ina bid to promote significant growth in its Own Branding & Manufacturing (OBM) business. In addition,with a deep knowledge and understanding on product characteristics and product demands in overseasmarket, Midea is promoting worldwide branding and expansion through global collaboration andcooperation. In this way, the global competitiveness of Midea is increasing steadily.
3.4 Broad channel networks and a well-established smart supply chain system ensuring the
steady growth of Midea’s domestic salesBy virtue of years of development and investments, Midea Group has formed an all-dimensional marketcoverage. In the mature first and second-tier markets, the Company has developed and maintained goodpartnerships with large home appliance retail chains. While in the broad third and fourth-tier markets, theCompany uses flagship stores, specialty shops, traditional channels and new channels as effectivesupplements. Currently, the Company has already covered the markets at all tiers. Additionally, theCompany's dominance in branding, products, offline channels and logistics distribution have also createdpowerful guarantees for the Company's rapid expansion of its e-commerce business and channels.Midea’s online retail sales during 2020 exceeded RMB86 billion, up by over 25% YoY. It remains the best-selling home appliance manufacturer on major e-commerce channels such as Tmall, JD, and Suning foryears consecutively.Making full use of the digital technology, Annto Logistics Technology Co., Ltd. (Annto), a subsidiary ofMidea, refines its nationwide logistics network through the big data technology to build a smart and digital
distribution platform. Annto concentrates its resources on urban distribution and is able to provide fullyvisualized direct distribution services covering every town and village of the country. Relying on nearly140 urban distribution centers nationwide, it covers more than 97% of towns and villages across thecountry. It can finish the delivery to 21,418 (or 51% of) towns and villages within 24 hours and to 38,744(or 87% of) towns and villages within 48 hours in the country. Additionally, Annto focuses on connectingits whole ToC service process, as well as refines its network of delivery and installation services in pursuitof integrated delivery and installation services and better user experience.
3.5 A user experience-oriented reform of “Comprehensive Digitalization and Comprehensive
Intellectualization” that focuses on “Digitization & Intelligence Driven” to make Midea a leader inthe IoT eraMidea has put in place and will prioritize the development of the Midea Cloud Sales commercial platformsupported by unified data and technology platforms, the IoT ecosystem platform, and the IndustrialInternet platform of “M.IoT”, with an aim to become a world-leading technology group driven by digitization& intelligence. On one hand, it promotes deep integration of the digital technology and business in thewhole value chain, with the view to becoming an icon in digitalization. On the other hand, with foresight,it plans for whole new products, services and business models centering on smart technologies, productsand scenes, so as to outcompete Internet companies. With continual investment and research in artificialintelligence (AI), silicon chip, sensor, big data, cloud computing and other new technologies, Midea hasbuilt the biggest AI team in the household appliance industry, which is committed to enabling products,machines, production processes and systems to sense, perceive, understand and judge, driven by thecombination of big data and AI, in order to create smart appliances without any assistance in interaction.Focusing on “people and their family”, Midea builds a whole value chain of IoT. Breakthroughs have beenmade in user data protection, content operation for smart scenes, smart connection technology, the smarthome ecosystem, cloud platforms, the smart voice function, the big data-based cloud housekeeperservices, etc. By doing so, Midea is able to offer complete smart home solutions for users, as well as toempower its business partners.Upon years of digital transformation, Midea has successfully materialized operations driven by softwareand data through its value chain, connecting end to end and covering planning and R&D, Product
Ordering, intelligent scheduling, flexible manufacturing, coordinative supply, product quality tracking,logistics, installation & post-sale services, etc. The Group’s digital platform has made come true C2Mflexible manufacturing, platform-based and modularized R&D, digitalized production techniques andsimulation, intelligent logistics, digital marketing, digital customer service, etc. By way of integrating theIoT capabilities of its AI Innovation Center, Software Engineering Institute, IT Department, IoT Division,Smart Home Business Group, Robotics & Automation Division, HVAC & Building Technologies Division,Digital Innovation Business and other organs, Midea has established a unified IoT technology platform.Its Industrial Internet platform has been upgraded to “M.IoT 2.0”, including two “Lighthouse Network”factories, which are swiftly applied to other Midea manufacturing bases across the world and provideproducts and services for around 300 customers in more than 40 market segments. Therefore, it is safeto say that Midea has built a solid foundation regarding Industrial Internet systems.
3.6 Sound corporate governance mechanism and effective incentive scheme to provide a solid
foundation for Midea’s sustained and steady developmentPaying close attention to the construction of a governance framework, regarding its corporate control,centralization and decentralization systems, the Group formed a mature management system forprofessional managers. The divisional system has been in operation for many years, and its performance-oriented evaluation and incentive mechanism featuring full decentralization has become a training andgrowth platform for the Group's professional managers. The Group's primary senior management teamconsists of professional managers who have been trained and forged in the operational practices of MideaGroup. They have been working for Midea on average for more than 15 years, all with rich professionaland industrial experience, deep understanding and insights of the global home appliance industry andrelated industries, and accurate understanding of the industry environment and corporate operationsmanagement. The Company's advantages in such systems and mechanisms have laid a solid foundationfor the efficient and effective business operations, as well as the promising, stable and sustainable futuredevelopment of the Company. At present, the Company has launched seven Stock Option IncentiveSchemes, four Restricted Share Incentive Schemes, six Global Partner Stock Ownership Schemes andthree Business Partner Stock Ownership Schemes for key managerial and technical personnel, markingthe establishment of a governance structure aligning the interests of senior management and core
business backbones with that of all shareholders, as well as the formulation of an incentive schemecomprising long and short-term incentives and restrains.
Section IV Performance Discussion and Analysis
1. Overview
1.1 Industry Overview
A. Home Appliance IndustryAs China’s consumer market took a heavy hit in the COVID-19 pandemic in 2020, people’s life styles andconsumption custom have changed, giving birth to new spending trends and forms. According to thestatistics published by the China Household Electric Appliance Research Institute (CHEARI) and theNational Household Electrical Appliance Industry Information Center, in 2020, the domestic retail sales ofhome appliances was RMB729.7 billion, down 9.2% year-on-year; and the exports of home appliances(exclusive of color TVs) reached RMB458.2 billion, up 24.2% year-on-year. Currently, the world is still ina grave and complex situation due to the pandemic, with unprecedented challenges for economicdevelopment. Nevertheless, in the medium and long run, upgrading of the industrial structure, stableincrease of household income, diversified consumption, the national policy support for the green andsmart industries, as well as upgrading of the standards for home appliances will create new opportunitiesand growth points. According to the 2020 Annual Report of China’s Household Electrical ApplianceIndustry published by CHEARI and the National Household Electrical Appliance Industry InformationCenter together, under the pressure of the pandemic, three trends occurred in the development of thedomestic home appliance industry in 2020: The “major” development trend, segmented demand marketand novel marketing model. The “major” development trend primarily includes the development directionof healthy, smart and high-end products, which will become the main market that home appliancemanufacturers would compete for. The segmented demand market has a booming growth and displaysa trend of diversity, especially in the small domestic appliances market where the diversified demand ofconsumers is more extensive, which requires the manufacturers to explore further. Novel marketingmodels emerge in an endless stream. These new tools such as live streaming can effectively reduceintermediate processes and can help to form competitive selling prices and more effective access tocustomers, especially for small domestic appliances that require no installation.
According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of air conditioners was RMB147.5 billion in 2020, down 22.8% year-on-year. In termsof product performance, the functions of air conditioners have been expanded from cooling and heatingto humidity, air cleanness and freshness, etc. Fresh-air air conditioners saw a year-on-year upswing ofover 150% in offline retail sales, in addition to a year-on-year surge of nearly 180% in online retail sales.Meanwhile, the market share of air conditioners which are capable of self-cleaning by retail sales alsoregistered a significant expansion (over 4% online and close to 13% offline). In addition, the pandemic,the implementation of the new energy efficiency standards, as well as a rise in raw material prices in thesecond half of 2020 further boosted the market prices of air conditioners. High-end products embraced alarger market share and a further structure upgrade. Data show that variable frequency floor-standingand wall-mounted air conditioners combined took up an over-92% offline market share by unit sales in2020, up 7% year-on-year.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of laundry appliances was RMB65.74 billion in 2020, down 6.8% year-on-year. Dueto the pandemic, the online sales of laundry appliances reached RMB32.38 billion in the year, a year-on-year increase of 8.9%. The amount represented 49.3% of the total sales, almost a tie with the offlinemarket. In the upgrade of the laundry appliance market, in terms of the product types, the market shareof front-loading products keeps growing stably. In 2020, the market share (by retail sales) increased to
79.8%, with the market share by unit sales reaching 58.8%, making such products the mainstream of the
market. Specifically, the market share by retail sales of front-loading washer-dryers also increased to
45.4%. Compared with top-loading washing machines, front-loading products are of a higher price but
consume less energy, deliver greater cleanness, and cause less tear and wear, which represent aninevitable trend of consumption upgrading. Product specifications continue to upgrade. The products of8kg have been completely replaced by that of 10kg. The offline unit sales of 10kg washers occupiedapproximately a 50% market share, which contributed 61.5% of sales, with an increase of over 10% fromthe previous year. In addition, the products with an over-10kg capacity and separate washing and dryingsections are highly favored by the high-end market. The design of such products focuses more on thinnermachines and space saving. The sterilization technology of laundry appliances has matured. Due to thepandemic, the offline market shares by retail sales and unit sales of the products with the sterilization
function reached 36.4% and 48.2%, respectively. The progress of function expansion from “wash” to“wash and care” still keeps going. For example, air washing, steam washing, and steam and iron washingare strong supplements for the traditional function of washing on eliminating odor, removing wrinkles,sterilizing and eradicating mites, preventing allergy, avoiding laundry detergent residue, and preservingthe texture of clothes. The offline market share of products with the function of air washing increasedsignificantly to 36.7% in 2020. Because the drying function brings the advantages of saving time, beingconvenient, non-ironing, and saving indoor space, the retail sales of clothes dryers in the domestic marketwere RMB2.26 billion in 2020, an increase of 46.2% year-on-year. Meanwhile, the growth momentum ofdomestic brands was strong, and the offline retail sales of domestic brands in 2020 increased nearly 200%year on year. Specifically, the heat pump condenser dryer is rapidly occupying the offline market. In 2020,its offline market shares by retail sales and unit sales reached 94.6% and 96.2%, respectively.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of refrigerators were RMB93 billion in 2020, down 2.8% year-on-year. In thedomestic market, online and offline sales differed in performance, with a rise of 13.6% and a decline of
12.4% respectively compared to last year. Nevertheless, product upgrading was prominent. The unit sales
of multi-door refrigerators continued to grow with their offline market share up by nearly 7% from last yearto 42% in the year under review. Due to consumers' increased willingness to pursue quality life, the trendof high-end products becomes obvious, and the offline market share by unit sales of refrigerators with aunit price of over RMB10,000 increased significantly. In particular, the market share (by retail sales) ofproducts with a unit price of over RMB14,000 increased 2%. Intelligent technologies of high-end productsbring consumers novel experience. For instance, COLMO, a refrigerator brand of Midea, can select themost accurate storage pattern in the background to provide nutritious food for users through the “AIIntelligent Solutions Whole Food Ingredient” technology. The pandemic increased the demand forrefrigerator's functions on product sterilization, health and other aspects. New refrigerators launched allfocused on these functions. For example, Midea Refrigerator manages to remove odor in 19 minutesbased on the “PST + super magnetic electrolysis odor-free technology”. Consumers' requirements forrefrigerators have upgraded from “being able to freeze food” to “being able to freeze food well” and “beingable to freeze food healthily”. Aside from that, products meeting the needs of different scenes likecosmetics, baby food, and breast milk through providing independent and separate storage space also
present a trend of scale expansion.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of kitchen appliances was RMB167.44 billion in 2020, down 4.8% year-on-year.Industrial landscape shows a further concentration of market shares to top brands in the industry. Offlinemarket shares of top five range hood brands reached 74.8%; and the market shares of top five gas waterheater brands reached 72.6%. The kitchen appliance market continues to move towards high-endproducts, as high-quality and high-end products become preferable to consumers. To state with numbers,in 2020, the offline sales of high-end range hoods above RMB6,000 and high-end gas stoves aboveRMB3,500 saw an increase of 2.3% and 4.5%, respectively. The market continues to see productupgrading. The offline market share of range hoods with a fan that rotates 20m?/min of air has drasticallyincreased to 22.6%, up 8.2% year-on-year. The market share of gas stoves offering up to 5kw fire hasincreased to 11.4%, up 2.6% year-on-year. The market share of large-sized built-in ovens of above 70Lcapacity has soared up to 38.7%, up 10.1% year-on-year. For other products, the sales growth ofemerging products, as represented by dishwashers and integrated stoves, has continued to led theindustry all year round, as a result of following the market trends of “healthy products” and “product suites”.The sales of dishwashers were RMB8.45 billion, up 24.6% year-on-year, of which online sales took up apercentage of 49.2%. In terms of products, large capacity and effective sterilization have been the twomajor functions focused for developing dishwashers. Online and offline market shares of dishwasherswith large capacity of up to 13 sets of bowls reached 36.2% and 42.1%, respectively, up around 10%. Aspandemic control continues to be stressed in daily life, sterilization has been required more than ever.High-temperature sterilization, UV sterilization, ion sterilization and other technologies have been widelyapplied. The sales of integrated stoves reached RMB17.68 billion, up 13.7% year-on-year. Specifically,the growth of online sales and offline sales were 35% and 5.6%, respectively. Due to the pandemicsituation, the offline channel flow of integrated stoves switched to online channels. Live streamingmarketing has contributed to the growth of sales despite the encumbrance met in offline channels.However, this kind of online marketing requires more efficient full-link service capacity from manufacturersand vendors. At the current stage, competition of online markets is stressing more on products than cheapprices. As a result of lockdown and social distancing, the need for high-end kitchen appliances includingsteamers and ovens has been surging, which provided a good opportunity for the development of
integrated stoves. In 2020, the online market share of integrated stove with steamer-oven reached 25.6%,representing the biggest growth in all categories.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic sales of small domestic appliances was RMB128.4 billion in 2020, down 0.5% year-on-year, ofwhich the online sales took up a percentage of 68.8%. In all categories, the sales of traditional productsin 2020 have not seen a promising growth. The annual sales of rice cookers were RMB13.61 billion, andthe retail sales have been down 13.2% year-on-year. However, the market of emerging and health-friendlysmall domestic appliances told a different story. The diversified and individualized consumer needs haveresulted in rapid growth for these products, driving the emergence of more niche products includingjuicers, toasters, muddlers, breakfast machines, etc. While this kind of creative small domestic appliancesis not faced to mass consumers, they are designed into diverse categories and with more specifiedfunctions. The exterior design for these products jumps outside the traditional visual pattern for domesticappliances and they cover all-scene application for all ages from infants, teenagers to seniors. In addition,the small smart domestic appliances for pets are also one of the most fast-growing categories. The annualsales of blenders reached RMB13.62 billion, up 7.7% year-on-year, of which the online sales took up apercentage of 60.7%. Functions that can solve pain points of consumers including silent mode, auto-cleaning and detachability of products have been designed upon needs. For example, the online sales ofproducts equipped with silent settings have seen an increase of over 150% year-on-year. The sales ofhealth-friendly vacuum cleaners during the COVID-19 pandemic were also promising. In 2020, thedomestic sales of vacuum cleaners were RMB23.18 billion, up 15.3% year-on-year, of which the onlinesales took up a percentage of over 80%. By categories, as consumption upgrading has made vacuumcleaners an integral part of domestic appliances, the online unit sales of handheld vacuum cleaners hasseen a year-on-year increase of 48.8%; and the unit sales of robot cleaners and dust mite vacuumcleaners has both seen a year-on-year increase of 13.9%. As the needs for house cleaning continue togrow, multiple new cleaning appliances such as steam mops and scrubbers have emerged. By industriallandscape, the distance on product competitiveness between domestic brands and foreign brands isgradually narrowing, as Chinese enterprises have been making various breakthroughs on digital motorsand other core technologies. As the data show, four out of the Top 5 brands on the online retail sales listare Chinese brands, with a combined percentage of 41.3%, achieving a steady year-on-year growth. By
development of product technologies, the competition in the vacuum cleaner market has switched itsfocus from price and capacity to user experience. Accordingly, new technologies including integration ofmoping and vacuuming, automatic dust collector, self-cleaning mops and bendable fronts have beendeveloped. These new technologies have solved pain points of consumers from multiple dimensions andimproved user experience.According to the data from the National Household Electrical Appliance Industry Information Center, theonline retail sales of home appliances in China amounted to RMB336.8 billion in 2020, up 8.4% year-on-year, accounting for a market share of 46.2%; while the offline retail sales amounted to RMB392.9 billion,down 20.2% year-on-year, accounting for 53.8%. In light of channel retail sales, most product categoriesincluding refrigerators, laundry appliances, kitchen appliances and small domestic appliances achievedgrowth in the online market. The offline market, on the other hand, saw a year-on-year decline in mostproduct categories, especially the traditional major appliances. That said, due to the gradual recovery ofconsumer confidence and the fast growth in the high-end market, more consumers spend on qualityproducts in the offline market. According to the data from the National Household Electrical ApplianceIndustry Information Center, 2020 witnessed a substantial increase in the offline unit sales of Grade 1variable frequency air conditioners, 400L-plus refrigerators, heat pump dryers, water purifiers with a unitprice of over RMB5,000, vacuum cleaners with a unit price of over RMB4,000, etc. In terms of channelevolvement, the booming digital economy accelerated the integration of online and offline channels, witha surge of new models and forms boosting consumption upgrading. Meanwhile, the rising interactivemarketing models such as live streaming and e-commerce, the innovative C2M model, the Internet, AI,big data and the like are pushing the retail sector into a new phase featuring “all channels, all scenes andall links”.B. Robotics and Industrial Automation IndustryAccording to MIR, the shipment of industrial robotics was 171,490 units in China in 2020, representingan increase of 14.8% year-on-year. In terms of the market changes throughout the year, the pandemichas not changed the prosperous trend in markets. Though the economy dropped sharply in the firstquarter due to the shock on markets brought by the pandemic, the domestic economy continuouslyrecovered its operation as the prevention and control of the pandemic gradually stepped into a stable
stage since the second quarter. In addition, a large number of orders in manufacturing flew back underthe impact of the severe overseas situation of pandemic, which also sped up the quick recovery of themarket, presenting a tendency of opening low and rising in the year. By industry, the electronic industryand the general industrial investment served as the main growth momentum for the market. Substantialinvestment was made in various industries including smart phones and components, intelligent wearables,laptops, Li-ion batteries, photovoltaic power, metal processing and food and beverage. Besides, owing tothe pandemic, the demand for the anti-pandemic and treatment supplies surged, and the application ofrobotics in new occasions was continuously expedited by the demand for nucleic acid and serology testsand the delivery of medical supplies. By application, the integration between robotics and technology wascontinued to be deepened. The application of robots was further expanded from “transfer-based” tasksto “processing-based” tasks. As a result, the robotic industry has made a further breakthrough ininnovative applications such as soft float in die-casting, chair panel drilling, FPC-FFC connectors,welding-cutting of medium-thick plates, as well as mixed robotic palletizers. In addition, according toanalysis from the GGII, it is predicted that the overall market of industrial robotics will present a tendencyof growth in the next two years. In detail, it is expected that some segments will achieve a record highgrowth, and the pattern of product segments will be reshaped. Specifically, multi-joint robotics mainlydepended on the small six-axis robotics as driving force which attracted various manufacturers, mainlyfocusing on the industrial applications such as 3C and new-energy products. The demand in theautomobile industry tended to be stable, producing a limited general driving effect. Similarly, the demandfor medium-load and large-load products witnessed limited growth. As for robotics, the SCARA roboticsbenefited from the demand in the 3C industry, reaching a market growth of above 30%. The delta roboticsachieved a market growth of about 20% in the first half of 2020 owing to the impact of the food andmedicine segments. The collaborative robot market received increasing popularity in the segments ofservices and attracted a lot number of manufacturers to put in a larger deal of effort on services, as thoughthe overall growth of the market slowed down a bit.In terms of policy support, the Ministry of Industry and Information unveiled in 2020 the Guiding Opinionson the Development of Industrial Big Data for the purposes of implementing the national big datadevelopment strategy, furthering the digital transformation of industries, unlocking the potential ofindustrial data resource elements, and accelerating the development of the industrial big data industry.
In March 2020, the Central Politburo Standing Committee of the Communist Party of China put forwardin a meeting to speed up the construction of new infrastructure including 5G networks and data centers.In April 2020, the National Development and Reform Commission defined clearly the scope of newinfrastructure for the first time, which comprises information, integrated and innovative infrastructure. InMay 2020, it was mentioned in the Report on the Work of the Government 2020 that support should befocused on new infrastructure, new urbanization initiatives and major projects such as transportation andhydraulic engineering. As China vigorously encourages the construction of new infrastructure, theindustrial robotics industry is considered to have enormous potential. From the perspective of localgovernment policies, relevant policies were issued by local governments to promote the development ofthe robot industry. For example, Jiangsu Province issued the Opinions on Deeply Pushing forwardDevelopment of Digital Economy, Guangdong Province issued the Implementation Plan of GuangdongProvince for Promoting New Infrastructure Construction in Three Years (2020-2022) and the Work Planfor Building a National Digital Economy Innovation and Development Pilot Zone in Guangdong Province,and Shanghai City issued the Plan for Special Actions of Building 100+ Smart Factories in Shanghai City.According to the latest statistics of IFR, in terms of industrial robotic density (the average number ofindustrial robotics per 10,000 workers), Singapore continues to rank No.1 in the world with 918 robotics,while the robotic density of China has surpassed France for the first time and has risen to 187, up 33%compared with that in 2018 and far beyond the global average of 113, indicating great potential andprospects. Supported by diverse factors such as flexible demands of the manufacturing sector, decliningdemographic dividend, emerging markets and the development of innovative technologies, industrialrobotics will be applied to more and more areas.
1.2 Analysis of the Company’s Main Business
Domestic consumption and production are expected to be affected to some degree in the short run bythe COVID-19 outbreak in 2020. Meanwhile, the COVID-19 has been spreading overseas since lateFebruary 2020. And the political and economic environment has become more complicated both at homeand abroad. Midea in 2020 can be summarized into five phases: the quick response in the domesticoutbreak of the pandemic in the first phase, the resumption of work/production in the second phase, theshift of focus from resumption of production to normal operation in the third phase, the catching up on
progress in the fourth phase, and the reflection, innovation and reform in the fifth phase. In light of itsoperating results and the performance of its team, Midea has weathered the storm in the year, deliveringa better-than-expected operating performance. This is partly attributable to its quick response andeffective measures with respect to the pandemic. More importantly, the organizational agility and businessresilience that Midea has long been cultivating through a series of reforms and adjustments in the pastyears have further boosted its “immunity”. All these efforts have resulted in improving trends in keyperformance indicators such as channel inventories and net cash flows from operating activities, betterproduct quality and reputation, as well as strengthened competitiveness in various product categoriesand global operation synergies. In the year, Midea has redefined the five business divisions for evengreater growth space, and has established the new strategic focus with “Technology Leadership” as thecore. Meanwhile, it firmly adhered to “Comprehensive Digitalization and ComprehensiveIntellectualization”, and continued to promote recreation of the corporate culture. Efforts were also madeto promote high-performance operations in the whole value chain, continuously optimize the Company’sproduct mix according to the consumption upgrade trends, and construct sustainable competitiveness forthe future through internal growth. For 2020, Midea achieved, on a consolidated basis, total revenue ofRMB285.710 billion, up 2.27% YoY; and a net profit attributable to shareholders of the Company ofRMB27.223 billion, up 12.44% YoY.In 2020, the Company carried out the following main tasks:
A. Focused on users, continuously refined the whole value chain, as well as upgraded businessscenes, products and servicesIn order to carry on with the “customer-oriented” strategic reform, the Company creates more user valuein business scenes, products and services which are in direct contact with users, builds a customer-oriented organization and digital experience management system, as well as continuously promotesexperience refinement in the whole value chain. In terms of business scenes, offline flagship store, homedecoration store, multi-category store and new retail store are reshaped based on the new retailtechnology and user analysis. This, together with refined shopping paths and improving onlineconsultation on e-commerce platforms, help sufficiently satisfy user demand for user scene-basedinteractions, shopping convenience and individualized shopping guide, thus further improving shopping
experience. Meanwhile, the customer groups under the membership system in all distribution channelsoffer an opportunity for users to share, which can trigger fission expansion of the customer base. In termsof product development, an information experience platform is put in place to understand life styles andpotential demand of customers in different scenes. Through involving customers in the whole R&Dprocess and profound R&D and technological accumulation, the Company is able to solve experiencebottlenecks and pain points in the industry, offer customers better-than-expected product innovation, andboost customer satisfaction and loyalty. In respect of smart products, the Company continues to createsurprises based on customers’ life styles and diverse user scenes. As for service experience, with thehelp of Internet tools, Midea goes beyond the traditional model to build a “Service + Internet” platform, inaddition to continuous investments in service certainty, value-added services and active service.Meanwhile, by means of digital service, as well as platform-based and modularized R&D and production,Midea takes the lead to explore the C2M model for its home appliance products, offering single productcustomization and product suite customization for the whole house for consumers with home decorationneeds. These measures to improve service experience are part of Midea’s efforts to deliver better productexperience throughout the product life cycle. In terms of industrial design, Midea leads the way in userexperience and interaction upgrading with ongoing innovations. In 2020, Midea won a total of 87 industrialdesign awards, including 25 Red Dot Design Awards, 29 iF Design Awards, 27 IDEA Awards and 6 G-mark Awards.For smart living room scenes:
Midea Air Conditioner continued to lead the way in the industry in terms of innovation. Launched initiallyin the industry, Midea iColor XT Series Air Conditioner applies the unique third generation wind guidingtechnology to the omnidirectional revolving air duct, and such integrated flow duct is extended by 30%outside. The technology allows the 180° turning of the spherical revolving air duct to precisely lead thewind direction and deliver wind to the entire space in a wide-angle manner, realizing a more completerange of flow coverage so as to cool or warm the space as expected more quickly. Based on suchachievements, it has been granted several awards such as the 2020 User Experience Innovation ProductGold Award by IFA, the 2020 G-mark Award and the 2020 China Household Appliances Innovation Award.Midea Freshness Pro Artistic Floor-Standing Air Conditioner, innovatively adopts the dual-duct design in
the aviation sector. Through the axial inner duct and the centrifugal outer duct, strong cold wind canbecome soft, achieving a breezeless and comfortable feeling. Air flows from the top air outlet, axial airoutlet and centrifugal air outlet interact to form an even wind and a constant temperature field across theentire space, upgrading user experience. This product ensures fresh air in the entire space by replacingthe stale air with fresh air under micro-positive pressure and delivering the fresh air through multipleoutlets. Besides, the industrial design of the product is inspired by “Chinese gardens”, which helps theproduct win the awards including the Best Product Award at AWE 2020 and the 2020 CMF Design Award.Midea Children's Air Conditioner II has upgraded its smart cold-prevention function to achieve real-timemonitoring. It is equipped with a customized breezeless and smart voice functions. Additionally, it is ableto quickly distinguish a baby’s crying and send notification to the user. The design of Midea Artistic Floor-Standing Air Conditioner was inspired by Beijing's CITIC Tower. Its breezeless function has beenupgraded to “customized breezeless” to meet the needs of customers with different physiques. The high-end version of this product is the first in the industry to be equipped with a central voice system thatunderstands multiple dialects. Midea Breezeless II Floor-Standing Air Conditioner is equipped with a freshair function. Its fresh air volume is 90m?/h, allowing those indoors to enjoy healthy air without openingwindows. The fresh air function is able to run independently. With H13 filters, it is able to achieve a one-time filtration efficiency of over 99%. Midea U is a new product lately launched for the overseas market.Developed by using the CDOC approach and equipped with an innovative insulating U-slot and the “NoiseBarrier” technology featuring noise absorption from both the inside and outside, it allows users to freelyopen or close windows whenever running Midea U, with little noise from the outside. It was awarded theGold Medal with the Congratulations of Jury at the 2021 International Exhibition of Inventions of Geneva.In May 2020, a total of 20 Midea air conditioner models received the “CVC Hygiene and Health Certificatefor Consumer Electric Appliance Product”.Midea has launched Xiaofangwu Dehumidifier, the first dehumidifier of which both the machine body andthe water tank can be folded for storage. It boasts a beautiful appearance and futuristic technology. Andthe awards it has won include the Gold Medal at the 2021 International Exhibition of Inventions of Geneva.In terms of portable air conditioners, Midea continued to focus on the customers' pain points and madesome progress. The newly launched Real Cool series reaches a cooling speed twice faster than that oftraditional products and an 8-meter distance of wind delivery through the initial hose-in-hose ventilation
system and the 102° coverage of wind delivery. This, together with an over-50% increase in energyefficiency, this product raises the standards of the portable AC industry. Midea’s new air circulation fan,with a uniquely designed appearance, realizes indoor circulation for a better indoor environment. Basedon Midea's patented Turbo Flow technology, this new product is able to function at a large capacity andfor an ultra-long distance, making cross-room air delivery a real possibility and enabling full-houseventilation in just five minutes. Powered by Midea’s unique internal rotation technology and universal balljoint technology, it features free 360° rotation to accelerate air flow in a room. With a stepless slider, itcan circulate air without direct blowing, and, with a special infinite sliding rod, can also achieve 90° cyclingwithout direct blowing.Equipped with the Lift-away function and its canister sliding along the rail, Midea Space Travel VacuumCleaner, with the suction power of 80W but reduced noise, has the best performance in floor brushingand floor or carpet dust removal among vacuum cleaners with the same suction power. Being the bestanti-hair wrap vacuum cleaner, Space Travel applies the anti-hair wrap technology with independentintellectual property rights of Midea, which is based on the eccentric design of drive device of hair removaltechniques. In addition to PVA-coated cotton, built-in planetary gear motor, solid-liquid waste separation,antibacterial deodorization and other leading technologies, Midea Handheld Electric Mop features alsoserves as a reminder of clean water, lack of water and full sewage tank. Midea Z7 Vacuum Cleaner, withthe new-generation vibration damping and noise reduction technologies, the anti-vibration technology ofan independently mounted motor module and the technology of labyrinth-shaped air ducts, achieves thelowest noise and vibration for the whole machine and the handheld part among products with the samepower, showing the excellent performance in vibration damping and noise reduction in the industry. Withan optimized duct system from efficient runner technology and minimized resistance of the runner, Mideacaptures the high-efficiency matching point between the air duct and the electric fan in Z7, achieving 35%efficiency of the whole machine, inserting itself into the first tier in the industry. Midea M7 Robot Cleaneris able to remove dust efficiently. The robot features a high-performance LDS 8M detection radius, anenvironmental scanning frequency up to 3,000Hz, a floating suction design, and a combination of bilateraland V-shaped roller brushes. With a high-capacity water tank and intelligent mopping technology, the M7can sweep and mop floors intelligently. Midea V5 Rechargeable Push-Rod Vacuum Cleaner has a high-efficiency digital motor, able to produce 100W of suction power. With an electric soft velvet brush, it
efficiently removes and absorbs dust. Its handheld component, 1.4KG only, is convenient to operate. Andit is capable of running for up to 45 minutes, thus meeting the requirements of whole-house cleaning.For smart balcony scenes:
COLMO Space Capsule Series Dual-Tub Front-Loading Washing Machine features the largest-capacityupper tub of 5kg and lower tub of 10kg in the industry. In a true technological breakthrough, the upperand lower tubs are able to conduct washing and spin-drying at the same time, a first practice in theindustry. Therefore, the washing machine can maintain extremely low vibration and noise, even whenrunning at high intensity and a high speed. The two tubs work without interference with each other,showing the industry a new way of sorting laundry and setting a new standard of 6S sorting laundry withseparation, capacity, silence, health, luxury care and built-in in one device. Besides, the built-in washingmachine adopts the one screen for two tubs control technology and the door caulking technology fromthe automobile industry. Upon technology upgrades, the capacity of the tubs is increased by one to twokilograms while harmful substances generated in the production process are reduced through a tallermachine and the paint-free technology. Midea Steam Non-Iron Series Clothes Dryer, with the steamgenerator jetting superheated steam to the super capacity tub, can get the clothing wrinkle-free whiledrying. Besides, the aseptic tub made of stainless steel with the UV sterilization function makes thoroughsterilization possible and obtain the COVID-19 inactivation certification. Based on the unique “dual-strokeclutch mechanism”, Midea Top-Loading Dual-Drive Quick-Wash Series uses the counterrotating of thepulsator and the inner tub to produce dual forces, simulating the tumbling and rinsing effects of washingby hand with dual water flows. It can deliver more cleanness and effectively prevent clothes from tangling.According to tests, compared with the single-drive washing machine, this dual-drive product can deliver15% more cleanness and 8% less tear and wear. Little Swan H36 Heat Pump Dryer is equipped with aunique steam-drying and non-iron technology. This technology guides water molecules into clothingfibers' non-crystalline areas, thereby maintaining swelling and enhancing the flexibility and softness ofthe fiber molecules. By doing so, it delivers better drying effects. Equipped with a 10KG heat pump anda 125L capacity, the dryer is able to instantly dry a whole family's worth of bedding and clothes. Equippedwith a unique UV sterilization technology, it kills over 99% of mites in the clothes, as certified by China’stesting authorities. The 4.5-cubic-feet top-loading washing machine targeted at the North America market
is equipped with a butterfly-shaped infusion structure, functioning in three steps of water intake,dispersion and rotation while putting detergent in automatically in two times, where a tornado-like powerfulwater force collides and impacts with the up-and-down tumbling clothes to effectively remove stains,achieving much more cleanness. Meanwhile, five products won the Red Dot Award, including Little SwanUltra Fine Bubble Water Cube Drum TG100-14366WMUDT, COLMO Cloud Atlas Series Washer-DryerCLDQ10, Beverly Tiancheng Series One-Tub Tech BVL3J110IY, Midea Front-Loading Washing MachineMD100V11D, and Toshiba Samurai T07.For smart kitchen scenes:
I-Family Built-in Kitchen Appliance Suite, winner of the Best Product Award at AWE 2020, features aminimalist design. Based on the fourth generation's nearly-soundless dual air duct design, the range hoodof the product suite is capable of a cooking-smoke escape rate as low as 3%. Its filter net is removableand dishwasher-washable. The embedded smoke sensor technology can reduce noise to as low as 42dB.The stove is equipped with two latest-technology latent wick burners, uniform temperature and intelligentcooking algorithms able to reproduce Michelin-grade chef cooking results, and enables automaticingredient matching and cooking with 50+ smart recipes. With a modularized Chinese-style basket forbowls and dishes, an industry first, the dishwasher saves users from bending over and reduces washtimes by 30%. With another industry first—the standing rinsing arm—the dishwasher's cleaning rate isincreased by 60%. COLMO-S67 Range Hood brings users a new experience of sight, sound, smell, tasteand touch. Users can enjoy cooking without being bothered by smoke since the range hood carries thepioneering third-generation AG air duct system, which features vertical suction to allow no escape ofsmoke. In addition, this product employs an advanced radar-based smoke capture technology, which isa smart control technology based on smoke conditions to offer a “hands free” experience. Meanwhile, itsinnovative flat control panel is ergonomic and easy to operate. Midea Charcoal Stove-Q67T Gas Stoveis designed to meet the different taste needs of family members, which is equipped with a burner forflash-fry and a charcoal burner for stewing, providing 14 kinds of fire. COLMO-QF3 Gas Stove, a designcombining simplicity with the special 360° edge-polished glass panel, enables accurate temperaturecontrol through a 225°-wide screen to achieve infinitely variable and accurate control for various cookingneeds. And the modular design of the major component makes it easy to clean.
Midea D3/D5 Jimu Microwave Oven is surprisingly easy to operate with a large display screen and asingle knob. It also boasts a food-grade cavity and a dual-power baking system. Powered by twinturbochargers, Midea Turbo Fresh Steamer features adjustable superheated steam. With combinedcharcoal jet roasting technology and high-temperature steam degreasing algorithm, it achieves uniform-temperature cooking. Its M-type copper tubing can condense up to 10 liters of saturated steam per minutefor zero steam overflow. Employing an infrared detector, Midea Constant Temperature CookingMicrowave Oven allows accurate temperature control from 30°C to 100°C since microwave algorithmsare adopted. An intelligent defrosting function is available with the efficiency increased by 25%, providingfast cooking experience. “Fresh” Steamer-Oven features the micro-pressure steam and charcoal grillfunctions, though which nutrition can be effectively retained with flavor released. High-temperaturesteaming and baking allows the cooking for health food of fat and salt reduction while the zero steamemission technology enables the steamer-oven to have a dew point of less than 50 degrees Celsius anda condensate recovery of up to 150g, effectively enhancing the cooking experience. It was granted the“Product Innovation Award” at the 16th China Household Appliances Innovation Award. Midea MasterMicro Combi Steamer Cooking Oven, integrates the functions of microwave, steamer and oven withseven main functions of cooking, and provides the steaming of 1850W, grill of 230 degrees like that ofcharcoal grill in kiln and fat and salt reduction. Moreover, recipes for over 200 dishes are available at theAPP for better user experience. It won the “Good Product” award from China Household ElectricAppliance Research Institute. Midea Chujian Oven, with seven baking modes and accurate temperaturecontrol function, can connect with WiFi intelligently and access the massive AI cloud recipes. The productwon the Technology Innovation Pioneer Award from China Household Electric Appliance ResearchInstitute. Adopting the steamer calorie burning technology, Kamen vortex street fatty solution at hightemperature, full-frequency-domain and loosely-coupled microwave fat burning and instant charcoal grillwith graphite and carbon for fat removal as well as MIX fat burning curve, the oven achieves 89% increasein fat removal year-on-year, and the “steamer + fat and salt reduction” cooking technology is VDE-certified.Focused on the new consumer trend of holistic health, Midea has launched a series of products including“Low-Sugar Rice Cooker”, “Low-Fat Electric Pressure Cooker”, “Constant Temperature Induction Cooker”,and “Smart, Variable Frequency and Washable Blender”. “Low-Sugar Rice Cooker” is a product of fiveyears' R&D and innovative sugar-leaching technology. This consists of the three-step cooking technology
of “high power boiling, powerful sugar leaching, and constant-temperature steaming”, by which the ricecooker is able to reduce the reducing sugar and resistant starch content by 50% and 23% respectively,effectively reducing sugar intake and suppressing increases in blood glucose increase after meals. Thisis the first low-sugar rice cooker certified by China Household Electric Appliances Research Institute(CHEAR). It sets a new trend that “a rice cooker without a low-sugar function is not a good rice cooker”.“Low-Fat Electric Pressure Cooker” is equipped with “mellow but fat-cutting” technology. Throughpressure-variable boiling, the cooker is able to enhance aroma and remove as much as over 92% of fat.“Constant Temperature Induction Cooker” is equipped with the industry-leading technology of “protrudingtemperature measurement and frequency conversion temperature constancy”, transforming the cookerfrom a conventional heating device to a professional cooking device with precise temperature control.The cooker is able to make a variety of constant-temperature foods without producing cooking smokethroughout the entire process. The cooker supports different cooking methods, such as shallow frying,frying, boiling, stewing, and deep-frying. Smart, Variable Frequency and Washable Blender adopts asmart, variable-frequency and constant-speed blending technology to achieve more delicate cuts andmore easily absorbed nutrition. Also, it is equipped with removable blades, an electroless body andunderneath heating—all technological firsts in the industry, is easy to clean in a thorough manner for theentire body is washable in water.COLMO B3 Dishwasher is equipped with a VF dual-drive system and disrotatory arms for thoroughtableware cleaning. COLMO B3 can clean valuable tableware to the third level of disinfection. With theapplication of intelligent storage technology, COLMO B3 can store tableware for up to 168 hours, makingit an “all-in-one” appliance for tableware washing, disinfection, drying, and storage. Utilizing the ultra finebubble technology, COLMO EVO Series Active Water Purifier V7 Pro can effectively oxidize anddecompose organic pollutants and kill almost all bacteria found in drinking water. It is also equipped witha warm washing function. It is NSF-certified and a winner of the Best Product Award at AWE 2020 andthe National Level Leader Honor. Midea Chinese-style Sterilization Dishwasher GX1000 is a dishwashingsolution perfect for health, cleanness, and intelligence. In terms of technologies, its quint-rotatory armssuper cleaning patented technology can remove stubborn stains. The main body is kept fresh and cleandue to the original photocatalyst odor-free system. The layered washing function satisfies personalizeddemands. Top-control and front-display design, the top knife and fork basket, and no-bending-over
operation are ergonomically convenient.Midea Zero Staleness Water Purifier is the world's only large-capacity water purifier certified by NSF,establishing a benchmark of zero staleness, thanks to its original zero staleness technology. The saltremoving rate of the first cup of water exceeds 70%. Each cup of filtered water is directly drinkable.Moreover, the original 10-year RO filter technology of Midea addresses the issue of frequentreplacements of the filter. With whole new technologies plus the patented slow stripping & rotary deep-cleaning system, the RO filter and the entire water system of the machine can be fully self-cleaning.Therefore, the product was granted the 2020 Red Star Design Award. Midea YR1908 I-Family WaterDispenser embraces a pioneering whole-process sterilization system. Its sterilization rate is over 99%,attributable to the bacteriological filtration membrane, high-temperature dynamic sterilization, and self-reflow. Water safety is guaranteed during the whole process from inflow to outflow. Furthermore, theoriginal dual-core heating technology enables the thermostatic precision at the outlet to reach ±1°C.In June 2020, the “Pesticide-Residue-Free Series” (“the Research and Application of the Pesticide-Residue-Free Technology of Deep UV Light + Photocatalyst in the Home Appliance Industry”) and the“Odor-Free Series” (“the Research and Application of the Odor-Free Technology of Catalysis-AssistedNon-Thermal Plasma in the Home Appliance Industry”), two of Midea’s core technologies for refrigerators,were both certified as “Internationally Advanced” by industry experts. The technologically innovative“Pesticide-Residue-Free Series” adopts deep UVC light in its fruit&vegetables zone, a drawer design forthe refrigerating chamber that allows for high photolysis efficiency, as well as the light energy iontechnology to degrade pesticide residue in fruits and vegetables in a highly effective manner, therebydelivering a green and healthy life for users. Likewise, the innovative “Odor-Free Series” generates low-temperature plasmas within the refrigerator via a miniaturized high-voltage power supply and thedielectric barrier discharge technology, so as to stimulate odor-decomposing catalysts for an odorless,highly sterile environment in just 19 minutes and keep the food safe. This technology is leading theindustry into “a new era of fast and clean refrigerating experience”. Six-Door Slim-Design ToshibaRefrigerator, launched by TLSC, adopts a pioneering star-rated cuisine and atomized fresh-keepingtechnology. This model is able to defrost food without compromising its original flavor, slightly freeze foodin a short time, and accurately adjust ambient temperatures required for the optimal flavoring of meat
ingredients. Its fruit&vegetables compartment is equipped with imported UNIT moisturizing films to keepfruit and vegetables hydrated and fresh. The humanized design of the “itouch” door, the middlefruit&vegetables compartment, and the external wall made from aircraft-grade insulation materials, allhelp to reduce the thickness of the safe and freezer walls by 60% and 44% respectively, achieving “largecapacity in a compact size”.For smart bathroom scenes:
Midea Morning Dew Electric Water Heater CQ6, a newly launched product, was recognized as a “CertifiedIntelligent Product” at the China Smart Home International Summit Forum. In line with the concept of“clean water life”, Midea adopted a creative all-time magnetic cleaning system, including pre-filtration,purification, post-cleaning and whole-process monitoring. The sterilization rate is up to 99%. The four-in-one process guarantees clean water. Pain points of general electric water heaters, such as dirt, bacteria,and insufficient water for showering, are solved, so customers can enjoy a comfortable shower. MideaArtificial Sunlight UV8 Gas Water Heater is the first zero cold water product with UV sterilization functionin the industry. The UV sterilization function has two models, cold and hot. The real-time sterilization rateat the flow rate of 13L/min surpasses 99%. Highlights in the appearance include a quite big roundmembrane and the arc smile-like light effect at the bottom. During the Double 11 shopping festival in 2020,this product was ranked first in prices among high-end products in the industry. Besides, it was grantedthe Enterprise Standard Innovation Award at the 16th China Household Appliances Innovation Award andcertified by authoritative agencies. Midea Heaven Spring Series HTL8 Gas Water Heater is the first dual-nuclear-magnetic-cleaning zero cold water product in the industry. It effectively addresses the issues ofcold water at the beginning of a shower and the fluctuation in water temperature during a shower due tothe start and stop of the machine. It also features Midea's pressurized circulating water pump andpatented constant temperature chamber. Midea's zero-fluctuation electric control algorithm and four-segment precise combustion technology keep shower water temperatures constant. Meanwhile, theexternal magnetic cleaning device actively inhibits scale formation in water heaters and pipes. COLMOEVO Series Refrigeration Pipeline Machine is equipped with an ultra-real touch screen, a first practice inthe industry. It can accurately carry out user-input instructions. With just one touch on its screen, userscan immediately access iced or heated water, thus satisfying their diversified water needs.
The intelligent bath heater launched by Midea Intelligent Lighting & Controls Technology Co., Ltd. wonthe first China Mark granted by T?V S?D for household heaters. Product experience and safety areguaranteed by an overheat protection thermostat, thermal fusing, overcurrent protection, an electriccontrol box of inflaming retarding class 5VA, and four-layer fireproofing and inflaming retarding of thewhole machine. Meanwhile, the small-mesh high-density silver ion filter screen blocks mosquitoes or dustthat breeds bacteria. Additionally, fresh air is conveyed to render a healthy shower. What's more, a 120°wide-angle swing and high-power heating can quickly raise the temperature in one minute and evenlyheat the shower room. The heating mode is compound and cyclical. For intelligent applications, it can becontrolled via an App. Intelligent constant temperature and drying can be started by pressing one key.B. Adhered to the strategy of “Technology Leadership”, increased R&D investments andefficiency, built a global R&D platform, and put in place a R&D system featuring digitalization andresponsive innovationMidea continued to invest in R&D, made innovations with respect to mechanism, and developed moreleading products through both excellent user experience and differentiated technologies, reform of thewhole value chain of R&D using digital technology, and deep integration of big data technology and R&D.It kept reforming its product development model according to the strategic focus of “Leading Products”.An innovative R&D model featuring a “Four-Tier R&D System” from the organizational dimension and“Three Generations” from the technology dimension has been put in place to support the fulfillment of thegoal of “Being the Number One or the Only One” in respect of various product categories. Centering oncustomer needs and based on different organizations and technologies, the Company carries outinnovative product development, research on cutting-edge platforms, research on core components,creation of differentiated selling points and improvement of the basic product performance. Through groupdevelopment of products across the world and building of a global product platform, Midea is building“Technology Leadership”. As of the end of 2020, Midea boasts eight corporate technology or industrialdesign centers at the state level, in addition to nearly 40 enterprise technology, engineering or designcenters at the ministerial or provincial levels.Midea Group never stops its core technology research. In 2020, a number of technological achievementsmade under the leadership of Midea were all certified as “Internationally Advanced” upon authoritative
review, including “the Research and Industrialization of Source Transformation Technology for AdaptableVariable-Frequency Air Conditioners”, “the Research and Application of Intelligent Regulation Technologyfor Residential VRF Air-Conditioning System Under Multi-Temperature And -Humidity Scenes”, “the R&Dand Industrialization of Key Technology for Comfortable and Efficient Window Air Conditioners”, “theResearch and Application of Key Green Manufacturing Technology of Efficient Room Air Conditioners”,“the Research of Key Technology for the Design and Application of Disrotatory Fans”, “the Research andApplication of the Pesticide-Residue-Free Technology of Deep UV Light + Photocatalyst in the HomeAppliance Industry”, “the Development and Application of the Temperature-and-Humidity-Control Fast-and-Strong-Heating VRF System Technology (Enhanced Vapor Injection)”, “the Research and Applicationof Key Technology for Oil and Salt Control for Microwaves, Steamers and Ovens”, “the Research andIndustrialization of Key Technology for the Compact Efficient Low-Noise Magnetron”, “the Research andApplication of Key Technology for RF Roasting and Compound Cooking Based on Dual Solid-StateSource Closed-Loop Control”, “the Research and Industrialization of Odor and Fume PurificationTechnology for Steamer-Ovens”, “the Research and Application of High-Temperature Steam GenerationTechnology for Residential Steaming, Baking, and Cooking Appliances”, and “the Research andApplication of Key Technology for Smart Energy Saving of Wide-Temperature-Range Heat RecoveryVRF”. In 2020, a total of nine Midea products won a “Best Product Award” at AWE 2020. Additionally,Midea Residential Air Conditioner was granted the “Outstanding Contribution Award for Energy Efficiencyand Environmental Protection” by the United Nations Industrial Development Organization for itscontinuous research and breakthroughs in regard of the environment-friendly refrigerant of R290 and therelated environmental protection technology. Meanwhile, “the Key Technology of Wide-Ambient-Temperature Energy-Efficient Air-Source Heat Pump for Heating and Its Industrialization” with Midea andShanghai Jiao Tong University as the applicants won China Energy Conservation Association Sci-TechProgress Award in Energy Conservation and Emission Reduction (First Prize).While carrying out the core technology research, Midea has attached great importance to thetransformation of R&D achievements. In 2020, Midea was granted 2,890 invention patents in China, and570 patents abroad, representing the most patents industrywide for five straight years. By the end of2020, the total number of patent applications of Midea (inclusive of TLSC) exceeded 160,000 and morethan 62,000 patents were granted. Midea continues to improve patent quality. A visualized tool for
reviewing the quality of patent applications has been developed and fully utilized for better patent quality.Upon three years of focusing on the quality instead of quantity in terms of patents, the patent quality ofMidea has improved remarkably. Midea’s “High-Frequency Fast Cooling and Heating AC Technology”won a Gold Award at the 2020 21st China Patent Awards. In addition, the “Intelligent Power Module” andother technologies of Midea won 2 Silver Awards and 15 Excellence Awards at the 2020 21st ChinaPatent Awards, as well as 1 Invention Gold Award at the 7th Guangdong Patent Awards. Meanwhile,closely following the strategy of “Technology Leadership”, Midea are applying for thousands of patentsregarding breezeless, disrotatory, brushless motor, smart home and other cutting-edge technologies.Midea Group has been sticking to the double drivers of “production innovation + standard innovation”,implementing the standardization strategy of “innovation patent, patent standardization, standardinternationalization, Midea standards going global”, and making active steps towards contributing to thestandardization of industrial technologies. In 2020, Midea Group took part in the formulation/revision of633 standards, including 27 international standards, 234 national standards, 145 industry standards, and227 group standards. These standards include the CHCT-JSGF-080-2020 Technical Specifications forSplit-type Air Conditioners with Breezeless Model for the breezeless technology, the Standard forRequirements of Evaluating Intelligent Performance of Refrigeration Appliances, the Automatic ElectricalControls for Household and Similar Use—Particular Requirements for Humidity Sensing Controls, theHeat Pump Water Heater for Household and Similar Application, the Cold and Hot Water Supply UnitsIntegrating Air Source and Heat Pump, the Sound Quality Ergonomics Evaluation of the HouseholdAppliances Noise—Part I: Refrigerator, the Household and Similar Adjustable Frequency ConvertersSafety—Part 4: Particular Requirements for Adjustable Frequency Converters for Washing Machines, theTechnical Specification of Intelligent Power Module for Household Appliances, the Automatic ElectricalControls—Humidity Sensor, the Household and Similar Electrical Appliances—Test Code for theDetermination of Airborne Acoustical Noise: Particular Requirements for Fans, the MeasurementMethods for Electromagnetic Fields of Household Appliances and Similar Apparatus with regard toHuman Exposure, the Standard Tableware for Energy and Water Efficiency Tests of Dishwashers, theMinimum Allowable Values of the Energy Efficiency and Energy Efficiency Grades for Electric Ovens forHousehold and Similar Use, and the Technical Specification for Green-Design Product Assessment—Electric Rice Cookers. In addition, Midea serves as the leader of the Intelligent Home Appliance Working
Group of TC212/WG9 National Standard Committee of Automatic Controls for Household Use. Midea'sair conditioners, refrigerators, and laundry appliances were included in the Demonstration Projects ofApplication of 100 Group Standards for 2020 of the Ministry of Industry and Information Technology ofthe People's Republic of China (MIIT). Midea Refrigerator won the “Outstanding Contribution Award”granted by the National Standard Committee of Automatic Controls for Household Use. Additionally, aproject with Midea Air Conditioner as a participant was granted the “First Prize of the Standard InnovationContribution Award of China”, and has been recognized as an “Enterprise Standard Leader” for threeconsecutive years, with five enterprise standards and 169 products selected in 2020.C. Deepened the channel transformation, further improved the channel efficiency and rebuilt theretail service ability so as to achieve direct connection with customersWith the rising of different consumer circles and fragmented communication, online sales as a percentageof Midea’s total sales surpassed 45% during the pandemic in 2020, and online and offline marketsintegrate at a faster speed. Integrating different levels and characteristics of different channels, as wellas centering on changes to customers’ needs and ways of spending, Midea drives the retailtransformation based on user demands and experience, and keeps refining the retail operations system,so as to achieve direct connection with customers in terms of retail sales. This mainly involves thefollowing aspects. Firstly, being customer experience-oriented, it provides just the shopping experiencewanted by customers through more than 460 Midea Smart Life Experience Centers for users with housedecoration demands in cities and prefectures across the country, over 2,350 Midea flagship stores indistricts and counties, as well as 6,370 Midea multi-category stores in towns and villages. Secondly,Midea proposed new marketing methods covering all links based on user demands. The Company builttouchpoints in all links through data driving, user stratification, content + livestreaming + interaction, userasset precipitation + activity, and performed lean management. Besides, it satisfied the differentiateddemands of consumer groups, such as home decoration customers, mothers and infants, the elderly, andfollowers and members by jointly building data, marketing, and systematic tools with e-commerceplatforms. The third is the launch of smart scenes in stores. It fully upgraded intelligent terminals bycentering on smart scenes. The number of retail outlets providing samples of intelligent models anddemonstrating intelligent scenes has exceeded 35,000. More than 550 EDIS smart home service outlets
provide home decoration, space transformation, and intelligent product suites and services to output andperfect home appliance packages of Midea. Fourthly, Midea constantly promoted collaborative supplychain projects with e-commerce platforms by taking advantage of its professional abilities in the wholesupply chain from design, delivery, installation to operations and maintenance. In the meantime, theCompany can materialize rational restocking, automatic order reviewing, intelligent distribution ofinventory, quantitative and attribution analysis of profit and loss through the connection of end-to-endsystems, data-driven approaches, and intelligent tools. It continuously narrowed the gap between supplyand demand and effectively turn operations more intelligent and lean. Fifthly, in regard to the channelreform, Midea perfected the middle platform of Midea Cloud Sales, deepened unified warehousing anddistribution, and constantly optimized delivery and installation integration to achieve a shared inventorysystem, maximize inventory sharing, and improve user experience. In addition, the Company realizedintelligent decision-making regarding the optimal warehouse network, inventory strategies, dynamicreplenishment, and intelligent transfer by introducing digital decision-making models and algorithms inorder to strongly support the business reform. As for the marketing approach of live streaming, multiplemodels such as all-star recommendation, boss live streaming and top geek recommendation are adoptedto promote Midea’s e-commerce marketing. By attracting more traffic to live streaming rooms throughmore entrances, sales through the live streaming channel quickly rise as a percentage of total sales.Further, live streaming is also moving from offering preferences and benefits and introducing products tomore professional and abundant content. As external live streaming platforms can deliver “what you seeis what you get” for consumers and formulate a trading closed loop, these platforms have become newchannels contributing to growth in Midea’s sales.Being customer-oriented, and based on consumer needs and service scenes, Midea promotes digitaltransformation and reform across the service system in pursuit of direct connection with customers interms of services. Firstly, Midea’s service charges are available online and transparent. Customers canget access to all of Midea’s service charge standards. In 2020, more than 41 million customers paid theirrates in a transparent manner, and inquiry calls about service charges went down over 90%. Secondly,the Company accelerated to enable intelligent customer services and took the lead in launching functionslike intelligent voice and text robots, intelligent knowledge searching, and intelligent quality check.Meanwhile, convenient, efficient, and high-quality services were offered through the IoT-based one-key
service work order. Thirdly, the service operation system was changed. The direct-pay engineer modelwas adopted with a coverage ratio of over 85%. Direct order distribution fully went live with a coverageratio exceeding 75%. In the meantime, the service assessment system was further reconstructed tovisualize service quality. Fourthly, interaction between after-sales and pre-sales links in the value chainis further enhanced in bid to drive sales through service and increase user royalty to Midea’s productsand brands. To encourage repeat purchases, a “backpacker” model is promoted in after-sales service,which generated sales of over RMB1.3 billion. Finally, Midea continues to improve its delivery-installationintegrated service capability for all of its home appliances. By 2020, it has completed the delivery-installation integrated service network which covers over 2,700 districts and counties across the country,with more than 28,000 installation technicians, as part of its efforts to offer users one-stop after-salesservice solutions in respect of all household appliances. In 2020, Midea continued to lead the way in theindustry regarding service quality, and topped the rating charts of e-commerce platforms with respect toair conditioners, refrigerators, laundry appliances and so on.Midea strove to expand engineering sales and promote new breakthroughs, with a purpose of enhancingits ToB competitiveness. Midea recorded a year-on-year growth of over 35% in ToB sales in 2020, withan addition of more than 300 trade customers and over 500 product categories. In the industry dimension,the trade customer base in the real estate sector kept expanding from the existing top 20 in the sector,with a preliminary four-level customer receiving system and an enhanced collaboration system in place.In terms of the business with chain operators, Midea adapted itself to changes in the market environment.In addition to deepening the cooperation with top chain operators, it explored new opportunities byimplementing new business forms in respect of apartments to be fully furnished, co-marketing, etc., aswell as achieved sales in key pilot programs in the real estate sector. Also, it reshaped the business ofspecial channels and its pricing system towards professional operations, explored new business forms inrespect of shopping platforms that allow installment buying, and carried out in-depth marketingcooperation with strategic customers in the finance sector. As a result, this business saw a year-on-yeargrowth of more than three times in sales.Under the background of Midea Group promoting the T+3 business model deep reform, Annto furtherpromoted the logistics reform. Upon completing the implementation of the unified warehousing and
distribution strategy, Annto focuses on two new approaches--intercity shuttles and urban long-term-cooperation vehicles to boost delivery efficiency, thus providing a strong support for the improvement ofcirculation efficiency of the sales channels. Meanwhile, it comprehensively improves ToC logistics. Basedon user needs, Annto refines and integrates its warehouse network across the country, and strengthensthe cultivation and expansion of end outlets, which enables it to provide accurate delivery-installationintegrated service for users. In this way, products can be delivered directly to users in the offline retaillink, thus significantly improving user experience. In terms of business expansion outside Midea Group,Annto closely focused on its core business of integrated warehousing and distribution services. Anntocan distribute from one warehouse and multiple warehouses to anywhere in the country. A logisticsservice platform covering various industries, product categories and scenes has been put in place.Meanwhile, client satisfaction has been further boosted through enhancing key capabilities of less-than-truck-load transportation, urban distribution, and integrated delivery and installation services. In 2020, theurban distribution and home distribution business scale of Annto saw a steadily increasing market share.D. Promoted “Global Impact”, enhanced localized operations overseas and accelerated thecooperative integration of TLSCMidea further promoted its global business layout to solidify its global competency. It formulated a globalsupply cooperative mechanism, strengthened localized operations overseas, and promoted productglobalization and regionalization. Its overseas business spans more than 200 countries and regions inNorth America, South America, Europe, Asia, Africa and Oceania. Meanwhile, guided by the market andfocusing on users, Midea builds a global user research network with foresight. Midea Germany ResearchCenter is newly established to strengthen research on the needs of European users. And more resourceshave been provided for user research centers in the U.S., Italy, Brazil, India and Singapore. In order toimprove the operating efficiency of core overseas business, Midea exerted great efforts to build theintelligent overseas commercial system, constantly deepened its data-based business decision-makingcapability, and created an overseas digital operation platform. Three major business regions and 23overseas branches were covered. A total of 45 key indicators were included, such as sales, finance,supply chain, products, retail, and e-commerce. Furthermore, real-time online business, datatransparency and sharing, and early risk warning became available.
In 2020, Midea continued to promote breakthroughs with regard to overseas channels. Over 17,000 newretail outlets selling own-branded products were launched overseas to improve distribution channels.Meanwhile, digital tools were used to empower channels, improving efficiency and capability. Also, Mideacontinued to refine the global customer base, dig down on core customers across the globe, and capturecustomer value. Currently, it has over 60,000 active trade customers in its overseas operations, providingstrong support for continual growth. Meanwhile, Midea accelerated the development of its overseas e-commerce business and refined its global e-commerce system, which has covered core markets includingthe US, Canada, Mexico, Brazil, Italy, the UK, Germany, Saudi Arabia, India, Russia, Japan, Malaysia,Vietnam, Thailand, and Singapore. Moreover, e-commerce platform coverage has been further improvedto include major global platforms such as Amazon, Ali-express, Flipkart, Shopee, and Lazada. And Mideais also trying to get its products on regional e-commerce platforms like Otto in Germany, Submarino andShoptime in Brazil, as well as Wayfair in the US. In terms of product breakthroughs, e-commerce productsare growing more competitive. Midea’s microwave ovens have taken up a market share as high as 50%in the US. U Shape, a window air conditioner of Midea, is the first crowdfunding project with over US$1million on Indiegogo. New product development progressed steadily. And the percentage of smart homeproducts kept expanding and they were gradually introduced to mainstream e-commerce platforms. Asfor marketing breakthroughs, in response to the shutdown of physical stores during the pandemic in 2020,all overseas sales units swiftly embraced new marketing models. A series of diverse online marketingactivities were launched across the world, including online conferences of sales agents, online businesspromotion conferences, KOL live streaming, new media promotion, online theme marketing, etc., asmeans for boosting online ToB and ToC sales. And these new marketing models have become a newnormal for Midea and continue to contribute to its growth. Meanwhile, Midea has deepened its globalmanufacturing network. Based on the existing overseas manufacturing bases, it built the local capacityof manufacturing bases in Thailand, Egypt, Brazil, etc. for products like residential air conditioners,refrigerators, laundry appliances, kitchen appliances, and water heaters. Additionally, the successfuldomestic practices of lean manufacturing were applied to overseas manufacturing bases to increaseefficiency. Also, Midea promoted local manufacturing of core components in overseas plants, and furtherupgraded the overseas manufacturing bases for better product quality and faster delivery. In themeantime, it refined the “Local Supply” cycle, and improved the global manufacturing and deliverycapability so as to ensure the overseas operating capability amid the anti-globalization trend. Another
move was to improve the global logistics and service system. On one hand, the international logisticsfunctions were integrated to establish a professional global logistics platform. And strategic partnershiphas been established with world-leading logistics companies for better global logistics efficiency. On theother hand, a global service management system covering the whole service cycle has been put in placeto promote responsive and active global service. The overseas iSERVICE system and the cloud callplatform have covered close to 50 countries and regions. Additionally, regional spare parts emergencyresponse centers have been set up to further boost customer satisfaction. In regard to overseas branding,overall planning is implemented for branding expenditures. While maintaining sufficient offline exposurefor its brands, Midea also invested greatly in online branding. Meanwhile, the international presence ofits brands was enhanced by way of sponsoring global and regional football teams and sports events.In face of a heavy hit to Japan’s consumer market from the COVID-19 pandemic in 2020, TLSC madefull use of the online channel to promote its products and sales while ensuring the safety of its employees.Its ability to deal with market changes and maintain operating resilience has been proved. TLSCcontinued to deepen the reform of its organizational structure and business model, and a dedicated teamhas been set up to work on the online channel, which resulted in a year-on-year rise of 30% in onlinesales during 2020. Furthermore, the pre-sales and after-sales teams have been refined, the staffstreamlining has been furthered, and a job rotation system has been implemented to boost organizationalvitality. TLSC continued to boost synergies with the Group and the relevant divisions on branding, R&Dand innovation, supply chain integration, quality improvement, etc., so as to build a strong productportfolio for the global market together. While ensuring its supply during the pandemic, TLSC managedto launch Toshiba-branded products to more than 60 countries or regions. Also, it optimized the productstructure to increase gross profits and strictly controlled expenses and costs, which helped improveprofitability significantly. In 2020, the retail sales of home appliances in Japan were flat year-on-year,while TLSC recorded a growth of 4% against the prevailing trend, with its market share for six majorproduct categories up to over 11%, as well as a larger market share in respect of air conditioners,refrigerators, laundry appliances, microwave ovens, etc. Through a series of reform and adjustments,TLSC recorded its best earnings in the last decade or so, with a considerable improvement in both thegross profit margin and the expense ratio.
