Midea Group Co., Ltd.
Semi-Annual Report 2022
August 2022
Section I Important Statements, Contents and Definitions
The 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.Mr. Fang Hongbo, Chairman of the Board and CEO of the Company, Ms. Zhong Zheng,CFO and Director of Finance of the Company, and Ms. Chen Lihong, head of theaccounting department of the Company, have represented and warranted that thefinancial statements in this report are true, accurate and complete.All directors of the Company attended the Board meeting to review this report.The future plans and other forward-looking statements mentioned in this report shallnot be considered as promises of the Company to investors. Therefore, investors arekindly reminded to pay attention to possible investment risks.The Company plans not to distribute cash dividends or bonus shares or convertcapital reserves into share capital.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 ...... 2
SECTION II COMPANY PROFILE AND KEY FINANCIAL RESULTS ...... 6
SECTION III MANAGEMENT DISCUSSION AND ANALYSIS ...... 9
SECTION IV CORPORATE GOVERNANCE ...... 94
SECTION V ENVIRONMENTAL AND SOCIAL RESPONSIBILITY ...... 106
SECTION VI SIGNIFICANT EVENTS ...... 131SECTION VII CHANGES IN SHARES AND INFORMATION ABOUT SHAREHOLDERS ..... 142SECTION VIII PREFERENCE SHARES ...... 148
SECTION IX BONDS ...... 149
SECTION X FINANCIAL REPORT ...... 152
Documents Available for Reference
1. The original of The Semi-Annual Report 2022 of Midea Group Co., Ltd. signed bythe legal representative;
2. The financial statements signed and stamped by the legal representative, the CFO& Director of Finance and the head of the accounting department;
3. The originals of all company documents and announcements that are disclosed tothe public via newspaper designated for information disclosure during the ReportingPeriod; and
4. The electronic version of The Semi-Annual Report 2022 that is released onhttp://www.cninfo.com.cn.
Definitions
| Term | Definition |
| The “Company”, “Midea”, “Midea Group” or the “Group” | Midea Group Co., Ltd. |
| Midea Holding | Midea Holding Co., Ltd. |
| TLSC | Toshiba Lifestyle Products & Services Corporation |
| KUKA | KUKA Aktiengesellschaft |
| Hiconics | Hiconics Eco-energy Technology Co., Ltd. |
| WDM | Beijing Wandong Medical Technology Co., Ltd. |
| Clou Electronics | ShenZhen Clou Electronics Co., Ltd. |
| Swisslog | Swisslog Holding AG |
| Servotronix | Servotronix Motion Control Ltd. |
| WINONE | WINONE Elevator Company Limited |
| “TTium” or “TTium Motor” | WuHan TTium Motor Technology Co., Ltd. |
| Reporting Period | 1 January 2022 to 30 June 2022 |
Section II Company Profile and Key Financial Results
1. Corporate Information
| Stock name | Midea Group | Stock code | 000333 |
| Stock exchange where the shares of the Company are listed | Shenzhen Stock Exchange | ||
| Name of the Company in Chinese | 美的集团股份有限公司 | ||
| Abbr. of the Company name in Chinese (if any) | 美的集团 | ||
| Name of the Company in English (if any) | Midea Group Co., Ltd. | ||
| Abbr. of the Company name in English (if any) | Midea Group | ||
| Legal representative | Fang Hongbo | ||
2. Contact Us
| Board Secretary | Representative for Securities Affairs | |
| Name | Jiang Peng | You Mingyang |
| Address | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China | Midea Headquarters Building, No. 6 Midea Avenue, Beijiao Town, Shunde District, Foshan City, Guangdong Province, China |
| Tel. | 0757-22607708 | 0757-23274957 |
| Fax | 0757-26605456 | |
| IR@midea.com | ||
3. Other Information
3.1 Ways to Contact the Company
Changes to the registered address, office address and their zip codes, website address and emailaddress of the Company in the Reporting Period:
□Applicable ?N/A
No such changes in the Reporting Period. The said information can be found in the 2021 Annual Report.
3.2 Information Disclosure and Place Where the Semi-Annual Report Is KeptChanges to the media for information disclosure and the place where materials carrying disclosedinformation such as this Report were kept in the Reporting Period:
□Applicable ?N/A
The newspapers designated by the Company for information disclosure, the website designated by theCSRC for disclosing this Report and the place where materials carrying disclosed information such asthis Report were kept did not change in the Reporting Period. The said information can be found in the2021 Annual Report.
3.3 Other Information
Changes to other information in the Reporting Period:
□Applicable ?N/A
4. Key Accounting Data and Financial Indicators
Whether the Company performed a retroactive adjustment to or restatement of accounting data
□Yes ?No
| H1 2022 | H1 2021 | Change (%) | |
| Operating revenue (RMB'000) | 182,661,009 | 173,809,565 | 5.09% |
| Net profit attributable to shareholders of the Company (RMB'000) | 15,995,496 | 15,009,046 | 6.57% |
| Net profit attributable to shareholders of the Company before non-recurring gains and losses (RMB'000) | 15,691,512 | 14,636,511 | 7.21% |
| Net cash flows from operating activities (RMB'000) | 21,394,710 | 20,176,410 | 6.04% |
| Basic earnings per share (RMB/share) | 2.34 | 2.17 | 7.83% |
| Diluted earnings per share (RMB/share) | 2.34 | 2.16 | 8.33% |
| Weighted average ROE (%) | 12.18% | 12.63% | -0.45% |
| 30 June 2022 | 31 December 2021 | Change (%) | |
| Total assets (RMB'000) | 413,104,145 | 387,946,104 | 6.48% |
| Net assets attributable to shareholders of the Company (RMB'000) | 129,665,290 | 124,868,124 | 3.84% |
5. Differences in Accounting Data under Domestic and Overseas AccountingStandards
5.1 Differences in the net profit and net assets disclosed in the financial reports prepared underChina Accounting Standards (CAS) and International Financial Reporting Standards (IFRS)
□Applicable ?N/A
No such differences for the Reporting Period.
5.2 Differences in the net profit and net assets disclosed in the financial reports prepared underCAS and foreign accounting standards
□Applicable ?N/A
No such differences for the Reporting Period.
6. Non-recurring Gains and Losses
?Applicable □N/A
Unit: RMB'000
| Item | Amount | Note |
| Gain or loss from disposal of non-current assets | 22,156 | |
| Except for effectively hedging business related to normal business operations of the Company, gain or loss arising from the change in the fair value of financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, and other non-current financial assets, as well as investment income or loss produced from the disposal of the aforesaid financial assets and liabilities | -434,341 | |
| Other non-operating income and expenses except above-mentioned items | 772,377 | |
| Less: Corporate income tax | 30,095 | |
| Minority interests (after tax) | 26,113 | |
| Total | 303,984 | -- |
Particulars about other items that meet the definition of non-recurring gain/loss:
□Applicable ?N/A
Explain the reasons if the Company classifies an item as a recurring gain/loss item, which is enumeratedas a non-recurring gain/loss in the <Explanatory Announcement No. 1 on Information Disclosure forCompanies Offering Their Securities to the Public—Non-Recurring Profits and Losses>:
□Applicable ?N/A
Section III Management Discussion and Analysis
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 Industrial Technology Business Group, the 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 the bestexperience of whole-house smart home appliances and service. The Industrial Technology BusinessGroup, with technology as the core driver, commands key technologies in intelligent transportation,industrial automation, green energy and consumer appliances. It operates many brands including GMCC,Welling, HICONICS, SUNYE, SERVOTRONIX, DORNA, MR, MSCT, TOSHIBA, etc., with its productscovering high-precision core components such as compressors, motors, chips, auto parts, electronicexpansion valves, variable frequency drive, servo and motion control systems, speed reducers andcooling modules. It provides green, efficient and intelligent products and technology solutions for industrialcustomers across the world. The Building Technologies Division is responsible for providing products andservices in relation to buildings, as well as the relevant operations. With the digital building serviceplatform as the core, it facilitates logistics, information, feeling and energy flows of buildings to providecomplete building solutions that are intelligent, digital and low-carbon. The Robotics & AutomationDivision primarily focuses on providing solutions of industrial robotics, automatic logistics systems, andtransmission systems for future factory-related fields, as well as solutions for health care, entertainment,new consumption, etc. The Digital Innovation Business primarily includes new business arising from thebusiness model transformation of Midea Group such as intelligent supply chains and Industrial Internet,which can provide software services, unmanned retail solutions, and production services, among others,for the digital transformation of enterprises. The Digital Innovation Business also comprises BeijingWandong Medical Technology Co., Ltd. (WDM) that is engaged in medical imaging devices and related
services.With “Bring Great Innovations to Life” as its corporate vision, “Integrate with the World, to Inspire YourFuture” as its mission, “Embrace what’s next - Aspiration、Customer First、Innovation、Collaboration、Dedication” as its values, “High-quality Development and High-performance Operations” as itsmanagement and operation standard, Midea integrates global resources and promotes technologicalinnovation to create a better life for over 400 million users, major customers and strategic partners indifferent areas worldwide every year with satisfying products and services. In face of higher requirementsfor products and services in the digital Internet era, Midea continues to promote its strategic focus of“Technology Leadership, Direct to Users, Digitization & Intelligence Driven, and Global Impact”, so as torebuild Midea in the new era.Midea, a global operating company, has now established a global platform with around 200 subsidiaries,35 R&D centers, 35 major manufacturing bases, and more than 160,000 employees. Its business coversmore than 200 countries and regions. Overseas, Midea has 20 R&D centers and 18 major manufacturingbases in more than ten countries, with around 30,000 employees. 22 currencies are used by Midea insettlement. In addition, Midea is the majority shareholder of KUKA, a Germany-based world-leadingprovider of robotics and automation solutions, with a stake of approximately 95%.
1.2 Position in home appliance industry
Midea ranks No. 245 on the Fortune Global 500 list unveiled in August 2022, moving up 43 places fromthe year before and marking its seventh year on the list. In July 2022, the Fortune China 500 list wasreleased and Midea ranks No. 35, moving up four places compared with the previous year. Meanwhile,Midea ranks No. 217 on the 20th Forbes Global 2000 list released in May 2022. In August 2022, ForbesChina and the China Electronics Chamber of Commerce jointly released the list of “China Digital 100”,and Midea was in sixth place for its comprehensive strength in the area of digital economy. In August2022, Midea Group topped the list of “Top 200 Enterprises of China’s Light Industry in 2021” at CLIESummit 2022 organized by the China National Light Industry Council. In September 2021, Midea won theChina Quality Award at the fourth such event with its “5 All 5 Digitalization" intelligent quality managementmodel. Up to early 2022, four factories of Midea have been included in the “Global Lighthouse Network”
initiated by the World Economic Forum, covering air conditioners, microwave ovens, refrigerators andlaundry appliances, which represents Midea’s leading intelligent manufacturing and digital capabilitiesacross the global manufacturing sector. Meanwhile, Midea takes the lead among domestic homeappliance makers by ranking No. 36 on the 2022 Brand Finance Tech 100 list released by Brand Finance,a British brand assessment institution. Also, Midea ranks No. 33 on the 2021 BrandZ? Top 100 MostValuable Chinese Brands list, with its brand value up 58%. Midea has been given excellent credit ratingsby the three major international credit rating agencies, Standard & Poor’s, Fitch Ratings and Moody’s.The ratings are in a leading position among home appliance manufacturers worldwide as well as amongChinese non-state-owned enterprises. Particularly, Standard & Poor’s has raised the credit rating onMidea to “A”, making it the highest-rated private manufacturer in China.In the first half of 2022, Midea has successfully retained the "Number One Engine" of ToC business onthe domestic market. According to data provider AVC, Midea ranks first with respect to both the onlineand offline domestic market share for seven home appliance categories, namely, residential airconditioners, microwave ovens, countertop ovens, electric fans, electric radiators, induction cookers, andelectric kettles.The table below shows the offline market shares and rankings of the Company’s primary home applianceproducts (by retail sales) in H1 2022:
| Product category | Market share | Ranking |
| Residential air conditioners | 34.27% | 1 |
| Laundry appliances | 25.66% | 2 |
| Clothes dryers | 26.04% | 2 |
| Refrigerators | 13.91% | 2 |
| Rice cookers | 40.76% | 1 |
| Microwave ovens | 54.74% | 1 |
| Electric radiators | 50.88% | 1 |
| Induction cookers | 46.57% | 1 |
| Electric fans | 40.74% | 1 |
| Electric kettles | 36.96% | 1 |
Product category
| Product category | Market share | Ranking |
| Water dispensers | 43.67% | 1 |
| Countertop ovens | 35.76% | 1 |
| Electric pressure cookers | 39.54% | 2 |
| Blenders | 30.63% | 2 |
| Water purifiers | 19.00% | 2 |
| Electric water heaters | 16.93% | 3 |
The table below shows the online market shares and rankings of the Company’s primary home applianceproducts (by retail sales) in H1 2022:
| Product category | Market share | Ranking |
| Residential air conditioners | 35.62% | 1 |
| Laundry appliances | 33.40% | 2 |
| Clothes dryers | 35.47% | 1 |
| Refrigerators | 18.50% | 2 |
| Microwave ovens | 47.11% | 1 |
| Countertop ovens | 25.04% | 1 |
| Electric pressure cookers | 39.15% | 1 |
| Induction cookers | 47.57% | 1 |
| Dishwashers | 29.37% | 1 |
| Electric kettles | 24.52% | 1 |
| Electric fans | 20.94% | 1 |
| Electric radiators | 23.29% | 1 |
| Water purifiers | 19.79% | 1 |
| Rice cookers | 26.68% | 2 |
| Electric water heaters | 31.81% | 2 |
| Gas water heaters | 15.97% | 2 |
| Sterilizing cabinets | 18.39% | 2 |
| Gas stoves | 12.15% | 2 |
| Water dispensers | 13.84% | 3 |
Product category
| Product category | Market share | Ranking |
| Blenders | 12.02% | 3 |
| Range hoods | 12.58% | 3 |
1.3 Industry Overview
A. Home Appliance IndustryIn the first half of 2022, the domestic economy bumped along under multiple pressures. The domesticGDP growth slowed, the recurrent COVID-19 pandemic dampened economic development, and lowincome perceptions and confidence indicators among residents led to a setback in consumption intentionand a decline in total retail of consumer goods. In addition, prices of raw materials related to homeappliances remained high. According to the 2022 Semi-Annual Report of China’s Household ElectricalAppliance Industry jointly published by the China Household Electric Appliance Research Institute(CHEARI) and the National Household Electrical Appliance Industry Information Center, China saw adecline in both the exports and domestic sales of home appliances. To be specific, the export sales ofhome appliances was RMB283.3 billion in H1 2022, down 8.2% year-on-year; and the domestic sales ofhome appliances was RMB360.9 billion in H1 2022, down 11.2% year-on-year. Currently, the world is stillin a grave and complex situation due to the pandemic, with multiple challenges for economic development.Nevertheless, in the medium and long run, upgrading of the industrial structure, relatively stable increaseof household income, diversified consumption, the national policy support for the green and smartindustries, as well as continuous upgrading of the standards for home appliances will create newopportunities for growth. In July 2022, the Ministry of Commerce and 12 other authorities issued theNotice on Several Measures to Promote Consumption of Green and Smart Household Appliances,proposing nine policy measures to promote consumption of green and smart home appliances, whichmainly cover four aspects: First, to carry out nationwide household appliance trade-in; second, to promotethe use of green and smart home appliances in rural areas; third, to strengthen the whole chain of serviceand guarantee; and fourth, to consolidate infrastructure support. With the introduction of detailed rules ontrade-in and "household appliances going to the countryside", it is expected that household applianceconsumption will heat up in the second half of the year.
According to the data from the National Household Appliances Industry Information Center, the domesticretail sales of air conditioners was RMB78.2 billion in H1 2022, down 16.2% year on year. In terms of theproduct structure, the market share of high-end products kept rising, with the market share (by unit sales)of products with a unit price of over RMB7,000 exceeding 10% in H1 2022. In terms of product functions,the concept of air conditions kept expanding from the functions of cooling and heating to fresh air, self-cleaning, dehumidification, odor removal, air purification, etc. As the comfort of product experience hasbeen focused on, the fresh air function products have developed rapidly, with their offline market share(by retail sales) surpassing 7% in H1 2022.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of laundry appliances was RMB30 billion in H1 2022, down 9.4% year-on-year, withthe retail sales of clothes dryers reaching RMB3.2 billion, up 15.5% year-on-year. In the upgrade of thelaundry appliance market, in terms of the product types, the market share of front-loading products keepsgrowing stably, with the offline market share (by unit sales) climbing to over 64% (over 35% for washer-dryers). Washing capacity continued to be upgraded, with large-capacity products increasingly replacingsmall-capacity ones. The offline unit sales of 10kg-12kg washers occupied a 70% market share, with ayear-on-year increase of over 12%. Meanwhile, mid- and high-end products saw a much bigger share inthe offline market by unit sales. To give an example, products with a unit price of over RMB7,000 took upa market share of nearly 10%.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of refrigerators were RMB42.7 billion in H1 2022, down 7.3% year-on-year. Themarket share (by retail sales) of the top five brands in the domestic refrigerator market has furtherincreased to 72.5%. Due to the impacts of rising raw material prices and structural upgrading, structuralupgrading was evident with refrigerators of different prices, with the market share (by unit sales) ofproducts priced over RMB12,000 reaching 7.6% and the offline market share (by unit sales) ofrefrigerators with an over-400L capacity exceeding 60%. Consumer's intensified willingness to pursuequality life has prompted the refrigerator market to pivot towards high-end multi-dimensional design,which is mainly manifested as "good looking", "capacious", "fresh", and "intelligent". In other words, betterappearance design and material, larger capacity and structure, improved storage and preservation
technology, and more smart applications.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic retail sales of kitchen appliances was RMB93 billion in H1 2022, down 8.3% year-on-year, withonline sales accounting for 50% of the total retail sales. As dishwashers became more popular on thedomestic market, the retail sales reached RMB5 billion during H1 2022, up 8.9% year-on-year. Andproduct upgrading continued. Integration of functions of washing, sterilization, drying and storage is agrowing trend, with nearly 70% of dishwashers carrying the sterilization function and integrateddishwashers becoming more and more popular. With respect to models and specifications, the marketshare (by unit sales) of built-in products has approximated 85%, with the offline market share (by unitsales) of dishwashers with 15 place settings capacity soaring from 2.5% in H1 2021 to 17% in H1 2022.Integrated stove sales reached RMB11.8 billion in the domestic market, an increase of 16.9% year-on-year. Due to the surge in demand for high-end kitchen appliances, in particular steamers and ovens as aresult of the pandemic, integrated stove products have evolved and upgraded rapidly, with the marketshare (by unit sales) of integrated stoves priced over RMB13,000 reaching 20.8% in H1 2022. Thesteamer-ovens have developed dramatically, with the market share (by unit sales) of products priced overRMB8,000 approximating 20%. Smart products with multiple functions are the trend. For instance,intelligent voice control function will be built in to deliver a more convenient handling experience, andintegration of different cooking methods such as sautéing, stir-frying, stewing, baking and steamingenables the multi-cooking scenario possible.According to the data from the National Household Electrical Appliance Industry Information Center, thedomestic sales of small domestic appliances was RMB58.9 billion in H1 2022, down 10.8% year-on-year,of which the online sales took up a higher 76.7% of the total retail sales. With respect to the marketperformance of all categories, traditional products such as rice cookers, blenders and electric fans saw adecline in domestic sales while the sales of health-friendly vacuum cleaners were relatively strong due tothe pandemic. In H1 2022, the domestic sales of vacuum cleaners were RMB12.7 billion, a slight year-on-year growth of 1.1%. By categories, the robot cleaner industry registered a slowdown in growth.According to AVC, the retail sales of robot cleaners were RMB5.73 billion, up 9% year-on-year. Innovativeproduct functions boosted growth, with the market share of products carrying self-cleaning and automatic
dust collecting functions continuing to expand. Meanwhile, the product mix has been substantiallyimproved, with the market share of products priced between RMB3,000 and RMB4,000 reaching 42.7%.Meanwhile, functions and experience of floor scrubbers have been improved as a result of theadvancement of technology, represented by the application of new technologies such as roller brush andmop self-drying, sterilization through electrolysed water, push-and-pull. According to AVC, floor scrubbersrecorded retail sales of RMB4.2 billion in H1 2022, up 84% year on year. In the meantime, competition isincreasingly fierce. As of June 2022, more than 100 floor scrubber brands compete in the online market.According to the data from the National Household Electrical Appliance Industry Information Center, theonline retail sales of home appliances in China surpassed the offline retail sales with RMB199.48 billionin H1 2022, down 1.3% year-on-year, accounting for a higher market share of 55.3%; while the offlineretail sales amounted to RMB161.39 billion, down 21% year-on-year, accounting for a lower 44.7% of thetotal retail sales. From the perspective of the development trend of the domestic household applianceindustry: First, the phenomena of brand concentration and new brand rise coexist, where theconcentration of large household appliance brands increase, and brands in the field of kitchen appliancesand small household appliances still have opportunities and develop rapidly. Second, the product upgradeis still continuing, mainly focusing on the four development trends of high-end, innovation, integration,and product suites. Third, a variety of channels and scenes jointly promote the progress of the industry.On the one hand, in addition to the traditional offline and online channels and platforms, emergingchannels such as Pinduoduo, Douyin, and Kuaishou are rapidly rising. During the "618" period in 2022,the total transaction amount of livestreaming marketing reached RMB144.5 billion, accounting for around20% of the online transaction amount. On the other hand, new applications and scenes tapped based oninsight into new user needs are increasing, expanding from diet, personal care, cleaning, and sleep tohealth care, pets, fitness, mother and infant products, security, and more scenes.B. Robotics and Industrial Automation IndustryWorld Robotics 2021 Industrial Robotics released by the International Federation of Robotics (hereinafterreferred to as "IFR") showed that there will be five trends in robot industry in 2022, which refer to thatrobots will be applied to more new industries, it will be more easy to operate robots, the skills of robotsand workers will get promoted, robots will guarantee manufacturing, and robots will support digital
automation technology. Global robot installations rebounded strongly in 2021, with IFR projecting a 13%increase of global robot installations, amounting to 435,000 units. In particular, Americas achieved anincrease of 18% year on year, Europe achieved an increase of 7.4% year on year, and Asia achieved anincrease of 15% year on year. IFR also predicted that the growth rate of the global industrial roboticsindustry will slow down relatively from 2022 to 2024, and the annual new installations will exceed 510,000units in 2024.According to the data released by the National Bureau of Statistics, the domestic production volume ofindustrial robotics stood at 202 thousand units in H1 2022, down 11% year on year. In the first half of2022, the continuation and recurrence of the epidemic had an impact on China's economy, as Shanghaiand other regions entered a long shutdown one after another. The uncertainty of the internationalenvironment increased, and factors such as the continued trade friction between China and the UnitedStates and the outbreak of the Russia-Ukraine conflict exacerbated the instability of the global supplychain. The robotics industry chain was also greatly affected, as the chip shortage, raw material price rise,and logistics disruption and cost increase all had a significant negative impact on the supply side. Someindustrial robotics manufacturers encountered capacity shortage and shipping delay, so order deliverywas affected. The epidemic also affected the investment plans of downstream manufacturing enterprises,with some of them suspending or postponing their investment activities. According to the statisticalanalysis of MIR, in the first half of 2022, only six-axis robots above 20 kg and collaborative robots grewagainst the trend, whereas all other models showed a decline. Specifically, shipments of six-axis robotsabove 20 kg grew significantly due to the market demand for new energy vehicles and power batteries;shipments of six-axis robots below 20 kg saw a year-on-year decline due to the contraction of marketdemand in general industries such as metal processing as a result of the macroeconomic downturn,commodity price increase, and export obstacles; shipments of SCARA robots declined year-on-year asthe 3C electronics industry was affected by the epidemic and slowdown in product innovation and theconsumer demand was low; in addition, non-manufacturing sectors such as new retail, health, catering,and education were also affected by the epidemic, which led to a decrease in demand for robotapplications, while the robot application markets such as electric power, inspection, and medical careperformed relatively well. According to the analysis of GG-Robot Industry Institute, with the epidemicunder control and economic stimulation policies introduced successively, the industrial robotics industry
is expected to achieve a high after a low start. Based on the analysis of the leading economic indicators,the momentum mainly comes from four aspects: First, industrial production has stopped falling andtrended upward significantly. The industrial value added above the designated size increased by 3.4%year-on-year in the first half of the year, and accelerated and rebound to an year-on-year increase of 3.9%in June. Second, the proportion of manufacturing industry in GDP has increased. In the first half of theyear, the manufacturing value added above the designated size increased by 2.8% year-on-year, andmanufacturing value added accounted for 28.8% of GDP. Third, the driving force of export continues tostrengthen. The delivery value for export of industrial enterprises grew by 10.8% in the first half of theyear and increased by 11.1% and 15.1% in May and June, respectively. Fourth, manufacturing investmentmaintains a high increase. Manufacturing investment increased by 10.4% year-on-year in the first half ofthe year. As the recovery of the manufacturing industry, especially the acceleration of capacity expansionin new energy industries such as lithium battery and photovoltaic markets, drove the growth in demandfor industrial robotics, downstream industries will also gradually recover. Meanwhile, in order to reducethe reliance on manpower, the demand for automated production lines in various fields of manufacturingwill continue to increase, and the output of robotics is expected to usher in growth. Moreover, MIR predictsthat the industrial robotics market will continue to grow throughout 2022, with a year-on-year growth rateof around 10%.According to the latest statistics of IFR, in terms of industrial robotic density (the average number ofindustrial robotics per 10,000 workers), South Korea ranks No.1 in the world with 932 robotics, while therobotic density of China has increased from 49 robotics in 2015 to 246, nearly twice the global averageof 126. China ranks No. 9 in this respect, with great potential and prospects. Supported by diverse factorssuch as flexible demands of the manufacturing sector, declining demographic dividend, emerging marketsand the development of innovative technologies, industrial robotics will be applied to more and moreareas.C. Smart Building IndustryIn the smart building industry, Midea focuses on products, services and related businesses with respectto buildings. It aims to provide users with comprehensive, intelligent and sustainable building solutionsbased on the digital building platform and by facilitating the logistics, information, feeling and energy flows.
The smart building ecosystem mainly includes HVAC, elevator, intelligent building (building automation)and integrated energy management. From the perspective of the industry competition pattern, domesticHVAC, elevator and building control have the same pattern and two major characteristics. The first is thehigh proportion of foreign and joint venture brands; the second is the low market concentration. Accordingto the data from HVAC, Industry Online and Changjiang Securities Research Institute, the proportion offoreign brands of commercial air conditioner in 2021 was about 48%, and the long tail effect was obviousas only four manufacturers have a share of more than 10%. For elevator, the data from the BusinessYearbook of Elevator Industry in China and Changjiang Securities Research Institute indicates that theproportion of foreign and joint venture brands in the elevator market is as high as 70%, while the revenuescale and market share of the top domestic brands are still low. In 2021, the four major brands of Kone,Mitsubishi, Hitachi and OTIS's revenues exceeded RMB20 billion in China. The building control marketis also dominated by Honeywell, Siemens, Johnson Controls, Schneider and other foreign brands. Fromthe perspective of the market size and development prospects, according to the data from Industry Online,HVAC and Changjiang Securities Research Institute, the sales revenue (excluding tax) of domesticcommercial air conditioner in 2021 was RMB123.2 billion, up 25% year on year, of which domestic salesaccounted for about 90%; the compound annual growth rate of the industry in the past five years was 9%.Affected by the real estate industry and the COVID-19 pandemic, sales revenue (net of tax) of commercialair conditioners was RMB62.7 billion during H1 2022, up 4% year on year. The application field ofcommercial air conditioner is mainly divided into residential, commercial, industrial and public building.By business type, the sales of ToB business accounted for more than 70%, and the revenue scale wasnearly RMB100 billion. In industrial development, the periodicity of the non-residential part of commercialair conditioner was smaller than that of residential part, which was more related to infrastructureinvestment. For example, government public construction, transportation, data center, culture, educationand entertainment, medicine and other downstream segmentation still maintained a good growth trend,and a long-term high growth rate. According to the data of National Bureau of Statistics and ChangjiangSecurities Research Institute, in 2021 the production of domestic elevators, escalators and lifts was 1.55million sets, up 17% year on year, which was mainly for domestic sales; the compound annual growthrate was 10% in the past five years, maintaining a steady expansion. Affected by the real estate industryand the COVID-19 pandemic, the domestic output of elevators, escalators and lifts was 647 thousandunits during H1 2022, down 11.5% year on year. Judging from the operating data of major manufacturers,
the output value of a single elevator was about RMB200,000, considering the average factory price of asingle elevator equipment and the maintenance business; the annual market size of domestic elevatorequipment was RMB250-300 billion, and the scale of the elevator industry was even larger. The data fromEqualOcean Intelligence and Changjiang Securities Research Institute shows that the current marketsize of intelligent building, which was about RMB7.1 billion in 2021, is relatively small. The equipment-based businesses such as commercial air conditioner and elevator are "organs" in building construction,whereas building control is the "nervous system" which controls various equipments for the high-efficiencyand low-carbon operation of buildings, and determines the overall quality of building solutions. Overall,the domestic revenue of the smart building industry alone is nearly RMB400 billion, and the compoundannual growth rate of the industry is between 5% and 10% (revenue caliber).New opportunities are ushered into the smart building industry, which are "carbon emission peak andcarbon neutrality", "digital and intelligent transformation" and "domestic replacement". With theestablishment of the dual-carbon strategy, the intelligent and low-carbon process of building constructionis expected to accelerate. As the Building Energy Conservation Research Center of Tsinghua Universityand the Changjiang Securities Research Institute showed in relevant data, the energy consumption andcarbon emissions of buildings account for a high proportion in the whole society. The carbon emissionsof building operation accounted for about 22% of the total domestic carbon emissions in 2019, and theproportion will further increase for the growing newly started buildings and the decreasing inventorybuildings. Therefore, as one of the major sources of carbon emissions in the whole society, the low-carbon or even zero-carbon process in the construction field will undoubtedly be propelled. In 2021, aseries of "carbon emissions peaking and carbon neutrality" policies were successively issued, such asthe Opinions on Implementing the New Development Concept to Achieve Peak Carbon Emissions andCarbon Neutrality in a Complete, Accurate and Comprehensive Manner, the Opinions on Advancing theGreen Development of Urban and Rural Development, the Action Plan for Peak Carbon Emissions by2030, and the 14th Five-Year Plan for Comprehensive Work on Energy Conservation and EmissionReduction. In 2022, China’s local governments issued their action plans for peaking carbon emissionswhile the ministries and committees of the central government rolled out documents for the same purpose,such as the Opinion on Fiscal Support for Peaking Carbon Emissions and Achieving Carbon Neutralityissued by the Ministry of Finance. All these policies mention buildings and constructions, with a view to
improving the building energy consumption management system, enhancing the building energyconsumption monitoring capacity, building energy saving management capacity, and building energyefficiency level, and promoting the large-scale development of ultra-low energy consumption, near-zeroenergy consumption, and low-carbon buildings. With stronger policy incentives and constraints, thebuilding energy-saving upgrading, intelligent operation, and cooperative energy management are boundto become the main measures for the targets in addition to the construction of low-carbon buildingstandards and administrative supervision. As to the market side, the electricity price reform, "powerrationing" and other measures have raised the cost and the input-output ratio in building energy savingrenovation, energy management, and digital operation, and thus more and more market entities begin topositively carry out the “dual carbon” strategy and energy saving renovation. Taken as a whole, under thebackground of "dual carbon", the building construction, as one of the main sources of energy consumptionand carbon emissions in the whole society, accelerates the process of energy conservation and carbonreduction, and catalyzes the outbreak of demand for efficient low-carbon building solutions. The demandfor digital intelligent building will also increase significantly, as the development level of buildings is a keylink in "smart city" and still lagging behind under the trend of digital economy. At the same time, withcontinuous progress of communication, computing power and algorithms, the system-level control suchas HVAC and elevators will move to the building-level control - the first is the space expansion broughtby changes from "control" to "service"; the second is the narrowing gap to foreign enterprises with firstmover advantage. Additionally, the more positive and clear signal comes from the transformation andupgrading of the elevator industry driven by digital intelligence. In 2018, the General Office of the StateCouncil issued the Opinions on Strengthening the Quality and Safety of Elevators for the purpose ofpromoting the elevator installation on existing residences and the maintenance of old elevators.Specifically, the maintenance should press for quality, and resources should be allocated on the basis offully grasping the operation of elevators, hence the application of information technology such as big dataand IoT is getting more important. In 2020, the State Administration for Market Regulation divided themaintenance methods of different elevators according to the standard of "whether there is a remotemonitoring system based on IoT". The domestic replacement of commercial air conditioner hasundergone three processes: unit machine, multi-split machine, and large-scale water units. In 2021, theshare growth of chillers of domestic brands began to accelerate and made breakthroughs, leading thecommercial air conditioner industry to the stage of domestic replacement in all aspects, and thus there is
a large space for future increase. Compared with air conditioner, the domestic replacement process ofelevator is relatively slow, but the relevant market pattern will be optimized with the gradually weakenedreal estate dividend, the changes in maintenance mode, and the application of IoT. In the medium andlong term, there will be more competition opportunities in the smart building industry with the marketstructure of "high proportion of foreign investment & low market concentration". On the one hand, thepolicy of "double carbon" is fostering the energy-saving upgrading and smart operation under the contextof high proportion of carbon emissions and energy consumption by buildings. On the other hand, with theimprovement of digital intelligence, the input-output effect of smart buildings is changing qualitatively, andthe optimization of competition pattern is underway.D. The Company’s Key Operations during the Reporting PeriodThe business environment remained harsh in the first half of 2022. With the recurrent COVID-19pandemic and the Russia-Ukraine conflict, the political and economic environment became morecomplicated both at home and abroad. Meanwhile, due to supply chain disruptions, the prices of bulk rawmaterials such as copper and aluminum remained at high levels. In face of these challenges, Mideaadhered to the profitability-oriented annual operational principle of “rational revenue, and recovery ofprofitability”. At the very beginning of 2022, it made swift plan adjustments to concentrate on the corebusinesses and products and return to the nature of business. Upon relentless efforts, remarkable resultswere achieved in the first half of the year. Overall, Midea delivered expected operating results, withsubstantial improvement in profit and cash flow, manifesting its resilience once again. Against anincreasingly uncertain backdrop, technology-driven transformation remains the main theme of the currentera. Midea adhered to the strategic focus with “Technology Leadership” as the core, promoteddevelopment both in the ToB and ToC business, and ignited the “Number Two Engine” of the ToB business.Through improving product competitiveness and core technologies in the ToC business, Midea is able toincrease profitability, which provides strategic support for ToB transformation. It is transforming from aChinese company to a global one by continuously enhancing its globalization capabilities. Also, theCompany is shifting its competitive edges from efficiency to products, technologies and innovation. ForH1 2022, Midea achieved, on a consolidated basis, total revenue of RMB183.7 billion, up 5.04% YoY;and a net profit attributable to shareholders of the Company of RMB16 billion, up 6.57% YoY.