E. Stepped up the comprehensive digitalization and industrial internet programs to materializedata- and platform-based operations in the whole value chain, and thus to become morecompetitive in the digital eraFocusing on “Digitization & Intelligence Driven”, Midea achieves changes in the format of products, driveshardware sales through software sales and intensifies contents and services; and achieves changes inbusiness methodology, promotes reforms in research, production and sales, and fosters disruptivechanges in existing business models through an Internet mindset and Internet tools. The comprehensivedigitalization program has produced preliminary results. With respect to R&D, Midea focuses on “Directto Users”, as well as builds digital capabilities such as user access, mid- and long-term trend analysis,and evaluation by users, so as to build an R&D capability that is customer-oriented. Meanwhile, a globalproduct platform has been put in place, which features the shift from single product development toplatform development to support C2M customization. Midea has established its own digital platforms forR&D, including GPM, MPLM and other industrial software platforms. The development efficiency isimproved by 27%, while the test period, shortened by 32%. In addition, the Company further standardizedits parts and accessories to cut costs and raise efficiency. Materials were downsized by over 50%. Morethan RMB300 million of costs were accumulatively saved. Meanwhile, the manufacturing link saw theintroduction of smart algorithms. Procurement efficiency and the ability to respond fast were improved.Also, Midea promoted the self-developed MRP system and smart scheduling, as well as refined the multi-factory coordinative production plan and the value flow procurement plan. Additionally, digital qualitymanagement was continuously propelled to extend to the suppliers and the market end. The quality cloudallows for more standardized and transparent control of the supply chain process and of finished products.Relying on M.IoT, Midea continued to promote digitalization in respect of safety, environment and energy.It has materialized EHS visualized management and smart early warning systems in factories by suchsmart means as mobile solutions and Internet access solutions for equipment. Also through the IndustrialInternet platform, Midea assists upstream suppliers in digital transformation, promotes transparency andefficiency of data information in the value chain, and optimizes suppliers' inventory management. In themarketing link, Midea adhered to the customer-oriented principle and focused on building the MideaCloud Sales platform. Smart order execution, unified warehousing and distribution, shared inventory, one-stop delivery, integrated delivery and installation services, big data-based intelligent analysis, etc. are
now available. As such, Midea has further boosted the order execution efficiency in channels, the retailend and the supply chain, as well as improved online and digital operations in all channels. Through the“online streaming + cloud-based order placing” model of Midea Cloud Sales, distributors can learn aboutMidea’s marketing policies and the selling points of its products in an timely manner before placing anorder online. Meanwhile, the membership system jointly established with retail stores can attract moreusers, encourage retail stores to take part in member activities, improve buying experience, and boostuser royalty. In regard with after-sales services, business reform was carried out to improve serviceexperience. Close attention was paid to charge transparency, after-sales returns and exchanges, and theintegrated services of delivery and installation. As a result, the rate of unreasonable charges was cut by68%. The online payment rate reached 76%. The service processing period was shortened dramaticallyby greatly raising the service uptime. The customer satisfaction rate has been improved to over 98%. Theproportion of the integrated service of delivery and installation constantly increased and surpassed 60%,basically achieving full coverage. The direct-management and direct-payment transformation has beencarried out for more than 9,000 service centers and 13,000 engineers to strengthen the control of after-sales services and enhance the dispatching efficiency. During the operation process, in-depth explorationis made in the best digital practice of talent development, and the establishment of talent analysis models,talent label systems and the talent portrait system is accelerated to lay a solid foundation for the intelligentapplication of human resources. Besides, aimed at standardizing the management procedure andimproving operating efficiency and service quality, we have made continuous efforts to improve theemployee management system, optimize the user experience of mobile office applications, and enhanceoffice efficiency and the capability of comprehensive digitalization. With the “International 632 Project” asthe core, Midea continues with the digital transformation of its overseas business so as to boost globalcompetitiveness under the new circumstances. The global order processing mechanism was launched toconnect overseas marketing and manufacturing in an effective and automatic manner. The digitalmarketing capability of overseas e-commerce was strengthened, and the e-commerce ToC businessoperation model was fully turned online. It is expected that the efficiency will increase by over 50%.Midea accelerates in respect of 5G+Industrial Internet. Midea Microwave & Cleaning Appliance5G+Industrial Internet Application Demonstration Park has achieved full 5G coverage and built a basicinformation network integrating the traditional network + 5G to realize efficient communication between
the corporate intranet and the extranet. It has been recognized by the Department of Industry andInformation Technology of Guangdong Province as one of the first demonstration industrial parks for“5G+Industrial Internet”. It was also selected as a “Lighthouse Network” factory by the World EconomicForum, making Midea the company with the most “Lighthouse Network” factories in China. In 2020, MideaGroup launched “5G+Industrial Internet” pilot programs across 11 parks of 7 business divisions throughstrategic cooperation with the three major telecom carriers in China and such manufacturers as Huawei.Midea further promotes the business application of AI by fully covering the business scenes of intelligentR&D, intelligent manufacturing, intelligent offices, intelligent operations and PaaS capability open-upbased on AI quality testing platforms and AI open platforms. In terms of intelligent R&D, the use of AI canidentify differences between drawings and scanned copies, assist in precision comparison to reduce theworkload of manual comparison by 30%, and realize the traceability of all test contents. Scan the codeto output the comparison results. In terms of intelligent manufacturing, the application of AI is promotedin inspection of PCB, the appearance of laundry appliances, cartons, ink-jet of cartons, components, theanti-creeping system in the footing, etc., which can help improve the yield substantially. The integrationof 5G + AI can substantially increase testing efficiency.Midea fully promotes the application of cloud computing to support its strategy of comprehensivedigitalization. Positioned as a leading cloud platform in the manufacturing sector, Midea Cloud Platformis established based on the cloud native technology with independent intellectual property rights. It iseasy to extend and takes into account needs in respect of Midea Cloud Sales, Industrial Internet, the IoTecosystem, and third-party developers. So far, 21 PaaS service products and 8 SaaS products have beenlaunched. Targeting corporate customers and based on IaaS and PaaS, the SaaS platform providescomplete management of applications through their entire life cycles and full customer service. It lowersthe threshold for small- and medium-sized enterprises to gain cloud access. It also provides a one-touchfunction to active business applications. With purchasing cloud as a trial program, Midea has providedSRM cloud, sourcing cloud, risk control cloud and other SaaS services for over 3,000 corporatecustomers.F. Promoted the strategy of “Digitization & Intelligence Driven” and accelerated theimplementation of “Comprehensive Intellectualization” to “Customize a Smarter Midea Life for
You”In 2020, with the goal of “Providing the Best Overall User Experience”, M.IoT carried out a series ofchanges to user research, smart scene planning, the IoT products and technology, ecosystemcooperation, IoT operation and more, focusing on connection technology and intelligent security systemupgrades, while accelerating the launch of 5G products and platform-based IoT ecosystem scenes andservice robots. At the same time, focusing on the five themes of safety, health, food, convenience andpersonality, smart scenes and the IoT technology are fully opened to ecosystem partners. And a businessvalue chain of Midea Smart Home, which is based on the life cycle of user experience and is customer-oriented, has been put in place in this way, providing users with all-scene experience services and morequality ecosystem value-added services to create a pan MSmart Life APP ecosystem that focuses on“Customize a Smarter Midea Life for You”. Over 4,000 smart product models are connected to the MideaIoT Developers’ Platform, and the number of connected smart devices went up 103% compared to lastyear, including around 38,000,000 active devices. The MSmartLife APP has been providing services forapproximately 32,000,000 families.Products were upgraded to meet the demands of subdivided user groups. The MSmartLife APP haslaunched over 225 smart scenes so far. Amid the pandemic, the APP upgraded its smart kitchen scenesand released smart and healthy cloud recipes. Healthy recipes were carefully customized to improve theimmunity of users. Health conditions were improved through a reasonable diet. Additionally, “Children'sRecipes” were introduced to satisfy the nutrition recipe demand of children. Owing to the feature of“recording blood sugar” launched on the basis of the Low-Sugar Rice Cooker, the daily blood sugar dataof users can be managed by connecting to glucometer data and low-sugar rice cooking data. Moreover,the recommendation of sugar control recipes can help build healthy eating habits. The fully upgradedMidea Voice-Enabled Air Conditioner allows users to experience the convenience of voice-enableddomestic appliances with its new speech recognition function for mixed dialects. In the meantime, withthe five-dimensional air regulation algorithm developed by Midea, the temperature, wind, humidity,cleanness, and fresh air of air conditioners can be automatically adjusted in accordance with theenvironment where the user is and his/her air preferences. By pressing one key, the user can enjoycomfortable experience. Midea Cloud Housekeeper has been providing services for over 2,700,000 users.
With two national patent applications filed for this technology, it can analyze water use habits, identifyseasonal and temperature changes, and accurately predict water demand curves. In this way, userexperience and energy conservation are improved. Meanwhile, with the new function of home applianceturn-off reminder, intelligent detection of the status of home appliances and remote control over homeappliances are enabled to solve the pain point of forgetting to turn off home appliances when leavinghome. By doing so, it can both save energy and ensure safety.By the end of December 2020, Midea has provided users with more value-added services and cross-scene experience through ecosystem cooperation. It launched 12 HarmonyOS-based products fallinginto seven categories. Users can use a HarmonyOS-based mobile to control Midea’s home applianceswithin three seconds. Midea realized the interconnectivity of smart life scenes and offered new experienceof man-machine interaction. In November 2020, Midea participated in the Google Developer Days (GDD)China. As a key smart home partner, it launched the App Flip function in the overseas market. Users canconnect to and control Midea's smart home appliances through the Google smart speaker. All Googleusers enjoy one-key login to the MSmartLife APP. In December 2020, M.IoT and BYD DiLink joined handsto develop the “Car-Home Interconnectivity APP” which fully demonstrates a “Men-Car-LifeInterconnectivity” full-time and whole-range smart lifestyle. The cooperation aimed to provide smart lifeexperience through the seamless connection between the vehicle and the home. No matter at home orin the car, users can connect and interact with Midea’s smart home appliances. In addition, Mideaconducted strategic cooperation with China Telecom to expand its products and content serviceecosystem and with China Electric Power Research Institute, State Grid, in multiple dimensions, such asthe user-side green energy consumption ecosystem, the Energy Internet intelligent power serviceecosystem, and AI in the power sector.Safeguarding user privacy and data security is the top priority for intellectualization. M.IoT is the first toreceive the IT Product Information Security Certificate (Smart Home Products) from the ChinaCybersecurity Review Technology and Certification Center. It has additionally earned multipleinternational security and privacy certifications - including the ePrivacyApp certificate for the MSmartLifeAPP, the PCI DSS certificate at the financial level for data protection, the TRUSTe certificate for M.IoT,the ISO 27001 Information Security Management System (ISMS) certificate for information security
management, and the ISO 27701 certificate for privacy information management. In addition, Midea isalso ETSI 303645-, NIST 8259- and ioXt-certified for privacy protection associated with smart homeappliances. Therefore, Midea Smart Home has reached an internationally advanced level in user dataprotection.G. In view of consumer stratification, launched multiple brands and enhanced the promotion ofthe core values of these brands to empower retail sales and user operationSince 2018, Midea Group has launched a number of new brands, including COLMO targeting high-endconsumers, BUGU targeting online consumers, WAHIN targeting young consumers. Always upholdingthe brand philosophy of “Technology Serve the Nature of Life and Design Maximize the Value ofRationalism”, COLMO is committed to providing AI-powered home appliances with premium quality andthe self-learning capability for high-end consumers. In 2020, for the brand end, COLMO centered on “LifeEvolution”, stressed brand cultural value, and cooperated with the cultural platforms, Vistopia.com.cn andOwspace.com. Meanwhile, it probed into independent IPs, sponsored the interview program, LifeEvolution, and joined hands with Fashion Group to present the annual rational aesthetics-based lifeceremony. Furthermore, it kept expressing its opinions on rational aesthetics, deepening the spiritualresonance with global super individuals, and leading advanced life evolution. In terms of products,COLMO launched the whole new 145N Solution, which focuses on family life (four major scenes—livingroom, kitchen, bathroom, wash and care) and creates the whole scene of AI-powered high-end smart lifefor high-end consumers through intelligent integrated appliances, IoT interconnection systems and AIlearning brain. A slew of other new products were also launched, including TURING Residential CentralAir Conditioner Floor Heating Hydraulic Module, TURING Steam Oven, and products for the aforesaidfour major scenes, such as Mantle Lava 513 Refrigerator, Separate Space Capsules Washing Machine,EVO Series S67 Range Hood, V7 Active Water Purifier, etc. COLMO won a total of 12 design awards in2020, including an iF Design Award and a Red Dot Design Award for BLANC Range Hood-Stove-Dishwasher Suite, as well as an iF Design Award for TURING Small Multi-Split Residential Central AirConditioner. In respect of marketing, COLMO has provided service for over 100,000 families across theworld since the launch of its products, with certain products enjoying a prominent high-end market shareas an icon for high-end home appliances. For instance, COLMO enjoys a market share of nearly 24% in
respect of wall-mounted residential air conditioners with a unit price of over RMB7,000; and a marketshare of over 20% in respect of floor-standing residential air conditioners with a unit price of overRMB20,000. As for user experience and channels, COLMO, being customer-oriented, builds diverseterminal experience space, including Product Category Zone, AI Smart Experience Space, and AI SmartExperience Hall. So far, nearly 5,000 stores and outlets have been put in place nationwide, which willprovide more scene-based experience and smart experience.In 2020, BUGU recorded operating revenue of over RMB200 million, surging 260% year-on-year. Thisnew brand aggressively grew against the trend. For the branding end, BUGU, as a brand targeting onlineconsumers, endeavored to make breakthroughs and innovation in marketing and business models andperfected the hot-selling product marketing model featuring “Hot-selling Products and Constant Effortsfor Product Category”. In the meantime, it gave full play to the multi-category synergistic advantages andachieved steady structural growth, while meeting the personalized demands of new-generation Internetusers. For instance, the portable juicer designed for young users was ranked first among similar productsin sales in July, as more than 200,000 such juicers were sold. The small saucepan targeting students wasthe best-selling saucepans at T-mall during the Double 11 shopping festival. The countertop dishwasherwas promoted to young people in small towns and tenants through channels outside the official websitelike TikTok and ranked among top regarding sales at T-mall and JD for several consecutive months. Interms of the product end, BUGU, based on the market analysis of the Z-generation, deeply expandedadvantageous product categories, earnestly developed new categories, created a smart and interestinglife scene system, covering diversified demands of young people, such as a healthy diet, healthcare,sports, and pets. In response to the facial attractiveness economy, BUGU launched a personal careproduct line, producing electric toothbrushes, hair dryers and massage devices. Furthermore, inconsideration of the demand of young and fashionable parents who were born after the 1990s, it offeredproducts for mothers and infants covering the whole cycle. BUGU Smart Milk Modulator is the first smartconstant temperature milk modulator in the industry. Meanwhile, BUGU seized opportunities arising fromthe single economy by creating personalized products for young people who often eat alone, such aselectric lunch boxes, individualized blenders, egg boilers, and portable kettles. For the pet consumptioneconomy, it launched a smart voice feeder for pets for the first time in 2020. Besides, its products coveredall pet scenes from pet feeding, interaction, to care. On the ecosystem side, BUGU has adhered to the
concept of inclusiveness and openness and actively performed cooperation in multiple dimensions, suchas portals, platforms, channels, and scenes. It has planned, developed, and introduced five categories ofecosystem products, namely, smart home, healthcare, intelligent sports, gadgets, and consumables, bycentering on “Men-Home-Life” and observing the principle of “supplementing scenes, raising stickiness,and intelligence and high frequency”. It has cooperated with quite a few partners in varied ways, includingChina Telecom, Mendale, Orvibo, YPOO, and Ximalaya.com. So far, they have jointly developed 119products. It took the lead in creating the “ecosystem column” at Midea Shopping Mall and put ecosystemproducts on the shelves of more than 3,000 physical stores. On the user side, BUGU persists in takingthe joint creation with users as its core strategy. Through the joint creation platform—the “BUGU ResearchInstitute”, users can take part in the whole product process from conceptual design to public testing. Sofar, “BUGU Research Institute” has launched three programs and received about 1,000 pieces of advicefrom nearly 300 users. By December 2020, BUGU has attracted up to 2,600,000 fans, selling over3,100,000 units of products in the year. On the sales side, BUGU's sales over the first five months of2020 exceeded last year's total sales. Particularly, BUGU recorded a 1,750% year-on-year increase inTmall sales on the first day of the “618” shopping festival, while its online sales during the “Double 11”shopping festival exceeded RMB26 million, surging 170% compared to last year. With respect to otherchannels, in addition to strategic cooperation with China Telecom and Honor, BUGU has partnered upwith special channels including banks and air lines, for more opportunities to get access to customers.WAHIN continues to establish connections with the young circles characterized by AGC and pop culturesby offering products featuring “Trendy Designs, Practical Functions and Fun Interactions”. Based on thecharacteristics of every product category, active efforts are made to expand sales channels. As a result,WAHIN recorded operating revenue of nearly RMB2.9 billion during 2020, representing a surge of morethan 200% compared to last year. In 2020, a number of Midea's business divisions launched their productpipelines for the WAHIN brand, which carried out active marketing on the Z-generation. On the eve of the“618” Shopping Festival in 2020, WAHIN launched its first celebrity live streaming for all productcategories. The total number of viewers reached 6.1 million, while total interactions exceeded 4.6 millionUV, facilitating sales to exceed RMB15 million on that day. At the eve of the Double 11 shopping festival,all product categories of WAHIN cooperated with the 2020 Chongqing Women's Half Marathon. Throughonline and offline integration, the brand was exposed to over 26 million audiences on the Internet, which
effectively attracted customers for sales. In 2020, WAHIN continued to devote enormous resources inmainstream e-commerce platforms for its air conditioners. Its overall sales exceeded RMB1 billion, up130% year-on-year. The sales during the Double 11 shopping festival reached RMB360 million with ayear-on-year increase of over 250%. More than 190,000 WAHIN laundry appliances were sold in 2020.Clothes dryers were also included in its product categories. In addition to the launch of the trendy drinksrefrigerator series catering to young consumers, “Xiaofendan” Mini-Fridge focusing on the cosmeticsscene has emerged at just the right moment. The unit sales of this product reached 30,000 units withinthe month following its launch, and the online sales of WAHIN refrigerators approximated RMB470 millionthroughout the year. WAHIN Kitchen Appliance generated sales of more than RMB1.2 billion in 2020, a200% growth from last year, with the “618” and “Double 11” retail sales up 220% and 210% respectivelycompared to 2019. In terms of branding, WAHIN deploys a 2D virtual spokesperson - WAHIN Girl - tocarry its brand image. Through continuous cooperation with external platforms, WAHIN broadens itsboundary while persists in appealing to the young consumers.H. Seized market opportunities amid domestic and international circulations, made technologicalbreakthroughs and innovations, and kept improving the ToB business landscapeThe management model adopts the operation of product company that integrates production, researchand marketing, subdivides operating entities, delegates operating rights, and stimulates operating vitality;mature businesses actively improve operating quality and contribute operating value; new businessesmust actively seize market opportunities, expand business boundaries, and form Key technology andproduct capabilities.In 2020, the two ToB business divisions, that is, the Electromechanical Business Group and the HVAC &Building Technologies Division, were included in the five major business divisions of Midea. TheElectromechanical Business Group is engaged in the production of core components and accessoriesand precision manufacturing-related industries. And it is committed to becoming a world-leading andinnovation-driven enterprise of core components and accessories. Currently, it has established abusiness layout consisting of four major business segments, namely, home appliances, new energyvehicals, industrial control, and 3C products, and eight major product companies. Besides, it keepsexpanding its business boundaries and improving its capacities. In 2020, the Electro-Mechanical
Research Institute was established, aiming to achieve technological breakthroughs in various sectors. Inthe year, the Company entered the industrial control and new energy fields by acquiring Hiconics Eco-energy Technology Co., Ltd. (Hiconics). Meanwhile, it further scaled up its presence in industrialautomation and power and electronics software. The Foshan Xingtan Base was newly established tomake a forward-looking layout in intelligent manufacturing of mechanical and electrical products andserve as an Industry 4.0 intelligent manufacturing demonstration base in China and a world-class“Lighthouse Network” factory. Hitachi Compressor (Thailand) Ltd. (HCTL) was acquired to greatly raisethe annual capacity of refrigerator compressors and further improve the global supply of core components.With respect to market expansion, the Electromechanical Business Group made constant efforts for homeappliances. According to ChinaIoL.com, the sales of residential air conditioner compressors grew 6%year-on-year against the trend and accounted for over 40% of the global sales in 2020, thus stablymaintaining first place in the world. More than 36 million refrigerator and freezer compressors were sold,representing 17% of the global sales. Midea entered the first echelon of the industry. Over 200 millionmotors for home appliances were sold. In particular, the sales of motors for residential air conditionersand laundry appliances accounted for 37% and 18% of the global figures, respectively, and took the firstplaces in the industry. Moreover, the Electromechanical Business Group conscientiously developed chipsfor home appliances. Its products were related to MCU, power, power supply, and the IoT. In regard tonew business, resources were input in the master motor, the thermal management system, and EPSmotors of new energy vehicles (NEVs). In addition, Midea has established strategic cooperation withseveral leading enterprises. It also focused on core technologies of the industrial control field, such ashigh- and low-voltage frequency converters, servo motors, servo drives, and servo systems. Furthermore,it strengthened the connection among basic technologies in 3C products. The ElectromechanicalBusiness Group regarded the heat dissipation module as an entry point and achieved rapid and steadyprogress. In terms of technological innovation, as a leader in the manufacturing of core components forhome appliances, the Electromechanical Business Group won multiple honors in 2020. For example, itwas granted the titles “Leader Brand of 2020-2021 Air Conditioner Compressor Industry” at the China AirConditioner Industry Symposium and “Research Center of Refrigeration Compressor EngineeringTechnology in Light Industry of China”. Besides, it won the “China Cooling & Heating IntelligentManufacturing Awards—Intelligent Chip Award” for four consecutive years. What's more, breakthroughswere made in respect to multiple core technologies. In this respect, two provincial patent gold awards,
one provincial patent silver award, and three provincial patent excellence awards were granted. MideaVariable Frequency Compressor for Residential Air Conditioners under the New Energy EfficiencyStandard was granted the “Award for Core Component of 2020-2021 Air Conditioner Industry” at theChina Air Conditioner Industry Symposium. Midea won the “China Machinery Industry Science andTechnology Award (Special Prize)” for its key breakthrough technology of diffusion welding, the “ChinaNational Light Industry Council Science and Technology Award (First Prize)” for its new sliding-vane high-efficiency compressor technology, and the “Award for Core Component of 2020 Air Conditioner Industry”for its lubrication and antifriction technology for the pump body of a compressor. In addition, Servotronix'sproducts and technologies have occupied a dominant position in the domestic direct drive market. In2020, the company was recognized as a “CDDIA 2020 Influential Direct Drive Brand” by the China DirectDrive Industrial Alliance. It won the “CDDIA 2020 Innovative Direct Drive Technology Award” for itsCDHD2 drive. In August 2020, it launched the rotary servo drive, BDHDE, in China to meet the localizationdemand in the industrial automation field.The HVAC & Building Technologies Division developed a strategic cooperative partnership with WinoneElevator Co., Ltd. (Winone) in 2020. Thus, it has entered the elevator industry and upgraded to be aprovider of building equipment. It strives to become a new force in the building equipment industry andcreate intelligent and future-oriented solutions for buildings. With respect to market performance, thelargest domestic market share remained with Midea Commercial Air Conditioners in 2020 according tothe Mechanical and Electrical Information-Central Airconditioning Market magazine. Midea has constantlyfocused on projects and business patterns, and kept expanding its business to commercial real estate,rail transit, agriculture, forestry, animal husbandry, and fishery, and industrial enterprises. For instance,its super-efficient intelligent environmental control system and smart operation and maintenance cloudplatform for the Guangzhou Metro project were certified as “Internationally Advanced”. For the real estatesector, Midea has won the Golden Brick Award for China Real Estate and the titles of Preferred CentralAir Conditioner Brand for Real Estate and Best Supplier of Chinese Real Estate for several consecutiveyears. It has developed a long-term strategic partnership with over 50 top 100 real estate companies.Moreover, the Company has constantly made breakthroughs in new fields. For example, it developed aproduction environment solution for the manufacturer of Lianhua Qingwen Jiaonang (literally LotusScourge-clearing Capsules) to boost the efficient production of drugs during the outbreak. It assisted in
the construction of Tesla Giga Shanghai and offered an intelligent heating and ventilation solution. Itcustomized an exclusive solution for the integrated refrigeration station for the Pengcheng CloudBrain-2Project. In addition, Midea joined hands with China Aviation Cloud (CAC) to jointly launch the Bingqianseries array-type air conditioners for machine rooms and with Ningsuan Technology Group to jointlycreate an innovative solution of evaporative cooling with heat recovery. In regard to product innovation,Midea has applied the PCI sterilization technology to the existing product portfolio to protect the health ofusers. Based on the combination of “floor heating + commercial air conditioner”, Midea All-Season Multi-Functional Series Floor-Heating Air Conditioner adopts the all DC variable frequency air-source heatpump technology and is equipped with a unique “multi-dimensional temperature control system”. Itsprecise temperature control can help reduce temperature fluctuations and improve user experience, whilefloor heating provides the comfort of “warm feet and a cool head” and meet diversified home demands.Midea HVAC & Building Technologies Division, as a leading brand in the air source heat pump industryin China, was awarded several major honors in the industry in 2020. For example, Midea Commercial AirConditioner Sterilization Box was granted the world’s first Tick-Mark for air-conditioning sterilizationproduct, and Midea Commercial Air Conditioners was honored as the “Leading Brand in China’s HeatPump Industry” for eight consecutive years. Midea VRF LCD Segment Display Screen Wander LeadController is a winner of the iF Award. The “Enhanced Vapor Injection (EVI) Air-Conditioning System” andthe “Heat-Pump Water Heater and Its Control Methods” were granted the First and Third Prizes of the 4thEnergy Conservation and Environmental Protection Patent Award, respectively. “The Key Technology ofWide-Ambient-Temperature Energy-Efficient Air-Source Heat Pump for Heating and Its Industrialization”jointly developed by Midea and Shanghai Jiao Tong University as the applicants won the 2020 ChinaEnergy Conservation Association Sci-Tech Progress Award in Energy Conservation and EmissionReduction (First Prize). “The Key Energy-saving Technology and Industrialization of Wide-range EfficientVRF” with Midea and Shanghai Jiao Tong University as the applicants won the 2020 China Associationof Inventions Invention and Entrepreneurship Award.I. Promoted innovation in robotic product development, accelerated integration and expansion ofthe robotics business for the China marketKUKA, a subsidiary of Midea, is the first robotic manufacturer in the world to introduce sensitive
lightweight robots into the production plant, as well as the first manufacturer with a product range coveringcollaborative robots, mobile robots and industrial heavy-duty robots. In the automotive sector, KUKAcontinues to maintain its advantages and unveiled the world’s first industrial robot with digital motionmodel - the new-generation high-load versatile robot KR QUANTEC-2 in 2019. The robot can effectivelyreduce costs for customers and offers substantially enhanced performances, precision and speed. In thegeneral industrial sector, KUKA launched in 2020 the Second-Generation New KR QUANTEC CastingRobot, which is equipped with a new digital motion mode and is able to deliver excellent production qualityeven in a high-temperature environment. In the second half of the year, KUKA successively launchednew KR CYBERTECH nano and KR SCARA robots. For the load level below 6kg, the working range ofKR SCARA is 500mm or 700mm. Its cycle time is as short as only 0.36s or 0.38s. Due to its high efficiencyand low costs, it benefits automation in the cost-sensitive market. For the low load level between 6-10kg,the new KR CYBERTECH nano robot can transfer, weld, stack, and bond. It is faster and highly precise,while its investment and maintenance costs are low. Therefore, it is suitable for the production chainrequiring high economic efficiency. In the motion control sector, KUKA launched Robot Control SystemKR C5. With powerful compatible hardware, more intelligent software and better technical performance,robots equipped with this system consume less power under the same conditions. In the logistics sector,targeting the industrial status where an increasing number of orders are placed online, the new-generation robot-based order sorting solution ItemPiQ, as a perfect example of the integration of know-hows by KUKA and Swisslog, combines new robotic technology and intelligent visual system and featuresefficient sorting performances and machine-learning functions. In the electronic industry, new KR 4AGILUS released in 2020 has a load level below 4kg. Its compact design makes it perfect for robot-basedautomatic production. This robot can be installed in any location and at any angle. Its working range canbe extended to 600mm. As its working range has been expanded by nearly 40%, it is highly precise evenin the narrowest space. In view of the pandemic in 2020, KUKA continued to extend the application of itsrobots in the medical sector. Based on KUKA’s LBR Med, Life Science Robotics, a Denmark-basedcompany, developed automatic medical equipment ROBERT, which can help move a patient’s body whenhe is receiving treatment. This can reduce physical contact between the therapist and the patent and stopthe COVID-19 virus from spreading through social distancing. KUKA’s KR AGILUS Series Robot is usedby the Aalborg University Hospital in Denmark for blood testing and classification. It can process 3,000blood samples per day, which is much more efficient than the manual method. In the Bulovka Hospital in
Prague, KUKA’s LBR iiwa Robot helps medical workers carry out throat swab sampling on potentialCOVID-19 patients.Affected by the COVID-19 pandemic spreading across the globe, economies worldwide have shut downone after another, and some of KUKA's customers have also temporarily closed their factories andreduced their investment activities, resulting in a significant decline in KUKA's main business. Under theimpact of the pandemic, demand for industrial robotics is expected to decline in 2020 compared to theprior year. Fortunately, in the mid-to-long term after the pandemic, demand for industrial robotics andautomation solutions will further increase and related investment activities postponed due to thepandemic will also resume swiftly. In 2020, regarding the automotive sector, KUKA received, at thebeginning of the year, orders from a European customer for three automobile engine assembly lines worthmillions of euros per line. In April 2020, KUKA also signed a framework agreement with BMW Group toprovide about 5,000 robots for BMW’s new production lines of automobile across the world. KUKA alsowon a contract for Audi’s automatic automobile production line to provide 42 industrial robotics for seamsealing and installation. KUKA obtained an order from Mercedes-Benz at the end of 2020, involving theengineering construction, assembly, and debugging of several body-in-white production lines. Throughits technical expertise and hundreds of KUKA industrial robots, it will provide the customer with a flexibleproduction scheme. Thanks to the previous good cooperation, SEOJIN, a South Korean company, as amajor auto part supplier of automobile enterprises like Hyundai and Kia, ordered 185 robots from KUKAfor manufacturing processes like welding and processing. Most of the robots were KR QUANTEC seriesproducts. In the NEV field, the Volkswagen Zwickau-Mosel Plant was transformed to produce electricvehicles (EVs), after inputting approximately EUR1.2 billion at the end of 2020. It is estimated that it willproduce approximately 300,000 EVs in 2021. KUKA and Volkswagen will constantly deepen theircooperation at the plant to build a production line of EVs. This task involves more than 1,700 KUKA robotsfor body manufacturing and assembly, including KR QUANTEC, KR FORTEC, and LBR iiwa series.Besides, KUKA’s robots have also participated in the manufacturing of the expandable battery systemfor Volkswagen with a mileage of over 500km. KUKA, as a participant of Germany’s first battery electricvehicle (BEV) plant, will endeavor to drive the electrification and technological change of the automobileindustry. KUKA obtained, in the first half of the year, a battery assembly line contract worth as much astens of millions of euros, which would be used for producing battery systems for high-end electric vehicles.
In May 2020, KUKA provided 50 robotics to the German SAR Group for its electric vehicle automaticproduction line. In November 2020, KUKA obtained the fully electric vehicle ID of the commercial vehiclecompany of Volkswagen. For the BUZZ body-in-white production line, KUKA will handle the design,delivery, assembly, and debugging of the automatic body manufacturing system. All manufacturingprocesses like spot welding, splicing, and stud welding will be adopted for 15 modularized productionlines. In the sector of logistics automation, the European cosmeceuticals chain retailer dm-drogerie marktGmbH built an innovative logistics center costing approximately 100 million euros in Germany this July,which would be equipped with a logistics automation system provided by KUKA’s subsidiary Swisslog. Interms of education and training, KUKA provided Czech Technical University in Prague with 23 robotsworth over EUR1 million, including LBR iiwa, KMR iiwa, and ready2_educate cell. These robots will beutilized by the new international research center of the university. In the sector of 3D printing, in responseto the pandemic, the Italy-based Caracol-AM used KUKA’s robotics to help manufacture protective masksby means of 3D printing, with a daily output of over 1,000 pieces. Moi Composites, an Italian startup,cooperates with leading experts in automation and shipbuilding. They applied KUKAKR QUANTECrobots to build the first fiberglass yacht by 3D printing, thus establishing a new benchmark in theshipbuilding industry. KUKA won the “Global Medical Robotics Company of the Year Award 2020” fromFrost & Sullivan (a consultancy) and the title of “2019 Supplier of the Year” by GM for the fifth time.The integration of KUKA’s robotics business in China has been accelerated. On one hand, under KUKA’snew organizational structure, KUKA China was established in 2019, covering robotics, flexible systems,general industrial automation, intelligent logistics automation and intelligent medical automation. On theother hand, the collaborative advantages of Midea and KUKA have started to show in various aspects,including development of business opportunities, technology sharing, customer service, purchasecollaboration and management improvement, laying a foundation for the fast growth of the industrialautomation business on all fronts. In 2020, KUKA China made breakthroughs in many aspects in spite ofthe impact of the COVID-19 pandemic. In terms of product R&D, it introduced experienced professionals,smoothly furthered the cooperation program in Germany, significantly improved local R&D and testingcapabilities as well as the product matrix. 17 software products, six applications, KR 4 AGILUS, KRSCARA and KR DELTA robotics, as well as Mobile Robot KMP 600-S were launched in the year. As formarketing, a value chain-driven business model has been put in place, significantly boosting the efficiency
of sales and channel management of robot ontology, which was well-received by customers, indicatingthe gradual introduction of digital products into the market. Upon the application of KUKA Robot LBS,KMS, Martec, and WeChat 24-hour Online Customer Service further improved business operationefficiency through digital control measures in R&D, sales and post-sales. The increasing efficiency of thewhole value chain is demonstrated by shortened product delivery, a guaranteed speed of response tocustomer demand, constantly improving supply systems and testing means, and significantly bettermaterial quality. As such, the customer-oriented principle has taken shape.In the automotive sector, against the backdrop of COVID-19 and the trade war-induced economicdownturn, QUANTEC Series II was launched and found favor among automobile manufacturers in termsof product iteration. The competitive edge with respect to Sino-foreign joint ventures has been solidified.KUKA China signed a new framework agreement with SAIC Volkswagen and received orders from BMWand Mercedes-Benz factories in China. KUKA China also expanded its cooperation with Chinese automanufacturers - for example, Geely. KUKA China is now a robot supplier for Geely's ChangxingProduction Base. In the new energy vehicle industry, KUKA China obtained orders respectively amountingto tens of millions euros from Weltmeister and Human Horizons. Capitalizing on the continuous growth inthe commercial vehicle market, KUKA China also won commercial vehicle project orders from FAW FAC,FAW-GM, FAW Jiefang, Changan Kuayue, Chery Kaiyi, etc. Meanwhile, KUKA China has vigorouslydeveloped applications for the assembly shop. It launched a following tire installation project at the FAW-Volkswagen Foshan Plant. It also jointly developed an AI-based anti-collision system with Midea Cloudfor the project. KUKA China has made significant progress in the NEV electric driver test technology anddeveloped overall technical competence in hardware systems, software development, and systemintegration. It delivered the first test station to the Volvo Zhangjiakou Plant in January 2021 and theautomatic assembly and test line of NEV batteries to the FAW-Volkswagen Foshan Plant in 2020,providing effective support for the commissioning of the customers. KUKA China has been highlyrecognized for its technical competence and quick response. Additionally, it will develop business andtechnologies in lithium batteries and fuel cells. In regard to consumer products, KUKA Robotics bringabout technical superiority to food, beverage, medicine, and tobacco industries, amid the huge challengesposed by the pandemic. A higher automation rate is required in the industry due to the pandemic. KUKA'sautomation solutions can flexibly satisfy the personalized demands of customers in food, beverage,
medicine, production, distribution, and logistics industries. KUKA has continuously made breakthroughsin new fields of consumer products. The 3D vision robot gumming application technology developed forthe shoemaking industry and the food-grade Delta robot for food and pharmaceutical industries are typicalexamples. Moreover, breakthroughs have been achieved in other newly developed industries, such askey recreational projects like universal studios and the first application of KUKA robots in the tire industry.KUKA has established a partnership with relevant new customers. As for the medical logistics sector, atthe beginning of the pandemic in China, Swisslog Healthcare under KUKA joined hands with Midea Groupto donate 20 automated guided vehicles (AGVs) to makeshift hospitals in Wuhan for fighting COVID-19.The Shanghai Public Health Clinical Center, which also received and treated COVID-19 patients duringthe pandemic, was equipped with a steel pipe pneumatic logistics system from Swisslog Healthcare,greatly enhancing the efficiency of treatment. In 2020, this business showed significant year-on-yeargrowth and developed dozens of new customers nationwide. Meanwhile, it simultaneously completed itsR&D of related products in China and a strategic layout for hospitals’ overall systems. For instance,Swisslog won the bid for the West China Hospital project in Tianfu to provide the pneumatic tube system,the box transmission system, the waste blanket and gown recovery system, and the operating room-storage and supply room transmission system for the hospital. Additionally, it has developed the domesticintelligent rail trolley, and the PIVAS ivONE system is in the pipeline. In the sector of warehousing andlogistics, Swisslog successfully won orders from a famous daily necessities direct selling enterprise inNorth America to provide a complete logistics automation system for its brand-new distribution center inShanghai. The order was worth over RMB100 million. In addition, KUKA China successfully signed acontract with a world-leading semiconductor company in Shanghai to supply the AutoStore system andmake it the most robot-equipped in the Asia-Pacific region. In the second half of 2020, it took part in theShenzhen Distribution Center project of the semiconductor company, which will be equipped with theAutoStore Black Line, the first high-speed robotic trolley system in China. The aforesaid project involvesa total amount of over RMB100 million. In addition, KUKA has been playing an active part in raising MideaGroup’s intelligent manufacturing level. By the end of 2020, the robot density of Midea is close to 240units per 10,000 persons. In the near future, this number is expected to reach 360 units per 10,000persons.J. Deepened the long-term incentive and protected the interests of shareholders
In 2020, Midea continued to encourage the core management to take responsibility for the Company’slong-term development and growth by further enhancing its long-term incentive schemes. Midea haslaunched seven stock option incentive schemes, four restricted share incentive schemes, six globalpartner stock ownership schemes and three business partner stock ownership schemes, which havehelped, in a more effective manner, to align the long-term interests of senior management and corebusiness backbones with that of all shareholders.Midea Group protects its shareholders’ interests by ensuring a consistent dividend policy. It shares itsgrowth with shareholders by putting forward cash dividend plans (including that of 2020) with a totalamount of nearly RMB58 billion since Group listing in 2013. In addition to the consistent dividend payouts,the Company has carried out a string of share repurchase plans. Subsequent to a share repurchase ofRMB4 billion in 2018, to further stabilize the market capitalization and protect the shareholders’ interests,the Company has launched share repurchase plans for three consecutive years since 2019. And therepurchased shares would be used for equity incentive schemes and/or employee stock ownershipschemes. During the period from 2019 to 31 December 2020, Midea has used nearly RMB6 billion forthe share repurchases.
2. Analysis of Main Business
2.1 Overview
Same with the contents presented in “1. Overview” of this section
√Yes □No
See “1. Overview” of this section.
2.2 Revenues and Costs
2.2.1 Breakdown of operating revenue
Unit: RMB’000
2020 2019
YoY Change (%)Amount
revenue (%)
Amount
As a percentageof total operating
revenue (%)
Total284,221,249
278,216,017
2.16%
By business segmentManufacturing256,694,589
90.32%
254,286,134
91.40%
0.95%
By product categoryHVAC121,215,043
42.65%
119,607,379
42.99%
1.34%
Consumer appliances 113,890,764
40.07%
109,486,791
39.35%
4.02%
Robotics andautomation systems
21,588,782
7.60%
25,191,964
9.05%
-14.30%
By geographical segmentPRC163,139,841
57.40%
161,432,313
58.02%
-0.63%
Outside PRC 121,081,408
42.60%
116,783,704
41.98%
0.63%
Note: Consumer appliances in the table above primarily include refrigerators, laundry appliances, kitchen appliances andsmall domestic appliances.
2.2.2 Business segments, products or geographical segments contributing over 10% of the
operating revenue or profit
√Applicable □N/A
Unit: RMB’000
OperatingRevenue
Cost of sales
Gross profit
margin
YoY change of
operatingrevenue (%)
YoY change of
cost of sales
(%)
YoY change of
gross profitmargin (%)By business segmentManufacturing256,694,589
188,335,826
26.63%
0.95%
6.65%
-3.92%
By product categoryHVAC121,215,043
91,925,363
24.16%
1.34%
12.62%
-7.59%
Consumer appliances
113,890,764
79,112,626
30.54%
4.02%
5.46%
-0.95%
Robotics andautomation systems
21,588,782
17,297,837
19.88%
-14.30%
-13.31%
-0.92%
By geographical segmentPRC163,139,841
122,571,889
24.87%
1.06%
10.56%
-6.46%
Outside PRC 121,081,408
90,267,703
25.45%
3.68%
3.70%
-0.01%
Under the circumstances that the statistical standards for the Company's main business data adjusted inthe Reporting Period, the Company's main business data in the recent year is calculated based onadjusted statistical standards at the end of the Reporting Period
□Applicable √N/A
2.2.3 Whether revenue from physical sales is higher than service revenue
√Yes □No
Business segment
Item Unit 2020 2019 YoY Change (%)Home appliances
Sales
In thousandunits/sets
507,591.4
456,680.2
11.15%
Output Ditto 510,986.9
465,063.3
9.87%
Inventory Ditto 62,511.8
59,169.3
5.65%
2.2.4 Execution of significant sales contracts in the Reporting Period
□Applicable √N/A
2.2.5 Breakdown of cost of sales
By business segment
Unit: RMB’000Businesssegment
Item
2020 2019
YoY Change
(%)Amount
of total cost of
sales (%)
Amount
As a
As a percentage | percentage |
of total cost ofsales (%)Homeappliances
Raw materials144,479,295
84.47%
134,231,337
85.69%
7.63%
Labor costs 11,066,122
6.47%
9,711,741
6.20%
13.95%
Depreciation 3,009,985
1.76%
2,673,507
1.71%
12.59%
Energy 2,567,340
1.50%
2,255,630
1.44%
13.82%
2.2.6 Changes in the scope of the consolidated financial statements for the Reporting Period
√Yes □No
The detailed information of major subsidiaries included in the consolidation scope in current year is setout in Notes 5 and 6. Entities newly included in the consolidation scope in current year include MediaGroup (Shanghai) Co., Ltd., Chongqing Midea Commercial Factoring Co., Ltd., Tianjin Annto NetworkTechnology Co., Ltd., Western-style Electric Products Company, Hiconics Eco-Energy Technology Co.,Ltd. and its subsidiaries (hereinafter “Hiconics”), andWINONE Elevator Company Limited and itssubsidiaries (hereinafter “WINONE Elevator”). Please refer to Note 5(1) and Note 5(2)(a) for details. The
detailed information of subsidiaries no longer included in the consolidation scope in current year is setout in Note 5(2)(b).
2.2.7 Major changes in the business, products or services in the Reporting Period
□Applicable √N/A
2.2.8 Main customers and suppliers
Major customers of the CompanyTotal sales to top five customers (RMB'000)
Total sales to top five customers as a percentage of thetotal sales for the year (%)
13.89%
39,476,942.09 |
Total sales to related parties among top five customersas a percentage of the total sales for the year (%)
Information on top five customersNo. Customer Sales revenue (RMB'000)
As a percentage of the total sales
revenue (%)1 Customer A
23,199,371.94
8.16%
23,199,371.94 |
2 Customer B
3.13%
8,907,826.58 |
3 Customer C
0.92%
2,626,776.31 |
4 Customer D
0.91%
2,599,044.53 |
5 Customer E
0.75%
2,143,922.73 |
Total --
13.89%
39,476,942.09 |
Major suppliers of the CompanyTotal purchases from top five suppliers (RMB'000)
Total purchases from top five suppliers as a percentageof the total purchases for the year (%)
5.14%
10,191,371.51 |
Total purchases from related parties among top fivesuppliers as a percentage of the total purchases for theyear (%)
Information on top five suppliers of the Company
No. Supplier Purchase (RMB'000) As a percentage of the total purchases (%)
1 Supplier A
2,776,345.52 |
1.40%
2 Supplier B
2,035,200.92 |
1.03%
3 Supplier C
1,930,072.00 |
0.97%
4 Supplier D
0.88%
1,749,648.68 |
5 Supplier E
0.86%
1,700,104.39 |
Total --
5.14%
10,191,371.51 |
2.3 Expense
Unit: RMB'0002020 2019
Reason for any significant changeSelling anddistributionexpenses
27,522,276
YoY Change (%) | ||
34,611,231
-20.48%
General andadministrativeexpenses
9,264,148
9,531,361
-2.80%
Finance costs 2,638,032
2,231,636
18.21%
Research anddevelopmentexpenses
10,118,667
9,638,137
4.99%
2.4 R&D investment
√Applicable □N/A
The Group is focused on building a competitive, multi-layered global R&D system centering on userexperience and product functions, which represents world-class R&D input and strength. With nearlyRMB45 billion invested in R&D over the past five years (more than RMB10 billion in 2020 alone), theGroup has set up a total of 28 research centers in 11 countries to gradually build up a “2+4+N” globalR&D network and gain the advantage of scale in this respect. Domestically, Midea Global InnovationCenter in Shunde District, Foshan City and Midea Global Innovation Center in Shanghai are the cores ofMidea’s R&D arm. Overseas, with Midea America Research Center, Midea Germany Research Center,Midea Japan Research Center and Midea Milan Design Center as the cores, Midea makes use of theregional technological advantages, integrates global R&D resources, and builds these facilities intocomplementary regional R&D centers. Following the strategy of “Technology Leadership”, it attracts moreprofessional talent and builds an organic global R&D network. It has over 15,000 R&D employees andover 500 senior foreign senior experts. While establishing its own research centers around the world,Midea also works on constructing an open platform of innovative ecosystems. The Group cooperates
with domestic and foreign scientific research institutions, such as Massachusetts Institute of Technology、University of California, Berkeley、University of Illinois at Urbana-Champaign, Stanford University, PurdueUniversity, University of Maryland, The University of Sheffield, Polytechnic University of Milan, TsinghuaUniversity, Shanghai Jiao Tong University, Zhejiang University, the Chinese Academy of Sciences, HarbinInstitute of Technology, Xi’an Jiaotong University, Huazhong University of Science and Technology andSouth China University of Technology, in order to establish joint labs for deepening technologicalcooperation. The Group also carries out strategic cooperation with tech giants such as BASF andHoneywell to build a global innovation ecosystem. The Group’s long-term focus on building technology,marketing, design, product and open innovation systems, building a cutting-edge research system andbuilding reserves in technology for mid/long term, has provided a solid foundation for the Group tomaintain technical superiority across the globe.Information about R&D investment
2020 2019 YoY Change (%)Number of R&D personnel16,071
13,727
17.08%
R&D personnel as apercentage of totalemployees
10.77%
10.18%
0.59%
R&D expense (RMB’000) 10,118,667
9,638,137
4.99%
R&D investment as apercentage of operatingrevenue
3.56%
3.46%
0.10%
Note: The R&D personnel in the table above exclude those of KUKA.
2.5 Cash flow
Unit: RMB'000
Item 2020 2019 YoY Change (%)Subtotal of cash inflows fromoperating activities
252,985,046
252,123,178
0.34%
Subtotal of cash outflows due tooperating activities
223,427,929
213,532,774
4.63%
Net cash flows from operatingactivities
29,557,117
38,590,404
-23.41%
Subtotal of cash inflows from 147,012,656
89,004,610
65.17%
investing activitiesSubtotal of cash outflows due toinvesting activities
182,323,319
112,112,311
62.63%
Net cash flows from investingactivities
-35,310,663
-23,107,701
-52.81%
Subtotal of cash inflows fromfinancing activities
54,749,413
20,015,594
173.53%
Subtotal of cash outflows due tofinancing activities
55,505,708
23,289,195
138.33%
Net cash flows from financingactivities
-756,295
-3,273,601
76.90%
Net increase in cash and cashequivalents
-6,893,252
12,489,478
-155.19%
Explanation of why the data above varied significantly
√Applicable □N/A
a. Primarily driven by an increase in cash paid to acquire investments, net cash flows from investingactivities decreased 52.81% from last year.b. Primarily driven by an increase in cash received from issuance of short-term financing bonds, net cashflows from financing activities increased 76.90% from last year.c. Primarily driven by a decrease in net cash flows from investing activities, net increase in cash and cashequivalents decreased 155.19% from last year.Explanation of main reasons leading to the material difference between net cash flows from operatingactivities during the Reporting Period and net profit for the year
□ Applicable √ N/A
3. Analysis of Non-Core Business
□Applicable √N/A
4. Assets and Liabilities
4.1 Material changes of asset items
The Company first adopted the new accounting standards governing revenue in 2020 and adjusted therelevant financial statement items at the beginning of the year accordingly.
Unit: RMB'000
31 December 2020 1 January 2020
Change in
(%)
Explanation about anymaterial changeAmount
As apercentage of
total assets
(%)
Amount
As apercentage oftotal assets(%)Cash at bankand on hand
81,210,482
percentage | ||
22.53%
70,916,841
23.49%
-0.96%
Accountsreceivable
22,978,363
6.38%
18,663,819
6.18%
0.20%
Inventories 3,236,848
0.90%
4,009,176
1.33%
-0.43%
Investmentproperties
31,076,529
8.62%
28,434,223
9.42%
-0.80%
Long-termequityinvestments
405,559
0.11%
399,335
0.13%
-0.02%
Fixed assets 2,901,337
0.81%
2,790,806
0.92%
-0.11%
Construction inprogress
22,239,214
6.17%
21,664,682
7.17%
-1.00%
Short-termborrowings
1,477,302
0.41%
1,194,650
0.40%
0.01%
Long-termborrowings
9,943,929
2.76%
5,701,838
1.89%
0.87%
Contract assets
42,827,287
11.88%
41,298,377
13.68%
-1.80%
Contractliabilities
18,400,922
5.11%
18,436,559
6.11%
-1.00%
Other currentliabilities
49,803,172
13.82%
36,870,072
12.21%
1.61%
4.2 Assets and liabilities measured at fair value
√Applicable □N/A
Unit: RMB'000
Item
Openingbalance
Profit or lossfrom changein fair valueduring theperiod
Cumulative fairvalue
toequity
change charged | Amount |
provide
d forimpairm
ent in
theperiod
Purchased in |
the period
Sold in the
period
Otherchanges
Closingbalance
Financial assets
1. Financial asset held
for trading (excludingderivative financialassets)
53,394,976
1,676,000
78,798,119
102,130,917
-137,728
31,600,450
2. Derivative financial
assets
295,984
524,880
354,741
12,823
1,188,428
3. Receivables
financing
7,565,776
27,778,080
814505
828,660
35,358,011
4. Other investments in
equity instruments
55,298
-8,647
46,651
Sub-total of financialassets
61,256,736
2,200,880
354,741
106,631,497
102,945,422
695,108
68,193,540
Investment properties
Productive living assets
Others
Sub-total of the above 61,256,736
2,200,880
354,741
106,631,497
102,945,422
695,108
68,193,540
Financial liabilities 27,132
137,336
19,479
-3,211
180,736
Whether there were any material changes on the measurement attributes of major assets of the Companyduring the Reporting Period
□ Yes √ No
Explanation of reasons leading to the material changes on the measurement attributes of major assetsof the Company during the Reporting Period, as well as their effects on the operating results and financialcondition
4.3 Restricted asset rights as of the end of this Reporting Period
As of the end of this Reporting Period, there were no such circumstances where any main assets of theCompany were sealed, distrained, frozen, impawned, pledged or limited in any other way.
5. Investment made
5.1 Total investment amount
√Applicable □N/A
Total investment amount of Reporting
Period (RMB'000)
Total investment amount of last year
(RMB'000)
YoY Change (%)
182,323,319 | 112,112,311 |
62.63%
5.2 Significant equity investment made in the Reporting Period
□Applicable √N/A
5.3 Significant non-equity investments ongoing in the Reporting Period
□Applicable √N/A
5.4 Financial investments
5.4.1 Securities investments
√Applicable □N/A
Unit: RMB’000
Type
ofsecurities
Code of
securitiesAbbreviation ofsecurities
Initialinvestment cost
Measurementmethod
Code of | Opening |
carryingamount
Profit or
change
in fairvalueduring
theperiod
Cumula
loss from | tive fair |
value
toequity
Purchased in
theperiod
Sold in
theperiod
Profit orloss in
theperiod
Closingcarryingamount
Accountin
g title
Fund
ingsour
ce
Overseaslistedstock
1810
XIAOMI-
W
1,272,584
Fairvaluemethod
936,358
1,364,35
-36,933
-
-876,650
1,653,77
1,676,54
Financialassetheld fortrading
OwnfundsOverseaslistedstock
DNK Danke 172,190
Fairvaluemethod
-
-135,066
-1,998
172,19
-
-135,066
35,126
Financialassetheld fortrading
OwnfundsDomesticallylistedstock
688018
Systems
14,625
Espressif |
Fairvaluemethod
150,993
-22,334
-
-
-7,011
-15,950
128,032
Financialassetheld fortrading
OwnfundsDom688165EFORT178,534
Fair-
249,200
-
226,06-
249,200
475,260
Financial Own
esticallylistedstock
valuemethod
assetheld fortrading
funds
Total1,637,933
--
1,087,35
1,456,15
-38,931
398,25
-883,661
1,751,95
2,314,96
-
--
5.4.2 Derivatives investments
√Applicable □N/A
Unit: RMB'000
Operatingparty
Relationship
with |
theCompany
Rel
transaction
Typeofderiva
tive
ated |
Initialinvestme
ntamount
Starting
date
Ending
date
Openinginvestme
ntamount
Purchase
d inReporting Period
SoldinRepor
tingPerio
d
Amou
ntprovid
ed for |
impairment
(ifany)
Closinginvestme
ntamount
investment
amount |
as apercentage of
theCompa
ny’sclosing
netassets
Actualgain/loss
inReporting
Period
Futurescompany
No No
Futurescontracts
1,377
01/01/20
31/12/2
1,377
- - -
0.0001
%
248,83
6 |
Bank No No
FXderivatives
267,475
01/01/20
31/12/2
267,475
44,681
30,41
-
1,007,58
0.8574
%
1,869,95
Total 268,852
3 | ||
-- -- 268,852
44,681
30,41
-1,007,58
0.8574
%
2,118,78
9 |
Source of derivativesinvestment funds
All from the Company’s own fundsLitigation involved (ifapplicable)
N/ADisclosure date of theannouncement aboutthe board’s consent forthe derivativeinvestment (if any)
30/04/2020
Disclosure date of theannouncement aboutthe general meeting’sconsent for thederivative investment (ifany)
22/05/2020
Risk analysis ofpositions held inderivatives during theReporting Period andexplanation of controlmeasures
not limited to marketrisk, liquidity risk, creditrisk, operational risk,legal risk, etc.)
(Including but | For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a |
result of significant fluctuations in raw material p
rate fluctuation, realizi
ng the preservation and appreciation of forex assets, reducing forex |
liabilities, as well as achieving locked-
and control against derivatives investment and position risks, details of which are desc
ribed as |
follows:
relationship between the Company and the agencies.
Control measures: The Company has designated relevant responsible departments to enhance learning of laws and regulations and market rules, conducted strict examination and verification |
of contracts, defined responsibility and obligation well, and streng
requirements of the laws and regulations and internal management system of the Company.
2. Operational risk: Imperfect internal process, st
aff, systems and external issues may cause the Company to suffer from loss during the course of its futures business and forex funds business. Control measures: The Company has not only developed relevant management systems that clearly defined the assignment of responsibility and approval process for the futures business |
and forex funds business, but also established a comparatively well-develop
business, decision-making and trading processes.
3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange |
rat
establish and maintain hedging positions in futures operations, or the fo
rex funds required for performance in forex funds operations being unable to be credited into account could also result |
in loss and default risks.
be conducted by
adhering to prudent operation principles. For futures business, the futures transaction volume and application have been determined strictly according to the requirements |
of production & operations, and the stop-loss mechanism has been implemented. Besides
occupied, floating gains and losses, margin amount available and margin am
ount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted application for funds business |
should conduct risk analysis on the conditions and en
business on a timely basis to ensure proper funds arrangement before the expiry dates.Changes in marketprices or fair value ofderivative productsduring the ReportingPeriod, specificmethods used andrelevant assumptionand parameter settingsshall be disclosed foranalysis of fair value ofderivatives
1. Gain from futures contracts during the Reporting Period was RMB248,836,000.
2. Gain from FX derivatives during the Reporting Period was RMB1,869,953,000.
3. Public quotations in futures market or forward forex quotations ann
vironment affecting operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update operating status of the funds |
ounced by the Bank of |
China are used in the analysis of derivatives fair value.
Explanation ofsignificant changes inaccounting policies andspecific financialaccounting principles inrespect of theCompany's derivatives
as compared to theprevious ReportingPeriod
No change
Special opinionsexpressed byindependent directorsconcerning theCompany's derivativesinvestment and riskcontrol
for the Reporting Period | |
The Company's independent directors are of the view that the futures hedging business is an |
effective instrument for the Company to elimin
improved through the fore
x funds business, so as to maintain and increase the value of foreign exchange assets and the abovementioned investment in derivatives can help the Company to fully bring out its competitive advantages. Therefore, it is practicable for the Company to carry |
out derivatives investment business, and the risks are controllable.
5.5 Use of funds raised
□ Applicable √ N/A
No such cases in the Reporting Period.
6. Sale of Major Assets and Equity Interests
6.1 Sale of major assets
□Applicable √N/A
No such cases in the Reporting Period.
6.2 Sale of major equity interests
□ Applicable √ N/A
7. Analysis of Major Subsidiaries
√Applicable □N/A
Main subsidiaries and joint stock companies with an over 10% influence on the Company’s net profitCompany name
Companytype
Businessscope
Registered capital
Totalassets (inRMBmillion)
Net
RMBmillion)
Operating
RMBmillion)
revenue (in | Operating |
profit (inRMBmillion)
(in RMBmillion)Guangdong MideaKitchen AppliancesManufacturing Co.,Ltd.
Subsidiary
Manufacturingof homeappliances
USD72million
Net profit | ||
17,976.46 |
14,407.31
6,369.45 |
1,821.82
1,589.79
GD Midea Air-ConditioningEquipment Co.,Ltd.
Subsidiary
Manufacturingof airconditioners
RMB854million
37,034.15
4,350.11
46,322.47
339.80
415.92
Foshan ShundeMidea ElectricalHeating AppliancesManufacturing Co.,Ltd.
Subsidiary
Manufacturingof homeappliances
USD42million
14,931.98
7,580.76
10,698.15
1,420.91
1,241.10
Wuhu Midea Kitchen& Bath AppliancesMfg. Co., Ltd.
Subsidiary
Manufacturingof waterheaters
RMB60million
13,950.03
1,171.59
11,879.86
1,084.47
941.00
Acquisition and disposal of subsidiaries during the Reporting Period
√Applicable □N/A
The detailed information of major subsidiaries included in the consolidation scope in current year is set
out in Notes 5 and 6. Entities newly included in the consolidation scope in current year include MediaGroup (Shanghai) Co., Ltd., Chongqing Midea Commercial Factoring Co., Ltd., Tianjin Annto NetworkTechnology Co., Ltd., Western-style Electric Products Company, Hiconics, andWINONE Elevator. Please
refer to Note 5(1) and Note 5(2)(a) for details. The detailed information of subsidiaries no longer includedin the consolidation scope in current year is set out in Note 5(2)(b).
8. Structured Bodies Controlled by the Company
□Applicable √N/A
9. Outlook for the Future Development of the Company
9.1 Development strategies of the Company
With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire yourFuture” as its mission, and “Embrace What’s Next - Aspiration、Dedication、Collaboration、Innovation”as its values, Midea adheres to its new strategic focus of “Technology Leadership, Direct to Users,Digitization & Intelligence Driven, and Global Impact” and focuses on “Comprehensive Digitalization andComprehensive Intellectualization”, in pursuit of a new Midea in the new era. It integrates global resources,follows the customer-oriented principle, and builds key technology barriers by way of technologicalinnovation and quality improvement, so as to achieve global leadership with respect to principal productcategories and new business breakthroughs, as well as to maintain technology leadership. It aims toestablish direct connection with customers in terms of mindsets, products, buying, services, etc. throughdigitalization and intellectualization in its operations. Supported by data- and platform-based operationsin the whole value chain, Midea strives to boost its business competitiveness and become morecompetitive in the digital era by implementing the strategy of “Digitization & Intelligence Driven”. It willalso promote global operations and try to lay a solid foundation in this regard and enhance global impactthrough promoting its own branded products. It will promote efficiency driven growth by improvingmanagement, manufacturing and asset efficiency to create more cost efficiency. Additionally, it willstrengthen its ToB business to build new business platform and growth points. It aims to create a betterlife for over 400 million users, major customers and strategic partners in different areas worldwide everyyear with satisfying products and services.
9.2 Key operation points in 2021
In 2021, based on the core strategic focus with “Technology Leadership” as the core, Midea will promotedevelopment both in the ToB and ToC business, as well as carry out transformation in both the domesticand overseas operations. With innovation, breakthroughs and planning as the keynote, it will make clearthe five business divisions, promothe the implementation of the four strategic focus, as well as ensureenough breakthroughs regarding management systems, the organizational structure and mechanisms.Specific priority tasks are set out below:
a. Midea will firmly increase R&D investment and build up the R&D scale advantage in key technologies,cutting-edge technologies, basic technologies, digitalization and intellectualization in particular. Driven bytechnology as the fundamental approach, it will make breakthroughs and build key technology barriers inall the product categories. Also, it will see to the full implementation of the customer-oriented principlewith respect to all the products, services and business models. By way of “Comprehensive Digitalizationand Comprehensive Intellectualization”, increasing efficiency internally and developing customersexternally, as well as deepening the R&D model of “Three Generations”, Midea is implementing thestrategy of “Being the Number One or the Only One”. Meanwhile, efforts will be made in bringing in toptalent, promoting a distributed working system and talent diversity at home and abroad, strengthening theglobal R&D network, refining the global R&D system, and building up an R&D-centric and innovation-driven model, with a purpose of maintaining technology leadership in a comprehensive manner.b. Midea will keep a high-quality development direction and stick to internal, sustained and effectiveorganic growth. It will promote the T+3 business model reform and high-performance operations in thewhole value chain in every link from product planning to after-sales service, so as to increase efficiencyin the whole value chain and the data-driven efficiency. Channel reform will be firmly pushed forward forthe front-end market in pursuit of better profitability. In order to win in competition, it is important to develophigh-end products to refine the product mix. Breakthroughs must be made in a faster manner regardingsmall and major appliances, in addition to the promotion of products catering to new consumption trends.Midea will explore new models, business and product categories and make breakthroughs in these areas.It will plan for, establish and refine business middle platforms, especially data and technology middleplatforms. In the meantime, it will maintain overall consistency by sticking to “One Midea, One System,
One Standard”. It will also maintain effective investments, control non-operating expenses, increase laborproductivity, improve human resource allocation efficiency, promote lean management and provide freshimpetus for continual growth through relentless innovation.c. For the domestic market, Midea will focus on promoting “One Midea” for users, enhance the basicsystems, and set up a unified business language and rules. It will also make use of the advantages ofsynergies, reinforce the result-oriented process control and improve operating efficiency.Intellectualization and digitalization will be deepened in the exclusive shop system. Specific measuresinclude rebuilding smart experience scenes at the retail end and the whole sales service process fromthe customers’ angle, enhance customers’ smart perception, building smart service package platformsfor home decoration customers and companies and communities, as well as constructing Midea’sintelligent terminal network. With specific objectives, Midea will continue to deepen platform reform andincrease efficiency, look for incremental systems, expand sources of sales, and improve efficiency at thefront and back end through the data middle platform. In terms of the ToB business, Midea will implementsales incremental approaches, make breakthroughs for new business, build the middle platform capabilityfor the engineering business, and expand its presence in the real estate industry by covering all keycustomers, making breakthroughs in the cooperation with regional strategic target customers, andincreasing sales to key target customers. In addition, operational professionalism is further enhancedwith regard to the chain operator business, the special channel business, etc., generating breakthroughsand growth in sales. Midea will deepen the reform of the service engineer model, rebuild the whole serviceprocess from the customers’ angle, and solve their pain points. The “get a new one instead of repairs”service is implemented for all the small domestic appliances, with super-fast identification and get-a-new-one services. And an industry-leading smart home service platform is being built. Meanwhile, it willcontinue to increase the efficiency of the supply chain system, enhance the advantage of Midea’s all-channels coverage, rebuild business processes and push forward the construction of a shared inventorysystem.d. For the overseas market, Midea will firmly carry forward the strategy of “Global Impact”, and adhere tothe strategies of being customer-oriented and leading products. Leveraging its advantageous global R&Dand user research networks, as well as benchmarking to other top brands across the globe, Midea will
continue to launch differentiated and innovative products to solve users’ pain points, enlarge themainstream market share and give play to its advantage of various product categories. It will continue toimprove the ability to operate multiple brands in the overseas market, refine the differentiated productportfolios of the brands, and carry out global and regional branding activities through digital marketing toboost the brands’ presence and reputation. Meanwhile, cross-border e-commerce will be promoted. Thefocus has shifted from product marketing to brand marketing. Midea will embrace digital and contentmarketing, work on new media and social media operation, and establish customer- and brand-orientedbusiness models. It will quickly upgrade its organizing capability to fully promote the development of theoverseas e-commerce business. Meanwhile, Midea will break through strategic markets, stick to a long-termist approach, implement business models with direct connection with customers and build upcapabilities by way of continuous product innovation. In addition to building the brand image of MSmartin a comprehensive manner in key strategic markets, Midea will enhance local capabilities in relation tocustomer insights, R&D and manufacturing. In terms of overseas channels, Midea will focus itsadvantageous resources on breaking through substantial channels. It plans to set up over 20,000 self-branded sales units in 2021 to boost channel vitality and enlarge the channel percentage. Digital toolsare used to empower and increase the efficiency of the value chain of all the channels. And the D2Cchannel will be the focus to get closer to consumers and achieve direct connection with them. Meanwhile,channel reform and empowerment will be deepened. Midea will continue to boost channel vitality andincrease channel efficiency. It will further its channel reform centering on empowering channel customersand increasing channel efficiency. A coordination platform will be put in place for key overseas channels.And one-stop services will be provided for customers at different levels, including product customization,order placing, automatic settlement, policy delivery, live-streaming training, etc. Also, digitalization will bepromoted for the overseas commercial operations. Midea will continue to strengthen data analysis for theoverseas business, particularly the e-commerce data analysis platform, the retail store shopping guidemonitoring system, the automatic data and product analysis system, and the smart warning module. Itwill effectively deepen the transformation towards digitalization in international operations for datatransparency and sharing, as well as for higher coordination efficiency. In addition, the global logisticsand service capability will be improved. Midea will improve the one-stop services of distribution,installation and repair for strategic markets, set up regional pre-warehouses, and substantially accelerateorder execution and boost customer satisfaction using the intelligent supply chain replenishing algorithm.
TLSC will enhance the in-depth cooperation with key customers and all the business divisions of theGroup, take proactive actions to deal with risks, firmly promote business reform, and focus on the Japanmarket. Firstly, in terms of products, it will focus on the real needs of customers, strengthen manufacturingcoordination with the Group’s business divisions, continue to improve the product quality and productportfolio, and ensure the timely supply of products and service spare parts. Secondly, it will promote alean and transparent sales system, accelerate reforms in relation to single-store and per-capita efficiency,further refine the e-commerce organizational system, and expand online sales as a percentage of thetotal revenue. Finally, the 632 program and the related system development will be furthered to improvethe capability of digitalized management.e. In light of different needs from different consumer groups, Midea will carry out long-term planning,improve its multi-brand matrix, and refine its high-end brand portfolio. COLMO, the brand targeting high-end consumers, will launch whole new product suites for all scenes, expand its channel network, andupgrade the scene-based and smart experience at the retail end. BUGU, the brand targeting onlineconsumers, will integrate internal and external resources to provide individualized experience for users,and establish all-scene ecosystem cooperation with external manufacturers to create innovativemarketing and business models. Meanwhile, consistency towards customers will be promoted. Beingcustomer-oriented, Midea will give play to its multi-category synergistic advantages, provide productsuites for customers based on scenes, and provide customized and integrated home solutions with fullcategories of the household appliances.f. Midea will boost its competitiveness in the digital era by implementing the strategy of “Digitization &Intelligence Driven”. It will strengthen the building of Midea as a digitalized enterprise, improve the digitaloperational methods and systems, support the integration of every link of Midea’s value chain by digitalmeans, and optimize efficiency, value creation and the fulfillment of operating objectives throughdigitalization. Effort will also be made to refine the Midea Cloud Sales platform, promote digital reform inmarketing, as well as further build and optimize digitalized Industrial Internet factories. And it willstrengthen digital support for the “Global Impact” strategy. Measures to be taken include enhancing thedata platform and data governance to promote data-driven improvement in operations. Meanwhile, Mideawill continue to increase its investment in the R&D of IoT basic technology. Upholding the customer-
oriented principle, it is dedicated to building an industry-leading open IoT platform featuring multiplescenes, entries and applications. Focusing on user research, smart scene experience, solution packages,smart marketing upgrading and one-stop delivery, among others, Midea will provide more families withsmart life services which are convenient, safe and reliable.g. Midea will beef up KUKA’s localized operations in China, increase investment in the development andapplication of robotics, as well as foster R&D innovation of core components and software systems. Interms of marketing, Midea will maintain leadership in the auto sector and take active steps to explore newareas including general industrial manufacturing, electronics, medical care and logistics, services, etc.Concerning operation, it will concentrate on R&D, supply chain management, high-performanceoperations and digitalization, among others, so as to build the core competitiveness of the robotics andindustrial automation business in a faster manner.
9.3 Key capital expenditure plan in future
To adapt to changes in the industry environment, the Company will focus its 2021 investments ontechnological innovation, product quality improvement, robotics and industrial automation systems,digitalization, e-commerce channel expansion and new retail channels construction, new brand marketing,global operations capability improvement and the smart home strategy. Meanwhile, the Company willstrictly control investment in infrastructure and capacity expansion, as well as non-operating expenditures.The capital expenditures will primarily come from the Company’s own funds.
9.4 Main risks in future development
a. Risk associated with the COVID-19 outbreakThe fluctuations and repeated outbreaks of the COVID-19 pandemic may impact the demand, productionand sales of the Company’s products and services. Pandemic control measures, such as lockdown, socialdistancing, and travel restrictions, reduce customer mobility. Other consequences include limitedproduction and operations in some regions, the shutdown of retail outlets, suspended customeroperations, and increased logistics costs. All these factors bring about uncertainties and challenges tothe normal functioning of the Company and the market environment.
b. Risk of macro economy fluctuationThe market demand for the Company’s consumer appliances, HVAC equipment, industrial robotics,among other products, can be easily affected by the economic situation and macro control. If the globaleconomy encounters a heavy hit and consumer demand slows down in growth, the growth of theindustries in which the Company operates, may slow down accordingly, and as a result, this may affectthe product sales of Midea Group.c. Risks in the fluctuation of production factorsThe raw materials required by Midea Group to manufacture its consumer appliances and corecomponents primarily include different grades of copper, steel, aluminum, and plastics. At present, thehousehold appliance manufacturing sector belongs to a labor intensive industry. If the price of rawmaterials fluctuate largely, or there is a large fluctuation in the cost of production factors (labor, water,electricity, and land) caused by a change to the macroeconomic environment and policy change, or thecost reduction resulted from lean production and improved efficiency, as well as the sale prices of endproducts cannot offset the total effects of cost fluctuations, the Company’s business will be influenced tosome degree.d. Risk in global asset allocation and overseas market expansionInternationalization and global operations is a long-term strategic goal of the Company. The Companyhas built joint-venture manufacturing bases in many countries around the world. Progress has been madeday by day regarding the Company’s overseas operations and new business expansion. However, itsefforts in global resource integration may not be able to produce expected synergies; and in overseasmarket expansion, there are still unpredictable risks such as local political and economic situations,significant changes in law and regulation systems, and sharp increases in production costs.e. Risk in foreign exchange losses caused by exchange rate fluctuationAs Midea carries on with its overseas expansion plan, its overseas sales have accounted for more than40% of the total revenues. Any sharp exchange rate fluctuation might not only bring negative effects on
the overseas operations of the Company, but could also lead to exchange losses and increase its financecosts.f. Market risks brought by trade frictions and tariff barriersDue to the rise of anti-globalization and trade protectionism, China will see more uncertainties in exportin 2021. The trade barriers and frictions of some major markets will affect the export business in the shortrun, as well as marketing planning and investment in the medium and long run. Political and compliancerisks are rising in international trade. These can mainly be seen on compulsory safety certificates,international standards and requirements, and product quality and management systems certification,energy-saving requirements, the call for increasingly strict environmental protection requirements, as wellas with rigorous requirements for recycling household appliances waste. Trade frictions caused by anti-dumping measures implemented by some countries and regions aggravate the burden in costs andexpenses for household appliance enterprises, and have brought about new challenges to marketplanning and business expansion for enterprises.In face of the complicated and changeable environment and risks at home and abroad, Midea will strictlyfollow the Company Law, the Securities Law, the CSRC regulations and other applicable rules, keepimproving its governance structure for better compliance, and reinforce its internal control system so asto effectively prevent and control various risks and ensure its sustained, steady and healthy development.
10. Visits Paid to the Company for Purposes of Research, Communication, Interview,
etc.
10.1 In the Reporting Period
√Applicable □N/A
Date PlaceWay of visit
Type of
visitor
Visitor Discussions
Index to maininquiry information
January
2020
S
hanghai |
One-on-
onemeeting
AberdeenStandardInvestments,Boyu Capital,
Institution | Janus Henderson |
Investors, MFSInternational,
channel reform
? 3. Please |
summarize
integration and expansion of Midea
. 4. How does Midea improve user |
Log Sheet ofInvestor RelationsActivities for 14January 2020disclosed on
Moore CapitalManagement
service quality?
14 March2020
MideaGroupHQ
By phone
, etc. | ||
I
FountainCapResearch &Investment (HK)Co Ltd, HarvestGlobalInvestment, GICPrivate Limited,GuocoManagement Co.Limited, etc.
nstitution | 1. Please describe Midea's changes |
in the retail network given
is Midea's in
tegration with KUKA? 3. |
Please briefly explain Midea’s
Midea’s
corporate governance |
mechanism.
Log Sheet ofInvestor RelationsActivities for 14March 2020disclosed on
15 May
2020
MideaGroup
HQ
By phone
www.cninfo.com.cn | ||
I
Investors
1. Midea ranks No. 36 on the 2019
nstitution |
Fortune China 500 list, the highest-ranking among the home appliance
industry in the country for five
consecutive years
player in the home
appliance |
industry, what's Midea’s
strategy of Midea? 2. How
does |
Midea adjust channels, given
franchised stores of home
appliances in villages and towns) |
like third-
view e-
commerce platforms and |
channels like Pinduoduo? 4. What
Midea’s
future strategic plan for |
home appliances? What does Midea
think of t
he future development of |
the small
progress of Midea’s
channel reform |
strategy. 6. How is the air-
Log Sheet ofInvestor RelationsActivities for 15May 2020disclosed on
conditioner pricing this year? How to | www.cninfo.com.cn |
expansion? 7. Midea
established a |
new IoT D
company, in April this y
ear. What's |
the strategic objective
division? Does Midea
have any |
plans fo
objective? How will the IoT D
ivision |
implement the strategic plans?
27 May2020
MideaGroup
HQ
By phone
I
nstitution |
Broad PeakMaster Fund IILtd, FILInvestmentManagement Ltd,
Limited, Point 72AssetManagement,Principal AssetManagement
, etc. | 1. Please briefly introduce the |
integration of TLSC
progress has Midea made in
the technological innovation of smart home? 3. Please briefly talk about the development of WAHIN in 2019. |
4. Midea
D
ivision, based on the IoT company, |
t
objective of this division?
Log Sheet ofInvestor RelationsActivities for 27May 2020disclosed on
his year. What's the strategic | www.cninfo.com.cn |
23 June
2020
MideaGroupHQ
By phone
I
nstitution |
Invesco GreatWall Fund
Ltd. (IGW), PHCapital, SoochowAsset
Management Co., |
Ltd., MaxwealthFund, GreenCourt CapitalManagementLimited, HarvestFund, Bank ofCommunicationsSchroder Fund
Ltd (BOCOMSchroders),Minsheng RoyalFund
Management Co., |
Ltd., Cathay LifeInsurance, New
App as an entry
to provide complete |
solutions
2019? 3. Please br
iefly explain the |
profit of the overseas operations
Please summarize the mid-to-
long |
term strategic planning
directions in the next five years.
Log Sheet ofInvestor RelationsActivities for 23June 2020disclosed on
and major | www.cninfo.com.cn |
China Fund,Foresea LifeInsurance, BOSCAsset, Zhong OuAMC, etc.
9 July2020
MideaGroupHQ
By phone
I
nstitution |
GW&KInvestmentManagementLLC, Teng YuePartners LP,MatthewsInternationalCapital, IvyInvestmentManagementCompany, WellsCapitalManagement
1. Please briefly describe the mid-to-
, etc. | long term planning and profitability |
of the KUKA business
how to effectively manag
e the |
overseas operations and apply
efficient systems of Midea
to those |
operations for better outcomes
incentive mechanisms.
Log Sheet ofInvestor RelationsActivities for 9 July2020 disclosed on
? 3. Please briefly talk about the development of Annto. 4. Please summarize the governance and | www.cninfo.com.cn |
30 July
2020
MideaGroup
HQ
By phone
I
nstitution |
Oriental AlphaFund, Ping AnFund, YinhuaFund, Bank ofChina InvestmentManagement,SinolinkSecurities,BOCOMSchroders,Morgan StanleyChina, Nan ShanLife Insurance,Harvest Fund,China Asset
1. Midea
Management, etc. | established a new IoT |
Division, b
t
his year. What's the strategic |
objective
Industrial Internet? What new
development directions will Midea
have? 3. Please briefly describe th
e development of channels. 4. Please |
summarize innovations
commercial air conditioners.
Log Sheet ofInvestor RelationsActivities for 30July 2020disclosed on
in relation to | www.cninfo.com.cn |
2020
MideaGroup
HQ
By phone
September |
I
APS AssetManagement,CalamosAdvisors, DymonAsia Capital,FidelityManagement &Research,Hardman
1. Please talk about the e-
nstitution | commerce business in the first half of the year. 2. Please briefly talk about the latest |
development of BUGU. 3. How is the
patented technologies?
Log Sheet ofInvestor RelationsActivities for 16September 2020disclosed on
IoT development? 4. What innovation has Midea achieved in | www.cninfo.com.cn |
Johnston GlblAdv Llc, etc.
2020
MideaGroup
HQ
By phone
November |
I
Tiger Pacific,BotongInvestment,China Fund, FirstState Cinda Fund
nstitution | Management Co., |
Ltd., EverbrightTrust, TruValueAssetManagement, etc.
1. Midea's R&D investment
and |
layout. 2. What's Midea's next move
regarding
the strategy of |
“Technology Leadership”?
Log Sheet ofInvestor RelationsActivities for 27November 2020disclosed on
Times of visit 243Number of visiting institutions 2,545Number of visiting individuals 125Number of other visitors 0
www.cninfo.com.cnSignificant undisclosed information disclosed,
revealed or leaked
No
Section V Significant Events
1. Profit Distribution and Converting Capital Surplus into Share Capital for Common
Shareholders
Formulation, execution or adjustments of profit distribution policy, especially cash dividend policy, forcommon shareholders in the Reporting Period
□Applicable √N/A
Cash dividend to common shareholders in the past three years (including the Reporting Period)
Unit: RMB
Year
Cash dividends
(tax included)
Net profitattributable to
commonshareholders ofthe Company in
year
Ratio of
cashdividends
the consolidated statement in the | to net profit attributable |
to comm
shareholders in theconsolidate
dstatementin the year
Cashdividends inother forms
(such as
sharerepurchase)
on | Ratio of cash |
dividends inother formsto net profitattributableto common
in the
consolidated |
statement in
the year
Total cashdividends(inclusive ofthose in other
forms)
cashdividends(inclusive of
those in
other forms) |
to net profitattributableto commonshareholder
s in the
the year2020
11,066,392,174.
consolidated statement in | |||
27,222,969,000 |
40.65%
2,700,000,00
9.92%
13,766,392,174.
40 |
50.57%
2019
11,131,489,692.
24,211,222,000
45.98%
3,200,000,00
13.22%
14,331,489,692.
59.19%
2018
8,561,589,853.7
20,230,779,000
42.32%
4,000,000,00
19.77%
12,561,589,853.
62.09%
The Company made a profit in the Reporting Period and the profit distributable to common shareholdersof the Company (without subsidiaries) was positive, but it did not put forward a preliminary plan for cashdividend distribution to its common shareholders
□Applicable √N/A
2. Preliminary Plan for Profit Distribution and Converting Capital Surplus into Share
Capital for the Reporting Period
√ Applicable □ N/A
Bonus shares for every 10 shares (share)
Dividend for every 10 shares (RMB) (taxincluded)
Additional shares converted from capitalsurplus for every 10 shares (share)
Total shares as the basis for the preliminaryplan for profit distribution (share)
6,916,495,109
Cash dividends (RMB) (tax inclusive) 11,066,392,174.40
Cash dividends in other forms (such as sharerepurchase) (RMB)
2,700,000,000
Total cash dividends (inclusive of those inother forms) (RMB) (tax inclusive)
Distributable profits (RMB) 25,795,300,000
13,766,392,174.4 |
Percentage of total cash dividends (inclusiveof those in other forms) in the total distributedprofit (%)
100%
Cash dividend policy adoptedW
here the Company is at a mature stage of development and has significant expenditure arrangements, cash dividends
shall account for at least 40% of the total distributed profit when carrying out profit distribution.
Details about the preliminary plan for profit distribution and converting capital surplus into share capitalAccording to the Auditor’s Report PwC ZT Shen Zi (2021) No. 10017 issued by PricewaterhouseCoopers
here the Company is at a mature stage of development and has significant expenditure arrangements, cash dividends
Zhong Tian
LLP, the parent company realized a net profit of RMB15,187,038,000 for 2020
. Pursuant to the relevant provisions under |
the Articles of Association, it provided 10% as statutory surplus reserve, namely RMB1,518,704,000
profits at the beginning of the year of RMB23,249,372,000
and minus the profit distributed in the year of |
RMB11,122,406,000, the actual distributable profit would be RMB25,795,300,000.
3. Performance of Undertakings
3.1 Undertakings of the Company’s actual controller, shareholders, related parties and acquirer, as well as the Company and other
commitment makers fulfilled in the Reporting Period or ongoing at the period-end
√ Applicable □ N/A
Undertaking
Undertakinggiver
Type ofundertaki
ng
Details of undertaking
Undertaking date
Term Particulars on the performance
Undertaking made
documents orshareholdingalternationdocuments
Controllingshareho
in offering | lder and |
actualcontroller
Maintenance ofindependence
rele
vant laws and regulations and regulatory documents. They will faithfully fulfill the above undertaking, and assume the corresponding legal liability. If they fail to fulfill their obligations |
and responsibilities conferred by the undertaking, they will bea
rules, regulations and regulatory documents.
28/03/2013
r the corresponding legal liabilities according to relevant laws, |
Long-standing
1. There has been no violation of this
undertaking.
Controllingshareho
actualcontroller
Avoidingcompetition withintheindustry
lder and | 2. In order to avoid possible competition within the industry between Midea Group and Midea Holding and its controlled enterprises as well as He Xiangjian, his immediate family and |
his controlled companies, Midea Holding and
undertaken as follows:
(1) None of the entities or individuals mentioned above is or will be engaged in the same or similar business as the existing main business of Midea Group and its controlled companies. They are | 28/03/2013 |
Long-standing
2. There has been no violation of this
undertaking.
institutions or economic organizations;
(2) If Midea Group and
its controlled companies expand their business on the basis of the existing ones to those where the above mentioned related entities or individuals are already performing such production and operations, as long as He |
Xiangjian is still the actual controll
within a reasonable period;
(3) If Midea Group and its controlled companies expand their |
business
shareholder, t
hey would undertake as not to engage in competitive business to the new ones of Midea Group and its |
controlled companies;
Midea Hold
ing is identified as the controlling shareholder of Midea Group, and He Xiangjian the actual controller, they will |
not change or terminate this undertaking.
above undertaking, and assume the
corresponding legal responsibilities. If they fail to fulfill their obligations and |
laws, rules, regulations and regulatory documents.
Controllingshareho
responsibilities conferred by the undertaking, they would bear the corresponding legal responsibilities according to relevant | ||
lder and |
actualcontroller
Regulation ofrelatedtransactions
Xiangjian have undertaken as follows:
(1) They will regulate any related transactions with Midea Group and its controlled companies using their utmost efforts to reduce them. For unavoidable related transactions with Midea Group |
and its controlled companies, inc
laws, regulations, rules, other regulatory
documents, and relevant provisions of the Articles of Association of Midea Group. They guarantee to offer fair prices for related transactions, and fulfill the information disclosure obligations in respect of the |
related transactions according to related l
damage the interests of its shareholders at
their advantages |
during the related transactions.
general meeting of Midea Group;
28/03/2013
(2) They shall fulfill the obligation of withdrawing from voting that involves the above mentioned related transactions at the |
Long-standing
3. There has been no violation of this
undertaking.
(3) The related subject mentioned above shall
independent third party in any fair market transactions.
(4) In accordance with effective laws, regulations or other |
regulatory documents of People's Republic of China, as long a
not change or terminate this undertaking.
(5) Midea Holding and He Xiangjian will faithfully fulfill the above |
undertaking and
regulatory documents.
Controllingshareho
assume the corresponding legal liabilities. If they fail to fulfill their obligations and responsibilities conferred by the undertaking, they will bear the corresponding legal responsibilities according to relevant laws, rules, regulations and | ||
lder and |
actualcontroller
TradeUnionCommitteetransferring itslimitedequity ofMideaGroup
4. On 4 January 2001, the Midea Trade
On Midea | Union Committee signed the "Equity Transfer Contract" with five people, namely He Xiangjian, Chen Dajiang, Feng Jingmei, Chen Kangning and Liang Jieyin, where it transferred all its limited equity of Midea |
Group (22. 85%) respectively to those five people.
opinions, therefore there was no dispute or potential dispute.
On 28 June 2013, Foshan Shunde Beijiao General Union, superior department of Midea Trade Union Committee, issued a confirmation letter to the fact that the Midea Trade Union Committee funded the establishment of Midea Group Co., Ltd. |
In addition the letter
28/03/2013
also confirmed that the council of Midea |
Long-standing
4. So far, this shareholding transfer has not
brought about any loss caused by any disputeor potential disputes. There has been noviolation of this undertaking.
agreement from all staff committee members.Midea Holding and He Xiangjian, respectively the
controlling shareholder and actual controller of Midea Group Co., Ltd. have undertaken as follows: For any loss to Midea Group caused by any dispute or potential dispute arising from the matters of equity |
transfer mentioned above, they are willing to assum
for such loss.
Controllingshareho
e full liability | ||
lder and |
actualcontroller
IssuesaboutPaymentof theStaffSocial
and theHousing
Provident |
Fundinvolvedin MideaGroup'sOverallListing
for (1) paying such expenses and related expenses o
n time based on the requirements of relevant state departments if Midea Group is required to be liable for the payment of staff social insurance, housing provident fund and the payment required by relevant state authorities prior to this merger, (2) |
paying
and its subsidiaries are required to pay them in advance.
28/03/2013
corresponding compensation for all direct and indirect losses incurred by Midea Group and its subsidiaries due to this merger, (3) indemnifying and holding harmless Midea Group and its subsidiaries in time from such expenses when Midea Group |
Long-standing
5. So far, the payment of the staff social
insurance and the housing provident fund hasnot brought about any controversy or potentialdisputes. There has been no violation of thisundertaking.
Controllingshareho
Issuesaboutasset
lder and | alteration, | 6. Undertakings on issues about asset alteration, asset flaw and |
house leasing of Midea Group and its subsidiaries
Long-standing
6. So far, the issues about asset alteration,
asset flaw and house leasing of Midea Groupand its subsidiaries have not brought aboutany controversy or potential disputes. There
actualcontroller
assetflaw andhouse
MideaGroupand itssubsidiaries
Midea Holding and He Xiangjian have undertaken as follows:
leasing of | (1) Midea Holding will do its utmost to assist and urge Midea |
Group (including i
of losses caused by issues abo
ut renaming procedures of |
related assets mentioned above to Midea Group.
land and housing or property declared in related files
of this |
merger.
subsidiaries) to re-
apply for corresponding construction procedures and apply for their ownership certificates for houses |
without complete procedures, as happened in the past, to ap
the re-
application for real estate registration procedures, Midea |
Holding shall do its utmost to provide assistance and be liabl
Midea Group (including its subsidiaries).
(4) Under any circumstances that Midea Group suffers from losses incurred from no longer using these properties or |
presently using the land or house
has been no violation of this undertaking. AndMidea Holding shall honor this undertakingbefore its expiration.
in full. Midea Holding shall compensat
claims from any other third party.
(5) Based on issues of defective house leasing declared in |
related files of thi
rights claims from a
third party or by means of an administrative authority exercising a right and therefore results in any economic losses due to eviction from rental houses, or any penalties subjected to by competent government departments or any |
recourse from related parties.
(includ
ing its subsidiaries) or through any penalties administered by competent government departments. Likewise if the lessor cannot compensate for losses caused by such defective leasing, Midea Holding shall compensate Midea Group for losses caused |
by such defective land leasing.
reality and Midea Group has suffered any loss ther
efrom, Midea |
Holding shall compensate in cash or make up for Midea Group’
loss upon Midea Group’
s notice in writing within 30 days when |
the loss occurs and the loss amount is definite.Whethertheundertaking isfulfilledon time
Yes
Specificreasonsfor failingto fulfillanyundertaking andplan forthe nextstep
N/A
3.2 Where any earnings forecast was made for any of the Company’s assets or projects and the
Reporting Period is still within the forecast period, the Company shall explain whether theperformance of the asset or project reaches the earnings forecast and why
□Applicable √N/A
4. Occupation of the Company’s Capital by the Controlling Shareholder or Its Related
Parties for Non-Operating Purposes
□Applicable √N/A
No such cases in the Reporting Period.
5. Explanation of the Board of Directors, the Supervisory Committee and Independent
Directors (If Any) Regarding the "Non-standard Audit Opinion" for the ReportingPeriod
□Applicable √N/A
6. Reason for Changes in Accounting Policies, Accounting Estimates and Accounting
Methods as Compared to the Financial Report for the Prior Year
√ Applicable □ N/A
7. Reason for Retrospective Restatement of Major Accounting Errors during the
Reporting Period
□Applicable √N/A
8. Reason for Changes in Scope of the Consolidated Financial Statements as
Compared to the Financial Report for the Prior Year
√ Applicable □ N/A
The detailed information of major subsidiaries included in the consolidation scope in current year is setout in Notes 5 and 6. Entities newly included in the consolidation scope in current year include MediaGroup (Shanghai) Co., Ltd., Chongqing Midea Commercial Factoring Co., Ltd., Tianjin Annto NetworkTechnology Co., Ltd., Western-style Electric Products Company, Hiconics Eco-Energy Technology Co.,Ltd. and its subsidiaries (hereinafter “Hiconics”), andWINONE Elevator Company Limited and its
subsidiaries (hereinafter “WINONE Elevator”). Please refer to Note 5(1) and Note 5(2)(a) for details. The
detailed information of subsidiaries no longer included in the consolidation scope in current year is setout in Note 5(2)(b).
9. Engagement and Disengagement of CPA Firm
CPA firm at presentName of the domestic CPA firm PricewaterhouseCoopers Zhong Tian LLPThe Company’s payment to the domestic CPA firm RMB8.953 millionConsecutive years of the audit service provided by thedomestic CPA firm
Six yearsNames of the certified public accountants from thedomestic CPA firm
Yao Wenping and Qiu XiaoyingConsecutive years of the audit service provided by thecertified public accountants from the domestic CPA firm
One year and four years respectivelyWhether the CPAs firm was changed in the current period
□Yes √No
Engagement of any CPAs firm for internal control audit, financial advisor or sponsor
√ Applicable □ N/A
The Company appointed PricewaterhouseCoopers Zhong Tian LLP as the internal control auditor for thecurrent year. The total amount paid by the Company to PricewaterhouseCoopers Zhong Tian LLP for itsfinancial statement and internal control audit services for 2020 was RMB8.953 million.
10. Possibility of Delisting after Disclosure of this Report
□Applicable √N/A
11. Bankruptcy and Reorganization
□Applicable √N/A
No such cases in the Reporting Period.
12. Material Litigation and Arbitration
□Applicable √N/A
No such cases in the Reporting Period.
13. Punishments and Rectifications
□Applicable √N/A
No such cases in the Reporting Period.
14. Credit Conditions of the Company as well as Its Controlling Shareholder and
Actual Controller
□Applicable √N/A
15. Implementation of any Equity Incentive Scheme, Employee Stock Ownership
Scheme or Other Incentive Measures for Employees
√Applicable □N/A
A. Overview of the Second Stock Option Incentive Schemea. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Retirement of Unexercised Stock Options under the Second Stock Option IncentiveScheme upon Expiry was reviewed and approved. As the Second Stock Option Incentive Scheme expiredon 26 May 2020, the Company agreed to retire the 22,000, 34,000, 37,000 and 47,900 stock options thathad been previously granted to Xia Manya, Yu Xiaoping, Fu Shengbin and Zeng Min respectively butwere unexercised upon expiry.During the Reporting Period, 9,744,890 shares were exercised under the Second Stock Option IncentiveScheme.B. Overview of the Third Stock Option Incentive Schemea. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustment to the Exercise Price for the Third Stock Option Incentive Scheme wasreviewed and approved. As the 2019 Annual Profit Distribution had been carried out, the exercise pricefor the Third Stock Option Incentive Scheme was revised from RMB17.85 to RMB16.26 per share.b. The Company convened the 23rd Meeting of the 3rd Board of Directors on 24 July 2020, at which the
Proposal for the Retirement of Unexercised Stock Options under the Third Stock Option IncentiveScheme upon Expiry was reviewed and approved. As the second exercise period of the Third StockOption Incentive Scheme expired on 27 June 2020 and the relevant unexercised stock options were notallowed for exercise from that date, the Company agreed to retire the 75,000, 70,000, 75,000, 60,000and 30,000 stock options that had been previously granted to Fu Shengbin, Ren Junfu, Yuan Dong, YangHui and Liao Zhiwen respectively but were unexercised upon expiry.During the Reporting Period, 20,583,246 shares were exercised under the Third Stock Option IncentiveScheme.C. Overview of the Fourth Stock Option Incentive Schemea. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustments to the Exercise Price, Incentive Recipients and Their Exercisable StockOptions for the Fourth Stock Option Incentive Scheme was reviewed and approved. As the 2019 AnnualProfit Distribution had been carried out, the exercise price for the Fourth Stock Option Incentive Schemewas revised from RMB30.22 to RMB28.63 per share. Meanwhile, it was agreed to adjust the incentiverecipients and their exercisable stock options for the Fourth Stock Option Incentive Scheme due to thedeparture, positional changes, low individual or business division performance appraisals or other factorsof some incentive recipients. Upon the adjustments, the number of locked-up stock options granted tothem was reduced from 26,740,000 to 23,867,600.b. The Proposal for Matters Related to the Stock Option Exercise for the Third Exercise Period of theFourth Stock Option Incentive Scheme was also reviewed and approved. Because the exerciseconditions have grown mature for the third exercise period, a total of 1,070 incentive recipients who havebeen verified for the Fourth Stock Option Incentive Scheme have been allowed to exercise 23,867,600stock options in the third exercise period (ended 11 May 2021).c. The Proposal for the Retirement of Unexercised Stock Options under the Fourth Stock Option IncentiveScheme upon Expiry was also reviewed and approved. As the Fourth Stock Option Incentive Schemeexpired on 11 May 2020, the Board of Directors of the Company agreed to retire the 19,500 and 30,000
stock options that had been previously granted to Huang Yongsong and Yu Shengming respectively butwere unexercised upon expiry.During the Reporting Period, 24,274,206 shares were exercised under the Fourth Stock Option IncentiveScheme.D. Overview of the Fifth Stock Option Incentive Schemea. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustment to the Exercise Price for the Fifth Stock Option Incentive Scheme and theProposal for the Adjustments to the Incentive Recipients and Their Exercisable Stock Options for the FirstPhase of the Grant under the Fifth Stock Option Incentive Scheme were reviewed and approved. As the2019 Annual Profit Distribution had been carried out, the exercise price for the first phase of the grantunder the Fifth Stock Option Incentive Scheme was revised from RMB55.04 to RMB53.45 per share, andthe exercise price for the reserved stock options from RMB45.87 to RMB44.28 per share. Meanwhile, itwas agreed to adjust the incentive recipients and their exercisable stock options for the Fifth Stock OptionIncentive Scheme due to the departure, positional changes, low individual or business divisionperformance appraisals or other factors of some incentive recipients. Upon the adjustments, the numberof locked-up stock options granted to them was reduced from 54,420,000 to 42,101,750.b. The Proposal for Matters Related to the Stock Option Exercise for the First Exercise Period of the FirstPhase of the Grant under the Fifth Stock Option Incentive Scheme was also reviewed and approved.Because the exercise conditions have grown mature for the first exercise period, a total of 1,044 incentiverecipients who have been verified for the Fifth Stock Option Incentive Scheme have been allowed toexercise 10,241,750 stock options in the first exercise period (ended 6 May 2021).During the Reporting Period, 9,110,719 shares were exercised under the Fifth Stock Option IncentiveScheme.E. Overview of the Sixth Stock Option Incentive Schemea. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which the
Proposal for the Adjustment to the Exercise Price for the Sixth Stock Option Incentive Scheme wasreviewed and approved. As the 2019 Annual Profit Distribution had been carried out, the exercise pricefor the Sixth Stock Option Incentive Scheme was revised from RMB52.87 to RMB51.28 per share.F. Overview of the Seventh Stock Option Incentive Schemea. On 28 April 2020, the Seventh Stock Option Incentive Scheme (Draft) of Midea Group Co., Ltd(hereinafter referred to as the “Seventh Stock Option Incentive Scheme (Draft)”) and its abstract werereviewed and approved at the 20th Meeting of the 3rd Board of Directors, and the incentive recipient listfor the Seventh Stock Option Incentive Scheme (Draft) was examined at the 14th Meeting of the 3rdSupervisory Committee.b. On 22 May 2020, the Company convened the 2019 Annual General Meeting of Shareholders, at whichthe Proposal on the Seventh Stock Option Incentive Scheme (Draft) and Its Abstract, the Proposal on theImplementation and Appraisal Measures for the Seventh Stock Option Incentive Scheme, the Proposalfor Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the SeventhStock Option Incentive Scheme and other relevant proposals were reviewed and approved.For this Incentive Scheme, the Company intended to grant 65,260,000 stock options to 1,425 incentiverecipients with the exercise price being RMB52.02 per share.c. In light of the authorization given at the 2019 Annual General Meeting of Shareholders, the Companyconvened the 23rd Meeting of the 3rd Board of Directors on 5 June 2020, at which the Proposal for theAdjustments to the Exercise Price, Incentive Recipient List and Number of Stock Options to Be Grantedfor the Seventh Stock Option Incentive Scheme, the Proposal for the Determination of the Grant Date forthe Seventh Stock Option Incentive Scheme and the Proposal for the Grant-Related Matters for theSeventh Stock Option Incentive Scheme were reviewed and approved. As such, the Company agreed togrant stock options to incentive recipients on 5 June 2020 with the exercise price revised from RMB54.17per share to RMB52.87 per share. Due to 2 incentive recipients’ departure from the Company, they wereno longer eligible for the Seventh Stock Option Incentive Scheme and the stock options granted to themwere cancelled. Therefore, the Board adjusted the number of incentive recipients from 1,425 to 1,423,
and the number of stock options from 65,260,000 to 65,180,000.The Company originally intended to grant 65,260,000 stock options to 1,425 incentive recipients.However, due to 5 incentive recipients’ departure from the Company or being without a securities account,they were no longer eligible for the Seventh Stock Option Incentive Scheme. Therefore, the Boardadjusted the number of incentive recipients from 1,425 to 1,420, and the number of stock options from65,260,000 to 65,020,000. On 8 July 2020, the Company completed the registration of the grant of stockoptions under the Seventh Stock Option Incentive Scheme.d. In accordance with the Accounting Standard No. 11 for Business Enterprises—Share-Based Paymentsand the Accounting Standard No. 22 for Business Enterprises—Recognition and Measurement ofFinancial Instruments, the Company chose the Black-Scholes model to measure the fair value of stockoptions. Upon the measurement on 5 June 2020 of the fair value of the 65,180,000 stock options grantedby the Company using the said model, the theoretical value of these stock options wasRMB1,001,164,400, which would be amortized within the 36 months after the date of grant. The saidamortization of cost was expected to have an impact on the Company’s net profit of the current period tosome degree, but it would not affect the Company’s operating results to a great extent.G. Overview of the 2017 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017, 2018and 2019 Restricted Share Incentive Schemes was approved at the 17th Meeting of the 3rd Board ofDirectors on 10 January 2020. As such, it was agreed to repurchase and retire 679,000 restricted sharesthat had been granted to 16 personnel but were still in lockup, for the reasons of their departure from theCompany, violation of company rules, low individual performance appraisals, position change or otherfactors.Also, the Proposal on the Satisfaction of the Conditions for the Second Unlocking Period for the ReservedRestricted Shares of the 2017 Restricted Share Incentive Scheme was approved at the aforesaid meeting.A total of 42 personnel were eligible for this unlocking, with 1,340,750 restricted shares (0.02% of theCompany’s total existing share capital) unlocked and allowed for public trading on 19 February 2020, of
which senior management Xiao Mingguang unlocked 50,000 shares.b. The Company submitted the application to China Securities Depository and Clearing Co., Ltd.(Shenzhen branch) (hereinafter referred to as “CSDC Shenzhen”) for the retirement of the 679,000restricted shares under the 2017 Restricted Share Incentive Scheme that had been granted but were stillin lockup. On 10 March 2020, as confirmed by CSDC Shenzhen, the retirement of the said restrictedshares had been completed.c. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustment to the Repurchase Price for the 2017 Restricted Share Incentive Schemewas reviewed and approved. As the 2019 Annual Profit Distribution had been carried out, the repurchaseprice for the first phase of the grant was revised from RMB13.36 to RMB11.77 per share, and therepurchase price for the reserved restricted shares from RMB25.49 to RMB23.90 per share.Also, the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017Restricted Share Incentive Scheme was approved at the said meeting. As such, it was agreed torepurchase and retire 187,500 restricted shares that had been granted to 3 personnel but were still inlockup, for the reasons of their business unit’s 2019 performance appraisal result being “just so-so”, lowindividual performance appraisals for 2019, violation of company rules or other factors.Also, the Proposal on the Satisfaction of the Conditions for the Third Unlocking Period for the First Phaseof the Grant under the 2017 Restricted Share Incentive Scheme was approved at the aforesaid meeting.A total of 99 personnel were eligible for this unlocking, with 5,532,500 restricted shares (0.0790% of theCompany’s total existing share capital) unlocked and allowed for public trading on 22 June 2020, of whichsenior management Hu Ziqiang, Zhang Xiaoyi and Zhong Zheng unlocked 100,000, 70,000 and 60,000shares respectively.d. The Company submitted the application to CSDC Shenzhen for the retirement of the 187,500 restrictedshares under the 2017 Restricted Share Incentive Scheme that had been granted but were still in lockup.On 31 July 2020, as confirmed by CSDC Shenzhen, the retirement of the said restricted shares had beencompleted.
H. Overview of the 2018 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017, 2018and 2019 Restricted Share Incentive Schemes was approved at the 17th Meeting of the 3rd Board ofDirectors on 10 January 2020. As such, it was agreed to repurchase and retire 1,586,500 restricted sharesthat had been granted to 33 personnel but were still in lockup, for the reasons of their departure from theCompany, violation of company rules, low individual performance appraisals, position change or otherfactors.b. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,586,500restricted shares under the 2018 Restricted Share Incentive Scheme that had been granted but were stillin lockup. On 10 March 2020, as confirmed by CSDC Shenzhen, the retirement of the said restrictedshares had been completed.c. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustment to the Repurchase Price for the 2018 Restricted Share Incentive Schemewas reviewed and approved. As the 2019 Annual Profit Distribution had been carried out, the repurchaseprice for the first phase of the grant was revised from RMB26.27 to RMB24.68 per share, and therepurchase price for the reserved restricted shares from RMB22.29 to RMB20.70 per share.Also, the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018Restricted Share Incentive Scheme was approved at the said meeting. As such, it was agreed torepurchase and retire 1,021,000 restricted shares that had been granted to 18 personnel but were still inlockup, for the reasons of their departure from the Company, position change, low individual performanceappraisals for 2019, violation of company rules or other factors.Also, the Proposal on the Satisfaction of the Conditions for the First Unlocking Period for the First Phaseof the Grant under the 2018 Restricted Share Incentive Scheme was approved at the aforesaid meeting.A total of231 personnel were eligible for this unlocking, with 3,704,125 restricted shares (0.0529% of theCompany’s total existing share capital) unlocked and allowed for public trading on 1 July 2020, of whichsenior management Hu Ziqiang, Xiao Mingguang, Zhang Xiaoyi and Zhong Zheng unlocked 25,000,
25,000, 25,000 and 20,000 shares respectively.d. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,021,000restricted shares under the 2018 Restricted Share Incentive Scheme that had been granted but were stillin lockup. On 31 July 2020, as confirmed by CSDC Shenzhen, the retirement of the said restricted shareshad been completed.I. Overview of the 2019 Restricted Share Incentive Schemea. The Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017, 2018and 2019 Restricted Share Incentive Schemes was approved at the 17th Meeting of the 3rd Board ofDirectors on 10 January 2020. As such, it was agreed to repurchase and retire 1,241,000 restricted sharesthat had been granted to 21 personnel but were still in lockup, for the reasons of their departure from theCompany, position change or other factors.b. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,241,000restricted shares under the 2019 Restricted Share Incentive Scheme that had been granted but were stillin lockup. On 10 March 2020, as confirmed by CSDC Shenzhen, the retirement of the said restrictedshares had been completed.c. The Company convened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which theProposal for the Adjustment to the Repurchase Price for the 2019 Restricted Share Incentive Schemewas reviewed and approved. As the 2019 Annual Profit Distribution had been carried out, the repurchaseprice was revised from RMB25.79 to RMB24.20 per share.Also, the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019Restricted Share Incentive Scheme was approved at the said meeting. As such, it was agreed torepurchase and retire 1,010,000 restricted shares that had been granted to 15 personnel but were still inlockup, for the reasons of their departure from the Company, position change, violation of company rulesor other factors.d. The Company submitted the application to CSDC Shenzhen for the retirement of the 1,010,000
restricted shares under the 2019 Restricted Share Incentive Scheme that had been granted but were stillin lockup. On 31 July 2020, as confirmed by CSDC Shenzhen, the retirement of the said restricted shareshad been completed.J. Overview of the 2020 Restricted Share Incentive Schemea. On 28 April 2020, the 2020 Restricted Share Incentive Scheme (Draft) of Midea Group Co., Ltd(hereinafter referred to as the “2020 Restricted Share Incentive Scheme (Draft)”) and its abstract werereviewed and approved at the 20th Meeting of the 3rd Board of Directors, and the incentive recipient listfor the 2020 Restricted Share Incentive Scheme (Draft) was examined at the 14th Meeting of the 3rdSupervisory Committee.b. On 22 May 2020, the Company convened the 2019 Annual General Meeting of Shareholders, at whichthe Proposal on the 2020 Restricted Share Incentive Scheme (Draft) and Its Abstract, the Proposal onthe Implementation and Appraisal Measures for the 2020 Restricted Share Incentive Scheme, theProposal for Asking the Meeting of Shareholders to Authorize the Board to Handle Mattes Related to the2020 Restricted Share Incentive Scheme and other relevant proposals were reviewed and approved. Forthis scheme, the Company intended to grant 34,180,000 restricted shares (0.49% of the Company’s totalexisting issued share capital) to 520 incentive recipients with the price being RMB26.01/share.c. In light of the authorization given at the 2019 Annual General Meeting of Shareholders, the Companyconvened the 21st Meeting of the 3rd Board of Directors on 5 June 2020, at which the Proposal for theAdjustment to the Grant Price of the 2020 Restricted Share Incentive Scheme, the Proposal for theDetermination of the Grant Date for the 2020 Restricted Share Incentive Scheme and the Proposal forthe Grant-Related Matters for the 2020 Restricted Share Incentive Scheme were reviewed and approved.As such, the Company agreed to grant 34,180,000 restricted shares to 520 incentive recipients on 5 June2020 under the said scheme with the price revised from RMB26.01 per share to RMB24.42 per share.d. The Company had intended to grant 34,180,000 restricted shares to 520 incentive recipients. However,after the date of grant, 14 incentive recipients left the Company or gave up subscription, and the 935,000restricted shares that had been granted to them were cancelled. As such, the Company actually granted
33,245,000 restricted shares to 506 incentive recipients, including 120,000 shares to senior managementWang Jinliang. Zhonghui Certified Public Accountants LLP issued on 6 July 2020 the Capital VerificationReport ZHKY [2020] No. 5044, verifying the payments as of 30 June 2020 by the 506 incentive recipientsfor share subscription under the 2020 Restricted Share Incentive Scheme. As verified, as of 30 June2020, the Company had received RMB811,842,900.00 from the 506 incentive recipients for restrictedshare subscription. After the grant, the total share capital of the Company remained the same, and therestricted shares rose by 33,245,000.00 due to the equity incentive and the unrestricted public sharesdecreased by 33,245,000.00.e. As per the CSRC’s Measures for the Administration of Equity Incentives of Listed Companies, and asconfirmed by the Shenzhen Stock Exchange and CSDC Shenzhen, the shares under the Company’s2020 Restricted Share Incentive Scheme had been registered and were allowed for public trading on 14July 2020.f. A total of 33,245,000 shares were granted under the 2020 Restricted Share Incentive Scheme, with adifference of approximately RMB918,226,900 between the amount received for the restricted sharesgranted and the share repurchase cost of approximately RMB1,730,069,800. As required by theAccounting Standard for Business Enterprises No. 37—Presentation of Financial Instruments, where afinancial instrument or a part thereof is an equity instrument, the issuer shall treat it as a change in equitywhen issuing (including refinancing), repurchasing, selling or cancelling the instrument. Meanwhile, inaccordance with the regulations concerning stock option incentives for employees through sharerepurchase in the Guidelines on the Application of the Accounting Standard for Business Enterprises No.11—Share-Based Payment, upon the receipt of employees’ payments for purchasing the enterprise’sshares in exercise, the enterprise shall write off the cost of treasury stock that is handed over toemployees and the cumulative capital surplus (other capital surplus) during the vesting period, and thedifference shall be treated as an adjustment to capital surplus (share premium). Therefore, theimplementation of the 2020 Restricted Share Incentive Scheme will not have a material impact on theoperating results of the Company.K. Overview of the Second Global Partner Stock Ownership Scheme
a. Under the Second Global Partner Stock Ownership Scheme, a total of 1,684,540 shares had beenvested in the Company’s incumbent senior management (FangHongbo, Yin Bitong, Gu Yanmin, Wang
Jianguo and Wang Jinliang), and a total of 1,179,170 shares had been vested in other incentive recipients,totaling 2,863,710 shares. The remaining unvested 1,010,880 shares and the corresponding dividends(if any) had been taken back by the administrative committee of this scheme for no compensation, andwould be sold at a proper timing before this scheme expired. The earnings on the sale would belong tothe Company.b. The Proposal on the Extended Duration of the Second Global Partner Stock Ownership Scheme wasapproved at the 18th Meeting of the 3rd Board of Directors on 22 February 2020. As proposed by theadministrative committee of this scheme, the Board agreed to extend the duration of this scheme fromfour years to five years, i.e. to 24 March 2021.c. The Company disclosed on 8 September 2020 the Announcement on the Completion of Share Clearing& Early Termination of the Second Global Partner Stock Ownership Scheme. As per the relevantprovisions of the Second Core Management and Global Partner Stock Ownership Scheme of MideaGroup Co., Ltd. (Draft), this scheme was completed and terminated ahead of schedule.As of the end of the Reporting Period, the Second Global Partner Stock Ownership Scheme wascompleted.L. Overview of the Third Global Partner Stock Ownership Schemea. The Company disclosed the Reminder of the Completion of Vesting under the Third Global PartnerStock Ownership Scheme & the Expiry of the Lockup Period on 2 June 2020. As such, the final 30%installment of shares under the Third Global Partner Stock Ownership Scheme had been vested, markingthe completion of this scheme. A total of 1,552,618 shares had been vested in the Company’s incumbentsenior management (Fang Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo, Wang Jinliang and XiaoMingguang), and a total of 718,800 shares had been vested in other incentive recipients, totaling2,271,418 shares. The remaining unvested 575,027 shares and the corresponding dividends (if any) hadbeen taken back by the administrative committee of this scheme for no compensation, and would be sold
at a proper timing before this scheme expired. The earnings on the sale would belong to the Company.As of the end of the Reporting Period, a total of 2,846,445 shares were held under the Third GlobalPartner Stock Ownership Scheme, representing 0.0405% of the Company’s total share capital.M. Overview of the Fourth Global Partner Stock Ownership Schemea. Under the Fourth Global Partner Stock Ownership Scheme, the total shares to be granted were2,714,700 shares (1,564,200 shares for senior management Fang Hongbo,Yin Bitong, Gu Yanmin, WangJianguo and Wang Jinliang, and the other 1,150,500 shares for other core management personnel). Dueto certain incentive recipients’ position change or departure from the Company in the duration of theFourth Global Partner Stock Ownership Scheme, there are remained 603,840 shares unallocated underthis scheme. As per the Fourth Global Partner Stock Ownership Scheme (Draft), these unallocatedshares and the corresponding dividends (if any) had been taken back by the administrative committee ofthis scheme for no compensation, and would be sold at a proper timing before this scheme expired. Theearnings on the sale would belong to the Company.As of the end of the Reporting Period, a total of 3,318,540 shares were held under the Fourth GlobalPartner Stock Ownership Scheme, representing 0.0472% of the Company’s total share capital.N. Overview of the First Business Partner Stock Ownership Schemea. Under the First Business Partner Stock Ownership Scheme, the total shares to be granted were1,151,687 shares (182,566 shares for senior management Zhang Xiaoyi, Xiao Mingguang, Hu Ziqiang,Liu Min and Jiang Peng, and the other 969,121 shares for other core management personnel). Due tocertain incentive recipients’ position change or departure from the Company in the duration of the FirstBusiness Partner Stock Ownership Scheme, there are remained 627,613 shares unallocated under thisscheme. As per the First Business Partner Stock Ownership Scheme (Draft), these unallocated sharesand the corresponding dividends (if any) had been taken back by the administrative committee of thisscheme for no compensation and belonged to the Company. In this case, the Company still had to returnthe performance bonuses corresponding to these unallocated shares under this scheme to the relevantsenior management.
As of the end of the Reporting Period, a total of 1,779,300 shares were held under the First BusinessPartner Stock Ownership Scheme, representing 0.0253% of the Company’s total share capital.O. Overview of the Fifth Global Partner Stock Ownership Schemea. The Company’s performance requirement for the Fifth Global Partner Stock Ownership Scheme is aweighted average ROE not lower than 20% for 2019. According to the 2019 Annual Auditor’s Report forMidea Group Co., Ltd. issued by PricewaterhouseCoopers China (LLP), this ROE requirement has beenmet at 26.43%.b. The Company disclosed the Announcement on the Share Allocation and Vesting under a Partner StockOwnership Scheme on 27 July 2020. A total of 3,732,075 of the Company’s shares were repurchased forthis scheme. As per the Fifth Global Partner Stock Ownership Scheme (Draft), the administrativecommittee of this scheme confirmed the number of shares to be granted to each partner, with the totalshares to be granted being 2,988,966 shares (2,001,374 shares for senior management Fang Hongbo,Yin Bitong, Gu Yanmin, Wang Jianguo and Zhang Xiaoyi, and the other 987,592 shares for other coremanagement personnel).Due to certain incentive recipients’ position change or departure from theCompany in the duration of the Fifth Global Partner Stock Ownership Scheme, there are remained743,109 shares unallocated under this scheme. As per the Fifth Global Partner Stock Ownership Scheme(Draft), these unallocated shares and the corresponding dividends (if any) had been taken back by theadministrative committee of this scheme for no compensation, and would be sold at a proper timing beforethis scheme expired. The earnings on the sale would belong to the Company.As of the end of the Reporting Period, a total of 3,732,075 shares were held under the Fifth Global PartnerStock Ownership Scheme, representing 0.0531% of the Company’s total share capital.P. Overview of the Second Business Partner Stock Ownership Schemea. The Company’s performance requirement for the Second Business Partner Stock Ownership Schemeis a weighted average ROE not lower than 20% for 2019. According to the 2019 Annual Auditor’s Reportfor Midea Group Co., Ltd. issued by PricewaterhouseCoopers China (LLP), this ROE requirement hasbeen met at 26.43%.
b. A total of 1,867,845 of the Company’s shares were repurchased for the Second Business Partner StockOwnership Scheme. As per the Second Business Partner Stock Ownership Scheme (Draft), theadministrative committee of this scheme confirmed the number of shares to be granted to each partner,with the total shares to be granted being 1,377,859 shares (220,124 shares for senior management WangJinliang, Xiao Mingguang, Liu Min, Jiang Peng and Zhong Zheng, and the other 1,157,735 shares forother core management personnel). Due to certain incentive recipients’ position change or departure fromthe Company in the duration of the Second Business Partner Stock Ownership Scheme, there areremained 489,986 shares unallocated under this scheme. As per the Second Business Partner StockOwnership Scheme (Draft), these unallocated shares and the corresponding dividends (if any) had beentaken back by the administrative committee of this scheme for no compensation and belonged to theCompany. In this case, the Company still had to return the performance bonuses corresponding to theseunallocated shares under this scheme to the relevant senior management.As of the end of the Reporting Period, a total of 1,867,845 shares were held under the Second BusinessPartner Stock Ownership Scheme, representing 0.0266% of the Company’s total share capital.Q. Overview of the Sixth Global Partner Stock Ownership Schemea. The Sixth Global Partner Stock Ownership Scheme was approved at the 20th Meeting of the 3rd Boardof Directors on 28 April 2020 and the 2019 Annual General Meeting of Shareholders on 22 May 2020.The shares for this scheme would be obtained from the Company’s securities account for repurchase ina non-transaction transfer and put into the securities account of “Midea Group Co., Ltd.—the SeventhEmployee Stock Ownership Scheme” for management.b. The Sixth Global Partner Stock Ownership Scheme was funded by the Company’s special fund ofRMB184.10 million for this scheme. With an average repurchase price of RMB52.04/share as the pricefor transferring the shares in the repurchase securities account to the securities account of the SixthGlobal Partner Stock Ownership Scheme, the shares to be transferred would be 3,537,663.c. According to the Confirmation of Securities Transfer received by the Company from CSDC Shenzhenon 13 July 2020, 3,537,663 shares (0.0504% of the Company’s total existing share capital) had been
transferred from the Company’s securities account for repurchase to the securities account of “MideaGroup Co., Ltd.—the Seventh Employee Stock Ownership Scheme” in a non-transaction transfer on 10July 2020. As required by the Sixth Global Partner Stock Ownership Scheme (Draft), the sharestransferred to the securities account of the Sixth Global Partner Stock Ownership Scheme would belocked up from 14 July 2020 to 13 July 2021.As of the end of the Reporting Period, a total of 3,537,663 shares were held under the Sixth GlobalPartner Stock Ownership Scheme, representing 0.0503% of the Company’s total share capital.R. Overview of the Third Business Partner Stock Ownership Schemea. The Third Business Partner Stock Ownership Scheme was approved at the 20th Meeting of the 3rdBoard of Directors on 28 April 2020 and the 2019 Annual General Meeting of Shareholders on 22 May2020. The shares for this scheme would be obtained from the Company’s securities account forrepurchase in a non-transaction transfer and put into the securities account of “Midea Group Co., Ltd.—the Eighth Employee Stock Ownership Scheme” for management.b. The Third Business Partner Stock Ownership Scheme was funded by the Company’s special fund andthe performance bonuses for senior management of RMB97.50 million. With an average repurchase priceof RMB52.04/share as the price for transferring the shares in the repurchase securities account to thesecurities account of the Third Business Partner Stock Ownership Scheme, the shares to be transferredwould be 1,873,559.c. According to the Confirmation of Securities Transfer received by the Company from CSDC Shenzhenon 16 July 2020, 1,873,559 shares (0.0267% of the Company’s total existing share capital) had beentransferred from the Company’s securities account for repurchase to the securities account of “MideaGroup Co., Ltd.—the Eighth Employee Stock Ownership Scheme” in a non-transaction transfer on 15July 2020. As required by the Third Business Partner Stock Ownership Scheme (Draft), the sharestransferred to the securities account of the Third Business Partner Stock Ownership Scheme would belocked up from 17 July 2020 to 16 July 2021.As of the end of the Reporting Period, a total of 1,873,559 shares were held under the Third Business
Partner Stock Ownership Scheme, representing 0.0267% of the Company’s total share capital.
16. Significant Related Transactions
16.1 Related transactions arising from routine operation
√Applicable □N/A
transactionparty
Relation
Related | Type of |
thetransactionContent
transac
tion
PricingprincipleTrans
s of the | action |
price
Transacti
onamount(RMB’000
)
Propo
rtionin thetotalamounts oftransaction
samekind(%)
Approvedtransaction
line(RMB’000)
Overappro
vedline
of the | Mode of |
settlement
Obtaina
blemarket
pricefor thetransaction of
thesame
kind
Disclos
uredate
disclo
sedinformation
InforeEnvironmentTechnologyGroupCo.,Ltd.
Controlled byfamilymember ofCompany’sactualcontroller
Procurement
Procurement ofgoods
Market price
- 951,20
Index to the | ||
1 |
0.48%
1,500,000
No
Payment afterdelivery
-
2020-4-
www.cninfo.com.cn
Orinko
Plastics |
Group
Controlled byfamilymember ofCompany’sactualcontroller
Procurement
Procurement ofgoods
Market price
- 1,238,81
0.62%
7 |
1,700,000
No
Payment afterdelivery
-
2020-4-
www.cninfo.com.cn
MideaRealEstate
Controlled byCompa
Sale
Sale ofgoods
Market price
198,90
3 |
0.07%
4,710,00
No
Payment afterdelivery
-2020-4-
www.cninfo.com.
Limited
ny’sactualcontroller
cn
Total -- --2,388,921
Holding | ||
-- 3,671,000
--
-- --Details of any sales return of alarge amount
ZeroGive the actual situation in theReporting Period (if any) where aforecast had been made for thetotal amounts of routine related-party transactions by type tooccur in the current period
The line for routine related transactions between the Company and the related
parties and their subsidiaries did not exceed the total amount of routine related
transactions estimated by the Company by type.Reason for any significantdifference between thetransaction price and the marketreference price (if applicable)
N/A
16.2 Related transactions regarding purchase or sales of assets or equity interests
□Applicable √N/A
No such cases in the Reporting Period.
16.3 Related transactions arising from joint investments in external parties
□Applicable √N/A
No such cases in the Reporting Period.
16.4 Credits and liabilities with related parties
□Applicable √N/A
No such cases in the Reporting Period.
16.5 Other significant related transactions
√Applicable □N/A
a. The Proposal for Related Transactions with Shunde Rural Commercial Bank in 2020 was reviewedand approved at the 20th Meeting of the 3rd Board of Directors held on 28 April 2020 and later at the
2019 Annual General Meeting of Shareholders held on 22 May 2020.In 2020, the deposit balance of the Company in Shunde Rural Commercial Bank shall not exceed RMB7billion and neither shall the credit balance provided by the bank to the Company exceed RMB7 billion.Meanwhile, the total amount of notes discounted by the Company for the bank and loans from the formerto the latter shall not exceed RMB2 billion in the year.Index to the announcement about the said related transactions disclosed
Title of announcement Disclosure date Disclosure websiteAnnouncement on Related Transactions with Rural
Commercial Bank in 2020
30/04/2020 www.cninfo.com.cn
There were no other significant related transactions in the Reporting Period.
17. Significant Contracts and Their Execution
17.1 Trusteeship, contracting and leasing
17.1.1 Trusteeship
□Applicable √N/A
No such cases in the Reporting Period.
17.1.2 Contracting
□Applicable √N/A
No such cases in the Reporting Period.
17.1.3 Leasing
□Applicable √N/A
No such cases in the Reporting Period.
17.2 Major Guarantees
√Applicable □N/A
17.2.1 Guarantees provided
Unit: RMB'000Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries)
Guaranteed party
Disclosure date oftheguarantee lineannouncement
Line ofguarantee
Actual
date (date
ofagreement
signing)
Actualguarantee amount
occurrence |
Type ofguarantee
Termofguarantee
Due
Guar
or not | antee |
for arelated
or not
No such casesTotal external guarantee line approved during theReporting Period (A1)
Total actual externalguarantee amount during
the Reporting Period (A2) |
Total approved external guarantee line at the end ofthe Reporting Period (A3)
Total actual externalguarantee balance at theend of the ReportingPeriod (A4)
Guarantees provided by the Company for its subsidiaries
Guaranteed party
Disclosuredate of theguarantee
lineannounce
ment
Line ofguarantee
Actual
occurrence
date (dateofagreement
signing)
Actualguarantee
amount
Type ofguarantee
occurrence |
Termofguarantee
Due
Guar
or not | antee |
for arelate
d
or not
Midea Group Finance Co., Ltd.2020-4-30 9,900,000
-
Joint liability
Oneyear
No NoGD Midea Air-
Conditioning Equipment |
Co.,Ltd.
2020-4-30 14,882,200
2020-1-16 2,629,620
Joint liability
Oneyear
No NoGuangzhou Hualing RefrigeratingEquipment Co.,ltd.
2020-4-30 1,163,000
Joint liability
Oneyear
No NoFoshan Midea Carrier Air-
Conditioning |
Equipment Co., Ltd.
2020-4-30 361,200
-
Joint liability
Oneyear
No NoGuangdong Midea Precision MoldingTechnology Co., Ltd.
2020-4-30 62,700
-
Joint liability
Oneyear
No No
Guangdong Midea Kitchen Appliances |
Manufacturing Co., Ltd.
2020-4-30 5,190,000
2020-1-9
1,493,010
Joint liability
Oneyear
No NoGuangdong Witol Vacuum ElectronicManufacture Co.,Ltd
2020-4-30 100,000
2020-1-22
10,330
Joint liability
Oneyear
No No
GD Midea Heating & VentilatingEquipment Co., Ltd.
2020-4-30 2,000,000
2020-1-10
60,500
Joint liability
Oneyear
No NoGuangdong Midea-SIIX ElectronicsCo., Ltd.
2020-4-30 150,000
-
Joint liability
Oneyear
No NoGuangdong Midea Commercial Air-Conditioning Equipment Co., Ltd.
2020-4-30 200,000
-
Joint liability
Oneyear
No NoGuangdong Midea Consumer ElectricManufacturing Co., Ltd.
2020-4-30 290,000
2020-1-19
Joint liability
Oneyear
No NoFoshan Shunde Midea ElectricalHeating Appliances ManufacturingCo., Ltd.
2020-4-30 1,210,000
2020-1-13
Joint liability
Oneyear
No NoGD Midea Environment AppliancesMfg. Co.,Ltd.
2020-4-30 420,000
-
Joint liability
Oneyear
No NoGuangdong Midea Cuchen CompanyLtd.
2020-4-30 5,000
-
Joint liability
Oneyear
No NoGD Midea Caffitaly Coffee MachineManufacturing Co., Ltd.
2020-4-30 15,000
-
Joint liability
Oneyear
No NoMain Power Inno Tech (Shenzhen)Manufacturing Co., Ltd.
2020-4-30 45,000
-
Joint liability
Oneyear
No NoFoshan Shunde Midea WashingAppliances Manufacturing Co., Ltd.
2020-4-30 2,200,000
2020-1-6
166,230
Joint liability
Oneyear
No NoGuangdong Midea Kitchen & BathAppliances Manufacturing Co., Ltd.
2020-4-30 436,000
-
Joint liability
Oneyear
No NoFoshan Shunde Midea WaterDispenser Manufacturing CompanyLimited
2020-4-30 710,000
2020-2-13
9,010
Joint liability
Oneyear
No NoFoshan Midea Chungho WaterPurification Equipment. Co., Ltd.
2020-4-30 142,000
-
Joint liability
Oneyear
No NoGuangdong Meizhi CompressorLimited
2020-4-30 230,000
2020-1-17
2,950
Joint liability
Oneyear
No NoGuangdong Meizhi Precision-Manufacturing Co., Ltd
2020-4-30 90,000
-
Joint liability
Oneyear
No NoGuangdong Welling MotorManufacturing Co., Ltd.
2020-4-30 230,000
2020-2-5
5,340
Joint liability
Oneyear
No NoFoshan Welling Washer MotorManufacturing Co., Ltd.