A. Focused on users and scene-based product planning, and continuously refined the wholevalue chain leveraging Midea’s multi-category advantages and digital technologies, so as toupgrade business scenes, 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. Based on users'yearning and pursuit for a better life, Midea pursues higher goals such as originality, sustainable sellingpoints and technology explicitness, and continues to empower itself with the tool of big data, so as toachieve the vision of "Bring Great Innovations to Life". In addition, based on user needs and consumptiontrends with respect to living rooms, balconies, kitchens, bathrooms, among others, Midea offers its ownproducts and ecosystem products. Household service is comprehensively deepened by using IoTtechnology, so as to provide intelligent comprehensive solutions for the whole house, making home lifemore efficient, convenient, healthy and comfortable, and improving experience and happiness forconsumers. By doing so, it aims to lead the way in the innovation of smart household appliances. Mideaindependently builds a big data platform integrating market, user and public opinion data, constructs abig data-based innovative planning platform, and implements a product innovation model driven by bothbig and small data. Centering on the planning process, it achieves the integration of SKU planning andsmart scene planning process. Midea continues to launch innovative products that lead the way insatisfying differentiated consumer needs, thus driving consumption upgrading in the industry. It is the firstto create the planning connect system in the industry, covering the whole planning process. By achievingcross-department data circulation and integrating internal and external data of the entire value chain,Midea enhances the efficiency of data circulation and shortens the cycle of new product development.Meanwhile, through intelligent analysis, intelligent early warning, intelligent prediction, intelligent decision-making and intelligent control, a unique smart decision-making support model for planning is created toempower planning decision-making. Compared to traditional market research, the intelligent marketscanning efficiency of the big data-based innovative planning center has increased by over 50%, whichcan closely follow up thousands of categories and explore market opportunities and trends of users'demand. It has covered multiple countries and regions around the world, further strengthening Midea'sglobal planning capability. With the big data platform's empowerment, digital marketing extends to theC2M model, while through user insight and user research, brands and products are empowered, where
real-time market feedback on new products is utilized to accurately target marketing. Real-time interactionwith consumers is achieved and supply and demand information is closely connected by perceiving usersand activating users' information through hundreds of millions of global user touch points, and thenproduct development changes from the chain mode to a closed-loop mode. In terms of industrial design,Midea leads the way in user experience and interaction upgrading with ongoing innovations. In H1 2022,Midea won a total of 120 industrial design awards, including 34 Red Dot Design Awards, 58 iF DesignAwards, and 28 IDEA Awards.For smart living room scenes:
In the first half of 2022, when the domestic epidemic continued and recurred, Midea launched the firstmobile air purification and disinfection machine "Protector" with a focus on "Healthy Air". This product ischaracterized by the innovative use of the dual elimination factors of plasma and hypochlorous acid. Windcirculation through the plasma friction grid makes it possible to quickly kill 99.9% of the coronavirus in theair in 30 minutes. Moreover, the active release and settlement of hypochlorous acid can disinfect thesurface of objects, which realizes the healthiness and safety of the whole space. The Protector is alsoequipped with an isolation water pump to avoid the corrosion of hypochlorous acid to the pump andrealizes the physical separation of the impeller and the motor, thus ensuring that the motor is capable ofreliable long-term operation even in extreme and harsh environmental conditions such as high salinity,high humidity, and strong acid. This product has a clean air delivery rate of 600 m?/h for particulate mattersand 140 m?/h for formaldehyde, and can be used repeatedly by cleaning the filter regularly.Based on users' pain point of slow cooling after using water heating products and relevant demands,Midea launched the Cool Boiled Water Smart Instant Thermos. Its application of the industry's pioneerplate water-cooled heat exchanger uses cold water to quickly cool the boiling water and produces coolboiled water in 10 seconds. Simultaneously, the cold water recovers the heat of boiling water and thenenters the heating tube to be heated, which does not produce sewage in the process and cancontinuously prepare warm boiled water, saving 60% of energy. The product adopts double-pump controlsystem and multi-sensory temperature probe + PID algorithm to achieve six kinds of water temperatureregulation. This product technology led the industry, applied for more than 40 patents, and won the goldmedal at the 2022 International Exhibition of Inventions of Geneva. As certified by a third-party authority,
the sterilization rates of all water temperature grades are greater than 99.9%, significantly improving theuser experience. With the industrialization application of this product technology, the group standard"T/CAB 0150-2022 Instant Heating and Cooling Water Boiler (for Cool Boiled Water)" was successfullyreleased in May 2022.To create a more comfortable living environment, Midea continued to research and apply various fantechnologies. Midea achieved self-adaptive comfortable wind adjustment through research on the comfortwind control technology of wind changing with temperature. Midea realized whole-house 3D surroundstereo wind of thermostatic warm air through research on dual-engine PTC control technology ofstaggered temperature difference. Midea also achieved multi-angle positioning blowing and intelligentobstacle avoidance through research on contactless detection control positioning technology of oscillatingstepping motors. Midea Micro-electrolysis Water Washing Air Cooling Tower Fan AAF12PXJ usesinnovative micro-electrolysis sterilization to electrolyze tap water into sterilized water with a sterilizationefficiency of 99.9%. The tower fan uses a water curtain waterfall to flush and clean the air in depth and isequipped with an air-conditioner-level cross flow turbine to offer healthy, fresh and clean wind. MideaFormaldehyde Digital Display Air Purifier KJ800G-H Pro adopts IFD micro-electrostatic purificationtechnology. It uses the charge device to charge particulate matters in the air and uses the strong electricfield to achieve a sterilization rate of 99.9%. IFD cartridge can be highly effective in filtering particles inthe full particle size range of PM0.01-PM10, with a purification rate of 99%. The IFD filter cartridge iswashable and reusable, and the formaldehyde sensor carried has strong anti-interference ability and candisplay indoor formaldehyde concentration in real time.In the first half of 2022, Midea continued the Eureka brand's concept of green healthy technology andlaunched the multifunctional fabric cleaning machine Ubox, and multiple functional innovations have beenmade. The application of electrolytic water sterilization technology achieves green pollution-free bacteriaremoval technology alongside effective cleaning of fabric. The pioneer shoe product cleaning functionsatisfies the daily care demands of trendy shoes with the unique brush head. The brush head speciallydesigned for pets cleans the hair while combing and can recover dirt in real time, meeting daily petcleaning needs. The LCD dynamic interactive screen displays cleaning status in real time to enhanceusers' cleaning experience. Midea’s floor scrubber products meet consumers' demand for ground
cleaning with its functional integration of suction, dragging, and washing. The new high-end flagshipproducts further optimize the product performance and use experience. The handle sensor offers two-way forward and backward boost to reduce the burden of cleaning. The forward and reverse rotationcontrol technology for the integrated self-cleaning roller brush improves the self-cleaning effect and fullycleans hidden corners with no residue of stains from the water jet. The integrated roller brush dryingtechnology prevents long-time moisture which breeds bacteria. The "flat lying" design with a tilt angle ofup to 170° allows cleaning deep to the bottom of furniture, preventing sewage backflow. The integratedelectrolytic water sterilization technology, with a sterilization efficiency of 99.9%. The close-to-edge dead-angle-free design and unique detachable roller brush design constitute the pioneer truly close-to-edgeand dead-angle-free design in the industry, cleaning any dead angle with a single push. The applicationof intelligent technology allows human-computer interaction, so water volume, suction power, and otherparameters can be adjusted as needed. In the first half of 2022, Midea released the first intelligent robotW11, Midea Small White Box, M9, P8, A8, A8+, and other products successively, adhering to theinnovative design principle of focusing on user experience. Midea used dual duct dust collection, basestation self-cleaning, automatic rag washing, rag drying, bacterial inhibition and deodorization, and othernew cleaning technology to provide users with a better cleaning experience. These products are equippedwith the industry's leading power management unit to achieve accurate and intelligent charge anddischarge control and enhance the service life and safety of the battery.For smart balcony scenes:
The COLMO Light Dry Cleaning 2.0 steam care technology upgrades dry cleaning care and ushers in anew era. Equipped with the industry's pioneer special program for ten types of odor elimination, itachieves A-class rapid odor elimination in five minutes and low temperature bacteria removal of no morethan 60°C with a bacteria removal rate of 99.9%, winning the China Aerospace Science andTechnology|ASES Certification. "Key Technology and Industrialization of Double-Driven, Dewatering andDouble-Drum Washing Machine with Large Capacity", "Key Technology and Industrial Application ofLong-Acting Plasma for Deodorization and Sterilization" and "Application and Industrialization of NewSpecial Effect Technology of Electrode Catalytic Coating for Use in Washing Machines" included in LightDry Cleaning Technology 2.0 have also been certified as "Internationally Advanced" by the China National
Light Industry Council. The original TM technology uses the industry's smallest dual engine system oftwo-appliance coordination and electric auxiliary heating to meet the demand for fast drying and whole-machine lean design and achieve product suite cost optimization. The industry's pioneer drum hole-freewashing machine technology introduces a new water inlet to rinse clothes with running water in a dynamicmanner and prevent dirt from flowing back. In addition, the formation of water film effect on the drum wallreduces friction between the clothing and the drum wall, achieving a 26% reduction in the rate of clothingwear and tear. Meanwhile, the independent chamber water storage not only reduces the water usebetween the inner and outer drums to save water by up to 50% but also improves the washing power.The COLMO Interstellar Station dry cleaning care kit combines the intelligent frequency conversioncompressor equipped with AI dual frequency conversion upgraded technology and a BLDC intelligentfrequency conversion motor and can intelligently adjust the working frequency, speed, and steering, soas to achieve precise odor elimination for various kinds of delicate and luxurious fabrics as well as drycleaning care for silk, cashmere, and other high-end fabrics. It is equipped with a plasma generator, whichionizes the air with a high voltage to achieve odor elimination and sterilization in a truly zero-dead-angleand residue-free manner. The application of the Light Dry Cleaning 2.0 steam care technology achievesprecise dust removal, bacteria removal, wrinkle removal, and odor elimination of high-end fabrics throughthe release of ultra-high-energy soft steam. The intelligent DC frequency conversion motor with theGerman VDE certification is capable of whole-procedure intelligent regulation of the inner drum rotationspeed, steering, and turn-stop ratio and can precisely control the inner drum rotation speed when drying.The dual frequency conversion source noise reduction, in combination with the multi-layer rear coverpassive noise blocking system, achieves remarkable noise reduction effects. With a slim 440 mm casedesign, the Interstellar Station dry cleaning and care kit can be perfectly incorporated into most householdscenes and spaces. In addition, ergonomically designed, it allows users to easily pick up their clothes.Midea Vigor Series Washer-Dryer Kit is equipped with hole-free inner drum technology to prevent sewagelaundry and reduce clothing wear and tear and achieves efficient cleaning of clothes while maintainingthe original quality of clothing. This product is the industry's first to be awarded the medical-grade laundrycertification. The cycle spray technology and fast cleaning 2.0 technology achieve the full utilization ofdetergent and can shorten laundry time by up to 30%. Moreover, it is equipped with multi-functionalmodules: The blue rod silver ion module can achieve sterilization in cold water environment withoutelectricity or heating; the red rod scale inhibition module can adjust the concentration of calcium and
magnesium ions and maintain the softness and color of clothing. Vigor Clothes Dryer, equipped with ahybrid drying system, ensures the thermal temperature conditions for whole-space inactivation ofpathogens by setting the coordination of heat, time, and temperature. Adopting UV ultraviolet bacteriaremoval technology, it achieves a 99.9% mite removal rate under the national testing standards. ToshibaT15 Series Front-loading Washing Machine has been upgraded to cover products of various capacitiesand functions. These products realize WIFI intelligent interconnection and OTA upgrade through IoTintelligence, adopt minimalist glass door appearance design, and achieve the European A-class energyefficiency. The automatic detergent input function uses the third generation of Midea smart detergentinput technology with a precision error of only 1 ml to reduce detergent residue. The unique Ultra FineBubble mode, with the front cavity pressuring on the special microporous outlet structure at the back end,can produce hundreds of millions of ultra fine bubbles to instantly dissolve sebum and grease for thoroughcleanness. The unique Greatwaves program provides the same washing effect as heating by adjustingthe washing pace to create strong water flows, saving energy and protecting colors. Additionally, theSteam Care function produces high temperature steam for sterilization and wrinkle removal. The MA500Series top-loading products for the American market have capacities of 13 Kg and 16 Kg. With localizedUI and UX design, these products are equipped with the Turbo fast cleaning function. The products adoptpulsator blade simulation optimization and barrel strength enhancement, which lead to a cleaningcapacity increase of 12% and a moisture content reduction of 12%. The products use the Auto Cleantechnology and can achieve Brazil's A-class energy efficiency.For smart kitchen scenes:
The "rapid purification technology" of Midea Refrigerator has been awarded the certification of first-classpurification and healthy preservation, creating a secure storage environment. Specifically, the technologyof high concentration AC silent ion field generation can significantly increase the discharge area andactive particle concentration while effectively reducing the short circuit risk arising from high voltagedischarge in the low temperature and high humidity environment in the refrigerator. The high odor affinitynano-catalysis technology enhances the catalyst's affinity to odor molecules and its own stability. Theionomer induced high current-carrying migration catalysis technology ensures that the catalytic efficiencybasically does not decay, meeting the long-cycle use demand of refrigerators. The "light quantum nutrition
enhancement technology" of Midea Refrigerator is a nutrition enhancement technology for fruits andvegetables. Specifically, the 450 nm high-energy blue light can induce the high level of expression ofanthocyanin genes, increasing anthocyanin content by more than 220%. The intelligent sensing moisturecontrol technology achieves the upgrade from passive freshness storage to active freshness locking,accurately identifying the type of food ingredients and matching it with the best storage humidity, so as toensure the first-class seven-day freshness of fruits and vegetables. The three-layer waterproof designand super scale surface area heat dissipation significantly increase the waterproof performance.COLMO's new AVANT Series Refrigerators, equipped with AI active nutrition technology, overturn passivestorage and realize active nutrition management. The industry's pioneer photovoltaic-level wireless powersupply technology is used to ensure that meat maintains initial freshness and does not freeze whileslowing down the production of hypoxanthine in aquatic products. The VC + active nutrition lockingtechnology is applied to intelligently detect the humidity of ingredients and provide the optimal humiditycontrol program, and the vitamin C retention rate of fruits and vegetables can reach 80% or more.Equipped with intelligent human-aware ambient lights, the refrigerator is capable of human-computerinteraction and refrigeration lighting at the same time. Toshiba Zhiwei Series Refrigerator, equipped withstar cuisine freshness technology, precisely matches the ecological storage environment required formeat and seafood ingredients with the three modes of quick micro-freezing, quick chilling, and originalflavor defrosting. It is also equipped with Toshiba's patented UNIT moisture-permeable film, achieving theeffect of moisture-permeability and air-impermeability, which prevents cold air from blowing directly onfruits and vegetables, delivers delicate water vapor that directly reaches the cells of fruits and vegetables,creates a constant moisture environment suitable for fruit and vegetable storage, and guarantees thefreshness of fruits and vegetables for seven days. The industry's pioneer Toshiba patented "iTouch"technology, is used to solve the pain point of the kitchen scene where both hands are occupied andinconvenient to open the door. It has the 60-minute rapid ice making function. In addition, special cleanwater filters cold air to avoid taint of odor, ice making parts are treated by antibacterial processing, andthe built-in water filter ensures the cleanliness of the ice. The height design of the middle fruit andvegetable chamber fits Asian consumers' body shape, so it is comfortable to use. With a small volumeand a large capacity, the inner wall of the refrigerator is made of an imported vacuum insulation material,the thickness of which is only 1/3 of ordinary insulation materials and the insulation effect of which isbetter, and the dual frequency conversion technology is used to achieve ultra-low energy consumption.
Following the current general trend of diversified and intelligent user demands, COLMO CXSP927W-SS8Range Hood is ultra thin and low-profile, exhausting cooking oily fume from the source. The low deepsuction structure design makes it closer to the smoke, and the ultra-thin design does not block the pan,so that the oily fume is quickly exhausted without choking the user. The intelligent fresh air purificationfunction can be activated with a mere touch, and the APP can customize different ventilation scenes atwill. The DC frequency conversion cruise booster, equipped with a high-power frequency conversioncopper wire motor, has strong power and a frying air volume of up to 28.5 m?/min. It can provide 1,260pa of maximum static pressure, exhausting the smoke more smoothly and effectively reducing the peakhour backflow of oily fume. Throughout the cooking process, the AI-assisted cooking has no need ofmanual adjustment, the concentration of oily fume is automatically recognized, and the air volume isautomatically adjusted by the AI algorithm. RF linkage technology enables the activation of the kitchenhood to exhaust oily fume at the moment of ignition. Equipped with IR sensing technology, the refrigeratorautomatically adjusts the gear based on the concentration of oily fume and pipe pressure without manualadjustment. Its AI active noise reduction function automatically adjusts the power level through theintelligent smoke sensor module to select the appropriate wind gear and reduce noise, thus achievingactive noise reduction. Midea launched a new series of products, Oxygen Stove Q63 is designed forbetter cooking efficiency on the "delicious", "aroma-producing" basis. With the concept of "rapidly well-done", it provides consumers with cooking experience with more tender meat. Also, it is equipped withthe smoke-stove linkage technology.Always focusing on users' pain points in installation and use, COLMO Star Atlas Water Purifier X1500adopts modular design based on the global platform development concept. The thickness is only 105 mm,easily meeting the demands of under-sink space installation in various scenes. The product is theindustry's first to be equipped with an intelligent front solenoid valve, effectively solving the problem thatin the winter the water stored in the machine easily freezes and damages the filter cartridge. The pioneerdual-membrane fine filtration system has a larger contact area with water, greatly enhancing the flow andwater-saving efficiency. Moreover, the product implements the green concept and is the first to adopt arecyclable metal body, greatly reducing environmental pollution. The product has won the "ValuableProduct" award of the water purification industry in 2022, the "Industry Contribution Award” for the waterpurifier category in 2022, and the iF Award 2022. COLMO TURING Water Purifier-Heater T2000 opens
the new purification and heating all-in-one track. The product is the first in the field of water purificationto design and position the faucet as a complete intelligent product and the first to introduce the TFTscreen, infrared sensor, light-sensitive button technology, springback handle, and other new technologiesto the faucet. In addition, the introduction of the optocoupler flowmeter makes accurate quantificationpossible even in high temperature and strong magnetic conditions, and the error is controlled within 5%,which is better than the industry average. The innovative use of proportional temperature adjustmenttechnology can prevent the decay of water flow alongside stepless temperature adjustment, increasingthe water flow of the temperature adjustment system by three times, which easily meets the needs ofdrinking water in different scenes.Based on an in-depth insight into user needs, Midea launched a series of innovative rice cooker products,such as Red Flame Premium Aroma, Live Rice Fresh Aroma, Wind-blown Rice Aroma, Watery PleasantAroma, and Rapid Aroma. When the rice leaves the rice field for the table, it experiences a long period ofstorage and multiple shipments and can be easily oxidized and lose the original rice aroma. Specifically,the original second-generation rice grain activation technology of the Wind-blown Rice Aroma cooker cansolve the pain point of "stale rice". In order to meet users' requirements for fried and roasted productstorage, Midea launched the "Ultra-thin Electric Grill", which is equipped with the industry's latest filmheating technology and adopts high-efficiency HP insulation materials. The thickness of the wholemachine is only 62 mm, which reduces the thickness by 40% in comparison with traditional products. Theheating plate adopting film heating technology makes heating more uniform and more efficient and canachieve a whole-machine heating power of more than 2200 W, increasing the preheating speed by 50%.The upper and lower baking trays of the product are free to disassemble and wash and easy to clean andcan also be put into the dishwasher for automatic cleaning. The upper layer of Midea 200XQ2 SterilizingCabinet realizes drying, odor elimination, and moisture and mildew resistance with circulating hot air andachieves the maintenance effect of long-term bacterial inhibition and odor elimination through PTC hotair circulation drying. The middle and lower layers are featured by two-star dual-effect sterilization anddisinfection, which strictly guards the health line of defense and achieves combined disinfection throughultraviolet + light waves, with a sterilization rate of over 99%. The thermostatic heating technology fullydestroys stubborn germs in just 35 minutes. In addition, the intelligent cloud housekeeper can achieveten customized disinfection modes, and the 72-hour cruise disinfection function makes long-term storage
possible. The cabinet also has a new inner cavity design of mirror finish stainless steel. COLMO VRFKitchen Air Conditioner responds to the core needs of users with the anti-oily-fume design of the indoorunit. Specifically, the Premium Golden Fin of the evaporator reduces the accumulation of grease and oil,and the return air panel equipped with dual filters realizes seven-layer filtration. It also has a smart self-cleaning function through the indoor unit evaporator and a stepless speed control air supply function. Inaddition, the indoor unit is as slim as 200 mm, easy to install and space-saving.For smart bathroom scenes:
Based on users' actual needs in water use scenes, Midea independently developed an on-demand heatpreservation and energy-saving program as well as an intelligent and precise heating mode to achievean innovative energy-saving system for efficient use of electricity, which can ensure that users usesufficient hot water without wasting and outperforms the first-class energy efficiency performance of thenational standard. The program's directional design technology of balanced heat insulation is a cross-border innovative application of aerospace-grade insulation materials, which achieves efficient andprecise temperature locking in all respects and allows quick access to hot water while saving energy andelectricity. It can also achieve on-demand quantitative and accurate heating based on the user'scustomized water use needs, conduct real-time AI monitoring of bathing time, and display the bathingtime of remaining hot water. To solve the main pain points of villa and large family residence users,COLMO Gas Water Heater CE116 provides an effective solution. The product has a beautiful appearancewith a glass panel, which is fingerprint resistant, high temperature resistant, and easy to clean, and thebody is also compact and easy to install. The built-in high-performance brushless DC water pumpprovides strong water power, increases single-point water output by 90%, and can drive a lift height of 17meters, meeting the multi-point water use demands of multi-storey villas or large residence users. Thegas proportional valve and the solenoid valve can achieve the intelligent control combustion of the four-segment fire row burner with a water temperature difference less than ± 0.5°C. Meanwhile, equipped withintelligent temperature sensing technology, it independently learns about user habits and take intoaccount weather changes for the self-adaptive adjustment of appropriate water temperature. Theaerospace-grade noise reduction, combined with micro-hole noise reduction technology, achieves multi-dimensional noise reduction effect with a working noise as quiet as 38.7 dB. Midea Electric Water Heater
F6032-UD (HE) responds to the needs of users and is equipped with user-friendly functions covering thefive dimensions of the shape, experience, energy saving, intelligence, and installation, and three bathingscene modes can be set, namely the extremely fast bath with time-saving rapid heating, the bathtub washwith ten times of normal water amount, and the skin cleaning bath. Specifically, the skin cleaning bathachieves deep disinfection through six layers of cleaning filtration, namely deep filtration of impurities,dynamic running water, whole-pipeline bacterial inhibition, 80°C high temperature disinfection,interception sterilization, and scattered scale inhibition. Also, equipped with self-cruise frequencyconversion, it can independently match two heating powers, and the low power insulation is more energyefficient. Its small volume slim and flat bucket has a large capacity of 60 L.B. Adhered to the strategy of “Technology Leadership”, increased R&D investments, built a globalR&D platform for better R&D efficiency, established a digital R&D system for agile innovation, andimplemented the strategy of “Innovation Patentability, Patent Standardization, StandardInternationalization and Midea Standard Goes Out”Midea continued to invest in R&D. Through larger investments in this respect, it aims to achieveleadership in R&D achievements and product trends, as well as a stronger presence in the industry anda better R&D environment. The Company made innovations with respect to mechanism, and developedmore leading products through both excellent user experience and differentiated technologies, reform ofthe whole value chain of R&D using digital technology, and deep integration of big data analysis 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 “Three-Tier Technical Committee System” and a “Four-Tier R&DSystem” from the organizational dimension and “Three Generations” from the technology dimension hasbeen put in place and constantly refined to support the fulfillment of the goal of “Being the Number Oneor the Only One” in respect of various product categories. Centering on customer needs and based ondifferent organizations and technologies, the Company carries out innovative product development,research on cutting-edge platforms, research on core components, creation of differentiated selling pointsand improvement of the basic product performance. Through group development of products across theworld, building a global product platform, as well as increasing product development efficiency by way ofgroup planning and group development, Midea is building “Technology Leadership”. As of June 2022,
Midea boasts ten corporate technology centers/industrial design centers/post-doctoral research centersat the state level, 19 academicians with long-term cooperation and eight academicianworkstations/workshops, in addition to more than 60 corporate technology centers/engineeringcenters/industrial design centers/key labs at the ministerial or provincial levels. By doing so, it buildscompetitive edges with its strength in technology. Under the guidance of the strategy of “TechnologyLeadership”, the innovation platform serves as the core of its technology innovation system and isresponsible for the implementation of technology development strategies and the commercialization andapplication of technology innovation achievements, thus driving Midea’s transformation towards a globaltechnology group in a faster manner.Midea Group is committed to investing in the research of core technologies and has made significantbreakthroughs in the main track of household appliances and in the field of new industrial technology. Inthe project of "Research on the Application of Precision Washing System based on AI Vision and ElectricSpray Arms in Household Dishwashers", Midea invented the precision washing technology based onmulti-task image intelligent recognition and realized a truly intelligent and fully automatic mode to meetthe demands of Chinese families for the cleanness and hygiene, convenience and efficiency, andprecision washing of dishwasher. In the project of "Key Technology and Application of Multi-Grade High-Efficiency Heat Energy Supply of Air Source Heat Pumps", an innovative breakthrough of key technologyof air source heat pump water heaters is made to solve the problem that conventional air source heatpumps cannot operate reliably in the cold areas in the north and to ensure the high efficiency and low-carbon supply of industrial steam, which leads the technical progress and industrial development of airsource heat pump heating, achieves pollution and carbon reduction, energy saving, and efficiencyincrease, and produces significant economic and social benefits. In the project of "Research andApplication of Key Technology of Low-noise Heavy-rare-earth-free Permanent Magnet Motors forCompressors", the multiplicative noise of compressors is reduced through the electromagnetic force ofthe motor body, and its "double pioneer" technology makes household appliances quieter and moreenvironment-friendly and significantly improves the noise of air conditioning system. In addition, thedependence of permanent magnet motors on heavy rare earth materials is effectively relieved throughthe comprehensive optimization of the magnetic circuit structure of the stator and rotor. As of June 2022,Midea has received a total of 190 "Internationally Advanced" certificates for its technologies.
Midea has strengthened the transformation of R&D achievements while carrying out the core technologyresearch. By June 2022, Midea (inclusive of TLSC) held more than 77,000 valid patents. In H1 2022,Midea was granted more than 2,000 invention patents around the globe. Midea continues to improvepatent quality. It won multiple awards at the 2022 23rd China Patent Awards. To be specific, the"Dishwasher" and the "Control Method, Controller, and Refrigerator of Meat Subcooling Preservation"won two Silver Invention Awards, the "Window Air Conditioner" won a Silver Design Award, and the"Compressor and the Heat Exchange System with it", "Recommendation Method, System, and Big DataServer of the Air Conditioner and Its Operation Parameters" and other patents won six Excellence Awards.In order to provide strong support for the fulfillment of the strategic objective of “Technology Leadership”,Midea further implements the “3+1” standardization strategy of “Innovation Patentability, PatentStandardization, Standard Internationalization and Midea Standard Goes Out”, and a two-tier (Group-business divisions) standardization management system has been put in place. Meanwhile, to ensurethe effective execution of the standardization strategy, the Group has set up a standardizationmanagement committee. With the double drivers of “standard innovation + production innovation”, Mideashifts innovation achievements to advanced technological standards. Additionally, it endeavors to play abigger part with respect to advanced technology standards of the industries, aiming to create more valuefor users, partners and industries. During H1 2022, Midea took part in the formulation/revision of 149technological standards, including six international standards, 33 national standards, 11 industrystandards, and 99 local and group standards, including the "Guidelines for Information Disclosure ofEnterprise Carbon Emission Management", "Artificial Intelligence-Audio, Video and Image AnalysisAlgorithm Interface", "A.C. Ventilating Fans and Regulators for Household and Similar Purposes-Methodsfor Measuring Performance", "Fine Bubble Technology—General Principals for Usage and Measurementof Fine Bubbles—Part 1: Terminology", "Information Technology—Digital Twins—Part 1: GeneralRequirements", "Radio Interference of Antenna and Receiving System—Part 4-1: EMC Test Method forElectronic Equipment Combined with Radio Module", "Minimum Allowable Values of Energy Efficiencyand Energy Efficiency Grades for Domestic Waste Food Disposers", and "General TechnicalRequirements for Smart Aging Household Products". In addition, Midea was also awarded the ThirdScience and Technology Award - Standard Contribution Award by the China Society for the Promotion ofScience and Technology Commercialization.
C. Deepened the channel transformation, further improved the channel efficiency and rebuilt theretail and ToB service abilities so as to achieve direct connection with customersBeing customer-oriented, Midea continues to enhance vertical efficiency and horizontal synergy efficiency,as well as accelerate retail growth and retail transformation. Through the reform of direct retailing, Mideahas been continuously promoting the "vertical efficiency improvement" of offline channels, with the shiftfrom distributors to operators completed and the retail operation capability greatly improved. Meanwhile,organizational reform has provided effective support for the "horizontal synergy efficiency enhancement".The China division and product divisions give play to their expertise and work with the operation center.Thus, the operation center is made the “main battlefield”, with deep coordination among all productcategories. Horizontal synergy efficiency has been greatly improved in channel expansion, scenario-based transformation at the retail end, etc. Through the corporate operations of the operation center,Midea has realized "One Midea" for all markets, ensuring the consistency of user service and experience.In H1 2022, online sales as a percentage of Midea’s total sales remained over 45%. Midea's online salesexceeded RMB44 billion, and it remained the best-selling household appliance manufacturer on major e-commerce channels such as JD and T-mall for ten consecutive years. In terms of e-commerce, Mideastrengthened the segmentation of channel operation, reconstructed and specially built the sales channelson Pinduoduo, interest e-commerce, and KA/TOP, focused on developing COLMO and Toshiba's abilityof online consistency operation, and accelerated the all-channel and all-brand structure optimization. Asits sales growth rate far exceeded that of mainstream e-commerce platforms, Midea achieved new growth.Meanwhile, Midea focused on enhancing new capabilities such as self-operation, self-livestreaming, andcontent marketing to consolidate the operation competitiveness. As online and offline markets integratedat a faster speed, based on different levels and characteristics of different channels, as well as changesto customers’ needs and ways of spending, Midea drives the retail transformation based on user demandsand experience, and keeps refining the retail operations system, so as to achieve direct connection withretail customers. This mainly involves the following aspects. Firstly, being customer experience-oriented,it provides just the shopping experience wanted by customers by putting in place an exclusive storenetwork covering all channels. To be specific, it possesses more than 1,300 pre-decoration stores in thedomestic channels of building materials and home decoration, over 2,600 flagship stores in districts and
counties, as well as over 14,000 multi-category stores in towns and villages. Second, in terms of the retailsegment, Midea integrated the advantages of all product categories and united with brands in otherindustries to create an all-scene, fully interconnected, and whole-household ecological immersionexperience for consumers. Midea built intelligent and digital terminals and promoted the installation ofintelligent scenes in terminal stores. More than 1,700 stores have been covered and more than 3,100scenes exhibition areas have been built, and the construction of all-category halls has been piloted inoffline channels. Meanwhile, Midea builds immersive 3D model rooms for entire home appliances focusedon home decoration users, providing a roaming shopping experience to achieve accuraterecommendations and exclusive intelligent shopping guide. At the same time, focused on theimprovement of the product suite purchase, it builds the service chain and exclusive rights and interestssystem for home decoration product suite purchase, driving transformation to integrated services forhome decoration + home appliances, and providing home decoration users with time-saving, cost-effective and worry-free comprehensive solutions. Third, Midea actively seeks new businessopportunities. On emerging channels such as Pinduoduo, Douyin, Kuaishou, and Xiaohongshu, Mideahas refined its product offering and optimized the marketing and rating system. It also continued to buildthe operation platform for e-commerce. By strengthening content and digital marketing, gaining insightinto users, and segmenting their needs, Midea promoted the integration of quality and efficiency,improved DTC capability, and upgraded from traffic operation to user operation. The number of membersand acquired customers on JD, Tmall, and other platforms was leading in the industry, and the proportionof self-broadcast on Douyin in June was over 85%. Fourth, special campaigns have been carried out tomake product mix breakthroughs. User needs are accurately identified through data analysis, newmeasures are taken to drive growth in new product categories, efforts are made to improve the smartscenario operation capability, and breakthroughs are constantly made on the high-end market. Fifth, post-sales service and logistics experience are well optimized. Midea promoted the construction of the unifieddistribution cloud warehouse and customer service middle office and the transformation of reverseprocess and improved the ToB forward fulfillment timeliness and reverse service capability. Midealeverages the “Digitization & Intelligence Driven” strategy to be “Direct to Users”, and initiates a series ofbusiness moves in user experience, user operation and user service from user needs and servicescenarios. Based on the underlying data capabilities for user demand insights, Midea can better serveusers through user life cycle management, membership and private domain operations to enhance user
loyalty. Firstly, Midea focuses on "user experience" and improves the user experience of the whole valuechain under the guidance of the Net Promoter Score (NPS), with the NPS increasing by 10% comparedto H1 2021. In addition, Midea strengthens user operation, promotes the establishment of membershipsystem and private domain traffic, and deeply promotes the intelligence and IoT of products. By the endof June 2022, the cumulative number of registered members exceeded 120 million. Furthermore, Mideareinforces the building of data platform and commercial data analysis. Analysis of user consumptionbehavior data serves as a strong support for business decision-making.Midea deepens and promotes the business model change and the digital and intelligent transformationof the user service system to provide one-stop whole-home smart home appliance service solutions forusers. First, Midea reconstructed the user experience from the user perspective with a focus on 24-hourservice speed improvement, reached an achievement rate of 86%, upgraded the 521 service standards,and reconstructed the return and replacement procedure experience. Replacement instead of repair hasbeen fully implemented for small domestic appliances and partly piloted for major domestic appliances.The return and replacement time has been shortened to three days through online identification/noidentification or the simultaneous delivery of the new appliance and recovery of the old one. Second,Midea accelerated the construction of active service capabilities, transformed from passive waiting toactive service for users, and built the active service platform. Twenty-one active service scenes werelaunched, with more than 1.85 million active service times, more than 400,000 private domain users, anda retention rate of up to 96%. Third, Midea built a whole-chain closed-loop system for the voice ofcustomers (VOC) and launched the user voice intelligent analysis platform to achieve rapid discovery,exploration, distribution, closed-loop management, and monitoring of all-channel problems, with a closed-loop improvement rate of over 98% for VOC. Fourth, Midea improved COLMO's high-end serviceexperience, promoted the suite-based construction of the COLMO network, selected high-quality serviceproviders, and invested resources in cultivating suite service capabilities. More than 2,200 COLMO suiteservice outlets have been developed to select high-quality engineers from multiple dimensions andguarantee and improve the reputation of high-end brand services. Fifth, Midea carried out green recyclingbusiness, deployed the two modes of self-owned channel recycling and external cooperation for themarket recycling end, and built the "Internet +" recycling platform. Phase Three of the green recyclingsystem has been launched, achieving the online circulation of recycling information.
Transformation of the ToB business model has been further deepened. Based on the Group's fivebusiness segments, the business model has been upgraded from traditional hardware product packagesto scene-based solutions targeting customers in the whole industry, so as to enhance sales and brandpresence on the ToB market. Meanwhile, refinements have been carried out for the existing customer,product and business structures, thus increasing the profitability of the business value chain. Midea hasenhanced cross-division horizontal synergy, forming a regular special collaboration mechanism forinformation exchange, business opportunity sharing, market strategy making, resource allocation andother aspects. In addition to the traditional home appliance industry, Midea has unfolded coordinatedmarketing in the ToB business of the Building Technologies Division, the Robotics & Automation Division,and the Digital Innovation Business through industry-wide solution development and promotion. In thefirst half of 2022, Midea focused on improving delivery capability to enhance customer satisfaction whilefocusing on promoting the transformation of Midea's ToB business model toward systematic solutions. Interms of key industries such as intelligent manufacturing, new and old infrastructure, office R&D, businessservices, and medical and health care, Midea cooperated with head customers in various industries,designed and delivered specialized solutions based on industrial characteristics and customer needs,and strongly supported the transformation of relevant industries and corporate customers towardintelligence, automation, low carbon, and digitalization in the context of the "carbon peak and carbonneutrality" policy.Annto, a subsidiary of Midea Group, is a technological innovation-based provider of supply chain (logistics)service. It is committed to providing customers with end-to-end digital and intelligent supply chainsolutions. In terms of internal support and services, under the background of Midea Group promoting theT+3 business model deep reform, Annto further promoted the logistics reform and improved B2C logisticscapacity. Through big data analysis and data modeling and based on user needs, Annto refines andintegrates its warehouse network across the country and expands the unified warehousing anddistribution model to retail stores. Overall planning of channel inventories and unified operation ofwarehousing and distribution boost channel efficiency and provide support for comprehensivestandardization and digitalization of user services. Annto refines the integrated delivery and installationservice network and connects the links from manufacturing to consumption, providing support for theachievement of Midea’s “Direct to Users” strategy. Annto has established an integrated and smart logistics
platform for the whole process of production logistics, warehousing, urban distribution, delivery andinstallation. It also cooperated with Sino-US Global Logistics Institute of Shanghai Jiao Tong Universityto establish the Joint Research Center for Smart Logistics and Supply Chain, generating achievementsin route planning for delivery vehicles, scheduling and controlling of digital manufacturing logistics andother fields. In the first half of 2022, Annto completed the deepening and application of urban deliverycapacity scheduling algorithm and corresponding scheduling system in 65 operation centers nationwideand launched research and application projects on core warehouse operation capabilities such as storagenetwork optimization and warehouse storage and sorting efficiency optimization, in order to form practicalresults such as solutions, key algorithms, and decision support tools. The service network of Annto ofwarehousing, trunk line transportation, distribution, delivery, and installation has realized the whole-procedure visualized direct distribution to districts, counties, and towns, and the service capacity hasbeen continuously upgraded. In terms of warehouse network layout, Annto has laid out large logisticsdistribution centers and thousands of distributed mini warehouses in more than 140 cities across China,realized real-time inventory sharing and allocation, and effectively reduced inventory costs and capitaloccupation through unified warehouse and unified distribution. In terms of warehouse management,Annto accelerated the deepening application of intelligent logistics warehousing center, realizedintelligent unmanned warehouse management through intelligent equipment and advanced technologyin high-standard automated warehouses for expensive consumer goods, reduced sorting operation, andimproved sorting efficiency through procedure optimization and information system functionenhancement. Annto optimized the layout of distributed mini warehouses through online big data analysisand scientific algorithms and achieved a 10% saving in the storage service area which meets the samemarket demand. Also, it optimized the integration services of terminal warehousing and distribution andof delivery and installation through inventory sharing and intelligent replenishment. In terms of intelligence,Annto focused on "smart parks" to realize the whole-procedure intelligent management system for parks,promote the improvement of the operational capacity of self-built parks, and create integrated productsof smart parks. In terms of production logistics, Annto realized the functions of factory logistics planningcollaboration, wave-based sorting, JIT delivery, inventory sharing and visualization, intelligentreplenishment, etc. through the whole-procedure digital construction of Vendor Managed Inventory (VMI),which increased the human efficiency of the VMI intelligent warehouse by 50%, the surface efficiency by46%, and the inventory reconciliation efficiency by 45%. In terms of trunk line urban distribution, Annto
realized direct inter-city delivery through the LCL trunk line network, and achieved optimal timingconfiguration through route planning. Meanwhile, it strengthened the cultivation and expansion of terminaloutlets, built a "scheduling center" platform based on the whole procedure of order-scheduling-capacity-operation-system, broke the management boundary between the project system and shipping capacityresources, integrated line resources, and built the operation capacity of domestic trunk line network, thusimproving user experience comprehensively. In terms of terminal delivery and installation, Anntooptimized the integrated delivery and installation and rebuilt the main procedure of the after-sales platformin the first half of 2022 and realized the digitalization of order and engineer management. The per capitaorder receiving efficiency of engineers increased by 34% year-on-year, and Annto effectively supportedbusiness models such as complied delivery and installation and delivery of the new and recovery of theold, with more than 3,000 delivery and installation outlets and a team of more than 32,000 professionalengineers, covering more than 2,700 districts and counties in China. In terms of capacity optimization,Annto deepened the construction of online freight platform capacity, realized online capacity and costtransparency through digital construction, accumulated valuable capacity resources and cost data, andrealized the integration of logistics, capital flow, information flow, contract flow, and bill flow.In terms of external business expansion, adhering to the business philosophy of building and sharing withcustomers, Annto provides strong support for corporate customers in promoting channel efficiency andsales growth. It focuses on industrial customers and industry in depth, while continuing to strengthen theconstruction of core capabilities such as LTL, urban distribution and integrated delivery and installationto steadily improve customer service experience, thus increasing its market share year by year. In thefirst half of 2022, Annto relied on the "1+3" service model, i.e., "whole chain" + "a shared inventory system,integration of delivery and installation, production and logistics" to help customers promote channeltransformation and supply chain efficiency optimization and to assist corporate customers in whole-chainvalue enhancement with smart logistics. The service model can provide integrated supply chain servicescovering the whole chain of "parts-finished products-stores-users" and help customers to solve problemssuch as rising fulfillment costs caused by diversified channels and fragmented orders "through a sharedinventory system" and to establish a whole-value-chain monitoring system for operation indicators,continuously optimize costs, strengthen risk control capabilities, and provide effective data support forenterprises' operation decisions. "Integrated delivery and installation" can help customers to better reach
users and improve service experience. "Production and logistics" means transforming Midea's years ofexperience in lean manufacturing into the "Lighthouse Factory Supply Chain Solution" and to realize theoutput of systematic solutions based on customer needs and industrial characteristics. Based on Midea'sindustry-leading experience of channel transformation and sound smart supply chain systems andnetworks, Annto has provided services to thousands of enterprises, with clients spanning many industriesacross home appliances, consumer electronics, food and beverage, maternal and infant, and householdnecessities and chemicals.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 the global manufacturing network and localized operationsoverseas, optimized the global logistics and service system, and promoted product globalization andregionalization. Its overseas business spans more than 200 countries and regions in North America,South America, Europe, Asia, Africa and Oceania. Meanwhile, guided by the market and focusing onusers, Midea builds a global user research network with foresight. Midea has established an organizationfor local consumer and market observation, built a digital marketing ecosystem, implemented productlifecycle management based on the changing trends of user needs and consumption habits around theworld, built user touch points throughout the entire chain, and continuously optimized and matched theretail operation system for the user-growth market.Midea has reconstructed the overseas sales operation system, continuously deepened the user-orienteddigital transformation, and established end-to-end procurement as well as execution processes, tools,operation mechanisms and information connection for sales orders to achieve online and visual overseasplanning and order execution. Midea exerted great efforts to build the intelligent overseas commercialsystem, constantly deepened its data-based business decision-making capability, and created a digitalplatform to facilitate mobile operations overseas. 23 overseas branches were covered. A total of 45 keyindicators were included, such as sales, finance, supply chain, products, and e-commerce. Furthermore,real-time online business, data transparency and sharing, and early risk warning have become availablefor better operating efficiency in the key part of the overseas business.