2020-4-30 350,000
2020-1-2
2,090
Joint liability
Oneyear
No NoGuangdong Midea EnvironmentalTechnologies Co., Ltd.
2020-4-30 50,000
-
Joint liability
Oneyear
No NoGuangdong Welling Auto Parts Co.,2020-4-30 20,000
-
Joint liabilityOneNo No
Ltd. year
Co. Ltd.
2020-4-30 1,070,000
Ningbo Midea United Materials Supply |
2020-1-10
154,350
Joint liability
Oneyear
No NoGuangzhou Kaizhao Commercial andTrading Co.,Ltd
2020-4-30 75,500
-
Joint liability
Oneyear
No No
Guangdong Midea Intelligent Robotics |
Co., Ltd.
2020-4-30 50,000
-
Joint liability
Oneyear
No NoServotronix Motion TechnologyDevelopment (Shenzhen) Ltd.
2020-4-30 10,000
-
Joint liability
Oneyear
No NoMidea Group E-Commerce Co., Ltd.2020-4-30 130,000
-
Joint liability
Oneyear
No NoAnnto Logistics Technology Co., Ltd. 2020-4-30 1,430,000
2020-2-25
616,930
Joint liability
Oneyear
No NoGuangdong Midea Smart LinkTechnologies Co., Ltd.
2020-4-30 41,200
2020-3-23
3,610
Joint liability
Oneyear
No NoGD Midea Group Wuhu Air-Conditioning Equipment Co.,Ltd.
2020-4-30 1,100,000
-
Joint liability
Oneyear
No NoWuhu Maty Air-ConditioningEquipment Co., Ltd
2020-4-30 800,000
-
Joint liability
Oneyear
No NoWuhu Midea Kitchen AppliancesManufacturing Co., Ltd.
2020-4-30 4,020,000
-
Joint liability
Oneyear
No NoHefei Hualing Co., Ltd.2020-4-30 1,700,000
2020-2-3
3,710
Joint liability
Oneyear
No NoHubei Midea Refrigerator Co., Ltd. 2020-4-30 230,000
2020-4-10
-
Joint liability
Oneyear
No NoHefei Midea Refrigerator Co., Ltd.2020-4-30 903,000
-
Joint liability
Oneyear
No NoGuangzhou Midea HualingRefrigerator Co., Ltd.
2020-4-30 1,345,000
2020-3-19
1,030
Joint liability
Oneyear
No NoHefei Midea Heating & VentilatingEquipment Co., Ltd.
2020-4-30 548,000
2020-3-13
Joint liability
Oneyear
No NoHefei Midea-SIIX Electronics Co.,Ltd. 2020-4-30 230,000
-
Joint liability
Oneyear
No NoHefei M&B Air ConditioningEquipment Co., Ltd.
2020-4-30 40,800
2020-4-14
Joint liability
Oneyear
No NoWuhu Midea Life Appliances Mfg Co.,Ltd.
2020-4-30 2,000,000
2020-6-22
902,850
Joint liability
Oneyear
No NoWuhu Midea Kitchen & BathAppliances Mfg. Co., Ltd.
2020-4-30 1,930,000
2020-2-13
11,030
Joint liability
Oneyear
No No
Anhui Meizhi Compressor Co., Ltd.2020-4-30 110,000
2020-3-12
Joint liability
Oneyear
No NoAnhui Meizhi Precision ManufacturingCo., Ltd.
2020-4-30 60,000
2020-2-12
Joint liability
Oneyear
No NoWelling (Wuhu) Motor ManufacturingCo., Ltd.
2020-4-30 10,000
2020-5-18
1,310
Joint liability
Oneyear
No NoWuhu Welling Motor Sales Co., Ltd. 2020-4-30 800,000
-
Joint liability
Oneyear
No NoAnhui Welling Auto Parts Co. , Ltd. 2020-4-30 50,000
2020-1-10
2,820
Joint liability
Oneyear
No NoWuxi Little Swan General ApplianceCo., Ltd.
2020-4-30 100,000
2020-2-25
-
Joint liability
Oneyear
No NoWuxi Little Swan Electric Co., Ltd. 2020-4-30 2,000,000
2020-1-31
8,550
Joint liability
Oneyear
No NoHefei Midea Laundry Appliance Co.,Ltd.
2020-4-30 1,180,000
2020-1-21
5,760
Joint liability
Oneyear
No NoJiangsu Midea Cleaning AppliancesCo., Ltd
2020-4-30 90,000
-
Joint liability
Oneyear
No NoMidea Group Wuhan RefrigerationEquipment Co.,Ltd.
2020-4-30 63,800
-
Joint liability
Oneyear
No NoHandan Midea Air-ConditioningEquipment Co.,Ltd.
2020-4-30 110,000
-
Joint liability
Oneyear
No NoChongqing Midea GeneralRefrigeration Equipment Co., Ltd.
2020-4-30 180,000
2020-3-10
3,780
Joint liability
Oneyear
No NoMidea Intelligent Lighting & ControlsTechnology Co., Ltd.
2020-4-30 261,000
2020-3-11
-
Joint liability
Oneyear
No NoChangzhou Welling MotorManufacturing Co., Ltd.
2020-4-30 5,000
-
Joint liability
Oneyear
No NoHuaian Welling Motor ManufacturingCo., Ltd.
2020-4-30 10,000
2020-4-24
Joint liability
Oneyear
No NoZhejiang Meizhi Compressor Co., Ltd.
2020-4-30 3,000,000
2020-3-13
2,006,340
Joint liability
Oneyear
No NoNingbo Annto Logistics Co., Ltd.2020-4-30 10,000
-
Joint liability
Oneyear
No NoReis Robotics (Kunshan) Co., Ltd. 2020-4-30 120,750
-
Joint liability
Oneyear
No NoKUKA Systems (China) CO., Ltd. 2020-4-30 245,000
2020-1-16
78,400
Joint liability
Oneyear
No No
KUKA Robotics Manufacturing ChinaCo.,Ltd
2020-4-30 115,000
-
Joint liability
Oneyear
No NoKUKA Robotics (Shanghai) Co.,Ltd. 2020-4-30 115,000
-
Joint liability
Oneyear
No NoShanghai Swisslog Healthcare Co.,Ltd.
2020-4-30 8,000
-
Joint liability
Oneyear
No NoSwisslog (Shanghai) Co., Ltd. 2020-4-30 110,000
2020-1-13
41,750
Joint liability
Oneyear
No NoShanghai Swisslog LogisticsAutomation Co. Ltd.
2020-4-30 60,000
-
Joint liability
Oneyear
No NoMidea International CorporationCompany Limited
2020-4-30 11,830,000
2020-1-17
7,803,910
Joint liability
Oneyear
No NoMidea International Trading CompanyLimited
2020-4-30 2,222,430
2020-1-2
-
Joint liability
Oneyear
No NoWelling International Hong Kong Ltd 2020-4-30 182,000
-
Joint liability
Oneyear
No NoMidea Electric Trading (Singapore)Co.,Pte. Ltd.
2020-4-30 4,996,000
2020-1-3
361,400
Joint liability
Oneyear
No No
Corporation and its subsidiaries
2020-4-30 2,667,450
Toshiba Lifestyle Products & Services |
2020-1-3
582,950
Joint liability
Oneyear
No NoOrient Household AppliancesLtd.(Orient)
2020-4-30 120,000
2020-1-31
-
Joint liability
Oneyear
No NoMidea Consumer Electric Vietnam 2020-4-30 112,000
-
Joint liability
Oneyear
No NoConcepcion Midea Inc. 2020-4-30 112,000
2020-3-24
-
Joint liability
Oneyear
No NoMidea Italia S.R.L. 2020-4-30 140,000
-
Joint liability
Oneyear
No NoMidea Scott & English ElectronicsSdn. Bhd.
2020-4-30 206,500
2020-1-30
-
Joint liability
Oneyear
No NoMidea Mexico, S. De R.L. De C.V. 2020-4-30 180,000
2020-3-13
-
Joint liability
Oneyear
No NoMidea Electric Trading (Thailand)Co.,Ltd.
2020-4-30 105,000
-
Joint liability
Oneyear
No NoMidea America Corp 2020-4-30 669,000
2020-2-10
-
Joint liability
Oneyear
No NoPt. Midea Planet Indonesia 2020-4-30 56,000
2020-1-15
-
Joint liability
Oneyear
No No
Midea Electrics Egypt 2020-4-30 175,000
-
Joint liability
Oneyear
No NoMidea Europe Gmbh 2020-4-30 70,000
-
Joint liability
Oneyear
No NoMidea America (Canada) Corp 2020-4-30 70,000
-
Joint liability
Oneyear
No NoServotronix Motion Control Ltd. 2020-4-30 940
-
Joint liability
Oneyear
No NoMidea Austria Gmbh 2020-4-30 5,700
-
Joint liability
Oneyear
No NoClivet Spa 2020-4-30 79,300
-
Joint liability
Oneyear
No NoMidea Electric Netherland (I) 2020-4-30 31,446,110
2020-1-1
28,856,400
Joint liability
Oneyear
No NoTotal guarantee line for subsidiaries approvedduring the Reporting Period (B1)
122,364,580
Total actual guaranteeamount for subsidiariesduring the ReportingPeriod (B2)
68,421,730
Total approved guarantee line for subsidiaries atthe end of the Reporting Period (B3)
122,364,580
Total actual guaranteebalance for subsidiariesat the end of theReporting Period (B4)
45,827,970
Guarantees between subsidiaries
Guaranteed party
Disclosure date of
theguarante
e lineannounce
ment
Line ofguarante
e
Actual
date (date
ofagreement
signing)
Actualguarantee amount
occurrence |
Type ofguarantee
Term
ofguarantee
Due
Guar
or not | antee |
for arelated
or not
No such casesTotal guarantee amount (total of the above-mentioned three kinds of guarantees)Total guarantee line approved during the ReportingPeriod (A1+B1+C1)
122,364,580
Total actual guaranteeamount during theReporting Period(A2+B2+C2)
68,421,730
Total approved guarantee line at the end of theReporting Period (A3+B3+C3)
122,364,580
Total actual guaranteebalance at the end of theReporting Period(A4+B4+C4)
45,827,970
Proportion of the total actual guarantee amount (A4+B4+C4) in net assetsof the Company
39.00%
Of which:
Amount of guarantees provided for shareholders, the actual controller andtheir related parties (D)
Amount of debt guarantees provided directly or indirectly for entities with aliability-to-asset ratio over 70% (E)
37,095,660
Portion of the total guarantee amount in excess of 50% of net assets (F) 0
Total amount of the three kinds of guarantees above (D+E+F) 37,095,660
Joint responsibilities possibly borne for undue guarantees (if any)
Provision of external guarantees in breach of the prescribed procedures (ifany)
N/A
N/A |
17.2.2 Illegal provision of guarantees for external parties
□ Applicable √ N/A
No such cases in the Reporting Period.
17.3 Entrusted cash management
17.3.1 Entrusted asset management
□ Applicable √ N/A
No such cases in the Reporting Period.
17.3.2 Entrusted loans
□ Applicable √ N/A
No such cases in the Reporting Period.
17.4 Other significant contracts
□ Applicable √ N/A
No such cases in the Reporting Period.
18. Social Responsibility (CSR)
18.1 Measures taken to fulfill CSR commitment
The Company has voluntarily disclosed its CSR work. Attaching great importance to protecting the legalrights and interests of its shareholders, employees, consumers and business partners, as well as thegovernment, the community and other stakeholders, the Company sticks to harmonious common growthwith them, honors its commitments, abides by law and moral principles, and continue to contribute to thesustainable development of the society and the environment. For further information, see the Company’sCorporate Social Responsibility Report 2020 released on www.cninfo.com.cn.
18.2 Measures taken for targeted poverty alleviation
A. Summary of the work done for targeted poverty alleviation during the yearIn 2020, Midea provided counterpart aid funds of RMB9.60 million, RMB5 million and RMB1.13 millionrespectively to Leizhou and Xuwen in Zhanjiang City and Liangshan Yi Autonomous Prefecture in SichuanProvince for local industrial development, education improvement, infrastructure improvement, livingenvironment improvement and other poverty alleviation purposes. By doing so, it has provided strongsupport to help lift registered impoverished households from poverty and win the battle against povertynationwide.During the COVID-19 pandemic, Midea Group was amongst the first companies to respond andparticipate in frequent support missions. It has donated anti-pandemic materials and home appliancesworth approximately RMB116 million in total to Hubei Province, Guangdong Province, Shanghai, etc.,making a contribution in the fight against the pandemic.
Indicator
Measurementunit
Quantity/ProgressI General information —— ——Of which: 1. Monetary inputs RMB’00015,730
2. Supplies converted to cash RMB’000
3. Number of registered impoverished individuals that
the Company has helped lift from poverty
Person22,730
II Inputs by item —— ——
1. Poverty alleviation through industrial development —— ——Of which: 1.1Type of poverty alleviation projects throughindustrial development
—— Helping develop tourism
1.2 Number of poverty alleviation projects through
industrial development
Number ofproject
1.3 Input amount to poverty alleviation projects through
industrial development
RMB’000 3,995
1.4 Number of registered impoverished individuals that
the Company has helped lift from poverty
Person 6,344
2. Poverty alleviation through labor migration —— ——
3. Poverty alleviation through relocation —— ——
4. Poverty alleviation through education —— ——Of which: 4.1 Input amount for impoverished students RMB’000
4.2 Number of students that the Company has helped Person
4.3 Input amount
impoverished areas
RMB’000 1,924.4
5. Poverty alleviation through improving health conditions —— ——
6. Poverty alleviation through improving environment —— ——Of which: 6.1 Type of project —— Improving environment
6.2 Input amount RMB’000 160
7. Assurance of minimum living standard —— ——
8. Social assistance in poverty alleviation —— ——Of which 8.1 Input amount for poverty alleviation in East andWest China
RMB’000 1,130
8.2 Input amount for fixed-point poverty alleviation RMB’000
8.3 Input amount to poverty alleviation public welfare
foundations
RMB’000
9. Other projects —— ——Of which 9.1 Number of projects
Number ofproject
9.2 Input amount RMB’000 8,520.6
9.3 Number of registered impoverished individuals that
the Company has helped lift from poverty
Person 17,560III Awards received (content, level) —— ——
16.2.2 Targeted poverty alleviation plans for the coming future
Midea Group will follow the relevant requirements of the Party and the government to continue to solidifyand expand the achievements in the targeted poverty alleviation campaign, and play its part in therevitalization of the countryside. It will continue to spread positive energy, motivate those who have beenlifted from poverty towards a better life, as well as boost the sense of fulfillment, happiness and the senseof pride among them.
18.3 Environmental protection
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities
√ Yes □ N/A
Name of
theCompan
y orsubsidiary
Majorpollutants
Discharge method
Number ofdischargeoutletsDistribution of discharge
outlets
Concentrat
of thedischarge(unit: mg/m?)
Pollutant dischargestandards
Totaldischarge
(ton)
Approve
d totaldischarg
e (ton)
ExcessdischargeFoshanShunde
Midea
ion | ||
Washing |
Applianc
esManufact
uringCo., Ltd.
(the
andSterilizingAppliances Park)
COD
Discharge after being treated bywastewater treatment system andreaching the standard
The southern side of 2#plant in the Washing andSterilizing Appliances Park
Washing | ||
The discharge limits of
water pollutants inGuangdong (DB44/26-
2001)
0. 1620 0.228 No
SS 29 0.0224 / NoBOD5 16 0.1320 / NoPetroleum 2.77 0.0035 / NoBenzene
High altitude discharge after beingtreated by waste gas treatment station
The southern side of 2#plant in the Washing andSterilizing Appliances Park
1.0×10
-2
Emission standard of
for furniture manufacturing(DB44/814-2010)
0.02 / No
volatile organic compounds
Toluene and
xylene
2.13 0.1843 / No
VOCS 16.1 0.75 / No
FoshanShundeMidea
Applianc
esManufacturingCo., Ltd.(theRangeHoodandStovePark)
COD
Discharge to the municipal sewagesystem after being treated bywastewater treatment system
The northeastern side of2# plant in the ThirdIndustrial Zone
The discharge standard ofwater pollutants forelectroplating inGuangdong (DB441597-
2015)
0.3846 2.41 No
SS 25 0.15 / NoPetroleum 0.16 0.0013 / NoAmmonianitrogen
1.72 0.0183 0.45 NoBenzene
High altitude discharge after beingtreated by waste gas treatment station
Washing
The northern and eastern
sides of 2# plant in theThird Industrial Zone
1.0×10
-2
Emission standard of airpollutants for industrial kilnand furnace (GB-9078-1996) / The emission limit
of gas pollutants in
Guangdong(DB-44/27-
2007)
0.02 / No
Toluene and
xylene
1.35 0.0686 / NoVOCS 25.9 0.9365 / No
Soot 14.5 0.0732 / NoSulfurdioxide
Less than the
limit of 3
0.02 0.114 No
Nitrogen
oxide
41 0.64 0.726 No
WuhuMideaKitchen& BathAppliances Mfg.Co., Ltd.
COD
Discharge after being treated bywastewater treatment system andreaching the standard
Toluene andWestern gate of the Wuhu
plant
Integrated wastewater
discharge standard(GB8978-1996)
135.07 / No
Ammonianitrogen
1.34 6.78 / NoBOD
47.4 73.46 / NoPetroleum 0.24 0.31 / No
Soot
15m high altitude discharge 45Plants
<20
Emission standard of air
pollutants for boiler(GB13271-2014)
0.005 / No
Sulfurdioxide
<50 / / NoNitrogenoxide
<150 0.102 / No
Soot
High altitude discharge after beingtreated by waste gas treatment station
<50
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
0.93 / No
Xylene <10 0.032 / NoVOCs <20 0.0687 / No
HefeiMideaHeating
&Ventilatin
gEquipme
nt Co.,Ltd.
COD
Discharge after being treated bywastewater treatment system andreaching the standard
The eastern side of 1#
plant
Implementation of thetakeover standards of theWestern Hefei Group
wastewater treatment plant
and integrated wastewater
discharge standard(GB8978-1996) third-level
3.89 / No
Ammonianitrogen
0.083 0.0807 / No
NMHC
RTO equipment 1
1 set at the northeastern
side of 3# plant
4.21
Integrated emissionstandards for atmosphericpollutants GB16297-1996
second-level
0.124
/ NoCondensation + degreasing + filtering
+ activated carbon + catalytic
combustion equipment
1 set at the southwestern
side of 4# plant
1.85 0.054Water spraying + activated carbon
equipment
2 sets at 1# plant and 1
set at 2# plant
6.5 0.19UV + activated carbon equipment 1 1 set at 2# plant 3.1 0.09Particles Filter cartridge dust collector 3
2 at 2# plant and 1 at 4#
plant
30 0.45 / No
HefeiMidea
COD
Discharge after being treated bywastewater treatment station
The eastern side ofwastewater treatment
station
Implementation of thetakeover standards of the
Western Hefei Group
25.000
58.150 No
LaundryApplianc
e Co.,
Ltd.(monitor
municipalgovernm
ent)
Ammonianitrogen
The eastern side ofwastewater treatment
station
1.5
ed by the | wastewater treatment plant | |
and integrated wastewaterdischarge standard(GB8978-1996) third-level
0.6 / No
Particles
treated by cyclone + filter cartridge
dust collector
1 outlet at 2# plant, 1outlet at 6# plant
<20
Table 5 of the EmissionStandards of IndustrialPollutants in the SyntheticResin Industry (GB 31572-2015): Special EmissionLimit Requirements
3.12 / No
Particles
15m high altitude discharge after being |
15m high altitude discharge after being |
treated by water spraying + dedusting+ UV photolysis + activated carbon
1 outlet at 3# plant
<20 1.27 / NoNMHC 1.46 0.1 / NoNMHC
treated by waste gas treatment station
3 1 outlet at 2# plant 2.25 2.00 / NoNMHC
15m high altitude discharge
treated by waste gas treatment station
6 outlets at 6# plant
1.11 2.69 / NoNMHC
treated by low-temperature plasma
1 outlet at 1# plant, 1outlet at 5# plant
2.215 0.16 / NoNMHC
15m high
15m high altitude discharge after being |
altitude discharge after being treated by photocatalyst and activated |
carbon
1 1 outlet at 3# plant 4.3 0.85 / No
GDMidea
Air-Conditio
ningEquipme
nt
COD
Discharge after being treated by
wastewater treatment station
The southeastern side of
4# plant
The discharge standard of
water pollutants forelectroplating (DB441597-
2015) chart 2 PRD
standard
13.89 / No
Ammonianitrogen
1.75 0.46 1.510 NoSS 19 3.56 / NoPetroleum 3.63 0.68 / No
CODDischarge after being treated by
The eastern side of 2#
The discharge limits of
5.6 9.59 No
Co.,Ltd.
SS
wastewater treatment station plant
water pollutants(DB44/26-2001)
1.6 / No
Ammonianitrogen
3.9 0.013 / NoPetroleum 6.22 3.88 / No
VOCs(dusting)
15m high altitude
treated by spray tower + activated
carbon
3 4# plant 22
Emission standard of
discharge after being | volatile organic compounds |
for furniture manufacturing(DB44/814-2010) the
second time period
4.12
/
No
VOCs
(screenprinting)
15m high altitude discharge
treated by environmental protection
equipment
4 1#, 5#, 9#, 11# plants 1.79
Emission standard of
after being | volatile organic compounds |
for printing industry(DB44/815-2010)
0.224 No
NMHC
&condenser)
(evaporator | 15m high altitude discharge after being |
treated by environmental protection
equipment
2 10# plants 30
Emission standard of
for printing industry(DB44/815-2010)Emission limits of airpollutants(DB44/27-2001)the second time
period
15 / No
NMHC(electronic)
15m high
volatile organic compounds
altitude discharge after being
treated by environmental protection
equipment
6 2#, 5# plants 26.7 18.32 / No
WuhuMaty Air-Conditio
ningEquipme
COD
Discharge after being treated bywastewater treatment station
The northern side of the
park
Integrated wastewater
discharge standard(GB8978-1996)chart 4
third-level
11.66 / No
SS 50 12.7 / NoBOD 9 2.3 / NoAmmonianitrogen
35 9.6 / No
nt Co.,
Ltd
Petroleum 0.5 0.1 / No
Particles
treated by environmental protection
equipment
5 2# plant <20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
1.52 / No
VOCs 8 2#, 3# plants 19
15m high altitude discharge after beingEmission Control Standard
for Industrial EnterprisesVolatile OrganicCompounds (DB13-2322-
2016)
14.9 / No
NOX 3 3# plant 17
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
1.22 / No
SO
3 3# plant 8 0.45 / No
Guangdo
ngMeizhiPrecision
-Manufact
uringCo., Ltd
COD
Discharge after being treated bywastewater treatment station
Near the wastewatertreatment station in thenorth side of the plant
The discharge limits of
water pollutants inGuangdong DB-44/26-2001 the second time
period first-level
12.43 16.28 No
Ammonianitrogen
2.12 1.24 2.034 No
GuangdoCOD 1Near the wastewater
The discharge standard of
3.115 6.046 No
ngMeizhiCompressorLimited
Ammonianitrogen
Discharge after being treated by
wastewater treatment station
treatment station in thenorth side of the plant
0.282
water pollutants forelectroplating DB-441597-2015, before 1 September
2012
0.154 0.756 No
FoshanShundeMidea
HeatingAppliancesManufact
uringCo., Ltd.
CODcr
Discharge after being treated bywastewater treatment system andreaching the standard
Waste water treatmentstations 1 and 2 of 3#
plant
The discharge standard of
water pollutants for
electroplating(DB44/1597-2015)
18.934 21.304 No
Petroleum 1.44 0.127 / NoAmmonianitrogen
0.81 0.77 4.26 No
Electrical
Toluene and
xylene
High altitude discharge after beingtreated by waste gas treatment station
Toluene and |
2 at 3# plant, outlets 1, 2and 3 for waste gas fromwave-soldering, paintingand drying at 6# plant,outlets 1 and 2 for wastegas from reflow soldering
at 6# plant
2.46
Table 1 of the Discharge
Standard of VolatileOrganic ChemicalCompounds in theFurniture Making Industry
(DB44/814-2010):
Discharge Limits for VOCs
Waste gas sprayers 1 and | through Exhaust Funnel/for |
Time Period II
3.013 / No
VOCs
High altitude discharge after beingtreated by waste gas treatment station
17.28 20.32 / No
NMHC
High altitude discharge after beingtreated by waste gas treatment station
Outlet of injection moldingwaste gas in the southside of 1# plant, outlet ofinjection molding waste
plant
1.99
Table 4 of the EmissionStandards of IndustrialPollutants in the SyntheticResin Industry (GB 31572-2015): Emission Limits of
Air Pollutants
0.48 / No
Particles Pulsed jet cloth filtering 4
Outlets 1
waste gas at 3# plant,
outlets 1 and 2 of polishing |
waste gas at 3# plant
9.3
Table 2 of the EmissionLimits of Air Pollutants(DB44/27-2001): EmissionLimits of Industrial Waste
0.733 0.2223 No
Sulfurdioxide
High altitude discharge after beingtreated by waste gas treatment station
Gas (Time Period 2), Level
Oxidation wire roof of 3#
plant
3 0.144 1.17 NoNitrogen
oxide
Drying furnace of 3# plant 33.5 1.135 12.9827 NoCookingfume
Discharge after being treated by waste
gas treatment station
South and east sectioncanteens
0.88
Emission Standard ofCooking Fume (Trial)(
18483-2001)
0.083 / No
Guangdo
GB
ng Midea
Consum
erElectricManufact
uringCo., Ltd.
CODcr
Discharge after being treated bywastewater treatment system and
reaching the standard
Wastewater treatment
station
The discharge standard of
water pollutants for
electroplating(DB44/1597-2015)
2.875 4.8 No
Petroleum 0.2275 0.01363 / Noss 8.5 0.5093 / NoAmmonianitrogen
6.73 0.4032 0.96 NoBenzene
High altitude discharge after beingtreated by waste gas treatment station
ng Midea
Spraying waste gas outlet
at 1# plant
0.01
Table 1 of the Discharge
Standard of Volatile
Organic ChemicalCompounds in theFurniture Making Industry
(DB44/814-2010):
Discharge Limits for VOCs
through Exhaust Funnel/for | ||
0.001 / No
Toluene
High altitude discharge after beingtreated by waste gas treatment station
2.4 0.276 / NoXylene
High altitude discharge after beingtreated by waste gas treatment station
3.14 0.35 / No
xylene
High altitude discharge after beingtreated by waste gas treatment station
Toluene and |
4.618 0.52 / No
VOCs
High altitude discharge after beingtreated by waste gas treatment station
17.4
Time Period II
1.47 / No
NMHC
High altitude discharge after beingtreated by waste gas treatment station
Injection molding wastegas outlet in the southernside of 2# plant, injectionmolding waste gas outletin the northern side of 2#
plant
1.818
Table 4 of the EmissionStandards of IndustrialPollutants in the SyntheticResin Industry (GB 31572-2015): Emission Limits ofAir Pollutants
0.407 / No
Particles Pulsed jet cloth filtering 2
Sanding waste gas outlet
at 1# plant, polishing
waste gas outlet at 1#
plant
14.25
Table 2 of the EmissionLimits of Air Pollutants(DB44/27-2001): EmissionLimits of Industrial Waste
0.339 / No
Sulfurdioxide
High altitude discharge after beingtreated by waste gas treatment station
Gas (Time Period 2), Level
1 Drying furnace at 1# plant
Not detected / 0.028 NoNitrogen
oxide
High altitude discharge after beingtreated by waste gas treatment station
25 0.1196 0.131 NoCooking
fume
gas treatment facility
1 Canteen of 1# plant 0.8275
Emission Standard ofCooking Fume (Trial)(GB
18483-2001)
0.123 / No
AnhuiMeizhiCompressor Co.,
Ltd.
COD
Discharge after being treated bywastewater treatment system andreaching the standard
The western side of thecomprehensivewastewater treatment
station
Implementation of thetakeover standards of the
Western Hefei Group
Discharge after being treated by wastewastewater treatment plant
and integrated wastewater
discharge standard(GB8978-1996) third-level
5.96 / No
Ammonianitrogen
1.60 0.196 / No
Particles
Collected by gas trap hood+15m high
exhaust cylinder
No. 1 workshop weldingsoot discharge outlet for
waste gas
<20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
10.076 65.45 No
outlet for the welding
waste gas
<20Waste gas outlet of 1#heat-treating furnace atNo. 2 workshop
<20
Emission standard of airpollutants for industrial kilnand furnace(GB9078-
1996)Waste gas outlet of 2#heat-treating furnace atNo. 2 workshop
<20
Waste gas outlet for diecasting at No. 2 workshop
<20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)Waste gas outlet for diecasting at No. 4 workshop
<20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)Emission standard of airpollutants for industrial kilnand furnace(GB9078-
1996)
Waste gas outlet of 1#heat-treating furnace atNo. 4 workshop
<20Waste gas outlet of 2#heat-treating furnace atNo. 4 workshop
<20Waste gas outlet for
No. 3 workshop dischargeelectrophoresis and drying
at No. 1 workshop
<20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
Waste gas outlet for
at No. 3 workshop
<20
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)Waste gas outlet of 1#-3#
furnaces
<20
Emission standard of airpollutants for boiler(GB13271-2014)
Sulfurdioxide
Collected by gas trap hood+15m high
exhaust cylinder
Waste gas outlet of 1#-3#
furnaces
1.5
Emission standard of airpollutants for boiler(GB13271-2014)
2.82 112.2 No
Outlet of 1# heat-treatingfurnace at No. 2 workshop
electrophoresis and drying
<3
Integrated emissionstandards for atmosphericpollutants GB16297-1996
second-level
Outlet of 2# heat-treatingfurnace at No. 2 workshop
<3Waste gas outlet for diecasting at No. 2 workshop
<3Outlet of 1# heat-treatingfurnace at No. 4 workshop
<3Outlet of 2# heat-treatingfurnace at No. 4 workshop
<3Waste gas outlet for diecasting at No. 4 workshop
<3
Nitrogenoxide
Collected by gas trap hood+15m high
exhaust cylinder
Waste gas outlet of 1#-3#
furnaces
Emission standard of air
pollutants for boiler(GB13271-2014)
3.69 33.24 No
Outlet of 1# heat-treatingfurnace at No. 2 workshop
<3
Integrated emissionstandards for atmospheric
Outlet of 2# heat-treatingfurnace at No. 2 workshop
<3
pollutants GB16297-1996
second-levelWaste gas outlet for diecasting at No. 2 workshop
<3Outlet of 1# heat-treatingfurnace at No. 4 workshop
<3Outlet of 2# heat-treatingfurnace at No. 4 workshop
<3Waste gas outlet for diecasting at No. 4 workshop
<3
VOCs
Collected by gas trap hood+15m high
exhaust cylinderDirect-
high exhaust cylinder
Waste gas outlet of thedrying furnace at No. 1workshop
1.35
fired waste gas incinerator+15m | Emission Control Standard |
for Industrial Enterprises
Volatile OrganicCompounds (DB12/ 524-
2020)
0.187 21.6 No
Waste gas outlet of 1#drying furnace at No. 3
workshop
0.985
Die casting at No. 2
workshop
0.323
Die casting at No. 4workshop
0.52
Guangdo
KitchenAppliances
COD
Discharge to the municipal sewagesystem after being treated bywastewater treatment system
The eastern side ofwastewater treatmentstation in Malong base
The discharge limits of
water pollutants inGuangdong (DB-44/26-
201)
10.90 22.77 No
Ammonianitrogen
2.7 0.74 4.554 NoParticles 20m high altitude discharge 11626 outlets at A1 plant, 50
16.1
Emission standard of air
28.01 / No
Manufact
uringCo., Ltd.
Sulfurdioxide
outlets at A2 plant, 21outlets at B2 plant, 9outlets at C2 plant, 2outlets at C3 plant, 1
at wastewater treatmentstation and 7 outlets at
canteen
pollutants for industrial kilnand furnace(GB-9078-1996)/ The emission limit
of gas pollutants inGuangdong(DB-44/27-
2007)
0.00 1.055 No
Nitrogen
oxide
7 0.26 10.314 NoBenzene
High altitude discharge after beingtreated by waste gas treatment station
outlet
0.773 0.02 / No
Toluene and
xylene
13.8 5.94 / NoVOCs 47 39.46 / NoNMHC 18.4 3.22 / NoStyrene 9.34 1.13 / NoCooking
fume
0.78 0.13 / No
FoshanWellingWasher
MotorManufact
uringCo., Ltd.
Benzene
Activated carbon + UV photolysis +
catalytic combustion
Waste gas outlet near 2#
plant
Emission standard of
Toluene andvolatile organic compounds
for furniture manufacturing(DB44/814-2010) thesecond time period
0 / No
volatile organic compounds | ||
Toluene and |
xylene
Activated carbon + UV photolysis +
catalytic combustion
Waste gas outlet near 2#
plant
2.71
Emission standard of
for furniture manufacturing
(DB44/814-2010) thesecond time period
0.87 / No
VOCs
Activated carbon + UV photolysis +
catalytic combustion
Waste gas outlet near 2#
plant
18.85
Emission standard of
for furniture manufacturing(DB44/814-2010) the
second time period
5.97 17.83 No
Welling(Wuhu)
MotorManufact
uringCo., Ltd.
Particles
Collected by gas trap hood + dust
volatile organic compoundscollector + activated carbon +15m high
exhaust cylinder
Exhaust funnels 1 and 2for mold injection
21.5
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
23 5 No
VOCs
collector + activated carbon +15m high |
Collected by gas trap hood +15m high |
exhaust cylinder
Waste gas outlets 1-7 ofthe die casting workshop
2.75
Emission standard of airpollutants for industrial kilnand furnace(GB9078-
1996)
3.388 0.9 No
VOCs Activated carbon + UV photolysis 2
Exhaust funnels 1 and 2for dip coating
26.1
Hebei Province Standard
DB13/2322-2016 The
Concentration Limits atEmission Reference Pointfor Coating Operations
31 3 No
COD
Discharge after being treated bywastewater treatment system andreaching the standard
General wastewater outlet
Integrated wastewater
discharge standard(GB8978-1996)chart 4
third-level
65 / NoAmmonianitrogen
20 7 / NoBOD 12.3 13.486 / No
SS 59 12.5 / NoPetroleum 0.95 1.04 / No
AnhuiCOD
Discharge after being treated by
The south side of Building
Integrated wastewater
32.4 / No
Meizhi
Manufact
uringCo., Ltd.
Ammonianitrogen
wastewater treatment system andreaching the standard
Precision | 6 for night shift at the north | |
side of the plant area
2.4
discharge standard(gb8978-1996), chart 4,
level 3
2.6214 / No
BOD 14 12.474 / No
SS 22 16.2 / NoPetroleum 0.73 1.126 / No
Particles
Collected by gas trap hood +21m high
exhaust cylinder
1-8# welding waste gas
outlets
7.3
Integrated emissionstandards for atmosphericpollutants GB16297-1996,chart 2, level 2
1.877.4
/
No9#-
10# welding waste gas
outlets
7.1
2# outlet of stator + rotorheat-treating furnace
0.672
Emission standard of airpollutants for industrial kilnand furnace GB9078-
10# welding waste gas | ||
1996, |
chart 2, level 2
4.7256 No
3# outlet of 2# stator heat-
treating furnace
0.9
1# outlet of stator + rotor
heat-treating furnace
0.7992
Outlet at the head of 3#
stator furnace
0.3384
Outlets at the head of 2#
furnace
0.7848
Outlets at the tail of 3#
stator furnace and 4# rotor |
and 4# stator furnaces and comprehensive outlet for 4 |
aluminum melting
furnaces
0.7704
Waste gas outlet ofaluminum melting furnace
0.4608
Sulfurdioxide
exhaust cylinder
1# outlet of heat-treating
furnace
3.0
Emission standard of airpollutants for industrial kilnand furnace GB9078-
Collected by gas trap hood +21m high | 1996, | |
chart 2, level 2
0.68 / No
2# outlet of heat-treating
furnace
10.0
Nitrogen
oxide
exhaust cylinder
2# outlet of stator + rotor
heat-treating furnace
2.6616
6.7416 / No
3# outlet of 2# stator heat-
treating furnace
1.5456
1# outlet of stator + rotorheat-treating furnace
2.5344
VOCs
Direct-
Collected by gas trap hood +21m high |
fired waste gas incinerator+21m |
high exhaust cylinder
1# outlet for waste gasfrom drying
0.5256
Chart 1 of Hebei Province
Standard—EmissionControl Standard forIndustrial Enterprises
Volatile Organic
Compounds (DB13/2322-
2016)
2.2038 / No
9-10# outlets for waste
gas from drying
25.3
GDMideaEnvironmentAppliances Mfg.Co.,Ltd.
VOCs
Gas trap hood + dry filtering + UV +activated carbon + 15m high altitude
discharge
During the screen printing
process
1.21
Emission standard of
for printing industry(DB44/815-2010)
0.068 0.07 No
volatile organic compounds | ||
Dry filtering + UV + activated carbon + |
catalytic combustion + 15m high
altitude discharge
Outlet for waste gas from
dip coating, drying and
hardening
Emission standards forodor pollutants (GB14554-
93)
3.19 3.42 No
Gas trap hood + dry filtering + UV +activated carbon + 15m high altitude
discharge
process
0.15
Emission Limits of AirPollutants (DB44/27-
During the manual welding | 2001): |
Time Period 2, Level 2
and
Emission standards forodor pollutants (GB14554-
93)
0.005 0.009 No
Gas trap hood + dry filtering + UV +activated carbon + 15m high altitude
discharge
During the wave
process (paste printingand wave reflow)
1.24
Emission Limits of AirPollutants (DB44/27-
soldering | 2001): |
Time Period 2, Level 2
and
Emission standards forodor pollutants (GB14554-
93)
0.078 0.086 No
NMHC
Gas trap hood + dry filtering + UV +activated carbon + 15m high altitude
discharge
Exhaust funnel for wastegas from the baking and
injection moldingprocesses
2.78
Emission Standards ofIndustrial Pollutants in the
Synthetic Resin Industry
(GB 31572-2015)
1.278 1.432 No
Particles
Gas trap hood + water spraying + dryfiltering + UV + activated carbon +15m high altitude discharge
Outlet for waste gas fromdusting, electrophoresis
and hardening
Emission Limits of AirPollutants (DB44/27-
Time Period 2, Level 2
and
Emission standards forodor pollutants (GB14554-
93)
0.973 1.05 No
Cooking
fume
2001): | ||
Water wash hood + electrostatic range |
hood + 15m high altitude discharge
Cooking fume outlet at
canteen
0.3
Emission Standard ofCooking Fume(GB
18483-2001)
0.287 0.4 No
HubeiMideaRefrigera
tor Co.,
Ltd.
COD
Domestic sewage in the plant isdischarged to the municipal sewagesystem after being treated by the
septic tank
Domestic sewage outlets
at the plant
Integrated wastewaterdischarge standard(GB8978-1996)
6.89 15 No
Ammonianitrogen
5.18 1.36 2.5 NoBOD 9.8 2.25 / No
SS 35 8.04 / NoAnimal andvegetable
oil
0.67 0.15 / NoPetroleum 0.70 0.16 / No
COD
Freezer spaying waste water isdischarged to the municipal sewagesystem after floatation +
aerobic sludge digestion + filtration
and other processes
Waste water outlets at thefreezer branch plant
Integrated wastewater
discharge standard(GB8978-1996)
2.94 15 No
Ammonianitrogen
4.49 0.20 2.5 NoBOD 26.8 1.08 / No
SS 21 0.85 / NoAnimal andvegetable
oil
1.82 0.07 / NoPetroleum 1.28 0.05 / No
Guangzhou MideaHualingRefrigerator Co., L
td.
NMHC,
odorconcentratio
n, andVOCS
High altitude discharge after beingtreated by waste gas treatment
acidification +station
(UV photolysis + light and oxygen
purification)
1# outlet: upper platformof central air-conditioning
room of 2# plant
station | 2# outlet: external platform |
of rolling line of 2# plant
5.5
For NMHC, Table 4 of the
Emission Standards ofIndustrial Pollutants in theSynthetic Resin Industry
(GB 31572-2015):
Emission Limits
3.3 / No
3# outlet: platform ofextruding line of 3# plant4# outlet: platform on 2/Fof plastic injection room
For odor concentration,
Table 2 of Emissionstandards for odorpollutants (GB14554-93):
Emission LimitsFor VOCs
of Air Pollutants (DB44/27-2001): Time Period 2,Level 2 (Limits for NMHC)
WuxiLittleSwanElectricCo., Ltd.
COD
Discharge to the municipal sewage
system
Exit at the middle gate of
the plant
Integrated wastewaterdischarge standard(GB8978-1996)
30.744
123.899
NoSS 45 8.724 87.2473 NoAnimal andvegetable
oil
1.33 1.1718 10.7034 NoTotalphosphorus
, Emission Limits
1.95 0.3155 1.0701 NoTotalnitrogen
32.5 3.7618 11.2612 NoAmmonianitrogen
25.6 2.6796 6.6906 NoParticles High altitude discharge after treatment
11 Buildings A, C, and D
ND
Integrated emissionstandards for atmosphericpollutants(GB16297-1996)/Tianjin Emission
0.2601 2.0696 No
VOCS
Direct discharge
0.49 0.4562 1.2218 NoSulfurdioxide
5 0.0903 0.624 No
Nitrogen
oxide
Control Standard forIndustrial Enterprises
Volatile OrganicCompounds (DB12/524-2014)/
of Industrial Pollutants inthe Synthetic ResinIndustry (GB 31572-2015)/
Emission standard of airpollutants for boiler(GB13271-2014)
0.598 3.38 No
Chongqi
GeneralRefrigera
tionEquipment Co.,Ltd.
Anionicsurfactant
Discharge after being treated bywastewater treatment system andreaching the standard
ng Midea | General waste water outlet | |
of the plant
Provincial DischargeStandard of Main WaterPollutants for ChemicalIndustry Park (GB/T4754-
2011)
Provincial DischargeStandard of Main WaterPollutants for ChemicalIndustry Park (DB50/457-
2012)
0.000035
0.001121
NoCOD 32000 0.001794
0.02802
NoSuspendedsolids
8000 0.000448
0.02242
NoPH value / / / NoAmmonianitrogen(NH3-N)
4210 0.000236 / NoFive-day
BOD
15000 0.000841
0.01681
NoToluene
High altitude discharge after beingtreated by waste gas treatment station
4 1# and 4# workshops
0.101
Limit of HarmfulSubstances of Industrial
Protective Coatings
0.0054 8.7048 No
Benzene 0.077 0.0041 1.404 No
NMHC 4.07 0.225 28.08 No
Xylene 1.77
(GB30981-2020); Fugitive
Emission Standard of
Volatile OrganicCompounds (GB37822-2019);
Standard of Air Pollutants(DB50-418-2016)
0.084 2.808 No
Particles 15.7 0.5054 2.2464 No
HuaianWelling
MotorManufacturingCo., Ltd.
Particles
Gas trap hood + cotton filter +activated carbon + 15m high exhaust
cylinder
5# waste gas outlet:
outside the inductor dip
coating room8# waste gas outlet:
outside the reactor dip
coating room
7.1
Integrated emissionstandards for atmospheric
pollutants(GB16297-
1996)
0.585 0.97 No
NMHC 1.84
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
0.1870 0.3078 No
Styrene /
Emission standards forodor pollutants (GB14554-
93)
/ 0.032 No
MideaGroupWuhanRefrigera
tionEquipme
ntCo.,Ltd.
PH value
Discharge after being treated bywastewater treatment system andreaching the standard
1 West of the plant
7.38-7.48
Integrated wastewater
discharge standard(GB8978-1996)
/ / NoSuspended
solids
21 / / NoFive-day
COD
53.6 / / No
COD 150 2.19 19.60 NoPetroleum 0.24 / / NoAmmonianitrogen
0.152 0.002 1.764 NoFluoride 11.1 / / NoTotal zinc 3.38 / / NoParticles
1. Water spraying + low-temperature
plasma; direct-fired TO furnace
2. Frame filtration + activated carbon
UV photolysis + carbon absorption
4. Activated carbon
5. RTO regenerative combustion
Northwestern corner of 1#plant; central 1# plant
0.129
Integrated emissionstandards for atmosphericpollutants(GB16297-
1996)
1.548
2.775 No
Sulfurdioxide
Northeastern corner of 3#
plant
0.0278
0.334
0.405 No
Nitrogenoxide
1 West Gate 2 of 4# plant 0.1458
1.750
1.89 No
VOCs 2
West Gate 2 of 5# plant,West Gate 1 of 5# plant
0.129
2.270
/ No
The construction of pollution prevention facilities and their operationDuring the Reporting Period, all subsidiaries have strictly abided by the laws and regulations related to environment protection, and no majorenvironmental pollution incidents occurred. All subsidiaries have set up reliable waste water and gas treatment systems. Through regular monitoring,
supervision and inspection mechanisms, as well as third-party testing, it is ensured that the discharge of waste water, waste gas and solid waste duringthe production and operation process meets the national and local laws and regulations. There is no excessive discharge by any subsidiary, which is incompliance with the relevant requirements of the environment administrations.The environmental effect evaluation of construction projects and other administrative permits in relation to environmental protectionAll subsidiaries strictly observe the laws and regulations governing environmental protection, and all construction projects are in compliance with theenvironmental effect requirements and other rules, with no misdeeds during the Reporting Period. Once a construction project is finished, a third-partytesting institution is hired to examine indexes including waste water, waste gas and noise, and the compilation and approval of the environmental effectevaluation report is finished in time.Contingency plans for environmental accidentsAll subsidiaries have finished the compilation and approval of their contingency plans for environmental accidents. Emergency mechanisms forenvironmental pollution accidents have been established and improved, and the subsidiaries’ ability to deal with environmental pollution accidents hasbeen enhanced, so as to maintain social stability, protect the lives, health and properties of the public, protect the environment, and promote acomprehensive, coordinated and sustainable development of the society.According to the accident levels, subsidiaries have formulated rules covering working principles, contingency plans, risk prevention measures,commanding departments, responsibilities and labor division, and have filed these contingency plans with the government.Environment self-monitoring plans
All the subsidiaries have formulated their own environment self-monitoring plans according to China’s relevant laws and regulations, , which include: 1)Waste gas pollution source monitoring: Sampling points are set at various discharge ports of waste gas for monitoring on a quarterly basis; 2) Wastewater pollution source monitoring: Samples are fetched at intake and outlet ports of waste water treatment stations to monitor changes of pollutionsource of waste water and up-to-standard emission of waste water after being treated at the waste water treatment stations. Monitoring items includeCODcr, SS and petroleum, etc. The data is uploaded to the governmental monitoring authority online and the government authority conducts real-timemonitoring; 3) Noise monitoring: Noise monitoring points are set at noise sensitive points and on the border of factories. Noise is monitored once inspring and summer respectively and at daytime and at nighttime respectively each time; 4) Solid waste pollution source monitoring: Hazardous wasteproduced from the subsidiaries is handed over to the units with qualifications for treatment, monitoring systems are established, and related managementforms and accounts are set up.Other environment-related information that should be made publicNoneOther environment-related informationNone
19. Other Significant Events
□Applicable √N/A
20. Significant Events of Subsidiaries
√Applicable □N/A
Midea Group acquired, through its subsidiary GD Midea Heating & Ventilating Equipment Co., Ltd.(hereinafter referred to as “Midea Heating & Ventilating”), a controlling interest in Hiconics Eco-energyTechnology Co., Ltd. (hereinafter referred to as “Hiconics”, a company listed on the ChiNext Board of theShenzhen Stock Exchange by the stock code of 300048) by an agreement (hereinafter referred to as the“Acquisition”).On 25 March 2020, Midea Heating & Ventilating entered into the Share Transfer Agreement with ShanghaiShangfeng Group Co., Ltd. (hereinafter referred to as “Shangfeng Group”) and Liu Jincheng. A total of208,685,418 shares (approximately 18.73% of Hiconics’s total share capital) were acquired in theAcquisition, with a total payment of RMB742,582,087. Midea Heating & Ventilating entered into the VotingRights Entrustment Agreement with Shangfeng Group and Ye Jinwu, which agreed to entrust the votingrights in respect of their holdings of 55,747,255 shares in Hiconics (approximately 5% of Hiconics’s totalshare capital) to Midea Heating & Ventilating on an irrevocable basis for a term of 15 months commencingfrom the settlement date of the Acquisition, which makes Midea Heating & Ventilating have control overthe voting rights in respect of a total of 264,432,673 shares in Hiconics (approximately 23.73% ofHiconics’s total share capital).On 30 April 2020, China Securities Depository and Clearing Co., Ltd. (Shenzhen branch) issued theConfirmation of Transfer of Securities Ownership, representing the completion of the transfer of all the208,685,418 non-restricted public shares in Hiconics in the Acquisition.
Section VI Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
Before
Increase/decrease in Reporting Period
(+/-)
AfterShares
Percentage (%)
New issue Others Subtotal Shares
Percentage(%)
1. Restricted shares
165,402,513
2.37
17,460,118
17,460,118
182,862,631
2.60
1.1 Shares held by the
state
1.2 Shares held by state-
owned corporations
1.3 Shares held by other
domestic investors
163,369,513
2.34
16,415,618
16,415,618
179,785,131
2.56
Among which: Sharesheld by domesticcorporations
2,363,601
0.03
2,363,601
0.03
Sharesheld by domesticindividuals
161,005,912
2.31
16,415,618
16,415,618
177,421,530
2.52
1.4 Shares held by
foreign investors
2,033,000
0.03
1,044,500
1,044,500
3,077,500
0.04
Among which: Sharesheld by foreigncorporations
Sharesheld by foreignindividuals
2,033,000
0.03
1,044,500
1,044,500
3,077,500
0.04
2. Non-restricted shares 6,806,497,061
97.63
63,801,425
-23,185,118
40,616,307
6,847,113,368
97.40
2.1 RMB common shares 6,806,497,061
97.63
63,801,425
-23,185,118
40,616,307
6,847,113,368
97.40
2.2 Domestically listed
foreign shares
2.3 Overseas listed
foreign shares
2.4 Other
3. Total shares 6,971,899,574
100.00
63,801,425
-5,725,000
58,076,425
7,029,975,999
100.00
Reasons for the changes in shares
√Applicable □N/A
a. As the conditions for the second unlocking period for the reserved restricted shares of the 2017Restricted Share Incentive Scheme had been satisfied, the 1,340,750 restricted shares of a total of 42eligible employees were unlocked and allowed for public trading on 19 February 2020, including 53,000restricted shares of foreign employees.b. As the conditions for the third unlocking period for the first phase of the 2017 Restricted Share IncentiveScheme had been satisfied, the 5,532,500 restricted shares of a total of 99 eligible employees wereunlocked and allowed for public trading on 22 June 2020, including 150,000 restricted shares of foreignemployees.c. As the conditions for the first unlocking period for the first phase of the 2018 Restricted Share IncentiveScheme had been satisfied, the 3,704,125 restricted shares of a total of 231 eligible employees wereunlocked and allowed for public trading on 1 July 2020, including 187,500 restricted shares of foreignemployees.d. For the reasons of certain incentive recipients’ departure from the Company, violation of company rules,position change, individual performance appraisal result being “substandard” or other factors, theCompany repurchased and retired 679,000 shares of 16 incentive recipients under the 2017 RestrictedShare Incentive Scheme on 10 March 2020, 1,586,500 shares of 33 incentive recipients under the 2018Restricted Share Incentive Scheme, and 1,241,000 shares of 21 incentive recipients under the 2019Restricted Share Incentive Scheme, totaling 3,506,500 restricted shares (including 125,000 restrictedshares of foreign employees).e. For the reasons of certain incentive recipients’ business unit’s 2019 performance appraisal result being
“just so-so”, departure from the Company, violation of company rules, position change, individualperformance appraisal result being “substandard” or other factors, the Company repurchased and retired187,500 shares of 3 incentive recipients under the 2017 Restricted Share Incentive Scheme on 31 July2020, 1,021,000 shares of 18 incentive recipients under the 2018 Restricted Share Incentive Scheme,and 1,010,000 shares of 15 incentive recipients under the 2019 Restricted Share Incentive Scheme,totaling 2,218,500 restricted shares (including 175,000 restricted shares of foreign employees).f. 33,245,000 restricted shares (repurchased shares) were granted to 506 employees (including1,510,000 restricted shares to foreign employees) under the 2020 Restricted Share Incentive Scheme,with no change to the total share capital of the Company. These shares would be allowed for publictrading on 14 July 2020.g. In 2020, the incentive recipients of stock options chose to exercise 63,801,425 shares, which havebeen registered into the Company’s share capital.h. In 2020, locked-up shares held by senior management increased by 517,493 shares.Approval of share changes
□ Applicable √ N/A
Transfer of share ownership
□ Applicable √ N/A
Progress of any share repurchase
√ Applicable □ N/A
a. The Proposal on the Plan for the Repurchase of Some Public Shares (hereinafter referred to as the“2020 Repurchase Plan”) was approved at the 18th Meeting of the 3rd Board of Directors on 21 February2020. As such, the Company was agreed to repurchase, with its own funds, no less than 40,000,000shares and no more than 80,000,000 shares by way of centralized bidding at a price not exceedingRMB65/share (adjusted to a price not exceeding RMB63.41/share upon the implementation of the 2019Annual Profit Distribution Plan). All the repurchased shares would be used for the Company’s equityincentive schemes and/or employee stock ownership schemes.
As disclosed in the Announcement on the Completion of the Implementation of the Share RepurchasePlan dated 23 October 2020, during the repurchase period, the Company had repurchased 41,826,050shares (0.5953% of the Company’s total share capital as of 21 October 2020) by way of centralizedbidding. With the highest trading price being RMB74.99/share and the lowest being RMB46.30/share, thetotal payment amounted to RMB2,697,409,655.33 (exclusive of trading fees). Therefore, the Companyhas repurchased over 40,000,000 shares (the lower limit for this share repurchase) for the 2020Repurchase Plan, and the fact that the Company’s share price has been consistently higher than theupper limit of the repurchase price has made continued repurchase unlikely. Therefore, theimplementation of this share repurchase plan has been completed.So far, cumulatively 10,635,020
repurchased shares have been transferred. If the Company does not use the repurchased shares for theaforesaid purposes within 36 months upon the completion of the share repurchase, the unused shareswill be retired following the relevant procedure.Progress of any repurchased share reduction through centralized price bidding
□ Applicable √ N/A
Effects of changes in shares on basic EPS, diluted EPS, net assets per share attributable to commonshareholders of the Company and other financial indexes over the last year and the last Reporting Period
□Applicable √N/A
Other contents that the Company considers necessary or is required by the securities regulatoryauthorities to disclose
□Applicable √N/A
1.2 Changes in restricted shares
√ Applicable □ N/A
Unit: shareName of shareholder
Openingrestricted
shares
Unlocked in
currentperiod
Increased in
currentperiod
Closingrestricted
shares
Reason for change Date of unlocking
Incentive recipients
of 2017 Restricted Share Incentive Scheme (first |
phase) ①
6,140,000
5,532,500
Lockup according to |
the Scheme
22 June 2020
Incentive recipients
Incentive Scheme ②
2,924,750
of reserved restricted shares under 2017 Restricted Share |
1,340,750
1,325,000
Lockup according to |
the Scheme
19 February 2020
Incentive recipients
phase) ③
17,094,000
of 2018 Restricted Share Incentive Scheme (first |
3,704,125
11,232,375
Lockup according to |
the Scheme
1 July 2020Incentive recipients ofreserved restrictedshares under 2018Restricted ShareIncentive Scheme ④
2,420,000
1,970,000
Lockup according to |
the Scheme
10 May 2021Incentive recipients
Incentive Scheme ⑤
28,560,000
of 2019 Restricted Share |
26,309,000
Lockup according to |
the Scheme
10 July 2021Incentive recipients
2020
Restricted Share |
Incentive Scheme
33,245,000 | 33,245,000 | Lockup according to |
the Scheme
14 July 2021
Zhang Xiaoyi 273,875
151,056
424,931
Lockup for seniormanagementposition
-
Jiang Peng 458,475
114,525
343,950
Lockup for seniormanagementposition
-
Xiao Mingguang 66,250
153,750
220,000
Lockup for seniormanagementposition
-
Zhong Zheng 11,152
87,212
98,364
Lockup for seniormanagementposition
-
Hu Ziqiang 0
225,000
225,000
Lockup for seniormanagementposition
-
Zhu Fengtao 765,300
15,000
780,300
Locked-
a former seniorexecutiveassociated with hisformer tenure
-
Total58,713,802
up shares of | ||
10,691,900
33,877,018
76,173,920
-- --
Notes: ① 607,500 restricted shares in total for the first phase of the 2017 Restricted Share IncentiveScheme that had been granted but were still in lockup were retired on 10 March 2020 and 31 July 2020,reducing the closing restricted shares by 607,500 shares.
② 259,000 reserved restricted shares under the 2017 Restricted Share Incentive Scheme that had been
granted but were still in lockup were retired on 10 March 2020, reducing the closing restricted shares by259,000 shares.
③ 2,157,500 restricted shares in total for the first phase of the 2018 Restricted Share Incentive Scheme
that had been granted but were still in lockup were retired on 10 March 2020 and 31 July 2020, reducingthe closing restricted shares by 2,157,500 shares.
④ 450,000 reserved restricted shares in total under the 2018 Restricted Share Incentive Scheme that
had been granted but were still in lockup were retired on 10 March 2020 and 31 July 2020, reducing theclosing restricted shares by 450,000 shares.
⑤ 2,251,000 restricted shares in total for the 2019 Restricted Share Incentive Scheme that had been
granted but were still in lockup were retired on 10 March 2020 and 31 July 2020, reducing the closingrestricted shares by 2,251,000 shares.
2. Issuance and Listing of Securities
2.1 Securities (excluding preference shares) issued in the Reporting Period
□Applicable √N/A
2.2 Changes in total shares of the Company and the shareholder structure, as well as the asset
and liability structures
√ Applicable □ N/A
The total shares of the Company were 6,971,899,574 at the beginning of the Reporting Period. Duringthe Reporting Period, 63,801,425 awarded stock options were exercised and registered; and a total of5,725,000 restricted shares under the 2017, 2018 and 2019 Restricted Share Incentive Schemes wererepurchased and retired. As such, total shares are 7,029,975,999 at the end of the Reporting Period.
2.3 Existing staff-held shares
□Applicable √N/A
3. Shareholders and Actual Controller
3.1 Total number of shareholders and their shareholdings
Unit: shareTotal numberof commonshareholdersat the end ofthe ReportingPeriod
226,871
Total number of |
common
the prior month-end before thedisclosure dateof the annualreport
404,034
shareholders at |
Total number ofpreferenceshareholders withresumed votingrights at theperiod-end (if any)
Total number of |
preferenceshareholderswith resumedvoting rights atthe prior month-end before thedisclosure dateof the annualreport (if any)
5% or greater common shareholders or top 10 common shareholdersName ofshareholder
Nature ofshareholder
Shareholdingpercentage (%)
Total common |
shares held atthe period-
Increase/decrease duringtheReporting
Period
Number ofrestrictedcommonshares held
Number ofnon-restricted
common
shares held
Pledged or frozen
sharesStatu
s
Shares
Midea HoldingCo., Ltd.
Domesticnon-state-ownedcorporation
30.86%
end | |
2,169,178,713
-42,867,900
2,169,178,713
Pledg
ed
100,000,000
Hong KongSecuritiesClearingCompany Limited
Foreigncorporation
15.05%
1,057,722,637
-119,585,807
1,057,722,637
China SecuritiesFinance Co., Ltd.
State-ownedcorporation
2.82%
198,145,134
198,145,134
Fang Hongbo
Domesticindividual
1.66%
116,990,492
-20,000,000
102,742,869
14,247,623
Canada PensionPlan InvestmentBoard- own
Foreigncorporatio
1.48%
103,913,897
-16,465,170
103,913,897
funds (stockexchange)
nCentral HuijinAssetManagement Ltd.
State-
owned
corporatio
n
1.28%
90,169,354
90,169,354
Huang Jian
Domestic
individual
1.25%
88,030,000
-2,200
88,030,000
UBS AG
Foreign
corporatio
n
0.79%
55,877,225
18,513,229
55,877,225
Li Jianwei
Foreign
individual
0.72%
50,300,000
-1,400,000
50,300,000
Yuan Liqun
Domestic
individual
0.60%
42,125,195
-10,748,375
42,125,195
Strategic investors or general |
corporations becoming top-ten common shareholdersdue to placing of new shares
N/ARelated-parties or acting-in-concert parties among theshareholders above
N/A
Top 10 non-restricted common shareholdersName of shareholder
Number of non-
restricted common shares
held at the period-end
Type of sharesTypeSharesMidea Holding Co., Ltd. 2,169,178,713
restricted common shares |
RMB common stock 2,169,178,713
Hong Kong Securities Clearing
Company Limited
1,057,722,637
RMB common stock 1,057,722,637
China Securities Finance Co.,Ltd.
198,145,134
RMB common stock 198,145,134
Canada Pension PlanInvestment Board- ownfunds (stock exchange)
103,913,897
RMB common stock 103,913,897
Central Huijin AssetManagement Ltd.
90,169,354
RMB common stock 90,169,354
Huang Jian 88,030,000
RMB common stock 88,030,000
UBS AG 55,877,225
RMB common stock 55,877,225
Li Jianwei 50,300,000
RMB common stock 50,300,000
Yuan Liqun 42,125,195
RMB common stock 42,125,195
Merrill Lynch International40,958,596
RMB common stock 40,958,596
Related-parties or acting-in-concert parties among the topten non-restricted commonshareholders and between thetop ten non-
shareholders and the top tencommon shareholders
N/A
Explanation on the top 10common shareholdersparticipating in securitiesmargin trading (if any)
1. The Company’s shareholder Yuan Liqun holds 9,138,000 shares in the Company
through her common securities account and 32,987,195 shares in the Companythrough her account of collateral securities for margin trading, representing a totalholding of 42,125,195 shares in the Company.
Did any of the top 10 common shareholders or the top 10 non-restricted common shareholders of theCompany conduct any promissory repurchase during the Reporting Period
□Yes √No
No such cases in the Reporting Period.
3.2 Controlling shareholder
Name of controlling
shareholder
Legalrepresentative / companyprincipal
Date ofestablishment
Credibility codeMain business scope
Midea Holding Co., Ltd.
restricted common
He Xiangjian |
2002-08-05
914406067429989733
Manufacture and commerce investment;domestic commerce and materials supplyand marketing industry (excluding state-designated monopoly); CP software andhardware development; industrial productdesign; information technology consultingservices, providing investment consultantand consulting services; installation,maintenance and after-sales service ofelectric appliances; real estate
intermediary service and forwarding agent |
service.Shareholdings of thecontrolling shareholderin other controlled ornon-controlled listedcompanies at home orabroad during the
Apart from a direct control over the Company, Midea Holding does not directly control or haveshares in other listed companies at home or abroad.
Reporting PeriodChange of the controlling shareholder during the Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
3.3 Actual controller and acting-in-concert parties thereof
Name of the actual controller
Relationship with
94.55%
the actual controller
Nationality
Right of residence in other countries or
regionsHe Xiangjian
Actual controllerhimself
The People'sRepublic of China
the actual controller | |
NoMain occupation and duty Incumbent board chairman of Midea Holding Co., Ltd.Domestically and overseas listedcompanies controlled in the last10 years
Midea Group (000333.SZ), KUKA (KU2.DE), Hiconics (300048.SZ),
Estate (3990.HK),
Little Swan (A: 000418.SZ; B: 200418) (delisted in 2019), and |
Welling Holding (00382.HK) (delisted in 2018)Whether the Company has any shareholder with a greater than 10% interest at the ultimate control level
□ Yes √ No
Shareholders with a greater than 5% interest at the ultimate control level
□Applicable √N/A
Change of the actual controller during the Reporting Period
□Applicable √N/A
No such cases in the Reporting Period.
Ownership and control relations between the actual controller and the Company
He Xiangjian
The actual controller controls the Company via trust or other ways of asset management
□Applicable √N/A
3.4 Other corporate shareholders with a shareholding percentage above 10%
□Applicable √N/A
3.5 Limits on the Company’s shares held by its controlling shareholder, actual controller,
reorganizer and other commitment subjects
□Applicable √N/A
Midea Group Co., Ltd.
0.25%
30.86%
Midea Holding Co., Ltd.
Section VII Information about Directors, Supervisors, Senior
Management and Employees
1. Changes in Shareholdings of Directors, Supervisors and Senior Management
Name Office title
Incumbe
nt/Former
Gender
Age
Startingdate oftenure
Endingdate oftenure
Sharesheld atthe year-begin(share)
Sharesincreased attheReportingPeriod(share)
Sharesdecreased
at theReporting
Period
(share)
Otherincrease/
decrease |
(share)
Shares heldat the period-
end (share)
FangHongbo
Chairman ofthe Board andCEO
Incumbent
Mal
e
54 2012-8-25 2021-9-25
136,990,
20,000,000
116,990,492
HeJianfeng
Director
Incumbent
Mal
e
54 2012-8-25 2021-9-25 0
YinBitong
Director andVice President
Incumbent
Mal
e
53 2016-12-16
2021-9-25
2,109,65
2,109,655
GuYanmin
Director andVice President
Incumbent
Mal
e
58 2014-4-21 2021-9-25 0
YuGang
Director
Incumbent
Mal
e
62 2018-9-26 2021-9-25 0
XueYunkui
IndependentDirector
Incumbent
Mal
e
57 2018-9-26 2021-9-25 179,914
179,914
GuanQingyou
IndependentDirector
Incumbent
Mal
e
44 2018-9-26 2021-9-25 0
HanJian
IndependentDirector
Incumbent
Female
49 2018-9-26 2021-9-25 0
Dong Chairman of IncuMal35 2020-10-16
2021-9-25 0
Wentao
theSupervisoryCommittee
mbent
e
ZhaoJun
Supervisor
IncumbentMal
e
46 2014-4-21 2021-9-25 0
LiangHuiming
EmployeeSupervisor
Incumbent
Female
38 2017-3-30 2021-9-25 0
WangJianguo
Vice President
Incumbent
Mal
e
45 2017-12-15
2021-9-25 0
ZhangXiaoyi
Vice President
Incumbent
Mal
e
48 2018-4-23 2021-9-25 586,575
70,000
516,575
XiaoMingguang
Vice President
Incumbent
Mal
e
51 2019-3-22 2021-9-25 355,000
105,000
460,000
HuZiqiang
Vice President
Incumbent
Mal
e
64 2014-8-18 2021-9-25 400,000
400,000
WangJinliang
Vice President
Incumbent
Mal
e
54 2014-8-18 2021-9-25 120,000
120,000
240,000
LiGuolin
Vice President
Incumbent
Mal
e
45 2020-7-3 2021-9-25 165,000
100,000
265,000
Liu Min
Chairman oftheSupervisoryCommittee
Former
Female
2016-2-1 2020-10-16
Vice President
Incumbent
2020-10-16
2021-9-25ZhongZheng
Director ofFinance
Incumbent
Female
39 2019-3-22 2021-9-25 201,152
10,000
211,152
JiangPeng
BoardSecretary
IncumbentMal
e
48 2013-10-30
2021-9-25 458,600
100,000
358,600
HelmutZodl
CFO
Former
Mal
e
48 2019-10-22
2021-1-25 0
Total -- -- -- -- -- --
141,566,
20,170,000
335,000
121,731,388
2. Changes in Directors, Supervisors and Senior Management
√Applicable □N/A
Name Office title Type of change DateReasonLi Guolin Vice President Appointed 2020-7-3 -
Liu Min
Chairman of theSupervisory Committee
Former 2020-10-16 Job changeLiu Min Vice President Appointed 2020-10-16 -Dong Wentao
Chairman of theSupervisory Committee
Elected 2020-10-16 -Helmut Zodl CFO Former 2021-1-25 Personal reason
3. Brief Biographies
Professional backgrounds, main work experience and current responsibilities in the Company of theincumbent directors, supervisors and senior managementMr. Fang Hongbo, male, holder of a Master's degree, is the Chairman and CEO of the Company. Hejoined Midea in 1992 and previously served as the General Manager of Midea Air-Conditioning BusinessUnit, CEO of Midea Refrigeration Electric Appliances Group, Chairman and CEO of GD Midea HoldingCo., Ltd.Mr. He Jianfeng, male, holder of a Bachelor's degree, is a Director of Midea Group. He is also theChairman of the Board and President of Infore Investments Holding Group Co., Ltd.Mr. Yin Bitong, male, a Master's graduate, joined Midea in 1999 and served as GM Assistant andMarketing Director of the Residential Air Conditioning Division as well as GM and Director of Wuxi LittleSwan Co. Ltd. He is now a Director and Vice President of Midea Group, a Co-President of the SmartHome Business Group, the President of Midea Residential Air Conditioning Division, and the Presidentof Midea China.
Mr. Gu Yanmin, male, holder of a Doctoral degree, joined Midea in 2000 and has functioned as the Headof Planning & Investment, Head of Overseas Strategy & Development, Vice President and Head ofOverseas Business Development of Midea Air-Conditioning & Refrigeration Group, Head of OverseasStrategy of Midea Group. Currently he is a Director and Vice President of the Company, the President ofthe Robotics & Automation Division, as well as the Chairman of the Supervisory Committee of KUKA.Mr. Yu Gang, male, holder of a Doctoral degree given by the Wharton School of the University ofPennsylvania, is the Honorary Chairman and a co-founder of YHD.COM. He once served as the GlobalSupply Chain Vice President of Amazon and the Global Procurement Vice President of Dell. He is nowthe Executive Chairman of the Board of Directors and a co-founder of 111, Inc., as well as a Director ofMidea Group.Mr. Xue Yunkui, male, is a holder of a Doctoral degree given by the Southwest University and a holderof a Post-Doctoral degree given by the Shanghai University of Finance and Economics. He used to bethe associate dean and a doctoral supervisor at the School of Accountancy of Shanghai University ofFinance and Economics, a Founding Vice President of Shanghai National Accounting Institute andCheung Kong Graduate School of Business, the Secretary-General of China Association of AccountingProfessors, a Vice Chairman of the Steering Committee of the National Accounting Institute under theMinistry of Finance, etc. He is now an accounting professor of Cheung Kong Graduate School of Business,and an Independent Director of Midea Group.Mr. Guan Qingyou, male, is a holder of a Doctoral degree in economics given by the Chinese Academyof Social Sciences and a holder of a Post-Doctoral degree given by the Tsinghua University. He onceworked as a Vice President and the Director of the Research Institute of Minsheng Securities. Currently,he serves as the President and Chief Economist of the Reality Institute of Advanced Finance, a Professorof the Faculty of Economics of Hainan University, a Vice Chairman of China Institute of Private Sector,an Academic Committee of the International Monetary Institute of the Renmin University of China, theChief Economist of Zhongguancun Equity Investment Association and Guangdong Province VentureCapital Association, etc.Ms. Han Jian, female, holder of a Doctoral degree given by the Cornell University, is an associate
professor of management in China Europe International Business School, a co-director of the SinoEuropean Innovation Institute in China and the Sino European Digital Economy and Intelligent EnterpriseResearch Center, as well as an Independent Director of Midea Group.Mr. Dong Wentao, male, a Master's degree graduate, joined Midea in 2016. He used to work in CIMCand ZTE. And he once served in the Legal Affairs Department, the Investor Relations Department, etc. ofMidea Group, with over 10 years of experience in legal affairs, risk control, market value management,capital operation, etc.Mr. Zhao Jun, male, a Master's degree graduate, joined Midea in 2000 and has functioned as the Directorand the CFO of GD Midea Holding Co., Ltd. He is now a Supervisor of the Company, the ExecutivePresident in Midea Holding Co., Ltd., as well as a Non-Executive Director of Midea Real Estate HoldingLimited.Ms. Liang Huiming, female, is a holder of a Bachelor’s degree. Joining Midea in 2007, she used to serveas the Chief Business Administration Commissioner in Midea Group’s Administration and HumanResources Department. She is now the Employee Supervisor of Midea Group.Mr. Wang Jianguo, male, a Master’s degree holder, joined Midea in 1999. He was once the Director ofthe Supply Chain Management Department of Midea Group’s Residential Air Conditioner Division, theDirector of the Administration and Human Resources Department of Midea Group, and the GeneralManager of Midea Group’s Refrigeration Division. Currently, he is a Vice President of Midea Group, a Co-President of the Smart Home Business Group, and the President of Midea International Business.Mr. Zhang Xiaoyi, male, is a holder of a Master’s degree. Joining Midea Group in 2010, he used to serveas the head of the overseas process IT system, the head of the supply chain system, and the IT Directorof Midea Group, etc. He is now a Vice President and the Chief Information Officer of Midea Group.Mr. Xiao Mingguang, male, a holder of a Master’s degree, joined Midea in 2000. He once was the DeputyDirector of the Financial Management Department and the Director of the Operational ManagementDepartment of Midea Group, the Director of the Audit and Supervision Department and a Director of GDMidea Holding Co., Ltd., as well as the Director of Finance of Midea Group, etc. He is now a Vice
President of Midea Group.Mr. Hu Ziqiang, male, holder of a Doctoral degree, joined Midea in 2012, and has formerly worked forGE and Samsung and as a Vice GM in Wuxi Little Swan Co., Ltd. At present he is a Vice President andthe CTO of the Company.Mr. Wang Jinliang, male, holder of a Master’s degree, joined Midea in 1995 and previously worked asthe Vice President of China Marketing in the Company, and was GD Midea Holding’s Vice President andMarketing Head. He is now a Vice President of the Company.Mr. Li Guolin, male, holder of a Master’s degree, joined Midea in 1998 and previously worked as a VicePresident of the Residential Air Conditioner Division, and the President of the Small Domestic ApplianceDivision of Midea Group. He is now a Vice President, and the President of the Manufacturing TechnologyResearch Institute, of the Company.Ms. Liu Min, female, a Master’s degree graduate, joined Midea in 1998. She used to be the GeneralManager of the Overseas Marketing Company under Midea’s Residential Air-Conditioning Division andthe Director of Midea Executive Office. She is now a Vice President, a Vice President of the Robotics &Automation Division, of the Company, as well as a member of KUKA’s Supervisory Committee.Ms. Zhong Zheng, female, a holder of a Master’s degree, joined Midea in 2002. She once was theFinancial Manager of the factory in Guangzhou of the Residential Air Conditioner Division and of domesticand overseas marketing subsidiaries, the Director of Finance of the Financial Center and the ComponentDivision, as well as the Audit Director of Midea Group, etc. She is now the Director of Finance of MideaGroup.Mr. Jiang Peng, male, holder of a Master’s degree, joined Midea in 2007 and used to be theRepresentative for Securities Affairs and Board Secretary for GD Midea Holding Co., Ltd. He is now theBoard Secretary and Director of Investor Relations of Midea Group.
Posts held in shareholding entities
√Applicable □N/A
Name Shareholding entity Position
Beginningdate of office
term
Ending date of
office term
Allowance fromthe shareholdingentityHe Jianfeng
Midea Holding Co., Ltd. President 2016-01 - NoZhao Jun Midea Holding Co., Ltd. Executive President 2020-03 - YesNote N/APosts held in other entities
√Applicable □N/A
Name Other entity Position
Beginning date
of office term
Ending date of
office term
Allowance fromthe entityHe Jianfeng
Infore Investments Holding GroupCo., Ltd.
Ending date of | ||
Chairman of the |
Board andPresident
1995-06 - Yes
Gu YanminKUKA
SupervisoryCommittee
2017-01 2024-06 YesYu Gang 111, Inc.
Executive
Chairman of the |
Chairman of the |
Board
2011-04 - Yes
Xue Yunkui
Ouyeel Co., Ltd.
Independent
Director
2019-08 2022-08 Yes
Management Group Co., Ltd.
Independent
Director
2020-02 2023-02 YesBank of Shanghai Co., Ltd.
Independent
Director
2021-01 2024-01 YesHinova Pharmaceuticals Inc.
Independent
Director
2020-09 2023-09 Yes
Guan Qingyou
Dalian Wanda Commercial
Beijing Rushi Research Information | |
Consulting Service Co., Ltd.
Board
2017-12 - YesShaanxi International Trust Co., Ltd.
Chairman of the | |
IndependentDirector
2019-07 2022-07 YesNanhua Futures Co., Ltd.
Independent
Director
2019-02 2022-02 YesShandong Hi-
Co., Ltd.
Independent
Director
2020-06 2023-06 Yes
Speed Road&Bridge |
Hangzhou Hikvision Digital |
Independent
Director
2021-03 2024-03 Yes
Technology Co., Ltd.Liu MinKUKA
Member of the
SupervisoryCommittee
2017-01 2024-06 YesNote N/A
Punishments imposed in the recent three years by the securities regulators on the incumbent directors,supervisors and senior management as well as those who left in the Reporting Period
□Applicable √N/A
4. Remuneration of Directors, Supervisors and Senior Management
The following describes the decision-making procedures, grounds on which decisions are made andactual remuneration payment of directors, supervisors and senior management.The decision-making remuneration procedure for directors, supervisors and senior management: Theremuneration is proposed by the Board Remuneration Committee and approved by the Board. Decisionsare made finally after the deliberation of shareholders' meeting.The remuneration of directors, supervisors and senior management consist of basic annual paymentsand performance-related annual payments according to the Salary Management System for the Directors,Supervisors and Senior Management which has been approved by the Company. Basic payment isdetermined based on the responsibility, risk and pressure of directors, supervisors and seniormanagement. The basic annual payment remains stable. Performance-related annual payment is relatedto the completion rate of corporate profit, the assessment result of target responsibility system and theperformance evaluation structure of their own department. The remuneration system for directors,supervisors and senior management serves the Company's strategy, and shall be adjusted with theCompany's operating conditions in order to meet the Company’s development requirements. The basisfor adjusting the remuneration of directors, supervisors and senior management are as follows:
a. Wage growth in the industryb. Inflation
c. Corporate earningsd. Organizational structure adjustmente. Individual adjustment due to a change in position
Remuneration of directors, supervisors and senior management during the Reporting Period
Unit: RMB'000NamePositionGenderAge
Former
Total before-tax
remuneration
from theCompany
Remuneration
from relatedparties of the
CompanyFang Hongbo
Chairman of the Boardand CEO
Male 53 Incumbent 12,130He Jianfeng Director Male 53 Incumbent - YesYin Bitong
Director and Vice
President
Male 52 Incumbent 8,840Gu Yanmin
Director and VicePresident
Male 57 Incumbent 5,540Yu Gang Director Male 61 Incumbent 450Xue Yunkui Independent Director Male 56 Incumbent 450Guan Qingyou Independent Director Male 43 Incumbent 450
Han JianIndependent Director Female 48 Incumbent 450Dong Wentao
Incumbent/
Chairman of theSupervisory Committee
Female 35 Incumbent 490Zhao Jun Supervisor Male 45 Incumbent - YesLiang Huiming Employee Supervisor Female 37 Incumbent 250Wang Jianguo Vice President Male 44 Incumbent 5,660Zhang Xiaoyi Vice President Male 47 Incumbent 4,960
Hu ZiqiangVice President Male 63 Incumbent 4,760Wang Jinliang Vice President Male 53 Incumbent 4,310Xiao Mingguang
Vice President Male 50 Incumbent 4,300Liu Min
Chairman of theSupervisory Committee
Female 43 Incumbent 4,620Li GuolinVice President Male 45 Incumbent 4,480Helmut Zodl Chief Financial Officer Male 47 Former 7,770
Zhong Zheng Director of Finance Female 38 Incumbent 3,960
Jiang Peng Board Secretary Male 47 Incumbent 3,070Total -- -- -- -- 76,940 --
Share incentives for directors, supervisors and senior executives in the Reporting Period
√Applicable □N/A
Unit: share
Name Office title
Exercisable shareoptionsfor the
Period
Exercised shareoptionsin theReporting Period
Reporting |
Exerciseprice for
share
options in |
the
Period(RMB /share)
Marketprice at
Reporting | the end of |
the
Period(RMB /share)
Reporting | Restricted |
sharesheld at
thebeginning
of the
Reporting |
Period
shares in
the
Reporting |
Period
shares
granted in |
the
Period
Grantprice of
the
Reporting | restricted |
shares(RMB/sha
re)
sharesheld at
the end of |
the
PeriodHuZiqiang
Reporting | ||
VicePresident
-
-
-
98.44
100,000 | 100,000 | ||
15.86
100,000 | 25,000 |
27.57
75,000 |
XiaoMinggu
ang
VicePresident
210,000 | 105,000 |
17.85
98.44
100,000
25,000 |
27.57
75,000 |
100,000
50,000 |
27.99
50,000 |
ZhangXiaoyi
VicePresident
80,000 | 80,000 |
16.06
98.44
70,000
70,000
15.86
100,000
25,000
27.57
75,000 |
WangJinliang
VicePresident
-
-
-
98.44
120,000
120,000
24.42
240,000
LiGuolin
VicePresident
-
-
-
98.44
100,000
24.42
100,000
ZhongZheng
Director of
Finance
75,000 | 10,000 |
17.85
98.44
60,000
60,000
15.86
80,000
20,000
27.57
60,000
Total --
365,000 | 195,000 |
-- --
830,000 | 375,000 | 220,000 |
-- 675,000
Note (if any)N/A
5. Staff in the Company
5.1 Number, functions and educational backgrounds of the staff
Number of in-service staff of the Company 1,729Number of in-service staff of main subsidiaries 147,510Total number of in-service staff 149,239Total number of staff with remuneration in the period 149,239Number of retirees to whom the Company or its mainsubsidiaries need to pay retirement pension
2,369FunctionsFunction Number of staffProduction121,579Sales 8,063Technical 16,071Financial 1,830Administrative1,696Total 149,239
Educational backgroundsEducational background Number of staff
Master and doctor 5,491
Bachelor27,770College, technical secondary school 59,393
Others 56,585
Total 149,239Note: The data above have not yet included the staff of KUKA, which are around 14,000.
5.2 Staff remuneration policy
Staff remuneration shall be paid on time according to the Salary Management System. The Companydecides the regular salary of the employees according to the position’s value and evaluationperformances and decides the variable salary according to the Company's and employee’s performance.The remuneration distribution shows more consideration for strategic talent and ensures the marketcompetitiveness in the salary of core talent. The Company shall make dynamic adjustments to the staffremuneration policy according to regional differences, number of employees, staff turnover, environmentchanges in the industry and paying ability of the Company.
5.3 Staff trainings
In Midea, new employees will receive orientation and job-specific skill training or tutoring, while in-serviceones will be given irregular trainings inside or outside the Company to help improve their professionaland universal skills. In this way, Midea people enjoy better development opportunities.Midea has also put in place a multi-tier talent development system, including a mature leadershipdevelopment program comprising the Sailor Project, the Voyager Project and the Pilot Project to cultivatereserve talent for manager, director and general manager.The attendances at internal training sessions were 5,448,046 in 2020, of which 27,467 were managementpersonnel, 2,233,420 technical and marketing personnel and 3,187,159 operational personnel. Thetrainings included:
a. Building Leadership Development Programs such as the Sailor-Voyager-Pilot program and a High-Potential Leaders Training system to facilitate talent management and training. 55 talent trainingprograms were carried out, where 3,205 highly skilled managerial staff were trained for a total of 68,160man-hours.b. Building a professionalism promotion system. 809 such programs were carried out, where 326,282staff were trained for a total of 2,609,472 man-hours.c. Providing channels for common skill improvement. 682 such programs such as the Lecture for Staffwere launched, where 73,679 staff were trained for a total of 262,188 man-hours.d. Improving individual comprehensive ability. 140 external trainings for individuals at junior, middle andsenior levels were organized, where 515 staff were trained for a total of 8,073 man-hours.e. In order to help new graduates develop themselves fast and foster a new power for the Company, 63relevant programs such as the Re-Education of New Graduates, the Training Camp for New Graduates,and the Orientation Training Camp for New Graduates were organized, where 9,647 new graduates weretrained for a total of 256,733 man-hours.
f. Facilitating organizational learning. 6,013 internal sharing sessions were held, where 235,870employees were trained for 367,901 man-hours. With the addition of 888 new internal trainers, annualteaching time reached 7,805 hours in total. And a total of 852 courses were designed in the year.g. 12,399 key technical staff and working team leaders were trained for a total of 258,723 hours.h. 110,728 staff visited M-Learning, a mobile app developed by Midea for online training, for a total of476,721 times in 2020.
5.4 Labor outsourcing
□Applicable √N/A
Section VIII Corporate Governance
1. Basic Situation of Corporate Governance
Any incompliance with the regulatory documents issued by the CSRC governing the governance of listedcompanies
□Yes √No
The Company is constantly improving its corporate governance in strict accordance with the CompanyLaw, the Securities Law and the relevant regulations of the China Securities Regulatory Commission.There are four special committees under the Board, namely the Strategy Committee, the AuditingCommittee, the Nomination Committee as well as the Remuneration and Appraisal Committee. Theywere designed to provide consultation and advice to the Board and validate the professionalization andefficiency of discussions and decision-making. The Company has established clear rules of procedurefor its shareholders' meeting, board of directors, Supervisory Committee and special committees underthe board, as well as the Work Rules for Company Secretary. It has also established a set of standarddocuments including Information Disclosure Management System, Funds Raising Management System,Connected Transaction Management System, Wealth Management Entrustment Management System,Insider Registration System, External Guaranty Decision-making System, Foreign InvestmentManagement System, and Management System for Finance Flow with Connected Parties, InternalAuditing System. The shareholders' meeting, the Board of Directors, the Supervisory Committee andoperations management departments have clear authority and responsibility. Each performs its ownfunctions and maintains its stability effectively. Their scientific decision-making and coordinatedoperations have laid a firm foundation for the sustained, healthy and steady development of the Company.The Company has also launched core management team shareholding plans and equity incentive plansfor core research, quality control, technical, production and management staff, which helps to develop asound shareholding structure for the future growth of the Company.In 2020, the Company won the following honors:
No. 307 of “Fortune Global 500”; No. 229 of “The World’s 2,000 Largest Public Companies” releasedby the Forbes; No. 33 of the “BrandZ? 2020 Top 100 Most Valuable Chinese Brands” jointlyreleased by WPP and Kantar Millward Brown; No.174 of the “2021 Brand Finance Global 500”; the
Golden Bull Award for Social Responsibilities of Listed Companies” by China Securities Journal; andthe “Poverty Alleviation Contribution Award of the Year” at “China ESG Golden Awards 2020”presented by finance.sina.com.cn.
2. Independency of businesses, personnel, assets, organizations, and finance which
are separate from the controlling shareholder
The Company is totally autonomous with respect to business, personnel, assets, organizations, andfinance from Midea Holding Co., Ltd., the controlling shareholder of the Company, therefore maintainingintegrity and independency in both business and operations.
2.1 Business independence:
The Company has a complete industrial chain for its manufacturing business, a completely distinctpurchase and sales system, and an independent and comprehensive business operation capability.
2.2 Personnel independence:
The Company is completely autonomous from the controlling shareholder regarding its personnel. Thelabor, personnel and remuneration management of the company are totally unrelated. All seniormanagement members received remuneration from the Company except those that hold only a director’sposition in the controlling shareholder.
2.3 Asset integrity:
The Company has its own independent production system as well as ancillary production systems andfacilities. Intangible assets such as industrial rights, trademark ownership and non-patent technology areheld by the Company.
2.4 Organization independence:
The Company has set up an independent organizational structure which maintains its independentoperation. The Company has the right to appoint or remove any personnel so there is no overlapping withthe controlling shareholder.
2.5 Financial independence:
The Company's financial management is independent from the controlling shareholder. The Companyhas its own accounting department, accounting system, financial management system, and bankaccounts and independently makes financial decisions and pays its own taxes according to relevant laws.
3. Horizontal Competition
□Applicable √N/A
4. Annual Meeting of Shareholders and Special Meetings of Shareholders Convened
during the Reporting Period
4.1 Meetings of shareholders convened during the Reporting Period
Meeting Type
Investorparticipationratio
Convened dateDisclosure date Disclosure index2020
Meeting ofShareholders
Specialmeeting ofshareholders
First Special |
54.4367% 13 March 2020 14 March 2020
Announcement No.2020-023, disclosed onwww.cninfo.com.cn2019 AnnualMeeting ofShareholders
Annualmeeting ofshareholders
57.2182% 22 May 2020 23 May 2020
Announcement No.2020-050, disclosed onwww.cninfo.com.cn2020 SecondSpecial Meetingof Shareholders
Specialmeeting ofshareholders
57.9386% 22 June 2020 23 June 2020
Announcement No.2020-076, disclosed onwww.cninfo.com.cn2020 ThirdSpecial Meetingof Shareholders
Specialmeeting ofshareholders
60.4888% 16 October 2020 17 October 2020
Announcement No.2020-107, disclosed onwww.cninfo.com.cn
4.2 Special meetings of shareholders convened at the request of preference shareholders with
resumed voting rights
□Applicable √N/A
5. Performance of Independent Directors during the Reporting Period
5.1 Attendance of independent directors in Board meetings and meetings of shareholders
Attendance of independent directors in Board meetings and meetings of shareholders
Independentdirector
Presencedue
meetings in
the Reporting |
Period(times)
Presence atBoardmeetings onsite (times)
Presence at
Boardmeetings bytelecommunication (times)
Presence atBoardmeetingsthrough aproxy (times)
Absencefrom Boardmeetings(times)
Absencefrom Boardmeetings fortwoconsecutivetimes
Presence atmeetings of
shareholders |
(times)Xue Yunkui 11
0 0 No 0
Guan Qingyou 11
0 0 No 1
Han Jian
0 0 No 0
Explanation of absence from Board meetings for two consecutive times
5.2 Objections from independent directors on related issues of the Company
Were there any objections on related issues of the Company from independent directors
□Yes √No
No such cases in the Reporting Period.
5.3 Other details about the performance of duties by independent directors
Were there any suggestions from independent directors adopted by the Company
√Yes □No
During the Reporting Period, independent directors strictly followed related rules, regulations and theArticles of Association. They focused on the Company operation, carried out their duties independentlyand imparted lots of professional advice on perfecting the Company’s systems, daily operations anddecisions. They provided fair advice during the Reporting Period and played an effective role in improvingthe Company supervisory systems and protecting the legal rights of the Company and the shareholdersas a whole.
6. Performance of Duties by Special Committees under the Board during the
Reporting Period
6.1 The Audit Committee under the Board convened four meetings in the Reporting Period, at which the
following proposals were considered and approved: The 2019 Final Account Report, The 2019 AnnualReport & Its Abstract, The Report of the Audit Committee on Concluding and Appraising the 2019 AnnualAudit Work, The Proposal for Appointing an Auditor for the 2020 Annual Result, The Proposal forAppointing an Auditor for the Internal Control in 2020, The Report on the First Quarter of 2020, The 2020Semi-Annual Report and The Report on the Third Quarter of 2020.
6.2 The Remuneration and Appraisal Committee under the Board convened three meetings in the
Reporting Period, at which the following proposals were considered and approved: The RemunerationStandard for Directors, Supervisors and Senior Management for 2019, The Proposal on the SeventhStock Option Incentive Scheme (Draft) and Its Abstract, The Proposal on the 2020 Restricted ShareIncentive Scheme (Draft) and Its Abstract, The Sixth Core Management and Global Partner StockOwnership Scheme of Midea Group Co., Ltd. (Draft) and Its Abstract, The Third Core Management andBusiness Partner Stock Ownership Scheme of Midea Group Co., Ltd. (Draft) and Its Abstract, TheProposal on the Repurchase and Retirement of Certain Incentive Shares under the 2017, 2018 and 2019Restricted Share Incentive Schemes, The Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the Reserved Restricted Shares of the 2017 Restricted Share Incentive Scheme,The Proposal for Matters Related to the Stock Option Exercise for the Third Exercise Period of the FourthStock Option Incentive Scheme, The Proposal for Matters Related to the Stock Option Exercise for theFirst Exercise Period of the Fifth Stock Option Incentive Scheme, The Proposal on the Satisfaction of theConditions for the Third Unlocking Period for the First Phase of the 2017 Restricted Share IncentiveScheme, and The Proposal on the Satisfaction of the Conditions for the First Unlocking Period for theFirst Phase of the 2018 Restricted Share Incentive Scheme.
6.3 The Nomination Committee under the Board convened two meetings in the Reporting Period, at which
the following proposals were considered and approved: The Proposal for Vice President Appointment,and The Proposal for the Change of Representative for Securities Affairs.
7. Performance of Duties by the Supervisory Committee
Were there any risks to the Company identified by the Supervisory Committee when performing itsduties during the Reporting Period
□Yes √No
The Supervisory Committee of the Company had no objection to the matters of supervision during theReporting Period.
8. Assessment and Incentive Mechanism for the Senior Management
The Company established an appraisal system on the basis of its target-oriented responsibility systemand adopted an appraisal agreement for senior management members, which determines the appraisalcriterion, appraisal method and measures taken based on the appraisal result. During the ReportingPeriod, the Company has carried out appraisals of senior management members on the basis of itstarget-oriented responsibility system and the appraisal result was reflected in the annual performance-based incentive rewards. Meanwhile, the Company promoted the unification of interests betweenmanagers and shareholders through high-level staff and core management teams' shareholding schemesas well as multiple stock option or restricted share incentive schemes, laying a good foundation for thefuture growth of the Company.
9. Internal Control
9.1 Serious internal control defects found in the Reporting Period
□Yes √No
9.2 Self-evaluation report on internal control
Disclosure date of the internal control self-evaluation report30 April 2021Index to the disclosed internal control self-evaluation report
For details, please refer to the 2020 Self-EvaluationReport on Internal Control, which has been disclosedon www.cninfo.com.cnRatio of the total assets of the appraised entities to theconsolidated total assets
70%Ratio of the operating revenue of the appraised entities to theconsolidated operating revenue
70%Defect identification standardsTypeFinancial-report related Non-financial-report relatedNature standard
For details, please refer to “(c) Basis forinternal control evaluation and
For details, please refer to “(c) Basis forinternal control evaluation andidentification standards for internal control
defects” under Section III of The 2020Self-
disclosed on www.c
ninfo.com.cn dated 30 |
April 2021.
defects” under Section III of The 2020Self-Evaluation Report on Internal Controldisclosed on www.cninfo.com.cn dated 30April 2021.
Quantitative standard
For details, please refer to “(c) Basis forinternal control evaluation and
defects” under Section III of The 2020Self-
Evaluation Report on Internal Control |
disclosed on www.cninfo.com.c
April 2021.
For details, please refer to “(c) Basis forinternal control evaluation andidentification standards for internal controldefects” under Section III of The 2020Self-Evaluation Report on Internal Controldisclosed on www.cninfo.com.cn dated 30April 2021.Number of serious financial-report-related defects
Number of serious non-financial-report-related defects
Number of important financial-report-related defects
Number of important non-financial-report-related defects
10. Auditor’s Report on Internal Control
√Applicable □N/A
Opinion paragraph in the auditor’s report on internal controlThe internal control auditor holds the view that on 31 December 2020, Midea Group maintained an effective internalcontrol of a financial report in all significant aspects based on the General Specifications of Company Internal Controland relevant specifications.Auditor’s report on internalcontrol disclosed or not
Disclosed on www.cninfo.com.cnDate of disclosing the full text ofthe auditor’s report on internalcontrol
30 April 2021Index to the disclosed full text ofthe auditor’s report on internalcontrol
For details, please refer to the 2020 Auditor’s Report on Internal Control, which has
been disclosed on www.cninfo.com.cnType of the auditor’s opinion Standard & unqualifiedSerious non-financial-report-related defects
No
Whether any modified opinions are expressed by the accounting firm in its auditor’s report on theCompany’s internal control
□ Yes √ No
Whether the auditor’s report on the Company’s internal control issued by the accounting firm is consistentwith the self-evaluation report of the Board
√ Yes □ No
Section IX Financial Report
1. Auditor’s report
Type of the auditor’s opinion Unqualified opinionSigning date of the auditor’s report 28 April 2021Name of the auditor PricewaterhouseCoopers Zhong Tian LLPNo. of the auditor’s report PwC ZT Shen Zi (2021) No. 10017Names of certified public accountants Yao Wenping and Qiu Xiaoying
[English Translation for Reference Only]
Auditor’s Report
PwC ZT Shen Zi (2021) No. 10017
(Page 1 of 6)
To the Shareholders of Midea Group Co., Ltd., |
Opinion |
What we have audited |
We have audited the accompanying financial statements of Midea Group Co., Ltd. |
(hereinafter “
”), which comprise:
? the consolidated and company balance sheets as at 31 December 2020;? the consolidated and company income statements for the year then ended;? the consolidated and company cash flow statements for the year then ended;?
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 Group as at 31 December 2020, and their financial
(“CASs”).
performance and cash flows for the year then ended in accordance with the requirements of the Accounting Standards for Business Enterprises |
Basis for Opinion |
We conducted our audit in accordance with China Standards on Auditing |
(“CSAs”). Our responsibilities
’
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 Group in accordance with the Code of Ethics for Professional Accountants of the Chines |
e 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 judgement, were of |
on these matters.
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 |
Key audit matters identified in our audit are summarised as follows: |
? Recognition of revenue from heating & ventilation, as well as air-conditioner (hereinafter referred to as “HVAC”) and consumer appliances |
? Impairment testing of goodwill |
PwC ZT Shen Zi (2021) No. 10017
(Page 2 of 6)
Key Audit Matters (Cont’d) | How our audit addressed the Key Audit Matter |
s
consumer
appliances |
- sales of products” and
Note 4(44) “Operating revenue” to the financial statements. |
up’s consolidated operating
revenue was RMB284,221,249,000 and the revenue from |
HVAC and
was
RMB235,105,807,000 |
.
HVAC and consumer
appliances |
mainly due to the large
overseas
customer base and high volume of sales through various |
distribution
. In addition, the amount of
revenue |
recognized is material to the
as a whole. Therefore, completing the |
necessary
required
substanti |
al audit resources.
Regarding the Group’s revenue from sales of |
HVAC
, we performed the following procedures:
1. We interviewed management from operation and financial
departments to understand the necessary details of sales |
processes
internal control of processes relating to the revenue from
sale of HVAC and consumer appliances designed by |
management and tested the operating effectiveness of keycontrols;
2. We reviewed household appliance sales contract template
entered into by and between the Group and the clients fromall distribution channels, and analysed and evaluated theGroup’s accounting policies on the revenue from sales ofHVAC and consumer appliances based on our interviewwith management, understanding of the Group’s business
operation and audit experience;
3. Performed risk assessment through fluctuation analysis of
monthly sales and gross margin by product;
4. Reviewed supporting documents relevant to revenue
recognition on a
sample basis, including sales contracts, |
orders, sales invoices, shipping orders, acknowledgement ofgoods receipts signed by customers, billing agreements withcustomers, etc.;
5. Validated the revenue by external confirmation on a
sampling basis;
6. Evaluated whether or not the products sales occurred near
year end was recorded in the proper period by checking thesupporting documents which include acknowledgement ofgoods receipts signed by customers, billing agreements withcustomers or other supporting documents.
HVAC and consumer are supported by the
available evidence. |
PwC ZT Shen Zi (2021) No. 10017
(Page 3 of 6)
How our audit addressed the Key Audit Matters
Key Audit Matters (Cont’d) |
Impairment |
assessment of
Please refer to Note 4(19) “Goodwill” to the financial statements. |
y
assessing the recoverable amount of |
containing the relevant goodwill, based on the present value of cash flows forecasts. Key assumptions adopted in the impairment testing of goodwill included expected revenue growth rates, EBITDA margins, perpetual annual growth rates, discount rates, etc. |
which required
We focused on the impairment assessment o |
f the goodwill totalling
RMB25,780,780,000 arising from the business acquisition of KUKA Group and TLSC due to the significance of the goodwill and degree of key estimates and judgements involved in the impairment assessment. | Regarding the impairment testing of goodwill arising from the acquisition of KUKA Group and TLSC, we performed the following |
procedures:
1.
relating to impairment testing of goodwill, and assessed theinherent risks of material misstatement by considering the
degree of estimation uncertainty and the level of other |
inherent risk factors, s
fraud;
2. E
valuated and tested the operating effectiveness of key controls relevant to the impairment testing of goodwill, |
including review and approval of key assumptions appliedand internal control over calculating recoverable amountsof the asset group and asset groups containing the allocatedgoodwill;
3. Evaluated the rationality of the asset group
groups identification;
4. Evaluated the rationality of forecasts made by management
by comparing the estimated future cash flows of the prioryear with the actual business performance of the currentyear, and considered whether
the judgement made by |
management during the selection of data would give rise toindicators of possible management bias;
5. Evaluated the rationality of key assumptions applied in the
impairment testing of goodwill, such as expected revenue
rates and discount rates by reference to company’shistorical operating performance, future operation plan andmarket developments;
6. Verified the mathematical accuracy of the calculation
process during the impairment assessment of goodwill;
7. Evaluated the appropriateness of the goodwill impairment
testing model and discount rate employed by managementwith the involvement of internal valuation expert.
Based on the work performed, |
management’s judgments in goodwill
supported by the available evidences.
PwC ZT Shen Zi (2021) No. 10017
(Page 4 of 6)
Other Information |
report of the Group other than the financial statements and
’s report thereon.
our auditor |
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 Group 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 Group |
’s ability to
nt either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so. |
Those charged with governance are responsible for overseeing the Group |
’s financial reporting process.
PwC ZT Shen Zi (2021) No. 10017
(Page 5 of 6)
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
it 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. |
As part of an audit |
in accordance with CSAs, we exercise professional judgement 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 an
detecting a material misstatement resulting from fraud is higher than for one resulting f
rom 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 eventsor conditions that may cast significant doubt on the Group’s ability to continue as a going concern.
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 Group to cease to continue as a going concern. |
? |
Evaluate the overall presentation (including the
financial statements, 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 Group to express an opinion on the consolidated financial |
statements. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion. |
PwC ZT Shen Zi (2021) No. 10017
(Page 6 of 6)
Auditor’s Responsibilities for the Audit of the Financial Statements (Cont’d) |
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. |
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 l
h the public interest benefits of such communication.
aw 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 outweig | |
PricewaterhouseCoopers Zhong Tian |
LLP
’s Republic of China
[2 |
8] April 2021
Signing CPA
Signing CPA
—————————
Yao Wenping(Engagement Partner)
—————————
Qiu Xiaoying
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETSAS AT 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
ASSETS | Note | 31 December 2020 | 31 December 2019 | 31 December 2020 | 31 December 2019 |
Consolidated | Consolidated | Company | Company | ||
Current assets | |||||
Cash at bank and on hand | 4(1) | 81,210,482 | 70,916,841 | 49,240,180 | 52,291,056 |
Financial assets held for trading | 4(2) | 28,239,601 | 1,087,351 | 16,614,658 | - |
Derivative financial assets | 420,494 | 197,412 | - | - | |
Notes receivable | 4(3) | 5,304,510 | 4,768,520 | - | - |
Accounts receivable | 4(4) | 22,978,363 | 18,663,819 | - | - |
Receivables financing | 4(6) | 13,901,856 | 7,565,776 | - | - |
Advances to suppliers | 4(7) | 2,763,710 | 2,246,177 | 45,306 | 36,877 |
Contract assets | 4(8) | 3,236,848 | —— | - | —— |
Loans and advances | 4(9) | 16,469,069 | 10,869,396 | - | - |
Other receivables | 4(5), 17(1) | 2,973,945 | 2,712,974 | 28,318,670 | 18,369,865 |
Inventories | 4(10) | 31,076,529 | 32,443,399 | - | - |
Other current assets | 4(11) | 33,079,918 | 65,011,027 | 20,533,745 | 42,665,884 |
Total current assets | 241,655,325 | 216,482,692 | 114,752,559 | 113,363,682 | |
Non-current assets | |||||
Other debt investments | 4(12) | 21,456,155 | - | 20,064,155 | - |
Long-term receivables | 4(13) | 981,623 | 1,208,079 | - | - |
Loans and advances | 4(9) | 1,113,501 | 790,101 | - | - |
Long-term equity investments | 4(14), 17(2) | 2,901,337 | 2,790,806 | 54,991,161 | 52,605,859 |
Investments in other equity instruments | 46,651 | - | - | - | |
Other non-current financial assets | 4(15) | 3,360,849 | 1,750,107 | 80,937 | 487,564 |
Investment properties | 405,559 | 399,335 | 476,839 | 518,828 | |
Fixed assets | 4(16) | 22,239,214 | 21,664,682 | 749,835 | 878,239 |
Construction in progress | 4(17) | 1,477,302 | 1,194,650 | 204,304 | 155,681 |
Intangible assets | 4(18) | 15,422,393 | 15,484,179 | 684,997 | 700,836 |
Goodwill | 4(19) | 29,557,218 | 28,207,065 | - | - |
Long-term prepaid expenses | 4(20) | 1,300,962 | 1,267,127 | 97,078 | 123,548 |
Deferred tax assets | 4(21) | 7,208,635 | 5,768,993 | 287,360 | 189,888 |
Other non-current assets | 4(22) | 11,255,879 | 4,947,603 | 10,141,031 | 4,359,507 |
Total non-current assets | 118,727,278 | 85,472,727 | 87,777,697 | 60,019,950 | |
TOTAL ASSETS | 360,382,603 | 301,955,419 | 202,530,256 | 173,383,632 |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 31 December 2020 | 31 December 2019 | 31 December 2020 | 31 December 2019 |
Consolidated | Consolidated | Company | Company | ||
Current liabilities | |||||
Short-term borrowings | 4(25) | 9,943,929 | 5,701,838 | 799,314 | 4,550,064 |
Customer deposits and |
deposits from banks and
other financial institutions | 87,535 | 62,477 | - | - | |
Derivative financial liabilities | 161,225 | 27,100 | - | - | |
Notes payable | 4(26) | 28,249,939 | 23,891,600 | - | - |
Accounts payable | 4(27) | 53,930,261 | 42,535,777 | - | - |
Advances from customers | 4(28) | - | 16,231,854 | - | - |
Contract liabilities | 4(29) | 18,400,922 | —— | - | —— |
Employee benefits payable | 4(30) | 6,954,822 | 6,436,109 | 562,954 | 566,861 |
Taxes payable | 4(31) | 5,758,058 | 5,096,267 | 1,326,219 | 1,059,246 |
Other payables | 4(32) | 4,501,391 | 3,800,568 | 123,120,354 | 103,624,998 |
Current portion of non-current liabilities | 4(33) | 6,310,181 | 1,460,117 | 4,000,000 | - |
Other current liabilities | 4(34) | 49,852,239 | 39,074,777 | 3,048,794 | 19,539 |
Total current liabilities | 184,150,502 | 144,318,484 | 132,857,635 | 109,820,708 | |
Non-current liabilities | |||||
Long-term borrowings | 4(35) | 42,827,287 | 41,298,377 | 5,800,000 | 4,000,000 |
Long-term payables | 13,260 | 33,646 | - | - | |
Provisions | 298,110 | 353,269 | - | - | |
Deferred income | 779,729 | 617,155 | - | - | |
Long-term employee benefits payable | 4(36) | 2,159,675 | 2,418,563 | - | - |
Deferred tax liabilities | 4(21) | 5,223,954 | 4,556,002 | 67,792 | 59,032 |
Other non-current liabilities | 4(37) | 692,986 | 863,826 | - | - |
Total non-current liabilities | 51,995,001 | 50,140,838 | 5,867,792 | 4,059,032 | |
Total liabilities | 236,145,503 | 194,459,322 | 138,725,427 | 113,879,740 | |
Shareholders' equity | |||||
Share capital | 4(38) | 7,029,976 | 6,971,900 | 7,029,976 | 6,971,900 |
Capital surplus | 4(40) | 22,488,105 | 19,640,313 | 29,123,547 | 26,592,959 |
Less: Treasury stock | 4(39) | (6,094,347) | (3,759,732) | (6,094,347) | (3,759,732) |
Other comprehensive income | 4(41) | (1,549,003) | (711,554) | (16,009) | 1,735 |
General risk reserve | 587,984 | 366,947 | - | - | |
Special reserve | 12,730 | - | - | - | |
Surplus reserve | 4(42) | 7,966,362 | 6,447,658 | 7,966,362 | 6,447,658 |
Undistributed profits | 4(43) | 87,074,453 | 72,713,631 | 25,795,300 | 23,249,372 |
Total equity attributable to |
shareholders of the
Company | 117,516,260 | 101,669,163 | 63,804,829 | 59,503,892 | |
Minority interests | 6,720,840 | 5,826,934 | - | - | |
Total shareholders’ equity | 124,237,100 | 107,496,097 | 63,804,829 | 59,503,892 | |
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 360,382,603 | 301,955,419 | 202,530,256 | 173,383,632 |
The accompanying notes form an integral part of these financial statements.Legal representative:
Fang Hongbo
Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item | Note | 2020 | 2019 | 2020 | 2019 | |
Consolidated | Consolidated | Company | Company | |||
Total revenue | 285,709,729 | 279,380,506 | 1,852,312 | 1,767,902 | ||
Including: Operating revenue | 4(44), 17(3) | 284,221,249 | 278,216,017 | 1,852,312 | 1,767,902 | |
Interest income | 4(45) | 1,488,211 | 1,163,180 | - | - | |
Fee and commission income | 269 | 1,309 | - | - | ||
Less: Cost of sales | 4(44) | (212,839,592) | (197,913,928) | (51,350) | (45,823) | |
Interest costs | 4(45) | (105,168) | (122,618) | - | - | |
Fee and commission expenses | (6,972) | (11,633) | - | - | ||
Taxes and surcharges | 4(46) | (1,533,646) | (1,720,616) | (32,546) | (37,481) | |
Selling and distribution expenses | 4(47) | (27,522,276) | (34,611,231) | - | - | |
General and administrative expenses | 4(48) | (9,264,148) | (9,531,361) | (701,711) | (579,072) | |
Research and development expenses | 4(49) | (10,118,667) | (9,638,137) | - | - | |
Financial income | 4(50) | 2,638,032 | 2,231,636 | 1,421,019 | 1,974,379 | |
Including: Interest expenses | (1,305,591) | (880,703) | (1,903,866) | (1,402,376) | ||
Interest income | 3,663,028 | 3,807,136 | 3,352,633 | 3,363,003 | ||
Add: Other income | 4(56) | 1,424,090 | 1,194,665 | 369,889 | 464,034 | |
Investment income | 4(54), 17(4) | 2,362,462 | 164,132 | 12,578,455 | 10,384,466 | |
Including: Investment income from associates | 402,528 | 506,225 | 216,318 | 272,089 | ||
Profit or loss arising from derecognition of financial |
assets measured at
amortised costs | - | (709) | - | - | ||
Gains on changes in fair value | 4(53) | 1,762,950 | 1,361,163 | 108,605 | 162,565 | |
Credit impairment losses | 4(52) | (247,605) | (96,446) | (6,340) | (418) | |
Asset impairment losses | 4(51) | (705,209) | (871,909) | - | - | |
(Losses)/Gains on disposal of assets | 4(55) | (60,523) | (131,131) | 146 | (1,040) | |
Operating profit | 31,493,457 | 29,683,092 | 15,538,479 | 14,089,512 | ||
Add: Non-operating income | 384,986 | 613,310 | 102,429 | 39,832 | ||
Less: Non-operating expenses | (214,904) | (367,288) | (116,120) | (22,741) | ||
Total profit | 31,663,539 | 29,929,114 | 15,524,788 | 14,106,603 | ||
Less: Income tax expenses | 4(57) | (4,156,997) | (4,651,970) | (337,750) | (420,984) | |
Net profit | 27,506,542 | 25,277,144 | 15,187,038 | 13,685,619 | ||
(1) Classified by continuity of operations | ||||||
Net profit from continuing operations | 27,506,542 | 25,277,144 | 15,187,038 | 13,685,619 | ||
Net profit from discontinued operations | - | - | - | - | ||
(2) Classified by ownership of the equity | ||||||
Attributable to shareholders of the Company | 27,222,969 | 24,211,222 | 15,187,038 | 13,685,619 | ||
Minority interests | 283,573 | 1,065,922 | - | - |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTS (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item | Note | 2020 | 2019 | 2020 | 2019 | |
Consolidated | Consolidated | Company | Company | |||
Other comprehensive income, net of tax | (1,177,809) | 348,040 | (17,744) | (4,285) | ||
Other comprehensive income attributable to |
shareholders of the Company, net of
tax | (837,449) | 283,152 | (17,744) | (4,285) | ||
(1) Other comprehensive income items |
which will not be reclassified
subsequently to profit or loss | 112,388 | (142,753) | - | - | ||
1) Changes arising from |
remeasurement of defined
benefit plan | 111,895 | (142,753) | - | - | ||
2) Changes in fair value of |
investments in other equity
instruments | 493 | - | - | - | ||
(2) Other comprehensive income items |
which will be reclassified
subsequently to profit or loss | (949,837) | 425,905 | (17,744) | (4,285) | ||
1) Other comprehensive income |
that will be transferredsubsequently to profit orloss under the equity
method | (20,445) | (6,590) | (17,744) | (4,285) | ||
2) Effective portion of cash flow hedging gains or losses | 298,721 | 113,890 | - | - | ||
3) Differences on translation of |
foreign currency financial
statements | (1,228,113) | 318,605 | - | - | ||
Other comprehensive income attributable to minority shareholders, net of tax | (340,360) | 64,888 | - | - | ||
Total comprehensive income | 26,328,733 | 25,625,184 | 15,169,294 | 13,681,334 | ||
Attributable to shareholders of the Company | 26,385,520 | 24,494,374 | 15,169,294 | 13,681,334 | ||
Minority interests | (56,787) | 1,130,810 | - | - | ||
Earnings per share | ||||||
Basic earnings per share (RMB Yuan) | 4(58) | 3.93 | 3.60 | Not applicable | Not applicable | |
Diluted earnings per share (RMB Yuan) | 4(58) | 3.90 | 3.58 | Not applicable | Not applicable |
The accompanying notes form an integral part of these financial statements.
Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item | Note | 2020 | 2019 | 2020 | 2019 |
Consolidated | Consolidated | Company | Company | ||
1. Cash flows from operating activities | |||||
Cash received from sales of goods or rendering of services | 240,052,501 | 238,815,589 | - | - | |
Net increase in customer deposits and deposits from banks and other financial institutions | 25,058 | 18,091 | - | - | |
Net decrease in deposits with the Central Bank | - | 693,023 | - | - | |
Cash received from interest, fee and commission | 1,381,851 | 1,315,921 | - | - | |
Refund of taxes and surcharges | 6,574,762 | 6,271,733 | - | - | |
Cash received relating to other operating activities | 4(59)(a) | 4,950,874 | 5,008,821 | 21,491,325 | 30,809,036 |
Sub-total of cash inflows | 252,985,046 | 252,123,178 | 21,491,325 | 30,809,036 | |
Cash paid for goods and services | (139,660,744) | (130,099,497) | - | - | |
Net increase in loans and advances | (6,078,053) | (318,859) | - | - | |
Net decrease in loans with the Central Bank | - | (99,754) | - | - | |
Net increase in balances with the Central Bank | (1,274,496) | - | - | ||
Cash paid for interest, fee and commission | (113,517) | (134,251) | - | - | |
Cash paid to and on behalf of employees | (28,460,318) | (26,851,139) | (72,404) | (52,269) | |
Payments of taxes and surcharges | (13,407,607) | (14,897,513) | (342,190) | (133,421) | |
Cash paid relating to other operating activities | 4(59)(b) | (34,433,194) | (41,131,761) | (10,178,648) | (6,818,472) |
Sub-total of cash outflows | (223,427,929) | (213,532,774) | (10,593,242) | (7,004,162) | |
Net cash flows from operating activities | 4(59)(c) | 29,557,117 | 38,590,404 | 10,898,083 | 23,804,874 |
2. Cash flows (in)/from investing activities | |||||
Cash received from disposal of investments | 141,821,724 | 84,852,601 | 103,460,300 | 56,920,222 | |
Cash received from returns on investments | 4,874,990 | 4,026,590 | 15,565,104 | 12,812,869 | |
Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 273,544 | 125,419 | 255 | 1,040 | |
Net cash received from disposal of subsidiaries and other business units | 42,398 | - | 13,000 | - | |
Sub-total of cash inflows | 147,012,656 | 89,004,610 | 119,038,659 | 69,734,131 | |
Cash paid to acquire fixed assets, intangible assets and other long-term assets | (4,656,582) | (3,451,856) | (187,723) | (183,326) | |
Cash paid to acquire investments | (176,621,347) | (108,457,398) | (117,386,281) | (88,883,737) | |
Net cash paid to acquire subsidiaries and other business units | (1,045,390) | (203,057) | - | - | |
Sub-total of cash outflows | (182,323,319) | (112,112,311) | (117,574,004) | (89,067,063) | |
Net cash flows (in)/from investing activities | (35,310,663) | (23,107,701) | 1,464,655 | (19,332,932) | |
3. Cash flows in financing activities | |||||
Cash received from capital contributions | 2,657,489 | 2,897,917 | 2,542,556 | 2,777,490 | |
Including: Cash received from capital contributions by minority shareholders of subsidiaries | 114,933 | 120,427 | - | - | |
Cash received from borrowings | 18,070,961 | 17,117,677 | 6,599,314 | 11,059,564 | |
Cash received from issuance of short-term financing bonds | 33,998,238 | - | 33,998,238 | - | |
Cash received relating to other financing activities | 22,725 | - | - | - | |
Sub-total of cash inflows | 54,749,413 | 20,015,594 | 43,140,108 | 13,837,054 | |
Cash repayments of borrowings | (8,354,338) | (8,643,875) | (4,550,064) | (3,084,500) | |
Cash paid for repayment of short-term financing bonds | (31,000,000) | - | (31,000,000) | - | |
Cash payments for interest expenses and distribution of dividends or profits | (12,822,636) | (11,055,769) | (12,831,949) | (9,740,298) | |
Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (425,461) | (1,651,504) | - | - | |
Cash payments relating to other financing activities | (3,328,734) | (3,589,551) | (2,934,420) | (3,257,482) | |
Sub-total of cash outflows | (55,505,708) | (23,289,195) | (51,316,433) | (16,082,280) | |
Net cash flows in financing activities | (756,295) | (3,273,601) | (8,176,325) | (2,245,226) | |
4. Effect of foreign exchange rate changes on cash and cash equivalents | (383,411) | 280,376 | - | - | |
5. Net (decrease)/increase in cash and cash equivalents | 4(59)(c) | (6,893,252) | 12,489,478 | 4,186,413 | 2,226,716 |
Add: Cash and cash equivalents at the beginning of the year | 30,441,760 | 17,952,282 | 12,408,650 | 10,181,934 | |
6. Cash and cash equivalents at the end of the year | 4(59)(d) | 23,548,508 | 30,441,760 | 16,595,063 | 12,408,650 |
The accompanying notes form an integral part of these financial statements.Legal representative:
Fang Hongbo
Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item | Equity attributable to shareholders of the Company | |||
Share
Capital
capital | surplus | Less: |
Treasury
stock | Other |
comprehensive
income | General |
risk
Surplus
reserve | reserve |
Undistributed
Minority
profits | interests | Total |
shareholders’
equity | ||||||||||
(Note 4(38)) | (Note 4(40)) | (Note 4(39)) | ||||||||
Balance at 1 January 2019 | 6,663,031 | 18,451,307 | (4,918,427) | (994,706) | 366,947 | 5,079,096 | 58,424,868 | 9,382,401 | 92,454,517 | |
Movements for the year ended 31 December 2019 | ||||||||||
Total comprehensive income | ||||||||||
Net profit | - | - | - | - | - | - | 24,211,222 | 1,065,922 | 25,277,144 | |
Other comprehensive income, net of tax | - | - | - | 283,152 | - | - | - | 64,888 | 348,040 | |
Total comprehensive income | - | - | - | 283,152 | - | - | 24,211,222 | 1,130,810 | 25,625,184 | |
Capital contribution and withdrawal by shareholders | ||||||||||
Ordinary shares invested by shareholders | 87,150 | 2,426,916 | (57,088) | - | - | - | - | 120,427 | 2,577,405 | |
Share-based payment included in shareholders' equity | - | 144,287 | - | - | - | - | - | 82,268 | 226,555 | |
Others | 221,719 | (1,221,661) | 1,215,783 | - | - | - | - | (3,231,072) | (3,015,231) | |
Profit distribution | ||||||||||
Appropriation to general risk reserve | - | - | - | - | - | - | - | - | - | |
Appropriation to surplus reserve | - | - | - | - | - | 1,368,562 | (1,368,562) | - | - | |
Profit distribution to shareholders | - | - | - | - | - | - | (8,553,897) | (1,670,654) | (10,224,551) | |
Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - | - | |
Others | - | (160,536) | - | - | - | - | - | 12,754 | (147,782) | |
Balance at 31 December 2019 | 6,971,900 | 19,640,313 | (3,759,732) | (711,554) | 366,947 | 6,447,658 | 72,713,631 | 5,826,934 | 107,496,097 |
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item | Equity attributable to shareholders of the Company | |||
Share
Capital
capital | surplus | Less: |
Treasury
stock | Other |
comprehensive
income | General |
risk
Special
reserve | reserve | Surplus reserve |
Undistributed
Minority
profits | interests | Total |
shareholders’
equity | |||||||||||
(Note 4(38)) | (Note 4(40)) | (Note 4(39)) | |||||||||
Balance at 1 January 2020 | 6,971,900 | 19,640,313 | (3,759,732) | (711,554) | 366,947 | - | 6,447,658 | 72,713,631 | 5,826,934 | 107,496,097 | |
Movements for the year ended 31 December 2020 | |||||||||||
Total comprehensive income | |||||||||||
Net profit | - | - | - | - | - | - | - | 27,222,969 | 283,573 | 27,506,542 | |
Other comprehensive income, net of tax | - | - | - | (837,449) | - | - | - | - | (340,360) | (1,177,809) | |
Total comprehensive income | - | - | - | (837,449) | - | - | - | 27,222,969 | (56,787) | 26,328,733 | |
Capital contribution and withdrawal by shareholders | |||||||||||
Ordinary shares invested by shareholders | 63,801 | 2,157,530 | - | - | - | - | - | - | 89,465 | 2,310,796 | |
Business combinations | - | - | - | - | - | 13,618 | - | - | 1,663,792 | 1,677,410 | |
Share-based payment included in shareholders' equity | - | 508,256 | - | - | - | - | - | - | 55,314 | 563,570 | |
Others | (5,725) | (193,357) | (2,334,615) | - | - | - | - | - | (517,436) | (3,051,133) | |
Profit distribution | |||||||||||
Appropriation to general risk reserve | - | - | - | - | 221,037 | - | - | (221,037) | - | - | |
Appropriation to surplus reserve | - | - | - | - | - | - | 1,518,704 | (1,518,704) | - | - | |
Profit distribution to shareholders | - | - | - | - | - | - | - | (11,122,406) | (417,486) | (11,539,892) | |
Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - | - | - | |
Special reserve | - | - | - | - | - | - | - | - | - | - | |
Appropriation in the current period | - | - | - | - | - | 165 | - | - | 41 | 206 | |
Use in the current period | - | - | - | - | - | (1,053) | - | - | (263) | (1,316) | |
Others | - | 375,363 | - | - | - | - | - | - | 77,266 | 452,629 | |
Balance at 31 December 2020 | 7,029,976 | 22,488,105 | (6,094,347) | (1,549,003) | 587,984 | 12,730 | 7,966,362 | 87,074,453 | 6,720,840 | 124,237,100 |
The accompanying notes form an integral part of these financial statements. |
Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item |
Share
Capital
capital | surplus | Less: |
Treasury
stock | Other |
comprehensive
Surplus
income | reserve |
Undistributed
profits | Total |
shareholders’
equity | ||||||||
Balance at 1 January 2019 | 6,663,031 | 10,615,389 | (4,918,427) | 6,020 | 5,079,096 | 19,486,212 | 36,931,321 | |
Movements for the year ended 31 December 2019 | ||||||||
Total comprehensive income | ||||||||
Net profit | - | - | - | - | - | 13,685,619 | 13,685,619 | |
Other comprehensive income, net of tax | - | - | - | (4,285) | - | - | (4,285) | |
Total comprehensive income | - | - | - | (4,285) | - | 13,685,619 | 13,681,334 | |
Capital contribution and withdrawal by shareholders | ||||||||
Ordinary shares invested by shareholders | 87,150 | 2,426,916 | (57,088) | - | - | - | 2,456,978 | |
Share-based payment included in shareholders' equity | - | 226,556 | - | - | - | - | 226,556 | |
Others | 221,719 | 13,372,750 | 1,215,783 | - | - | - | 14,810,252 | |
Profit distribution | ||||||||
Appropriation to surplus reserve | - | - | - | - | 1,368,562 | (1,368,562) | - | |
Profit distribution to shareholders | - | - | - | - | - | (8,553,897) | (8,553,897) | |
Transfer from capital surplus to share capital | - | - | - | - | - | - | - | |
Others | - | (48,652) | - | - | - | - | (48,652) | |
Balance at 31 December 2019 | 6,971,900 | 26,592,959 | (3,759,732) | 1,735 | 6,447,658 | 23,249,372 | 59,503,892 | |
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
Item |
Share
Capital
capital | surplus | Less: |
Treasury
stock | Other |
comprehensive
Surplus
income | reserve |
Undistributed
profits | Total |
shareholders’
equity | ||||||||
Balance at 1 January 2020 | 6,971,900 | 26,592,959 | (3,759,732) | 1,735 | 6,447,658 | 23,249,372 | 59,503,892 | |
Movements for the year ended 31 December 2020 | ||||||||
Total comprehensive income | ||||||||
Net profit | - | - | - | - | - | 15,187,038 | 15,187,038 | |
Other comprehensive income, net of tax | - | - | - | (17,744) | - | - | (17,744) | |
Total comprehensive income | - | - | - | (17,744) | - | 15,187,038 | 15,169,294 | |
Capital contribution and withdrawal by shareholders | ||||||||
Ordinary shares invested by shareholders | 63,801 | 2,157,530 | - | - | - | - | 2,221,331 | |
Share-based payment included in shareholders' equity | - | 566,167 | - | - | - | - | 566,167 | |
Others | (5,725) | (193,357) | (2,334,615) | - | - | - | (2,533,697) | |
Profit distribution | ||||||||
Appropriation to surplus reserve | - | - | - | - | 1,518,704 | (1,518,704) | - | |
Profit distribution to shareholders | - | - | - | - | - | (11,122,406) | (11,122,406) | |
Transfer from capital surplus to share capital | - | - | - | - | - | - | - | |
Others | - | 248 | - | - | - | - | 248 | |
Balance at 31 December 2020 | 7,029,976 | 29,123,547 | (6,094,347) | (16,009) | 7,966,362 | 25,795,300 | 63,804,829 | |
The accompanying notes form an integral part of these financial statements. |
Legal representative: Fang Hongbo | Principal in charge of accounting: Zhong Zheng | Head of accounting department: Chen Lihong |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
1 General information
The principal business activities of Midea Group Co., Ltd. (hereinafter referred to as “theCompany”) and its subsidiaries (hereinafter collectively referred to as “the Group”) includeresidential air-conditioner, central air-conditioner, heating and ventilation systems, kitchenappliances, refrigerators, washing machines and various small appliances, robotics andautomation system. Other services include the smart supply chain; sale, wholesale andprocessing of raw materials of household electrical appliances; and financial businessinvolved in customer deposits, interbank lendings and borrowings, consumption credits,buyer’s credits and finance leases.
The Company was set up by the Council of Trade Unions of GD Midea Group Co., and wasregistered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April 2000,with its headquarters located in Foshan, Guangdong. On 30 August 2012, the Companywas transformed into a limited liability company. On 29 July 2013, the Company wasapproved to merge and acquire Guangdong Midea Electric Co., Ltd., which was listed onShenzhen Stock Exchange. On 18 September 2013, the Company’s shares were listed onShenzhen Stock Exchange.
As at 31 December 2020, the Company's share capital is RMB 7,029,975,999, and the totalnumber of shares in issue is 7,029,975,999, of which 182,862,631 shares are restrictedtradable A shares and 6,847,113,368 shares are unrestricted tradable A shares.
The detailed information of major subsidiaries included in the consolidation scope in thecurrent year is set out in Notes 5 and 6. Subsidiaries newly included in the consolidationscope via acquisition in the current year mainly include Hiconics Eco-energy TechnologyCo., Ltd. and its subsidiaries (“Hiconics Eco-energy”) and WINONE ELEVATOR COMPANYLIMITED and its subsidiaries (“WINONE ELEVATOR”), and are detailed in Note 5(1)(a);subsidiaries newly included in the consolidation scope via establishment in the current yearare detailed in Note 5(2)(a); subsidiaries no longer included in the consolidation scope inthe current year are detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directorson [28] April 2021.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates
The Group determines specific accounting policies and accounting estimates based on thefeatures of production and operation, mainly including the measurement of expected creditloss (ECL) on receivables and contract assets (Note 2(9(a))), valuation method of inventory(Note 2(11)), depreciation of fixed assets and amortisation of intangible assets (Note 2(14),
(17)), impairment of long-term assets (Note 2(19)) and recognition of revenue (Note 2(26)).
Key judgements and critical accounting estimates and key assumptions applied by theGroup on the determination of significant accounting policies are set out in Note 2(31).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard forBusiness Enterprises - Basic Standard, and the specific accounting standards and otherrelevant regulations issued by the Ministry of Finance on 15 February 2006 and insubsequent periods (hereinafter collectively referred to as the “Accounting Standards forBusiness Enterprises” or “CASs”) and the disclosure requirements in the PreparationConvention of Information Disclosure by Companies Offering Securities to the Public No. 15– General Rules on Financial Reporting issued by the China Securities RegulatoryCommission (“CSRC”).
The financial statements are prepared on a going concern basis.