In 2021, Midea made headway towards the Global Impact strategy that has focused on the United States,Brazil, Germany, Japan and ASEAN, and initiated a special campaign for overseas branding. It not onlyclarified specific plans for user segmentation, product maps, brand matrices and localizationinfrastructure construction in strategic markets, but also invested more resources in user insight, branding,product innovation and organizational consolidation to ensure the implementation of the relevantstrategies. Midea has kept improving the distribution of overseas channels, being customer-oriented andpromoting the transformation of overseas channels into retail terminals. In the first half of 2022, it hadapproximately 2,600 new active partners and built more than 20,000 new sales outlets for its ownoverseas brands. Besides, it constantly streamlined the channel hierarchy and expanded e-commercechannels to promote flat channels. Meanwhile, it rolled out the pilot direct retail model in Brazil and thePhilippines to improve channel efficiency and data transparency. By enhancing the visualization of dataand information in different dimensions on more than 60,000 retail outlets, it effectively supported andoptimized the strategies for the operation of stores. Midea has steadily increased its investment in theoverseas e-commerce business. It has established overseas e-commerce companies and formed specialteams for the overseas e-commerce IT system. Additionally, it has improved the e-commerceorganizational structure by introducing professional talent, pushed ahead with the digital transformationand reform of overseas business, enhanced the logistics and storage capacity in the project of globaldigitization, optimized the networks of post-sale services and spare parts, and promoted the overseasiService3.0 digital post-sale service system. By doing so, it has achieved the digital upgrade of the e-commerce business. Own branding has been strengthened overseas. Midea has expedited the pace ofthe global breakthrough of its own brand by launching a special project for branding in North America. Ithas strengthened its own brand penetration in key markets in multiple dimensions, including offlineterminal retail experience, guide team development, social media campaign and whole-house productsuite marketing. Specifically, Midea sponsors well-known foreign football clubs and sports events andhas intensified the effects of sponsorship for the Manchester City Football Club. It has reached more than800 million fans worldwide in over 20 home competitions and has conveyed the content it created to 300million people worldwide via social media, football stars and Internet celebrities, which has expanded itslocalized marketing in local markets and increased its global visibility. Midea has also created amechanism for co-creating smart scenes overseas. By setting up the positions of IoT Product Managerand Engineer in the markets of key countries, it has localized the connectivity testing of new IoT products.
As of June 2022, the shipment of IoT products in overseas markets has surpassed 1.4 million units,among which more than 260,000 units have been activated. Additionally, Midea has completed theconstruction of the MSmartLife App—a globally unified international platform for online support services,built a service team for the global application market such as App Store and Googleplay and for "in-appfeedback" applications, and completed the localization of FAQ for the markets of five core countries. Adigital ecosystem of user growth was constructed with six major touch points: user co-creation, userservices, brand official website, social media, overseas e-commerce and the MSmartLife App. With thebest modes of overseas user data storage, content iteration and operation explored, an overseascustomer data platform was created to promote overseas private domain traffic. Through the pilot projectsfor the growth of overseas users initiated in the US and Brazil, indicators such as user conversion rateand customer acquisition of the post-sale system have increased significantly, which has boosted sales.Therefore, Midea has promoted its experience accrued in this regard in other markets overseas. By June2022, it has reached a total of 1.2 billion people through foreign social media and interacted with 17million users. Besides, the number of registered users of its official website has surpassed 5.4 million.Moreover, Midea has constantly improved the overseas manufacturing layout and expedited theintroduction of the "China-Based Supply for the World + Local Supply" model. In the first half of 2022,Midea further carried forward the construction of manufacturing bases in Mexico and Egypt in order tocover the North American, the Mideast and African markets. Meanwhile, efforts were stepped up topromote the construction of the new manufacturing base in Brazil to cover several key categories. Inaddition, the domestic refined manufacturing system was introduced and promoted in the overseasmanufacturing bases, and overseas talent development was enhanced with respect to lean management,driving improvement in global production and delivery capacity. The constantly refined EHS managementsystem provides firm assurance for the safe and stable operation of the overseas manufacturing bases.Global logistics and service system was enhanced. On the one hand, it deepened cooperation with globalstrategic partners, and created a new mode of international logistics cooperation to effectively ensure thesupply of logistics resources during drastic market changes. On the other hand, it improved the globalservice capability. Midea optimizes service networks of overseas iService system and cloud call centerplatform, and master data management of global outlets and service projects, and continues to constructfast-response and proactive global service system. In 2022, the introduction of Amazon Connect, a global,omnichannel cloud contact center, into Midea enabled the Company to achieve the iterative upgrading of
its global contact center and directly reach the end customers worldwide. With the constantly improvedglobal integrated service system, Midea has achieved the whole-procedure closed-loop managementthat ranged from user reaching to service completion, dramatically improving the service efficiency anduser experience.In H1 2022, the COVID-19 pandemic has remained a serious impediment to the Japanese market. Theoperation was further affected by rising raw material costs and exchange rate fluctuations. TLSCcontinued to deepen the synergy with the Group's product divisions in the value chain to ensure thesupply of products despite the pandemic and tight sea freight resources, while safeguarding the safety ofemployees. Measures such as price adjustments through the faster launch of new products andenhanced sales activities, improved product mix, increased retail market share and tightly controlled non-operating expenses, so as to address the impact of product costs, currency fluctuations and other factorsand ensure the accomplishment of the operating objectives. During H1 2022, the retail sales of theJapanese home appliance market grew 6% compared to H1 2021, while that of TLSC grew 25%. Itsmarket share of six major product categories combined has increased to over 14%, with the respectivemarket share of air conditioners, refrigerators, laundry appliances, microwave ovens and rice cookerscontinuously growing. Organizational structure and business model are transformed to adapt to marketchanges, and organizational efficiency and vitality were continuously enhanced. TLSC continued to boostsynergies with the Group and the relevant divisions on branding, R&D and innovation, supply chainintegration, quality improvement, etc., so as to build a strong product portfolio for the global markettogether. By June 2022, the business of TLSC has covered more than 120 countries and regions.E. Stepped up the comprehensive digitalization to materialize data- and platform-basedoperations in the whole value chain, and thus to become more competitive 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. Midea has promotedbusiness digitization and established a data business system. After years of digital practice, focusing onthe development trend of industrial digitalization and the characteristics of industrial digitalization, Midea
has established its SMART data business system. With process changes throughout the whole chain ofdata business, data governance to ensure data specification and availability, high-value data assetsconstructed relying on the public layer, data products and data applications have been created with datatechnology. In terms of domestic sales, Midea has adhered to the "Direct to Users" and "Digitization &Intelligence Driven" strategies and the "customer-oriented" principle. It has improved the efficiency of theomnichannel value chain with data-driven measures. With "user experience" as a focus, Midea hasenhanced the user experience of the whole value chain under the guidance of the Net Promoter Score(NPS) and constantly promoted the establishment of the membership system and private domain traffic.It has effectively promoted the instantiation reform of the direct-to-customer (DTC) business model andoperation center by relying on the Midea Cloud Sales platform, which supports pronged measures inmultiple dimensions, including cloud warehouse, omnichain inventory sharing, self-assessment review oforders, simplified policies, omnichain visualization of orders, and customer-to-manufacturer (C2M) whole-house solutions. At the same time, it has optimized the store site selection using a data algorithm. Mideahas kept empowering channel reform with digital means. In terms of overseas sales, Midea has providedvigorous support for the "Global Impact" strategy, deepened the development of digital capabilities of thesystem driven by the original equipment manufacturer (OEM) and own branding & manufacturing (OBM),and focused on the five core regional markets worldwide. Furthermore, it has promoted the digitaltransformation of overseas business in line with local circumstances and pushed ahead with the productplan based on user insights, to upgrade its overseas products in an all-around way. Based on newtechnology architecture, it has built the iBOS platform for the integration of overseas sales. With thecollaborative planning, forecasting and replenishment (CPFR) model, whole-procedure visualization ofoverseas orders, and other features, the iBOS platform has improved the execution and deliveryefficiency of overseas orders and dramatically reduced the cost. Additionally, the self-created MCCchannel management system of Midea supports the channel management reform for overseas markets.Midea has comprehensively upgraded the overseas localized digital marketing platform in Brazil on apilot basis, to shore up the ToC capability development of overseas markets. It also has pushed aheadwith the establishment of the overseas user operation and membership system and rolled out theoverseas contact center system in the Asia-Pacific region in an all-around way, thereby providing betterservices for users of the OBM business. The construction of digital systems in manufacturing bases inThailand, Italy and Egypt has been completed, contributing to the improvement of the efficiency of
overseas manufacturing. In the process of R&D, following the "Technology Leadership" strategy, Mideahas improved its digitization and intelligence capabilities in multiple application areas, includingtechnology innovation, user research, digital simulation and verification, software-defined hardware,development of the global platform cluster, and C2M customization. It has built a digital planning platformto rapidly translate technological capabilities into popular products of high user perception, increasing thehit rate of the product plan by 8%. Midea has started the digital simulation era, established a unified digitalsimulation platform and simulation talent system, and drove the transformation toward an efficient andcollaborative R&D mode. In the processes of manufacturing and supply chain, Midea has promoted thetransformation toward an end-to-end integrated supply chain and developed industry-leading capabilitiesin regard to order execution, global supply chain management, and agile delivery. It has optimized thesales and operations planning (S&OP) procedures that balance production and sales and improved thesynergy efficiency of production, supply and sales of the whole value chain. Meanwhile, the "GlobalPlanning Center" and "Global Order Center" have been established to provide digital support for thedecisions on the business plan for production and sales. Midea has empowered and improved itsmanufacturing capability and developed highly-flexible, highly-efficient, and highly-elastic agile deliverycapabilities, thereby meeting the market demand for diversity and customization. In the first half of 2022,another two factories of Midea were included in the "Global Lighthouse Network" initiated by the WorldEconomic Forum, enabling the digital, flexible manufacturing of Midea. Guided by the "LighthouseNetwork" factories that feature sustainable development, Midea has carried forward the smartmanufacturing of 5G + industrial Internet factories. Driven by the Voice of the Process (VOP) and Voiceof the Customer (VOC), the overall quality has been improved. Additionally, Midea has supported thenetwork-based supply chain resources and agile end-to-end response. It has applied a smart pricedetermination model to secure its advantage in cost and supported and helped thousands of enterpriseswith rapid cloud and platform migration. In terms of overseas sales, with the optimized "T + 3" model( production strategy based on customer orders), the loading rate has risen by 20%, and the deliverycycle has been shortened by 16%. Midea has been committed to building green and energy-savingfactories, so as to gradually conserve energy and reduce carbon emissions. At the same time, it haspromoted and implemented the visualization and green and smart monitoring of carbon emission andconducted full-coverage smart monitoring and early warning for the main emission points. Moreover, theuse of the smart air compression station has enabled Midea to save energy by 30%. In the process of
warehousing and distribution, with digital technology, Midea has achieved the sharing and visualizationof the inventories of raw materials as well as the integration of delivery and packaging, thereby effectivelyreducing carbon emissions. Besides, it has taken advantage of the big data technology to design theoptimal warehouse network structure and the best planning and smart scheduling of main and branchlines for distribution, so as to promote inventory and channel management and improve the flow efficiencyof goods. Furthermore, Midea has built an engineer team to provide delivery and installation services,which covers approximately 40,000 villages and towns across the country. It has provided high-qualitylast-kilometer delivery and installation services through smart customer services and order assignmentoptimization. In the process of operations management, Midea has fully promoted the objective and keyresult (OKR) system as well as management by objectives and collaboration, improved the digitalcollaboration platform, strengthened the fundamental capabilities of office platforms, and enhanced theefficiency and transparency of cross-team collaboration. The five scenes of smart logistics have beenextended to more than 30 industrial parks across the country, expanding the coverage of administrativeservices and improved customers' experiences when they provide services. By creating a unified biddinginvitation and procurement platform for Midea Group, all scenes designed for non-production materialshave been unified, network-based, and process-based. With the optimization of the process efficiency asthe core lever, Midea has further clarified the decentralization system and has achieved reciprocitybetween power and responsibility. It also has constantly boosted organizational vitality. As a result, theprocess efficiency of the core value chain covering research, production, sales, and supply has increasedby 10%; the process efficiency of finance and other functions has risen by 30%; the process efficiency ofthe office automation (OA) system has climbed by 50%. Midea has carried out capability training,assessment and certification for digital talent to enhance their digital capabilities.Midea has constantly built the CloudNative digital base and pushed ahead with the construction of itscloud project in Guian New Area, located between Guiyang and Anshun, Southwest China's Guizhouprovince. Currently, the CloudNative application management platform has been rolled out, whichsupports the microservice architecture of the business system. Besides, the total volume of resourcesmanaged by the container has increased by 20%, promoting the integration and collaboration ofdevelopment, operation and maintenance (DevOps) in the R&D of effectiveness, connecting continuousintegration and continuous delivery (CI/CD) to achieve a closed loop and full life cycle management of
the R&D process, and shoring up the agile reform of Midea Group. In March 2022, the contract for thecloud project in Guian New Area was officially signed. The project will meet the computing need of DigitalMidea in the next ten years and provide a guarantee for Midea Group to develop into a leader in the IoTera. In June 2022, the Privacy Computing Joint Laboratory jointly established by Midea Group andCollege of Computer Science and Technology, Zhejiang University, was officially launched. The laboratoryis intended to carry out industry-education-research cooperation in privacy computing and artificialintelligence and explore the application scenes of privacy computing in the manufacturing industry,thereby speeding up Midea's digital construction. Being one of the important strategic technologies in thefuture, privacy computing will further boost Midea's digital development.Midea has constantly developed artificial intelligence (AI) technology and furthered the in-depthapplication of smart technologies. In the first half of 2022, Midea AI Innovation Center achievedapplication breakthroughs in four fields, namely household robots, smart home empowered by AI, smartmanufacturing empowered by AI, and smart medical services empowered by AI. Midea's household robotbrand WISHUG and its first-generation robot Xiaowei have been successfully rolled out. Xiaowei has fourcore features, namely AI housekeeper, home assistant, security guard, and technology playmate. Besides,Midea has applied voice full-stack technology to its home appliances of all categories and created aknowledge graph of the vertical field of the home appliance industry, providing fundamental data supportfor scenes such as human-robot interaction, smart customer services, and active services. Also, the AImotion recognition solution has been applied to the plant of Midea Kitchen in Wuhu, Anhui Province. Thefirst-generation household robot created by Midea AI Innovation Center won the Red Dot Award 2022:
Product Design and the Red Dot Award 2022: Smart Product Design. In the SAPIEN ManiSkill Challenge,a world-class event held by the University of California San Diego during the 2022 InternationalConference on Learning Representations (ICLR 2022), a premier gathering of professionals dedicated toAI advancement, Midea's technical team won the championship of the No Interaction group. Additionally,Midea's household robot and edge intelligence were included in the "Artificial Intelligence InnovationCandidate for Projects Launched under An Open Competition Mechanism" list released by the Ministryof Industry and Information Technology. The two projects led by Midea, namely the smart grading ofservice-oriented robots and the tool chain for the distribution of edge devices, were successfully initiated.
F. Promoted the strategy of “Digitization & Intelligence Driven” and accelerated theimplementation of “Comprehensive Intellectualization” to “Customize a Smarter Midea Life forYou”M.IoT has continuously improved fundamental technologies and developed customer-oriented MideaSmart Life solutions. To provide home users with smart product experiences that cover the whole sceneand more high-quality ecosystem value-added services, it has created a pan-MSmartLife App ecosystemthat focuses on "Customize a Smarter Midea Life for You", thereby providing high-quality productexperiences and richer derivative value-added services for users. Midea has met users' demand for asmart life through one-stop services. In the first half of 2022, facing consumers' demand for cooking athome, Midea rolled out Midea Smart Kitchen solutions that combined smart home appliances and pre-made food. With smart recipes and convenient pre-made food services, a beginner can become a chefin a twinkling. At the same time, the market shares of small domestic appliances for kitchen scenes suchas air fryers also grew. Focusing on themes such as kitchen, balcony, bathroom, living room, bedroom,whole-house air, whole-house water, smart lighting, and smart security, M.IoT has accelerated the launchof smart whole-house solutions with full-scene experiences in the pre-installation market. Also, it hascontinued to carry out iterative optimization based on the demand of the pre-installation market, therebyproviding consumers with scene-based smart whole-house solutions. Midea has promoted thedevelopment of an offline business model that ranges from the retail of home appliance products to smartwhole-house solutions. Additionally, it has created an omnichain scene-based marketing model and one-stop services to explore new markets. Through the integration of "hardware, software, content andservices", Midea has created a super-smart link for the home and delivered users smart whole-houseexperiences. At the same time, adhering to opening-up and cooperation, Midea has actively carried outstrategic cooperation with leading home decoration companies in the industry. Moreover, Midea andHuawei have opened up to each other and been integrated in the field of whole-house intelligence,providing consumers with one-stop smart whole-house services. In the first half of 2022, M.IoT had nearly13 million units of newly connected devices, and it provided services for more than 70 million families, upby 87% year on year. Midea's smart scenes were executed more than 210 million times, representing ayear-on-year increase of over 300%. Through scene-based user connection, the number of users ofmultiple scene-based devices grew steadily. The monthly active users of Midea Smart Cloud
Housekeeper grew more than 90% year on year. The APP has provided more than 10 million Midea userswith more energy-saving, more comfortable, more convenient, safer and healthier digital family lives.Meanwhile, 40 patent applications for algorithm innovation technologies have been submitted.With the protection of user privacy and data security at the core, Midea has continuously built andimproved the Midea smart home security system that is in line with the standards of the domestic andoverseas industry, which has been CNAS and ISO 17025 certified. In the first half of 2022, the ChinaNational App Administration Center (CNAAC) carried out an all-around inspection of information securityand privacy protection of the MSmartLife App and awarded the app "CNAAC App Security Mark".According to the result of the appraisal of excellent cases for practicing the national standards oncybersecurity on the 20th anniversary released by the National Information Security StandardizationTechnical Committee, Midea was the only home appliance business that was included in the list and wona case award for "the application of personal information security standards to smart home", fullydisplaying the achievements of Midea's long-term construction of the personal information protectionsystem as well as Midea's technical strengthen in protecting the personal privacy of consumers. Besides,the mobile security technology of Midea's MSmartLife App was included in the "2022 Security GuardProgram Excellent Cases" by the China Academy of Information and Communications Technology(CAICT) and the China Communications Standards Association (CCSA). As such, M-Smart is consideredindustry-leading in terms of data security.Based on the demand of user scenes, M.IoT has held firm to ecological opening-up and win-win obtainedthrough cooperation. It has paid continuous attention to the application of innovative smart homeappliance technologies to energy saving and emissions reduction, and worked with the China ElectricPower Research Institute ("CEPRI") to jointly develop the first batch of home appliances equipped withenergy-saving solutions, achieving the online regulation of load resources and two-way interaction withthe power grid. Additionally, by proactively responding to the demand of the power grid, M.IoT hascontributed to the efficiency improvement and safe and stable operation of the power grid, therebypromoting the national "carbon peak and carbon neutrality" strategy. It has expanded the scope and scaleof cooperation with Huawei and worked with peers to roll out the first smart kitchen solution equippedwith the HarmonyOS system, further enriching the cross-industry ecological scenes. Approximately 5
million home appliance products equipped with the HarmonyOS system expect to be rolled out in 2022.Through the product scene-based interconnection with ecosystem manufacturers, M.IoT will enable usersto experience more-open smart whole-house scenes. Moreover, M.IoT has played an active part in thedrafting and formulation of relevant industry standards, thereby promoting the wider popularization andapplication of new industry technologies and displaying the fruits of Midea's intelligent development. Forthe first half of 2022 alone, four group standards in the smart home appliance industry have been unveiled,including Technical Requirements for Smart Home Appliance Sets, Application Guide for KnowledgeGraph of Smart Home Appliances, Assessment Model of Intelligence Capabilities of Smart Home, andTechnical Specifications for WLAN Modules of Smart Home Appliances and Connection Performance ofthe Whole Machine. M.IoT has expedited the promotion of smart technological innovation and productstoward the global smart home appliance market. For example, it has continuously expanded itscooperation with Google, Amazon and Apple in the smart home field, especially focused on air, wash andcare, and cooking. Through in-depth cooperation, M.IoT has delivered overseas users more abundantscene experiences and products. Meanwhile, it has continued to optimize the smart features of productssuch as the voice interaction experience to achieve a multi-equipment, cross-brand, cross-platform, andcross-industry whole-scene ecosystem experience. Based on the localized scene demands of users indifferent regions, M.IoT has actively explored the cooperation in the service ecosystem of energy savingand emissions reduction, smart cooking and post-sale maintenance. Additionally, Midea has become amember unit of the Council of the Connectivity Standards Association (CSA). It will contribute to theapplication of Matter standards to the field of home appliances.G. In view of consumer stratification, launched multiple brands and diversified product portfolios,and enhanced the promotion of the core values of these brands to empower retail sales and useroperationCOLMO serves high-end users with high-end smart products. Its overall sales reached over RMB4 billionin H1 2022, up 150% year on year, with more than 130,000 product suites sold. In terms of products,after three years of development, COLMO's high-end smart product packages have covered commercialair conditioners, water-related appliance packages, refrigerators, wine cabinets, clothes dryers, washingmachines, personal care cabinets, kitchen appliances and other categories, preliminarily establishing a
leading high-end smart life solution in the global home appliance market. In July 2022, COLMO launchednew flat-panel integrated kitchenware, using high-end customized appearance design and suite-basedminimalist visual experience to enhance the experience of the five senses and thereby provide a naturalkitchen life. With a vision of "providing global high-end users with an all-inclusive high-end smart lifesolution", COLMO started the evolution and upgrade from high-end smart products to high-end whole-house smart systems, launching the industry positioning of "Villa Intelligence Expert" to enter the marketfor higher-end whole-house smart products. In the first half of 2022, together with the Future ThingsAdministration and the WAD Luxury Home Institute, COLMO released the Villa Intelligence Expertcapabilities and five core Villa Intelligence systems to consolidate the product's industry positioning. Interms of the brand, as the promoter and leader of the COLMO Lifestyle, COLMO cooperated with IPs inluxury housing, technology, fashion and architecture to launch the third Elite Life, presenting a picture ofthe COLMO Lifestyle in a multidimensional manner. In terms of users, COLMO has worked hand-in-handwith more than 500,000 high-net-worth customers since its release. In terms of the market, according tothe data from AVC, the proportion of COLMO products in the high-end market has increased significantlyin the first half of 2022, with wall-mounted air conditioners and water purification products occupying morethan 20% of the market and dishwashers close to 13%. In terms of sales channels, to provide high-endusers with better whole-house smart experiences, COLMO collaborated with the international fashionmedia group Marie Clarie in the first half of 2022 to build a high-end, stylist architectural and culturallandmark, the COLMO "Villa Intelligence Beautiful Home" Experience Space, in Sino-Ocean Taikoo LiChengdu. Additionally, it further expanded the high-end whole-scene channel by setting up nearly 170smart experience pavilions.As a world-renowned home appliances brand with a century-old history, Toshiba is committed to providingusers with inspiring, perfect products and services. With strict requirements for the entire production flowand quality inspection criteria higher than international standards, Toshiba has become the bellwether ofinternational quality in the home appliance industry. In recent years, Toshiba's increasing sales in Chinahave made it a new choice for high-end home appliances in the country. To create a leader in a high-end,exquisite and star-level lifestyle, Toshiba continued its efforts in the first half of 2022. In terms of products,it built a consistent brand mindset with a suite-based design, launching the first Toshiba product suite—the "Xingzhuo" suite, which provides users with an exquisite, star-level lifestyle through star-level
technology, design and experiences. In terms of marketing, campaigns were carried out for different usercircles, including food lovers and mothers, to achieve precise marketing and sustain inbound marketingthrough targeted membership coverage combined with KOL recommendations. In terms of saleschannels, joint efforts were made for core terminals. In the first half of 2022, Toshiba built 42 star-levellife pavilions. Supported by Midea's domestic market resources, it built benchmarks from core storesevery month, helping single-store sales exceed one million. Meanwhile, it released standardized terminalguidelines to ensure a unified terminal image. In terms of the market, the sales of Toshiba products in allchannels of the domestic market surpassed RMB1.1 billion as of June, a year-on-year increase of morethan 110%. During the "618" promotion, Toshiba recorded more than RMB200 million in sales, up 74%year on year, including more than 160% year-on-year growth in its refrigerator sales. Additionally, Toshibahas improved its product layout in the domestic market. The 479 Large White Peach and the 429 SmallWhite Peach, two new refrigerators launched in February 2022, exceeded RMB78 million in sales for thefirst half year of release. According to the data from AVC, Toshiba's 479 Large White Peach continued torank first in the sales of six-door refrigerators, and its new 10LTC 3-Liter Rice Cooker made RMB4 millionin sales within the four months of launch.WAHIN continued breaking the boundaries of traditional home appliance models. The brand insists oninnovation, embracing the Generation Z with “Trendy Designs, Practical Functions and Fun Interactions”.It continued focusing on exploring the potential of young users. WAHIN deepened the brand marketingtowards the younger generation with innovative products as the core, the virtual character "WAHIN Girl"being the spokesperson and a slogan of "It's your turn, young man!" Positing itself as "young,technological and trendy appliances", WAHIN continues to provide users with good-looking, interestingand surprising products with easy-to-use technology. In the first half of 2022, WAHIN integrated marketingand upgraded the anime IP WAHIN Girl to an ultra-high-simulation digital human, who won the 2021Forbes Business Value Award for Virtual Humans in Chinese Home Appliance Industry and reached 150million users while serving as the brand's digital manager. In the meantime, WAHIN cooperated withPeking University School of Journalism & Communication, using a young brand positioning to gainpenetration into and resonance with young consumers, delivering notable results in the "618" e-commerce promotion. On the May 4th Youth Day, WAHIN announced a full range of new products at its"Dare to Be a Youth to Step Forward" Launch, being the first to provide good-looking suite products in all
categories based on the trend of popular colors. Meanwhile, with the help of professional esports players,its new products kept breaking the circle, attracting 250 million unique visitors overall. Additionally, thebrand released the idea of "Lite Smart" that would gradually cover all categories. Building on Ling lite, a"lighter, younger" Lite Smart 2.0 is about to be launched with the product philosophy of being instantlydiscovered, instantly connected and instantly controlled. During the "618" promotion in 2022, the sales ofWAHIN products reached close to RMB1.6 billion, up 80% year on year. Particularly, WAHIN refrigeratorsranked among the top three in JD.com, Tmall and Douyin, grew 1,000% from the previous year at theself-operated store on Pinduoduo, and sold 95,000 units via livestreaming. Furthermore, more than10,000 articles were published online in WAHIN's air conditioner-focused content marketing. Notably, thesearch index of "WAHIN air conditioner" increased by 300% on Xiaohongshu and by 260% on Zhihu.H. Seized market opportunities amid domestic and international circulations, responded toChina’s goals regarding “carbon emission peak” and “carbon neutrality”, made technologicalbreakthroughs and innovations, and kept improving the ToB business landscapeIn 2021, the Electromechanical Business Group has been transformed into the Industrial TechnologyBusiness Group. With the vision of "Technology Drives the Whole World" and the power of technologicalinnovation to support the global industrial development in the new era, the Industrial Technology BusinessGroup is dedicated to becoming the world's leading solution provider in intelligent transportation, industrialautomation, green energy and consumer appliances. The Industrial Technology Research Institute and astrategic development organization have been established in 2021. It focuses on both independentdevelopment and acquisitions, and improves the technology, product and market structures in four majorareas. A complete industrial chain has taken shape, covering information, control, drive, and execution.Meanwhile, it continues to increase investments in the development of key and cutting-edge technologies.During 2021, it invested over RMB1 billion in R&D and introduced 400 more R&D personnel, in additionto greater effort made in the introduction of senior experts in the industry. The Industrial TechnologyBusiness Group made constant efforts for consumer appliances and consolidated its leading position inthe industry. According to data provider ChinaIOL, in H1 2022, the global market share of residential airconditioner compressors increased to 44%, representing the largest market share across the world. Theglobal market share of refrigerator compressors reached 14%, thus ranking at the forefront of the industry.
The unit sales of motors for residential air conditioners and laundry appliances accounted for 42% and18% of the global figures respectively, still leading the way in the industry. Meanwhile, the whole-new MSeries DC Compressor for car refrigerators has been launched to the market in May 2022, with the ordervolume surpassing 56,000 units in the first three months of its launch. Midea continues with digital andintelligent transformation to deal with workforce challenges in the future and keeps expanding andimproving its capacities. The Foshan Xingtan Base was newly established to make a forward-lookinglayout in intelligent manufacturing of mechanical and electrical products. Midea has comprehensivelyautomated, digitalized and intellectualized the production layout, process design and productionmanagement, seeking to build an Industry 4.0 intelligent manufacturing demonstration base in China anda world-class “Lighthouse Network” factory. The integration work on the Thai compressor companyproceeded well, which has helped significantly increase the overseas production capacity of refrigeratorcompressors. In addition, construction of the Indian A/C compressor plant has started, laying a foundationfor mass production in the second half of the year and further enhancing the global supply capability ofcore components.The Industrial Technology Business Group puts more resources to core components of new energyvehicles, focusing on the cutting-edge CO? rotary automotive electric compressors that solves theindustry's pain point of low-temperature heating, domestic self-developed EPS motors forauxiliary/autonomous driving, and main drive motors with cutting-edge performances. The existing threeproduct lines and five products have basically been tested on board and will be mass-produced insuccession. In terms of market expansion, it provides product technical solutions for numerous renownedcar companies. In the first half of 2022, it obtained designated cooperation projects from variouscustomers. These projects are expected to generate orders with a total output of more than RMB5 billion,including the cumulative shipment of more than 36,000 units so far. In terms of production capacity, amanufacturing base for new energy vehicle parts was built in Anqing in February 2022. With a totalinvestment plan of approximately RMB11 billion, the base focuses on breaking though bottlenecks suchas core basic components, primarily produces power steering motors, electric compressors for newenergy vehicles and drive motors for new energy vehicles, and creates system R&D centers for thermalmanagement, electric drive and chassis. In the meantime, the Hefei Manufacturing Base also continuesto improve its production capacity, with a year-on-year increase of 100% in compressors, a year-on-year
rise of 200% in electric drives and a year-on-year growth of over 200% in EPS motors. Midea IndustrialTechnology Business Group acquired WuHan TTium Motor in April 2022, officially entering the field oftwo-wheeled travel and expanding the core components of two-wheeled electric vehicles. By introducingMidea's supply-chain system and advanced experience of large-scale production, it set up modernfactories in China and Vietnam to continuously provide customers with high-quality products. Additionally,at the Eurobike 2022, it launched three large crankset center motor products with technical advantagessuch as high power density, high efficiency, quick response and low loss rate, attracting extensiveattention. With efforts in the whole industrial chain of industrial automation covering software tools,equipment control, servo drivers, servo motors and encoder, Servotronix continues to provide customizedmotion control solutions for customers in various fields. Meanwhile, it took active steps in marketing modelreform, delivering over 40% year-on-year growth in linear drive products in the first half of 2022.Additionally, a range of new products and applications were launched, including the softMC703 High-performance Multi-axis Controller and CDHD and CDHD2 High-performance Servo Drives exhibited atHannover Messe 2022. These core products and solutions have gained wide attention and recognitionfor their "high-speed, high-precision and high-performance" customization. Moreover, it continues to stepup the promotion and application of existing products in new areas, including lithium batteries and 3Celectronics. It also addresses industry pain points with tailor-made solutions, empowering applicationscenarios such as laser precision cutting, lean manufacturing of die-bonding machines, precise controlof six-axis robots and precise positioning of visual inspection equipment. In the field of new energy, basedon its industry-leading high-voltage variable frequency drive products, the Industrial Technology BusinessGroup made breakthroughs in intelligent micro-grid, energy storage and SVG dynamic reactive powercompensation device in the first half of 2022, with orders totaling over RMB100 million. Meanwhile, high-voltage variable frequency drive products increased their market shares steadily in the petrochemical andpower industries, and low-voltage variable frequency drive products gained recognition from corecustomers. In terms of new product development, in the first half of 2022, the High-voltage VariableFrequency Drive HCA Series products completed verification, and the Household Energy StorageIntegrated Machine and Solution HEC-S and container-type integrated energy storage products werelaunched. Additionally, in the field of consumer appliances, the Business Group puts more resources inproduct lines of MCU, IoT, power supply and power chip. In the first half of 2022, it made breakthroughsin chip products in MCU master control, MCU touch control, MCU frequency conversion and power
management, which were supplied to more than 30 customers.As a leader of core components in the pan-industry field, Midea Industrial Technology Business Grouphas won many industry awards. For example, the relevant patented product technologies won sixExcellence Awards at the 22nd China Patent Awards as well as one Gold Award and two Silver Awardsat the 9th Guangdong Patent Awards. In June 2022, the China National Light Industry Council certifiedfour of its technologies as "Internationally Advanced", including "Research and Application of KeyTechnology of Low-noise, Heavy Rare Earth-free Permanent Magnet Motor for Compressors", "Researchand Application of Key Technology of Lightweight, Silent and High-efficiency Compressor forRefrigerators with High Volume Rate", "Research and Application of Key Technology of High-overloadPermanent Magnet Synchronous Motor Drive System for Home Appliances", and "Key Technology andApplication of Variable Capacitance Driven High-efficiency and Miniaturized Memory Motor System forHome Appliances". Additionally, three products, including "New-type High-efficiency, High-speed VariableFrequency Scroll Compressor", "New-generation Ultra-efficient Air Conditioner BLDC Motor", and "New-generation High-volume-rate Refrigerator Variable Frequency Compressor", were selected as the 2021-2022 energy-saving and ecological environment products by the China Association of Refrigeration.In 2021, Midea HVAC & Building Technologies Division was officially upgraded to Midea BuildingTechnologies Division. After the upgrade, Midea will make every effort to promote the construction of theBuilding Technologies Division's digital platform, and support plentiful, changeable scene groups as wellas flexible, personalized digital experience by "building equipment facilities & digital technology &industrial ecosystem", In the first half of 2002, under the guidance of the "Digitization & IntelligenceDriven" strategy, Midea Building Technologies Division, as an important business segment of MediaGroup that focuses on "intelligent building", helped China's building technology industry set sail towardthe Internet of Everything (IoE) era based on digital empowerment of buildings, and interconnected thelogistics flow, information flow, feeling flow and energy flow of buildings from multiple aspects such asequipment implementation, building control, edge application, cloud digital platform and applicationscenarios, with a view to providing customers with "end-to-end" SMART IN ONE overall solution. At the"Make iBuilding come TRUE" building technology conference held in early 2022, Midea BuildingTechnologies Division released the "iBUILDING, Midea Building Digital Platform" to empower hardware
products and promote business transformation. Additionally, according to the data monitored by IndustryOnline, Midea Commercial Air Conditioner has continued to rank first with respect to domestic marketshare in the first half of 2022.As building energy consumption is increasing its proportion of the energy consumption of the wholesociety in the progress of urbanization, accelerated efforts have been made in the construction of "zero-carbon buildings" with "green energy system" as the core. In building energy management, theiBUILDING Midea Building Digital Platform conducts intelligent energy adaptation and management witha customized design based on the building's characteristics. In the western part of Midea Industrial Park,iBUILDING connects the systems of power grid, carbon trading, energy and HVAC to deliver "low-carbonand energy-saving" in every link. In terms of power generation, the platform developed a distributedphotovoltaic + energy storage integrated project on the roof of Midea office buildings to offset fossil energyconsumption. In terms of power consumption, energy is saved by the MDV8 Unbounded Multi-splitMachine with digital sensors through space characteristic recognition, system refrigerant temperaturejudgment, and self-adaptive indoor machine air and flow volume. Moreover, by connecting the park'scarbon management system, iBUILDING provides the trading of carbon emission rights and greencertificates. As a model project of zero-carbon building, the park has taken the lead in achieving carbonneutrality. In terms of market expansion, iBUILDING developed its smart construction business fromindustrial parks to hospitals, health care and public facilities in the first half of 2022. In Shanghai TongjiHospital, centering on people and equipment, iBUILDING makes deep involvement of buildingautomation system and new technologies such as cloud computing, bid data, IoT and artificial intelligencein smart building management. For example, the whole process of staff entry and exit is visualized though3D virtual hospital modeling, and the hyper-converged application of building automation system, medicalspecial system and medical information system is realized by using the IOC platform to connectinformation islands. In the He Art Museum (HEM) in Shunde, Foshan, iBUILDING used a digital twinmodel to create a "Virtual HEM", which senses the museum's temperature and humidity as well asmonitors the status of precious collections in the storage cabinet in real time. In the event of abnormalstorage environment, the system will response with an early warning to prevent any damage. Additionally,iBUILDING integrates security, operation and maintenance, elevators, and energy management intounified management to achieve interconnection between devices, customer-oriented experience and full
life cycle management of buildings, effectively supporting the better operation of HEM. In Shenzhen'sMeilin Vanke Center, the Space Tech Energy Management System was built based on iBUILDING. It notonly solves the energy data statistics and predictive analysis of existing buildings but also provides energyoptimization suggestions based on self-developed algorithms, delivering consumption reduction targetsfor building through a smart operation. During the 24th Winter Olympics, Midea Building Technologiesprovided a wide range of products for multiple scenes, from the opening ceremony to the closingceremony, from sports venues to logistical support, and at the window of broadcasting the event globallyand the transportation hub connecting the world. It provided low-carbon, efficient and smart HVACsolutions for Winter Olympic venues and supporting buildings, including the National Stadium "Bird'sNest", the mountain broadcasting center in Zhangjiakou, Shougang Park, the National Speed SkatingStadium, Beijing-Zhangjiakou High-speed Railway, Winter Olympic Village, and Taizicheng Snow Town,helping the event to fulfill its green commitment and safeguarding the holding of the games. In June 2022,the Hetian-Ruoqiang Railway, the last piece of the world's first railway around the desert, officially opened.Midea Building Technologies solved the cooling of the computer room for its communication base stationthrough technology innovation and equipment upgrade. A high-efficiency cooling solution is applied in thecommunication base stations of the stations along the railway, and several air conditioners for confidentialcomputer rooms are deployed in stations' consoles and computer rooms. In overseas markets, MideaBuilding Technologies actively responded to the EU's "2050 Carbon Neutrality" program and stepped upits efforts in the upgrade of heat pump products. Midea's heap pump products started in 2003 and havedeveloped into heat pump water heaters, swimming pool machine heat pumps, commercial heat pumps,and the M thermal and Tri thermal series that integrates space heating and cooling and domestic hotwater, providing customers with reliable, low-carbon and energy-saving comprehensive solutions. Amongthem, the high-efficiency, reliable and environmentally-friendly M thermal series have the highest energyefficiency grade (A+++ at 35°C) and can provide hot water up to 65°C at an extremely low temperatureof -25°C. The ESG series swimming pool machine, the first net zero energy heat pump product developedby Midea, obtained the SGS zero-carbon production line certification. Manufactured by a zero-carbonproduction line, it uses recyclable materials to make the body and packaging, and adopts R32, arefrigerant that is more environmentally friendly. During operation, the clean energy generated from thephotovoltaic panels on the roof is used to connect the energy storage system to save energy and reduceemission. According to the data from Industry Online, in the first half of 2022, the export value of Midea's
heat pump products grew by more than 200% year on year, with its export volume ranking first in China'sheat pump industry.In terms of product innovation, in the first half of 2022, Midea Building Technologies launched variousnew products to strengthen its business in commercial air conditioners, building automation and elevators.For example, the MDV8 Unbounded Multi-split Machine loaded with digital sensors and MDV-Link chipsreconstructs the integrated value of space, air and humans. Midea Fully Variable Frequency Air-CooledChiller (Heat Pump) uses smart technologies to provide heating and cooling in an environmentally-friendly,energy-saving, healthy and safe manner. The energy-saving, comfortable and smart MDV FIT Unit isdesigned for small and medium-sized commercial spaces. The modular evaporative cooling scroll chiller,which combines smart control, high-efficiency and energy-saving, and modules, features independentdual systems and a whole-machine anti-corrosion design. The NYR100 Modular Hot Water ShelterHospital developed in cooperation with Shanghai Aerospace Smart Energy Technology Co., Ltd. ischaracterized by modular prefabrication, convenient installation, environmentally-friendly and energy-saving, safety, and intelligent IoT, ensuring hot water supply for all scenarios in the COVID-19 responsesin an all-around way. MeiKong's cleaning business, KONG DDC M0 new products and shelter hospitalsolutions brings efficient, convenient integrated solutions for medical buildings. LINVOL, a digital andintelligent elevator brand under Midea Building Technologies, released two new villa elevators, "Tianlin"and "Tianyi", the first digital and intelligent passenger elevator series, "Yunhang" (without computer room)and "Yunling" (with computer room), and the iBUILDING smart elevator management platform,empowering smart buildings with brand new digital and intelligent solutions. In terms of technologydevelopment, in the first half of 2022, Midea MDV8 Series Multi-split Air Conditioner (Heat Pump) Unitwas granted the certificates of "professional, characteristic, energy-saving and refined products", low-carbon certification and carbon footprint evaluation in the inspection and assessment by Hefei GeneralMachinery & Electrical Products Inspection Institute (National Quality Supervision and Inspection Centerof Compressors and Refrigeration Equipment). MDV8 VRF was honored with multiple Tick-Markperformance certifications issued by Intertek, three of which are free topology high reliability, ultra-hightemperature stable operation and ultra-high energy efficiency. In April 2022, two of Midea's star products,"Medium- and High-temperature Water Outlet Variable Frequency Direct Drive Centrifugal Unit" and"High-efficiency Modular Integrated Cooling Station", were listed in the "2021 Excellent Cold Source
Products for Data Center Cooling" selected by the China Association of Refrigeration. Specifically, withcore technologies such as advanced aerospace pneumatics, horizontally opposed compression, single-shaft direct drive, two-stage air-entraining and enthalpy-increasing compression, full falling-filmevaporation, high-speed frequency conversion, double anti-surge, extreme-speed start-up and low-temperature operation, Midea's Medium- and High-temperature Water Outlet Variable Frequency DirectDrive Centrifugal Unit reaches the national first-class energy efficiency in the whole series, addressingthe problem of poor energy efficiency, high noise and narrow operating range of traditional medium- andhigh-temperature water outlet centrifugal units. Midea's High-efficiency Modular Integrated CoolingStation integrates the refrigeration host, cold water pump and cooling water pump, among others, in thecontainer, and optimizes the layout of the water system pipeline. It combines system power distributionand system control, matching appropriate system components for different cooling sections. With a smartgroup control system for artificial intelligence, real-time optimization and edge design, the product ischaracterized by high integration, efficient host, smart group control and convenience. With the winnersof the 2022 International Exhibition of Inventions of Geneva announced, Midea Building Technologies’"MDV8 Smart Building Energy Solution" project won the Gold Medal, and its "KONG Cell: EmpoweringTraditional DDC with IoT Technology" and "M-thermal Arctic Heating Heat Pump" projects won the SilverAwards. Meanwhile, its "Maglev Compressor High-precision Control Technology" and "VRF SmartControl Technology" won the 9th Guangdong Patent Gold Award and Silver Award. In early 2022, MideaBuilding Technologies reached strategic cooperation with Nanjing Yangtze River Urban ArchitecturalDesign Co., Ltd., Space Tech and Shanghai Tongji Hospital in cloud computing, big data, informationsecurity and other fields. In April 2022, Midea Building Technologies signed a cooperation agreement on"Co-building a High-efficiency and Energy-Saving Technology Institute" with Xi'an Jiaotong University.Focusing on high-efficiency and energy-saving technology, both parties continue to strengthen in-depthindustry-university-research cooperation in heat exchangers and refrigeration systems based ondevelopment needs. Additionally, Midea Building Technologies and Guangzhou ElectromechanicalInstallation Co., Ltd. signed a strategic cooperation agreement and will work together on projectsnationwide.I. Promoted innovation in robotic product development, accelerated integration and expansion ofthe robotics business for the China market
KUKA, a subsidiary of Midea, is a world-renown robotics manufacturer. Relying on its industry-leadingmovement algorithm, KUKA can ensure superior movement performance of robotics products throughouttheir life cycle, and its mature design concept can continuously give birth to new products able to leadthe market. In the first half of 2022, KUKA continued to promote the innovation of various products andtechnologies. In the software field, KUKA won the German Innovation Award with its new iiQKA roboticoperating system and ecosystem. Relying on its excellent applicability, modern and modular softwarearchitecture, and high performance and flexibility, iiQKA.OS can help improve development efficiency andspeed, and enable users to easily and quickly achieve automation. In the field of general industry, KUKAhas launched new products of LBR IISY Series sensitive and light cooperative robotics. With wideroperating range and effective loads of 11 kg and15 kg respectively, the new robotics products justmentioned can operate through the new iiQKA.OS operating system. Additionally, the new generation ofKR CYBERTECH nano robotics will operate on the KR C5 micro robotics controller, which can ensureexcellent operating accuracy in continuous path motion, and can thus be applied in multiple scenariossuch as PCB assembly, painting, bonding, machining, polishing, packaging and arc welding. In the fieldof warehousing, the second-generation KR QUANTEC PA palletizing robotics of KUKA have a payloadof up to 240 kg, and adopt food-grade NSF H1 lubricant to meet the requirements of the food industry.Specially developed for demanding palletizing tasks, the aforesaid product incorporates optimized weightand gravity center design and improved drive unit, thanks to which it can effectively reduce floor space,increase speed by 10% and significantly shorten working hours. In the medical field, KUKA LBR Med isa certified collaborative robotics applied in medical products. At the International Conference on Roboticsand Automation (ICRA) held in May 2022, KUKA and its partners demonstrated how the LBR Med roboticscould be applied in highly complex and sensitive medical scenarios such as brain tumor biopsies.Considering that the food, medicine and cosmetics industries have special hygiene requirements forrobotic automation, the new "Hygienic Oil" product portfolios and "Hygienic Machine" products of KUKAare designed to avoid potential contamination and meet the highest hygiene requirements, whilemaintaining excellent performance in handling, packaging, palletizing and other application scenarios thatprioritize hygiene requirements. Applied with lubricants compatible with food and boasting smoothsurfaces easy to clean, the "Hygienic Oil" industrial robotics of KUKA also comply with the hygienerequirements of such standards as the EU Machinery Directive 2006/42/EC and the international DINISO 14159.