(2) Statement of compliance with the Accounting Standards for Business Enterprises
The financial statements of the Company for the year ended 31 December 2020 are incompliance with the Accounting Standards for Business Enterprises, and truly andcompletely present the consolidated and the Company’s financial position of the Companyas at 31 December 2020 and their financial performance, cash flows and other informationfor the year then ended.
(3) Accounting period
The Company’s accounting year starts on 1 January and ends on 31 December.
(4) Functional currency
The functional currency of the Company is Renminbi (“RMB”). The subsidiaries determinetheir functional currency based on the primary economic environment in which the businessis operated, mainly including EUR, JPY, USD and HKD. The financial statements arepresented in RMB.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(5) Business combinations
(a) Business combinations involving enterprises under common control
The consideration paid and net assets obtained by the Group in a business combination aremeasured at the carrying amount. If the absorbing party was bought by the ultimatecontroller from a third party in prior years, the value of its assets and liabilities (includinggoodwill generated due to the combination) are based on the carrying amount in the ultimatecontroller’s consolidated financial statements. The difference between the carrying amountof the net assets obtained by the Group and the carrying amount of the consideration paidfor the combination is treated as an adjustment to capital surplus (share premium). If thecapital surplus (share premium) is not sufficient to absorb the difference, the remainingbalance is adjusted against retained earnings. Costs directly attributable to the combinationare included in profit or loss in the period in which they are incurred. Transaction costsassociated with the issue of equity or debt securities for the business combination areincluded in the initially recognised amounts of the equity or debt securities.
(b) Business combinations involving enterprises not under common control
The cost of combination and identifiable net assets obtained by the Group in a businesscombination are measured at fair value at the acquisition date. Where the cost of thecombination exceeds the acquirer’s interest in the fair value of the acquiree’s identifiable netassets, the difference is recognised as goodwill; where the cost of combination is lower thanthe acquirer’s interest in the fair value of the acquiree’s identifiable net assets, the differenceis recognised in profit or loss for the current period. Costs directly attributable to thecombination are included in profit or loss in the period in which they are incurred. Transactioncosts associated with the issue of equity or debt securities for the business combination areincluded in the initially recognised amounts of the equity or debt securities.
For business combinations achieved by stages involving enterprises not under commoncontrol, previously-held equity in the acquiree is remeasured at its fair value at theacquisition dates, and the difference between its fair value and carrying amount is includedin investment income for the current period. Where the previously-held equity in the acquireeinvolves other comprehensive income under equity method and shareholders’ equitychanges other than those arising from the net profit or loss, other comprehensive incomeand profit distribution, the related other comprehensive income and other shareholders'equity changes are transferred into income for the current period to which the acquisitiondates belong, excluding those arising from changes in the investee's remeasurements ofnet liability or net asset related to the defined benefit plan. The excess of the sum of fairvalue of the previously-held equity and fair value of the consideration paid at the acquisitiondates over share of fair value of identifiable net assets acquired from the subsidiary isrecognised as goodwill.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Companyand all of its subsidiaries.
Subsidiaries are consolidated from the date on which the Group obtains control and are de-consolidated from the date that such control ceases. For a subsidiary that is acquired in abusiness combination involving enterprises under common control, it is included in theconsolidated financial statements from the date when it, together with the Company, comesunder common control of the ultimate controlling party. The portion of the net profits realisedbefore the combination date is presented separately in the consolidated income statement.
In preparing the consolidated financial statements, where the accounting policies and theaccounting periods of the Company and subsidiaries are inconsistent, the financialstatements of the subsidiaries are adjusted in accordance with the accounting policies andthe accounting period of the Company. For subsidiaries acquired from businesscombinations involving enterprises not under common control, the individual financialstatements of the subsidiaries are adjusted based on the fair value of the identifiable netassets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in theconsolidated financial statements. The portion of subsidiaries’ shareholders' equity and theportion of subsidiaries’ net profits and losses and comprehensive incomes for the period notattributable to the Company are recognised as minority interests, net profit attributed tominority interests and total comprehensive incomes attributed to non-controlling interestsand presented separately in the consolidated financial statements under shareholders'equity, net profit and total comprehensive income respectively. Where the loss for the currentperiod attributable to the minority shareholders of the subsidiaries exceeds the share of theminority interests in the opening balance of equity, the excess is deducted against minorityinterests. Unrealised profits and losses resulting from the sales of assets by the Companyto its subsidiaries are fully eliminated against net profit attributable to shareholders of theparent company. Unrealised profits and losses resulting from the sales of assets by asubsidiary to the Company are eliminated and allocated between net profit attributable toshareholders of the parent company and net profit attributable to minority interests inaccordance with the allocation proportion of the parent company in the subsidiary.Unrealised profits and losses resulting from the sales of assets by one subsidiary to anotherare eliminated and allocated between net profit attributable to shareholders of the parentcompany and net profit attributable to minority interests in accordance with the allocationproportion of the parent company in the subsidiary. If the accounting treatment of atransaction is inconsistent in the financial statements at the Group level and at the Companyor its subsidiary level, adjustment will be made from the perspective of the Group.
(7) Determination criterion for cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn ondemand, and short-term and highly liquid investments that are readily convertible to knownamounts of cash and which are subject to an insignificant risk of changes in value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(8) Foreign currency translation
(a) Foreign currency transactions
Foreign currency transactions are translated into functional currency using the exchangerates prevailing at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translatedinto functional currency using the spot exchange rates on the balance sheet date. Exchangedifferences arising from these translations are recognised in profit or loss for the currentperiod, except for those attributable to foreign currency borrowings that have been takenout specifically for acquisition or construction of qualifying assets, which are capitalised aspart of the cost of those assets. Non-monetary items denominated in foreign currencies thatare measured at historical costs are translated at the balance sheet date using the spotexchange rates at the date of the transactions. The effect of exchange rate changes on cashis presented separately in the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated atthe spot exchange rates on the balance sheet date. Among the equity items, the items otherthan undistributed profits are translated at the spot exchange rates of the transaction dates.The income and expense items in the income statements of overseas operations aretranslated at the spot exchange rates of the transaction dates. The differences arising fromthe above translation are recognised in other comprehensive income. The cash flows ofoverseas operations are translated at the spot exchange rates on the dates of the cashflows. The effect of exchange rate changes on cash is presented separately in the cash flowstatement.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and afinancial liability or equity instrument of another entity. A financial asset or a financial liabilityis recognised when the Group becomes a party to the contractual provisions of theinstrument.
(a) Financial assets
(i) Classification and measurement
Based on the business model for managing the financial assets and the contractual cashflow characteristics of the financial assets, financial assets are classified as: (1) financialassets at amortised cost; (2) financial assets at fair value through other comprehensiveincome; (3) financial assets at fair value through profit or loss.
The financial assets are measured at fair value at initial recognition. Related transactioncosts that are attributable to the acquisition of the financial assets are included in the initiallyrecognised amounts, except for the financial assets at fair value through profit or loss, therelated transaction costs of which are recognised directly in profit or loss for the currentperiod. Accounts receivable or notes receivable arising from sales of products or renderingof services (excluding or without regard to significant financing components) are initiallyrecognised at the consideration that is entitled to be charged by the Group as expected.
(i-1) Debt instruments
The debt instruments held by the Group refer to the instruments that meet the definition offinancial liabilities from the perspective of the issuer, and are measured in the following threeways:
Measured at amortised cost:
The objective of the Group’s business model is to hold the financial assets to collect thecontractual cash flows, and the contractual cash flow characteristics are consistent with abasic lending arrangement, which gives rise on specified dates to the contractual cash flowsthat are solely payments of principal and interest on the principal amount outstanding. Theinterest income of such financial assets is recognised using the effective interest method.Such financial assets mainly comprise cash at bank and on hand, loans and advances,notes receivable, accounts receivable, other receivables, debt investments and long-termreceivables, etc. Debt investments and long-term receivables that are due within one year(inclusive) as from the balance sheet date are included in the current portion of non-currentassets; debt investments with maturities of no more than one year (inclusive) at the time ofacquisition are included in other current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(i) Classification and measurement (Cont’d)
(i-1) Debt instruments (Cont’d)
Measured at fair value through other comprehensive income:
The objective of the Group’s business model is to hold the financial assets to both collectthe contractual cash flows and sell such financial assets, and the contractual cash flowcharacteristics are consistent with a basic lending arrangement. Such financial assets aremeasured at fair value through other comprehensive income, except for the impairmentgains or losses, foreign exchange gains and losses, and interest income calculated usingthe effective interest method which are recognised in profit or loss for the current period.Such financial assets mainly include receivables financing, other debt investments, etc.Other debt investments of the Group that are due within one year (inclusive) as from thebalance sheet date are included in the current portion of non-current assets; other debtinvestments with maturities no more than one year (inclusive) at the time of acquisition areincluded in other current assets.
Measured at fair value through profit or loss:
Debt instruments held by the Group that are not divided into those at amortised cost, orthose measured at fair value through other comprehensive income, are measured at fairvalue through profit or loss. At initial recognition, the Group designates a portion of financialassets as at fair value through profit or loss to eliminate or significantly reduce an accountingmismatch. Financial assets that are due over one year as from the balance sheet date andare expected to be held over one year are included in other non-current financial assets,and others are included in financial assets held for trading.
(i-2) Equity instruments
Investments in equity instruments, over which the Group has no control, joint control orsignificant influence, are measured at fair value through profit or loss under financial assetsheld for trading; investments in equity instruments expected to be held over one year asfrom the balance sheet date are included in other non-current financial assets.
In addition, a portion of certain investments in equity instruments not held for trading aredesignated as financial assets at fair value through other comprehensive income underother investments in equity instruments. The relevant dividend income of such financialassets is recognised in profit or loss for the current period.
(i-3) Derivative financial instruments
The derivative financial instruments held or issued by the Group are mainly used incontrolling risk exposures. Derivative financial instruments are initially recognised at fairvalue on the day when derivatives transaction contract was signed, and subsequentlymeasured at fair value. The derivative financial instruments are recorded as assets whenthey have a positive fair value and as liabilities when they have a negative fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(i) Classification and measurement (Cont’d)
(i-3) Derivative financial instruments (Cont’d)
The method for recognising changes in fair value of the derivative financial instrumentdepends on whether the derivative financial instrument is designated as a hedginginstrument and meets the requirement for it, and if so, the nature of the item being hedged.For derivative financial instruments that are not designated as hedging instruments and failto meet requirements on hedging instruments, including those held for the purpose ofproviding hedging against specific risks in interest rate and foreign exchange but notconforming with requirements of hedge accounting, the changes in fair value are recordedin gains or losses arising from changes in fair value in the consolidated income statement.
Cash flow hedge
The effective portion of gains or losses on hedging instruments is recognised in othercomprehensive income as cash flow hedging reserve, while the ineffective portion isrecognised in profit or loss for the current period. Where the hedge is a forecast transactionwhich subsequently results in the recognition of a non-financial asset or liability, the amountoriginally recognised in other comprehensive income is transferred and included in theinitially recognised amount of the asset or liability. For cash flow hedge beyond the foregoingscope, the amount originally recognised in other comprehensive income is transferred andincluded in profit or loss for the current period during the same time in which the profit orloss is influenced by the hedged expected cash flow. However, if all or part of net lossrecognised directly in other comprehensive income will not be recovered in futureaccounting periods, the amount not expected to be recovered should be transferred to profitor loss for the current period. When the Group revokes the designation of a hedge, a hedginginstrument expires or is sold, terminated or exercised, or the hedge no longer meets thecriteria for hedge accounting, the Group will discontinue the hedge accounting treatmentsprospectively. Where the Group discontinues the hedge accounting treatment for cash flowhedging, for hedged future cash flows that will still happen, the accumulated gains or lossesthat have been recognised in other comprehensive income are retained and subject toaccounting treatment under the subsequent treatment method of aforesaid cash flowhedging reserve; for hedged future cash flows that the forecast transaction will neverhappen, the accumulated gains or losses that have been recognised in other comprehensiveincome are transferred immediately and included in profit or loss for the current period.
(ii) Impairment
Loss provision for financial assets at amortised cost, investments in debt instruments at fairvalue through other comprehensive income, as well as contract assets and financialguarantee contracts is recognised on the basis of ECL.
Giving consideration to reasonable and supportable information on past events, currentconditions, forecasts of future economic conditions and forward-looking information, andweighted by the risk of default, the Group recognises the ECL as the probability-weightedamount of the present value of the difference between the cash flows receivable from thecontract and the cash flows expected to collect.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
As at each balance sheet date, the ECL of financial instruments at different stages aremeasured respectively. 12-month ECL provision is recognised for financial instruments inStage 1 that have not had a significant increase in credit risk since initial recognition; lifetimeECL provision is recognised for financial instruments in Stage 2 that have had a significantincrease in credit risk yet without credit impairment since initial recognition; and lifetime ECLprovision is recognised for financial instruments in Stage 3 that have had credit impairmentsince initial recognition.
For the financial instruments with lower credit risk on the balance sheet date, the Groupassumes there is no significant increase in credit risk since initial recognition and recognisesthe 12-month ECL provision.
For the financial instruments in Stage 1, Stage 2 and with lower credit risk, the Groupcalculates the interest income by applying the effective interest rate to the gross carryingamount (before deduction of the impairment provision). For the financial instruments inStage 3, the interest income is calculated by applying the effective interest rate to theamortised cost (after deduction of the impairment provision from the gross carrying amount).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(ii) Impairment (Cont’d)
For notes receivable, accounts receivable, receivables financing and contract assets arisingfrom sales of goods and rendering of services in the ordinary course of operating activities,the Group recognises the lifetime ECL provision regardless of whether there exists asignificant financing component. Since contract assets are related to work in progresswithout invoice, essentially, their risk characteristics are the same as the accountsreceivable of similar contracts. Therefore, the Group believes that the ECL rate of accountsreceivable is an approximation to that of contract assets.
In case the ECL of an individually assessed financial asset cannot be evaluated withreasonable cost, the Group divides the receivables and contract assets into certaingroupings based on credit risk characteristics, then pursuant to which, calculates the ECL.Basis and provision method for determining groupings are as follows:
Notes receivable - Bank acceptance notes | Bank credit risk grouping |
Notes receivable - Trade acceptance notes | Non-bank credit risk grouping |
Accounts receivable | Domestic/overseas business grouping |
Contract assets | Domestic/overseas business grouping |
Other receivables | Security deposit/guarantee payables grouping |
Long-term receivables | Finance lease payable grouping |
Loans and advances | Loans business grouping |
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates theECL of notes receivable and receivables financing that are classified into groupings withconsideration to historical credit losses experience, current conditions and forecasts offuture economic conditions.
With consideration to historical credit loss experience, current conditions and forecasts offuture economic conditions, the Group prepares the cross-reference between the numberof overdue days of accounts receivable and the lifetime ECL rate, and calculates the ECLof accounts receivable that are classified into groupings.
The Group, on the basis of the exposure at default and the 12-month or lifetime ECL rate,calculates the ECL of other receivables, loans and advances, and long-term receivables thatare classified into groupings with consideration to historical credit losses experience, thecurrent conditions and forecasts of future economic conditions.
The Group recognises the loss provision made or reversed into profit or loss for the currentperiod. For debt instruments held at fair value through other comprehensive income, theGroup adjusts other comprehensive income while the impairment loss or gain is recognisedin profit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(a) Financial assets (Cont’d)
(iii) Derecognition of financial assets
A financial asset is derecognised when: (i) the contractual rights to the cash flows from thefinancial asset expire, (ii) the financial asset has been transferred and the Group transferssubstantially all the risks and rewards of ownership of the financial asset to the transferee,or (iii) the financial asset has been transferred and the Group has not retained control of thefinancial asset, although the Group neither transfers nor retains substantially all the risksand rewards of ownership of the financial asset.
When a financial asset is derecognised, the difference between the carrying amount andthe sum of the consideration received and the cumulative changes in fair value that arepreviously recognised directly in other comprehensive income is recognised in profit or lossfor the current period, except for those as investments in other equity instruments, thedifference aforementioned is recognised in retained earnings instead.
(b) Financial liabilities
Financial liabilities are classified as financial liabilities at amortised cost and financialliabilities at fair value through profit or loss at initial recognition.
Financial liabilities of the Group mainly comprise financial liabilities at amortised cost,including notes payable, accounts payable, other payables, borrowings and short-termfinancing bonds payable in other current liabilities, customer deposits and deposits frombanks and other financial institutions, borrowings from the Central Bank, long-termpayables, etc. Such financial liabilities are initially recognised at fair value, net of transactioncosts incurred, and subsequently measured using the effective interest method. Financialliabilities that are due within one year (inclusive) are classified as current liabilities; thosewith maturities over one year but are due within one year (inclusive) as from the balancesheet date are classified as current portion of non-current liabilities. Others are classified asnon-current liabilities.
A financial liability is derecognised or partly derecognised when the underlying presentobligation is discharged or partly discharged. The difference between the carrying amountof the derecognised part of the financial liability and the consideration paid is recognised inprofit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(9) Financial instruments (Cont’d)
(c) Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined atthe quoted price in the active market. The fair value of a financial instrument that is nottraded in an active market is determined by using a valuation technique. In valuation, theGroup adopts valuation techniques applicable in the current situation and supported byadequate available data and other information, selects inputs with the same characteristicsas those of assets or liabilities considered in relevant transactions of assets or liabilities bymarket participants, and gives priority to the use of relevant observable inputs. Whenrelevant observable inputs are not available or feasible, unobservable inputs are adopted.
(10) Receivables
Receivables comprise accounts receivable, other receivables, notes receivable, long-termreceivables, loans and advances, etc. Accounts receivable arising from sale of goods orrendering of services are initially recognised at fair value of the contractual payments fromthe buyers or service recipients, and subsequently measured at amortised cost lessprovision for impairment using the effective interest method. Provision for impairment ofreceivables are set out in Note 2(9)(a).
(11) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low valueconsumables, work in progress, contract performance costs and finished goods, aremeasured at the lower of cost and net realisable value.
(b) Costing of inventories
Cost is determined using the first-in, first-out method when issued. The cost of finishedgoods and work in progress comprises raw materials, direct labour and systematicallyallocated production overhead based on the normal production capacity.
(c) Basis for determining net realisable values of inventories and method for making provision
for decline in the value of inventories
Inventories are initially measured at cost. The cost of inventories comprises purchase cost,processing cost and other expenditures to bring the inventories to current site and condition.
On the balance sheet date, inventories are measured at the lower of cost and net realisablevalue.
Net realisable value is determined based on the estimated selling price in the ordinarycourse of business, less the estimated costs to completion and estimated costs necessaryto make the sale and related taxes.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(11) Inventories (Cont'd)
(c) Basis for determining net realisable values of inventories and method for making provision
for decline in the value of inventories (Cont’d)
Provision for decline in the value of inventories is determined at the excess amount of thecost as calculated based on the classification of inventories over their net realisable value,and are recognised in profit or loss for the current period.
(d) Inventory system
The Group adopts the perpetual inventory system.
(e) Amortisation methods of low value consumables and packaging materials
Low value consumables are expensed in full when issued and recognised in cost of relatedassets or in profit or loss for the current period.
(12) Long-term equity investments
Long-term equity investments comprise the Company’s long-term equity investments in itssubsidiaries, and the Group’s long-term equity investments in its associates and jointventure.
Subsidiaries are the investees over which the Company is able to exercise control. A jointventure is a joint arrangement which is structured through a separate vehicle over which theGroup has joint control together with other parties and only has rights to the net assets ofthe arrangement based on legal forms, contractual terms and other facts and circumstances.Associates are the investees that the Group has significant influence on their financial andoperating policies.
Investments in subsidiaries are presented in the Company’s financial statements using thecost method, and are adjusted to the equity method when preparing the consolidatedfinancial statements. Investments in a joint venture and associates are accounted for usingthe equity method.
(a) Determination of investment cost
For long-term equity investments acquired through a business combination involvingenterprises under common control, the investment cost shall be the absorbing party’s shareof the carrying amount of equity of the party being absorbed in the consolidated financialstatements of the ultimate controller at the combination date; for long-term equity investmentacquired through a business combination involving enterprises not under common control,the investment cost shall be the combination cost.
For business combinations achieved by stages involving enterprises not under commoncontrol, the initial investment cost accounted for using the cost method is the sum of carryingamount of previously-held equity investment and additional investment cost. For previously-held equity accounted for using the equity method, the accounting treatment of related othercomprehensive income from disposal of the equity is carried out on a same basis with theinvestee's direct disposal of related assets or liabilities. Shareholders' equity, which isrecognised due to changes in investee’s shareholders’ equity other than those arising fromthe net profit or loss, other comprehensive income and profit distribution, is accordinglytransferred into profit or loss in the period in which the investment is disposed.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(a) Determination of investment cost (Cont’d)
For investment in previously-held equity accounted for using the recognition andmeasurement standards of financial instruments, the initial investment cost accounted forusing the cost method is the sum of carrying amount of previously-held equity investmentand additional investment cost. The difference between the fair value and carrying amountfor investment in previously-held equity and the accumulated changes in fair valuepreviously included in other comprehensive income are transferred to profit or loss for thecurrent period accounted for using the cost method.
For long-term equity investments acquired not through a business combination: for long-term equity investments acquired by payment in cash, the initial investment cost shall bethe purchase price actually paid; for long-term equity investments acquired by issuing equitysecurities, the initial investment cost shall be the fair value of the equity securities issued.
(b) Subsequent measurement and recognition methods of gains and losses
For long-term equity investments accounted for using the cost method, they are measuredat the initial investment costs, and cash dividends or profit distribution declared by theinvestees are recognised as investment income in profit or loss.
For long-term equity investments accounted for using the equity method, where the initialinvestment cost of a long-term equity investment exceeds the Group’s share of the fair valueof the investee’s identifiable net assets at the acquisition date, the long-term equityinvestment is measured at the initial investment cost; where the initial investment cost isless than the Group’s share of the fair value of the investee’s identifiable net assets at theacquisition date, the difference is included in profit or loss and the cost of the long-termequity investment is adjusted upwards accordingly.
For long-term equity investments accounted for using the equity method, the Grouprecognises the investment income according to its share of net profit or loss of the investee.The Group discontinues recognising its share of the net losses of an investee after thecarrying amounts of the long-term equity investment together with any long-term intereststhat in substance form part of the investor’s net investment in the investee are reduced tozero. However, if the Group has obligations for additional losses and the criteria with respectto recognition of provisions under the accounting standards on contingencies are satisfied,the Group continues recognising the investment losses and the provisions. The changes ofthe Group’s share of the investee’s owner's equity other than those arising from the net profitor loss, other comprehensive income and profit distribution, are recognised in the Group’sequity and the carrying amounts of the long-term equity investment are adjusted accordingly.The carrying amount of the investment is reduced by the Group’s share of the profitdistribution or cash dividends declared by an investee. The unrealised profits or lossesarising from the transactions between the Group and its investees are eliminated inproportion to the Group’s equity interest in the investees, based on which the investmentgain or losses are recognised. Any losses resulting from transactions between the Groupand its investees attributable to asset impairment losses are not eliminated.
(c) Basis for determining existence of control, joint control, significant influence over investees
Control is the power to govern an investee and obtain variable returns from participating theinvestee's activities, and the ability to utilise the power of an investee to affect its returns.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(12) Long-term equity investments (Cont’d)
(c) Basis for determining existence of control, joint control, significant influence over investees
(Cont’d)
Joint control is the contractually agreed sharing of control over an arrangement, and relevanteconomic activity can be arranged upon the unanimous approval of the Group and otherparticipants sharing of control rights.
Significant influence is the power to participate in the financial and operating policy decisionsof the investee, but is not control or joint control over those policies.
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint venture andassociates are reduced to the recoverable amounts when the recoverable amounts arebelow their carrying amounts (Note 2(19)).
(13) Investment properties
Investment properties, including land use rights that have already been leased out, buildingsthat are held for the purpose of leasing and buildings that are being constructed ordeveloped for future use for leasing, are measured initially at cost. Subsequent expendituresincurred in relation to an investment property are included in the cost of the investmentproperty when it is probable that the associated economic benefits will flow to the Groupand their costs can be reliably measured; otherwise, the expenditures are recognised inprofit or loss for the period in which they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties.Buildings and land use rights are depreciated or amortised to their estimated net residualvalues over their estimated useful lives. The estimated useful lives, the estimated netresidual values that are expressed as a percentage of cost and the annual depreciation(amortisation) rates of investment properties are as follows:
Estimated useful lives | Estimated net residual values | Annual depreciation (amortisation) rates | |
Buildings | 20 to 40 years | 5% | 2.38% to 4.75% |
Land use rights | 40 to 50 years | - | 2% to 2.5% |
When an investment property is transferred to owner-occupied properties, it is reclassifiedas fixed asset or intangible asset at the date of the transfer. When an owner-occupiedproperty is transferred out for earning rentals or for capital appreciation, the fixed asset orintangible asset is reclassified as investment properties at its carrying amount at the date ofthe transfer. At the time of transfer, the property is recognised based on the carrying amountbefore transfer.
The investment properties' estimated useful lives, the estimated net residual values and thedepreciation (amortisation) methods applied are reviewed and adjusted as appropriate ateach year-end.
An investment property is derecognised on disposal or when the investment property ispermanently withdrawn from use and no future economic benefits are expected from itsdisposal. The net amount of proceeds from sale, transfer, retirement or damage of aninvestment property after its carrying amount and related taxes and expenses is recognisedin profit or loss for the current period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Fixed assets
(a) Recognition and initial measurement of fixed assets
Fixed assets comprise buildings, overseas land, machinery and equipment, motor vehicles,electronic equipment and others.
Fixed assets are recognised when it is probable that the related economic benefits will flowto the Group and the costs can be reliably measured. The initial cost of purchased fixedassets include purchase price, related taxes and expenditures that are attributable to theassets incurred before the assets are ready for their intended use. The initial cost of self-constructed fixed assets is determined based on Note 2(15).
Subsequent expenditures incurred for a fixed asset are included in the cost of the fixed assetwhen it is probable that the associated economic benefits will flow to the Group and therelated cost can be reliably measured. The carrying amount of the replaced part isderecognised. All the other subsequent expenditures are recognised in profit or loss in theperiod in which they are incurred.
(b) Depreciation method for fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assetsto their estimated net residual values over their estimated useful lives. For the fixed assetsthat have been provided for impairment loss, the related depreciation charge is prospectivelydetermined based upon the adjusted carrying amounts over their remaining useful lives.
The estimated useful lives, the estimated net residual values expressed as a percentage ofcost and the annual depreciation rates of the Group's fixed assets are as follows:
Categories | Estimated useful lives | Estimated net residual values | Annual depreciation rates |
Buildings | 15 to 50 years | 0% - 10% | 6.7% - 1.8% |
Machinery and equipment | 2 to 25 years | 0% - 10% | 50% - 3.6% |
Motor vehicles | 2 to 20 years | 0% - 10% | 50% - 4.5% |
Electronic equipment and others | 2 to 20 years | 0% - 10% | 50% - 4.5% |
Overseas land | Permanent | Not applicable | Not applicable |
The estimated useful lives and the estimated net residual values of the Group's fixed assetsand the depreciation methods applied to the assets are reviewed, and adjusted asappropriate at each year-end.
(c) The carrying amount of a fixed asset is reduced to the recoverable amount when the
recoverable amount is below the carrying amount (Note 2(19)).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(14) Fixed assets (Cont’d)
(d) Basis for identification of fixed assets held under finance leases and related measurement
A lease that transfers substantially all the risks and rewards incidental to ownership of anasset is a finance lease. The leased asset is recognised at the lower of the fair value of theleased asset and the present value of the minimum lease payments. The difference betweenthe recorded amount of the leased asset and the minimum lease payments is accounted foras unrecognised finance charge.
Fixed assets held under a finance lease is depreciated on a basis consistent with thedepreciation policy adopted for fixed assets that are self-owned. When a leased asset canbe reasonably determined that its ownership will be transferred at the end of the lease term,it is depreciated over the period of expected use; otherwise, the leased asset is depreciatedover the shorter period of the lease term and the period of expected use.
(e) Disposal of fixed assets
A fixed asset is derecognised on disposal or when no future economic benefits are expectedfrom its use or disposal. The amount of proceeds from disposal on sales, transfer, retirementor damage of a fixed asset net of its carrying amount and related taxes and expenses isrecognised in profit or loss for the current period.
(15) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises constructioncosts, installation costs, borrowing costs that are eligible for capitalisation and other costsnecessary to bring the fixed assets ready for their intended use. Construction in progress istransferred to fixed assets when the assets are ready for their intended use, anddepreciation begins from the following month. The carrying amount of construction inprogress is reduced to the recoverable amount when the recoverable amount is below thecarrying amount (Note 2(19)).
(16) Borrowing costs
The borrowing costs that are directly attributable to the acquisition and construction of afixed asset that needs a substantially long period of time for its intended use commence tobe capitalised and recorded as part of the cost of the asset when expenditures for the assetand borrowing costs have been incurred, and the activities relating to the acquisition andconstruction that are necessary to prepare the asset for its intended use have commenced.The capitalisation of borrowing costs ceases when the asset under acquisition orconstruction becomes ready for its intended use and the borrowing costs incurred thereafterare recognised in profit or loss for the current period. Capitalisation of borrowing costs issuspended during periods in which the acquisition or construction of an asset is interruptedabnormally and the interruption lasts for more than 3 months, until the acquisition orconstruction is resumed.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(16) Borrowing costs (Cont'd)
For the specific borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of borrowing costs eligible for capitalisation isdetermined by actual interest expenses deducting any interest income earned fromdepositing the unused specific borrowings in the banks or any investment income arising onthe temporary investment of those borrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed assetqualifying for capitalisation, the amount of borrowing costs eligible for capitalisation isdetermined by applying the weighted average effective interest rate of general borrowings,to the weighted average of the excess amount of cumulative expenditures on the asset overthe amount of specific borrowings. The effective interest rate is the rate at which theestimated future cash flows during the period of expected duration of the borrowings orapplicable shorter period are discounted to the initial amount of the borrowings.
(17) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademarkrights, trademark use rights and others, are measured at cost.
(a) Land use rights
Land use rights are amortised on the straight-line basis over their approved use period of40 to 50 years. If the acquisition costs of the land use rights and the buildings locatedthereon cannot be reasonably allocated between the land use rights and the buildings, allof the acquisition costs are recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the periodas stipulated by contracts or the beneficial period.
(c) Trademark rights
The trademark rights is measured at cost when acquired and is amortised over theestimated useful life of 4 to 30 years. The cost of trademark rights obtained in the businesscombinations involving enterprises not under common control is measured at fair value. Assome of the trademarks are expected to attract net cash inflows injected into the Group, themanagement considers that these trademarks have an indefinite useful life and arepresented based upon the carrying amounts after deducting the provision for impairment(Note 4(18)).
(d) Trademark use rights
The trademark use rights is measured at cost when acquired. The cost of trademark userights obtained in the business combinations involving enterprises not under commoncontrol is measured at fair value, and is amortised over the estimated useful life of 40 years.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(17) Intangible assets (Cont’d)
(e) Periodical review of useful life and amortisation method
For an intangible asset with a finite useful life, review of its useful life and amortisationmethod is performed at each year-end, with adjustment made as appropriate.
(f) Research and development (“R&D”)
The expenditure on an internal research and development project is classified intoexpenditure on the research phase and expenditure on the development phase based onits nature and whether there is material uncertainty that the research and developmentactivities can form an intangible asset at the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research ofproduction processes or products is categorised as expenditure on the research phase, andit is recognised in profit or loss when it is incurred. Expenditure on design and test for thefinal application of the development of production processes or products before massproduction is categorised as expenditure on the development phase, which is capitalisedonly if all of the following conditions are satisfied.
? The development of production processes or products has been fully justified by
technical team;? The budget on the development of production processes or products has been
approved by the management;? There is market research analysis that demonstrates the product produced by the
production process or product has the ability of marketing;? There are sufficient technical and financial resources to support the development of
production processes or products and subsequent mass production; and
? Expenditure attributable to the development of production processes or products can
be reliably measured.
Other development expenditures that do not meet the conditions above are recognised inprofit or loss in the period in which they are incurred. Development costs previouslyrecognised as expenses are not recognised as an asset in a subsequent period. Capitalisedexpenditure on the development phase is presented as development costs in the balancesheet and transferred to intangible assets at the date that the asset is ready for its intendeduse.
(g) Impairment of intangible assets
The carrying amounts of intangible assets are reduced to the recoverable amounts whenthe recoverable amounts are below their carrying amounts (Note 2(19)).
(18) Long-term prepaid expenses
Long-term prepaid expenses include the expenditure for improvements to fixed assets heldunder operating leases, and other expenditures that have been incurred but should berecognised as expenses over more than one year in the current and subsequent periods.Long-term prepaid expenses are amortised on the straight-line basis over the expectedbeneficial period and are presented at actual expenditure net of accumulated amortisation.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(19) Impairment of long-term assets
Fixed assets, construction in progress, intangible assets with finite useful lives, investmentproperties measured using the cost model and long-term equity investments in subsidiaries,a joint venture and associates are tested for impairment if there is any indication that theassets may be impaired at the balance sheet date. Intangible assets not ready for theirintended use, intangible assets with infinite useful lives and overseas land are tested at leastannually for impairment, irrespective of whether there is any indication that it may beimpaired. If the result of the impairment test indicates that the recoverable amount of anasset is less than its carrying amount, a provision for impairment and an asset impairmentloss are recognised for the amount by which the asset’s carrying amount exceeds itsrecoverable amount. The recoverable amount is the higher of an asset’s fair value less coststo 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 recoverableamount of a group of assets to which the asset belongs is determined. A group of assets isthe smallest group of assets that is able to generate independent cash inflows.
Goodwill that is separately presented in the financial statements is tested at least annuallyfor impairment, irrespective of whether there is any indication that it may be impaired. Inconducting the test, the carrying value of goodwill is allocated to the related asset group orasset groups which are expected to benefit from the synergies of the business combinationIf the result of the test indicates that the recoverable amount of an asset group or assetgroups, including the allocated goodwill, is lower than its carrying amount, the correspondingimpairment loss is recognised. The impairment loss is first deducted from the carryingamount of goodwill that is allocated to the asset group or asset groups, and then deductedfrom the carrying amounts of other assets within the asset group or asset groups inproportion to the carrying amounts of assets other than goodwill.
Once the above asset impairment loss is recognised, it will not be reversed for the valuerecovered in the subsequent periods.
(20) Employee benefits
Employee benefits include short-term employee benefits, post-employment benefits,termination benefits and other long-term employee benefits provided in various forms ofconsideration in exchange for service rendered by employees or compensations for thetermination of employment relationship.
(a) Short-term employee benefits
Short-term employee benefits include employee wages or salaries, bonus, allowances andsubsidies, staff welfare, premiums or contributions on medical insurance, work injuryinsurance and maternity insurance, housing funds, union running costs and employeeeducation costs, short-term paid absences. The employee benefit liabilities are recognisedin the accounting period in which the service is rendered by the employees, with acorresponding charge to the profit or loss for the current period or the cost of relevant assets.Employee benefits which are non-monetary benefits are measured at fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(b) Post-employment benefits
The Group classifies post-employment benefit plans as either defined contribution plans ordefined benefit plans. Defined contribution plans are post-employment benefit plans underwhich the Group pays fixed contributions into a separate fund and will have no obligation topay further contributions; and defined benefit plans are post-employment benefit plans otherthan defined contribution plans. During the reporting period, the Group's defined contributionplans mainly include basic pensions and unemployment insurance, while the defined benefitplans are Toshiba Lifestyle Products & Services Corporation (“TLSC”), and KUKAAktiengesellschaft (“KUKA”) and its subsidiaries (“KUKA Group”) provide supplementalretirement benefits beyond the national regulatory insurance system.
Basic pensions
The Group’s employees participate in the basic pension plan set up and administered bylocal authorities of Ministry of Human Resource and Social Security. Monthly payments ofpremiums on the basic pensions are calculated according to prescribed bases andpercentage by the relevant local authorities. When employees retire, the relevant localauthorities are obliged to pay the basic pensions to them. The amounts based on the abovecalculations are recognised as liabilities in the accounting period in which the service hasbeen rendered by the employees, with a corresponding charge to the profit or loss for thecurrent period or the cost of relevant assets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans isthe present value of the defined benefit obligation at the end of the reporting period less thefair value of plan assets. The defined benefit obligation is calculated annually byindependent actuaries using the projected unit credit method at the interest rate of treasurybonds with similar obligation term and currency. The charges related to the supplementalretirement benefits (including current service costs, past-service costs and gains or losseson settlement) and net interest are recognised in the statement of profit or loss or includedin the cost of an asset, and the changes of remeasurement in net liabilities or net assetsarising from the benefit plan are charged or credited to equity in other comprehensiveincome.
(c) Termination benefits
The Group provides compensation for terminating the employment relationship withemployees before the end of the employment contracts or as an offer to encourageemployees to accept voluntary redundancy before the end of the employment contracts.The Group recognises a liability arising from compensation for termination of theemployment relationship with employees, with a corresponding charge to profit or loss forthe current period at the earlier of the following dates: 1) when the Group cannot unilaterallywithdraw an employment termination plan or a curtailment proposal; 2) when the Grouprecognises costs or expenses related to the restructuring that involves the payment oftermination benefits.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(20) Employee benefits (Cont’d)
(c) Termination benefits (Cont’d)
Early retirement benefits
The Group offers early retirement benefits to those employees who accept early retirementarrangements. The early retirement benefits refer to the salaries and social securitycontributions to be paid to and for the employees who accept voluntary retirement beforethe normal retirement date prescribed by the State, as approved by the management. TheGroup pays early retirement benefits to those early retired employees from the earlyretirement date until the normal retirement date. The Group accounts for the early retirementbenefits in accordance with the treatment for termination benefits, in which the salaries andsocial security contributions to be paid to and for the early retired employees from the off-duty date to the normal retirement date are recognised as liabilities with a correspondingcharge to the profit or loss for the current period. The differences arising from the changesin the respective actuarial assumptions of the early retirement benefits and the adjustmentsof benefit standards are recognised in profit or loss in the period in which they occur.
The termination benefits expected to be settled within one year since the balance sheet dateare classified as current liabilities.
(21) General risk reserve
General risk reserve is the reserve appropriated from undistributed profits to cover part ofunidentified potential losses, on the basis of the estimated potential risk value of risk assetsassessed by the standardised approach, which is deducted from recognised provision forimpairment losses on loans. Risk assets include loans and advances, long-term equityinvestments, deposits with banks and other financial institutions and other receivables ofsubsidiary engaged in financial business.
(22) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved bythe shareholders’ meeting.
(23) Provisions
Provisions for product warranties, onerous contracts, etc. are recognised when the Grouphas a present obligation, it is probable that an outflow of economic benefits will be requiredto settle the obligation, and the amount of the obligation can be measured reliably.
A provision is initially measured at the best estimate of the expenditure required to settle therelated 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 reachingthe best estimate of a provision. Where the effect of the time value of money is material, thebest estimate is determined by discounting the related future cash outflows. The increase inthe discounted amount of the provision arising from passage of time is recognised asinterest expenses.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted toreflect the current best estimate.
The provisions expected to be settled within one year since the balance sheet date areclassified as current liabilities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(24) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employeesas consideration for equity instruments of the entity or by incurring liabilities for amountsbased on the equity instruments. Equity instruments include equity instruments of theCompany, its parent company or other accounting entities of the Group. Share-basedpayments are divided into equity-settled and cash-settled payments. The Group’s share-based payments are equity-settled payments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains share option incentive plan,restricted share plan and employee stock ownership plan. These plans are measured at thefair value of the equity instruments at grant date and the equity instruments are tradable orexercisable when services in vesting period are completed or specified performanceconditions are met. In the vesting period, the services obtained in the current period areincluded in relevant cost and expenses at the fair value of the equity instruments at grantdate based on the best estimate of the number of tradable or exercisable equity instruments,and capital surplus is increased accordingly. If the subsequent information indicates thenumber of tradable or exercisable equity instruments differs from the previous estimate, anadjustment is made and, on the exercise date, the estimate is revised to equal to the numberof actual vested equity instruments.
(b) Determination of fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which isBlack - Scholes option pricing model.
The fair value of other equity instruments are based on the share prices, which excludedthe price that incentive objects pay, and the number of the shares on the grant date, takinginto account the effects of clause of the Group’s relevant plans.
(c) Basis for determining best estimate of tradable or exercisable equity instruments
As at each balance sheet date in the vesting period, the Group would make best estimatein accordance with the newly acquired information such as changes in the number ofemployees entitled with exercisable or tradable equity instruments, and amend theestimated number of exercisable or tradable equity instruments. On the exercise ordesterilisation date, the final number of estimated exercisable or tradable equity instrumentsis consistent with the actual number of exercised or tradable equity instruments.
(25) Treasury stock
The Group’s treasury stock mainly comes from the repurchase of equity instruments andthe issuance of restricted shares and so on.
Consideration and transaction costs paid by the Group for repurchasing equity instrumentsare deducted from equity and not recognised as financial assets. The considerations paidby the Group for repurchasing equity instruments are presented as treasury stock, and therelated transaction costs are recognised in owners' equity.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(25) Treasury stock (Cont’d)
On the deregistration day of shares, relevant share capital and treasury stock are reversedwith the difference included in capital surplus (share premium) based on actualderegistration results.
On the grant day of restricted shares, the Group recognise bank deposits when receivingsubscription from the employees and measures the repurchase obligation as liability. On theday of release of restricted shares, relevant treasury stocks, liabilities and capital surplusrecognised in the vesting period are reversed based on the actual vesting results.
(26) Revenue
The Group recognises revenue at the amount of the consideration which the Group isexpected to receive when the customer obtains control over relevant goods or services.Revenue is stated net of discounts, rebates and returns.
When any of the following conditions is met, the Group is subject to performance obligationswithin a period of time; otherwise, at a point in time.
(1) Customers obtain and consume economic benefits coming from the Group's
performance of contract while the Group performs the contract.
(2) Customers can control goods under construction during the Group's performance of
contract.
(3) Goods produced during the Group's performance of contract are irreplaceable. During
the whole contract period, the Group is entitled to collect payments for those which havebeen accumulated up to now.
For a contract obligation within a period of time, the Group shall recognise the revenuebased on the progress of the obligation fulfilment within that period of time, except wherethe progress of the obligation fulfilment cannot be determined reasonably.
Where the status of completion cannot be reasonably determined, revenue shall berecognised at the amount of cost incurred if it is predicted that the cost can be compensatedtill the progress of the obligation fulfilment can be reasonably determined.
For a contract obligation at a point in time, the Group shall recognise the revenue when acustomer is in control of the underlying goods.
(a) Sales of products
The Group are principally engaged in the manufacturing and sales of heating & ventilation,as well as air-conditioner (hereinafter referred to as “HVAC”) (mainly comprises residentialair conditioner, central air-conditioner, heating and ventilation systems, etc.) and consumerappliances (mainly comprises kitchen appliances, refrigerators, washing machines andvarious small appliances, etc.), and robotics and automation system.
Revenue from domestic sales of HVAC and consumer appliances is recognised when theGroup has delivered products to the location specified in the sales contract and the buyerhas confirmed the acceptance of the products, and the delivery order is signed by bothparties. Upon confirming the acceptance, the buyer has the right to sell the products at itsdiscretion and takes the risks of any price fluctuations and obsolescence and loss of theproducts.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont’d)
(a) Sales of products (Cont’d)
Revenue from overseas sales of HVAC and consumer appliances is recognised when thegoods have been declared to the customs and shipped out of the port in accordance withthe sales contract.
Revenue from sales of robotics and automation system is recognised when the Group hasdelivered products to the location specified in the sales contract and the buyer has confirmedthe acceptance of the products, and the delivery order is signed by both parties.
The credit period granted to distributors by the Group is determined based on their creditrisk characteristics, which is consistent with industry practice, and there is no significantfinancing component. Generally, the retail customers of the Group are entitled to return theproducts within 7 days after the confirmation of receipt.
The Group provides distributors with sales discount, and the relevant revenue is recognisedat contract consideration net of the discount amount estimated.
The periods and terms of product quality warranty are provided in accordance with the lawsand regulations related to the products. The Group has not provided any additional servicesor product quality warranty, so the product quality warranty does not constitute a separateperformance obligation.
(b) Rendering of services
The Group provides robotics and automation system construction service, intelligentlogistics integration solution, storage services, delivery services, installation services andtransportation service, which are recognised in a certain period of time based on the stageof completion. On the balance sheet date, the Group re-estimates the stage of completionto reflect the actual status of contract performance.
When the Group recognises revenue based on the stage of completion, the amount withunconditional collection right obtained by the Group is recognised as accounts receivable,and the rest is recognised as contract assets. Meanwhile, loss provision for accountsreceivable and contract assets are recognised on the basis of ECL (Note 2(9)). If the contractprice received or receivable exceeds the amount for the completed service, the excessportion will be recognised as contract liabilities. Contract assets and contract liabilities underthe same contract are presented on a net basis.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont'd)
(b) Rendering of services (Cont’d)
Contract costs include contract performance costs and contract acquisition costs. The costsincurred by the Group for the provision of services are recognised as contract performancecosts. The recognised revenue is carried forward to the cost of sales from main operationsbased on the stage of completion. Incremental costs incurred by the Group for theacquisition of contract are recognised as the costs to obtain a contract. For the costs toobtain a contract with the amortisation period within one year, the costs are charged to profitor loss when incurred. For the costs to obtain a contract with the amortisation period beyondone year, the costs are charged in the current profit or loss on the same basis as aforesaidrevenue of rendering of services recognised under the relevant contract. If the carryingamount of the contract costs is higher than the remaining consideration expected to beobtained by rendering of the service net of the estimated cost to be incurred, the Groupmakes provision for impairment on the excess portion and recognises it as asset impairmentlosses. As at the balance sheet date, based on whether the amortisation period of the coststo fulfil a contract is more than one year when initially recognised, the amount of the Group'scosts to fulfil a contract net of related provision for asset impairment is presented asinventories or other non-current assets. For costs to obtain a contract with amortisationperiod beyond one year at the initial recognition, the amount net of related provision forasset impairment is presented as other non-current assets.
(c) Interest income
Interest income from financial instruments is calculated by effective interest method andrecognised in profit or loss for the current period. Interest income comprises premiums ordiscounts, or the amortisation based on effective rates of other difference between the initialcarrying amount and the due amount of interest-earning assets.
The effective interest method is a method of calculating the amortised cost of a financialasset or liability and the interest income or interest costs based on effective rates. Theeffective interest rate is the rate at which the estimated future cash flows during the periodof expected duration of the financial instruments or applicable shorter period are discountedto the current carrying amount of the financial instruments. When calculating the effectiveinterest rate, the Group estimates cash flows by considering all contractual terms of thefinancial instrument (e.g. early repayment options, similar options, etc.), but withoutconsidering future credit losses. The calculation includes all fees and interest paid orreceived that are an integral part of the effective interest rate, transaction costs, and all otherpremiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is usedfor discounting estimated future cash flow when measuring the impairment loss.
(d) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e) Rental income
Rental income from investment prosperities is recognised in the income statement on astraight-line basis over the lease period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(26) Revenue (Cont'd)
(f) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when theservice is provided. The Group defers the initial charge income or commitment fee incomearising from the forming or acquisition of financial assets as the adjustment to effectiveinterest rate. If the loans are not lent when the loan commitment period is expired, relatedcharges are recognised as fee and commission income.
(27) Government grants
Government grants are transfers of monetary or non-monetary assets from the governmentto the Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied withand the government grant can be received. For a government grant in the form of transferof monetary assets, the grant is measured at the amount received or receivable For agovernment grant in the form of transfer of non-monetary assets, it is measured at fair value;if the fair value is not reliably determinable, the grant is measured at nominal amount.
Government grants related to assets are grants that are acquired by the Group and usedfor acquisition, construction or forming long-term assets in other ways. Government grantsrelated to income are government grants other than government grants related to assets
Government grants related to assets are recorded as deferred income reasonably andsystematically amortised to profit or loss over the useful life of the related asset.
For government grants related to income, where the grant is a compensation for relatedexpenses or losses to be incurred by the Group in the subsequent periods, the grant isrecognised as deferred income, and included in profit or loss over the periods in which therelated costs are recognised; where the grant is a compensation for related expenses orlosses already incurred by the Group, the grant is recognised immediately in profit or lossfor the current period.
The same kind of government grants are presented with the same method.
Those related to ordinary activities are recorded into operating profit while the other in non-operating income and expenses.
Loans to the Group at political preferential rate are recorded at the actual amount received,and the related loan expenses are calculated based on the principal and the politicalpreferential rate. Finance discounts directly received offset related loans expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(28) Deferred tax assets and deferred tax liabilities
Deferred tax assets and deferred tax liabilities are calculated and recognised based on thedifferences arising between the tax bases of assets and liabilities and their carrying amounts(temporary differences). Deferred income tax asset is recognised for the tax losses that canbe carried forward to subsequent years for deduction of the taxable profit in accordance withthe tax laws. No deferred tax liability is recognised for a temporary difference arising fromthe initial recognition of goodwill. No deferred tax asset or deferred tax liability is recognisedfor the temporary differences resulting from the initial recognition of assets or liabilities dueto a transaction other than a business combination, which affects neither accounting profitnor taxable profit (or deductible loss). At the balance sheet date, deferred tax assets anddeferred tax liabilities are measured at the tax rates that are expected to apply to the periodwhen the asset is realised or the liability is settled.
Deferred tax assets are only recognised for deductible temporary differences, deductible taxlosses and tax credits to the extent that it is probable that taxable profit will be available inthe future against which the deductible temporary differences, deductible tax losses and taxcredits can be utilised.
Deferred tax liabilities are recognised for temporary differences arising from investments insubsidiaries, associates and joint ventures, except where the Group is able to control thetiming of reversal of the temporary difference, and it is probable that the temporary differencewill not reverse in the foreseeable future. When it is probable that the temporary differencesarising from investments in subsidiaries, associates and joint ventures will be reversed inthe foreseeable future and that the taxable profit will be available in the future against whichthe temporary differences can be utilised, the corresponding deferred tax assets arerecognised.
Deferred tax assets and liabilities are offset when:
? the deferred tax assets and liabilities are related to the same tax payer within the Group
and the same taxation authority; and? that tax payer within the Group has a legally enforceable right to offset current taxassets against current tax liabilities.
(29) Leases
(a) Operating leases
Rental expenses for assets held under operating leases are recognised as the cost ofrelevant assets or expenses on a straight-line basis over the lease period. Contingentrentals are recognised as profit and loss for the current period when incurred.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(29) Leases (Cont'd)
(a) Operating leases (Cont’d)
Fixed assets leased out under operating leases, other than investment prosperities (Note2(13), are depreciated in accordance with the depreciation policy stated in Note 2(14(b) andprovided for impairment loss in accordance with the policy stated in Note 2(19). Rentalincome from operating leases is recognised as revenue on a straight-line basis over thelease period. Initial direct costs in large amount arising from assets leased out underoperating leases are capitalised when incurred and recognised as profit and loss for thecurrent period over the lease period on a same basis with revenue recognition; initial directcosts in small amount are directly recognised as profit and loss for the current period.Contingent rentals are recognised as profit and loss for the current period when incurred.
For the rental waivers as a result of COVID-19 and for the period ended 30 June 2021 only,the Group applies the practical expedient and records the waivers in profit or loss in thewaiving period.
(b) Finance leases
The leased asset is recognised at the lower of the fair value of the leased asset and thepresent value of the minimum lease payments. The difference between the recorded amountof the leased asset and the minimum lease payments is accounted for as unrecognisedfinance charge and is amortised using the effective interest method over the period of thelease. A long-term payable is recorded at the amount equal to the minimum lease paymentsless the unrecognised finance charge.
(30) Segment information
The Group identifies operating segments based on the internal organisation structure,management requirements and internal reporting system, and discloses segmentinformation of reportable segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the followingconditions: (1) the component is able to earn revenue and incur expenses from its ordinaryactivities; (2) whose operating results are regularly reviewed by the Group’s managementto make decisions about resources to be allocated to the segment and to assess itsperformance, and (3) for which the information on financial position, operating results andcash flows is available to the Group. Two or more operating segments that have similareconomic characteristics and satisfy certain conditions can be aggregated into one singleoperating segment.
(31) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgementsapplied based on historical experience and other factors, including expectations of futureevents that are believed to be reasonable.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Summary of significant accounting policies and accounting estimates (Cont’d)
(31) Critical accounting estimates and judgements (Cont’d)
Critical accounting estimates and key assumptions
The critical accounting estimates and key assumptions that have a significant risk of causinga material adjustment to the carrying amounts of assets and liabilities within the nextaccounting year are outlined below:
(i) Provision for impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverableamount of the asset group and asset groups that contain the apportioned goodwill isdetermined by the higher value between the use value and the net value that is calculatedby the fair value less the disposal costs. Accounting estimate is required for the calculationof the recoverable amount. The impairment testing is performed by assessing therecoverable amount of the asset group and asset groups containing the relevant goodwill,based on the present value of cash flows forecasts. Key assumptions adopted in theimpairment testing of goodwill included expected revenue growth rates, EBITDA margins,perpetual annual growth rates, discount rates, etc. which involved critical accountingestimates and judgement.
(ii) Income tax and deferred income tax
The Group is subject to enterprise income tax in numerous jurisdictions. There are manytransactions and events for which the ultimate tax determination is uncertain during theordinary course of business. Significant judgement is required from the Group in determiningthe provision for income taxes in each of these jurisdictions. Where the final tax outcome ofthese matters is different from the amounts that were initially recorded, such differences willimpact the income tax and deferred tax provisions in the period in which such determinationis made.
As stated in Note 3(1), some subsidiaries of the Group are high-tech enterprises. The “High-Tech Enterprise Certificate” is effective for three years. Upon expiration, application for high-tech enterprise assessment should be submitted again to the relevant governmentauthorities. Based on the past experience of reassessment for high-tech enterprise uponexpiration and the actual condition of the subsidiaries, the Group considers that thesubsidiaries are able to obtain the qualification for high-tech enterprises in future years, andtherefore a preferential tax rate of 15% is used to calculate the corresponding deferredincome tax. If some subsidiaries cannot obtain the qualification for high-tech enterprise uponexpiration, then the subsidiaries are subject to a statutory tax rate of 25% for the calculationof the income tax, which further influences the recognised deferred tax assets, deferred taxliabilities and income tax expenses.
Deferred tax assets are recognised for the deductible tax losses that can be carried forwardto subsequent years to the extent that it is probable that taxable profit will be available in thefuture against which the deductible tax losses can be utilised. Taxable profit that will beavailable in the future includes the taxable profit that will be realised through normaloperations and the taxable profit that will be increased upon the reversal of taxabletemporary differences incurred in prior periods. Judgements and estimates are required todetermine the time and amounts of taxable profit in the future. Any difference between thereality and the estimate may result in adjustment to the carrying amount of deferred taxassets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(32) | Significant changes in accounting policies |
The Ministry of Finance released the revised Accounting Standard for Business Enterprises No. 14 |
- Revenue (“new revenue standard”) in 2017 and the
-19 (
Cai Kuai [2020] No. 10) and the Questions and Answers on the Implementation of Accounting Standards for Business Enterprises |
(issued on 11 December 2020) in 2020. The financial statements for the yearended 31 December 2020 are prepared in accordance with the above standard and circular,and impacts on the Group’s and the Company’s financial statements are as follows:
(a)
(a) | Revenue |
(a-1) | In accordance with relevant provisions of the new revenue standard, the Group and the |
Company recognised the
cumulative effect of initially applying the standard as anadjustment to the relevant line items in the financial statements for the year ended 31December 2020. The comparatives for the year ended 31 December 2019 were notrestated.
The nature and the | |
reasons of the
The line items
changes in accounting policies | affected | The amounts affected | ||
1 January 2020 | ||||
Consolidated | Company | |||
Due to the implementation of new | ||||
revenue standard, the amount ofrevenue recognised in relation torendering of services based onprogress of the obligation fulfilmentin excess of the settled price isreclassified from inventories tocontract assets.
Contract assets | Increase by 4,009,176 | - | ||
Inventories | Decrease by 4,009,176 | - | ||
Due to the implementation of the new | ||||
revenue standard, advances from
as other current liabilities arisingfrom provision of installation
services are reclassified to contract liabilities. | Advances from customers | Decrease by 16,231,854 | - | |
Contract liabilities | Increase by 18,436,559 | - | ||
Other current liabilities | Decrease by 2,204,705 | - | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 | Summary of significant accounting policies and accounting estimates (Cont’d) |
(32) | Significant changes in accounting policies (Cont’d) |
(a) | Revenue (Cont’d) |
(a-2) | Compared with the original revenue standard, the impact of the implementation of the new revenue standard on main items of the |
balance sheets as at
31 December 2020 is as follows: | ||||
Balance sheet items affected | The amounts affected | |||
31 December 2020 | ||||
Consolidated | Company | |||
Contract assets | Increase by 3,236,848 | - | ||
Inventories | Decrease by 3,236,848 | - | ||
Advances from customers | Decrease by 14,942,068 | - | ||
Contract liabilities | Increase by 18,400,922 | - | ||
Other current liabilities | Decrease by 3,458,854 | - | ||
The impact of the implementation of the new revenue standard on main items of the consolidated income statement is |
that approximately RMB 8,928,186,000 of selling and
distribution expenses is reclassified to the cost of sales and operating revenue.(b)
(b) | Accounting treatment of rental waivers against COVID-19 |
For the rental waivers as a result of COVID-19 and agreed with lessees and lessors respectively for the period ended 30 June 2021 only, the Group and the Company have applied the above circular for the preparation of the financial statements for the year ended 31 December 2020; and the circular exerts no signific |
ant impacts on the Group’
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
3 Taxation
(1) Main tax category and rate
Category | Tax base | Tax rate |
Enterprise income tax | Levied based on taxable income | Note (a) |
Value-added tax |
(“VAT”)
calculated using the taxable sales amountmultiplied by the applicable tax rate less
deductible input VAT of the current period) | Note (b) | |
City maintenance and construction tax | The amount of VAT paid | 1% or 5% or 7% |
Educational surcharge | The amount of VAT paid | 3% or 5% |
Local educational surcharge | The amount of VAT paid | 2% |
Property tax | Price-based property is subject to a 1.2% tax rate |
after a 30% cut in the original price of property;rental-based property is subject to a 12% tax
rate for the rental income. | 1.2% or 12% |
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
15% in 2020 as they qualified as high-tech enterprises and obtained the High-
tech Enterprise Certificate: |
Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
Jiangsu Midea Cleaning Appliances Co., Ltd. | GR202032012131 | 2 December 2020 | 3 years |
GD Midea Environment Appliances Mfg. Co., Ltd. | GR201944000430 | 2 December 2019 | 3 years |
Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | GR201844000250 | 28 November 2018 | 3 years |
Guangdong Witol Vacuum Electronic Manufacture Co., Ltd. | GR202044001986 | 1 December 2020 | 3 years |
Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | GR202044003557 | 9 December 2020 | 3 years |
Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | GR201844010373 | 28 November 2018 | 3 years |
Guangdong Midea Precision Molding Technology Co., Ltd. | GR201944004780 | 2 December 2019 | 3 years |
Foshan Shunde Midea Electric Science and Technology Co., Ltd. | GR201944000317 | 2 December 2019 | 3 years |
GD Midea Heating & Ventilating Equipment Co., Ltd. | GR201844008219 | 28 November 2018 | 3 years |
Hefei Midea Heating & Ventilating Equipment Co., Ltd. | GR201934001163 | 9 September 2019 | 3 years |
Anhui Meizhi Precision Manufacturing Co., Ltd. | GR201834000890 | 24 July 2018 | 3 years |
Guangzhou Midea Hualing Refrigerator Co., Ltd. | GR201944009238 | 2 December 2019 | 3 years |
Guangdong Welling Motor Manufacturing Co., Ltd. | GR202044006087 | 9 December 2020 | 3 years |
Foshan Welling Washer Motor Manufacturing Co., Ltd. | GR202044005425 | 9 December 2020 | 3 years |
Huaian Welling Motor Manufacturing Co., Ltd. | GR201932010033 | 6 December 2019 | 3 years |
Annto Logistics Technology Co., Ltd. | GR201834001306 | 24 July 2018 | 3 years |
Wuxi Filin Electronics Co., Ltd. | GR201832001053 | 24 October 2018 | 3 years |
Wuxi Little Swan General Appliance Co., Ltd. | GR201832001100 | 24 October 2018 | 3 years |
GD Midea Air-Conditioning Equipment Co., Ltd. | GR202044003059 | 1 December 2020 | 3 years |
Handan Midea Air-Conditioning Equipment Co., Ltd. | GR202013000191 | 27 September 2020 | 3 years |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
3 Taxation (Cont’d)
(1) Main tax category and rate (Cont'd)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(Cont'd)
15% in 2020 as they qualified as high-tech enterprises and obtained the High-
tech Enterprise Certificate (Cont’d): |
Name of taxpayer | No. of the High-tech Enterprise Certificate | Dates of issuance | Term of validity |
Midea Group Wuhan Refrigeration Equipment Co., Ltd. | GR202042000684 | 1 December 2020 | 3 years |
Guangzhou Hualing Refrigerating Equipment Co., Ltd. | GR202044001953 | 1 December 2020 | 3 years |
Wuhu Maty Air-Conditioning Equipment Co., Ltd. | GR202034001383 | 17 August 2020 | 3 years |
Chongqing Midea General Refrigeration Equipment Co., Ltd. | GR202051100347 | 9 October 2020 | 3 years |
Guangdong Meizhi Compressor Limited | GR202044004270 | 9 December 2020 | 3 years |
Hubei Midea Refrigerator Co., Ltd. | GR202042000745 | 1 December 2020 | 3 years |
Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | GR202044007232 | 11 December 2020 | 3 years |
Anhui Meizhi Compressor Co., Ltd. | GR201934000046 | 9 September 2019 | 3 years |
Foshan Shunde Midea Water Dispenser Manufacturing Co., Ltd. | GR202044004098 | 9 December 2020 | 3 years |
Midea Welling Motor Technology (Shanghai) Co., Ltd. | GR202031001304 | 12 November 2020 | 3 years |
Welling (Wuhu) Motor Manufacturing Co., Ltd. | GR201834001144 | 24 July 2018 | 3 years |
Hefei Midea Laundry Appliance Co., Ltd. | GR201834000882 | 24 July 2018 | 3 years |
Hefei Hualing Co., Ltd. | GR201834000552 | 24 July 2018 | 3 years |
Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GR201844007089 | 28 November 2018 | 3 years |
Toshiba HA Manufacturing (Nanhai) Co., Ltd. | GR201844007107 | 28 November 2018 | 3 years |
Guangdong Meizhi Precision- Manufacturing Co., Ltd. | GR201844006181 | 28 November 2018 | 3 years |
Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | GR201834000818 | 24 July 2018 | 3 years |
Guangdong Midea Intelligent Technologies Co., Ltd. | GR201844003941 | 28 November 2018 | 3 years |
WINONE ELEVATOR COMPANY LIMITED | GR201844000152 | 28 November 2018 | 3 years |
Hiconics Eco-energy Technology Co., Ltd. | GR201811002361 | 10 September 2018 | 3 years |
Beijing Hiconics Eco-energy Frequency Conversion Technology Co., Ltd. | GR202011003365 | 21 October 2020 | 3 years |
Hiconics Drive Technology (Wuhan) Co., Ltd. | GR201842000036 | 15 November 2018 | 3 years |
Wuhan Hiconics Electric Drive Technology Co., Ltd. | GR202042001428 | 1 December 2020 | 3 years |
Wuhan Hiconics Power Technology Co., Ltd. | GR201942001459 | 15 November 2019 | 3 years |
Wuhan Hiconics Intelligent Electric Co., Ltd. | GR202042001512 | 1 December 2020 | 3 years |
Changsha Sunye Electric Co., Ltd. | GR201843000432 | 17 October 2018 | 3 years |
Beijing Huatairunda Energy Saving Co., Ltd. | GF201811003128 | 10 September 2018 | 3 years |
Dorna Technology Co., Ltd. | GR202033006717 | 1 December 2020 | 3 years |
Wuxi Little Swan Company Limited | GR202032006759 | 2 December 2020 | 3 years |
KUKA Robotics Manufacturing China Co., Ltd. | GR201931001602 | 28 October 2019 | 3 years |
KUKA Robotics Guangdong Co., Ltd. | GR202044003841 | 9 December 2020 | 3 years |
Midea Intelligent Lighting & Controls Technology Co., Ltd | GR202036000935 | 14 September 2020 | 3 years |
(a-2) The application on exemption and reduction of enterprise income tax for the Development
of Western China raised by Chongqing Midea Air-Conditioning Equipment Co., Ltd., theCompany’s subsidiary, was approved by the State Administration of Taxation of ChongqingEconomical and Technological Development Zone on 3 June 2014. And according to theAnnouncement on Continuing the Enterprise Income Tax Policies for the Development ofWestern China jointly issued by the Ministry of Finance, the State Taxation Administrationand the National Development and Reform Commission on 23 April 2020, the company wassubject to enterprise income tax at a rate of 15% in 2020.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
3 Taxation (Cont'd)
(1) Main tax category and rate (Cont'd)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(Cont'd)
(a-3) On 24 March 2016, Luanping Huitong Photovoltaic Power Co., Ltd., a subsidiary of the
Company, obtained the Record Form for Enterprise Income Tax Preference issued by theLuanping County Office of the State Taxation Administration. According to Announcementof the State Taxation Administration on the Income Tax Preference Policies for New PowerGrid Projects of Power Grid Enterprises (State Taxation Administration Announcement in2013, No.26), Phase I Project of the Company was subject to the preferential policy ofenterprise income tax exemption from 2016 to 2018, and is subject to the preferential policyof enterprise income tax reduction of 50% from 2019 to 2021. On 28 November 2017,Luanping Huitong Photovoltaic Power Co., Ltd., a subsidiary of the Company, obtained theRecord Form for Enterprise Income Tax Preference issued by the Luanping County Officeof the State Taxation Administration. According to Item 2 of Article 27 in the EnterpriseIncome Tax Law of the People’s Republic of China, Order of the President of the People’sRepublic of China (No. 63), Phase II Project of the Company was subject to the preferentialpolicy of enterprise income tax exemption from 2017 to 2019, and is subject to thepreferential policy of enterprise income tax reduction of 50% from 2020 to 2022.
(a-4) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) and (a-
3) are subject to enterprise income tax at the rate of 25%.
(a-5) In August 2008, Midea Electric Trading (Singapore) Co., Pte Ltd., the Company's subsidiary,
was awarded with the Certificate of Honour for Development and Expansion (No. 587) bythe Singapore Economic Development Board and subject to the applicable preferentialincome tax rate of 5.5% for 2020. Midea Singapore Trading Co., Pte Ltd. and Little SwanInternational (Singapore) Co., Pte Ltd., the Company's subsidiaries, are subject toenterprise income tax at the rate of 17%.
(a-6) The Company's subsidiaries in Hong Kong are subject to Hong Kong profits tax at the rate
of 16.5%. Such subsidiaries include Midea International Trading Company Limited, MideaInternational Corporation Company Limited, Midea Home Appliances Investments (HongKong) Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited,Midea Refrigeration (Hong Kong) Limited, Welling Holding Limited, Welling InternationalHong Kong Ltd., and Midea Investment (Asia) Company Limited.
(a-7) The Company's subsidiaries in BVI and Cayman Islands are exempted from enterprise
income tax. Such subsidiaries include Mecca International (BVI) Limited, Titoni InvestmentsDevelopment Ltd., Midea Investment Holding (BVI) Limited, Midea Electric Investment (BVI)Limited, Welling Holding (BVI) Ltd., Midea Holding (Cayman Islands) Limited and MideaInvestment Development Company Limited.
(a-8) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil enterprise
income tax at the rate of 34%.
(a-9) TLSC, the Company's subsidiary in Japan, and its subsidiaries (“TLSC Group”), are subject
to Japan enterprise income tax at the rate of 34.01%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
3 Taxation (Cont'd)
(1) Main tax category and rate (Cont'd)
(a) Notes to the enterprise income tax rate of the principal tax payers with different tax rates
(Cont'd)
(a-10) Clivet S.P.A (“Clivet”), the Company's subsidiaries in Italy, are subject to Italy enterprise
income tax at the rate between 20% and 31.4%.
(a-11) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise
income tax at the rate of 32%.
(a-12) Servotronix Motion Control Ltd. (“SMC”), the Company's subsidiary in Israel, is subject to
Israel enterprise income tax at the rate of 23%.
(a-13) Misr Refrigeration and Air Conditioning Manufacturing Company, S.A.E., the Company's
subsidiary in Egypt, is subject to Egyptian enterprise income tax at the rate of 22.5%.
(b) Notes to the VAT rate of the principal tax payers with different tax rates
(b-1) Pursuant to the Announcement on Relevant Policies for Deepening Value-Added Tax
Reform (Announcement [2019] No. 39) jointly issued by the Ministry of Finance, the StateTaxation Administration and the General Administration of Customs and relevantregulations, the applicable tax rate of revenue arising from sales of goods and rendering ofrepairing and replacement services of the Company’s certain subsidiaries is 13% from 1April 2019, while it was 16% before then.
(b-2) Pursuant to the Announcement on Relevant Policies for Deepening Value-Added Tax
Reform (Announcement [2019] No. 39) jointly issued by the Ministry of Finance, the StateTaxation Administration and the General Administration of Customs and relevantregulations, the applicable tax rate of revenue arising from rendering of real estate leasingand transportation services of the Company’s certain subsidiaries is 9% from 1 April 2019,while it was 10% before then.
(b-3) Financial services, consulting services and storage services provided by the Company and
certain subsidiaries are subject to VAT at the rate of 6%.
(b-4) Rental revenue ofthe Company’s certain subsidiaries is subject to easy levy of VAT at therate of 5%.
(b-5) Pursuant to the Announcement on Relevant Policies for Deepening the Value-Added Tax
Reform (Announcement [2019] No. 39) issued by the Ministry of Finance, the State TaxationAdministration and the General Administration of Customs, certain subsidiaries of theCompany engaged in the production service sector, are eligible for a 10% additional VATdeduction based on deductible input VAT in the current period from 1 April 2019 to 31December 2021.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements
(1) Cash at bank and on hand
31 December 2020 | 31 December 2019 | |||
Cash on hand | 2,538 | 3,128 | ||
Cash at bank (a) | 51,253,132 | 49,012,677 | ||
Other cash balances (b) | 688,481 | 153,022 | ||
Statutory reserve deposits with the Central Bank (c) | 1,707,645 | 433,149 | ||
Surplus reserve with the Central Bank | 344,860 | 355,471 | ||
Deposits with banks and other financial institutions (d) | 26,515,276 | 20,562,160 | ||
Accrued interest | 698,550 | 397,234 | ||
81,210,482 | 70,916,841 |
Including: Total amounts deposited with |
banks overseas (includingHong Kong, China,
China, Singapore, Japan,
Italy, Brazil, Germany, etc.) | 7,014,620 | 5,270,085 |
(a) As at 31 December 2020, cash at bank included fixed deposits with the term of over 3
months, amounting to RMB 37,067,298,000 (31 December 2019: RMB 39,491,676,000).
(b) Other cash balances mainly include letters of guarantee, bank acceptance notes and letters
of credit.
(c) Statutory reserve with the Central Bank represents the statutory reserve deposited in
People’s Bank of China by the financial enterprise in accordance with relevant regulations,which are calculated at 6% and 5% for eligible RMB deposits and foreign currency deposits,respectively, and are not available for use in the Group’s daily operations.
(d) As at 31 December 2020, deposits with banks and other financial institutions included fixed
deposits with the term of over 3 months, amounting to RMB 17,500,000,000 (31 December2019: Nil).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(2) Financial assets held for trading
31 December 2020 | 31 December 2019 | ||
Structural deposits (a) | 25,626,631 | - | |
Investments in equity instrument held for trading (b) | 2,314,965 | 1,087,351 | |
Others | 298,005 | - | |
28,239,601 | 1,087,351 |
(a) As at 31 December 2020, structural deposits were deposits with financial institutions due
within 1 year, which were measured at fair value through profit or loss.
(b) As at 31 December 2020, investments in equity instrument held for trading referred to equity
investments in listed companies, which were measured at fair value through profit or loss.
(3) Notes receivable
31 December 2020 | 31 December 2019 | |||
Bank acceptance notes | 5,086,749 | 4,768,520 | ||
Trade acceptance notes | 218,108 | - | ||
Less: Provision for bad debts | (347) | - | ||
5,304,510 | 4,768,520 |
(a) Provision for bad debts
For notes receivable of the Group arising from sales of goods or rendering of services in theordinary course of business, the Group measures bad debts based on the lifetime ECLregardless of whether there exists a significant financing component. As at 31 December2020, the Company considered that there was no significant credit risk associated with itsbank acceptance notes and did not expect that there would be any significant losses fromnon-performance by these banks.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable
31 December 2020 | 31 December 2019 | |||
Accounts receivable | 23,854,936 | 19,631,644 | ||
Less: Provision for bad debts | (876,573) | (967,825) | ||
22,978,363 | 18,663,819 |
(a) The ageing of accounts receivable is analysed as follows:
31 December 2020 | 31 December 2019 | |||
Within 1 year | 23,015,280 | 19,168,694 | ||
1 to 2 years | 580,644 | 301,554 | ||
2 to 3 years | 159,427 | 101,643 | ||
3 to 5 years | 87,938 | 42,106 | ||
Over 5 years | 11,647 | 17,647 | ||
23,854,936 | 19,631,644 |
As at 31 December 2020, the Group had no significant overdue accounts receivable.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(b) Under the new financial instruments standards, the Group measures the loss provision for
accounts receivable according to the lifetime ECL.
As at 31 December 2020, accounts receivable for which the related provision for bad debtswas provided on the individual basis were analysed as follows:
Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |||
Domestic customers | 14,288 | 100.00% | (14,288) | The debtor | ||
encounteredfinancial
distress, etc.Overseas customers
Overseas customers | 1,000 | 100.00% | (1,000) | |||
15,288 | (15,288) |
As at 31 December 2019, accounts receivable for which the related provision for bad debtswas provided on the individual basis were analysed as follows:
Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |||
Domestic customers | 2,998 | 100.00% | (2,998) | The debtor | ||
encounteredfinancial
distress, etc.Overseas customers
Overseas customers | 4,767 | 100.00% | (4,767) | |||
7,765 | (7,765) |
As at 31 December 2020, accounts receivable for which the related provision for bad debtswas provided on the grouping basis were analysed as follows:
31 December 2020 | ||||||
Book balance | Provision for bad debts | |||||
Amount | Lifetime ECL rate | Amount | ||||
Domestic business grouping | 11,521,032 | 3.71% | (427,912) | |||
Overseas business grouping | 12,318,616 | 3.52% | (433,373) | |||
23,839,648 | (861,285) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(4) Accounts receivable (Cont’d)
(b) Under the new financial instruments standards, the Group measures the loss provision for
accounts receivable according to the lifetime ECL. (Cont’d)
As at 31 December 2019, accounts receivable for which the related provision for bad debtswas provided on the grouping basis were analysed as follows:
31 December 2019 | ||||||
Book balance | Provision for bad debts | |||||
Amount | Lifetime ECL rate | Amount | ||||
Domestic business grouping | 7,908,831 | 5.53% | (437,578) | |||
Overseas business grouping | 11,715,048 | 4.46% | (522,482) | |||
19,623,879 | (960,060) |
(c) The provision for bad debts in the current year amounted to RMB 168,438,000 (2019: RMB
215,902,000). The provision for bad debts reversed in the current year amounted to RMB81,179,000 (2019: RMB 145,990,000). The provision for bad debts written off in the currentyear amounted to RMB 114,893,000 (2019: RMB 97,348,000).
(d) As at 31 December 2020, the five largest accounts receivable aggregated by debtor were
summarised and analysed as follows:
Amount | Provision for bad debts | % of total balance | ||||
Total amount of the five largest accounts receivable | 3,493,123 | (64,023) | 14.64% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables
31 December 2020 | 31 December 2019 | |||
Other receivables | 3,026,970 | 2,766,098 | ||
Less: Provision for bad debts | (53,025) | (53,124) | ||
2,973,945 | 2,712,974 |
(a) Other receivables mainly include deposits, receivables related to share options, current
accounts and petty cash to staff.
The ageing of other receivables is analysed as follows:
31 December 2020 | 31 December 2019 | |||
Within 1 year | 2,708,730 | 2,643,584 | ||
1 to 2 years | 222,785 | 69,490 | ||
2 to 3 years | 50,457 | 16,555 | ||
3 to 5 years | 30,867 | 25,773 | ||
Over 5 years | 14,131 | 10,696 | ||
3,026,970 | 2,766,098 |
(b) Provision for bad debts and changes in book balance statement
Stage 1 | Stage 3 | |||
12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | Sub-total | |
Book
balance | Provision |
for bad
Book
debts | balance | Provision |
for bad
Book
debts | balance | Provision |
for bad
debts | Provision |
for bad
debts | |||||||
31 December 2019 | 2,701,638 | 49,767 | 61,103 | - | 3,357 | 3,357 | 53,124 |
Transfer to Stage 3 | (5,991) | (2,396) | - | - | 5,991 | 2,396 | - |
Net increase/(decrease) in the current year | 288,006 | 613 | (23,362) | - | (3,772) | (107) | 506 |
Including: Write-off in |
the current
year | - | - | - | - | (3,772) | (3,772) | (3,772) |
Derecognition | - | - | - | - | - | - | - |
Differences on |
translation of foreigncurrency financial
statements | - | (535) | - | - | - | (70) | (605) |
31 December 2020 | 2,983,653 | 47,449 | 37,741 | - | 5,576 | 5,576 | 53,025 |
As at 31 December 2020 and 31 December 2019, the Group had no other receivables atStage 2.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont’d)
(c) As at 31 December 2020 and 31 December 2019, other receivables of the Group at Stage
1 and Stage 3 were analysed as follows:
(i) As at 31 December 2020, other receivables for which the related provision for bad debts
was provided on the individual basis were analysed as follows:
Book
balance | ECL rate in the following 12 months | Provision for bad debts | Reason | ||||
Stage 1 | 37,741 | 0% | - | Relatively low bad debt risks |
Book
balance | ECL rate in the following 12 months | Provision for bad debts | Reason | ||||
Stage 3 | 5,576 | 100.00% | (5,576) | The debtor |
encounteredfinancial distress,
As at 31 December 2019, other receivables for which the related provision for bad debtswas provided on the individual basis were analysed as follows:
etc.
Book
balance | ECL rate in the following 12 months | Provision for bad debts | Reason | ||||
Stage 1 | 61,103 | 0% | - | Relatively low bad debt risks |
Book
balance | ECL rate in the following 12 months | Provision for bad debts | Reason | ||||
Stage 3 | 3,357 | 100.00% | (3,357) | The debtor |
encounteredfinancial distress,
(ii) As at 31 December 2020 and 31 December 2019, other receivables of which provision for
bad debts was provided on the grouping basis were all at Stage 1, which were analysed asfollows:
etc.
31 December 2020 | 31 December 2019 | ||||||||
Book balance | Provision for bad debts | Book balance | Provision for bad debts | ||||||
Amount | Amount | Provision ratio | Amount | Amount | Provision ratio | ||||
Security deposit/guarantee |
payables
grouping | 2,983,653 | (47,449) | 1.59% | 2,701,638 | (49,767) | 1.84% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(5) Other receivables (Cont'd)
(c) As at 31 December 2020 and 31 December 2019, other receivables of the Group at Stage
1 and Stage 3 were analysed as follows: (Cont'd)
(iii) The provision for bad debts in the current year amounted to RMB 19,151,000 (2019: RMB
19,276,000). The provision for bad debts reversed in the current year amounted to RMB14,873,000 (2019: RMB 8,481,000). The provision for bad debts written off in the currentyear amounted to RMB 3,772,000 (2019: RMB 475,000).
(d) As at 31 December 2020, the five largest other receivables aggregated by debtor were
summarised and analysed as follows:
Amount | Provision for bad debts | % of total balance | ||||
Total amount of the five largest other receivables | 189,911 | (3,559) | 6.27% |
(e) As at 31 December 2020, the Group had no significant government grants recognised at
amounts receivable.
(6) Receivables financing
31 December 2020 | 31 December 2019 | |||||
Receivables financing | 13,901,856 | 7,565,776 | ||||
The Group’s receivables financing were mainly accounts receivable and bank acceptance notes transferred, discounted and endorsed for the purpose of daily treasury management and were qualified for derecognition. | ||||||
No provision for bank acceptance notes was individually provided. As at 31 December 2020 and 31 December 2019, the Group measured provision for bad debts based on the lifetime ECL and expected that there was no significant credit risk associated with its bank acceptance notes and did not | ||||||
expect that there would be any significant losses from non-
performance by these banks.
As at 31 December 2020, the Group's notes receivable and accounts receivable transferred, endorsed or discounted but not matured presented in receivables |
financing
were as follows: | ||||
Derecognised | Not derecognised | |||
Receivables financing | 13,318,731 | 3,728,875 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(7) Advances to suppliers
31 December 2020 | 31 December 2019 | |||
Prepayments for raw materials and others | 2,763,710 | 2,246,177 |
(a) The ageing of advances to suppliers is analysed below:
31 December 2020 | 31 December 2019 | |||||||
Amount | % of total balance | Amount | % of total balance | |||||
Within 1 year | 2,562,904 | 92.73% | 2,176,110 | 96.88% | ||||
1 to 2 years | 163,765 | 5.93% | 26,925 | 1.20% | ||||
2 to 3 years | 17,579 | 0.64% | 22,895 | 1.02% | ||||
Over 3 years | 19,462 | 0.70% | 20,247 | 0.90% | ||||
2,763,710 | 100.00% | 2,246,177 | 100.00% |
As at 31 December 2020, advances to suppliers over 1 year with a carrying amount of RMB200,806,000 (31 December 2019: RMB 70,067,000) were mainly unsettled prepayments forraw materials.
As at 31 December 2020, the five largest advances to suppliers aggregated by debtor weresummarised and analysed as follows:
Amount | % of total balance | |||
Total amount of the five largest advances to suppliers | 708,564 | 25.64% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(8) Contract assets
31 December 2020 | 1 January 2020 | 31 December 2019 | ||||
Contract assets | 3,289,783 | 4,009,176 | —— | |||
Less: Provision for impairment of contract assets | (52,935) | - | —— | |||
Total | 3,236,848 | 4,009,176 | —— | |||
For contract assets, the Group measures the loss provision based on the lifetime ECL regardless of whether there exists a significant financing component. As at 31 December 2020, the Group |
’s contract assets were not overdue, and the provision for impairment was
made on the grouping basis. | ||||||
Book balance | Lifetime ECL rate | Provision for impairment | ||||
Domestic business grouping | 749,521 | 5.23% | (39,218) | |||
Overseas business grouping | 2,540,262 | 0.54% | (13,717) | |||
3,289,783 | (52,935) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(9) Loans and advances
(a) By individual and corporation:
31 December 2020 | 31 December 2019 | |||
Loans and advances measured at amortised cost | ||||
Loans and advances to individuals | 2,235,275 | 1,110,127 | ||
Loans and advances to corporations | 15,660,149 | 10,708,289 | ||
Including: Loans | 10,133,447 | 9,558,953 | ||
Discounted bills | 5,526,702 | 1,149,336 | ||
17,895,424 | 11,818,416 | |||
Less: Provision for bad debts | (312,854) | (158,919) | ||
17,582,570 | 11,659,497 |
As at 31 December 2020, loans and advances over 1 year amounted to RMB 1,113,501,000(31 December 2019: RMB 790,101,000).
(b) By type of collateral held
31 December 2020 | 31 December 2019 | |||
Unsecured loans | 1,645,282 | 1,075,217 | ||
Guaranteed loans | 885,659 | 1,476,273 | ||
Pledged loans | 15,364,483 | 9,266,926 | ||
17,895,424 | 11,818,416 | |||
Less: Provision for bad debts | (312,854) | (158,919) | ||
17,582,570 | 11,659,497 |
(c) The provision for bad debts in the current year amounted to RMB 169,043,000 (2019: RMB
68,617,000), the provision for bad debts written off in the current year amounted to RMB1,786,000 (2019: RMB 10,826,000) and the provision for bad debts reversed in the currentyear amounted to RMB 13,322,000 (2019: RMB 52,878,000) (Note 4(23)).
(d) As at 31 December 2020, the Group’s loans and advances for which the provision for bad
debts was provided on the individual basis amounted to RMB 5,347,295,000, of which theprovision for bad debts amounted to RMB 123,882,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(10) Inventories
(a) Inventories are summarised by category as follows:
31 December 2020 | 1 January 2020 | 31 December 2019 | ||||
Book
balance | Provision for |
decline in thevalue of
inventories |
Carrying
amount |
Book
balance | Provision for |
decline in the
value of
inventories |
Carrying
amount |
Book
balance | Provision for |
decline in thevalue of
inventories |
Carrying
amount | ||||||||||||||||||
Finished goods | 21,718,749 | (372,474) | 21,346,275 | 22,046,730 | (407,598) | 21,639,132 | 22,046,730 | (407,598) | 21,639,132 | |||||||||
Raw materials | 7,402,034 | (70,221) | 7,331,813 | 5,009,197 | (67,875) | 4,941,322 | 5,009,197 | (67,875) | 4,941,322 | |||||||||
Work in progress | 1,875,881 | - | 1,875,881 | 1,596,042 | - | 1,596,042 | 1,596,042 | - | 1,596,042 | |||||||||
Consigned processing materials, etc. | 522,560 | - | 522,560 | 257,727 | - | 257,727 | 257,727 | - | 257,727 | |||||||||
Projects completed but unsettled | —— | —— | —— | —— | —— | —— | 4,009,176 | - | 4,009,176 | |||||||||
31,519,224 | (442,695) | 31,076,529 | 28,909,696 | (475,473) | 28,434,223 | 32,918,872 | (475,473) | 32,443,399 |
(b) Analysis of provision for decline in the value of inventories is as follows:
31 December 2019 | Changes in accounting policies | 1 January 2020 | Increase in the current year | Decrease in the current year | Difference on translation of foreign currency financial statements | 31 December 2020 | ||||||||
Provision | Reversal or write-off | |||||||||||||
Finished goods | 407,598 | - | 407,598 | 301,876 | (315,860) | (21,140) | 372,474 | |||||||
Raw materials | 67,875 | - | 67,875 | 69,089 | (65,860) | (883) | 70,221 | |||||||
475,473 | - | 475,473 | 370,965 | (381,720) | (22,023) | 442,695 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(10) Inventories (Cont’d)
(c) Provision for decline in the value of inventories is as follows:
Specific basis for determining
net realisable value | Reason for reversal or write-off of |
provision for decline in the value of
inventories | ||||
Finished goods | Stated at the lower of cost and net realisable value | Sales | ||
Raw materials, etc. | Stated at the lower of cost and net realisable value | Requisition for production |
(11) Other current assets
31 December 2020 | 31 December 2019 | |||
Structural deposits (a) | - | 60,038,855 | ||
Monetary investment products (b) | 25,542,595 | - | ||
Input VAT to be deducted | 4,336,260 | 3,159,794 | ||
Prepaid expenses | 786,140 | 875,451 | ||
Others | 2,414,923 | 936,927 | ||
33,079,918 | 65,011,027 |
(a) As at 31 December 2019, structural deposits were deposits with financial institutions due
within 1 year, which were mainly measured at fair value through profit or loss.
(b) As at 31 December 2020, monetary investment products were fixed income products with
financial institutions due within 1 year, which were mainly measured at amortised cost.
(12) Other debt investments
31 December 2020 | 31 December 2019 | |||
Fair value through other comprehensive income | ||||
- Transferable certificate of deposit | 21,456,155 | - | ||
As at 31 December 2020, the cost of the Group’s transferable certificate of deposit approximated its fair value. | ||||
As at 31 December 2020, the Group expected that there has no significant increase in credit risk of |
transferable certificate of deposit since initial recognition and made provision for loss
-
month ECL. The Group considered that there was no significant credit risk associated with transferable certificate of deposit and did not expect that ther |
e would be
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(13) Long-term receivables
31 December 2020 | 31 December 2019 | |||
Long-term receivables | 981,623 | 1,208,079 | ||
Less: Provision for bad debts | - | - | ||
981,623 | 1,208,079 |
The Group’s long-term receivables are presented in net amount of finance lease receivablesafter offsetting the unrealised financing income.
(14) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2020 | 31 December 2019 | |||
Investments in associates (a) | 2,901,337 | 2,790,806 | ||
Less: Provision for impairment of |
long-term equity
investments | - | - | ||
2,901,337 | 2,790,806 |
(a) Investments in associates mainly refer to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by theGroup.
(15) Other non-current financial assets
31 December 2020 | 31 December 2019 | |||
Measured at fair value | ||||
- Equity of unlisted companies, etc. | 3,360,849 | 1,750,107 | ||
Less: Provision for impairment of |
other non-current financial
assets | - | - | ||
3,360,849 | 1,750,107 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(16) Fixed assets
Buildings | Overseas land |
Machinery and
equipment | Motor vehicles |
Electronic
equipment and others | Total | ||||||
Cost | |||||||
31 December 2019 | 17,900,603 | 1,296,493 | 19,702,128 | 707,703 | 4,510,738 | 44,117,665 | |
Increase in the current year | |||||||
Purchase | 160,770 | 109,950 | 1,530,408 | 22,849 | 780,575 | 2,604,552 | |
Transfer from construction in progress | 509,876 | - | 84,865 | 2,577 | 33,389 | 630,707 | |
Increase by business combinations | 547,527 | - | 485,357 | 153,797 | 13,835 | 1,200,516 | |
Others | 55,728 | - | - | - | - | 55,728 | |
Decrease in the current year | |||||||
Disposal and retirement | (55,749) | (2,214) | (762,320) | (54,391) | (319,979) | (1,194,953) | |
Others | (49,106) | - | (26,625) | (18,748) | (172) | (94,651) | |
Differences on translation of |
foreign currency financial
statements | (57,387) | (9,790) | (121,971) | (1,036) | (15,000) | (205,184) | |
31 December 2020 | 19,012,262 | 1,394,439 | 20,891,842 | 812,751 | 5,003,386 | 47,114,680 | |
Accumulated depreciation | |||||||
31 December 2019 | 7,362,635 | - | 11,405,514 | 509,473 | 3,135,874 | 22,413,496 | |
Increase in the current year | |||||||
Provision | 909,579 | - | 1,640,339 | 104,194 | 755,409 | 3,409,521 | |
Others | 15,506 | - | - | - | - | 15,506 | |
Decrease in the current year | |||||||
Disposal and retirement | (37,184) | - | (527,487) | (52,022) | (292,352) | (909,045) | |
Others | (38,542) | - | (832) | (937) | (9) | (40,320) | |
Differences on translation of |
foreign currency financial
statements | (32,913) | - | (55,169) | (574) | (13,809) | (102,465) | |
31 December 2020 | 8,179,081 | - | 12,462,365 | 560,134 | 3,585,113 | 24,786,693 | |
Provision for impairment | |||||||
31 December 2019 | 6,746 | 5,907 | 17,713 | 210 | 8,911 | 39,487 | |
Increase in the current year | |||||||
Provision | 620 | - | 20,425 | 32,965 | - | 54,010 | |
Decrease in the current year | |||||||
Disposal and retirement | - | - | (4,513) | - | (45) | (4,558) | |
Differences on translation of |
foreign currency financial
statements | (35) | (15) | (24) | (4) | (88) | (166) | |
31 December 2020 | 7,331 | 5,892 | 33,601 | 33,171 | 8,778 | 88,773 | |
Carrying amount | |||||||
31 December 2020 | 10,825,850 | 1,388,547 | 8,395,876 | 219,446 | 1,409,495 | 22,239,214 | |
31 December 2019 | 10,531,222 | 1,290,586 | 8,278,901 | 198,020 | 1,365,953 | 21,664,682 |
(a) In 2020, the depreciation of fixed assets amounted to RMB 3,409,521,000 (2019: RMB
3,355,820,000) and was included in the income statement.
(b) As at 31 December 2020, the Company was still in the course of obtaining the ownership
certificate for the fixed asset with a carrying amount of RMB 123,789,000 (31 December2019: RMB 219,475,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(17) Construction in progress
31 December 2020 | 31 December 2019 | ||||||||||
Book balance | Provision for impairment | Carrying amount | Book balance | Provision for impairment | Carrying amount | ||||||
Indian Science Park | 364,554 | - | 364,554 | 274,429 | - | 274,429 | |||||
Midea Headquarters A04 Land Parcel Project | 197,540 | - | 197,540 | 85,493 | - | 85,493 | |||||
Other projects | 964,524 | (49,316) | 915,208 | 834,728 | - | 834,728 | |||||
1,526,618 | (49,316) | 1,477,302 | 1,194,650 | - | 1,194,650 |
(a) Movements of significant projects of construction in progress
Increase inthe current
year |
Transfer tofixed assets
in the
current year | Source of funds | |||||||
31 December
2019 | Difference |
ontranslationof foreigncurrencyfinancial
statements |
31 December
2020 | |||||||||||||
Book balance | Other decreases | Book balance | |||||||||||
Indian Science Park | 274,429 | 263,096 | (142,977) | - | (29,994) | 364,554 | Self-financing | ||||||
Midea Headquarters A04 Land Parcel Project | 85,493 | 112,047 | - | - | - | 197,540 | Self-financing | ||||||
Other projects(a) | 834,728 | 703,597 | (487,730) | (79,856) | (6,215) | 964,524 | Loan/Self-financing | ||||||
1,194,650 | 1,078,740 | (630,707) | (79,856) | (36,209) | 1,526,618 |
(a) In 2020, Accumulative amount of capitalised borrowing costs was RMB 155,000, and the capitalisation rate of borrowing costs in the current
year was 6.08%
(b) As at 31 December 2020, the cost of construction in progress matched the budget amount, and the projects were carried out on schedule.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(18) Intangible assets
Land use
rights | Patents and |
non-patent
technologies |
Trademark
rights |
Trademark
use rights | Others | Total | ||||||||||
Cost | ||||||||||||
31 December 2019 | 4,655,273 | 2,088,792 | 4,993,393 | 2,689,087 | 5,021,178 | 19,447,723 | ||||||
Increase in the current year | ||||||||||||
Purchase | 21,540 | 27,320 | - | - | 313,132 | 361,992 | ||||||
Increase by business combinations | 208,259 | 105,087 | 150,300 | - | 223,986 | 687,632 | ||||||
Others | 11,887 | 6,291 | 23 | - | 149,720 | 167,921 | ||||||
Decrease in the current year | ||||||||||||
Disposal | (55,756) | (43,458) | (1,733) | - | (281,740) | (382,687) | ||||||
Other decreases | (7,901) | - | - | - | - | (7,901) | ||||||
Differences on |
translation of foreigncurrency financial
statements | (5,461) | 7,147 | 117,133 | (42,280) | 55,345 | 131,884 | ||||||
31 December 2020 | 4,827,841 | 2,191,179 | 5,259,116 | 2,646,807 | 5,481,621 | 20,406,564 | ||||||
Accumulated amortisation | ||||||||||||
31 December 2019 | 912,013 | 578,738 | 108,928 | 238,714 | 2,112,508 | 3,950,901 | ||||||
Increase in the current year | ||||||||||||
Provision | 94,467 | 228,593 | 4,507 | 92,218 | 663,899 | 1,083,684 | ||||||
Others | 1,778 | - | - | - | - | 1,778 | ||||||
Decrease in the current year | ||||||||||||
Disposal | (6,131) | (25,881) | - | - | (229,728) | (261,740) | ||||||
Others | (1,482) | - | - | - | - | (1,482) | ||||||
Differences on |
translation of foreigncurrency financial
statements | (134) | (6,023) | (169) | (940) | 24,768 | 17,502 | ||||||
31 December 2020 | 1,000,511 | 775,427 | 113,266 | 329,992 | 2,571,447 | 4,790,643 | ||||||
Provision for impairment | ||||||||||||
31 December 2019 | - | 11,412 | - | - | 1,231 | 12,643 | ||||||
Increase in the current year | ||||||||||||
Provision | - | 120,819 | - | - | 76,557 | 197,376 | ||||||
Decrease in the current year | ||||||||||||
Disposal | - | (11,719) | - | - | - | (11,719) | ||||||
Differences on |
translation of foreigncurrency financial
statements | - | (5,903) | - | - | 1,131 | (4,772) | ||||||
31 December 2020 | - | 114,609 | - | - | 78,919 | 193,528 | ||||||
Carrying amount | ||||||||||||
31 December 2020 | 3,827,330 | 1,301,143 | 5,145,850 | 2,316,815 | 2,831,255 | 15,422,393 | ||||||
31 December 2019 | 3,743,260 | 1,498,642 | 4,884,465 | 2,450,373 | 2,907,439 | 15,484,179 |
(a) In 2020, the amortisation of intangible assets amounted to RMB 1,083,684,000 (2019: RMB
1,243,970,000) and was included in the income statement in full amount.
(b) As at 31 December 2020, the Group had no certificates of land use rights that were still in
process.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(19) Goodwill
The Group’s goodwill had been allocated to the asset group and asset groups at theacquisition date, without any change of goodwill allocation in 2020, and the allocation is asfollows:
31 December 2020 | 31 December 2019 | |||
Goodwill - | ||||
KUKA Group | 22,836,294 | 22,240,132 | ||
TLSC Group | 2,944,486 | 2,984,110 | ||
Little Swan | 1,361,306 | 1,361,306 | ||
Others | 2,931,654 | 2,173,765 | ||
30,073,740 | 28,759,313 | |||
Less: Provision for impairment | (516,522) | (552,248) | ||
29,557,218 | 28,207,065 |
When making an impairment testing of goodwill for assets, the Group compares the carryingamounts of related asset group and asset groups (including goodwill) with their recoverableamounts. If the recoverable amount is lower than the carrying amount, the difference shallbe included in profit or loss for the current period. The Group’s goodwill allocation wasunchanged in 2020.
As at 31 December 2020, the recoverable amount of asset group and asset groups withgoodwill is calculated using discounted future cash flows determined according to thebudget approved by management (the budget period is 5 to 6 years). The future cash flowsbeyond the budget period are calculated based on the estimated perpetual annual growthrates. The perpetual annual growth rates (mainly 1%-2%) applied by management areconsistent with the estimates of the industry, and do not exceed the long-term averagegrowth rates of each product. Management determines expected revenue growth rates(mainly 2.00%-15.87%) and EBITDA margins (mainly 3.05%-11.47%) based on pastexperience and forecast on future market development. The discount rates (mainly 9.48%-
14.49%) used by management are the pre-tax rates that are able to reflect the risks specific
to the related asset group and asset groups. Management analyses the recoverable amountof each asset group and asset groups based on these assumptions and considers that nofurther provision for impairment is necessary for the goodwill.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(20) Long-term prepaid expenses
Long-term prepaid expenses mainly include expenses prepaid for software and projectreconstruction.
(21) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
31 December 2020 | 31 December 2019 | ||||
Deductible | |||||
temporarydifferences anddeductible
losses | Deductible | |||
temporarydifferences and
deductible
losses | ||||
Deferred tax
Deferred tax
assets | assets | |||||||
Deductible losses | 2,825,364 | 693,098 | 1,457,853 | 416,248 | ||||
Provision for asset impairment | 2,023,621 | 409,576 | 1,489,044 | 291,763 | ||||
Employee benefits payable | 1,821,805 | 426,845 | 1,394,921 | 337,172 | ||||
Other current liabilities | 29,914,787 | 5,305,009 | 24,574,237 | 4,767,558 | ||||
Others | 6,615,646 | 1,700,311 | 6,408,056 | 1,484,817 | ||||
43,201,223 | 8,534,839 | 35,324,111 | 7,297,558 | |||||
Including: | ||||||||
Expected to be |
recovered within 1
year (inclusive) | 6,415,757 | 6,073,311 | ||||||
Expected to be recovered after 1 year | 2,119,082 | 1,224,247 | ||||||
8,534,839 | 7,297,558 |
(b) Deferred tax liabilities before offsetting
31 December 2020 | 31 December 2019 | ||||
Taxable |
temporary
differences | Taxable | |||
temporary
differences | ||||||||
Deferred tax liabilities | Deferred tax liabilities | |||||||
Changes in fair value | 1,495,449 | 205,628 | 827,153 | 162,129 | ||||
Business combination |
involving enterprisenot under common
control | 11,673,627 | 3,415,470 | 11,785,555 | 3,474,098 | ||||
Others | 11,296,707 | 2,929,060 | 9,644,666 | 2,448,340 | ||||
24,465,783 | 6,550,158 | 22,257,374 | 6,084,567 | |||||
Including: | ||||||||
Expected to be |
recovered within 1
year (inclusive) | 1,026,806 | 1,145,971 | ||||||
Expected to be recovered after 1 year | 5,523,352 | 4,938,596 | ||||||
6,550,158 | 6,084,567 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(21) Deferred tax assets and deferred tax liabilities (Cont’d)
(c) The net balances of deferred tax assets and deferred tax liabilities after offsetting are as
follows:
31 December 2020 | 31 December 2019 | |||
Balance after offsetting | Balance after offsetting | |||
Deferred tax assets | 7,208,635 | 5,768,993 | ||
Deferred tax liabilities | 5,223,954 | 4,556,002 |
(22) Other non-current assets
31 December 2020 | 31 December 2019 | ||
Structural deposits (a) | - | 4,355,799 | |
Monetary investment products (b) | 10,128,172 | - | |
Others | 1,127,707 | 591,804 | |
11,255,879 | 4,947,603 |
(a) As at 31 December 2019, structural deposits were deposits with financial institutions due
over 1 year, which were mainly measured at fair value through profit or loss.
(b) As at 31 December 2020, monetary investment products were fixed income products with
financial institutions due over 1 year, which were mainly measured at amortised cost.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(23) Asset impairment and provision for loss
31 December
2019 | Changes in accounting policies | 1 January 2020 |
Increase inthe current
year |
Decrease in the current
year | Difference |
ontranslation
of foreigncurrencyfinancial
statements |
31 December
2020 | ||||||||||||||||
Reversal | Charge-off/ Written-off | |||||||||||||||
Provision for bad debts | 1,179,868 | —— | 1,179,868 | 356,979 | (109,374) | (120,451) | (64,223) | 1,242,799 | ||||||||
Including: Provision for bad debts of accounts receivable | 967,825 | —— | 967,825 | 168,438 | (81,179) | (114,893) | (63,618) | 876,573 | ||||||||
Provision for bad debts of loans and advances | 158,919 | —— | 158,919 | 169,043 | (13,322) | (1,786) | - | 312,854 | ||||||||
Provision for bad debts of notes receivable | - | —— | - | 347 | - | - | - | 347 | ||||||||
Provision for bad debts of other receivables | 53,124 | —— | 53,124 | 19,151 | (14,873) | (3,772) | (605) | 53,025 | ||||||||
Provision for decline in the value of inventories | 475,473 | —— | 475,473 | 370,965 | (15,270) | (366,450) | (22,023) | 442,695 | ||||||||
Provision for impairment of fixed assets | 39,487 | —— | 39,487 | 54,010 | - | (4,558) | (166) | 88,773 | ||||||||
Provision for impairment of intangible assets | 12,643 | —— | 12,643 | 197,376 | - | (11,719) | (4,772) | 193,528 | ||||||||
Provision for impairment of contract assets | —— | - | - | 52,153 | - | - | 782 | 52,935 | ||||||||
Provision for impairment of investment properties | 12,576 | —— | 12,576 | - | - | - | - | 12,576 | ||||||||
Provision for impairment of construction in progress | - | —— | - | 45,975 | - | - | 3,341 | 49,316 | ||||||||
Provision for impairment of goodwill | 552,248 | —— | 552,248 | - | - | - | (35,726) | 516,522 | ||||||||
2,272,295 | - | 2,272,295 | 1,077,458 | (124,644) | (503,178) | (122,787) | 2,599,144 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(24) Assets with use rights restricted
As at 31 December 2020, assets with use rights restricted were as follows:
31 December 2020 | 31 December 2019 | |||
Cash at bank and on hand | ||||
Including: Cash at bank (Note 4(1)) | 37,067,298 | 39,491,676 | ||
Other cash balances (Note 4(1)) | 688,481 | 153,022 | ||
Legal reserves with the Central Bank (Note 4(1)) | 1,707,645 | 433,149 | ||
Deposits with banks and |
other financial
institutions (Note 4(1)) | 17,500,000 | - | ||
56,963,424 | 40,077,847 |
(25) Short-term borrowings
31 December 2020 | 31 December 2019 | |||
Unsecured borrowings | 2,281,509 | 5,665,756 | ||
Guaranteed borrowings | 7,402,260 | 36,082 | ||
Pledged borrowings | 192,569 | - | ||
Mortgage borrowings | 67,591 | - | ||
9,943,929 | 5,701,838 | |||
As at 31 December 2020, the annual interest rate range of short-term borrowings was 0.90%to 9.40% (31 December 2019: 0.57% to 9.40%).
(26) Notes payable
31 December 2020 | 31 December 2019 | |||
Bank acceptance notes | 28,233,818 | 23,891,600 | ||
Trade acceptance notes | 16,121 | - | ||
28,249,939 | 23,891,600 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(27) Accounts payable
31 December 2020 | 31 December 2019 | |||
Materials cost payable | 49,451,076 | 39,528,815 | ||
Others | 4,479,185 | 3,006,962 | ||
53,930,261 | 42,535,777 |
As at 31 December 2020, accounts payable over 1 year with a carrying amount of RMB985,248,000 (31 December 2019: RMB 886,355,000) were mainly unsettled accountspayable for materials.
(28) Advances from customers
31 December 2020 | 1 January 2020 | 31 December 2019 | ||||
Advances on sales | - | - | 14,054,839 | |||
Settled but not completed | - | - | 2,177,015 | |||
- | - | 16,231,854 |
(29) Contract liabilities
31 December 2020 | 1 January 2020 | 31 December 2019 | ||||
Advances on sales and services | 16,511,435 | 16,259,544 | —— | |||
Advances for construction projects | 1,889,487 | 2,177,015 | —— | |||
18,400,922 | 18,436,559 | —— | ||||
More than 90% of contract liabilities included in the carrying amount as at 1 January 2020 were transferred to revenue in 2020. | ||||||
As mentioned in Note 5(1), due to business combinations involving enterprises not under common control in the current year, the amount of contract liabilities increased by |
RMB
(30) Employee benefits payable
491,780,000.
31 December 2020 | 31 December 2019 | |||
Short-term employee benefits payable (a) | 6,666,830 | 6,118,722 | ||
Others | 287,992 | 317,387 | ||
6,954,822 | 6,436,109 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(30) Employee benefits payable (Cont'd)
(a) Short-term employee benefits
31 December 2019 | Increase in the current year | Decrease in the current year | 31 December 2020 | |||||
Wages and salaries, bonus, |
allowances and
subsidies | 5,714,684 | 23,936,384 | (23,469,332) | 6,181,736 | ||||
Staff welfare | 255,901 | 1,118,803 | (1,032,894) | 341,810 | ||||
Social security contributions | 89,603 | 2,037,550 | (2,053,335) | 73,818 | ||||
Including: Medical insurance | 87,173 | 1,958,163 | (1,973,697) | 71,639 | ||||
Work injury insurance | 1,303 | 14,743 | (14,990) | 1,056 | ||||
Maternity insurance | 1,127 | 64,644 | (64,648) | 1,123 | ||||
Housing funds | 28,445 | 463,190 | (468,098) | 23,537 | ||||
Labour union funds and |
employee education
funds | 20,361 | 107,501 | (110,349) | 17,513 | ||||
Other short-term employee benefits | 9,728 | 509,454 | (490,766) | 28,416 | ||||
6,118,722 | 28,172,882 | (27,624,774) | 6,666,830 |
(31) Taxes payable
31 December 2020 | 31 December 2019 | |||
Enterprise income tax payable | 3,121,236 | 2,985,670 | ||
Unpaid VAT | 1,013,378 | 900,204 | ||
Others | 1,623,444 | 1,210,393 | ||
5,758,058 | 5,096,267 |
(32) Other payables
31 December 2020 | 31 December 2019 | ||
Other payables | 4,501,391 | 3,800,568 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security
deposit payable, reimbursed logistics expense, manufacturing equipment expense, dividendpayable, etc.
(b) As at 31 December 2020, other payables with ageing over 1 year with a carrying amount of
RMB 1,392,059,000 (31 December 2019: RMB 765,092,000) were mainly those recognisedfor performing equity incentive plan and deposit and security deposit payable, which wereunsettled since related projects were uncompleted.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(33) Current portion of non-current liabilities
31 December 2020 | 31 December 2019 | |||
Current portion of long-term borrowings (Note 4(35)) | 6,284,643 | 1,230,966 | ||
Current portion of long-term payables | 25,538 | 39,426 | ||
Current portion of equity purchase payables | - | 189,725 | ||
6,310,181 | 1,460,117 |
(34) Other current liabilities
31 December 2020 | 1 January 2020 | 31 December 2019 | ||||
Accrued sale rebates | 31,192,652 | 26,175,014 | 26,175,014 | |||
Short-term financing bonds payable (a) | 3,030,785 | - | - | |||
Others | 15,628,802 | 10,695,058 | 12,899,763 | |||
49,852,239 | 36,870,072 | 39,074,777 |
(a) As at 31 December 2020, short-term financing bonds payable represented super short-term
financing bonds with a total face value of RMB 3,000,000,000 issued by the Company, witha term of 240 days, and a coupon rate of 1.65%.
(35) Long-term borrowings
31 December 2020 | 31 December 2019 | |||
Mortgage borrowings (a) | 29,673,661 | 28,892,783 | ||
Guaranteed borrowings (b) | 7,785,898 | 6,569,414 | ||
Unsecured borrowings | 11,633,434 | 7,067,146 | ||
Pledged borrowings | 18,937 | - | ||
49,111,930 | 42,529,343 | |||
Less: Current portion of mortgage borrowings (Note 4(33)) | (48,962) | (39,078) | ||
Current portion of guaranteed borrowings (Note 4(33)) | (2,174,775) | - | ||
Current portion of unsecured borrowings (Note 4(33)) | (4,054,593) | (1,191,888) | ||
Current portion of pledged borrowings (Note 4(33)) | (6,313) | - | ||
42,827,287 | 41,298,377 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(35) Long-term borrowings (Cont'd)
(a) As at 31 December 2020, bank mortgage borrowings were mainly mortgage borrowings with
a cost of EUR 3,691,857,000, equivalent to RMB 29,627,150,000 (31 December 2019: acost of EUR 3,696,857,000, equivalent to RMB 28,892,783,000) and were pledged by
81.04% equity of KUKA Group, which was acquired by the subsidiary of the Company.
Interest is paid on a semi-annual basis, and the borrowings are due in August 2022.
(b) As at 31 December 2020, bank guaranteed borrowings mainly included: (i) guaranteed
borrowings with a cost of EUR 271,000,000, equivalent to RMB 2,174,775,000 (31December 2019: a cost of EUR 271,000,000, equivalent to RMB 2,118,000,000) guaranteedby the Company, with interest paid every 3 months, which will be due in April 2021; (ii)guaranteed borrowings with a cost of JPY 69,460,000,000, equivalent to RMB4,392,373,000 (31 December 2019: a cost of JPY 69,460,000,000, equivalent to RMB4,451,414,000) guaranteed by the Company, with interest paid on a monthly basis, whichwill be due in May 2024.
(c) As at 31 December 2020, the annual interest rate range of long-term borrowings was 0.49%
to 6.08% (31 December 2019: 0.5% to 5.5%).
(36) Long-term employee benefits payable
31 December 2020 | 31 December 2019 | |||
Supplementary retirement benefits (a) | 2,014,651 | 2,267,015 | ||
Others | 145,024 | 151,548 | ||
2,159,675 | 2,418,563 |
(a) Supplementary retirement benefits
Supplementary retirement benefits obligation of the Group recognised on the balance sheetdate is calculated using the projected unit credit method, and reviewed by externalindependent actuary institution.
(i) The Group’s supplementary retirement benefits liabilities:
31 December 2020 | 31 December 2019 | |||
Defined benefit obligation | 3,850,400 | 3,896,591 | ||
Less: Fair value of planned assets | (1,835,749) | (1,629,576) | ||
Liabilities of defined benefit obligation | 2,014,651 | 2,267,015 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(36) Long-term employee benefits payable (Cont'd)
(a) Supplementary retirement benefits (Cont'd)
(ii) The actuarial assumptions used to determine the present value of defined benefit obligation
31 December 2020 | |||
Discount rate | 0.00%-6.00% | ||
Inflation rate | 1.00% | ||
Salary growth rate | 0.00%-8.10% | ||
Pension dynamics | 0.00%-3.65% | ||
Retirement rate | 0.00%-12.57% | ||
Changes in cost of medical services | 6.50% |
(37) Other non-current liabilities
Other non-current liabilities are mainly equity purchase payables.
(38) Share capital
Movements in the current year | ||||
31 December
2019 | Share-based |
paymentincentive plan
(a) | Desterilisation |
Additional
Repurchases
issuance | and write-offs | Sub-total |
31 December
2020 | ||||||||
RMB-denominated ordinary shares - | ||||||||
RMB-denominated |
ordinary shares
subject to trading restriction | 165,403 | 33,245 | (10,060) | - | (5,725) | 17,460 | 182,863 | |
RMB-denominated |
ordinary sharesnot subject to
trading restriction | 6,806,497 | 30,556 | 10,060 | - | - | 40,616 | 6,847,113 | |
6,971,900 | 63,801 | - | - | (5,725) | 58,076 | 7,029,976 |
Movements in the current year | ||||
31 December
2018 | Share-based |
paymentincentive plan
(a) | Desterilisation |
Additional
Repurchases
issuance | and write-offs | Sub-total |
31 December
2019 | ||||||||
RMB-denominated ordinary shares - | ||||||||
RMB-denominated |
ordinary sharessubject to trading
restriction | 147,175 | 30,980 | (8,298) | 2,379 | (6,833) | 18,228 | 165,403 | |
RMB-denominated |
ordinary sharesnot subject to
trading restriction | 6,515,856 | 56,170 | 8,298 | 321,278 | (95,105) | 290,641 | 6,806,497 | |
6,663,031 | 87,150 | - | 323,657 | (101,938) | 308,869 | 6,971,900 |
(a) In 2020, the share-based payment incentive plan increased the share capital by 63,801,000
shares (2019: 87,150,000 shares).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(39) Treasury stock
Increase in | ||||
the current
year | Decrease in |
the current
year | ||||||||
31 December 2019 | 31 December 2020 | |||||||
Treasury stock used |
for share-basedpayment incentive
plan | 3,759,732 | 2,798,468 | (463,853) | 6,094,347 |
Increase in | ||||
the current
year | Decrease in |
the current
year | ||||||||
31 December 2018 | 31 December 2019 | |||||||
Treasury stock used |
for share-basedpayment incentive
plan | 918,171 | 3,157,236 | (315,675) | 3,759,732 | ||||
Repurchased shares |
that have not yet
been written off | 4,000,256 | - | (4,000,256) | - | ||||
4,918,427 | 3,157,236 | (4,315,931) | 3,759,732 |
In 2020, the Group’s repurchased treasury stock amounted to RMB 2,798,468,000, and therestricted shares and employee stock ownership plans granted in 2020 were approximatelyRMB 2,012,093,000. As at 31 December 2020, treasury stock mainly comprised treasurystock of RMB 2,185,356,000 used for share-based payment incentive plan and restrictedshares amounting to RMB 3,908,991,000 that have not met unlock condition, amounting toRMB 6,094,347,000 in total (31 December 2019: RMB 3,759,732,000).
(40) Capital surplus
Increase in | ||||
the current
year | Decrease in |
the current
year | ||||||||
31 December 2019 | 31 December 2020 | |||||||
Share premium (a) | 15,683,499 | 2,694,886 | (193,357) | 18,185,028 | ||||
Share-based payment incentive plan (b) | 1,443,942 | 1,022,236 | (1,051,336) | 1,414,842 | ||||
Others (c) | 2,512,872 | 513,951 | (138,588) | 2,888,235 | ||||
19,640,313 | 4,231,073 | (1,383,281) | 22,488,105 | |||||
Increase in | ||||||||
the current
year | Decrease in |
the current
year | ||||||||
31 December 2018 | 31 December 2019 | |||||||
Share premium | 14,478,244 | 5,260,907 | (4,055,652) | 15,683,499 | ||||
Share-based payment incentive plan | 1,299,655 | 733,330 | (589,043) | 1,443,942 | ||||
Others | 2,673,408 | 10,806 | (171,342) | 2,512,872 | ||||
18,451,307 | 6,005,043 | (4,816,037) | 19,640,313 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(40) Capital surplus (Cont’d)
(a) The increase in share premium arose from the exercise of share options with the amount of
RMB 2,157,530,000, the unlocking of restricted shares with the amount of RMB537,356,000; the decrease in share premium arose from the repurchase of restricted shareswith the amount of RMB 193,357,000.
(b) The increase of share-based payment incentive plan arose from expenses attributable to
shareholders' equity of the parent company in the share-based payment incentive plan withthe amount of RMB 1,022,236,000, while the decrease arose from the transfer of RMB1,051,336,000 to share premium due to exercise of share-based payment incentive plan.
(c) Other increases in the capital surplus were mainly due to the Group's purchase of equity
held by the minority shareholders of subsidiaries, including Clivet, Annto Logistics, etc.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(41) Other comprehensive income
Other comprehensive income in the balance sheet | Other comprehensive income in the income statement for the year ended 31 December 2020 | ||||
Attributable to theparent company
after tax | ||
Amount arising
before income tax | Less: |
Reclassification of
othercomprehensiveincome to profit or
Less: Income tax
loss | expenses |
Attributable to the
parent company
Attributable to
minorityshareholders after
after tax | tax |
31 December 2019 | 31 December 2020 | |||||||||
Other comprehensive income items which will not be reclassified to profit or loss | ||||||||||
Changes arising from remeasurement of defined benefit plan | (92,685) | 111,895 | 19,210 | 102,595 | - | 8,909 | 111,895 | (391) | ||
Changes in fair value of investments in other equity instruments | - | 493 | 493 | (5,132) | - | (594) | 493 | (6,219) | ||
Other comprehensive income items which will be reclassified to profit or loss | - | - | - | - | - | - | - | |||
Other comprehensive income that will be transferred |
subsequently to profit or loss under the equity
method | (65,736) | (20,445) | (86,181) | (20,445) | - | - | (20,445) | - | ||
Effective portion of gains or losses on hedging instruments in a cash flow hedge | 12,620 | 298,721 | 311,341 | 348,437 | (13,175) | (33,459) | 298,721 | 3,082 | ||
Differences on translation of foreign currency financial statements | (565,753) | (1,228,113) | (1,793,866) | (1,564,945) | - | - | (1,228,113) | (336,832) | ||
(711,554) | (837,449) | (1,549,003) | (1,139,490) | (13,175) | (25,144) | (837,449) | (340,360) |
Other comprehensive income in the balance sheet | Other comprehensive income in the income statement for the year ended 31 December 2019 | ||||
Changes inaccounting
policies | |
Attributable to
the parent
company after tax | Amount | ||
arisingbefore income
tax | Less: |
Reclassificationof othercomprehensiveincome to profit
Less: Income
or loss | tax expenses |
Attributable tothe parentcompany after
Attributable tominorityshareholders
tax | after tax |
31 December
1 January
2018 | 2019 |
31 December
2019 | ||||||||||||
Other comprehensive income items which will not be reclassified to profit or loss | ||||||||||||
Changes arising from remeasurement of defined benefit plan | 50,068 | - | 50,068 | (142,753) | (92,685) | (160,406) | - | 10,017 | (142,753) | (7,636) | ||
Other comprehensive income items which will be reclassified to profit or loss | ||||||||||||
Other comprehensive income that will be transferred |
subsequently to profit or loss under the equity
method | (59,146) | - | (59,146) | (6,590) | (65,736) | (6,580) | - | - | (6,590) | 10 | ||
Gains or losses arising from changes in fair value of available-for-sale financial assets | (337,447) | 337,447 | —— | —— | —— | —— | —— | —— | —— | —— | ||
Effective portion of gains or losses on hedging instruments in a cash flow hedge | (101,270) | - | (101,270) | 113,890 | 12,620 | 13,175 | 107,675 | (2,511) | 113,890 | 4,449 | ||
Differences on translation of foreign currency financial statements | (884,358) | - | (884,358) | 318,605 | (565,753) | 386,670 | - | - | 318,605 | 68,065 | ||
(1,332,153) | 337,447 | (994,706) | 283,152 | (711,554) | 232,859 | 107,675 | 7,506 | 283,152 | 64,888 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(42) Surplus reserve
31 December 2019 | Increase in the current year | 31 December 2020 | |||
Statutory surplus reserve | 6,447,658 | 1,518,704 | 7,966,362 |
31 December 2018 | Increase in the current year | 31 December 2019 | |||
Statutory surplus reserve | 5,079,096 | 1,368,562 | 6,447,658 |
In accordance with the Company Law of the People's Republic of China and the Company’sArticles of Association, the Company should appropriate 10% of net profit for the year to thestatutory surplus reserve, and the Company can cease appropriation when the statutorysurplus reserve accumulated to more than 50% of the registered capital. The statutorysurplus reserve can be used to make up for the losses or increase the share capital afterapproval from the appropriate authorities. According to a resolution at the Board of Directors'meeting, the Company appropriated 10% of net profit for the year, amounting to RMB1,518,704,000 (2019: 10% of net profit, amounting to RMB 1,368,562,000) to the statutorysurplus reserve in 2020.
(43) Undistributed profits
2020 | 2019 | |||
Undistributed profits at the beginning of the year | 72,713,631 | 58,424,868 | ||
Add: Net profit attributable to shareholders |
of the parent company for the
current year | 27,222,969 | 24,211,222 | ||
Less: Ordinary share dividends payable (a) | (11,122,406) | (8,553,897) | ||
Appropriation to general risk reserve (b) | (221,037) | - | ||
Appropriation to statutory surplus reserve (Note 4 (42)) | (1,518,704) | (1,368,562) | ||
Undistributed profits at the end of the year | 87,074,453 | 72,713,631 |
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 22 May2020, the Company distributed a cash dividend to the shareholders at RMB 1.60 per share,amounting to approximately RMB 11,131,490,000 calculated by 6,957,181,058 issuedshares less those repurchased; 5,725,000 repurchased incentive shares in the restrictedshares incentive plan were written off (Note 4(38)), and cash dividend amounting to RMB9,084,000 was cancelled. The actual cash dividend distributed in the current year amountedto RMB 11,122,406,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(43) Undistributed profits (Cont’d)
(b) General risk reserve
In 2020, according to the Notice on Strengthening the Supervision and Administration ofCommercial Factoring Enterprises issued by China Banking and Insurance RegulatoryCommission and the Administrative Measures for the Provision of Reserves of FinancialEnterprises issued by the Ministry of Finance, certain subsidiaries of the Group providedgeneral risk reserve amounting to RMB 221,037,000 (2019: Nil).
(44) Revenue and cost of sales
2020 | 2019 | |||
Revenue from main operations | 261,474,699 | 257,059,725 | ||
Other operating income | 22,746,550 | 21,156,292 | ||
284,221,249 | 278,216,017 | |||
2020 | 2019 | |||
Cost of sales from main operations | 192,791,358 | 179,314,385 | ||
Cost of sales from other operations | 20,048,234 | 18,599,543 | ||
212,839,592 | 197,913,928 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(44) Revenue and cost of sales (Cont’d)
(a) Revenue and cost of sales from main operations
2020 | 2019 | ||||
Revenue from |
main
operations | Cost of sales from main operations | Revenue from |
main
operations | Cost of sales from main operations | |||||||
HVAC | 121,215,043 | 91,925,363 | 119,607,379 | 81,626,941 | ||||
Consumer appliances | 113,890,764 | 79,112,626 | 109,486,791 | 75,014,044 | ||||
Robotics and automation system | 21,588,782 | 17,297,837 | 25,191,964 | 19,953,437 | ||||
Others | 4,780,110 | 4,455,532 | 2,773,591 | 2,719,963 | ||||
261,474,699 | 192,791,358 | 257,059,725 | 179,314,385 |
In 2020, cost of sales from main operations was mainly material costs and labour costs,which accounted for over 80% of total cost of sales from main operations (2019: over 80%).
(b) Revenue and cost of sales from other operations
2020 | 2019 | ||||
Revenue from |
other
operations | Cost of sales from other operations | Revenue from |
other
operations | Cost of sales from other operations | |||||||
Revenue from sales of materials | 20,190,867 | 19,378,005 | 18,933,525 | 17,997,520 | ||||
Others | 2,555,683 | 670,229 | 2,222,767 | 602,023 | ||||
22,746,550 | 20,048,234 | 21,156,292 | 18,599,543 |
In 2020, cost of sales from other operations was mainly material costs, which accounted forover 80% of total cost of sales from other operations (2019: over 80%).
(c) In 2020, among the Group’s revenue from main operations, the amount recognised at a
point in time accounted for above 90% and the amount recognised within a certain periodof time mainly included revenue from main operations of robotics and automation systemsegment. The Group’s revenue from other operations was recognised at a point in time.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(45) Interest income and interest costs
The Group’s interest income and expenses arising from financial business are presented asfollows:
2020 | 2019 | |||
Interest income from loans and advances | 1,229,255 | 1,058,536 | ||
Including: Interest income from loans and |
advances to corporations
and individuals | 1,072,209 | 730,885 | ||
Interest income from note discounting | 157,046 | 327,651 | ||
Interest income from deposits with banks, other financial institutions and the Central Bank | 258,956 | 104,644 | ||
Interest income | 1,488,211 | 1,163,180 | ||
Interest costs | (105,168) | (122,618) | ||
1,383,043 | 1,040,562 |
(46) Taxes and surcharges
2020 | 2019 | |||
City maintenance and construction tax | 642,902 | 699,256 | ||
Educational surcharge | 470,229 | 508,523 | ||
Others | 420,515 | 512,837 | ||
1,533,646 | 1,720,616 |
(47) Selling and distribution expenses
2020 | 2019 | |||
Selling and distribution expenses | 27,522,276 | 34,611,231 |
In 2020, selling and distribution expenses were mainly maintenance expenses,advertisement and promotion fee, employee benefits, rental expenses and transportationand storage fee, which accounted for over 70% of total selling and distribution expenses(2019: over 70%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(48) General and administrative expenses
2020 | 2019 | |||
General and administrative expenses | 9,264,148 | 9,531,361 |
In 2020, general and administrative expenses were mainly employee benefits, depreciationand amortisation expenses, technical maintenance expenses, administrative officeexpenses and rental expenses and property management expenses, which accounted forover 70% of total general and administrative expenses (2019: over 70%).
(49) R&D expenses
2020 | 2019 | |||
R&D expenses | 10,118,667 | 9,638,137 |
In 2020, R&D expenses were mainly employee benefits, depreciation and amortisationexpenses, trial products and material inputs expenses, which accounted for over 80% oftotal R&D expenses (2019: over 80%).
(50) Financial income
The Group's financial income, other than those arising from financial business (Note 4(45)),are presented as follows:
2020 | 2019 | |||
Interest expenses | (1,305,591) | (880,703) | ||
Less: Interest income | 3,663,028 | 3,807,136 | ||
Exchange gains or losses | 446,352 | (531,088) | ||
Others | (165,757) | (163,709) | ||
2,638,032 | 2,231,636 |
(51) Asset impairment losses
2020 | 2019 | |||
Losses on decline in the value of inventories (Note 4(10)) | 355,695 | 311,195 | ||
Impairment losses on contract assets (Note 4(8)) | 52,153 | —— | ||
Impairment losses on fixed assets (Note 4(16)) | 54,010 | 8,466 | ||
Impairment losses on intangible assets (Note 4(18)) | 197,376 | - | ||
Impairment losses on construction in progress (Note 4(17)) | 45,975 | - | ||
Impairment loss on goodwill (Note 4(19)) | - | 552,248 | ||
705,209 | 871,909 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(52) Credit impairment losses
2020 | 2019 | |||
Losses on bad debts of accounts receivable (Note 4(4)) | 87,259 | 69,912 | ||
Losses on bad debts of other receivables (Note 4(5)) | 4,278 | 10,795 | ||
Losses on bad debts of notes receivable (Note 4(3)) | 347 | - | ||
Impairment losses on loans and advances (Note 4(9)) | 155,721 | 15,739 | ||
247,605 | 96,446 |
(53) Gains on changes in fair value
2020 | 2019 | |||
Derivative financial assets and liabilities | 86,950 | 707,527 | ||
Other financial assets | 1,676,000 | 653,636 | ||
1,762,950 | 1,361,163 |
(54) Investment income
2020 | 2019 | |||
Investment income from wealth management products | - | 91,359 | ||
Investment income from holding of financial assets held for trading | 1,598,107 | - | ||
Investment income from disposal of financial assets held for trading | 295,802 | - | ||
Investment income/(loss) from disposal of derivative financial assets and liabilities | 122,576 | (357,265) | ||
Investment income from associates | 402,528 | 506,225 | ||
Profit or loss arising from derecognition of |
financial assets measured at amortised
cost | - | (709) | ||
Others | (56,551) | (75,478) | ||
2,362,462 | 164,132 |
There is no significant restriction on recovery of investment income of the Group.