In the first half of 2022, in terms of market expansion, KUKA and Ford Otosan signed a new frameworkagreement, based on which KUKA will provide more than 700 robotics for the new generation ofelectrically interconnected commercial vehicle project at Ford's Kocaeli Plant in Turkey for such fields asthe production of white vehicle body. KUKA's proprietary technologies also serve the Swedish AutomotiveGroup. Specifically, KUKA provides such services as design and assembly of production lines for thechassis systems of the two new electric vehicles of Swedish Automotive Group at its Southern CaliforniaPlant, and In addition to the assembly of the new fully automated body production line, KUKA is alsoresponsible for the transformation of the original logistics transportation system of the production line,which will include spot welding, self-piercing riveting, flow drilling screw assembly and connection, gluingand other relevant technologies. KUKA robotics provide an automated solution involving flour packaging,delivery and loading for Moulins Bourgeois, a household flour mill in France. KUKA Assembly & TestGmbH and Wiksfors Technology AB have established a strategic partnership to work together in themodular house construction industry and position themselves as providers of "next-generation plant"solutions. KUKA will provide Ellume (an Australian diagnostics company) with 144 KUKA KR AGILUSSeries robotics to expand the automated production capacity of the latter's rapid detector of novelcoronavirus, and this project is worth more than EUR1 million. KUKA and FlexFactor announced theircooperation on "production payment models" at AUTOMATICA, a trade show for robotics and automationtechnology in Munich, in hope of providing adaptive capacity services for customers, so that they canfully focus on product development and customer requirements. The "pay to produce model" has beendeveloped and successfully practiced in the automotive industry, and the manufacturing operation ofKUKA Toledo Base has been using this model to manufacture car body in white since 2006, and hasaccumulated years of experience in this field. Moreover, in April 2022, KUKA was named GM's "Supplierof the Year" for 2021, the sixth time in history.KUKA continuously promotes the integration and expansion of the robotics business in the Chinesemarket and deepens the promotion of organizational reform with a focus on industrial applications andkey customers. KUKA China reaches a record high in order reception, production and delivery. Its productvarieties are further enriched, supply chain bottlenecks such as core components are graduallyaddressed, and operating trend keeps improving overall. Taking opportunity of the explosive investmentin energy expansion of new energy and lithium battery, KUKA China had had more than 20,000 robotics
been ordered by June 2022, manufactured and delivered more than 10,000 robotics in spite of difficultiesbrought by the COVID-19 pandemic and supply chain, and established cooperative relations with BYD,Tesla, NIO, Ningde Times and other top customers in the new energy vehicle industry. Additionally,through value chain collaboration, KUKA China had improved the production capacity of upstream coreparts suppliers, completed the redesign and release of RDC (a core component of control cabinet), andpromoted the localized auxiliary configuration of key materials such as balance cylinder in joint effortswith the aforesaid upstream core parts suppliers, thus effectively supporting the market demand of heavyload robotics, while providing guarantee for the achievement of KUKA China's strategic goals for the nextfive years. KUKA China meets the requirements of rapid market development through continuousbusiness optimization. Adhering to the customer-oriented operation philosophy and the positioning of astartup, KUKA China provides customers with systematic solutions and, in response to the explosivemarket demand, integrates the logistics and mobile robotics businesses of Swisslog, and establishes ateam specially in charge of the logistics automation business to provide complete industrial automationsystem solutions. KUKA China keeps increasing R&D investment, builds its core competitiveness underthe driving of technology and, in spite of the impact of COVID-19, restarts the global exchange programfor R&D personnel to accelerate the progress of Sino-German team cooperation projects. In order tofurther enrich its product family matrix, KUKA China launched 11 new products such as SCARA and AGVrobotics in the first half of 2022. Additionally, KUKA Robotics Guangdong Co., Ltd. obtained thequalification of Guangdong Enterprise Technology Center. The center has built its own laboratory with atotal floor area of more than 10,000 square meters. Equipped with more than 200 sets of precisionequipment, the laboratory has established the highest standard in hardware R&D among all laboratoriesof KUKA worldwide. Enabling all such experiments as drive system verification experiment, motorverification experiment, reducer verification experiment and controller development experiment, thelaboratory can fully address various verification demands at such levels as core components, roboticsnoumenon and system application. Furthermore, the patent technology of "control method, device,computer equipment and storage media for robotics motion" independently developed by KUKA Chinawon the Silver Award of the 9th Guangdong Patent Award. In addition, KUKA has been playing an activepart in raising Midea Group’s intelligent manufacturing level. By June 2022, the robot density of Midea isover 440 units per 10,000 persons. And this number is expected to reach 700 by in the next two yearswith greater investments in this respect.
J. Deepened the long-term incentive and protected the interests of shareholdersIn H1 2022, 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 nine stock option incentive schemes, six restricted share incentive schemes, eight globalpartner stock ownership schemes and five 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 with a total amount of more than RMB69billion since Group listing in 2013. In addition to the consistent dividend payouts, the Company has carriedout a string of share repurchase plans. To further stabilize the market capitalization and protect theshareholders’ interests, the Company has launched share repurchase plans for four consecutive yearssince 2019. And the repurchased shares would be used for equity incentive schemes and employee stockownership schemes. During the period from the beginning of the Reporting Period to the disclosure dateof this Report, Midea has used more than RMB1.8 billion for share repurchases.
2. Core Competitiveness Analysis
A. As one of the leaders among the global household appliance makers and a dominator in themajor appliance sectors, Midea Group provides high-quality, one-stop home solutions through itswide product range.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 and
interaction 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.B. Adherence to the strategy of “Technology Leadership”, global R&D resource integrationcapabilities, a global innovation ecosystem and a scientist system, as well as continuing lead inR&D and technical innovationThe Group is focused on building a globally competitive R&D capability and system. It has established athree-tier technical committee system responsible for the formulation and implementation of technologystrategies. And the four-tier R&D system has been improved with an aim to build world-leading R&Dcapabilities. The interconnected technology strategies and mid- and long-term product planning serve astwo drivers of growth. Midea currently focuses on 11 technologies in a bid to make breakthroughs withkey technologies and achieve technology leadership. It has invested over RMB45 billion in R&D over thepast five years, with the investment of nearly RMB6 billion in H1 2022. In order to deepen its globaltechnology ecosystem in a faster way, the Group has set up a total of 35 research centers in 12 countries.It has over 18,000 R&D personnel and over 500 foreign senior experts. With the “2+4+N” global R&Dnetwork, it has gained the advantage of scale in R&D across the world. Domestically, Midea GlobalInnovation Center in Shunde District, Foshan City and Midea Global Innovation Center in Shanghai arethe cores of Midea’s R&D arm. Overseas, with Midea America Research Center, Midea GermanyResearch Center, Midea Japan Research Center and Midea Italy Research Center as the cores, Mideamakes use of the regional technological advantages, integrates global R&D resources, and buildscomplementary global R&D capabilities. Following the strategy of “Technology Leadership”, it attractsmore professional talent and builds an organic global R&D network.Midea’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 long-term product and technological superiority.While strengthening its global R&D network, Midea also works on constructing an open platform ofinnovative ecosystems. Through deepening the implementation of technology projects to integrate qualitytechnological resources across the world, a global innovation system has been put in place. By way of
integrating various resources of large companies, technology companies, universities, research institutesand innovation consulting agencies, a technology ecosystem has been put in place and continuouslyexpanded, which has access to enormous resources for technological innovation. Additionally, a scientistsystem has been established with eight academician workstations/workshops and 19 academicians onmore than 100 cooperation projects. These projects cover green, energy-saving, health, intelligent,robotics and automaton technologies, among others. In terms of basic research, the Group cooperateswith domestic and foreign scientific research institutions, such as Massachusetts Institute of Technology,University of California, Berkeley, University of Illinois at Urbana-Champaign, Stanford, Purdue University,University of Maryland, The University of Sheffield, Tsinghua University, Shanghai Jiao Tong University,Zhejiang University, the Chinese Academy of Sciences, Harbin Institute of Technology, Xi’an JiaotongUniversity, Huazhong University of Science and Technology and South China University of Technology,in order to establish joint labs for deepening technological cooperation. The Group also upgrades andmake innovations on cooperation models by carrying out strategic cooperation with tech companies suchas BASF, Honeywell, 3M, and SCHOTT to build a global innovation ecosystem through multiple channels.C. 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 leadingproduction 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 18 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 in
a 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.D. A complete and broad channel network and a well-established smart supply chain systemensuring the steady growth of Midea on the domestic marketWith its continuous efforts, Midea has formed a multi-channel network which has a complete businesslayout and covers a wide range of areas, thus meeting the purchase needs of online and offlineconsumers for household appliances. Offline retail outlets have reached more than 140,000. Midea hascreated a network layout of comprehensive household appliance stores, specialty stores of self-ownedproducts, traditional retailers and e-commerce franchise stores. It provides easy access to Midea'sproducts and services, covering the entire market from first-tier cities to townships. Particularly, Mideaboasts a unique exclusive shop system in the industry with more than 20,000 outlets, where variousneeds of users from new decoration to updates can be met in pre-decoration stores, flagship stores,professional stores and other stores. In 2022, Midea combined the exclusive store business and the pre-decoration store business to create “Midea Cloud Sales+”. With a unified platform, unified managementand unified operation, the “Midea Cloud Sales+” ecosystem has been enhanced, with its businesscovering markets of all tiers. Upholding the customer-oriented principle, Midea continuously promotesdigital transformation on the direct retail end, providing customers with digital platform services that areindustry-leading. By providing offline stores with professional digital platform support such as capacityenhancement, purchasing guarantee, and user operation, it can help improve the actuarial rate, orderreview timeliness and logistics efficiency to ensure store supply experience. The Company continues torefine the Midea Cloud Sales App, improve the supply chain capability, and increase logistics efficiency.It also builds an online shopping mall for offline stores through the Midea Home Delivery mini-app,empowering offline retail by using tools such as marketing tool packages, user operation platforms, andthe home delivery platform. Focusing on "smart home" and "whole-house decoration solutions", Mideapromotes deep cooperation with decoration, furnishing, building materials, design and other channels. Ithas built more than 1,300 smart home experience centers. Supported by the “1+N” store network, smart
product suites and the M+Design Designer Club, Midea drives pre-decoration transformation towardsunified supply, operation and services. Thus, it is able to achieve standard operation of stores and provideone-stop service for users, created diversified smart lifestyles for them. In H1 2022, the retail sales onthe pre-decoration market rose by over 100% year on year. Besides, in Pinduoduo, Douyin, Kuaishouand other emerging channels, Midea grows at a faster pace, driving sales and user growth throughmembership operation, as well as the offering of product suites and smart products.Annto, a technological innovation-based provider of new supply chain (logistics) services under MideaGroup, makes full use of digital and big data technologies to refine and manage its comprehensivelogistics network, building a smart and digital integrated logistics service platform. Annto concentrates itsresources on urban distribution and is able to provide fully visualized direct distribution services coveringevery town and village of the country. Relying on more than 140 urban distribution centers nationwide, itcovers more than 99% of towns and villages across the country. It can finish the delivery to 30,739 (orover 77% of) towns and villages within 24 hours and to 37,260 (or over 94% of) towns and villages within48 hours in the country. Additionally, Annto strengthens the shared inventory system for online and offlinechannels and the competitive edge of integrated delivery for the ToB/ToC business, refines its network ofintegrated delivery and installation services, drives connectivity through the whole process frommanufacturing to sale, provides quality service solutions for various orders from customers, as well ascomprehensively better the end user experience.E. A user experience-oriented reform of “Comprehensive Digitalization and ComprehensiveIntellectualization” 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 artificial
intelligence (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 reduce obstacles for man-machine interaction to the minimumand create smart appliances without any assistance in interaction. Focusing on “people and their family”,Midea builds a whole value chain of IoT. Breakthroughs have been made in user data protection, contentoperation for smart scenes, smart connection technology, the smart home ecosystem, cloud platforms,the smart voice function, the big data-based cloud housekeeper services, etc. By doing so, Midea is ableto offer complete smart home solutions for users, as well as to empower its business partners.Upon years of digital transformation characterized by “One Midea, One System, One Standard”, Mideahas successfully materialized operations driven by software and data through its value chain, connectingend to end and covering planning and R&D, Product Ordering, intelligent scheduling, flexiblemanufacturing, coordinative supply, product quality tracking, logistics, installation & post-sale services,etc. The Group’s digital platform has made come true C2M flexible manufacturing, platform-based andmodularized R&D, digitalized production techniques and simulation, intelligent logistics, digital marketing,digital customer service, etc. By way of integrating the IoT capabilities of its AI Innovation Center, SoftwareEngineering Institute, IT Department, IoT Division, Smart Home Business Group, Robotics & AutomationDivision, Building Technologies Division, Digital Innovation Business and other organs, Midea hasestablished a unified IoT technology platform. Its Industrial Internet platform has been upgraded to “M.IoT
2.0”, and four of its factories have been included in the “Global Lighthouse Network” initiated by the WorldEconomic Forum, representing Midea’s powerful technology attribute and strong intelligent manufacturingcapability. These practices are swiftly applied to other Midea manufacturing bases across the world.Based on these “Lighthouse” factories and the “Lighthouse Network”, Midea brings the relevantexperience and services outside the Group to empower ecosystem partners and facilitate thetransformation of China’s manufacturing sector. It has provided the relevant products and services foraround 300 customers in more than 40 market segments. Therefore, it is safe to say that Midea has builta solid foundation regarding Industrial Internet systems. While driving online systems and digitalization,Midea also adopts a systematic data-based approach to governance. A whole new data platform hasbeen put in place to accumulate data assets and achieve integration of online and offline business data,
as well as product and service data. Further, the “User One_ID” system has been refined to provideadequate data support for all business lines.F. Sound corporate governance mechanism and effective incentive scheme to provide a solidfoundation 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 rich management experience and practices in the relevant industries, deepunderstanding and insights of the relevant industries with respect to ToC and ToB, and accurateunderstanding of the industry environment and corporate operations and management. The Company'sadvantages in such systems and mechanisms have laid a solid foundation for the efficient and effectivebusiness operations, as well as the promising, stable and sustainable future development of the Company.At present, the Company has launched nine Stock Option Incentive Schemes, six Restricted ShareIncentive Schemes, eight Global Partner Stock Ownership Schemes and five Business Partner StockOwnership Schemes for key managerial and technical personnel at different levels, in addition to theexploration and practices with respect to diversified stock ownership schemes of key innovativesubordinates. As such, a governance structure has been put in place that aligns the interests of seniormanagement and core business backbones with that of all shareholders, as well as comprises long andshort-term incentives and restrains.
3. Analysis of Main Business
OverviewSee contents under the heading “1. Business Scope in the Reporting Period” above.YoY changes in key financial data:
Unit: RMB’000
| H1 2022 | H1 2021 | YoY Change (%) | Main reasons for change | |
| Operating revenue | 182,661,009 | 173,809,565 | 5.09% | |
| Cost of sales | 140,424,168 | 135,727,446 | 3.46% | |
| Selling and distribution expenses | 14,698,373 | 13,950,077 | 5.36% | |
| General and administrative expenses | 4,951,069 | 4,251,893 | 16.44% | |
| Finance costs | -1,735,418 | -2,321,726 | 25.25% | |
| Research and development expenses | 5,865,033 | 5,314,637 | 10.36% | |
| Investment income | 607,847 | 1,080,896 | -43.76% | Decreased investment income derived in the period of holding financial assets held for trading |
| Losses on disposal of assets | 18,962 | -17,833 | 206.33% | Increased gains on disposal of non-current assets |
| Non-operating expenses | 53,628 | 105,716 | -49.27% | Decreased donation expenditures |
| Income tax expenses | 2,710,551 | 2,407,939 | 12.57% | |
| Net profit attributable to minority interests | 126,901 | 207,399 | -38.81% | Decreased profits of non-wholly-owned subsidiaries |
| Net cash flows from operating activities | 21,394,710 | 20,176,410 | 6.04% | |
| Net cash flows from investing activities | -6,562,852 | 9,137,053 | -171.83% | Decreased cash received from disposal of investments |
| Net cash flows from financing activities | 5,783,043 | -16,559,579 | 134.92% | Decreased cash payments relating to other financing activities |
| Net increase in cash and cash equivalents | 20,760,688 | 12,520,109 | 65.82% | Increased net cash flows from financing activities |
Major changes to the profit structure or sources of the Company in the Reporting Period:
No such cases in the Reporting Period.
Breakdown of operating revenue:
Unit: RMB’000
| H1 2022 | H1 2021 | YoY Change (%) | |||
| Amount | As a percentage of total operating revenue (%) | Amount | As a percentage of total operating revenue (%) | ||
| Total | 182,661,009 | 100% | 173,809,565 | 100% | |
| By business segment | |||||
| Manufacturing | 163,263,193 | 89.38% | 154,065,437 | 88.64% | 5.97% |
| By product category | |||||
| HVAC | 83,236,383 | 45.57% | 76,408,470 | 43.96% | 8.94% |
| Consumer appliances | 66,334,685 | 36.31% | 64,964,319 | 37.38% | 2.11% |
| Robotics, automation systems and other manufactured products | 13,692,125 | 7.50% | 12,692,648 | 7.30% | 7.87% |
| By geographical segment | |||||
| PRC | 104,822,467 | 57.39% | 99,850,129 | 57.45% | 4.98% |
| Outside PRC | 77,838,542 | 42.61% | 73,959,436 | 42.55% | 5.24% |
The Company’s five business segments, namely the Smart Home Business Group, the Industrial
Technology Business Group, the Building Technologies Division, the Robotics & Automation Division, andthe Digital Innovation Business recorded revenue of RMB125.9 billion (up 3.48% year-on-year), RMB12.1billion (up 13.26% year-on-year), RMB12.2 billion (up 33.09% year-on-year), RMB12.2 billion (up 2.15%year-on-year), and RMB5.2 billion (up 42.37% year-on-year) respectively during the Reporting Period.Business segments, products or geographical segments contributing over 10% of the operating revenueor profit?Applicable □N/A
Unit: RMB’000
| Operating Revenue | Cost of sales | Gross profit margin | YoY change of operating revenue (%) | YoY change of cost of sales (%) | YoY change of gross profit margin (%) | |
| By business segment | ||||||
| Manufacturing | 163,263,193 | 123,371,723 | 24.43% | 5.97% | 4.30% | 1.21% |
| By product category | ||||||
| HVAC | 83,236,383 | 65,712,490 | 21.05% | 8.94% | 7.14% | 1.33% |
| Consumer appliances | 66,334,685 | 46,958,140 | 29.21% | 2.11% | -0.44% | 1.81% |
| Robotics, automation systems and other manufactured products | 13,692,125 | 10,701,093 | 21.84% | 7.87% | 9.41% | -1.10% |
| By geographical segment | ||||||
| PRC | 104,822,467 | 80,102,964 | 23.58% | 4.98% | 3.05% | 1.43% |
| Outside PRC | 77,838,542 | 60,321,204 | 22.50% | 5.24% | 4.01% | 0.92% |
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 period is calculated based onadjusted statistical standards at the end of the Reporting Period
□Applicable ?N/A
Reason for any over 30% YoY movements in the data above
□Applicable ?N/A
4. Analysis of Non-Core Business
□Applicable ?N/A
5. Assets and Liabilities
5.1 Material changes of asset items
Unit: RMB’000
| 30 June 2022 | 31 December 2021 | Change in percentage | Explanation about any material change | |||
| Amount | As a | Amount | As a | |||
percentage of
total assets
(%)
| percentage of total assets (%) | percentage of total assets (%) | (%) | ||||
| Cash at bank and on hand | 76,701,938 | 18.57% | 71,875,556 | 18.53% | 0.04% | |
| Accounts receivable | 29,586,420 | 7.16% | 24,636,440 | 6.35% | 0.81% | |
| Contract assets | 4,264,364 | 1.03% | 3,823,476 | 0.99% | 0.05% | |
| Inventories | 36,750,838 | 8.90% | 45,924,439 | 11.84% | -2.94% | |
| Investment properties | 826,593 | 0.20% | 859,195 | 0.22% | -0.02% | |
| Long-term equity investments | 3,769,304 | 0.91% | 3,796,705 | 0.98% | -0.07% | |
| Fixed assets | 23,473,308 | 5.68% | 22,852,848 | 5.89% | -0.21% | |
| Construction in progress | 3,590,625 | 0.87% | 2,690,930 | 0.69% | 0.18% | |
| Right-of-use assets | 2,257,416 | 0.55% | 2,297,354 | 0.59% | -0.05% | |
| Short-term borrowings | 10,658,682 | 2.58% | 5,381,623 | 1.39% | 1.19% | |
| Contract liabilities | 24,331,594 | 5.89% | 23,916,595 | 6.16% | -0.27% | |
| Long-term borrowings | 26,646,374 | 6.45% | 19,734,020 | 5.09% | 1.36% | |
| Lease liabilities | 1,547,117 | 0.37% | 1,533,552 | 0.40% | -0.02% |
5.2 Main assets overseas
□Applicable ?N/A
5.3 Assets and liabilities measured at fair value
?Applicable □N/A
Unit: RMB’000
| Item | Opening balance | Profit or loss from change in fair value during the period | Cumulative fair value change charged to equity | Amount provided for impairment in the period | Purchased in the period | Sold in the period | Other changes | Closing balance |
| Financial assets | ||||||||
| 1. Financial assets held for trading (excluding derivative financial assets) | 5,879,202 | -335,682 | - | - | 1,112,599 | 3,425,460 | 34,982 | 3,265,641 |
| 2. Derivative financial assets | 1,298,815 | -351,418 | -364,172 | - | 37,026 | 6,072 | 8,283 | 622,462 |
| 3. Receivables financing | 10,273,552 | - | - | - | 3,798,896 | - | - | 14,072,448 |
| 4. Other debt investments and others | 27,484,322 | - | - | - | 2,830,000 | 7,992,716 | 564,464 | 22,886,070 |
| 5. Investments in other equity instruments | 45,747 | - | - | - | - | 2,062 | -308 | 43,377 |
| 6. Other non-current financial assets | 5,912,873 | -394,470 | - | - | 1,581,046 | 85,777 | 62,692 | 7,076,364 |
| Sub-total of financial assets | 50,894,511 | -1,081,570 | -364,172 | - | 9,359,567 | 11,512,087 | 670,113 | 47,966,362 |
Investment properties
| Investment properties | ||||||||
| Productive living assets | ||||||||
| Others | ||||||||
| Sub-total of the above | 50,894,511 | -1,081,570 | -364,172 | - | 9,359,567 | 11,512,087 | 670,113 | 47,966,362 |
| Financial liabilities | 166,649 | 115,087 | 416,521 | - | 1,789,514 | 17,056 | -4,258 | 2,466,457 |
Contents of other changesOther changes were primarily differences on translation of foreign currency financial statements andinterest income.Whether there were any material changes on the measurement attributes of major assets of the Companyduring the Reporting Period
□ Yes ? No
5.4 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.
6. Investment Made
6.1 Total investment amount
?Applicable □N/A
| Total investment amount of the Reporting Period (RMB’000) | Total investment amount of the same period of last year (RMB’000) | YoY Change (%) |
| 60,554,514 | 70,538,082 | -14.15% |
6.2 Significant equity investment made in the Reporting Period
□Applicable ?N/A
6.3 Significant non-equity investments ongoing in the Reporting Period
□Applicable ?N/A
6.4 Financial investments
6.4.1 Securities investments
?Applicable □N/A
Unit: RMB’000
| Type of securities | Code of securities | Abbreviation of securities | Initial investment cost | Measurement method | Opening carrying amount | Profit or loss from change in fair value during the period | Cumulative fair value change charged to equity | Purchased in the period | Sold in the period | Profit or loss in the period | Closing carrying amount | Accounting title | Funding source |
| Overseas listed stock | 1810 | XIAOMI-W | 769,972 | Fair value method | 927,158 | -262,253 | 34,982 | -262,253 | 699,887 | Financial assets held for trading | Own funds | ||
| Overseas listed stock | SOUN | SoundHound AI | 157,203 | Fair value method | - | -164,362 | 6,696 | 225,806 | -164,362 | 68,140 | Other non-current financial assets | Own funds | |
| Domestically listed stock | 688165 | EFORT | 178,534 | Fair value method | 392,312 | -36,312 | - | - | -36,312 | 356,000 | Financial assets held for trading | Own funds | |
| Domestically listed stock | 688159 | Neoway | 31,600 | Fair value method | - | -16,908 | - | 60,308 | - | -16,908 | 43,400 | Financial assets held for trading | Raised funds |
| Domestically listed stock | 688162 | JEE | 88,180 | Fair value method | - | -133,187 | - | 317,779 | - | -133,187 | 184,592 | Other non-current financial assets | Raised funds |
| Domestically listed stock | 301135 | Real-Design | 40,000 | Fair value method | - | 33,884 | - | 40,000 | - | 33,884 | 73,884 | Other non-current financial assets | Raised funds |
| Domestically listed stock | 688097 | BOZHON | 55,000 | Fair value method | - | -40,785 | - | 144,743 | - | -40,785 | 103,958 | Other non-current financial assets | Raised funds |
| Total | 1,320,489 | -- | 1,319,470 | -619,923 | 41,678 | 788,636 | - | -619,923 | 1,529,861 | -- | -- | ||
6.4.2 Derivatives investments
?Applicable □N/A
Unit: RMB’000
| Operating party | Relationship with the Company | Related transaction | Type of derivative | Initial investment amount | Starting date | Ending date | Opening investment amount | Purchased in Reporting Period | Sold in Reporting Period | Amount provided for impairment | Closing investment amount | Closing investment amount as a percentage of the Company’s closing net assets | Actual gain/loss in Reporting Period |
| Futures company | No | No | Futures contracts | 71,790 | 01/01/2022 | 31/12/2022 | 71,790 | -365,081 | -0.2816% | -238,108 | |||
| Bank | No | No | FX derivatives | 902,875 | 01/01/2022 | 31/12/2022 | 902,875 | 14,465 | 6,072 | -118,284 | -0.0912% | -894,709 | |
| Total | 974,675 | -- | -- | 974,675 | 14,465 | 6,072 | -483,365 | -0.3728% | -1,132,817 | ||||
| Source of derivatives investment funds | All from the Company’s own funds | ||||||||||||
| Litigation involved (if applicable) | N/A | ||||||||||||
| Disclosure date of the announcement about the board’s consent for the derivative investment (if any) | 30/04/2022 | ||||||||||||
| Disclosure date of the announcement about the general meeting’s consent for the derivative investment (if any) | - | ||||||||||||
| Risk analysis of positions held in derivatives during the Reporting Period and explanation of control measures (Including but not limited to market risk, liquidity risk, credit risk, operational risk, legal risk, etc.) | For the sake of eliminating the cost risk of the Company's bulk purchases of raw materials as a result of significant fluctuations in raw material prices, the Company not only carried out futures business for some of the materials, but also made use of bank financial instruments and promoted forex funds business, with the purpose of avoiding the risks of exchange and interest rate fluctuation, realizing the preservation and appreciation of forex assets, reducing forex liabilities, as well as achieving locked-in costs. The Company has performed sufficient evaluation and control against derivatives investment and position risks, details of which are described as follows: 1. Legal risk: The Company's futures business and forex funds businesses shall be conducted in compliance with laws and regulations, with clearly covenanted responsibility and obligation relationship between the Company and the agencies. Control measures: The Company has designated relevant responsible departments to enhance learning of laws and regulations and market rules, conducted strict examination and verification of contracts, defined responsibility and obligation well, and strengthened compliance check, so as to ensure that the Company's derivatives investment and position operations meet the requirements of the laws and regulations and internal management system of the Company. 2. Operational risk: Imperfect internal process, staff, systems and external issues may cause the Company to suffer from loss during the course of its futures business and forex funds business. Control measures: The Company has not only developed relevant management systems that clearly defined the assignment of responsibility and approval process for the futures business and forex funds business, but also established a comparatively well-developed monitoring mechanism, aiming to effectively reduce operational risk by strengthening risk control over the business, decision-making and trading processes. 3. Market risk: Uncertainties caused by changes in the prices of bulk commodity and exchange rate fluctuations in foreign exchange market could lead to greater market risk in the futures business and forex funds business. Meanwhile, inability to timely raise sufficient funds to | ||||||||||||
establish and maintain hedging positions in futures operations, or the forex funds required forperformance in forex funds operations being unable to be credited into account could also resultin loss and default risks.Control measures: The futures business and forex funds business of the Company shall alwaysbe conducted by adhering to prudent operation principles. For futures business, the futurestransaction volume and application have been determined strictly according to the requirementsof production & operations, and the stop-loss mechanism has been implemented. Besides, todetermine the prepared margin amount which may be required to be supplemented, the futuresrisk measuring system has been established to measure and calculate the margin amountoccupied, floating gains and losses, margin amount available and margin amount required forintended positions. As for forex funds business, a hierarchical management mechanism has beenimplemented, whereby the operating unit which has submitted application for funds businessshould conduct risk analysis on the conditions and environment affecting operating profit andloss, evaluate the possible greatest revenue and loss, and report the greatest acceptable marginratio or total margin amount, so that the Company can update operating status of the fundsbusiness on a timely basis to ensure proper funds arrangement before the expiry dates.
| establish and maintain hedging positions in futures operations, or the forex funds required for performance in forex funds operations being unable to be credited into account could also result in loss and default risks. Control measures: The futures business and forex funds business of the Company shall always be conducted by adhering to prudent operation principles. For futures business, the futures transaction volume and application have been determined strictly according to the requirements of production & operations, and the stop-loss mechanism has been implemented. Besides, to determine the prepared margin amount which may be required to be supplemented, the futures risk measuring system has been established to measure and calculate the margin amount occupied, floating gains and losses, margin amount available and margin amount required for intended positions. As for forex funds business, a hierarchical management mechanism has been implemented, whereby the operating unit which has submitted application for funds business should conduct risk analysis on the conditions and environment affecting operating profit and loss, evaluate the possible greatest revenue and loss, and report the greatest acceptable margin ratio or total margin amount, so that the Company can update operating status of the funds business on a timely basis to ensure proper funds arrangement before the expiry dates. | |
| Changes in market prices or fair value of derivative products during the Reporting Period, specific methods used and relevant assumption and parameter settings shall be disclosed for analysis of fair value of derivatives | 1. Loss from futures contracts during the Reporting Period was RMB-238.108 million. 2. Loss from FX derivatives during the Reporting Period was RMB-894.709 million. 3. Public quotations in futures market or forward forex quotations announced by the Bank of China are used in the analysis of derivatives fair value. |
| Explanation of significant changes in accounting policies and specific financial accounting principles in respect of the Company's derivatives for the Reporting Period as compared to the previous Reporting Period | No change |
| Special opinions expressed by independent directors concerning the Company's derivatives investment and risk control | The Company's independent directors are of the view that the futures hedging business is an effective instrument for the Company to eliminate price volatility and implement risk prevention measures through enhanced internal control, thereby improving the operation and management of the Company; the Company's foreign exchange risk management capability can be further improved through the forex 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. |
6.5 Use of funds raised
□ Applicable ? N/A
No such cases in the Reporting Period.