(55) Losses on disposal of assets
2020 | 2019 | |||
Gains on disposal of non-current assets | 26,876 | 48,152 | ||
Losses on disposal of non-current assets | (87,399) | (179,283) | ||
(60,523) | (131,131) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(56) Other income
2020 | 2019 | Assets related/ Income related | ||||
Special subsidy | 1,424,090 | 1,194,665 | Income related |
(57) Income tax expenses
2020 | 2019 | |||
Current income tax calculated based on tax law and related regulations | 4,928,687 | 5,865,722 | ||
Deferred income tax | (771,690) | (1,213,752) | ||
4,156,997 | 4,651,970 |
The reconciliation from income tax calculated based on the applicable tax rates and totalprofit presented in the consolidated income statement to the income tax expenses is listedbelow:
2020 | 2019 | |||
Total profit | 31,663,539 | 29,929,114 | ||
Income tax calculated at tax rate of 25% | 7,915,885 | 7,482,279 | ||
Effect of different tax rates applicable to subsidiaries | (3,314,153) | (2,418,377) | ||
Effect of income tax annual filing for prior periods | (241,941) | (132,198) | ||
Income not subject to tax | (163,339) | (225,015) | ||
Costs, expenses and losses not deductible for tax purposes | 459,501 | 435,334 | ||
Utilisation of previous temporary |
differences or deductible losses forwhich no deferred tax assets were
recognised in prior periods | (33,534) | (52,064) | ||
Others | (465,422) | (437,989) | ||
Income tax expenses | 4,156,997 | 4,651,970 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Calculation of basic and diluted earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing consolidated net profit attributable toordinary shareholders of the Company by the weighted average number of outstandingordinary shares:
Unit | 2020 | 2019 | |||
Consolidated net profit attributable to |
ordinary shareholders of the parent
company | RMB’000 | 27,222,969 | 24,211,222 | ||
Less: Dividends payable to restricted shares | RMB’000 | (64,930) | (41,095) | ||
27,158,039 | 24,170,127 | ||||
Weighted average number of outstanding ordinary shares | Thousands shares | 6,908,891 | 6,707,294 | ||
Basic earnings per share | RMB Yuan/share | 3.93 | 3.60 | ||
Including: | |||||
- Basic earnings per share from continuing operations: | 3.93 | 3.60 | |||
- Basic earnings per share for discontinued operations: | - | - |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Calculation of basic and diluted earnings per share (Cont’d)
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the Company by the diluted weighted average number ofoutstanding ordinary shares:
Unit | 2020 | 2019 | |||
Consolidated net profit attributable to ordinary shareholders of the Company | RMB’000 | 27,222,969 | 24,211,222 | ||
Weighted average number of outstanding ordinary shares | Thousands shares | 6,908,891 | 6,707,294 | ||
Weighted average number of ordinary |
shares increased from share-based
Thousands
payment | shares | 63,495 | 64,256 | ||
Weighted average number of diluted outstanding ordinary shares | Thousands shares | 6,972,386 | 6,771,550 | ||
Diluted earnings per share | RMB Yuan/share | 3.90 | 3.58 |
(59) Notes to the cash flow statement
(a) Cash received relating to other operating activities
2020 | 2019 | |||
Other income | 1,522,883 | 1,218,555 | ||
Revenue from other operations | 2,450,466 | 2,116,396 | ||
Non-operating income | 383,436 | 612,867 | ||
Financial income - interest income | 441,016 | 339,475 | ||
Others | 153,073 | 721,528 | ||
4,950,874 | 5,008,821 |
(b) Cash paid relating to other operating activities
2020 | 2019 | |||
Selling and distribution expenses |
(excluding employee benefits and taxes
and surcharges) | 22,851,294 | 30,246,514 | ||
General and administrative expenses and |
R&D expenses (excluding employee
benefits and taxes and surcharges) | 10,305,790 | 9,601,758 | ||
Others | 1,276,110 | 1,283,489 | ||
34,433,194 | 41,131,761 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(59) Notes to the cash flow statement (Cont’d)
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flows from operating activities is as follows:
2020 | 2019 | |||
Net profit | 27,506,542 | 25,277,144 | ||
Add: Asset impairment losses | 705,209 | 871,909 | ||
Credit impairment losses | 247,605 | 96,446 | ||
Depreciation and amortisation | 5,020,256 | 5,168,262 | ||
Losses on disposal of assets | 60,523 | 131,131 | ||
Gains on changes in fair value | (1,762,950) | (1,361,163) | ||
Financial income | (1,714,530) | (2,847,411) | ||
Investment income | (2,362,462) | (164,132) | ||
Increase in deferred tax assets | (1,424,584) | (1,347,604) | ||
Increase in deferred tax liabilities | 625,273 | 149,942 | ||
Increase in inventories | (1,803,072) | (2,670,712) | ||
Increase in operating receivables | (16,538,695) | (1,445,679) | ||
Increase in operating payables | 19,916,109 | 15,916,673 | ||
Share-based payments and others | 1,081,893 | 815,598 | ||
Net cash flows from operating activities | 29,557,117 | 38,590,404 | ||
Net increase/(decrease) in cash and cash equivalents: | ||||
Cash and cash equivalents at the end of the year | 23,548,508 | 30,441,760 | ||
Less: Cash and cash equivalents at the beginning of the year | (30,441,760) | (17,952,282) | ||
Net (decrease)/increase in cash and cash equivalents | (6,893,252) | 12,489,478 | ||
(d) Composition of cash and cash equivalents
31 December 2020 | 31 December 2019 | |||
Cash on hand | 2,538 | 3,128 | ||
Cash at bank that can be readily drawn on demand | 14,185,834 | 9,521,001 | ||
Deposits with the Central Bank that can be readily drawn on demand | 344,860 | 355,471 | ||
Deposits with banks and other financial |
institutions that can be readily drawn on
demand | 9,015,276 | 20,562,160 | ||
Cash and cash equivalents at the end of the year | 23,548,508 | 30,441,760 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Monetary items denominated in foreign currencies
31 December 2020 | ||||||
Foreign currency balance | Exchange rate | RMB balance | ||||
Cash at bank and on hand | ||||||
USD | 606,052 | 6.5249 | 3,954,427 | |||
JPY | 12,604,953 | 0.0632 | 796,633 | |||
HKD | 2,415,846 | 0.8416 | 2,033,176 | |||
EUR | 118,549 | 8.0250 | 951,354 | |||
BRL | 285,067 | 1.2556 | 357,930 | |||
VND | 508,313,333 | 0.0003 | 152,494 | |||
Other currencies | Not applicable | Not applicable | 1,422,214 | |||
Sub-total | 9,668,228 | |||||
Accounts receivable | ||||||
USD | 1,275,071 | 6.5249 | 8,319,713 | |||
JPY | 12,798,608 | 0.0632 | 808,872 | |||
HKD | 11,535 | 0.8416 | 9,708 | |||
EUR | 361,026 | 8.0250 | 2,897,230 | |||
BRL | 677,500 | 1.2556 | 850,669 | |||
VND | 2,435,706,667 | 0.0003 | 730,712 | |||
Other currencies | Not applicable | Not applicable | 2,034,429 | |||
Sub-total | 15,651,333 | |||||
Other receivables | ||||||
USD | 144,189 | 6.5249 | 940,820 | |||
JPY | 1,329,367 | 0.0632 | 84,016 | |||
HKD | 10,903 | 0.8416 | 9,176 | |||
EUR | 55,540 | 8.0250 | 445,707 | |||
BRL | 179,288 | 1.2556 | 225,114 | |||
Other currencies | Not applicable | Not applicable | 253,468 | |||
Sub-total | 1,958,301 | |||||
Total | 27,277,862 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Monetary items dominated in foreign currencies (Cont’d)
31 December 2020 | ||||||
Foreign currency balance | Exchange rate | RMB balance | ||||
Short-term borrowings | ||||||
USD | 280,000 | 6.5249 | 1,826,972 | |||
EUR | 154,489 | 8.0250 | 1,239,777 | |||
BRL | 105,884 | 1.2556 | 132,948 | |||
Other currencies | Not applicable | Not applicable | 122,280 | |||
Sub-total | 3,321,977 | |||||
Accounts payable | ||||||
USD | 280,661 | 6.5249 | 1,831,288 | |||
JPY | 5,637,532 | 0.0632 | 356,292 | |||
HKD | 14,244 | 0.8416 | 11,988 | |||
EUR | 156,419 | 8.0250 | 1,255,266 | |||
BRL | 222,265 | 1.2556 | 279,076 | |||
Other currencies | Not applicable | Not applicable | 1,656,574 | |||
Sub-total | 5,390,484 | |||||
Other payables | ||||||
USD | 12,737 | 6.5249 | 83,109 | |||
JPY | 7,245,791 | 0.0632 | 457,934 | |||
HKD | 7,272 | 0.8416 | 6,120 | |||
EUR | 1,182 | 8.0250 | 9,485 | |||
Other currencies | Not applicable | Not applicable | 173,688 | |||
Sub-total | 730,336 | |||||
Current portion of non-current liabilities | ||||||
USD | 3,769 | 6.5249 | 24,593 | |||
EUR | 276,000 | 8.0250 | 2,214,900 | |||
Other currencies | Not applicable | Not applicable | 22,833 | |||
Sub-total | 2,262,326 | |||||
Long-term borrowings | ||||||
USD | 140,061 | 6.5249 | 913,886 | |||
EUR | 3,944,261 | 8.0250 | 31,652,691 | |||
JPY | 69,460,000 | 0.0632 | 4,392,373 | |||
Other currencies | Not applicable | Not applicable | 3,039 | |||
Sub-total | 36,961,989 | |||||
Total | 48,667,112 | |||||
Monetary items denominated in foreign currencies above present all foreign currenciesexcept RMB.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Monetary items dominated in foreign currency (Cont’d)
31 December 2019 | ||||||
Foreign currency balance | Exchange rate | RMB balance | ||||
Cash at bank and on hand | ||||||
USD | 317,624 | 6.9762 | 2,215,810 | |||
JPY | 5,212,777 | 0.0641 | 334,139 | |||
HKD | 100,593 | 0.8958 | 90,111 | |||
EUR | 180,362 | 7.8155 | 1,409,618 | |||
BRL | 150,491 | 1.7308 | 260,469 | |||
VND | 377,386,667 | 0.0003 | 113,216 | |||
Other currencies | Not applicable | Not applicable | 1,309,279 | |||
Sub-total | 5,732,642 | |||||
Accounts receivable | ||||||
USD | 872,897 | 6.9762 | 6,089,502 | |||
JPY | 14,299,236 | 0.0641 | 916,581 | |||
HKD | 24,233 | 0.8958 | 21,708 | |||
EUR | 345,216 | 7.8155 | 2,698,038 | |||
BRL | 578,855 | 1.7308 | 1,001,883 | |||
VND | 1,233,736,667 | 0.0003 | 370,121 | |||
Other currencies | Not applicable | Not applicable | 1,982,229 | |||
Sub-total | 13,080,062 | |||||
Other receivables | ||||||
USD | 118,625 | 6.9762 | 827,551 | |||
JPY | 2,392,309 | 0.0641 | 153,347 | |||
HKD | 11,071 | 0.8958 | 9,917 | |||
EUR | 88,187 | 7.8155 | 689,229 | |||
BRL | 99,705 | 1.7308 | 172,569 | |||
Other currencies | Not applicable | Not applicable | 146,583 | |||
Sub-total | 1,999,196 | |||||
Total | 20,811,900 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(60) Monetary items dominated in foreign currency (Cont’d)
31 December 2019 | ||||||
Foreign currency balance | Exchange rate | RMB balance | ||||
Short-term borrowings | ||||||
EUR | 159,081 | 7.8155 | 1,243,298 | |||
BRL | 54,530 | 1.7308 | 94,380 | |||
Other currencies | Not applicable | Not applicable | 164,160 | |||
Sub-total | 1,501,838 | |||||
Accounts payable | ||||||
USD | 230,576 | 6.9762 | 1,608,545 | |||
JPY | 7,697,192 | 0.0641 | 493,390 | |||
HKD | 73,082 | 0.8958 | 65,467 | |||
EUR | 183,248 | 7.8155 | 1,432,176 | |||
BRL | 262,096 | 1.7308 | 453,636 | |||
Other currencies | Not applicable | Not applicable | 1,191,342 | |||
Sub-total | 5,244,556 | |||||
Other payables | ||||||
USD | 31,148 | 6.9762 | 217,296 | |||
JPY | 6,349,314 | 0.0641 | 406,991 | |||
HKD | 73,628 | 0.8958 | 65,956 | |||
EUR | 8,944 | 7.8155 | 69,899 | |||
Other currencies | Not applicable | Not applicable | 105,353 | |||
Sub-total | 865,495 | |||||
Current portion of non-current liabilities | ||||||
USD | 9,987 | 6.9762 | 69,674 | |||
EUR | 176,223 | 7.8155 | 1,377,267 | |||
Other currencies | Not applicable | Not applicable | 13,176 | |||
Sub-total | 1,460,117 | |||||
Long-term borrowings | ||||||
USD | 148,000 | 6.9762 | 1,032,475 | |||
EUR | 4,070,228 | 7.8155 | 31,810,870 | |||
JPY | 69,444,836 | 0.0641 | 4,451,414 | |||
Other currencies | Not applicable | Not applicable | 3,618 | |||
Sub-total | 37,298,377 | |||||
Total | 46,370,383 | |||||
Monetary items denominated in foreign currencies above present all foreign currenciesexcept RMB.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
5 | Changes of consolidation scope |
(1) | Business combinations involving enterprises not under common control |
(a) | Business combinations involving enterprises not under common control in the current year |
GD Midea Heating & Ventilating Equipment Co., Ltd., a wholly-owned subsidiary of theCompany, acquired Hiconics Eco-energy in May 2020. Hainan Midea Building Co., Ltd., awholly-owned subsidiary of the Company, acquired WINONE ELEVATOR and FoshanLongyue Investment Co., Ltd. in December 2020.
The acquisition has no significant impact on the Group's consolidated financial statements.
(2) | Changes of consolidation scope due to other reasons |
(a) | Increase of consolidation scope |
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Midea Group (Shanghai) Co., Ltd. in January2020, holding 90% and 10% of the shares respectively.
Foshan Shunde Midea Household Appliances Industry Co., Ltd., a wholly-owned subsidiaryof the Company, established Chongqing Midea Commercial Factoring Co., Ltd. in March2020, holding 100% of its shares.
Wuhu Annto Investment Co., Ltd. and Annto Logistics Technology Co., Ltd., the Company’swholly-owned subsidiaries, established Tianjin Annto Network Technology Co., Ltd. in April2020, holding 99% and 1% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Western-style Electric Products Company inJune 2020, holding 90% and 10% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Shanghai Kaizhao Commercial and TradingCo., Ltd. in August 2020, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Guangdong MeiKong Intelligent BuildingCo., Ltd. in August 2020, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Midea Smart Life (Shanghai) TechnologyCo., Ltd. in September 2020, holding 90% and 10% of the shares respectively.
The Company established Midea (Shanghai) Supply Chain Technology Co., Ltd. inSeptember 2020, holding 100% of its shares.
KUKA Systems GmbH, the Company's holding subsidiary, spun off KUKA Assembly & TestGmbH in September 2020, holding 100% of its shares.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
5 | Changes of consolidation scope (Cont’d) |
(2) | Changes in consolidation scope due to other reasons (Cont'd) |
(a) | Increase of consolidation scope (Cont'd) |
Chongqing Midea General Refrigeration Equipment Co., Ltd., the Company's holdingsubsidiary, established Meitong Energy Technology (Chongqing) Co., Ltd. in October 2020,holding 100% of its shares.
The Company established Maytech Technology Co., LTD. in October 2020, holding 100%of its shares.
GD Midea Heating & Ventilating Equipment Co., Ltd. and Foshan Midea Air-conditioningIndustry Investment Co., Ltd., the Company’s wholly-owned subsidiaries, establishedHainan Midea Building Co., Ltd. in November 2020, holding 95% and 5% of the sharesrespectively.
Midea Group (Shanghai) Co., Ltd. and Foshan Midea Air-conditioning Industry InvestmentCo., Ltd., the Company's wholly-owned subsidiaries, established Shanghai M-BMSIntelligent Construction Co., Ltd. in November 2020, holding 95% and 5% of the sharesrespectively.
KUKA Group, the Company's holding subsidiary, established KUKA Real EstateManagement GmbH. in November 2020, holding 100% of its shares.
Midea Electrics Netherlands B.V. and Midea Electric Trading (Singapore) Co., Pte. Ltd., theCompany's wholly-owned subsidiaries, established Midea (Egypt) Kitchen & Water HeaterAppliance Co., Ltd. in November 2020, holding 99% and 1% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Hainan Midea United Supplies Co., Ltd. inDecember 2020, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-owned subsidiary of the Company, established Midea Group Wuhan Heating VentilationEquipment Co., Ltd. in December 2020, holding 95% and 5% of the shares respectively.
Midea Group (Shanghai) Co., Ltd. and Foshan Midea Air-conditioning Industry InvestmentCo., Ltd., the Company's wholly-owned subsidiaries, established Hainan XingchenghaiElectric Appliance Co., Ltd. in December 2020, holding 95% and 5% of the sharesrespectively.
Midea Group (Shanghai) Co., Ltd. and Foshan Midea Air-conditioning Industry InvestmentCo., Ltd., the Company's wholly-owned subsidiaries, established Hainan Midea Kitch Co.,Ltd. in December 2020, holding 95% and 5% of the shares respectively.
Wuxi Little Swan Electric Co., Ltd. and Foshan Midea Air-conditioning Industry InvestmentCo., Ltd., the Company's wholly-owned subsidiaries, established Hubei Midea LaundryAppliance Co., Ltd. in December 2020, holding 95% and 5% of the shares respectively.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
5 | Changes of consolidation scope (Cont’d) |
(2) | Changes in consolidation scope due to other reasons (Cont'd) |
(a) | Increase of consolidation scope (Cont'd) |
WINONE ELEVATOR COMPANY LIMITED, the Company's holding subsidiary, establishedGuangdong Ling Mei Technology Co., Ltd. in December 2020, holding 100% of its shares.
The Company established Guangdong Midea Electromechanical Technology Co., Ltd. inDecember 2020, holding 100% of its shares.
KUKA Group, the Company's holding subsidiary, established KUKA Real Estate GmbH &Co. KG. in December 2020, holding 100% of its shares.
(b) | Decrease of consolidation scope |
Decrease of consolidation scope in the current year mainly includes deregistration ofsubsidiaries. Details are as follows:
Name of company | Disposal method of the equity | Disposal time-point of the equity |
Wuhu Midea Washing Appliances Trade Co., Ltd. | Deregistration | January 2020 |
GD Midea Carfitaly Coffee Machine Manufacturing Co., Ltd. | Deregistration | March 2020 |
Reis SCI i. L., Pontault Combault | Deregistration | March 2020 |
Guangdong De Yi Jie Appliances Co., Ltd. | Change of equity | August 2020 |
Shandong Chang Dee Technology Development Co., Ltd. | Change of equity | August 2020 |
Wuhan Changdi Technology Co., Ltd. | Change of equity | August 2020 |
Shijiazhuang Chang Dee Technology Co., Ltd. | Change of equity | September 2020 |
Hangzhou Chang Dee Technology Development Co., Ltd. | Change of equity | September 2020 |
KUKU Industries Italia i. L., Bellusco | Deregistration | September 2020 |
Foshan Welling Materials Supply Co., Ltd. | Deregistration | October 2020 |
Hiconics Ruima Motor (Ningbo) Co., Ltd. | Change of equity | November 2020 |
Guizhou Chang Dee Technology Co., Ltd. | Change of equity | November 2020 |
Wuxi Little Swan Company Limited | Deregistration | December 2020 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
6 Interests in other entities
(1) Interests in subsidiaries
(a) Composition of significant subsidiaries
Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
Direct | Indirect | |||||
GD Midea Air-Conditioning Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC |
Manufacture and sales of
air conditioner | 73% | 7% | Business combinations |
involving enterprises not under
common control | ||
GD Midea Group Wuhu Air |
-Conditioning Equipment
Co., Ltd. | Wuhu, PRC | Wuhu, PRC |
Manufacture and sales of
air conditioner | 73% | 7% | Business combinations |
involving enterprises not under
common control | ||||||
Midea Group Wuhan Refrigeration Equipment Co., Ltd. | Wuhan, PRC | Wuhan, PRC | Manufacture of air conditioner | 73% | 7% | Establishment |
Wuhu Maty Air-Conditioning Equipment Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of air conditioner | 87% | 13% | Establishment |
Chongqing Midea Air-Conditioning Equipment Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Manufacture and sales of air conditioner | 95% | 5% | Establishment |
GD Midea Heating & Ventilating Equipment Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of air conditioner | 90% | 10% | Establishment |
Zhejiang Meizhi Compressor Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Manufacture of air conditioner | 100% | - | Establishment |
Hefei Midea Refrigerator Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations |
involving enterprises not under
common control | ||||||
Hefei Hualing Co., Ltd. | Hefei, PRC | Hefei, PRC | Manufacture of refrigerator | 75% | 25% | Business combinations |
involving enterprises not under
common control | ||||||
Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Foshan, PRC | Foshan, PRC | Manufacture of small household appliances | - | 100% | Establishment |
Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Wuhu, PRC | Wuhu, PRC |
Manufacture of small
household appliances | 90% | 10% | Business combinations |
involving enterprises under
common control | ||||||
Wuxi Little Swan Electric Co., Ltd. | Wuxi, PRC | Wuxi, PRC | Manufacture of washing machine | 100% | - | Establishment |
Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
6 Interests in other entities (Cont'd)
(1) Interests in subsidiaries (Cont'd)
(a) Composition of significant subsidiaries (Cont'd)
Subsidiaries | Major business location | Place of registration | Nature of business | Shareholding (%) | Acquisition method | |
Direct | Indirect | |||||
Midea Group Finance Co., Ltd. | Foshan, PRC | Foshan, PRC | Financial industry | 95% | 5% | Establishment |
Midea Microfinance Loan Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Petty loan | 5% | 95% | Business combinations |
involving enterprises not
under common control | ||||||
Mecca International (BVI) Limited | British Virgin Islands | British Virgin Islands | Investment holding | - | 100% | Establishment |
Midea International Corporation Company Limited | Hong Kong | Hong Kong | Investment holding | 100% | - | Establishment |
Wuhu Midea Life Appliances Mfg Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Manufacture of |
small household
appliances | 100% | - | Establishment | |||
Midea Electric Netherlands (I) B.V. | Netherlands | Netherlands | Investment holding | - | 100% | Establishment |
Toshiba Consumer Marketing Corporation | Japan | Japan |
Manufacture of
home appliances | - | 100% | Business combinations |
involving enterprises not
under common control | ||||
TLSC | Japan | Japan |
Manufacture of
home appliances | - | 100% | Business combinations |
involving enterprises not
under common control | ||||
KUKA | Germany | Germany |
Manufacture and
sales of robots | - | 95% | Business combinations |
involving enterprises not
under common control | ||||||
Ningbo Midea United Materials Supply Co., Ltd. | Ningbo, PRC | Ningbo, PRC | Wholesale and retail | 100% | - | Establishment |
Chongqing Midea Commercial Factoring Co., Ltd. | Chongqing, PRC | Chongqing, PRC | Factoring | - | 100% | Establishment |
Tianjin Midea Commercial Factoring Co., Ltd. | Tianjin, PRC | Tianjin, PRC | Factoring | - | 100% | Establishment |
Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment holding | 85% | 15% | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020
(All amounts in RMB'000 Yuan unless otherwise stated)[English translation for reference only]
6 Interests in other entities (Cont'd)
(2) Interest in associates
The Group’s associates have no significant influence on the Group and are summarised asfollows:
2020 | 2019 | |||
Aggregated carrying amount of investments | 2,901,337 | 2,790,806 | ||
Aggregate of the following items in proportion | ||||
Net profit (i) | 402,528 | 506,225 | ||
Other comprehensive income (i) | (20,445) | (9,378) | ||
Total comprehensive income | 382,083 | 496,847 |
(i) The net profit and other comprehensive income have taken into account the impacts of both the fair value of the identifiable assets and liabilities upon the acquisition of investment in associates and the unification of accounting policies adopted by the associates to those adopted by the Company. |
7 Segment information
The reportable segments of the Group are the business units that provide different productsor service, or operate in different areas. Different businesses or areas require differenttechnologies and marketing strategies, the Group, therefore, separately manages theproduction and operation of each reportable segment and evaluates their operating resultsrespectively, in order to make decisions about resources to be allocated to these segmentsand to assess their performance.
The Group identified 4 reportable segments as follows:
- Heating & ventilation, as well as air-conditioner- Consumer appliances- Robotics and automation system- Others
Inter-segment transfer prices are determined by reference to selling prices for third parties.
The assets are allocated based on the operations of the segments and the physical locationsof the assets. The liabilities are allocated based on the operations of the segments.Expenses indirectly attributable to each segment are allocated to the segments based onthe proportion of each segment’s revenue.
Operating expenses include cost of sales, interest costs, fee and commission expenses,taxes and surcharges, selling and distribution expenses, general and administrativeexpenses, R&D expenses and financial income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
8 Segment reporting
(a) Information on the profit or loss, assets and liabilities of reported segment
Segment information as at and for the year ended 31 December 2020 is as follows:
Heating & |
ventilation, aswell as air-
Consumer
conditioner | appliances |
Robotics and
Other segments
automation system | and unallocated | Elimination | Total | ||||
Revenue from external customers | 137,750,899 | 120,229,314 | 21,743,789 | 5,985,727 | - | 285,709,729 | |
Inter-segment revenue | 2,969,649 | 417,949 | 174,762 | 7,504,091 | (11,066,451) | - | |
Operating expenses | (127,623,183) | (107,643,923) | (23,045,690) | (11,197,652) | 10,758,011 | (258,752,437) | |
Segment profit | 13,097,365 | 13,003,340 | (1,127,139) | 2,292,166 | (308,440) | 26,957,292 | |
Other profit or loss | 4,706,247 | ||||||
Total profit | 31,663,539 | ||||||
Total assets | 141,224,648 | 126,922,410 | 34,082,837 | 174,557,282 | (116,404,574) | 360,382,603 | |
Total liabilities | 100,386,504 | 100,604,599 | 24,094,633 | 150,399,172 | (139,339,405) | 236,145,503 | |
Long-term equity investment in associates | 240,925 | 124,128 | 31,877 | 2,504,407 | - | 2,901,337 | |
Investment income from associates | 115,265 | 12,692 | (19,464) | 294,035 | - | 402,528 | |
Increase in non-current assets (excluding |
long-term equity investments, financial
assets, goodwill and deferred tax assets) | 2,958,978 | 1,558,622 | 1,872,743 | 352,374 | - | 6,742,717 | |
Asset impairment losses | 22,389 | 252,621 | 424,710 | 5,489 | - | 705,209 | |
(Reversal of)/losses on credit impairment | (11,271) | (79,131) | 25,641 | 311,653 | 713 | 247,605 | |
Depreciation and amortisation | 1,660,118 | 1,629,611 | 1,104,376 | 626,151 | - | 5,020,256 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
8 Segment reporting (Cont'd)
(a) Information on the profit or loss, assets and liabilities of reported segment (Cont'd)
Segment information as at and for the year ended 31 December 2019 is as follows:
Heating & |
ventilation, as
well as air-
Consumer
conditioner | appliances |
Robotics and
Other segments
automation system | and unallocated | Elimination | Total | ||||
Revenue from external customers | 135,470,711 | 114,367,462 | 25,356,999 | 4,185,334 | - | 279,380,506 | |
Inter-segment revenue | 2,227,043 | 756,506 | 163,663 | 7,408,736 | (10,555,948) | - | |
Operating expenses | (124,219,498) | (101,665,999) | (25,955,822) | (9,771,544) | 10,294,975 | (251,317,888) | |
Segment profit | 13,478,256 | 13,457,969 | (435,160) | 1,822,526 | (260,973) | 28,062,618 | |
Other profit or loss | 1,866,496 | ||||||
Total profit | 29,929,114 | ||||||
Total assets | 121,176,656 | 103,888,887 | 37,236,774 | 121,317,404 | (81,664,302) | 301,955,419 | |
Total liabilities | 81,518,812 | 74,715,832 | 27,386,386 | 99,888,660 | (89,050,368) | 194,459,322 | |
Long-term equity investment in associates | 210,811 | 91,779 | 83,964 | 2,404,252 | - | 2,790,806 | |
Investment income from associates | 160,908 | 4,035 | (25,831) | 367,113 | - | 506,225 | |
Increase in non-current assets (excluding |
long-term equity investments, financial
assets, goodwill and deferred tax assets) | 2,221,732 | 1,205,818 | 847,053 | 242,998 | - | 4,517,601 | |
Asset impairment losses | 64,814 | 245,923 | 560,382 | 790 | - | 871,909 | |
Losses on/(Reversal of) credit impairment | 102,545 | 54,637 | (75,990) | 100,895 | (85,641) | 96,446 | |
Depreciation and amortisation | 1,780,289 | 1,565,812 | 1,157,866 | 664,295 | - | 5,168,262 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
8 Segment reporting (Cont'd)
(b) Geographical area information
The Group’s revenue from external customers domestically and in foreign countries orgeographical areas, and the total non-current assets other than long-term equityinvestments, financial assets, goodwill and deferred tax assets located domestically and inforeign countries or geographical areas (including Germany, Hong Kong, Macau, Singapore,Japan, Italy, South America, etc.) are as follows:
Revenue from external customers | 2020 | 2019 | ||
Domestic | 164,628,321 | 162,596,802 | ||
In other countries/geographical areas | 121,081,408 | 116,783,704 | ||
285,709,729 | 279,380,506 | |||
Total non-current assets | 31 December 2020 | 31 December 2019 | ||
Domestic | 24,258,048 | 22,206,308 | ||
In other countries/geographical areas | 17,715,088 | 18,395,469 | ||
41,973,136 | 40,601,777 |
In 2020 and 2019, revenue from each individual customer is lower than 10% of the Group’stotal revenue.
9 Related parties and significant related party transactions
(1) Information of the parent company
(a) General information of the parent company
Name of the parent company | Relationship | Place of registration | Nature of business |
Midea Holding Co., Ltd. | Controlling shareholder | Shunde District, Foshan | Commercial |
The Company’s ultimate controlling person is Mr. He Xiangjian.
(b) Registered capital and changes in registered capital of the parent company
31 December 2020 and | |
31 December 2019 | |
Midea Holding Co., Ltd. | 330,000 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(1) Information of the parent company (Cont'd)
(c) The percentages of shareholding and voting rights in the Company held by the parent
company
31 December 2020 | 31 December 2019 | |||||||||
Shareholding (%) | Voting rights | Shareholding (%) | Voting rights | |||||||
Direct | Indirect | (%) | Direct | Indirect | (%) | |||||
Midea Holding Co., Ltd. | 30.86% | - | 30.86% | 31.73% | - | 31.73% |
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s main subsidiaries.
(3) Information of other related parties
Name of other related parties | Relationship |
Guangdong Wellkey Electrician Material Co., Ltd. | Under the common control of the direct |
relatives of the Company’s ultimate
controlling shareholder | |
Anhui Wellkey Electrician Material Co., Ltd. | Under the common control of the direct |
relatives of the Company’s ultimate
controlling shareholder | |
Guangdong Infore Material-Tech Co., Ltd. | Under the common control of the direct |
relatives of the Company’s ultimate
controlling shareholder | |
Orinko New Material Co., Ltd. | Under the common control of the direct |
relatives of the Company’s ultimate
controlling shareholder | |
Guangdong Ruizhu Intelligent Technoloy Co., Ltd. | Under the common control of the Company’s ultimate controlling shareholder |
Foshan Micro Midea Filter Mfg. Co., Ltd. | Associates of the Company |
Guangdong Shunde Rural Commercial Bank Co., Ltd. | Associates of the Company |
(4) Information of related party transactions
The following primary related party transactions with major related parties are conducted inaccordance with normal commercial terms or relevant agreements.
(a) Purchase of goods:
Related parties | Content of | |
related party
transactions | Pricing policies of related party transactions | 2020 | 2019 | |
Guangdong Wellkey Electrician Material Co., Ltd. | Purchase of goods | Agreed price | 708,793 | 851,608 | ||
Foshan Micro Midea Filter Mfg. Co., Ltd. | Purchase of goods | Agreed price | 312,860 | 298,143 | ||
Anhui Wellkey Electrician Material Co., Ltd. | Purchase of goods | Agreed price | 242,408 | 312,038 | ||
Orinko New Material Co., Ltd. | Purchase of goods | Agreed price | 1,238,817 | 1,159,702 | ||
2,502,878 | 2,621,491 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(4) Information of related party transactions (Cont’d)
(b) Sales of goods
Related parties | Content of | |
related party
transactions | Pricing policies of |
related party
transactions | 2020 | 2019 | |
Guangdong Ruizhu Intelligent Technoloy Co., Ltd. | Sales of goods | Agreed price | 198,903 | 105,382 |
(c) Investment income and interest income
2020 | 2019 | |||
Guangdong Shunde Rural Commercial Bank Co., Ltd. | 130,457 | 78,696 |
(d) Remuneration of key management
2020 | 2019 | |||
Remuneration of key management | 76,940 | 57,800 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(5) Receivables from and payables to related parties
Receivables from related parties:
Items | Related parties | 31 December 2020 | 31 December 2019 | ||
Cash at bank and on |
hand, and other
debt investments | Guangdong Shunde Rural Commercial Bank Co., Ltd. | 3,653,592 | 3,058,300 |
Payables to related parties:
Items | Related parties | 31 December 2020 | 31 December 2019 | ||
Accounts payable | Guangdong Wellkey Electrician Material Co., Ltd. | 133,290 | 201,956 | ||
Foshan Micro Midea Filter Mfg. Co., Ltd. | 62,837 | 68,258 | |||
Anhui Wellkey Electrician Material Co., Ltd. | 53,889 | 60,373 | |||
Orinko New Material Co., Ltd. | 218,888 | 80,121 | |||
Sub-total | 468,904 | 410,708 | |||
Notes payable | Guangdong Wellkey Electrician Material Co., Ltd. | 52,246 | - | ||
Total | 521,150 | 410,708 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment
(1) Share option incentive plan
(a) Pursuant to the seventh share option incentive plan (the “Seventh Share Option Incentive
Plan”) approved at the 2019 annual shareholders’ meeting in 2020, the Company granted65,180,000 share options with exercise price of RMB 50.43 to 1,423 employees. Under thecircumstance that the Company meets expected performance, 1/3 of the total share optionsgranted will become effective after 1 year, 2 years and 3 years respectively since 5 June2020.
Determination method for fair value of share options at the grant date
Exercise price of options: | RMB 50.43 |
Effective period of options: | 4 years |
Current price of underlying shares: | RMB 58.95 |
Estimated fluctuation rate of share price: | 35.67% |
Estimated dividend rate: | 3.13% |
Risk-free interest rate within effective period of options: | 2.06% |
The fair value of the Seventh Share Option Incentive Plan calculated pursuant to the aboveparameters is: RMB 1,001,164,000.
(b) Movements in share options during the year
2020 | ||
(Share in thousands) | ||
Share options issued at the beginning of the year | 182,905 | |
Share options granted during the year | 65,180 | |
Share options exercised during the year | (63,801) | |
Share options lapsed during the year | (16,053) | |
Share options issued at the end of the year | 168,231 |
As at 31 December 2020, the residual contractual maturity date of the Third Share OptionIncentive Plan is on 27 June 2021. The residual contractual maturity date of the FourthShare Option Incentive Plan is on 11 May 2021. The residual contractual maturity date ofthe Fifth Share Option Incentive Plan is on 6 May 2024. The residual contractual maturitydate of the Fifth Reserved Share Option Incentive Plan is on 10 March 2025. The residualcontractual maturity date of the Sixth Share Option Incentive Plan is 29 May 2025. Theresidual contractual maturity date of the Seventh Share Option Incentive Plan is 4 June2024.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment (Cont'd)
(2) Restricted share plan
(a) Pursuant to the restricted shares incentive plan for 2020 approved at the 2019 annual
shareholders’ meeting in 2020 (the "Restricted Shares Incentive Plan for 2020"), theCompany granted 33,245,000 restricted shares with exercise price of RMB 24.42 to 506employees. Under the circumstance that the Company meets expected performance, 1/3 ofthe total restricted shares granted will be unlocked after 1 year, 2 years and 3 yearsrespectively, since 5 June 2020. The listing date for the granted restricted shares of this planis 14 July 2020.
(b) Movements in restricted shares during the year
2020 | ||
(Share in thousands) | ||
Restricted shares issued at the beginning of the year | 57,139 | |
Restricted shares granted during the year | 33,245 | |
Restricted shares unlocked during the year | (10,577) | |
Restricted shares lapsed during the year | (5,725) | |
Restricted shares issued at the end of the year | 74,082 |
(3) Employee stock ownership plan
Pursuant to the sixth stock ownership plan of the Midea Global Partner Plan (the “SixthGlobal Partner Plan”) approved at the shareholders' meeting for the year ended 31December 2019 held during the year 2020, the Company would purchase a total of3,537,663 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 52.04 per share and the purchase fund was the special fund of approximatelyRMB 184,100,000 accrued by the Company. The Company then entrusted ChinaInternational Capital Corporation Limited (“CICC”) to provide an asset management plan.The lock-up period of shares under this plan is from 14 July 2020 to 13 July 2021.
Pursuant to the second stock ownership plan of the Midea Business Partner Plan (the “ThirdBusiness Partner Plan”) approved at the shareholders' meeting for the year ended 31December 2019 held during the year 2020. The Company would purchase a total of1,873,559 shares of Midea Group from the secondary market, with an average purchaseprice of RMB 52.04 per share. The purchase fund was the special fund and part ofperformance bonus for management of RMB 97,500,000 in total accrued by the Company.The Company then entrusted CICC to provide an asset management plan. The lock-upperiod of shares under this plan is from 17 July 2020 to 16 July 2021.
(4) The total expenses due to the above share-based payment incentive plan, which were
granted, recognised for the year ended 31 December 2020 were RMB 1,077,550,000 (2019:
RMB 815,598,000). As at 31 December 2020, the balance relating to the share-basedpayment incentive plan and accrued from capital surplus was RMB 1,414,842,000 (31December 2019: RMB 1,443,942,000).
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
11 Contingencies
As at 31 December 2020, the amount in tax disputes involving Brazilian subsidiary with 51%interests held by the Company is about BRL 670 million (equivalent to RMB 841 million)(Some cases have lasted for more than 10 years. The above amount includes the principaland interest). As at 31 December 2020, relevant cases are still at court. Originalshareholders of Brazilian subsidiary have agreed to compensate the Company according toverdict results of the above tax disputes. The maximum compensation amount is about BRL157 million (equivalent to RMB 197 million). With reference to judgements of third-partyattorneys, management believes that the probability of losing lawsuits and makingcompensation is small, and expects no significant risk of tax violation.
12 Commitments
(1) Capital commitments
Capital expenditures contracted for by the Group but are not yet necessary to be recognisedon the balance sheet as at the balance sheet date are as follows:
31 December 2020 | 31 December 2019 | |||
Buildings, machinery and equipment | 2,896,245 | 1,433,420 |
(2) Operating lease commitments
The Group has no significant operating lease commitments at the balance sheet date.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
13 Events after the balance sheet date
(1) Business acquisition
On 2 February 2021, the Group acquired 29.09% equity of Beijing Wandong MedicalTechnology Co., Ltd. by agreement, with a purchase price of approximately RMB 2,297million. As at the date on which the financial statements were authorised for issue, theacquisition had not been completed yet.
(2) Repurchased shares
Pursuant to the Proposal on the Scheme for the Repurchase of Certain Social Public Sharesapproved at the twenty-ninth meeting of the third Board of Directors dated 23 February 2021,the Company is allowed to use its own funds to repurchase some of the Company’s sharesthrough centralised price bidding, with number of shares to be repurchased ranging from 50million to 100 million and purchase price not exceeding RMB 140 per share. The scheme isto be implemented within 12 months from the date of approval by the Board of Directors. Asat the date on which the financial statements were authorised for issue, the Group hasrepurchased 100 million shares, and purchase price was RMB 8.7 billion.
(3) Overview of profit distribution
On 28 April 2021, on the basis of the total shares 6,916,495,109 to be distributed (totalexisting 7,047,686,070 shares net of repurchased 131,190,961 shares) of the Company,the Board of Directors proposed a distribution of cash dividends of approximately RMB11,066,392,000 at RMB 16 every 10 shares (including tax). Such proposal is pending forapproval at the shareholders’ meeting. The distribution of cash dividends proposed after thebalance sheet date is not recognised as liabilities at the balance sheet date.
14 Financial risk
The Group is exposed to various financial risks in the ordinary course of business, mainlyincluding:
? Market risk (mainly including foreign exchange risk, interest rate risk and price risk)? Credit risk? Liquidity risk
The following mainly relates to the above risk exposures and relevant causes, objectives,policies and process of risk management, method of risk measurement, etc.
The objective of the Group's risk management is to seek balance between risk and income,minimising the adverse impact of financial risks on the Group's financial performance.Pursuant to the risk management objective, the Group has made risk management policiesto identify and analyse the risks it is exposed to and set appropriate risk resistant level anddesign relevant internal control procedures to monitor the Group’s risk level. The Groupreviews regularly these risk management policies and relevant internal control systems toadapt to changes in market condition or its operating activities.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont'd)
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in China, Europe, America, Asia, South America and Africa forthe manufacturing, sales, investments and financing activities. Any foreign currencydenominated monetary assets and liabilities other than in RMB would subject the Group toforeign exchange exposure.
The Group’s finance department at its headquarters has a professional team to manageforeign exchange risk, with approach of the natural hedge for settling currencies, signingforward foreign exchange hedging contracts and controlling the scale of foreign currencyassets and liabilities, to minimise foreign exchange risk, and to reduce the impact ofexchange rate fluctuations on business performance.
(b) Interest rate risk
The Group's interest rate risk arises from interest bearing borrowings including long-termborrowings and debentures payable. Financial liabilities issued at floating rates expose theGroup to cash flow interest rate risk. Financial liabilities issued at fixed rates expose theGroup to fair value interest rate risk. The Group determines the relative proportions of itsfixed rate and floating rate contracts depending on the prevailing market conditions. As at31 December 2020, the Group’s long-term interest bearing borrowings at floating ratesamounting to RMB 933,886,000 (31 December 2019: RMB 971,090,000) (Note 4(35)).
The Group’s finance department at its headquarters continuously monitors the interest rateposition of the Group. Increases in interest rates will increase the cost of new borrowing andthe interest costs with respect to the Group’s outstanding floating rate borrowings, andtherefore could have a material adverse effect on the Group’s financial performance. TheGroup makes adjustments timely with reference to the latest market conditions and mayenter into interest rate swap agreements to mitigate its exposure to interest rate risk.
As at 31 December 2020, if the borrowing rate rises or falls 50 base points while otherfactors remain constant, the group’s profit before tax would increase or decrease amountingto RMB 4,669,000.
(c) Other price risk
The Group's other price risk arises mainly from financial assets held for trading (Note 4(2)),other non-current financial assets (Note 4(15)) andinvestments in other equity instrumentsmeasured at fair value. As at 31 December 2020, if expected price of the investments heldby the Group fluctuated, the Group's gains or losses on changes in fair value and othercomprehensive incomewould be affected accordingly.
As at 31 December 2020, if the Group’s expected price of equity instruments investmentrises or falls by 10% while other factors remain constant, the Group would have an increaseor decrease profit before tax amounting to RMB 567,581,000 (31 December 2019: RMB283,746,000), and an increase or decrease other comprehensive income amounting to RMB4,665,000 (31 December 2019: Nil).
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont'd)
(2) Credit risk
Credit risk is managed on the grouping basis. Credit risk mainly arises from cash at bankand on hand, deposits with the Central Bank, deposits with banks and other financialinstitutions, notes receivable, accounts receivable, receivables financing, loans andadvances, other receivables, contract assets, other debt investments and derivativefinancial assets at fair value through profit or loss that are not included in the impairmentassessment scope.
The Group expects that there is no significant credit risk associated with cash at bank,deposits with the Central Bank and deposits with banks and other financial institutions sincethey 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-performanceby these counterparties.
In addition, the Group has policies to limit the credit exposure on notes receivable, accountsreceivable, contract assets, loans and advances, other receivables, monetary investmentsin other current assets and other debt investments. The Group assesses the credit qualityof and sets credit limits on its customers by taking into account their financial position, theavailability of guarantee from third parties, their credit history and other factors such ascurrent market conditions. The credit history of the customers is regularly monitored by theGroup. In respect of customers with a poor credit history, the Group will use written paymentreminders, or shorten or cancel credit periods, to ensure the overall credit risk of the Groupis limited to a controllable extent.
As at 31 December 2020, the Group had no significant collateral or other creditenhancements held as a result of the debtor's mortgage (31 December 2019: Nil).
(3) Liquidity risk
Cash flow forecasting is performed by each subsidiary of the Group and aggregated by theGroup’s finance department in its headquarters. The Group’s finance department at itsheadquarters monitors rolling forecasts of the Group's short-term and long-term liquidityrequirements to ensure it has sufficient cash and securities that are readily convertible tocash to meet operational needs, while maintaining sufficient headroom on its undrawncommitted borrowing facilities from major financial institutions so that the Group does notbreach borrowing limits or covenants on any of its borrowing facilities to meet the short-termand long-term liquidity requirements. As at 31 December 2020, monetary assets held by theGroup, including cash at bank and on hand, notes receivable, notes receivable included inloans and advances, notes receivable included in receivables financing, wealthmanagement funds and structural deposits included in financial assets held for trading andmonetary investments included in other current assets amounted to RMB 155,886,115,000.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont'd)
(3) Liquidity risk (Cont'd)
The financial liabilities of the Group at the balance sheet date are analysed by their maturitydate below at their undiscounted contractual cash flows:
31 December 2020 | ||||||||||
Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||
Short-term borrowings (including interest) | 10,033,656 | - | - | - | 10,033,656 | |||||
Customer deposits and deposits from banks and |
other financialinstitutions (including
interest) | 87,596 | - | - | - | 87,596 | |||||
Notes payable | 28,249,939 | - | - | - | 28,249,939 | |||||
Accounts payable | 53,930,261 | - | - | - | 53,930,261 | |||||
Other payables | 4,501,391 | - | - | - | 4,501,391 | |||||
Derivative financial liabilities | 161,225 | - | - | - | 161,225 | |||||
Other current liabilities (including interest) | 18,661,350 | - | - | - | 18,661,350 | |||||
Current portion of non- |
current liabilities
(including interest) | 6,355,016 | - | - | - | 6,355,016 | |||||
Long-term borrowings (including interest) | 557,805 | 31,435,123 | 12,002,785 | - | 43,995,713 | |||||
Long-term payables | - | 8,870 | 4,390 | - | 13,260 | |||||
Other non-current liabilities | - | - | 692,986 | - | 692,986 | |||||
122,538,239 | 31,443,993 | 12,700,161 | - | 166,682,393 |
31 December 2019 | ||||||||||
Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total | ||||||
Short-term borrowings (including interest) | 5,840,214 | - | - | - | 5,840,214 | |||||
Customer deposits and deposits from banks and |
other financialinstitutions (including
interest) | 62,521 | - | - | - | 62,521 | |||||
Notes payable | 23,891,600 | - | - | - | 23,891,600 | |||||
Accounts payable | 42,535,777 | - | - | - | 42,535,777 | |||||
Other payables | 3,800,568 | - | - | - | 3,800,568 | |||||
Derivative financial liabilities | 27,100 | - | - | - | 27,100 | |||||
Other current liabilities | 12,899,763 | - | - | - | 12,899,763 | |||||
Current portion of non- |
current liabilities
(including interest) | 1,471,468 | - | - | - | 1,471,468 | |||||
Long-term borrowings (including interest) | 512,262 | 4,425,755 | 37,467,552 | - | 42,405,569 | |||||
Long-term payables | - | 29,256 | 4,390 | - | 33,646 | |||||
Other non-current liabilities | - | - | 863,826 | - | 863,826 | |||||
91,041,273 | 4,455,011 | 38,335,768 | - | 133,832,052 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates
The level in which fair value measurement is categorised is determined by the level of thefair value hierarchy of the lowest level input that is significant to the entire fair valuemeasurement:
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 theasset or liability, either directly or indirectly.
Level 3: Unobservable inputs for the asset or liability.
(1) Assets and liabilities measured at fair value on a recurring basis
As at 31 December 2020, the assets and liabilities measured at fair value on a recurringbasis by the above three levels are analysed below:
Level 1 | Level 2 | Level 3 | Total | |||||
Financial assets measured at fair value - | ||||||||
Financial assets held for trading | 2,324,965 | 25,914,636 | - | 28,239,601 | ||||
Derivative financial assets | - | 420,494 | - | 420,494 | ||||
Receivables financing | - | 13,901,856 | - | 13,901,856 | ||||
Other current assets - hedging instruments | - | 767,934 | - | 767,934 | ||||
Other debt investments | - | 21,456,155 | - | 21,456,155 | ||||
Investments in other equity instruments | - | - | 46,651 | 46,651 | ||||
Other non-current financial assets | - | - | 3,360,849 | 3,360,849 | ||||
Total assets | 2,324,965 | 62,461,075 | 3,407,500 | 68,193,540 | ||||
Financial liabilities measured at fair value - | ||||||||
Derivative financial liabilities | - | 161,225 | - | 161,225 | ||||
Other financial liabilities - hedging instruments | - | 19,511 | - | 19,511 | ||||
Total liabilities | - | 180,736 | - | 180,736 |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
As at 31 December 2019, the assets and liabilities measured at fair value on a recurringbasis by the above three levels are analysed below:
Level 1 | Level 2 | Level 3 | Total | |||||
Financial assets measured at fair value - | ||||||||
Financial assets held for trading | 1,087,351 | - | - | 1,087,351 | ||||
Derivative financial assets | - | 197,412 | - | 197,412 | ||||
Receivables financing | - | 7,565,776 | - | 7,565,776 | ||||
Other current assets - hedging instruments | - | 98,572 | - | 98,572 | ||||
Other current assets - structural deposits | - | 50,557,518 | - | 50,557,518 | ||||
Other non-current financial assets | - | - | 1,750,107 | 1,750,107 | ||||
Total assets | 1,087,351 | 58,419,278 | 1,750,107 | 61,256,736 | ||||
Financial liabilities measured at fair value - | ||||||||
Derivative financial liabilities | - | 27,100 | - | 27,100 | ||||
Other financial liabilities - hedging instruments | - | 32 | - | 32 | ||||
Total liabilities | - | 27,132 | - | 27,132 |
The Group takes the date on which events causing the transfers between the levels takeplace as the timing specific for recognising the transfers. There was no significant transferof fair value measurement level of the above financial instruments among the three levels.
The fair value of financial instruments traded in an active market is determined at the quotedmarket price; and the fair value of those not traded in an active market is determined by theGroup using valuation technique. The valuation models used mainly comprise discountedcash flow model and market comparable corporate model. Inputs of valuation techniquemainly comprise risk-free interest rate, estimated interest rate and estimated annual yield.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont'd)
(1) Assets and liabilities measured at fair value on a recurring basis (Cont’d)
There were no changes in the valuation technique for the fair value of the Group’s financialinstruments in the current year.
The changes in Level 3 financial assets are analysed below: | ||||
Financial assets held for trading, |
investments in other equityinstruments and other non-
current financial assets | ||||
1 January 2020 | 1,750,107 | |||
Increase | 1,872,884 | |||
Decrease | (63,570) | |||
Transfer out of Level 3 | (226,060) | |||
Total gains of current period | ||||
Investment income recognised in the income statement | 181,583 | |||
Gains recognised in other comprehensive income | (107,444) | |||
31 December 2020 | 3,407,500 |
Financial assets held for trading |
and other non-current financial
assets | ||||
1 January 2019 | 2,315,705 | |||
Increase | 4,232,805 | |||
Decrease | (5,274,444) | |||
Transfer out of Level 3 | (56,340) | |||
Total gains of current period | ||||
Investment income recognised in the income statement | 509,578 | |||
Gains recognised in other comprehensive income | 22,803 | |||
31 December 2019 | 1,750,107 |
(a) The fair value of this part of other non-current financial assets is measured using discounted
cash flows approach. The judgement of Level 3 of the fair value hierarchy is based on themateriality of unobservable inputs towards calculation of whole fair value. Significantunobservable inputs mainly include the financial data of targeted company and risk adjusteddiscount rates.
Assets and liabilities subject to Level 2 fair value measurement are mainly structuraldeposits, receivables financing and forward exchange contracts and are evaluated bymarket approach and income approach.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
15 Fair value estimates (Cont'd)
(2) Assets and liabilities not measured at fair value but disclosed
The Group's financial assets and financial liabilities measured at amortised cost mainlyinclude: cash at bank and on hand, deposits with the Central Bank, deposits with banks andother financial institutions, notes receivable, accounts receivable, contract assets, loans andadvances, other receivables, other current assets (excluding those mentioned in Note15(1)), notes payable, accounts payable, contract liabilities, short-term borrowings, long-term borrowings, current portion of non-current liabilities, customer deposits and depositsfrom banks and other financial institutions, other payables, other current liabilities, etc.
Carrying amounts of the Group’s financial assets and financial liabilities measured atamortised cost as at 31 December 2020 and 31 December 2019 approximated to their fairvalue.
16 Capital management
The Group’s capital management policies aim to safeguard the Group’s ability to continueas a going concern in order to provide returns for shareholders and benefits for otherstakeholders, and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount ofdividends paid to shareholders, refund capital to shareholders, issue new shares or sellassets to reduce debts.
The Group is not subject to external mandatory capital requirements, and monitors capitalstructure on the basis of gearing ratio (total liabilities divide total assets).
As at 31 December 2020 and 31 December 2019, the Group's gearing ratio was as follows:
31 December 2020 | 31 December 2019 | |||
Total liabilities | 236,145,503 | 194,459,322 | ||
Total assets | 360,382,603 | 301,955,419 | ||
Gearing ratio | 65.53% | 64.40% |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the parent company’s financial statements
(1) Other receivables
31 December 2020 | 31 December 2019 | |||
Other receivables | 28,332,268 | 18,377,123 | ||
Less: Provision for bad debts | (13,598) | (7,258) | ||
28,318,670 | 18,369,865 | |||
(a) Other receivables are analysed by ageing as follows:
31 December 2020 | 31 December 2019 | |||
Within 1 year | 28,205,960 | 18,356,942 | ||
1 to 2 years | 125,127 | 19,000 | ||
Over 2 years | 1,181 | 1,181 | ||
28,332,268 | 18,377,123 | |||
(b) Provision for bad debts and changes in book balance statements:
Stage 1 | Stage 3 | |||
12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | Sub-total | |
Book
balance | Provision |
for bad
Book
debts | balance | Provision |
for bad
Book
debts | balance | Provision |
for bad
debts | Provision |
for bad
debts | |||||||
31 December 2019 | 732,508 | 7,200 | 17,644,557 | - | 58 | 58 | 7,258 |
Transfer to Stage 3 in the current year | - | - | - | - | - | - | - |
Net (decrease)/increase in the current year | (308,992) | 6,340 | 10,264,137 | - | - | - | 6,340 |
Including: Written-off in the current year | - | - | - | - | - | - | - |
Derecognition | - | - | - | - | - | - | - |
31 December 2020 | 423,516 | 13,540 | 27,908,694 | - | 58 | 58 | 13,598 |
As at 31 December 2020 and 31 December 2019, the Company did not have otherreceivables in Stage 2.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(1) Other receivables (Cont’d)
(c) As at 31 December 2020 and 31 December 2019, other receivables of the Company at
Stage 1 and Stage 3 were analysed as follows:
(i) As at 31 December 2020, other receivables for which the related provision for bad debts
was provided on the individual basis were analysed as follows:
Book balance | ECL rate in the |
following 12
months |
Provision for
bad debts | Reason | ||||||
Stage 1 | 27,908,694 | 0% | - | Relatively low expected loss risk |
Book balance | ECL rate in the |
following 12
months | Provision for bad debts | Reason | |||||
Stage 3 | 58 | 100.00% | (58) | The debtor |
encounteredfinancial distress,
As at 31 December 2019, other receivables for which the related provision for bad debtswas provided on the individual basis were analysed as follows:
etc.
Book balance | ECL rate in the |
following 12
months |
Provision for
bad debts | Reason | ||||||
Stage 1 | 17,644,557 | 0% | - | Relatively low expected loss risk |
Carrying
amount | ECL rate in the |
following 12
months |
Provision for
bad debts | Reason | ||||||
Stage 3 | 58 | 100.00% | (58) | The debtor |
encounteredfinancial distress,
(ii) As at 31 December 2020 and 31 December 2019, other receivables of which provision for
bad debts was calculated on grouping basis were all in Stage 1, which was analysed asfollows:
etc.
31 December 2020 | 31 December 2019 | ||||||||||
Book balance | Provision for bad debts | Book balance | Provision for bad debts | ||||||||
Amount | Amount | Provision ratio | Amount | Amount | Provision ratio | ||||||
Security |
deposit/guarantee
payables grouping | 423,516 | (13,540) | 3.20% | 732,508 | (7,200) | 0.98% |
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(1) Other receivables (Cont’d)
(d) As at 31 December 2020, the five largest other receivables aggregated by debtors were
analysed as follows:
Nature | Balance | Ageing | % of total balance | Provision for bad debts | ||
Company A | Current accounts | 23,260,000 | Within 1 year | 82.10% | - | |
Company B | Current accounts | 2,141,890 | Within 1 year | 7.56% | - | |
Company C | Current accounts | 952,572 | Within 1 year | 3.36% | - | |
Company D | Current accounts | 787,000 | Within 1 year | 2.78% | - | |
Company E | Current accounts | 230,309 | Within 1 year | 0.81% | - | |
27,371,771 | 96.61% | - |
(2) Long-term equity investments
Long-term equity investments are classified as follows:
31 December 2020 | 31 December 2019 | |||
Subsidiaries (a) | 53,320,578 | 51,025,905 | ||
Associates (b) | 1,670,583 | 1,579,954 | ||
54,991,161 | 52,605,859 | |||
Less: Provision for impairment | - | - | ||
54,991,161 | 52,605,859 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(a) Subsidiaries
Movements in the current year | |||||||
31 December
2019 | |
Increase in
investment | |
Decrease in
investment | |
Provision for
impairment | Others | ||
31 December
2020 | Provision for impairment loss | Cash dividends |
attributable to the parentcompany declared in the
current year
Ending balance | |||||||||||||
Little Swan | 20,117,836 | - | - | - | 76,404 | 20,194,240 | - | - | |||||
Guangdong Midea Electric Co., Ltd. | 5,000,000 | - | - | - | - | 5,000,000 | - | - | |||||
Midea Group Finance Co., Ltd. | 3,358,112 | - | - | - | 2,465 | 3,360,577 | - | - | |||||
Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 2,949,000 | - | - | - | - | 2,949,000 | - | - | |||||
Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | - | 1,880,041 | - | - | |||||
GD Midea Air-Conditioning Equipment Co., Ltd. | 1,662,637 | - | - | - | 129,533 | 1,792,170 | - | 405,835 | |||||
Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,109,106 | - | - | - | 37,036 | 1,146,142 | - | - | |||||
Hefei Midea Heating & Ventilation Equipment Co., Ltd. | 1,071,459 | - | - | - | 4,794 | 1,076,253 | - | 1,499,310 | |||||
Guangdong Midea Intelligent Technologies Co., Ltd. | 1,051,011 | - | - | - | 2,473 | 1,053,484 | - | - | |||||
Midea Group (Shanghai) Co., Ltd. | - | 900,000 | - | - | 3,368 | 903,368 | - | - | |||||
Hubei Midea Refrigerator Co., Ltd. | 847,490 | - | - | - | 7,513 | 855,003 | - | - | |||||
Anhui Meizhi Precision Manufacturing Co., Ltd. | 823,738 | - | - | - | 3,865 | 827,603 | - | - | |||||
GD Midea Heating & Ventilating Equipment Co., Ltd. | 700,228 | - | - | - | 79,900 | 780,128 | - | 1,045,319 | |||||
Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 757,331 | - | - | - | 7,109 | 764,440 | - | 1,596,658 | |||||
Annto Logistics Technology Co., Ltd. | 485,328 | 245,631 | - | - | 11,725 | 742,684 | - | 157,417 | |||||
Hefei Midea Refrigerator Co., Ltd. | 512,920 | - | - | - | 19,128 | 532,048 | - | - | |||||
Ningbo Midea United Materials Supply Co., Ltd. | 495,419 | - | - | - | 2,448 | 497,867 | - | 656,827 | |||||
GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 352,041 | - | - | - | 20 | 352,061 | - | - | |||||
Hefei Hualing Co., Ltd. | 212,852 | - | - | - | 52,778 | 265,630 | - | - | |||||
Midea International Corporation Company Limited | 176,974 | - | - | - | - | 176,974 | - | - | |||||
Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 161,185 | - | - | - | 11,427 | 172,612 | - | 976,385 | |||||
Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 102,959 | - | - | - | 7,368 | 110,327 | - | 268,823 | |||||
Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 77,820 | - | - | - | 6,133 | 83,953 | - | 511,843 | |||||
Zhejiang Meizhi Compressor Co., Ltd. | 65,654 | - | - | - | 626 | 66,280 | - | 857,440 | |||||
Wuhu Midea Life Appliances Mfg Co., Ltd. | 56,223 | - | - | - | - | 56,223 | - | - | |||||
Others | 6,998,541 | 214,498 | (13,000) | - | 481,431 | 7,681,470 | - | 3,379,569 | |||||
51,025,905 | 1,360,129 | (13,000) | - | 947,544 | 53,320,578 | - | 11,355,426 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2020(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
17 Notes to the parent company’s financial statements (Cont'd)
(2) Long-term equity investments (Cont’d)
(b) Associates
Investment in associates mainly refers to the investments in Guangdong Shunde RuralCommercial Bank Co., Ltd. and Hefei Royalstar Motor Co., Ltd. and other companies by theCompany.
(3) Operating revenue
Operating revenue mainly comprises other operating revenue including the trademarkroyalty income, rental income, management fee income, etc. obtained by the Company fromthe subsidiaries.
(4) Investment income
2020 | 2019 | |||
Income from long-term equity investments under cost method | 11,355,426 | 9,637,326 | ||
Investment income from wealth |
management products purchased from
financial institutions | - | 91,359 | ||
Investment income from holding of financial assets held for trading | 1,063,774 | - | ||
Investment income from associates | 216,318 | 272,089 | ||
Others | (57,063) | 383,692 | ||
12,578,455 | 10,384,466 |
There is no significant restriction on repatriation of the Company's investment income.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION
(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
1 Details of non-recurring profit or loss
2020 | 2019 | |||
Gains or losses on disposal of non-current assets | (52,424) | (131,131) | ||
Except for the effective hedging activities |
related to the Company’s ordinaryactivities, profit or loss arising fromchanges in fair value of financial assetsheld for trading, derivative financialassets, financial liabilities held fortrading, derivative financial liabilities,other non-current financial assets, andinvestment income from disposal offinancial assets held for trading,derivative financial assets, financialliabilities held for trading, derivativefinancial liabilities, other non-current
financial assets. | 2,204,165 | 676,430 | ||
Others (mainly including government |
grants, compensation income, penaltyincome and other non-operating income
and expenses) | 1,378,105 | 1,347,788 | ||
3,529,846 | 1,893,087 | |||
Less: Effect of income tax | (765,871) | (394,095) | ||
Effect of minority interests (after tax) | (155,659) | (12,162) | ||
2,608,316 | 1,486,830 |
Basis of preparation of details of non-recurring profit or loss:
Under the requirements of the Explanatory Announcement No. 1 on InformationDisclosure by Companies Offering Securities to the Public - Non-recurring Profitor Loss [2008] from CSRC, non-recurring profit or loss refers to that arises fromtransactions and events that are not directly relevant to ordinary activities, or thatis relevant to ordinary activities, but is extraordinary and not expected to recurfrequently that would have an influence on users of financial statements makingeconomic decisions on the financial performance and profitability of anenterprise.
MIDEA GROUP CO., LTD.
SUPPLEMENTARY INFORMATION(All amounts in RMB’000 Yuan unless otherwise stated)[English translation for reference only]
2 Return on net assets and earnings per share
The Group's return on net asset and earnings per share calculated pursuant tothe Compilation Rules for Information Disclosure of Companies OfferingSecurities to the Public No. 9 - Calculation and Disclosure of Return on Net Assetand Earnings per Share (revised in 2010) issued by CSRC and relevantrequirements of accounting standards are as follows:
Weighted average | Earnings per share (in RMB Yuan) | |||||||||||
Return on net assets (%) | Basic earnings per share | Diluted earnings per share | ||||||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||||
Net profit attributable to |
shareholders of the
Company | 24.95% | 26.43% | 3.93 | 3.60 | 3.90 | 3.58 | ||||||
Net profit attributable to |
shareholders of theCompany net of non-
recurring profit or loss | 22.56% | 24.80% | 3.55 | 3.38 | 3.53 | 3.36 |
Section X Documents Available for Reference
1. The original of The 2020 Annual Report of Midea Group Co., Ltd. signed by
the legal representative;
2. The financial statements signed and stamped by the legal representative,
the Director of Finance and the accounting supervisor;
3. The original of the auditor’s report with the seal of the accounting firm, and
signed and stamped by CPAs;
4. The originals of all company documents and announcements that are
disclosed to the public via newspaper designated for information disclosureduring the Reporting Period; and
5. The electronic version of The 2020 Annual Report that is released on
http://www.cninfo.com.cn.
Midea Group Co., Ltd.
Legal Representative: Fang Hongbo
30 April 2021