7. Sale of Major Assets and Equity Interests
7.1 Sale of major assets
□Applicable ?N/A
No such cases in the Reporting Period.
7.2 Sale of major equity interests
□Applicable ?N/A
8. Analysis of Major Subsidiaries
?Applicable □N/AMain subsidiaries and joint stock companies with an over 10% influence on the Company’s net profit
(in RMB million)
| Company name | Company type | Business scope | Registered capital | Total assets (in RMB million) | Net assets (in RMB million) | Operating revenue (in RMB million) | Operating profit (in RMB million) | Net profit (in RMB million) |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | Subsidiary | Manufacturing of home appliances | USD72 million | 20,630 | 8,977 | 8,870 | 1,006 | 888 |
| Wuxi Little Swan Electric Co., Ltd. | Subsidiary | Manufacturing of laundry appliances | RMB100 million | 20,036 | 6,787 | 10,605 | 905 | 868 |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | Subsidiary | Manufacturing of home appliances | USD42 million | 17,745 | 9,234 | 3,232 | 464 | 441 |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | Subsidiary | Manufacturing of water heaters | RMB60 million | 16,537 | 2,589 | 6,758 | 950 | 823 |
Acquisition and disposal of subsidiaries during the Reporting Period?Applicable □N/AThe detailed information of major subsidiaries included in the consolidation scope in the current period isset out in Notes 5 and 6. Entities newly included in the consolidation scope in the current period throughacquisition mainly include Midea Capital Co., Ltd. and its subsidiaries (including structured entities),WuHan TTium Motor Technology Co., Ltd. and its subsidiaries, as well as Shaanxi ConstructionInvestment Group Co., Ltd. (please refer to Note 5(1)), while details of those through incorporation canbe found in Note 5(2)(a). The detailed information of subsidiaries no longer included in the consolidation
scope in the current period is set out in Note 5(2)(b).Particulars about major subsidiariesN/A
9. Structured Entities Controlled by the Company
?Applicable □N/AAs of the end of the Reporting Period, two structured entities were included in the Group’s consolidatedfinancial statements, which are both private-equity funds controlled by the Group. As a manager andinvestor of the structured entities, the Group has relevant management power in and variable returnsfrom these entities, and has the ability to exercise its management power to impact the returns.
10. Outlook for the Future Development of the Company
Development strategies of the CompanyMidea adheres to the strategic focus of “Technology Leadership, Direct to Users, Digitization &Intelligence Driven, and Global Impact”, focuses on “Comprehensive Digitalization and ComprehensiveIntellectualization”, and drives sustained growth in the five business segments under the guidance of thestrategic focus. Midea are built to grow on the back of advanced governance mechanism, future-proofvalues, and managerial mindset growth. Midea will continuously improve the governance mechanism byempowering responsibilities, rights and obligations, clarify decentralization and authorization, constantlyrefine the agent mechanism, optimize the incentive and constraint system, encourage entrepreneurshipand boost organizational vitality, and establish a flat organization and optimization process. It will alsoadhere to the values of long-termism and altruism, truly put employees, users, customers and partnersat the center of all things, and improve the EHS governance and ESG rating. Additionally, theManagement will keep reflecting on and challenging themselves, endeavoring to achieve all-round growthboth spiritually and intellectually. Meanwhile, Midea will continue to improve the talent structure, builddiverse teams that are inclusive and collaborative, further strengthen diversity, openness andinclusiveness, and create a simple, straightforward, flat and equal environment. In the meantime, it willconstantly improve consistency management across the Group, so as to achieve consistent operations,corporate culture and values and philosophies, which will ensure the sustained and steady development
of the Company. Midea integrates global resources, follows the customer-oriented principle, and buildskey technology barriers by way of technological innovation and quality improvement, so as to achieveglobal leadership with respect to principal product categories and new business breakthroughs, as wellas to maintain technology leadership. It aims to establish direct connection with customers in terms ofmindsets, products, buying, services, etc. through digitalization and intellectualization in its operations.Supported by data- and platform-based operations in the whole value chain, Midea strives to boost itsbusiness competitiveness and become more competitive in the digital era by implementing the strategyof “Digitization & Intelligence Driven”. It will also promote global operations and try to lay a solid foundationin this regard and enhance global impact through promoting its own branded products. It will promoteefficiency driven growth by improving management, manufacturing and asset efficiency to create morecost efficiency. Additionally, it will strengthen its ToB business to build new business platform and growthpoints. It aims to create a better life for over 400 million users, major customers and strategic partners indifferent areas worldwide every year with satisfying products and services.Key operation points in H2 2022:
In H2 2022, based on the core strategic focus with “Technology Leadership” as the core, Midea willpromote development both in the ToB and ToC business, as well as adhere to the annual operationalprinciple of “rational revenue, and recovery of profitability”. As Midea Group’s revenue exceeded RMB300billion in 2021, it needs to respect market rules and trends more than ever. It needs to find certaintiesamid uncertainties and place importance on the quality of growth. The ability to innovate continuously iskey to building a vigorous and ever-lasting business. Therefore, Midea will continue to makebreakthroughs and innovations in products, technologies, business models, etc. Meanwhile, Midea needsto return to the nature of business, focus on product mix, efficiency and cash flow improvement, andprovide products with high added value that comprise high technology content and can satisfydifferentiated needs, in pursuit of more value for users. Core competitiveness is central to sustainedgrowth. Through building product, technological and innovation competitiveness in the home appliancesector, Midea will create stronger core competitiveness. The accumulation of competitiveness in the corebusiness will in turn support Midea’s transformation from the ToC business to the ToB business. Specificpriority tasks are set out below:
a. Based on the core strategy of “Technology Leadership”, Midea will establish a comprehensive researchorganization, increase investment in digitalization and R&D, improve talent structure, and carry out thetask of scientific innovation, product innovation, technological innovation, business model innovation, andprocess innovation. Midea will resolutely increase R&D investment, build up R&D scale advantage, andcontinuously lay out key technologies, cutting-edge technologies, basic technologies, digitalization andintellectualization. By virtue of the two drivers of technology strategy and product strategy, as well asinnovation mechanism assurance of the three-tier technical committee and the four-tier R&D system,Midea will pool together its R&D strength and continuously drive core technology breakthroughs in energysaving, energy storage, health, green development, etc. by adopting a joint innovation model, in pursuitof a stronger presence in the technology world. It will actively respond to China’s dual-carbon strategyand carry on with its "Green Strategy", apply eco-friendly and low-carbon technology to products bytechnology innovation, help to save energy and reduce emissions in the life cycle of products, and leadthe formulation of green standards in a deep manner to obtain the national green product certification ofall categories of products. To promote the rapid application of scientific innovation through standardization,it will implement the "3+1" strategy for standardization, drive technological standardization for innovationsin green development, energy saving, intelligent technologies, as well as healthy, comfortable andconvenient technologies, etc., and strengthen the formulation and revision of international standards. Forthe purpose of making breakthroughs and building key technology barriers in all the product categories,and promoting innovation of global products, product structure improvement and high-end strategy, it willcontinue to implement the "Three Generations" project, accelerate the application of research results,and retain the "Number One Engine" of ToC business. In ToB business, it will cooperate with strategicpartners by digital technology to increase the research on differentiated innovation technologies in newindustries and foster the industrialization of innovation technologies. Also, it will continuously build thescientist system, vigorously introduce high-end talent, and constantly refine the R&D network. Based onregional technology advantages, it will continue to improve the "2+4+N" R&D network, increase thecomprehensive strength of overseas R&D centers, and build an innovation mechanism for the“Technology Leadership” strategy, so as to maintain technology leadership in a comprehensive manner.b. Midea will keep a high-quality development direction and stick to internal, sustained and effectiveorganic growth. In the process of implementing new strategies to boost new growth areas, the key for
Midea's survival in competition lies in improving operational efficiency. Therefore, Midea will optimize thedelivery cycle, enhance the inventory turnover, improve the cash cycle, and implement the sharedinventory system. Being customer-oriented, Midea will strive to be “Direct to Users” through user research,user insight, product plan transforming and user operation. Midea will promote the T+3 business modelreform and high-performance operations in the whole value chain in every link from product planning toafter-sales service, so as to increase efficiency in the whole value chain and the data-driven efficiency.Channel reform will be firmly pushed forward for the front-end market in pursuit of better profitability. Inorder to win in competition, it is important to develop high-end products to refine the product mix.Breakthroughs must be made in a faster manner regarding small appliances and upgrading of the majorappliance business must be accelerated, in addition to the promotion of products catering to newconsumption trends. Midea will plan for, establish and refine business middle platforms, especially dataand technology middle platforms. In the meantime, it will maintain overall consistency by sticking to “OneMidea, One System, One Standard”. In face of common problems such as fluctuations in exchange ratesand prices of bulk raw materials, as well as sourcing management, Midea will firmly promote its internalcoordination and sharing mechanism and keep perfecting the relevant solutions. It will also maintaineffective investments, control non-operating expenses, increase labor productivity, improve humanresource allocation efficiency, promote lean management and provide fresh impetus for continual growththrough relentless innovation.c. In the domestic market, based on the “Direct to Users” strategy, Midea will continue to deepen thereform of its organizational structure, improve retail capacity, and develop user insights and back-endcapacity. Midea will also commit itself to intelligent experience terminals and user experience as part ofefforts to connect with users' preferences. In terms of channel reform, the Company will deepen marketingchanges and simplify delivery rules with a focus on terminal retail, and set up a professional team in theregional headquarters and operation center in China with a focus on retail capability and user operation.While organizing organizational reform, the Company will continuously strengthen the principle of "OneMidea, One System and One Standard", give full play to collaborative advantages, and do well in result-oriented process control to achieve constant improvement of operating efficiency. The Company will,based on digital systems and tools, invest special resources to ensure the implementation of the threecore projects of "full life cycle management of stores", "transformation of existing stores" and "optimization
of all-inclusive retail", while increasing intelligent investment to strengthen the capacity building of datamiddle office and business intelligence (BI). As to the reform of online channel, the Company will mainlyfocus on such aspects as product structure upgrade, omni-channel and hierarchical product management,scale expansion of high-end brands, and enhancement of content broadcast capability. Supply chaincapability will also be improved to satisfy the needs of customers and users while improving turnoverefficiency. In terms of product marketing, the Company will strengthen branding and product suites-basedoperation to provide users with a full set of household appliances solutions. Furthermore, the Companywill continue to, centering around product structure upgrade, promote the implementation of intelligentscenes and the construction of whole-house intelligent decoration center, create a terminal for immersiveexperience of Midea smart home, and cultivate the core capability of providing whole-house intelligentsolutions. In terms of user operation and service, the Company will continue to, centering around theprinciple of "creating value for users" and the orientation of user experience, improve the iteration ofproduct design and experience of purchase services, optimize the rights and interests of members, andaccelerate the construction of private domain traffic platform. Moreover, the Company will keepstrengthening the retail empowerment of "people, goods and stores", deepen terminal transformation ina user-centered manner, and further transform to active service, strengthen diversified skill certificationand optimize user access experience. The Company will also improve its distribution capability to achievethe integration of delivery and installation that can ensure direct access to users, improve the operationsystem of service engineers, and continue to promote the cultivation of suite-based service outlets toenable such outlets to gradually achieve such capabilities as full-category service capability, pre-installation service capability, and whole-house intelligent scene-oriented service capability. Additionally,further progress will be made in the reform of such services as green recycling, active service andintelligent customer service construction, so that users can truly enjoy one-stop service experience.d. On the overseas market, Midea will continuously optimize the product structure, build experiencecenters for overseas users with intelligent-based scene, and comprehensively promote the whole-houseintelligent scene system and the upgrade of intelligent terminals to build a product competition systemwith high added value. It will improve channel efficiency and flattening, enhance product turnoverefficiency, explore direct retail and the shared inventory system, and attempt to implement the DTCbusiness model. In response to building the capabilities of terminal retail operation and direct access to
users, it will continue to improve the breadth and depth of the network layout of offline channels, expandthe coverage of overseas sales outlets, and drive retail transformation and the “Direct to Users” capability.Also, to enhance the competitiveness of online channels, it will accelerate the key capacity building ofoverseas e-commerce, and improve cross-border logistics, user research and digital marketing. It willpropel the digital transformation and reform of overseas business, improve logistics and storage capacityin the project of global digitization, optimize the network of after sales service and spare parts, andpromote the overseas iService3.0 digital after-sales service system. It will strengthen local manufacturingcoordination to greatly shorten the delivery cycle and increase product competitiveness. Furthermore, itwill propel the end-to-end process sorting and reconstruction in business scenes of export, and improveaccuracy, consistency and visualization of data flow to make progress in operation efficiency of valuechain.In the second half of 2022, the impact of COVID-19, currency fluctuations and other factors is expectedto persist. TLSC will continue to strengthen the close cooperation with key customers to jointly andproactively address various risks, and ensure the improvement of its profitability capability throughoptimizing price strategy, improving product structure and channel system, and strictly controllingexpenditure. Meanwhile, it will, through deepening the collaboration with the Group and relevant productdivisions, further promote the improvement of product quality, and ensure the launch schedule of newproducts and the supply of products, while doing well in medium and long-term product planning.e. In the second half of 2022, COLMO will focus on the whole process service capability of "VillaIntelligence Expert", gain deep insight into the mansion decoration needs of high-end users, establishand improve the three major capabilities of intelligent design, fine installation and personality debugging,provide whole-house intelligent services and experience that meet the needs of high-end users, and paycontinuous efforts to build "Villa Intelligence Expert" into a leader in whole-house intelligence that leadsthe high-end market. The Toshiba brand will still take suite-based measures to, following the goal ofcreating popular single products, build the brand mindset and reinforce the star life label of Toshiba.Specifically, Toshiba will center around the construction of terminal halls and the building of benchmarkstores on one hand, and on the other hand, it will leverage the strength of brand to continuously empowerrelevant businesses, help achieve sales growth, and finally build "Toshiba" into the second engine of the
Company oriented at the high-end market. The WAHIN brand will continue to focus on young user groupsby virtue of the job-hunting season on campus and school-enterprise cooperation, and will work to expandits user base through cross-border cooperation with brands targeting different user groups. Meanwhile,the brand will further attract the attention of young user groups through holding interesting activities suchas "store manager employment" and constantly exploring new methods and means for young user groupsto enjoy home appliances, thus improving the marketing mode of e-commerce brands and driving salesgrowth by branding.f. Midea will keep promoting the reform of core businesses and digital empowerment, with a focus onsuch projects as digital empowerment of the operating center, experience optimization of the Midea CloudSales App, improvement of procurement experience, cloud warehouse, whole-chain inventory sharing,and whole-house C2M, so as to improve the experience of end users and empower channel dealers.Moreover, Midea will build a global order and planning center with the integrated supply chain project(ISC) as the core, improve the flexible delivery capability and delivery efficiency of the whole value chaincentering around the collaboration between production and marketing, and build a future-oriented globaloperation model through G400 project. Midea will also strengthen the digital construction of ToB businesssegment to facilitate the building of model and digital template for ToB business, promote thecomprehensive micro-service transformation of digital system architecture to achieve architectureupgrade and agile delivery, and intensify efforts on the construction of underlying digital capabilities topromote the in-depth integration of digital forecasting, decision-making capabilities and artificialintelligence into the whole value chain involving such links as operation management and productdevelopment.g. Midea will dedicate itself to driving new growth in the core ToB business, constantly expand thebusiness boundaries and accelerate business growth, and rapidly layout, enter into and occupy themarket of new business. In H2 2022, focusing on the field of new energy automobile parts, Midea willrealize the comprehensive improvement in customers, products and manufacturing capabilities, that is, itwill shift to mass production from project acquisition to cover more mainstream customers, improvecompetitiveness in three major product lines (i.e. thermal management, electric drive, chassis) and othertechnical fields to gradually implement the development plan of "Parts - Components - Systems", and
carry out mass production at the new base in Anqing, Anhui. In the field of industrial automation, theCompany will, making full use of its technology accumulation in the servo field and in combination withdifferent characteristics and needs of segmented markets, strictly control supply chain risks, provide newproducts and systematic comprehensive solutions, make breakthroughs in localization of reducerproducts, achieve rapid transformation in marketing model, expand new channel resources, stabilize topcustomers, and seize market opportunities. In the field of core components, the Company will makebreakthroughs in overseas strategic layout, and promote the successful mass production of its plants inIndia and the completion and operation of the TTium plant in Vietnam. Furthermore, the Company willincrease the investment in R&D resources, constantly improve the strength of technological innovation,make continuous breakthroughs in new products, new technologies and new scenes, and launch newproducts such as new integrated compressors and lightweight commercial refrigeration compressors withlarge discharge capacity to create value for customers. The Company will also set up an overseasprofessional service platform to provide one-stop services for small and medium-scale customers andspecial services for large-scale customers, so as to achieve breakthroughs in large-scale customersoverseas and increase its share in global market. Additionally, breakthroughs will be made in the massproduction and sales of chips, and six new products will be developed as planned.h. 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 new energy, general industrial manufacturing, electronics, medical care and logistics,services, etc. Concerning operation, it will concentrate on R&D, supply chain management, high-performance operations and digitalization, among others, so as to build the core competitiveness of therobotics and industrial automation business in a faster manner.Risks Faced by the Company and Countermeasures:
a. Risk associated with the COVID-19 pandemicThe 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, social
distancing, 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, plastics and aluminum. 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 onthe 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 2022. 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.
Section IV Corporate Governance
1. Annual and Extraordinary General Meetings of Shareholders Convened during theReporting Period
1.1 General meetings of shareholders convened during the Reporting Period
| Meeting | Type | Investor participation ratio | Convened date | Disclosure date | Resolution of the meeting |
| First Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 59.06% | 14 January 2022 | 15 January 2022 | Announcement No. 2022-002 on Resolutions of First Extraordinary General Meeting of Shareholders of 2022, disclosed on www.cninfo.com.cn |
| Second Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 58.19% | 11 March 2022 | 12 March 2022 | Announcement No. 2022-012 on Resolutions of Second Extraordinary General Meeting of Shareholders of 2022, disclosed on www.cninfo.com.cn |
| 2021 Annual General Meeting of Shareholders | Annual | 58.31% | 20 May 2022 | 21 May 2022 | Announcement No. 2022-035 on Resolutions of 2021 Annual General Meeting of Shareholders, disclosed on www.cninfo.com.cn |
| Third Extraordinary General Meeting of Shareholders of 2022 | Extraordinary | 57.61% | 24 June 2022 | 25 June 2022 | Announcement No. 2022-068 on Resolutions of Third Extraordinary General Meeting of Shareholders of 2022, disclosed on www.cninfo.com.cn |
1.2 Extraordinary general meetings of shareholders convened at the request of preferenceshareholders with resumed voting rights
□ Applicable ? N/A
2. Changes in Directors, Supervisors and Senior Management?Applicable □N/A
Name
| Name | Office title | Type of change | Date | Reason |
| Cai Weiding | Chief Financial Officer | Former | 29 January 2022 | Personal reason |
| Zhao Wenxin | Chief Human Resource Officer | Appointed | 23 February 2022 | |
| Zhong Zheng | Chief Financial Officer | Appointed | 23 February 2022 | |
| Bai Lin | Vice President | Appointed | 31 May 2022 |
3. Preliminary Plan for Profit Distribution and Converting Capital Reserves into ShareCapital for the Reporting Period
□ Applicable ? N/A
The Company plans not to distribute cash dividends or bonus shares or convert capital reserves intoshare capital for the first half of 2022.
4. Implementation of any Equity Incentive Scheme, Employee Stock OwnershipScheme or Other Incentive Measures for Employees?Applicable □N/A
4.1 Equity incentive schemes
A. Overview of the Fifth Stock Option Incentive Schemea. The Company convened the Seventh Meeting of the Fourth Board of Directors on 28 April 2022, atwhich the Proposal for the Retirement of Unexercised Reserved Stock Options under the Fifth StockOption Incentive Scheme upon Expiry was approved. As such, 58,000 stock options of five awardees thathad been unexercised upon expiry were retired.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Retirement of Unexercised Stock Options in the First Grant under the Fifth StockOption Incentive Scheme upon Expiry was approved. As such, 30,270 stock options of five awardees thathad been unexercised upon expiry were retired.c. At the above-mentioned meeting, the Proposal for the Retirement of Unexercised Reserved StockOptions under the Fifth Stock Option Incentive Scheme upon Expiry was approved. As such, 260,000stock options of 18 awardees that had been unexercised upon expiry were retired.
d. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the exercise price for the first grant under the Fifth Stock Option Incentive Scheme was revised fromRMB51.88 to RMB50.21 per share, and the exercise price for the reserved stock options under the FifthStock Option Incentive Scheme was revised from RMB42.71 to RMB41.04 per share.e. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the First Grant under the Fifth Stock Option Incentive Scheme wasapproved. It was agreed to adjust the awardees and their exercisable stock options under the Fifth StockOption Incentive Scheme due to the resignation, reassignment, substandard individual or business unitperformance or other factors of some awardees. Upon the adjustments, the number of locked-up stockoptions granted to them in the first grant under the Fifth Stock Option Incentive Scheme was reducedfrom 20,380,000 to 17,447,750.f. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theThird Exercise Period for the First Grant under the Fifth Stock Option Incentive Scheme was approved.A total of 926 awardees who are eligible for the Fifth Stock Option Incentive Scheme have been allowedto exercise 8,237,750 stock options in the third exercise period (ended 6 May 2023).g. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Reserved Stock Options under the Fifth Stock Option Incentive Schemewas approved. It was agreed to adjust the awardees and their exercisable stock options under the FifthStock Option Incentive Scheme due to the resignation of some awardees. Upon the adjustments, thenumber of locked-up reserved stock options granted to them under the Fifth Stock Option IncentiveScheme was reduced from 3,270,000 to 2,835,000.h. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theSecond Exercise Period for the Reserved Stock Options under the Fifth Stock Option Incentive Schemewas approved. A total of 69 awardees who are eligible for the reserved stock options under the Fifth StockOption Incentive Scheme have been allowed to exercise 945,000 stock options in the second exerciseperiod (ended 10 March 2023).
During the Reporting Period, 4,570,499 shares were exercised with respect to the first grant under theFifth Stock Option Incentive Scheme.During the Reporting Period, 366,900 shares were exercised with respect to the reserved stock optionsunder the Fifth Stock Option Incentive Scheme.B. Overview of the Sixth Stock Option Incentive Schemea. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Retirement of Unexercised Stock Options under the Sixth Stock Option IncentiveScheme upon Expiry was approved. As such, 25,100 stock options of four awardees that had beenunexercised upon expiry were retired.b. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the exercise price for the Sixth Stock Option Incentive Scheme was revised from RMB49.71 toRMB48.04 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Sixth Stock Option Incentive Scheme was approved. It was agreed toadjust the awardees and their exercisable stock options under the Sixth Stock Option Incentive Schemedue to the resignation, substandard business unit performance, substandard individual performance,reassignment or other factors of some awardees. Upon the adjustments, the number of locked-up stockoptions granted to them under the Sixth Stock Option Incentive Scheme was reduced from 30,255,000to 26,982,250.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theSecond Exercise Period for the Sixth Stock Option Incentive Scheme was approved. A total of 905awardees who are eligible for the Sixth Stock Option Incentive Scheme have been allowed to exercise8,412,250 stock options in the second exercise period (ended 29 May 2023).During the Reporting Period, 3,834,609 shares were exercised under the Sixth Stock Option Incentive
Scheme.C. Overview of the Seventh Stock Option Incentive Schemea. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Retirement of Unexercised Stock Options under the Seventh Stock Option IncentiveScheme upon Expiry was approved. As such, 103,990 stock options of 12 awardees that had beenunexercised upon expiry were retired.b. At the above-mentioned meeting, the Proposal for the Adjustment to the Exercise Prices for the StockOption Incentive Scheme was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the exercise price for the Seventh Stock Option Incentive Scheme was revised from RMB48.86 toRMB47.19 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Awardees and TheirExercisable Stock Options for the Seventh Stock Option Incentive Scheme was approved. It was agreedto adjust the awardees and their exercisable stock options under the Seventh Stock Option IncentiveScheme due to the resignation, substandard business unit performance, substandard individualperformance, reassignment or other factors of some awardees. Upon the adjustments, the number oflocked-up stock options granted to them under the Seventh Stock Option Incentive Scheme was reducedfrom 49,440,000 to 44,200,200.d. At the above-mentioned meeting, the Proposal for Matters Related to the Stock Option Exercise for theSecond Exercise Period for the Seventh Stock Option Incentive Scheme was approved. A total of 1,237awardees who are eligible for the Seventh Stock Option Incentive Scheme have been allowed to exercise15,490,200 stock options in the second exercise period (ended 4 June 2023).During the Reporting Period, 4,630,832 shares were exercised under the Seventh Stock Option IncentiveScheme.
D. Overview of the Eighth Stock Option Incentive Schemea. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Exercise Prices for the Stock Option Incentive Schemes wasapproved. As the 2021 Annual Profit Distribution Plan had been carried out, the exercise price for theEighth Stock Option Incentive Scheme was revised from RMB81.41 to RMB79.74 per share.E. Overview of the Ninth Stock Option Incentive Schemea. The Proposal on the Ninth Stock Option Incentive Scheme (Draft) and its Abstract was approved at theSeventh Meeting of the Fourth Board of Directors and the 2021 Annual General Meeting of Shareholders,and the awardee list for the Ninth Stock Option Incentive Scheme (Draft) was reviewed at the FifthMeeting of the Fourth Supervisory Committee.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Exercise Price, Awardee List and Granted Number for the NinthStock Option Incentive Scheme was approved. As the 2021 Annual Profit Distribution Plan had beencarried out, the exercise price for the Ninth Stock Option Incentive Scheme was revised from RMB56.28to RMB54.61 per share.c. At the above-mentioned meeting, the Proposal for the Adjustments to the Exercise Price, Awardee Listand Granted Number for the Ninth Stock Option Incentive Scheme was approved. It was agreed to adjustthe awardees and their stock options under the Ninth Stock Option Incentive Scheme due to theresignation of some awardees. Upon the adjustments, the number of awardees and the total stock optionsunder the Ninth Stock Option Incentive Scheme were reduced from 2,849 to 2,815, and from 109,074,000to 107,791,000, respectively.d. On 4 July 2022, the Company granted 107,693,000 stock options to 2,813 awardees with the exerciseprice being RMB54.61 per share.
F. Overview of the 2018 Restricted Share Incentive Schemea. The Company convened the Third Meeting of the Fourth Board of Directors on 24 December 2021 andthe First Extraordinary General Meeting of Shareholders of 2022 on 14 January 2022, at which theProposal on the Repurchase and Retirement of Certain Incentive Shares under the 2018 Restricted ShareIncentive Scheme was approved. As such, it was agreed to repurchase and retire 386,250 restrictedshares that had been granted to 13 awardees but were still in lockup, for the reasons of their resignationor being reassigned. The retirement of the said restricted shares was completed on 20 April 2022.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Exercise Prices, Repurchase Prices and Grant Prices for theEquity Incentive Schemes was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the repurchase prices for the first grant under the 2018 Restricted Share Incentive Scheme wasrevised from RMB23.11 to RMB21.44 per share, and the repurchase price for the reserved restrictedshares under the 2018 Restricted Share Incentive Scheme from RMB19.13 to RMB17.46 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2018 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 767,551 restricted shares that had been granted to 54 awardees but were still inlockup, for the reasons of their resignation, being reassigned, substandard 2021 individual or businessunit performance or other factors.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the ThirdUnlocking Period for the First Grant under the 2018 Restricted Share Incentive Scheme was approved.A total of 189 awardees were eligible for this unlocking, with 2,791,699 restricted shares (0.0399% of theCompany’s total existing share capital) unlocked for public trading on 28 June 2022, of which 25,000shares, 25,000 shares and 20,000 shares were unlocked for senior management Guan Jinwei, ZhangXiaoyi and Zhong Zheng, respectively.e. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the Reserved Restricted Shares under the 2018 Restricted Share Incentive Scheme
was approved. A total of 21 awardees were eligible for this unlocking, with 377,083 restricted shares(0.0054% of the Company’s total existing share capital) unlocked for public trading on 22 June 2022, ofwhich 25,000 shares were unlocked for senior management Zhao Wenxin.G. Overview of the 2019 Restricted Share Incentive Schemea. The Company convened the Third Meeting of the Fourth Board of Directors on 24 December 2021 andthe First Extraordinary General Meeting of Shareholders of 2022 on 14 January 2022, at which theProposal on the Repurchase and Retirement of Certain Incentive Shares under the 2019 Restricted ShareIncentive Scheme was approved. As such, it was agreed to repurchase and retire 771,042 restrictedshares that had been granted to 18 awardees but were still in lockup, for the reasons of their resignationor being reassigned. The retirement of the said restricted shares was completed on 20 April 2022.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Exercise Prices, Repurchase Prices and Grant Prices for theEquity Incentive Schemes was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the repurchase price for the 2019 Restricted Share Incentive Scheme was revised from RMB22.63to RMB20.96 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2019 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 1,348,916 restricted shares that had been granted to 81 awardees but were still inlockup, for the reasons of their resignation, being reassigned, substandard 2021 individual or businessunit performance or other factors.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the 2019 Restricted Share Incentive Scheme was approved. A total of 334 awardeeswere eligible for this unlocking, with 5,247,500 restricted shares (0.0750% of the Company’s total existingshare capital) unlocked for public trading on 11 July 2022, of which 25,000 shares, 30,000 shares and25,000 shares were unlocked for senior management Zhao Wenxin, Wang Jinliang and Guan Jinwei,respectively.
H. Overview of the 2020 Restricted Share Incentive Schemea. The Company convened the Third Meeting of the Fourth Board of Directors on 24 December 2021, atwhich the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2020Restricted Share Incentive Scheme was approved. As such, it was agreed to repurchase and retire1,314,501 restricted shares that had been granted to 30 awardees but were still in lockup, for the reasonsof their resignation, being reassigned, violation of the Company’s “Red Lines” or other factors. Theretirement of the said restricted shares was completed on 20 April 2022.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Exercise Prices, Repurchase Prices and Grant Prices for theEquity Incentive Schemes was approved. As the 2021 Annual Profit Distribution Plan had been carriedout, the repurchase price for the 2020 Restricted Share Incentive Scheme was revised from RMB22.85to RMB21.18 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2020 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 1,914,495 restricted shares that had been granted to 154 awardees but were stillin lockup, for the reasons of their resignation, being reassigned, substandard 2021 individual or businessunit performance or other factors.d. At the above-mentioned meeting, the Proposal on the Satisfaction of the Conditions for the SecondUnlocking Period for the 2020 Restricted Share Incentive Scheme was approved. A total of 443 awardeeswere eligible for this unlocking, with 7,899,587 restricted shares (0.1129% of the Company’s total existingshare capital) unlocked for public trading on 19 July 2022, of which 36,000 shares, 30,000 shares and36,000 shares were unlocked for senior management Zhao Wenxin, Li Guolin and Wang Jinliang,respectively.I. Overview of the 2021 Restricted Share Incentive Schemea. The Company convened the Third Meeting of the Fourth Board of Directors on 24 December 2021, atwhich the Proposal on the Repurchase and Retirement of Certain Incentive Shares under the 2021
Restricted Share Incentive Scheme was approved. As such, it was agreed to repurchase and retire290,000 restricted shares that had been granted to 7 awardees but were still in lockup, for the reasonsof their resignation, being reassigned, violation of the Company’s “Red Lines” or other factors. Theretirement of the said restricted shares was completed on 20 April 2022.b. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Repurchase Prices for the Restricted Share Incentive Schemeswas approved. As the 2021 Annual Profit Distribution Plan had been carried out, the repurchase price forthe 2021 Restricted Share Incentive Scheme was revised from RMB39.92 to RMB38.25 per share.c. At the above-mentioned meeting, the Proposal on the Repurchase and Retirement of Certain IncentiveShares under the 2021 Restricted Share Incentive Scheme was approved. As such, it was agreed torepurchase and retire 1,100,000 restricted shares that had been granted to 21 awardees but were still inlockup, for the reasons of their resignation, being reassigned or other factors.J. Overview of the 2022 Restricted Share Incentive Schemea. The Company convened the Seventh Meeting of the Fourth Board of Directors on 28 April 2022, atwhich the 2022 Restricted Share Incentive Scheme (Draft) and its Abstract of Midea Group Co., Ltd. wasapproved. And the awardee list for the 2022 Restricted Share Incentive Scheme (Draft) was reviewed atthe Fourth Meeting of the Fourth Supervisory Committee.b. The Company convened the 2021 Annual General Meeting of Shareholders on 20 May 2022, at whichthe following proposals in relation to the 2022 Restricted Share Incentive Scheme were approved: theProposal on the 2022 Restricted Share Incentive Scheme (Draft) and its Abstract, the Proposal on theFormulation of the Implementation and Appraisal Measures for the 2022 Restricted Share IncentiveScheme, and the Proposal on the Request to the General Meeting of Shareholders for Authorizing theBoard of Directors to Handle Matters in Relation to the 2022 Restricted Share Incentive Scheme, etc.c. The Company convened the Ninth Meeting of the Fourth Board of Directors on 8 June 2022, at whichthe Proposal for the Adjustments to the Grant Price, Awardee List and Granted Number for the 2022Restricted Share Incentive Scheme was approved. As the 2021 Annual Profit Distribution Plan had been
carried out, the number of awardees and total restricted shares under the 2022 Restricted Share IncentiveScheme was revised from 199 to 197 awardees, and from 12,630,000 to 12,450,000 shares, respectively.d. On 13 July 2022, the Company granted 12,152,500 restricted shares to 191 awardees with the grantprice being RMB26.47 per share, of which senior management Wang Jinliang, Li Guolin, Jiang Peng andZhao Wenxin were granted 80,000 shares each.
4.2 Employee stock ownership schemes
?Applicable □N/AOutstanding employee stock ownership schemes during the Reporting Period
| Scope of employees | Number of employees | Total shares held | Change | As a percentage of the Company’s total share capital | Funding source |
| Employees under the Fourth Global Partner Stock Ownership Scheme | 20 | 3,318,540 | N/A | 0.0474% | Special fund for the scheme |
| Employees under the First Business Partner Stock Ownership Scheme | 50 | 1,779,300 | N/A | 0.0254% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Fifth Global Partner Stock Ownership Scheme | 16 | 3,732,075 | N/A | 0.0533% | Special fund for the scheme |
| Employees under the Second Business Partner Stock Ownership Scheme | 45 | 1,867,845 | N/A | 0.0267% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Sixth Global Partner Stock Ownership Scheme | 17 | 3,537,663 | N/A | 0.0506% | Special fund for the scheme |
| Employees under the Third Business Partner Stock Ownership Scheme | 46 | 1,873,559 | N/A | 0.0268% | Special fund for the scheme and part of the performance bonuses for senior management |
| Employees under the Seventh Global Partner Stock Ownership Scheme | 15 | 2,436,518 | N/A | 0.0348% | Special fund for the scheme |
| Employees under the Fourth Business Partner Stock Ownership Scheme | 44 | 1,985,611 | N/A | 0.0284% | Special fund for the scheme and part of the performance bonuses for senior management |
Shares held by directors, supervisors and senior management under employee stock ownership schemes
during the Reporting Period
| Name | Office title | Shares held at the beginning of the Reporting Period | Shares held at the end of the Reporting Period | As a percentage of the Company’s total share capital |
| Fang Hongbo, Yin Bitong, Gu Yanmin, Wang Jianguo, Zhang Xiaoyi, Hu Ziqiang, Wang Jinliang, Li Guolin, Fu Yongjun, Guan Jinwei, Bai Lin, Zhong Zheng, Zhao Wenxin, and Jiang Peng | Certain directors and senior management of the Company | 9,172,335 | 9,172,335 | 0.1310% |
Change of asset management organizations during the Reporting Period
□Applicable ?N/A
Equity changes incurred by disposal of shares by holders, etc. during the Reporting Period
□Applicable ?N/A
4.3 Other incentive measures for employees
□Applicable ?N/A
Section V Environmental and Social Responsibility
1. Major Environmental Issues
Whether the Company or any of its subsidiaries is declared a heavily polluting business by the environmental protection authorities? Yes □ No
| Name of the Company or subsidiary | Major pollutants | Discharge method | Number of discharge outlets | Distribution of discharge outlets | Concentration of the discharge | Pollutant discharge standards | Total discharge (ton) | Approved total discharge (ton) | Excess discharge |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. (the Washing and Sterilizing Appliances Park) | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The southern side of 2# plant in the Washing and Sterilizing Appliances Park | 34 mg/L | Discharge Limits of Water Pollutants (DB44/26-2001) of Guangdong Province | 0.00012 | 0.228 | No |
| SS | 122.5 mg/L | 0.0003674 | / | No | |||||
| BOD5 | 115.2 mg/L | 0.0003456 | / | No | |||||
| Petroleum | 0.06 mg/L | 0.0000018 | / | No | |||||
| Ammonia-nitrogen | 0.8205mg/L | 0.000002461 | 0.0576 | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | The southern side of 2# plant in the Washing and Sterilizing Appliances Park | 0.025 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) | 0.00105 | / | No | |
| Toluene and xylene | 0.54 mg/m? | 0.024 | / | No | |||||
| VOCS | 4.48 mg/m? | 0.3852 | / | No | |||||
| Wuhu Midea Kitchen & Bath Appliances Mfg. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Western gate of the Wuhu plant | 112 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 20.16 | 70.898 | No |
| Ammonia-nitrogen | 1.11 mg/ L | 0.2 | 2.496 | No | |||||
| BOD5 | 34.1mg/ L | 6.14 | / | No | |||||
| Petroleum | 1.43mg/ L | 0.26 | / | No | |||||
Co., Ltd.
| Co., Ltd. | Total phosphorus | 2.16 mg/m? | 0.39 | / | No | ||||
| Fluoride | 5.25 mg/m? | 0.95 | / | No | |||||
| Soot | 15m high altitude discharge | 45 | Plants at each workshop | 19.91 mg/m? | Emission Standard of Air Pollutants for Boiler (GB13271-2014) | 4.59 | / | No | |
| Sulfur dioxide | <3mg/m? | 1 | / | No | |||||
| Nitrogen oxide | 18.2mg/m? | 4.2 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 71.15mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 138 | / | No | |||
| Xylene | <0.01mg/m? | 0.001 | / | No | |||||
| VOCs | 5.22mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 6.8 | / | No | ||||
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The eastern side of 1# plant | 55.78 mg/ L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 Integrated Emission Standards for Atmospheric Pollutants GB16297-1996 Level 2 Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 1.652 | / | No |
| Ammonia-nitrogen | 11.09 mg/ L | 0.3276 | |||||||
| BOD5 | 67.10 mg/ L | 1.9818 | |||||||
| Total nitrogen | 35.40 mg/ L | 1.0456 | |||||||
| Total phosphorus | 1.76 mg/ L | 0.0520 | |||||||
| Anionic surfactant | 1.72 mg/ L | 0.0508 | |||||||
| Suspended matters | 100.33 mg/ L | 2.9634 | |||||||
| Petroleum | 0.25 mg/ L | 0.0073 | |||||||
| pH value | 7.63 | / | |||||||
| NMHC | RTO equipment | 2 | 1 set at the northeastern side of 3# plant and 1 at the southwestern side of 4# plant | 2.765mg/m? | Integrated Emission Standards for Atmospheric Pollutants GB16297-1996 Level 2 | 0.188 | / | No | |
| Water spray + activated carbon equipment | 3 | 2 sets at 1# plant and 1 set at 2# plant | 3.122 mg/m? | 0.162 | |||||
Two-stage activated carbon equipment
| Two-stage activated carbon equipment | 7 | 2 at 1# plant, 1 at 2# plant, 1 at 3# plant, 2 at 4# plant and 1 cyclopentane | 12.27 mg/m? | 0.699 | |||||
| Particles | Filter cartridge dust collector | 6 | 1 at 1# plant, 2 at 2# plant, 2 at 3# plant and 1 at 4# plant | 0.527 mg/m? | 0.729 | / | No | ||
| Hefei Midea Laundry Appliance Co., Ltd. (monitored by the municipal government) | COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of wastewater treatment station | 39mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 4.335 | 58.150 | No |
| Ammonia-nitrogen | The eastern side of wastewater treatment station | 1.23 mg/L | 0.42 | / | No | ||||
| Particles | 15m high altitude discharge after being treated by cyclone + filter cartridge dust collector | 2 | 1 at 2# plant, 1 at 6# plant | < 20 mg/m? | Table 5 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Special Emission Limit Requirements | 0.13 | / | No | |
| Particles | 15m high altitude discharge after being treated by water spraying + dedusting+ UV photolysis + activated carbon | 1 | 1 at 3# plant | < 20 mg/m? | 0.88 | / | No | ||
| NMHC | 1.39 mg/m? | 0.12 | / | No | |||||
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 3 | 1 at 2# plant | 1.89mg/m? | 0.13 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by waste gas treatment station | 6 | 6 at 6# plant | 0.98 mg/m? | 0.16 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by low-temperature plasma | 2 | 1 at 1# plant, 1 at 5# plant | 1.13mg/m? | 0.12 | / | No | ||
| NMHC | 15m high altitude discharge after being treated by photocatalyst and activated carbon | 2 | 2 at 3# plant | 3.42 mg/m? | 0.23 | / | No | ||
| GD Midea Air-Conditioning Equipment Co., Ltd. | COD | Discharge after being treated by wastewater treatment station | 1 | The southeastern side of 4# plant | 36 mg/L | The Discharge Standard of Water Pollutants for Electroplating (DB441597- 2015) Chart 2 PRD standard | 1.7 | 9.59 | No |
| Ammonia-nitrogen | 1.90 mg/L | 0.09 | 1.51 | No | |||||
| SS | 20 mg/L | 0.94 | / | No | |||||
| Petroleum | 0.98 mg/L | 0.05 | / | No | |||||
| COD | Discharge after being treated by wastewater treatment station | 1 | The eastern side of 2# plan | 85 mg/L | The Discharge Limits of Water Pollutants (DB44/26- | 4.02 | 9.59 | No | |
| SS | 58.5 mg/L | 2.77 | / | No | |||||
Ammonia-nitrogen
| Ammonia-nitrogen | 2.52 mg/L | 2001) | 0.12 | / | No | ||||
| Petroleum | 5.02 mg/L | 0.24 | / | No | |||||
| VOCs (dusting) | 15m high altitude discharge after being treated by spray tower + activated carbon | 3 | 4# plant | 21.23mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.47 | / | No | |
| VOCs (Screen Printing) | 15m high altitude discharge after being treated by environmental protection equipment | 4 | 1#, 5#, 9#, 11# plants | 1.92 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.40 | / | No | |
| VOCs (electronic) | 15m high altitude discharge after being treated by environmental protection equipment | 2 | 10# plants | 25.21mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 5.04 | / | No | |
| NMHC (evaporator & condenser) | 15m high altitude discharge after being treated by environmental protection equipment | 6 | 2#, 5# plants | 25 mg/m? | Emission Limits of Air Pollutants (DB44/27- 2001) the second time period | 2.13 | / | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd | COD | Discharge after being treated by wastewater treatment station | 1 | The northern side of the park | 52 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 3.62 | 7.5 | No |
| SS | 55 mg/L | 2.33 | / | No | |||||
| BOD | 9 mg/L | 3.22 | / | No | |||||
| Ammonia-nitrogen | 7mg/L | 0.318 | 0.675 | No | |||||
| Petroleum | 0.5 mg/L | 0.054 | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 5 | 2# plant | 0.18mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.0691 | 0.148 | No | |
| VOCs | 8 | 2#, 3# plants | 32 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13-2322- 2016) | 3.82 | / | No | ||
| NOX | 3 | 3# plant | 0.48 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.242 | 0.515 | No | ||
| SO2 | 3 | 3# plant | < 3 mg/m? | 0.942 | 2.209 | No | |||
| Guangdong Meizhi Precision-Manufacturing Co., Ltd | COD | Discharge after being treated by wastewater treatment station | 1 | Near the wastewater treatment station in the north side of the plant | 44 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 8.615 | 16.28 | No |
| Suspended matters | 9 mg/L | 1.762 | / | No | |||||
| Petroleum | 2.53 mg/L | 0.495 | / | No | |||||
| Total phosphorus | 0.96 mg/L | 0.188 | / | No | |||||
| Total zinc | 0.16 mg/L | 0.031 | / | No | |||||
| pH value | 7.9 mg/L | 1.547 | / | No | |||||
| Total nitrogen | 4.11 mg/L | 0.805 | / | No | |||||
| Ammonia-nitrogen | 0.257 mg/L | The discharge limits of water pollutants in Guangdong DB44/26-2001 | 0.050 | 2.034 | No | ||||
| Fluoride | 0.1 mg/L | 0.020 | / | No | |||||
| Particles | 15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of the plant | 23.58 mg/m? | Emission Limits of Air Pollutants（DB44/27-2001）/ Emission Standard of Air Pollutants for Industrial Kiln and Furnace（GB 9078-1996） | 17.17 | / | No | |
| Sulfur dioxide | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | Less than the limit | Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0 | 0.436 | No | |
| Oxynitride | 15m high altitude discharge after being treated by environmental protection equipment | 4 | Roof of the plant | 3.14 mg/m? | 0.855 | 2.039 | No | ||
| VOCs | 15m high altitude discharge after being treated by environmental protection equipment | 10 | Roof of the plant | 3.98 mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry （DB44/816-2010） | 2.647 | 4.553 | No | |
| Benzene | 15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of the plant | 0.035 mg/m? | 0.008 | / | No | ||
| Total toluene and xylene | 15m high altitude discharge after being treated by environmental protection equipment | Roof of the plant | 0.469 mg/m? | 0.111 | / | No | |||
GuangdongMeizhiCompres
sorLimited
| Guangdong Meizhi Compressor Limited | COD | Discharge after being treated by wastewater treatment station | 1 | Near the wastewater treatment station in the north side of the plant | 45 mg/L | The Discharge Standard of Water Pollutants for Electroplating of Guangdong Province DB-441597-2015, before 1 September 2012 | 3.078 | 6.046 | No |
| Suspended matters | 7 mg/L | 0.479 | / | No | |||||
| Petroleum | 0.45 mg/L | 0.031 | / | No | |||||
| Total phosphorus | 0.54 mg/L | 0.037 | / | No | |||||
| Total zinc | 0.21 mg/L | 0.014 | / | No | |||||
| pH value | 7.4 mg/L | / | / | No | |||||
| Total nitrogen | 2.26 mg/L | 0.155 | / | No | |||||
| Ammonia-nitrogen | 0.133 mg/L | 0.009 | 0.756 | No | |||||
| Fluoride | 0.1 mg/L | 0.007 | / | No | |||||
| Total nickel | 0.06 mg/L | 0.004 | 0.024 | No | |||||
| Particles | Over-15m high altitude discharge after being treated by environmental protection equipment | 17 | Roof of main plant and metal plate workshop | 28.485 mg/m? | Emission Limits of Air Pollutants（DB44/27-2001）/ Emission Standard of Air Pollutants for Industrial Kiln and Furnace（GB 9078-1996） | 3.905 | 8.705 | No | |
| Sulfur dioxide | Over-15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | Less than the limit | Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0 | 0.799 | No | |
| Oxynitride | Over-15m high altitude discharge after being treated by environmental protection equipment | 11 | Roof of main plant and metal plate workshop | 3 mg/m? | 1.196 | 7.814 | No | ||
| Benzene | Over-15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 4.03 mg/m? | Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry （DB44/816-2010） | 0.004 | / | No | |
| Total toluene and xylene | Over-15m high altitude discharge after being treated by environmental protection equipment | 2 | Roof of main plant and metal plate workshop | 0.368 mg/m? | 0.037 | / | No | ||
| VOCs | Over-15m high altitude discharge after being treated by environmental protection equipment | 7 | Roof of main plant and metal plate workshop | 4.11 mg/m? | 1.872 | 5.718 | No | ||
FoshanShunde
MideaElectricalHeatingAppliancesManufacturingCo., Ltd.
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | CODcr | Discharge after being treated by wastewater treatment system and reaching the standard | 2 | Waste water treatment stations 1 and 2 of 3# plant | 52.5 mg/L | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 2.15 | 15.304 | No |
| Petroleum | 0.17 mg/L | 0.006 | / | No | |||||
| Ammonia-nitrogen | 0.53 mg/L | 0.023 | 1.913 | No | |||||
| Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 8 | Waste gas sprayers 1 and 2 at 3# plant, outlets 1, 2 and 3 for waste gas from wave-soldering, painting and drying at 6# plant, outlets 1 and 2 for waste gas from reflow soldering at 6# plant | 0.1208 mg/m? | Table 1 of the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010): Discharge Limits for VOCs through Exhaust Funnel/for Time Period II | 0.315 | / | No | |
| VOCs | High altitude discharge after being treated by waste gas treatment station | 0.8711 mg/m? | 2.178 | 22.72 | No | ||||
| NMHC | High altitude discharge after being treated by waste gas treatment station | 2 | Outlet of injection molding waste gas in the south side of 1# plant, outlet of injection molding waste gas in the south side of 9# plant | 0.14 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.067 | / | No | |
| Particles | Pulse bag dust collecting | 4 | Outlets 1 and 2 of sanding waste gas at 3# plant, outlets 1 and 2 of polishing waste gas at 3# plant | 0.1856 mg/m? | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 | 0.072 | / | No | |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 2 | Oxidation wire roof of 3# plant | 3.25 mg/m? | 0.072 | 3.8231 | No | ||
| Oxynitride | Drying furnace of 3# plan | 1.625 mg/m? | 0.427 | 13.132 | No | ||||
| Cooking fume | Discharge after being treated by waste gas treatment station | 2 | South and north section canteens | 0.15 mg/m? | Emission Standard of Cooking Fume (Trial) (GB 18483-2001) | 0.046 | / | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | CODcr | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | Sewage treatment station | 28 mg/L | Discharge Standard of Water Pollutants for Electroplating (DB44/1597-2015) | 0.875 | 4.8 | No |
| Petroleum | 0.06 mg/L | 0.00188 | / | No | |||||
| SS | 18.5 mg/L | 0.5792 | / | No | |||||
| Ammonia-nitrogen | 0.7885 mg/L | 0.2463 | 0.96 | No | |||||
| Benzene | High altitude discharge after being treated by waste gas treatment station | 1 | Spraying waste gas outlet at 1# plant | 0.01 mg/m? | Table 1 of the Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010): Discharge Limits for VOCs through Exhaust Funnel/for | 0.000163 | / | No | |
| Toluene | High altitude discharge after being treated by waste gas treatment station | 0.09 mg/m? | 0.0015 | / | No | ||||
| Xylene | High altitude discharge after being treated by waste gas treatment station | 1.08 mg/m? | 0.0135 | / | No | ||||
Totaltoluene andxylene
| Total toluene and xylene | High altitude discharge after being treated by waste gas treatment station | 1.17 mg/m? | Time Period II | 0.01497 | / | No | |||
| VOCs | High altitude discharge after being treated by waste gas treatment station | 4.45 mg/m? | 0.0571 | 0.61 | No | ||||
| NMHC | High altitude discharge after being treated by waste gas treatment station | 2 | Injection molding waste gas outlet in the southern side of 2# plant, injection molding waste gas outlet in the northern side of 2# plant | 0.5575 mg/m? | Table 4 of the Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015): Emission Limits of Air Pollutants | 0.04107 | 0.104 | No | |
| Particles | Pulse bag dust collecting | 7 | Sanding waste gas outlet of 1# plant Polishing waste gas outlet of 1# plant | 0.45 mg/m? | Table 2 of the Emission Limits of Air Pollutants (DB44/27-2001): Emission Limits of Industrial Waste Gas (Time Period 2), Level 2 Emission Standard of Air Pollutants for Boiler （DB44/765-2019） | 0.03314 | / | No | |
| Sulfur dioxide | High altitude discharge after being treated by waste gas treatment station | 1 | Drying furnace of 1# plant | <3 mg/m? | 0.01567 | 0.028 | No | ||
| Oxynitride | High altitude discharge after being treated by waste gas treatment station | <3 mg/m? | 0.0329 | 0.131 | No | ||||
| Cooking fume | Discharge after being treated by waste gas treatment station | 1 | Canteen of 1# plant | 0.575 mg/m? | Emission Standard of Cooking Fume (GB 18483-2001) | 0.00942 | / | No | |
| Anhui Meizhi Compressor Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The western side of the comprehensive wastewater treatment station | 16 mg/L | Implementation of the takeover standards of the Western Hefei Group wastewater treatment plant and Integrated Wastewater Discharge Standard (GB8978-1996) Level 3 | 3.36 | / | No |
| Ammonia-nitrogen | 0.149 mg/L | 0.059 | / | No | |||||
| Particles | Collected by gas trap hood+15m high exhaust cylinder | 13 | No. 1 workshop welding soot discharge outlet for waste gas | 6.7mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 5.46 | 65.45 | No | |
| No. 3 workshop discharge outlet for the welding waste gas | 6.4 mg/m? | ||||||||
| Waste gas outlet of 1# heat-treating furnace at No. 2 workshop | 7.6 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | |||||||
| Waste gas outlet of 2# heat-treating furnace at No. 2 workshop | 7.0 mg/m? | ||||||||
Waste gas outlet for diecasting at No. 2 workshop
| Waste gas outlet for die casting at No. 2 workshop | 5.9 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | ||||||
| Waste gas outlet for die casting at No. 4 workshop | 6.6 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | ||||||
| Waste gas outlet of 1# heat-treating furnace at No. 4 workshop | 5.9 mg/m? | |||||||
| Waste gas outlet of 2# heat-treating furnace at No. 4 workshop | 5.6 mg/m? | |||||||
| Waste gas outlet for electrophoresis and drying at No. 1 workshop | 6.5 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | ||||||
| Waste gas outlet for electrophoresis and drying at No. 3 workshop | 3.5 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | ||||||
| Waste gas outlet of 1#-3# furnaces | 4.7 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | ||||||
| Sulfur dioxide | Collected by gas trap hood+15m high exhaust cylinder | 9 | Waste gas outlet of 1#-3# furnaces | <3 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 19.26 | 112.2 | No |
| Outlet of 1# heat-treating furnace at No. 2 workshop | 58 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level 2 | ||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | 21 mg/m? | |||||||
| Waste gas outlet for die casting at No. 2 workshop | <3 mg/m? | |||||||
| Outlet of 1# heat-treating furnace at No. 4 workshop | 116 mg/m? | |||||||
| Outlet of 2# heat-treating furnace at No. 4 workshop | 29 mg/m? | |||||||
| Waste gas outlet for die casting at No. 4 workshop | 14 mg/m? | |||||||
| Oxynitride | Collected by gas trap hood+15m high exhaust cylinder | 9 | Waste gas outlet of 1#-3# furnaces | 25 mg/m? | Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 6.63 | 33.24 | No |
Outlet of 1# heat-treatingfurnace at No. 2 workshop
| Outlet of 1# heat-treating furnace at No. 2 workshop | 25 mg/m? | Air Pollutant Emission Standards (GB16297-1996) Standard Level 2 | |||||||
| Outlet of 2# heat-treating furnace at No. 2 workshop | 33 mg/m? | ||||||||
| Waste gas outlet for die casting at No. 2 workshop | 11 mg/m? | ||||||||
| Outlet of 1# heat-treating furnace at No. 4 workshop | 8 mg/m? | ||||||||
| Outlet of 2# heat-treating furnace at No. 4 workshop | <3 mg/m? | ||||||||
| Waste gas outlet for die casting at No. 4 workshop | 9mg/m? | ||||||||
| VOCs | Collected by gas trap hood+15m high exhaust cylinder Direct-fired waste gas incinerator+15m high exhaust cylinder | 4 | Waste gas outlet of the drying furnace at No. 1 workshop | 4.62 mg/m? | Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB12/ 524-2020) | 1.13 | 21.6 | No | |
| Waste gas outlet of 1# drying furnace at No. 3 workshop | 10.5 mg/m? | ||||||||
| Die casting at No. 2 workshop | 0.74 mg/m? | ||||||||
| Die casting at No. 4 workshop | 1.14 mg/m? | ||||||||
| Guangdong Welling Motor Manufacturing Co., Ltd. | Benzene | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | Less than the limit | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.00 | / | No |
| Total toluene and xylene | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 0.255 mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.62 | / | No | |
| Total VOCs | Zeolite drum + RTO | 1 | Waste gas outlet around plant C | 3.17mg/m? | Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010) the second time period | 0.81 | 17.09 | No | |
Guangdong Midea
KitchenAppliancesManufacturingCo., Ltd.
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | COD | Discharge to the municipal sewage system after being treated by wastewater treatment system | 1 | The eastern side of wastewater treatment station in Malong base | 60 mg/L | The Discharge Limits of Water Pollutants in Guangdong DB-44/26- 20 Emission Standard of Volatile Organic Compounds for Furniture Manufacturing (DB44/814-2010)/Emission Standard of Volatile Organic Compounds for Surface Coating of Automobile Manufacturing Industry (DB44/816-2010)/Emission Standards of Industrial Pollutants in the Synthetic Resin Industry (GB 31572- 2015)/Guangdong Province Emission Limits of Air Pollutants (DB44/27-2001)/Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010)/Emission Standard of Cooking Fume (on Trial) (GB18483-2001) | 6.03 | 22.77 | No |
| Ammonia-nitrogen | 0.457 mg/L | 0.029 | 4.554 | No | |||||
| Particles | 20m high altitude discharge after being treated by waste gas treatment equipment and reaching the standard | 112 | 26 outlets at A1 plant, 47 outlets at A2 plant, 21 outlets at B2 plant, 9 outlets at C2 plant, 2 outlets at C3 plant, 1 outlet at wastewater treatment station and 6 outlets at canteen | 0.34 mg/m? | 1.18 | / | No | ||
| Sulfur dioxide | 7 mg/m? | 0.262 | 1.055 | No | |||||
| Oxynitride | 9 mg/m? | 2.33 | 10.314 | No | |||||
| Benzene | Less than the limit | 0.027 | / | No | |||||
| Total toluene and xylene | 0.11 mg/m? | 1.13 | / | No | |||||
| VOCs | 8.35 mg/m? | 5.97 | 35.051 | No | |||||
| NMHC | 2.15 mg/m? | 0.15 | / | No | |||||
| Styrene | 12.91 mg/m? | 0.473 | / | No | |||||
| Fume | 15m high altitude discharge after being treated by oil fume purification facility and reaching the standard | 0.17 mg/m? | 0.024 | / | No | ||||
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | Particles | Collected by gas trap hood + dust collector + activated carbon +15m high exhaust cylinder | 2 | Exhaust funnels 1 and 2 for mold injection | 13.8 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 1.562 | / | No |
| VOCs | Collected by gas trap hood+15m high exhaust cylinder | 7 | Waste gas outlets 1-7 of the die casting workshop | 19.4 mg/m? | Emission Standard of Air Pollutants for Industrial Kiln and Furnace (GB9078- 1996) | 3.1752 | / | No | |
| VOCs | Activated carbon + UV photolysis | 2 | Exhaust funnels 1 and 2 for dip coating | 19.4 mg/m? | Hebei Province Standard DB13/2322-2016 The Concentration Limits at Emission Reference Point for Coating Operations | 1.224 | / | No | |
| COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | General wastewater outlet | 80 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 | 1.2096 | / | No | |
| Ammonia-nitrogen | 20 mg/L | 0.2592 | / | No | |||||
BOD
| BOD | 30 mg/L | Level 3 | 1.0368 | / | No | ||||
| SS | 23 mg/L | 0.3368 | / | No | |||||
| Petroleum | 0.87 mg/L | 0.0791 | / | No | |||||
| Anhui Meizhi Precision Manufacturing Co., Ltd. | COD | Discharge after being treated by wastewater treatment system and reaching the standard | 1 | The south side of Building 6 for night shift at the north side of the plant area | 115.3mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 41.728 | / | No |
| Ammonia-nitrogen | 20.8mg/L | 7.528 | / | No | |||||
| BOD | 31.4 mg/L | 11.364 | / | No | |||||
| SS | 20.7 mg/L | 7.492 | / | No | |||||
| Petroleum | 0.32 mg/L | 0.116 | / | No | |||||
| Particles | Collected by gas trap hood +21m high exhaust cylinder | 10 | Welding waste gas outlet 1# | 13.65 mg/m? | Requirements in Table 1 of Integrated Emission Standards of Air Pollutants of Shanghai (DB31/933-2015) | 6.7402608 | / | No | |
| Welding waste gas outlet 2# | 12.1 mg/m? | ||||||||
| Collected by gas trap hood +21m high exhaust cylinder | Heat-treating furnace 1# | 11.35 mg/m? | Integrated emission standards for atmospheric pollutants GB16297-1996, chart 2, Level 2 | ||||||
| Heat-treating furnace 2# | 15.35 mg/m? | ||||||||
| Heat-treating furnace 3# | 12.55 mg/m? | ||||||||
| Heat-treating furnace | 10.8 mg/m? | ||||||||
| Drying waste gas outlet 1# | 6.5 mg/m? | ||||||||
| Drying waste gas outlet 2# | 8.75 mg/m? | ||||||||
| Drying waste gas outlet 3# | 6.7 mg/m? | ||||||||
| Drying waste gas outlet 4# | 8.45 mg/m? | ||||||||
| Sulfur dioxide | Collected by gas trap hood +21m high exhaust cylinder | 8 | Heat-treating furnace 1# | 5.25 mg/m? | Emission limit standards for other industrial furnaces and kilns in the Comprehensive Control Plan for Air Pollution of Industrial Furnaces (H.D.Q.[2019] NO.56) | 1.48750758 | / | No | |
| Heat-treating furnace 2# | 5.75 mg/m? | ||||||||
| Heat-treating furnace 3# | 5.25 mg/m? | ||||||||
| Heat-treating furnace | 1.5 mg/m? | ||||||||
| Drying waste gas outlet 1# | 3.25 mg/m? | ||||||||
| Drying waste gas outlet 2# | 3.75 mg/m? | ||||||||
| Drying waste gas outlet 3# | 1.5 mg/m? | ||||||||
Drying waste gas outlet 4#
| Drying waste gas outlet 4# | 4.75 mg/m? | ||||||||
| Oxynitride | Collected by gas trap hood +21m high exhaust cylinder | 8 | Heat-treating furnace 1# | 10.75 mg/m? | 1.50728058 | / | No | ||
| Heat-treating furnace 2# | 7.75 mg/m? | ||||||||
| Heat-treating furnace 3# | 1.5 mg/m? | ||||||||
| Heat-treating furnace | 1.5 mg/m? | ||||||||
| Drying waste gas outlet 1# | 5.75 mg/m? | ||||||||
| Drying waste gas outlet 2# | 1.5 mg/m? | ||||||||
| Drying waste gas outlet 3# | 3.75 mg/m? | ||||||||
| Drying waste gas outlet 4# | 7.75 mg/m? | ||||||||
| VOCs | Direct-fired waste gas incinerator+21m high exhaust cylinder | 2 | Drying waste gas outlet 1# | 7.385 mg/m? | NMHC emissions meet the relevant standard limit requirements in Table 1 of Shanghai Integrated Emission Standards for Atmospheric Pollutants (DB31/933-2015) | 2.8546128 | / | No | |
| Drying waste gas outlet 2# | 10.4 mg/m? | ||||||||
| Adsorption and desorption catalytic combustion +21m high exhaust cylinder | 2 | Drying waste gas outlet 3# | 10.255 mg/m? | ||||||
| Drying waste gas outlet 4# | 6.81 mg/m? | ||||||||
| GD Midea Environment Appliances Mfg. Co.,Ltd. | VOCs | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 2 | During the screen printing process | 0.19 mg/m? | Emission Standard of Volatile Organic Compounds for Printing Industry (DB44/815-2010) | 0.0122 | / | No |
| Dry filtering + direct combustion of natural gas +15m high altitude discharge | 2 | Outlet for waste gas from dip coating, drying and hardening | 28.01 mg/m? | Emission Standards for Odor Pollutants GB14554-93 | 1.746 | 3.42 | No | ||
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | During the manual welding process | 4.31 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.0626 | / | No | ||
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | During the wave soldering process (paste printing and wave reflow) | 16.4 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 1.177 | / | No | ||
| NMHC | Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 6 | Exhaust funnel for waste gas from the baking and injection molding processes | 1.985 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（BG 31572-2015） | 0.4347 | / | No | |
Gas trap hood + dry filtering + UV +activated carbon + 15m high altitude
discharge
| Gas trap hood + dry filtering + UV + activated carbon + 15m high altitude discharge | 3 | Metal plate dusting waste gas exhaust cylinder | 2.11 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（BG 31572-2015） | 0.110 | / | No | |
| Particles | Gas trap hood + water spraying + dry filtering + UV + activated carbon + 15m high altitude discharge | 1 | Dusting waste gas | 0.39 mg/m? | Emission Limits of Air Pollutants (DB44/27-2001): Time Period 2, Level 2 | 0.140 | / | No |
| Cooking fume | Fume hood + electrostatic range hood + 15m high altitude discharge | 7 | Cooking fume outlet at canteen | 0.1 mg/m? | Emission Standard of Cooking Fume GB18483-2001 | 0.000118 | / | No |
| Suspended matters | Oil separation and slagging - hydrolysis and acidification - contact oxidation - MRB | 1 | Domestic wastewater treatment station | 6 mg/L | Discharge Standard of Pollutants for Municipal Wastewater Treatment Plant GB18918-2002 | 0.0839 | ||
| COD | 18.6 mg/L | 0.250 | / | No | ||||
| Animal and vegetable oil | 0.06 mg/L | 0.00896 | / | No | ||||
| Ammonia-nitrogen（NH3- N) | 0.052 mg/L | 0.5566 | / | No | ||||
| pH value | 7.06 | / | / | No | ||||
| Five-day BOD | 5.9 mg/L | 0.083 | / | No | ||||
| Total zinc | Coagulation and sedimentation + hydrolysis and acidification + aeration + biological tank + MBR + water reuse | 1 | Domestic wastewater treatment station | 0.002 mg/L | Discharge Standard of Water Pollutants for Electroplating DB 44/1597-2015 | 0.0085 | / | No |
| COD | 8.93 mg/L | 0.27 | / | No | ||||
| Suspended matters | 8 mg/L | 0.155 | / | No | ||||
| pH value | 7.7 | / | / | No | ||||
| Total phosphorus（in P ) | 0.012 mg/L | 0.324 | / | No | ||||
| Ammonia-nitrogen（NH3-N) | 0.140 mg/L | 0.004328 | 1.724 | No | ||||
| Petroleum | 0.03 mg/L | 0.00087 | / | No | ||||
| Total aluminum | 0.0194 mg/L | 0.00011 | / | No | ||||
| Total iron | 0.00144 mg/L | 0.00008 | / | No |
| Hubei Midea Refrigerator Co., Ltd. | COD | Discharge to the municipal domestic sewage system | 1 | Domestic sewage outlets at the plant | 43 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 5.37 | 15 | No |
| Ammonia-nitrogen | 5.58 mg/L | 0.7 | 2.5 | No | |||||
| BOD | 14.9 mg/L | 1.86 | / | No | |||||
| SS | 32 mg/L | 4 | / | No | |||||
| Animal and vegetable oil | 2.33 mg/L | 0.29 | / | No | |||||
| COD | Discharge to the municipal industrial sewage system after deep treatment in the industrial sewage treatment station | 1 | Waste water outlets at the freezer branch plant | 92 mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) | 1.44 | 15 | No | |
| Ammonia-nitrogen | 13.7 mg/L | 0.21 | 2.5 | No | |||||
| BOD | 17.5 mg/L | 0.27 | / | No | |||||
| SS | 7 mg/L | 0.11 | / | No | |||||
| Petroleum | 0.5 mg/L | 0.01 | / | No | |||||
| Animal and vegetable oil | 1.2 mg/L | 0.2 | / | No | |||||
| NMHC | 15m discharge after light and oxygen purification + activated carbon adsorption | 1 | First installation branch waste gas outlets | 22.1 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 2.45 | / | No | |
| NMHC | 1 | Second installation branch waste gas outlets | 14.5 mg/m? | 1.87 | / | No | |||
| NMHC | 1 | Injection molding workshop waste gas outlets | 16.8 mg/m? | 0.52 | / | No | |||
| NMHC | 15m high altitude discharge after dry filtration +light and oxygen purification + activated carbon | 1 | Extrusion workshop waste gas outlets | 11 mg/m? | 0.41 | / | No | ||
| NMHC | Water scrubber+ Swirl plate tower + Demister + activated carbon, 15m high altitude discharge | 1 | Cold cabinet branch waste gas outlets | 38.1 mg/m? | 1.15 | / | No | ||
| Particles | 4.6 mg/m? | 0.14 | / | No | |||||
| Wuxi Little Swan Electric Co., Ltd. | COD | Discharge to municipal sewage network | 1 | Exit at the middle gate of the plant | 250 mg/L | Integrated Wastewater Discharge Standard（GB8978-1996） | 56.572 | 123.8994 | No |
| SS | 87.3 mg/L | 24.192 | 87.2473 | No | |||||
| Animal and vegetable oil | 6.81 mg/L | 2.036 | 10.7034 | No | |||||
| Total phosphorus | 2.856mg/L | 0.473 | 1.0701 | No | |||||
Totalnitrogen
| Total nitrogen | 33.43mg/L | 5.261 | 11.2612 | No | |||||
| Ammonia-nitrogen | 26.2mg/L | 3.28 | 6.6906 | No | |||||
| Particles | 1. Activated carbon + 20m high altitude discharge 2. Water spraying + UV + activated carbon + Filter cartridge dust collector +15m high altitude discharge 3. Grade 2 activated carbon+15m high altitude discharge 4. Dry Filtering + electrostatic degreasing + 15m high altitude discharge 5. Pulse dust collecting +15m high altitude discharge | 11 | 1. Injection molding workshop of Building C 2. Buildings A and D 3. Painting workshop 4. Injection molding workshop of Building C 5. Crushing workshop of Building C | 1.325 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（GB16297-1996）/ Tianjin Emission Control Standard for Industrial Enterprises Volatile Organic Compounds DB12/524-2014/ Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015）/Emission Standard of Air Pollutants for Boiler （GB13271-2014） | 0.3367 | 2.0696 | No | |
| VOCS | 2.37 mg/m? | 0.4852 | 1.2218 | No | |||||
| Sulfur dioxide | 22.25 mg/m? | 0.3074 | 0.624 | No | |||||
| Oxynitride | 22.25mg/m? | 0.3262 | 3.38 | No | |||||
| Huaian Welling Motor Manufacturing Co., Ltd. | Particles | 5#：Grade 3 filtering + honeycomb zeolite + CO 8#：Grade 3 filtering + Grade 2 activated carbon | 2 | 5# waste gas outlet: outside the inductor dip coating room 8# waste gas outlet: outside the reactor dip coating room | 3.2 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.0895 | 2.697 | No |
| NMHC | 5.85 mg/m? | Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 0.45 | 1.3853 | No | ||||
| Styrene | 0.028 mg/m? | Emission Standards for Odor Pollutants (GB14554-93) | 0.002 | 0.032 | No | ||||
| Midea Group Wuhan Refrigeration Equipment Co.,Ltd. | pH value | Discharge after being treated by wastewater treatment station and reaching the standard | 1 | West Gate 2 of 4# plant on the west side of plant areas | 7.1 | Integrated Wastewater Discharge Standard GB8978-1996 Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | / | / | No |
| COD | 259 mg/L | 5.85 | 19.60 | No | |||||
| Ammonia-nitrogen | 0.272 mg/L | 0.0067 | 1.764 | No | |||||
| Suspended matters | 32 mg/L | 0.994 | / | No | |||||
| Petroleum | 3.64 mg/L | 0.087 | / | No | |||||
Totalphosphorus
| Total phosphorus | 0.12 mg/L | 0.004 | / | No | |||||
| Fluoride | 4.22 mg/L | 0.083 | / | No | |||||
| Total zinc | 0.83 mg/L | 0.039 | / | No | |||||
| BOD5 | 67.7 mg/L | 1.35 | / | No | |||||
| Particles | Discharge after being treated by environmental protection equipment | 21 | 1# plant, 3# plant, 4# plant, 5# plant | 4.8 mg/m? | 2.76 | 6.09 | No | ||
| Sulfur dioxide | 16 | 4 mg/m? | 0.39 | 1.56 | No | ||||
| Oxynitride | 16 | 28 mg/m? | 2.19 | 5.9 | No | ||||
| Tin and its compounds | 3 | 3# plant | 5.92*10-4 mg/m? | 1.68*10-9 | / | No | |||
| Acrylonitrile | 3 | Less than the limit | ND | / | No | ||||
| Styrene | 3 | 0.098 mg/m? | 2.78*10-7 | / | No | ||||
| VOCs | 10 | 1# plant | 3.44 mg/m? | 1.58 | / | No | |||
| Handan Midea Air-Conditioning Equipment Co.,Ltd. | NMHC | 15m high altitude discharge after being treated by environmental protection equipment | 9 | 1#、2# plants | 4.74 mg/m? | 1) NMHC: Implementation of the emission concentration limits on organic chemicals in Table 1 of Emission Control Standard for Industrial Enterprises Volatile Organic Compounds (DB13/2322-2016) 2) Sulfur dioxide/nitrogen oxides/particles: Implementation of the new furnace standards in Table 1 and Table 2 of Emission Standard of Air Pollutants for Industrial Kiln and Furnace (DB13/1640-2012) 3) Tin and its compounds: Implementation of the requirements of Level 2 in the Integrated Emission Standards for Atmospheric Pollutants (GB16297-1996) | 2.51 | / | No |
| Particles | 7 | 1#、2#、3# plants | 1.8 mg/m? | 0.53 | / | No | |||
| Oxynitride | 7 | 1#、2#、3# plants | 7 mg/m? | 1.47 | 3.241 | No | |||
| Sulfur dioxide | 7 | 1#、2#、3# plants | < 3 mg/m? | 0.42 | 3.241 | No | |||
| Tin and its compounds | 4 | 2# plant | <3*10-6mg/m | 0.00037 | / | No | |||
| COD | Discharge after being treated by | 1 | North side of the power | 68 mg/L | Requirements for inflow | 0.51 | 8.97 | No | |
Ammonia-
nitrogen
| Ammonia-nitrogen | wastewater treatment system and reaching the standard | 1 | house | 2.9 mg/L | water quality of wastewater treatment plant in Handan Economic and Technological Development Zone | 0.029 | 0.7 | No | |
| pH | 1 | 7.1 | / | / | No | ||||
| Suspended matters | 1 | 13mg/L | 0.11 | / | No | ||||
| Petroleum | 1 | 0.56mg/L | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | 0.0048 | / | No | |||
| Fluoride | 1 | 0.18 mg/L | 0.0018 | / | No | ||||
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | pH value | Treatment by waste water treatment station and reaching the standard | 1 | West gate | 7.7 | Integrated Wastewater Discharge Standard (GB8978-1996) chart 4 Level 3 | / | / | No |
| COD | 293 mg/L | 1.868 | 76.63 | No | |||||
| SS | 9 mg/L | 0.057 | / | No | |||||
| NH3-N | 20.5 mg/L | 0.1307 | 5.32 | No | |||||
| Petroleum | 0.24 mg/L | 0.002 | / | No | |||||
| Fluoride | 11.5 mg/L | 0.0733 | / | No | |||||
| BOD5 | 121 mg/L | 0.7714 | / | No | |||||
| LAS | 0.105 mg/L | 0.0007 | / | No | |||||
| Total zinc | 0.03 mg/L | 0.0002 | / | No | |||||
| Animal and vegetable oil | 0.43 mg/L | 0.003 | / | No | |||||
| Particles | After treatment by environmental protection and treatment facilities and reaching the standard, 25m high altitude discharge | 11 | East, west, south and north corners of the plant | 9.9 mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50、418-2016 Table 1 Central Downtown | 7.80 | / | No | |
| SO2 | 5 mg/m? | 1.175 | / | No | |||||
| NOX | 14 mg/m? | 2.769 | / | No | |||||
| Tin and its compounds | 0.27 mg/m? | 0.0029 | / | No | |||||
| NMHC | 2.5 mg/m? | 0.6321 | / | No | |||||
| Chongqing Midea General Refrigeration Equipme | PH | Discharge to municipal wastewater treatment plant after being treated by the wastewater treatment system | 1 | General sewage discharge exit of plant areas | 7.65 | Integrated Wastewater Discharge Standard (GB8978-1996) Chart 4 Level 3 | / | / | No |
| Suspended matters | 14mg/L | 1.069 | / | No | |||||
| COD | 122.5mg/L | 9.354 | / | No | |||||
| Ammonia- | 7.015mg/L | 0.536 | / | No | |||||
nt Co.,
Ltd.
| nt Co., Ltd. | nitrogen（NH3-N） | ||||||||
| Animal and vegetable oil | 1.37mg/L | 0.105 | / | No | |||||
| Petroleum | 0.255mg/L | 0.019 | / | No | |||||
| Five-day BOD | 45.35mg/L | 3.463 | / | No | |||||
| Anionic surfactant | 0.147mg/L | 0.011 | / | No | |||||
| Phosphate | 0.075mg/L | 0.006 | / | No | |||||
| Fluoride | 4.49mg/L | 0.343 | / | No | |||||
| Particles | High altitude discharge after being treated by waste gas treatment station | 4 | 2 sets for paint waste gas of 1# and 4# plants each | 10.742mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 1.470 | / | No | |
| Toluene | 0.376mg/m? | 0.042 | / | No | |||||
| Xylene | 0.027mg/m? | 0.004 | / | No | |||||
| NMHC | 3.090mg/m? | 0.402 | / | No | |||||
| Particles | Filter cartridge dust collector | 9 | 5 sets for 1# plant and 4 sets for 4# plant | 11.536mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 1.989 | / | No | |
| Direct discharge | 2 | Brazing waste gas outlets for 2# and 4# plants | |||||||
| Sulfuric acid mist | Lye spray tower | 2 | Acid pickling waste gas outlets for 1# and 4# plants | 0.833 mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown | 0.007 | / | No | |
| Hydrogen Chloride | 6.100 mg/m? | 0.050 | / | No | |||||
| Particles | 1 set of direct discharge (no longer running) 1 set of RTO | 2 | Volatile oil drying waste gas outlet | 9.95mg/m? | Integrated Emission Standards for Atmospheric Pollutants DB 50/418-2016 Table 1 Central Downtown Emission Standard of Air Pollutants for Industrial Kiln and Furnace DB 50/659-2016 Table 1/2 | 0.072 | / | No | |
| Sulfur dioxide | 4mg/m? | 0.036 | / | No | |||||
| Oxynitride | 17.5mg/m? | 0.126 | / | No | |||||
| NMHC | 4.08mg/m? | 0.03 | / | No | |||||
| Hefei branch of Hefei Hualing Co., Ltd. | COD | After deep treatment by industrial waste water treatment station, discharge to municipal sewage network with domestic sewage | 1 | Freezer waste water outlet | 40 mg/L | Takeover standards of the Western Group wastewater treatment plant | 5.69 | 9.53 | No |
| Ammonia-nitrogen | 13.4 mg/L | 1.9 | / | No | |||||
| BOD | 21 mg/L | 11.01 | / | No | |||||
| SS | 66 mg/L | 5.99 | / | No | |||||
Petroleum
| Petroleum | 10.7 mg/L | 1.78 | / | No | ||||
| Phosphate | 1.29 mg/L | 0.72 | / | No | ||||
| Total zinc | 0.35 mg/L | 0.48 | / | No | ||||
| Fluoride | 0.56 mg/L | 1.15 | / | No | ||||
| pH | 7.36 | / | / | No | ||||
| NMHC | After photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Screen printing waster gas outlet | 6.1 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015） | 0.19 | / | No |
| NMHC | 1 | 5# plastic uptake/foaming waster gas outlet | 2.4 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.08 | / | No | |
| Particles | After filter cartridge dust collector + activated carbon, 15m high altitude discharge | 2 | Welding waste gas outlets of 7# and 8# plants | 12 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.24 | / | No |
| Particles | After filter cartridge dust collector, 15m high altitude discharge | 1 | Crushing waste gas outlet | 9.8 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.2 | / | No |
| NMHC | After Grade 2 activated carbon, 15m high altitude discharge | 2 | Foaming waste gas outlets of 7# and 8# plants | 34 mg/m? | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015） | 1.06 | / | No |
| Styrene | / | Emission Standards of Industrial Pollutants in the Synthetic Resin Industry（GB31572-2015） | / | / | No | |||
| Odor concentration | 549 mg/m? | Emission Standards for Odor Pollutants（GB14554-93）Table 1 | / | / | No | |||
| NMHC | After Grade 2 activated carbon, 15m high altitude discharge | 1 | 7# plastic uptake waster gas outlet | 7.3 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.23 | / | No |
| NMHC | After dry filtering + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | 8# plastic uptake waster gas outlet | 11 mg/m? | Integrated Emission Standards for Atmospheric Pollutants（DB31/933-2015） | 0.34 | / | No |
| NMHC | After spray tower + demister + photo-catalytic oxidation + activated carbon, 15m high altitude discharge | 1 | Spraying waste gas outlet | 7.1 mg/m? | Emission Standards of Industrial Pollutants in the | 0.22 | / | No |
Synthetic Resin Industry（GB31572-2015）
| Synthetic Resin Industry（GB31572-2015） | |||||||||
| Guangzhou Hualing Refrigerating Equipment Co.,ltd. | Waste mineral oil, waste oil-containing liquid, waste packaging, waste activated carbon, waste lead battery, waste filter cotton, waste circuit board, etc | treatment entrusted to third-party qualified enterprise | N/A | N/A | N/A | N/A | 78.48 | 151.523 | 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 the
environmental 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 plansAll 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. Majordischarge points are equipped with an online pollution discharge monitoring system for stationary pollution sources to produce and upload real-timedata to Midea Environmental Protection Online Monitoring Platform; 2) Waste water pollution source monitoring: Samples are fetched at intake andoutlet ports of waste water treatment stations to monitor changes of pollution source of waste water and up-to-standard emission of waste water afterbeing treated at the waste water treatment stations. Monitoring items include CODcr, SS and petroleum, etc. The data is uploaded to the governmental
monitoring authority online and the government authority conducts real-time monitoring; 3) Noise monitoring: Noise monitoring points are set at noisesensitive points and on the border of factories. Noise is monitored once in spring and summer respectively and at daytime and at nighttime respectivelyeach time; 4) Solid waste pollution source monitoring: Hazardous waste produced from the subsidiaries is handed over to the units with qualificationsfor treatment, monitoring systems are established, and related management forms and accounts are set up.Administrative penalties received during the Reporting Period due to environmental issuesNone of the Company’s subsidiaries received any administrative penalty during the Reporting Period due to environmental issues.Other environment-related information that should be made publicNoneMeasures taken to reduce carbon emissions during the Reporting Period and the results
√ Applicable □ N/A
a. Midea Group promoted the implementation of 29 distributed photovoltaic projects in the first half of 2022, with a total designed installed capacity of
154.34MW. So far, construction has started for 13 such projects, with a combined installed capacity of 53.34MW. These 13 projects are expected to beable to generate power of approximately 54.34 million KWH per year upon the completion of construction, representing a carbon emission reduction ofaround 43,472 tons of CO2.b. All manufacturing plants kept improving their energy management systems and carried out work related to ISO 50001 (GB23331) certification. As of
August, 22 plants have been certified, and the other ones are expected to be all certified by the end of the year. The certification of the energymanagement systems has greatly improved the energy management level of these plants. By carrying out energy saving diagnosis, these plants areable to enhance leakage identification and the closed-loop management.c. Greater efforts have been made in the research and development of green technologies, as well as the implementation of the related projects. Energysaving and emission reduction projects are promoted from the dimensions such as compressed air, waste heat recovery, combustion efficiency, powerquality and central air conditioning. As confirmed by the relevant plants’ financial departments, the energy saving and emission reduction projectsproduced an income of over RMB50 million.Other environment-related informationNone
2. Corporate Social Responsibility (CSR)
2.1 Overview of the public welfare activities in the first half of 2022
Midea Group is committed to providing support for educational development. In the first half of 2022, Midea Group actively responded to the call forrural revitalization and implemented the East China and West China coordination policy by donating RMB10 million to Qiandongnan Prefecture inGuizhou Province, which would be used to help the students and teachers in the region for better educational development.In addition, Midea has been donating RMB100,000 to the Dandelion School (specialized school for the children of rural migrant workers) in Beijing forthree consecutive years from 2021 to 2023. The donated money would be used to improve education in the school and the living conditions of the
students and teachers of the school, support teacher cultivation plans, fund and cultivate volunteers for the school, etc.
2.2 Follow-up work plan
In the second half of 2022, Midea will continue to play its part in supporting social development. Adhering to both economic and social development, itwill give full play to its advantages and strength and play an active role in charity and public welfare activities such as the fight against the COVID-19pandemic, poverty alleviation, disaster relief, rural revitalization, educational development, and green development. In addition to active participation inthese charity and public welfare activities as a way to give back to society, Midea will continue to increase its core competitiveness, build a good corporateimage, and motivate more companies to support charity, playing its part in pursuit of a more harmonious society.
Section VI Significant Events
1. Undertakings of the Company’s Actual Controller, Shareholders, Related Partiesand Acquirer, as well as the Company and Other Commitment Makers Fulfilled in theReporting Period or Overdue at the Period-end
□Applicable ?N/A
No such cases in the Reporting Period.
2. Occupation of the Company’s Capital by the Controlling Shareholder or Its RelatedParties for Non-Operating Purposes
□Applicable ?N/A
No such cases in the Reporting Period.
3. Illegal Provision of Guarantees for External Parties
□Applicable ?N/A
No such cases in the Reporting Period.
4. Engagement and Disengagement of CPA Firm
Have the semi-annual financial statements been audited by a CPA firm?
□ Yes ? No
The semi-annual financial statements are unaudited by a CPA firm.
5. Explanation of the Board of Directors and the Supervisory Committee Regardingthe "Non-standard Audit Opinion" for the Reporting Period
□Applicable ?N/A
6. Explanation of the Board of Directors Regarding the "Non-standard Audit Opinion"for Last Year
□Applicable ?N/A
7. Bankruptcy and Reorganization
□Applicable ?N/A
No such cases in the Reporting Period.
8. Litigation
Material litigation and arbitration:
□Applicable ?N/A
No such cases in the Reporting Period.Other legal matters:
□Applicable ?N/A
9. Punishments and Rectifications
□Applicable ?N/A
No such cases in the Reporting Period.
10. Credit Conditions of the Company as well as Its Controlling Shareholder andActual Controller
□Applicable ?N/A
11. Significant Related Transactions
11.1 Continuing related transactions
?Applicable □N/A
| Related transaction party | Relation | Type of the transaction | Contents of the transaction | Pricing principle | Transaction price | Transaction amount (RMB’000) | Proportion in the total amounts of transaction of the same kind (%) | Approved transaction line (RMB’000) | Over approved line | Mode of settlement | Obtainable market price for the transaction of the same kind | Disclosure date | Index to the disclosed information |
| Orinko Advanced Plastics | Controlled by family membe | Procurement | Procurement of goods | Market price | - | 697,804 | 0.60% | 1,900,000 | No | Payment after delivery | - | 30 April 2022 | www.cninfo.com.cn |
Co.,Ltd.
| Co., Ltd. | r of Company’s actual controller | ||||||||||||
| Midea Real Estate Holding Limited | Controlled by Company’s actual controller | Sale | Sale of goods | Market price | - | 74,357 | 0.04% | 576,430 | No | Payment after delivery | - | 30 April 2022 | www.cninfo.com.cn |
| Details of any sales return of a large amount | Zero | ||||||||||||
| Give the actual situation in the Reporting Period (if any) where a forecast had been made for the total amounts of continuing related-party transactions by type to occur in the current period | The line for continuing related transactions between the Company and the related parties and their subsidiaries did not exceed the total amount of continuing related transactions estimated by the Company by type. | ||||||||||||
| Reason for any significant difference between the transaction price and the market reference price (if applicable) | N/A | ||||||||||||
11.2 Related transactions regarding purchase or sales of assets or equity interests
□Applicable ?N/A
No such cases in the Reporting Period.
11.3 Related transactions arising from joint investments in external parties
□Applicable ?N/A
No such cases in the Reporting Period.
11.4 Credits and liabilities with related parties
□Applicable ?N/A
No such cases in the Reporting Period.
11.5 Transactions with related finance companies
□Applicable ?N/A
The Company did not make deposits in, receive loans or credit from and was not involved in any otherfinance business with any related finance company or any of its related parties.
11.6 Transactions between finance companies controlled by the Company and related parties
□Applicable ?N/A
No related parties made deposits in, received loans or credit from or was involved in any other financebusiness with any finance company controlled by the Company.
11.7 Other significant related transactions
□Applicable ?N/A
No such cases in the Reporting Period.
12. Significant Contracts and Their Execution
12.1 Trusteeship, contracting and leasing
12.1.1 Trusteeship
□Applicable ?N/A
No such cases in the Reporting Period.
12.1.2 Contracting
□Applicable ?N/A
12.1.3 Leasing
□Applicable ?N/A
12.2 Major guarantees
?Applicable □N/A
Unit: RMB'000
| Guarantees provided by the Company and its subsidiaries for external parties (excluding those for subsidiaries) | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| No such cases | ||||||||
| Total external guarantee line approved during the Reporting Period (A1) | 0 | Total actual external guarantee amount during the Reporting Period (A2) | 0 | |||||
| Total approved external guarantee line at the end of the Reporting Period (A3) | 0 | Total actual external guarantee balance at the end of the Reporting Period (A4) | 0 | |||||
| Guarantees provided by the Company for its subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the guarantee line announcement | Line of guarantee | Actual occurrence date (date of agreement signing) | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a related party or not |
| Midea Group Finance Co., Ltd. | 2022/4/30 | 8,000,000 | - | Joint liability | One year | No | No | |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 15,430,000 | 2022-1-1 | 6,665,030 | Joint liability | One year | No | No |
| Guangzhou Hualing Refrigerating Equipment Co., Ltd. | 2022/4/30 | 1,350,000 | 2022-1-4 | 122,310 | Joint liability | One year | No | No |
| Foshan Midea Carrier Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 360,000 | 2022-2-23 | 2,760 | Joint liability | One year | No | No |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 2,800,000 | - | Joint liability | One year | No | No | |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 380,000 | 2022-1-1 | 36,240 | Joint liability | One year | No | No |
| Guangdong Midea Precision Molding Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 2022/4/30 | 550,000 | - | Joint liability | One year | No | No | |
| Hainan Midea United Materials Supply Co. Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 2022/4/30 | 1,200,000 | - | Joint liability | One year | No | No | |
| Midea Group (Shanghai) Co., Ltd. | 2022/4/30 | 1,000 | - | Joint liability | One year | No | No | |
| Midea Group Wuhan Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 258,000 | - | Joint liability | One year | No | No | |
Meizhisheng Technology Co., Ltd.
| Meizhisheng Technology Co., Ltd. | 2022/4/30 | 1,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Kitchen Appliances Manufacturing Co., Ltd. | 2022/4/30 | 7,032,000 | 2022-1-1 | 1,727,500 | Joint liability | One year | No | No |
| Guangdong Witol Vacuum Electronic Manufacture Co., Ltd | 2022/4/30 | 100,000 | 2022-1-5 | 280 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen Appliances Manufacturing Co., Ltd. | 2022/4/30 | 2,520,000 | 2022-1-18 | 1,000,000 | Joint liability | One year | No | No |
| Jiangsu Midea Cleaning Appliances Co., Ltd | 2022/4/30 | 640,000 | 2022-1-1 | 9,430 | Joint liability | One year | No | No |
| Maytech Technology Co., LTD. | 2022/4/30 | 75,000 | - | Joint liability | One year | No | No | |
| Hainan Meizhi Canghai E-commerce Service Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| Hainan Meizhi Hangjian Electric Appliance Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| Eureka Technology Co., Ltd. | 2022/4/30 | 22,000 | - | Joint liability | One year | No | No | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 3,110,000 | 2022-1-1 | 166,270 | Joint liability | One year | No | No |
| Guangdong Midea-SIIX Electronics Co., Ltd. | 2022/4/30 | 10,000 | 2022-3-9 | 130 | Joint liability | One year | No | No |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Hefei Midea-SIIX Electronics Co., Ltd. | 2022/4/30 | 5,000 | - | Joint liability | One year | No | No | |
| Chongqing Midea General Refrigeration Equipment Co., Ltd. | 2022/4/30 | 30,000 | 2022-1-1 | 9,170 | Joint liability | One year | No | No |
| Meitong Energy Technology (Chongqing) Co., Ltd. | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Guangdong MeiKong Intelligent Building Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Shanghai M-BMS Intelligent Construction Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Winone Elevator Company Limited | 2022/4/30 | 410,000 | 2022-1-1 | 65,610 | Joint liability | One year | No | No |
| Guangdong Lingmei Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Hubei Midea Building Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Meizhi Compressor Limited | 2022/4/30 | 290,000 | 2022-1-1 | 37,870 | Joint liability | One year | No | No |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd | 2022/4/30 | 55,000 | - | Joint liability | One year | No | No | |
| Guangdong Welling Motor Manufacturing Co., Ltd. | 2022/4/30 | 250,000 | 2022-1-1 | 22,890 | Joint liability | One year | No | No |
| Foshan Welling Washer Motor Manufacturing Co., Ltd. | 2022/4/30 | 310,000 | 2022-1-1 | 18,490 | Joint liability | One year | No | No |
| Guangdong Midea Environmental Technologies Co., Ltd. | 2022/4/30 | 20,000 | - | Joint liability | One year | No | No | |
| Huaian Welling Motor Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 2022/4/30 | 20,000 | - | Joint liability | One year | No | No | |
| Zhejiang Meizhi Compressor Co., Ltd. | 2022/4/ | 4,000,000 | 2022-3-31 | 602,000 | Joint liability | One | No | No |
| 30 | year | |||||||
| Anhui Meizhi Compressor Co., Ltd. | 2022/4/30 | 40,000 | 2022-1-1 | 7,660 | Joint liability | One year | No | No |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 2022/4/30 | 60,000 | 2022-1-24 | 310 | Joint liability | One year | No | No |
| Welling (Wuhu) Motor Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | 2022-1-17 | 800 | Joint liability | One year | No | No |
| Wuhu Welling Motor Sales Co., Ltd. | 2022/4/30 | 1,865,000 | - | Joint liability | One year | No | No | |
| Anhui Welling Auto Parts Co. , Ltd. | 2022/4/30 | 130,000 | 2022-5-9 | - | Joint liability | One year | No | No |
| Dorna Technology Co., Ltd. | 2022/4/30 | 55,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| MiSiliconn SemiConductor Technologies Co., Ltd. | 2022/4/30 | 67,000 | - | Joint liability | One year | No | No | |
| Guangdong Jiya Precision Machinery Technology Co., Ltd. | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Anqing Welling Auto Parts Co., Ltd. | 2022/4/30 | 50,000 | - | Joint liability | One year | No | No | |
| Servotronix Motion Technology Development (Shenzhen) Ltd. | 2022/4/30 | 30,000 | - | Joint liability | One year | No | No | |
| Ningbo Midea United Materials Supply Co. Ltd. | 2022/4/30 | 2,000,000 | 2022-1-12 | 40,990 | Joint liability | One year | No | No |
| Guangzhou Kaizhao Commercial and Trading Co., Ltd | 2022/4/30 | 60,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 2022/4/30 | 185,000 | 2022-1-1 | 2,630 | Joint liability | One year | No | No |
| Foshan Shunde Midea Electrical Heating Appliances Manufacturing Co., Ltd. | 2022/4/30 | 1,665,000 | 2022-1-1 | 192,320 | Joint liability | One year | No | No |
| GD Midea Environment Appliances Mfg. Co.,Ltd. | 2022/4/30 | 1,400,000 | 2022-1-1 | 11,700 | Joint liability | One year | No | No |
| Guangdong Midea Cuchen Company Ltd. | 2022/4/30 | 6,000 | - | Joint liability | One year | No | No | |
| GD Midea Caffitaly Coffee Machine Manufacturing Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 2022/4/30 | 2,200,000 | 2022-6-6 | 810,000 | Joint liability | One year | No | No |
| Foshan Shunde Midea Washing Appliances Manufacturing Co., Ltd. | 2022/4/30 | 2,750,000 | 2022-1-1 | 244,760 | Joint liability | One year | No | No |
| Guangdong Midea Kitchen & Bath Appliances Manufacturing Co., Ltd. | 2022/4/30 | 400,000 | - | Joint liability | One year | No | No | |
| Foshan Shunde Midea Water Dispenser Manufacturing Company Limited | 2022/4/30 | 855,000 | 2022-1-1 | 14,910 | Joint liability | One year | No | No |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | 2022/4/30 | 230,000 | 2022-1-20 | 12,970 | Joint liability | One year | No | No |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 2022/4/30 | 2,600,000 | 2022-1-1 | 4,520 | Joint liability | One year | No | No |
| Wuxi Little Swan Electric Co., Ltd. | 2022/4/30 | 3,395,000 | 2022-1-1 | 1,135,290 | Joint liability | One year | No | No |
| Hefei Midea Laundry Appliance Co., Ltd. | 2022/4/30 | 2,880,000 | 2022-1-1 | 12,440 | Joint liability | One year | No | No |
| Wuxi Filin Electronics Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No |
Hubei Midea Laundry Appliance Co., Ltd.
| Hubei Midea Laundry Appliance Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Hainan Midea Refrigerator & Washer Sales Co., Ltd. | 2022/4/30 | 50,000 | - | Joint liability | One year | No | No | |
| Hefei Hualing Co., Ltd. | 2022/4/30 | 700,000 | 2022-1-1 | 99,790 | Joint liability | One year | No | No |
| Hubei Midea Refrigerator Co., Ltd. | 2022/4/30 | 260,000 | - | Joint liability | One year | No | No | |
| Hefei Midea Refrigerator Co., Ltd. | 2022/4/30 | 3,000,000 | - | Joint liability | One year | No | No | |
| Guangzhou Midea Hualing Refrigerator Co., Ltd. | 2022/4/30 | 700,000 | 2022-1-6 | 9,880 | Joint liability | One year | No | No |
| Toshiba Home Appliances Manufacturing (Nanhai) Co., Ltd | 2022/4/30 | 100,000 | 2022-3-10 | - | Joint liability | One year | No | No |
| Little Swan (Jing Zhou) Sanjin Electronic Appliances Limited | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea Group E-Commerce Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Guangdong Midea Smart Link Technologies Co., Ltd. | 2022/4/30 | 91,200 | 2022-1-1 | 4,130 | Joint liability | One year | No | No |
| Reis Robotics (Kunshan) Co., Ltd. | 2022/4/30 | 70,000 | 2022-1-1 | 1,880 | Joint liability | One year | No | No |
| KUKA Systems (China) CO., Ltd. | 2022/4/30 | 500,000 | 2022-1-1 | 56,670 | Joint liability | One year | No | No |
| KUKA Robotics Manufacturing China Co.,Ltd | 2022/4/30 | 50,000 | 2022-1-19 | 22,700 | Joint liability | One year | No | No |
| KUKA Robotics Guangdong Co., Ltd | 2022/4/30 | 150,000 | 2022-2-24 | 61,140 | Joint liability | One year | No | No |
| KUKA Robotics (Shanghai) Co.,Ltd. | 2022/4/30 | 450,000 | 2022-1-1 | 32,790 | Joint liability | One year | No | No |
| Shanghai Swisslog Healthcare Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Swisslog Technology Co., Ltd. | 2022/4/30 | 50,000 | 2022-2-23 | 550 | Joint liability | One year | No | No |
| Shanghai Swisslog Technology Co., Ltd. | 2022/4/30 | 230,000 | 2022-1-1 | 48,140 | Joint liability | One year | No | No |
| Swisslog (Shanghai) Co., Ltd. | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Guangdong Meicloud Technology Co., Ltd. | 2022/4/30 | 40,000 | - | Joint liability | One year | No | No | |
| Foshan Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Guangdong Yueyun Industrial Internet Innovative Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Wuhan Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Suzhou Meicloud Technology Co., Ltd. | 2022/4/30 | 10,000 | - | Joint liability | One year | No | No | |
| Midea International Corporation Company Limited | 2022/4/30 | 12,330,000 | 2022-1-1 | 9,867,720 | Joint liability | One year | No | No |
| Midea Investment Development Company Limited | 2021/12/27 | 8,053,680 | 2022-2-24 | 3,020,130 | Joint liability | One year | No | No |
| Midea International Trading Company Limited | 2022/4/30 | 650,000 | 2022-1-5 | 4,230 | Joint liability | One year | No | No |
| Welling International Hong Kong Ltd | 2022/4/ | 310,000 | - | Joint liability | One | No | No |
| 30 | year | |||||||
| Midea Electric Trading (Singapore) Co.,Pte. Ltd. | 2022/4/30 | 3,000,000 | 2022-3-15 | 367,200 | Joint liability | One year | No | No |
| Orient Household Appliances Ltd. | 2022/4/30 | 33,500 | - | Joint liability | One year | No | No | |
| Midea Consumer Electric (Vietnam) Co., Ltd. | 2022/4/30 | 6,700 | - | Joint liability | One year | No | No | |
| Concepcion Midea Inc. | 2022/4/30 | 6,700 | 2022-1-1 | - | Joint liability | One year | No | No |
| Midea Italia S.R.L. | 2022/4/30 | 120,000 | - | Joint liability | One year | No | No | |
| Midea Mexico, S. DE R.L. DE C.V. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Midea Electric Trading (Thailand) Co., Ltd. | 2022/4/30 | 13,400 | - | Joint liability | One year | No | No | |
| Midea America Corp. | 2022/4/30 | 150,000 | 2022-1-1 | 64,350 | Joint liability | One year | No | No |
| PT. Midea Planet Indonesia | 2022/4/30 | 247,000 | - | Joint liability | One year | No | No | |
| Midea Europe GmbH | 2022/4/30 | 400,000 | - | Joint liability | One year | No | No | |
| Midea America (Canada) Corp. | 2022/4/30 | 102,900 | 2022-1-1 | - | Joint liability | One year | No | No |
| Midea Consumer Appliances DMCC | 2022/4/30 | 175,000 | - | Joint liability | One year | No | No | |
| Midea Middle East | 2022/4/30 | 70,000 | - | Joint liability | One year | No | No | |
| Meco Innovations Technology, LLC | 2022/4/30 | 80,000 | - | Joint liability | One year | No | No | |
| Toshiba Lifestyle Products & Services Corporation | 2022/4/30 | 2,055,390 | 2022-1-1 | 8,250 | Joint liability | One year | No | No |
| Midea Electric Netherlands (I) B.V. | 2022/4/30 | 52,260,000 | 2022-1-1 | 28,856,400 | Joint liability | One year | No | No |
| Midea Electrics Netherlands B.V. | 2022/4/30 | 1,000,000 | - | Joint liability | One year | No | No | |
| Clivet S.p.A. | 2022/4/30 | 90,000 | 2022-1-1 | 76,150 | Joint liability | One year | No | No |
| Servotronix Motion Control Ltd. | 2022/4/30 | 940 | - | Joint liability | One year | No | No | |
| Midea Austria GmbH | 2022/4/30 | 5,000 | - | Joint liability | One year | No | No | |
| Midea (Egypt) Kitchen & water heater appliances Co. ,Ltd | 2022/4/30 | 70,000 | - | Joint liability | One year | No | No | |
| Total guarantee line for subsidiaries approved during the Reporting Period (B1) | 160,967,410 | Total actual guarantee amount for subsidiaries during the Reporting Period (B2) | 57,807,670 | |||||
| Total approved guarantee line for subsidiaries at the end of the Reporting Period (B3) | 160,967,410 | Total actual guarantee balance for subsidiaries at the end of the Reporting Period (B4) | 55,579,380 | |||||
| Guarantees between subsidiaries | ||||||||
| Guaranteed party | Disclosure date of the guarant | Line of guarantee | Actual occurrence date (date of | Actual guarantee amount | Type of guarantee | Term of guarantee | Due or not | Guarantee for a relate |
ee lineannouncement
| ee line announcement | agreement signing) | d party or not | ||||||
| Guangdong Midea Electric Co., Ltd. | 2022/2/23 | 2,803,360 | 2022-4-26 | 1,177,410 | Joint liability | One year | No | No |
| Wuhu Midea Annto Logistics Co., Ltd. | 2022/4/30 | 1,450,000 | 2022-1-1 | 296,340 | Joint liability | One year | No | No |
| Ningbo Annto Logistics Co., Ltd. | 2022/4/30 | 950,000 | Joint liability | One year | No | No | ||
| Hainan Annto Zhilian Supply Chain Management Co., Ltd. | 2022/4/30 | 100,000 | - | Joint liability | One year | No | No | |
| Total line for guarantees between subsidiaries approved during the Reporting Period (C1) | 5,303,360 | Total actual guarantee amount between subsidiaries during the Reporting Period (C2) | 1,596,480 | |||||
| Total approved line for guarantees between subsidiaries at the end of the Reporting Period (C3) | 5,303,360 | Total actual guarantee balance between subsidiaries at the end of the Reporting Period (C4) | 1,473,750 | |||||
| Total guarantee amount (total of the above-mentioned three kinds of guarantees) | ||||||||
| Total guarantee line approved during the Reporting Period (A1+B1+C1) | 166,270,770 | Total actual guarantee amount during the Reporting Period (A2+B2+C2) | 59,404,150 | |||||
| Total approved guarantee line at the end of the Reporting Period (A3+B3+C3) | 166,270,770 | Total actual guarantee balance at the end of the Reporting Period (A4+B4+C4) | 57,053,130 | |||||
| Proportion of the total actual guarantee amount (A4+B4+C4) in net assets of the Company | 44.00% | |||||||
| Of which: | ||||||||
| Amount of guarantees provided for shareholders, the actual controller and their related parties (D) | 0 | |||||||
| Amount of debt guarantees provided directly or indirectly for entities with a liability-to-asset ratio over 70% (E) | 52,804,090 | |||||||
| 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) | 52,804,090 | |||||||
| Joint responsibilities possibly borne for undue guarantees (if any) | N/A | |||||||
| Provision of external guarantees in breach of the prescribed procedures (if any) | N/A | |||||||
12.3 Entrusted asset management
□ Applicable ? N/A
No such cases in the Reporting Period.
12.4 Other significant contracts
□ Applicable ? N/A
No such cases in the Reporting Period.
13. Other Significant Events
? Applicable □ N/AOn 23 May 2022, the Company and Clou Electronics signed the Share Subscription Agreement. As such,the Company intended to subscribe for 422,504,744 shares in a private placement of Clou Electronics,accounting for 30% of Clou Electronics’ total share capital at the agreement signing date. As the privateplacement of Clou Electronics is priced at RMB3.28/share, the Company’s estimated subscription amountis RMB1.386 billion, all of which is to be paid in cash (final number of shares subscribed for subject tothe requirement of the CSRC approval document).On the same day, the Company and Shenzhen Capital Holdings Co., Ltd. (hereinafter, “ShenzhenCapital”) signed the Share Transfer Agreement. As such, Shenzhen Capital intended to transfer the126,047,248 shares held by it in Clou Electronics (or 8.95% of Clou Electronics’ total share capital at theagreement signing date) to the Company. As the transfer is priced at RMB6.64/share, the total transferconsideration is RMB836.9537 million. In the meantime, the Company and Shenzhen Capital signed theVoting Rights Entrustment Agreement. According the said agreement, Shenzhen Capital intended toentrust the Company with the voting rights in correspondence to the 126,047,248 shares held by it inClou Electronics (or 8.95% of Clou Electronics’ total share capital at the agreement signing date). Theentrustment period will expire after 24 months of the acceptance of the private placement applicationmaterials by the CSRC or any of the following conditions occurs (whichever is earlier): (1) both partiesagree, in writing, to terminate this agreement; (2) the shares carrying the entrusted voting rights aretransferred to the consignee; or (3) the Share Transfer Agreement is terminated before the sharescarrying the entrusted voting rights are transferred to the Company and/or the Share SubscriptionAgreement is terminated before the private placement shares are registered under the Company.Upon the acquisition, the Company is to hold 548,551,992 shares in Clou Electronics, approximatelyaccounting for 29.96% of Clou Electronics’ total share capital upon the private placement.
14. Significant Events of Subsidiaries
□ Applicable ? N/A
Section VII Changes in Shares and Information about
Shareholders
1. Changes in Shares
1.1 Changes in shares
Unit: share
| Before | Increase/decrease in Reporting Period (+/-) | After | |||||
| Shares | Percentage (%) | New issue | Others | Subtotal | Shares | Percentage (%) | |
| 1. Restricted shares | 156,538,881 | 2.24 | -6,918,316 | -6,918,316 | 149,620,565 | 2.14 | |
| 1.1 Shares held by the state | |||||||
| 1.2 Shares held by state-owned corporations | |||||||
| 1.3 Shares held by other domestic investors | 153,773,081 | 2.20 | -6,724,266 | -6,724,266 | 147,048,815 | 2.10 | |
| Among which: Shares held by domestic corporations | 2,363,601 | 0.03 | 0 | 2,363,601 | 0.03 | ||
| Shares held by domestic individuals | 151,409,480 | 2.17 | -6,724,266 | -6,724,266 | 144,685,214 | 2.07 | |
| 1.4 Shares held by foreign investors | 2,765,800 | 0.04 | -194,050 | -194,050 | 2,571,750 | 0.04 | |
| Among which: Shares held by foreign corporations | |||||||
| Shares held by foreign individuals | 2,765,800 | 0.04 | -194,050 | -194,050 | 2,571,750 | 0.04 | |
| 2. Non-restricted shares | 6,830,024,963 | 97.76 | 13,526,990 | 4,156,523 | 17,683,513 | 6,847,708,476 | 97.86 |
| 2.1 RMB common shares | 6,830,024,963 | 97.76 | 13,526,990 | 4,156,523 | 17,683,513 | 6,847,708,476 | 97.86 |
| 2.2 Domestically listed foreign shares | |||||||
| 2.3 Overseas listed foreign shares | |||||||
| 2.4 Other | |||||||
| 3. Total shares | 6,986,563,844 | 100.00 | 13,526,990 | -2,761,793 | 10,765,197 | 6,997,329,041 | 100.00 |
Reasons for the changes in shares?Applicable □N/Aa. The 377,083 restricted shares of a total of 21 eligible awardees for the second unlocking period of the
reserved restricted shares under the 2018 Restricted Share Incentive Scheme were unlocked on 22 June2022.b. The 2,791,699 restricted shares of a total of 189 eligible awardees for the third unlocking period of thefirst grant under the 2018 Restricted Share Incentive Scheme were unlocked on 28 June 2022, including182,250 restricted shares of foreign employees.c. For the reasons of certain awardees’ resignation, violation of the Company’s “Red Lines”, beingreassigned or other factors, on 20 April 2022, the Company repurchased and retired 248,333 shares ofnine awardees with respect to the first grant under the 2018 Restricted Share Incentive Scheme, 137,917shares of four awardees with respect to the reserved restricted shares under the 2018 Restricted ShareIncentive Scheme, 771,042 shares of 18 awardees under the 2019 Restricted Share Incentive Scheme,1,314,501 shares of 30 awardees under the 2020 Restricted Share Incentive Scheme, and 290,000shares of seven awardees under the 2021 Restricted Share Incentive Scheme, totaling 2,761,793restricted shares.d. In the Reporting Period, the awardees of stock options chose to exercise 13,526,990 shares, whichhave been registered into the Company’s share capital.e. In the Reporting Period, locked-up shares held by senior management decreased by 987,741 shares.Approval of share changes
□Applicable ?N/A
Transfer of share ownership
□Applicable ?N/A
Progress of any share repurchase?Applicable □N/AAs of the date of this Report, via the special securities account for share repurchases, the Companycumulatively repurchased 33,072,771 shares (0.4725% of the Company’s total share capital) by way ofcentralized bidding. With the highest trading price being RMB60.05/share and the lowest beingRMB50.14/share, the total payment amounted to RMB1,830,811,030 (exclusive of transaction costs).
This share repurchase has been in conformity with the applicable laws and regulations, as well as theCompany’s share repurchase plan.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: share
| Name of shareholder | Opening restricted shares | Unlocked in current period | Increased in current period | Repurchased and retired | Closing restricted shares | Reason for change | Date of unlocking |
| Awardees of the first grant of 2018 Restricted Share Incentive Scheme | 6,687,750 | 2,791,699 | 0 | 248,333 | 3,647,718 | Locked up according to the Scheme | 28 June 2022 |
| Awardees of reserved restricted shares under 2018 Restricted Share Incentive Scheme | 1,297,500 | 377,083 | 0 | 137,917 | 782,500 | Locked up according to the Scheme | 22 June 2022 |
| Zhu Fengtao | 780,300 | 780,300 | 0 | 0 | 0 | Unlocked for former senior management | - |
| Xiao Mingguang | 353,750 | 353,750 | 0 | 0 | 0 | Unlocked for former senior management | - |
| Zhang Xiaoyi | 337,431 | 0 | 25,000 | 0 | 362,431 | Locked up for senior management | - |
| Jiang Peng | 268,950 | 20,000 | 0 | 0 | 248,950 | Locked up for senior management | - |
| Hu Ziqiang | 250,000 | 0 | 25,000 | 0 | 275,000 | Locked up for senior management | - |
| Guan Jinwei | 276,250 | 0 | 25,000 | 0 | 301,250 | Locked up for | - |
seniormanagement
| senior management | |||||||
| Bai Lin | 0 | 0 | 71,309 | 0 | 71,309 | Locked up for senior management | - |
| Zhong Zheng | 167,114 | 0 | 20,000 | 0 | 187,114 | Locked up for senior management | - |
| Total | 10,419,045 | 4,322,832 | 166,309 | 386,250 | 5,876,272 | -- | -- |
2. Issuance and Listing of Securities
□Applicable ?√N/A
3. Total Number of Shareholders and Their Shareholdings
Unit: share
| Total number of common shareholders at the period-end | 426,506 | Total number of preference shareholders with resumed voting rights at the period-end (if any) | 0 | |||||||
| 5% or greater common shareholders or top 10 common shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Shareholding percentage (%) | Total common shares held at the period-end | Increase/decrease during the Reporting Period | Number of restricted common shares held | Number of non-restricted common shares held | Shares in pledge or frozen | |||
| Status | Shares | |||||||||
| Midea Holding Co., Ltd. | Domestic non-state-owned corporation | 31.00% | 2,169,178,713 | - | 0 | 2,169,178,713 | In pledge | 100,000,000 | ||
| Hong Kong Securities Clearing Company Limited | Foreign corporation | 17.86% | 1,249,815,931 | 32,851,440 | 0 | 1,249,815,931 | ||||
| China Securities Finance Co., Ltd. | Domestic non-state-owned corporation | 2.83% | 198,145,134 | - | 0 | 198,145,134 | ||||
| Fang Hongbo | Domestic individual | 1.67% | 116,990,492 | - | 87,742,869 | 29,247,623 | ||||
| Central Huijin Asset Management Ltd. | State-owned corporation | 1.26% | 88,260,460 | - | 0 | 88,260,460 | ||||
| Huang Jian | Domestic individual | 1.23% | 86,140,000 | - | 0 | 86,140,000 | ||||
| Canada Pension Plan Investment Board－ own funds (stock exchange) | Foreign corporation | 0.88% | 61,913,903 | -41,999,994 | 0 | 61,913,903 | ||||
| Li Jianwei | Foreign individual | 0.66% | 46,264,545 | -3,368,455 | 0 | 46,264,545 | ||||
| Yuan Liqun | Domestic | 0.57% | 39,633,597 | 2,137,215 | 0 | 39,633,597 | ||||
individual
| individual | ||||||||||
| Merrill Lynch International | Foreign corporation | 0.55% | 38,554,877 | -5,268,098 | 0 | 38,554,877 | ||||
| Strategic investors or general corporations becoming top-ten common shareholders due to placing of new shares (if any) (see Note 3) | N/A | |||||||||
| Related-parties or acting-in-concert parties among the shareholders above | N/A | |||||||||
| Explain if any of the shareholders above was involved in entrusting/being entrusted with voting rights or waiving voting rights | N/A | |||||||||
| Special account for repurchased shares among the top 10 shareholders | 138,411,603 shares (or 1.98% of the Company’s total share capital) were held in the special account for repurchased shares of Midea Group Co., Ltd. at the end of the Reporting Period. | |||||||||
| Top 10 non-restricted common shareholders | ||||||||||
| Name of shareholder | Number of non-restricted common shares held at the period-end | Type of shares | ||||||||
| Type | Shares | |||||||||
| Midea Holding Co., Ltd. | 2,169,178,713 | RMB common stock | 2,169,178,713 | |||||||
| Hong Kong Securities Clearing Company Limited | 1,249,815,931 | RMB common stock | 1,249,815,931 | |||||||
| China Securities Finance Co., Ltd. | 198,145,134 | RMB common stock | 198,145,134 | |||||||
| Central Huijin Asset Management Ltd. | 88,260,460 | RMB common stock | 88,260,460 | |||||||
| Huang Jian | 86,140,000 | RMB common stock | 86,140,000 | |||||||
| Canada Pension Plan Investment Board－ own funds (stock exchange) | 61,913,903 | RMB common stock | 61,913,903 | |||||||
| Li Jianwei | 46,264,545 | RMB common stock | 46,264,545 | |||||||
| Yuan Liqun | 39,633,597 | RMB common stock | 39,633,597 | |||||||
| Merrill Lynch International | 38,554,877 | RMB common stock | 38,554,877 | |||||||
| Huang Xiaoxiang | 37,835,332 | RMB common stock | 37,835,332 | |||||||
| Related-parties or acting-in-concert parties among the top ten non-restricted common shareholders and between the top ten non-restricted common shareholders and the top ten common shareholders | N/A | |||||||||
| Explanation on the top 10 common shareholders participating in securities margin trading | 1. The Company’s shareholder Yuan Liqun holds 660,000 shares in the Company through her common securities account and 38,973,597 shares in the Company through her account of collateral securities for margin trading, representing a total holding of 39,633,597 shares in the Company. 2. The Company’s shareholder Huang Xiaoxiang holds 29,435,332 shares in the Company through his common securities account and 8,400,000 shares in the Company through his account of collateral securities for margin trading, representing a total holding of 37,835,332 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
4. Changes in Shareholdings of Directors, Supervisors and Senior Management
□Applicable ?√N/A
No changes occurred to the shareholdings of the Company’s directors, supervisors and seniormanagement during the Reporting Period. For further information, see the 2021 Annual Report.
5. Change of Controlling Shareholder or Actual Controller in the Reporting PeriodChange of the controlling shareholder during the Reporting Period
□Applicable ?√N/A
No such cases in the Reporting Period.Change of the actual controller during the Reporting Period
□Applicable ?√N/A
No such cases in the Reporting Period.
Section VIII Preference Shares
□ Applicable ? N/A
No such cases in the Reporting Period.
Section IX Bonds
? Applicable □ N/A
1. Enterprise Bonds
□ Applicable ? N/A
No such cases in the Reporting Period.
2. Corporate Bonds
? Applicable □ N/A
2.1 General information on corporate bonds
Unit: RMB
| Bond name | Abbr. | Bond code | Date of issuance | Value date | Maturity | Outstanding balance | Interest rate | Way of principal repayment and interest payment | Place of trading |
| Midea Group Co., Ltd. maturity 2027 coupon 2.88% $450 million senior unsecured green bonds | MIDEAZ 2.88% 02/24/2027 | ISIN XS2432130453 | 2022-02-16 | 2022-02-24 | 2027-02-24 | USD 450Million | 2.88% | Interest payable semiannually, principal and interest payable at maturity | The Stock Exchange of Hong Kong Ltd. |
| Investor eligibility arrangements (if any) | N/A | ||||||||
| Trading system applicable | N/A | ||||||||
| Risk of termination of listing and trading (if any) and countermeasures | No such risk | ||||||||
Overdue bonds
□ Applicable ? N/A
2.2 Triggering and execution of issuer or investor option clauses and investor protection clauses
□ Applicable ? N/A
2.3 Changes in credit ratings in the Reporting Period
□ Applicable ? N/A
2.4 Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the Reporting Period, as well as the impact on the interests of bond holders
□ Applicable ? N/A
3. Debt Instruments as a Non-financial Enterprise
? Applicable □ N/A
3.1 General information on debt instruments as a non-financial enterprise
| Name of debt instrument | Abbr. | Code of debt instrument | Date of issuance | Value date | Maturity | Outstanding balance | Interest rate | Way of principal repayment and interest payment | Place of trading |
| Super-short-term Commercial Papers of Midea Group Co., Ltd. (Tranche 1, 2022) | 22 Midea SCP001 | 012281718.IB | 2022-04-27 | 2022-04-29 | 2022-10-26 | RMB4 billion | 2.2300% | Principal and interest repayable in full upon maturity | Inter-bank market |
| Investor eligibility arrangements (if any) | N/A | ||||||||
| Trading system applicable | N/A | ||||||||
| Risk of termination of listing and trading (if any) and countermeasures | No such risk | ||||||||
Overdue debt instruments
□ Applicable ? N/A
3.2 Triggering and execution of issuer or investor option clauses and investor protection clauses
□ Applicable ? N/A
3.3 Changes in credit ratings in the Reporting Period
□ Applicable ? N/A
3.4 Execution and changes with respect to guarantees, repayment plans and other repayment-ensuring measures in the Reporting Period, as well as the impact on the interests of debtinstrument holders
□ Applicable ? N/A
4. Convertible Corporate Bonds
□ Applicable ? N/A
No such cases in the Reporting Period.
5. Consolidated Loss of the Reporting Period Over 10% of Net Assets as at the Endof Last Year
□ Applicable ? N/A
6. Key Financial Information of the Company in the Past Two Years
Unit: RMB’000
| Item | 30 June 2022 | 31 December 2021 | Change |
| Current ratio | 118.37% | 111.67% | 6.70% |
| Debt/asset ratio | 66.01% | 65.25% | 0.77% |
| Quick ratio | 99.58% | 86.92% | 12.65% |
| H1 2022 | H1 2021 | Change | |
| Net profit before non-recurring gains and losses | 15,792,300 | 14,854,608 | 6.31% |
| EBITDA/debt ratio | 23.02% | 21.64% | 1.38% |
| Interest cover (times) | 22.70 | 26.85 | -15.46% |
| Cash-to-interest cover (times) | 31.11 | 33.31 | -6.61% |
| EBITDA-to-interest cover (times) | 26.45 | 31.18 | -15.18% |
| Loan repayment ratio (%) | 100.00% | 100.00% | 0.00% |
| Interest payment ratio (%) | 100.00% | 100.00% | 0.00% |
Section X Financial Report
1. Auditor’s Report
Have the semi-annual financial statements been audited by a CPA firm?
□ Yes ? No
The semi-annual financial statements are unaudited by a CPA firm.
2. Financial Statements
(All amounts in RMB'000 Yuan unless otherwise stated）
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY BALANCE SHEETSAS AT 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| ASSETS | Note | 30 June 2022 | 31 December 2021 | 30 June 2022 | 31 December 2021 |
| Consolidated | Consolidated | Company | Company | ||
| Current assets | |||||
| Cash at bank and on hand | 4(1) | 76,701,938 | 71,875,556 | 42,386,058 | 48,153,997 |
| Financial assets held for trading | 4(2) | 3,265,641 | 5,879,202 | 356,000 | 3,442,317 |
| Derivative financial assets | 586,771 | 545,865 | 346,191 | 157,501 | |
| Notes receivable | 4(3) | 6,597,218 | 4,784,914 | - | - |
| Accounts receivable | 4(4) | 29,586,420 | 24,636,440 | - | - |
| Receivables financing | 4(6) | 14,072,448 | 10,273,552 | - | - |
| Advances to suppliers | 4(7) | 4,385,716 | 4,352,807 | 37,966 | 106,838 |
| Contract assets | 4(8) | 4,264,364 | 3,823,476 | - | - |
| Loans and advances | 4(9) | 15,584,795 | 20,656,600 | - | - |
| Other receivables | 4(5), 17(1) | 2,175,663 | 3,104,065 | 26,512,317 | 31,447,849 |
| Inventories | 4(10) | 36,750,838 | 45,924,439 | - | - |
| Current portion of non-current assets | 4(11) | 38,717,839 | 19,851,577 | 35,669,169 | 19,095,262 |
| Other current assets | 4(12) | 43,127,422 | 33,156,012 | 29,945,467 | 11,713,182 |
| Total current assets | 275,817,073 | 248,864,505 | 135,253,168 | 114,116,946 | |
| Non-current assets | |||||
| Other debt investments | 4(13) | 8,150,694 | 7,893,935 | 4,954,490 | 6,034,563 |
| Long-term receivables | 4(14) | 809,030 | 871,356 | - | - |
| Loans and advances | 4(9) | 1,190,970 | 851,927 | - | - |
| Long-term equity investments | 4(15), 17(2) | 3,769,304 | 3,796,705 | 70,366,961 | 66,805,691 |
| Investments in other equity instruments | 43,377 | 45,747 | - | - | |
| Other non-current financial assets | 4(16) | 7,076,364 | 5,912,873 | 353,336 | 537,214 |
| Investment properties | 826,593 | 859,195 | 407,641 | 428,460 | |
| Fixed assets | 4(17) | 23,473,308 | 22,852,848 | 620,423 | 661,692 |
| Construction in progress | 4(18) | 3,590,625 | 2,690,930 | 994,114 | 800,243 |
| Right-of-use assets | 4(19) | 2,257,416 | 2,297,354 | 11,054 | 2,585 |
| Intangible assets | 4(20) | 16,774,398 | 17,173,072 | 661,239 | 669,158 |
| Goodwill | 4(21) | 27,110,127 | 27,874,752 | - | - |
| Long-term prepaid expenses | 4(22) | 1,409,257 | 1,394,240 | 93,373 | 79,799 |
| Deferred tax assets | 4(23) | 9,117,529 | 8,192,309 | 259,890 | 289,964 |
| Other non-current assets | 4(24) | 31,688,080 | 36,374,356 | 30,717,985 | 33,023,304 |
| Total non-current assets | 137,287,072 | 139,081,599 | 109,440,506 | 109,332,673 | |
| TOTAL ASSETS | 413,104,145 | 387,946,104 | 244,693,674 | 223,449,619 |
MIDEA GROUP CO., LTD.CONSOLIDATED AND COMPANY BALANCE SHEETS (CONT’D)AS AT 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| LIABILITIES AND SHAREHOLDERS’ EQUITY | Note | 30 June 2022 | 31 December 2021 | 30 June 2022 | 31 December 2021 |
| Consolidated | Consolidated | Company | Company | ||
| Current liabilities | |||||
| Short-term borrowings | 4(27) | 10,658,682 | 5,381,623 | - | - |
| Borrowings from the Central Bank | 249,139 | 178,878 | - | - | |
| Customer deposits and deposits from banks and other financial institutions | 98,826 | 78,180 | - | - | |
| Financial liabilities held for trading | 1,706,821 | - | - | - | |
| Derivative financial liabilities | 238,448 | 157,602 | - | - | |
| Notes payable | 4(28) | 29,331,809 | 32,752,007 | - | - |
| Accounts payable | 4(29) | 65,533,733 | 65,983,559 | - | - |
| Contract liabilities | 4(30) | 24,331,594 | 23,916,595 | - | - |
| Employee benefits payable | 4(31) | 5,435,991 | 7,535,168 | 478,745 | 420,536 |
| Taxes payable | 4(32) | 4,451,690 | 5,404,267 | 607,447 | 1,184,813 |
| Other payables | 4(33) | 4,781,862 | 4,288,104 | 175,577,921 | 151,450,555 |
| Current portion of non-current liabilities | 4(34) | 27,532,454 | 28,947,540 | 96,347 | 92,647 |
| Other current liabilities | 4(35) | 58,664,857 | 48,227,953 | 4,029,027 | 35,932 |
| Total current liabilities | 233,015,906 | 222,851,476 | 180,789,487 | 153,184,483 | |
| Non-current liabilities | |||||
| Long-term borrowings | 4(36) | 26,646,374 | 19,734,020 | 16,420,000 | 12,509,900 |
| Debentures payable | 4(37) | 3,047,541 | - | - | - |
| Lease liabilities | 4(38) | 1,547,117 | 1,533,552 | 5,807 | - |
| Provisions | 297,087 | 310,571 | - | - | |
| Deferred income | 1,531,430 | 1,228,459 | 154,015 | 154,015 | |
| Long-term employee benefits payable | 4(39) | 1,435,923 | 1,825,016 | - | - |
| Deferred tax liabilities | 4(23) | 4,496,992 | 4,950,245 | 30,102 | 17,028 |
| Other non-current liabilities | 4(40) | 687,305 | 687,689 | - | - |
| Total non-current liabilities | 39,659,084 | 30,269,552 | 16,609,924 | 12,680,943 | |
| Total liabilities | 272,705,675 | 253,121,028 | 197,399,411 | 165,865,426 | |
| Shareholders’ equity | |||||
| Share capital | 4(41) | 6,997,329 | 6,986,564 | 6,997,329 | 6,986,564 |
| Capital surplus | 4(43) | 21,106,635 | 20,516,930 | 28,171,282 | 27,105,153 |
| Less: Treasury stock | 4(42) | (14,645,088) | (14,044,550) | (14,645,088) | (14,044,550) |
| Other comprehensive income | 4(44) | (1,286,877) | (1,758,948) | (6,274) | (7,295) |
| General risk reserve | 686,352 | 719,922 | - | - | |
| Special reserve | 16,434 | 15,542 | - | - | |
| Surplus reserve | 4(45) | 9,449,901 | 9,449,901 | 9,449,901 | 9,449,901 |
| Undistributed profits | 4(46) | 107,340,604 | 102,982,763 | 17,327,113 | 28,094,420 |
| Total equity attributable to shareholders of the Company | 129,665,290 | 124,868,124 | 47,294,263 | 57,584,193 | |
| Minority interests | 10,733,180 | 9,956,952 | - | - | |
| Total shareholders’ equity | 140,398,470 | 134,825,076 | 47,294,263 | 57,584,193 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 413,104,145 | 387,946,104 | 244,693,674 | 223,449,619 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY INCOME STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2022 | For the six months ended 30 June 2021 | For the six months ended 30 June 2022 | For the six months ended 30 June 2021 |
| Consolidated | Consolidated | Company | Company | ||
| Total revenue | 183,663,399 | 174,846,895 | 824,660 | 940,047 | |
| Including: Operating revenue | 4(47), 17(3) | 182,661,009 | 173,809,565 | 824,660 | 940,047 |
| Interest income | 4(48) | 1,001,960 | 1,037,174 | - | - |
| Fee and commission income | 430 | 156 | - | - | |
| Total operating cost | (165,037,325) | (157,800,033) | 206,836 | 564,220 | |
| Including: Cost of sales | 4(47) | (140,424,168) | (135,727,446) | (20,820) | (21,460) |
| Interest costs | 4(48) | (33,643) | (41,149) | - | - |
| Fee and commission expenses | (1,518) | (3,400) | - | - | |
| Taxes and surcharges | 4(49) | (798,939) | (833,157) | (10,053) | (23,317) |
| Selling and distribution expenses | 4(50) | (14,698,373) | (13,950,077) | - | - |
| General and administrative expenses | 4(51) | (4,951,069) | (4,251,893) | (785,386) | (461,254) |
| Research and development expenses | 4(52) | (5,865,033) | (5,314,637) | - | - |
| Financial income | 4(53) | 1,735,418 | 2,321,726 | 1,023,095 | 1,070,251 |
| Including: Interest expenses | (867,954) | (681,864) | (1,264,787) | (1,091,508) | |
| Interest income | 2,764,267 | 2,501,014 | 2,294,576 | 2,034,935 | |
| Add: Other income | 4(59) | 644,525 | 578,265 | 18,782 | 96,380 |
| Investment income | 4(57), 17(4) | 607,847 | 1,080,896 | 272,392 | 2,233,559 |
| Including: Investment income from associates and joint ventures | 263,014 | 309,013 | 126,297 | 142,640 | |
| Gains/(Losses) on changes in fair value | 4(56) | (749,742) | (801,944) | (80,116) | (250,070) |
| Asset impairment losses | 4(54) | (230,679) | (178,230) | - | - |
| Credit impairment losses | 4(55) | (192,891) | (154,460) | (567) | (1,081) |
| Losses on disposal of assets | 4(58) | 18,962 | (17,833) | (280) | (964) |
| Operating profit | 18,724,096 | 17,553,556 | 1,241,707 | 3,582,091 | |
| Add: Non-operating income | 162,480 | 176,544 | 27,359 | 26,929 | |
| Less: Non-operating expenses | (53,628) | (105,716) | (247) | (48,764) | |
| Total profit | 18,832,948 | 17,624,384 | 1,268,819 | 3,560,256 | |
| Less: Income tax expenses | 4(60) | (2,710,551) | (2,407,939) | (364,840) | (71,539) |
| Net profit | 16,122,397 | 15,216,445 | 903,979 | 3,488,717 | |
| (1) Classified by continuity of operations | |||||
| Net profit from continuing operations | 16,122,397 | 15,216,445 | 903,979 | 3,488,717 | |
| Net profit from discontinued operations | - | - | - | - | |
| (2) Classified by ownership of the equity | |||||
| Attributable to shareholders of the Company | 15,995,496 | 15,009,046 | 903,979 | 3,488,717 | |
| Minority interests | 126,901 | 207,399 | - | - | |
| Other comprehensive income, net of tax | 406,142 | (225,356) | 1,021 | 18,926 | |
| Other comprehensive income attributable to equity owners of the Company, net of tax | 470,720 | (247,653) | 1,021 | 18,926 | |
| (1) Other comprehensive income items which will not be reclassified subsequently to profit or loss | 185,263 | 121,268 | - | - | |
| 1) Changes arising from remeasurement of defined benefit plan | 183,574 | 120,835 | - | - | |
| 2) Changes in fair value of investments in other equity instruments | 1,689 | 433 | - | - | |
| (2) Other comprehensive income items which will be reclassified subsequently to profit or loss | 285,457 | (368,921) | 1,021 | 18,926 | |
| 1) Other comprehensive income that will be transferred subsequently to profit or loss under the equity method | 47 | 24,624 | 1,021 | 18,926 | |
| 2) Cash flow hedging reserve | (613,659) | (359,040) | - | - | |
| 3) Differences on translation of foreign currency financial statements | 899,069 | (34,505) | - | - | |
| Other comprehensive income attributable to minority shareholders, net of tax | (64,578) | 22,297 | - | - | |
| Total comprehensive income | 16,528,539 | 14,991,089 | 905,000 | 3,507,643 | |
| Attributable to equity owners of the Company | 16,466,216 | 14,761,393 | 905,000 | 3,507,643 | |
| Attributable to minority interests | 62,323 | 229,696 | - | - | |
| Earnings per share | |||||
| (1) Basic earnings per share | 4(61) | 2.34 | 2.17 | Not applicable | Not applicable |
| (2) Diluted earnings per share | 4(61) | 2.34 | 2.16 | Not applicable | Not applicable |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
| Item | Note | For the six months ended 30 June 2022 | For the six months ended 30 June 2021 | For the six months ended 30 June 2022 | For the six months ended 30 June 2021 |
| Consolidated | Consolidated | Company | Company | ||
| 1. Cash flows from operating activities | |||||
| Cash received from sales of goods or rendering of services | 153,366,180 | 151,628,820 | - | - | |
| Net increase in customer deposits and deposits from banks and other financial institutions | 20,646 | - | - | - | |
| Net decrease in loans and advances | 4,692,117 | - | - | - | |
| Net decrease in deposits with the Central Bank, banks and other financial institutions | 7,470 | 1,167,441 | - | - | |
| Net increase in borrowings from the Central Bank | 70,261 | - | - | - | |
| Cash received from interest, fee and commission | 1,000,789 | 973,445 | - | - | |
| Refund of taxes and surcharges | 5,236,807 | 4,567,109 | - | - | |
| Cash received relating to other operating activities | 4(62)(a) | 3,354,892 | 3,795,388 | 30,323,333 | 39,536,448 |
| Sub-total of cash inflows | 167,749,162 | 162,132,203 | 30,323,333 | 39,536,448 | |
| Cash paid for goods and services | (104,212,384) | (99,315,226) | - | - | |
| Net increase in loans and advances | - | (1,947,468) | - | - | |
| Net decrease in customer deposits and deposits from banks and other financial institutions | - | (68,391) | - | - | |
| Cash paid for interest, fee and commission | (35,840) | (45,029) | - | - | |
| Cash paid to and on behalf of employees | (18,431,348) | (17,098,011) | (241,178) | (10,281) | |
| Payments of taxes and surcharges | (8,683,607) | (7,493,467) | (352,102) | (419,819) | |
| Cash paid relating to other operating activities | 4(62)(b) | (14,991,273) | (15,988,201) | (1,107,662) | (6,307,651) |
| Sub-total of cash outflows | (146,354,452) | (141,955,793) | (1,700,942) | (6,737,751) | |
| Net cash flows from operating activities | 4(62)(c) | 21,394,710 | 20,176,410 | 28,622,391 | 32,798,697 |
| 2. Cash flows from investing activities | |||||
| Cash received from disposal of investments | 50,554,179 | 76,492,455 | 33,400,000 | 42,246,499 | |
| Cash received from returns on investments | 3,023,041 | 3,033,825 | 1,889,667 | 3,122,815 | |
| Net cash received from disposal of fixed assets, intangible assets and other long-term assets | 64,531 | 79,031 | 23 | 2 | |
| Net cash received from disposal of subsidiaries and other business units | 14,829 | 69,824 | 6,500 | - | |
| Cash received relating to other investing activities | 335,082 | - | - | - | |
| Sub-total of cash inflows | 53,991,662 | 79,675,135 | 35,296,190 | 45,369,316 | |
| Cash paid to acquire fixed assets, intangible assets and other long-term assets | (2,868,894) | (3,447,518) | (283,430) | (167,543) | |
| Cash paid to acquire investments | (57,309,340) | (65,061,652) | (41,670,159) | (57,395,753) | |
| Net cash paid to acquire subsidiaries and other business units | (376,280) | (2,028,912) | - | - | |
| Cash paid relating to other investing activities | - | - | - | - | |
| Sub-total of cash outflows | (60,554,514) | (70,538,082) | (41,953,589) | (57,563,296) | |
| Net cash flows from investing activities | (6,562,852) | 9,137,053 | (6,657,399) | (12,193,980) | |
| 3. Cash flows from financing activities | |||||
| Cash received from capital contributions | 1,134,582 | 881,832 | 1,133,582 | 859,332 | |
| Including: Cash received from capital contributions by minority shareholders of subsidiaries | 1,000 | 22,500 | - | - | |
| Cash received from borrowings | 16,025,436 | 11,292,776 | 4,000,000 | 6,800,000 | |
| Cash received from issuance of medium-term debentures | 2,841,690 | - | - | - | |
| Cash received from issuance of short-term financing bonds | 3,999,500 | 2,999,629 | 3,999,500 | 2,999,629 | |
| Cash received relating to other financing activities | 89,498 | 24,948 | - | - | |
| Sub-total of cash inflows | 24,090,706 | 15,199,185 | 9,133,082 | 10,658,961 | |
| Cash repayments of borrowings | (3,916,525) | (6,893,639) | (89,900) | (4,799,314) | |
| Cash paid for repayment of short-term financing bonds | - | (3,000,000) | - | (3,000,000) | |
| Cash payments for interest expenses and distribution of dividends or profits | (12,537,953) | (11,889,373) | (13,313,757) | (12,234,993) | |
| Including: Cash payments for dividends or profit to minority shareholders of subsidiaries | (49,705) | (128,450) | - | - | |
| Cash payments relating to other financing activities | (1,853,185) | (9,975,752) | (1,357,933) | (9,512,267) | |
| Sub-total of cash outflows | (18,307,663) | (31,758,764) | (14,761,590) | (29,546,574) | |
| Net cash flows from financing activities | 5,783,043 | (16,559,579) | (5,628,508) | (18,887,613) | |
| 4. Effect of foreign exchange rate changes on cash and cash equivalents | 145,787 | (233,775) | - | - | |
| 5. Net increase in cash and cash equivalents | 20,760,688 | 12,520,109 | 16,336,484 | 1,717,104 | |
| Add: Cash and cash equivalents at the beginning of the period | 40,550,039 | 23,548,508 | 21,957,042 | 16,595,063 | |
| 6. Cash and cash equivalents at the end of the period | 4(62)(d) | 61,310,727 | 36,068,617 | 38,293,526 | 18,312,167 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
Item
| Item | Amount in the current period | |||||||||
| Attributable to equity owners of the Company | Minority interests | Total shareholders’ equity | ||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | General risk reserve | Special reserve | Surplus reserve | Undistributed profits | |||
| Balance at the end of the prior year | 6,986,564 | 20,516,930 | (14,044,550) | (1,758,948) | 719,922 | 15,542 | 9,449,901 | 102,982,763 | 9,956,952 | 134,825,076 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,986,564 | 20,516,930 | (14,044,550) | (1,758,948) | 719,922 | 15,542 | 9,449,901 | 102,982,763 | 9,956,952 | 134,825,076 |
| Movements for the current period | 10,765 | 589,705 | (600,538) | 472,071 | (33,570) | 892 | - | 4,357,841 | 776,228 | 5,573,394 |
| (1) Total comprehensive income | - | - | - | 470,720 | - | - | - | 15,995,496 | 62,323 | 16,528,539 |
| (2) Capital contribution and withdrawal by shareholders | 10,765 | 1,036,064 | (600,538) | - | - | - | - | - | 734,108 | 1,180,399 |
| 1). Capital contribution by shareholders | 13,527 | 818,573 | - | - | - | - | - | - | 68,530 | 900,630 |
| 2). Business combinations | - | - | - | - | - | - | - | - | 87,493 | 87,493 |
| 3). Share-based payment included in shareholders’ equity | - | 642,992 | - | - | - | - | - | - | 35,283 | 678,275 |
| 4). Others | (2,762) | (425,501) | (600,538) | - | - | - | - | - | 542,802 | (485,999) |
| (3) Profit distribution | - | - | - | - | (33,570) | - | - | (11,637,716) | (71,118) | (11,742,404) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | - | - | - | - |
| 2). Appropriation to general risk reserve | - | - | - | - | - | - | - | - | - | - |
| 3). Profit distribution to shareholders | - | - | - | - | - | - | - | (11,671,286) | (71,118) | (11,742,404) |
| 4). Others | - | - | - | - | (33,570) | - | - | 33,570 | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - | - | - |
| 4). Others | - | - | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | 892 | - | - | 223 | 1,115 |
| 1). Appropriation in current period | - | - | - | - | - | 1,656 | - | - | 414 | 2,070 |
| 2). Use in current period | - | - | - | - | - | (764) | - | - | (191) | (955) |
| (6) Others | - | (446,359) | - | 1,351 | - | - | - | 61 | 50,692 | (394,255) |
| Balance at the end of the current period | 6,997,329 | 21,106,635 | (14,645,088) | (1,286,877) | 686,352 | 16,434 | 9,449,901 | 107,340,604 | 10,733,180 | 140,398,470 |
MIDEA GROUP CO., LTD.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
Item
| Item | Amount in the prior year | |||||||||
| Attributable to equity owners of the Company | Minority interests | Total shareholders’ equity | ||||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | General risk reserve | Special reserve | Surplus reserve | Undistributed profits | |||
| Balance at the end of the prior year | 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 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 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 |
| Movements for the current year | (43,412) | (1,971,175) | (7,950,203) | (209,945) | 131,938 | 2,812 | 1,483,539 | 15,908,310 | 3,236,112 | 10,587,976 |
| (1) Total comprehensive income | - | - | - | (207,079) | - | - | - | 28,573,650 | 411,499 | 28,778,070 |
| (2) Capital contribution and withdrawal by shareholders | (43,412) | (2,493,602) | (7,950,203) | - | - | - | - | - | 3,389,721 | (7,097,496) |
| 1). Capital contribution by shareholders | 34,437 | 1,495,004 | - | - | - | - | - | - | 587,480 | 2,116,921 |
| 2). Business combinations | - | - | - | - | - | - | - | - | 3,189,892 | 3,189,892 |
| 3). Share-based payment included in shareholders’ equity | - | 1,190,124 | - | - | - | - | - | - | 62,031 | 1,252,155 |
| 4). Others | (77,849) | (5,178,730) | (7,950,203) | - | - | - | - | - | (449,682) | (13,656,464) |
| (3) Profit distribution | - | - | - | - | 131,938 | - | 1,483,539 | (12,668,206) | (401,397) | (11,454,126) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | 1,483,539 | (1,483,539) | - | - |
| 2). Appropriation to general risk reserve | - | - | - | - | 131,938 | - | - | (131,938) | - | - |
| 3). Profit distribution to shareholders | - | - | - | - | - | - | - | (11,052,729) | (401,397) | (11,454,126) |
| 4). Others | - | - | - | - | - | - | - | - | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - | - | - |
| 4). Others | - | - | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | 2,812 | - | - | 703 | 3,515 |
| 1). Appropriation in current period | - | - | - | - | - | 2,812 | - | - | 703 | 3,515 |
| 2). Use in current period | - | - | - | - | - | - | - | - | - | - |
| (6) Others | - | 522,427 | - | (2,866) | - | - | - | 2,866 | (164,414) | 358,013 |
| Balance at the end of the current year | 6,986,564 | 20,516,930 | (14,044,550) | (1,758,948) | 719,922 | 15,542 | 9,449,901 | 102,982,763 | 9,956,952 | 134,825,076 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
Item
| Item | Amount in the current period | |||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profits | Total shareholders’ equity | |
| Balance at the end of the prior year | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | - | 9,449,901 | 28,094,420 | 57,584,193 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | - | 9,449,901 | 28,094,420 | 57,584,193 |
| Movements for the current period | 10,765 | 1,066,129 | (600,538) | 1,021 | - | - | (10,767,307) | (10,289,930) |
| (1) Total comprehensive income | - | - | - | 1,021 | - | - | 903,979 | 905,000 |
| (2) Capital contribution and withdrawal by shareholders | 10,765 | 1,066,163 | (600,538) | - | - | - | - | 476,390 |
| 1). Capital contribution by shareholders | 13,527 | 818,573 | - | - | - | - | - | 832,100 |
| 2). Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3). Share-based payment included in owners’ equity | - | 673,091 | - | - | - | - | - | 673,091 |
| 4). Others | (2,762) | (425,501) | (600,538) | - | - | - | - | (1,028,801) |
| (3) Profit distribution | - | - | - | - | - | - | (11,671,286) | (11,671,286) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | - | - | - |
| 2). Profit distribution to shareholders | - | - | - | - | - | - | (11,671,286) | (11,671,286) |
| 3). Others | - | - | - | - | - | - | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - |
| 4). Others | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | - | - | - |
| 1). Appropriation in the current year | - | - | - | - | - | - | - | - |
| 2). Use in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | (34) | - | - | - | - | - | (34) |
| Balance at the end of the current period | 6,997,329 | 28,171,282 | (14,645,088) | (6,274) | - | 9,449,901 | 17,327,113 | 47,294,263 |
MIDEA GROUP CO., LTD.
COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (CONT’D)FOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
Item
| Item | Amount in the prior year | |||||||
| Share capital | Capital surplus | Less: Treasury stock | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profits | Total shareholders’ equity | |
| Balance at the end of the prior year | 7,029,976 | 29,123,547 | (6,094,347) | (16,009) | - | 7,966,362 | 25,795,300 | 63,804,829 |
| Add: Changes in accounting policies | - | - | - | - | - | - | - | - |
| Balance at the beginning of the current year | 7,029,976 | 29,123,547 | (6,094,347) | (16,009) | - | 7,966,362 | 25,795,300 | 63,804,829 |
| Movements for the current year | (43,412) | (2,018,394) | (7,950,203) | 8,714 | - | 1,483,539 | 2,299,120 | (6,220,636) |
| (1) Total comprehensive income | - | - | - | 8,714 | - | - | 14,835,388 | 14,844,102 |
| (2) Capital contribution and withdrawal by shareholders | (43,412) | (2,452,437) | (7,950,203) | - | - | - | - | (10,446,052) |
| 1). Capital contribution by shareholders | 34,437 | 1,495,004 | - | - | - | - | - | 1,529,441 |
| 2). Capital contribution by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3). Share-based payment included in owners’ equity | - | 1,231,289 | - | - | - | - | - | 1,231,289 |
| 4). Others | (77,849) | (5,178,730) | (7,950,203) | - | - | - | - | (13,206,782) |
| (3) Profit distribution | - | - | - | - | - | 1,483,539 | (12,536,268) | (11,052,729) |
| 1). Appropriation to surplus reserve | - | - | - | - | - | 1,483,539 | (1,483,539) | - |
| 2). Profit distribution to shareholders | - | - | - | - | - | - | (11,052,729) | (11,052,729) |
| 3). Others | - | - | - | - | - | - | - | - |
| (4) Transfer within shareholders’ equity | - | - | - | - | - | - | - | - |
| 1). Transfer from capital surplus to share capital | - | - | - | - | - | - | - | - |
| 2). Transfer from surplus reserve to share capital | - | - | - | - | - | - | - | - |
| 3). Surplus reserve used to offset accumulated losses | - | - | - | - | - | - | - | - |
| 4). Others | - | - | - | - | - | - | - | - |
| (5) Specific reserve | - | - | - | - | - | - | - | - |
| 1). Appropriation in the current year | - | - | - | - | - | - | - | - |
| 2). Use in the current year | - | - | - | - | - | - | - | - |
| (6) Others | - | 434,043 | - | - | - | - | - | 434,043 |
| Balance at the end of the current year | 6,986,564 | 27,105,153 | (14,044,550) | (7,295) | - | 9,449,901 | 28,094,420 | 57,584,193 |
| Legal representative: | Principal in charge of accounting: | Head of accounting department: |
| Fang Hongbo | Zhong Zheng | Chen Lihong |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 business involvingcustomer deposits, interbank lendings and borrowings, consumption credits, buyer’s credits andfinance leases.
The Company was set up by the Council of Trade Unions of GD Midea Group Co., Ltd. and wasregistered in Market Safety Supervision Bureau of Shunde District, Foshan on 7 April 2000, withits headquarters located in Foshan, Guangdong. On 30 August 2012, the Company wastransformed into a limited liability company. On 29 July 2013, the Company was approved tomerge and acquire Guangdong Midea Electric Co., Ltd., which was listed on Shenzhen StockExchange. On 18 September 2013, the Company’s shares were listed on Shenzhen StockExchange.
As at 30 June 2022, the Company’s share capital was RMB 6,997,329,041, and the total numberof shares in issue was 6,997,329,041, of which 149,620,565 shares were restricted tradable Ashares and 6,847,708,476 shares were unrestricted tradable A shares.
The detailed information of major subsidiaries included in the consolidation scope in the currentyear is set out in Notes 5 and 6. Subsidiaries newly included in the consolidation scope viaacquisition in the current year mainly include Midea Capital Corporation Limited. and itssubsidiaries (including structured entities), Wuhan TTium Motor Technology Co., Ltd. and itssubsidiaries and Shaanxi Construction Investment Co., Ltd., and are detailed in Note 5(1);subsidiaries newly included in the consolidation scope via establishment in the current year aredetailed in Note 5(2)(a); subsidiaries no longer included in the consolidation scope in the currentyear are detailed in Note 5(2)(b).
These financial statements were authorised for issue by the Company’s Board of Directors on30 August 2022.
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 credit loss(ECL) on receivables and contract assets (Note 2(9)(a)), valuation method of inventory (Note2(10)), depreciation of fixed assets, amortisation of intangible assets and right-of-use assets(Note 2(13), (16), (28)), impairment of long-term assets (Note 2(18)), and recognition andmeasurement of revenue (Note 2(25)).
Key judgements and critical accounting estimates and key assumptions applied by the Groupon the determination of significant accounting policies are set out in Note 2(30).
(1) Basis of preparation
The financial statements are prepared in accordance with the Accounting Standard for BusinessEnterprises - Basic Standard, and the specific accounting standards and other relevantregulations issued by the Ministry of Finance on 15 February 2006 and in subsequent periods(hereinafter collectively referred to as the “Accounting Standards for Business Enterprises” or“CASs”) and the disclosure requirements in the Preparation Convention of InformationDisclosure by Companies Offering Securities to the Public No. 15 - General Rules on FinancialReporting issued by the China Securities Regulatory Commission (“CSRC”).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(1) Basis of preparation (Cont’d)
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 six months ended 30 June 2022 are incompliance with the Accounting Standards for Business Enterprises, and truly and completelypresent the consolidated and company’s financial position of the Company as at 30 June 2022and their financial performance, cash flows and other information for the six months 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 determine theirfunctional currency based on the primary economic environment in which the business isoperated, mainly including EUR, JPY, USD and HKD. The financial statements are presented inRMB.
(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 absorbed party was bought by the ultimate controllerfrom a third party in prior years, the value of its assets and liabilities (including goodwill generateddue to the combination) are based on the carrying amount in the ultimate controller’sconsolidated financial statements. The difference between the carrying amount of the net assetsobtained by the Group and the carrying amount of the consideration paid for the combination istreated as an adjustment to capital surplus (share premium). If the capital surplus (sharepremium) is not sufficient to absorb the difference, the remaining balance is adjusted againstretained earnings. Costs directly attributable to the combination are included in profit or loss inthe period in which they are incurred. Transaction costs associated with the issue of equity ordebt securities for the business combination are included in the initially recognised amounts ofthe 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 the combinationexceeds the acquirer’s interest in the fair value of the acquiree’s identifiable net assets, thedifference is recognised as goodwill; where the cost of combination is lower than the acquirer’sinterest in the fair value of the acquiree’s identifiable net assets, the difference is recognised inprofit or loss for the current period. Costs directly attributable to the combination are included inprofit or loss in the period in which they are incurred. Transaction costs associated with the issueof equity or debt securities for the business combination are included in the initially recognisedamounts of the equity or debt securities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 (Cont’d)
(b) Business combinations involving enterprises not under common control (Cont’d)
For business combinations achieved by stages involving enterprises not under common control,previously-held equity in the acquiree is remeasured at its fair value at the acquisition dates inthe consolidated financial statements, and the difference between its fair value and carryingamount is included in investment income for the current period. Where the previously-held equityin the acquiree involves other comprehensive income under equity method and owners’ equitychanges other than those arising from the net profit or loss, other comprehensive income andprofit distribution, the related other comprehensive income and other owners’ equity changesare transferred into income for the current period to which the acquisition dates belong, excludingthose arising from changes in the investee’s remeasurement of net liability or net asset relatedto the defined benefit plan. The excess of the sum of fair value of the previously-held equity andfair value of the consideration paid at the acquisition dates over share of fair value of identifiablenet assets acquired from the subsidiary is recognised as goodwill.
(6) Preparation of consolidated financial statements
The consolidated financial statements comprise the financial statements of the Company and allof its subsidiaries (including structured entities).
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 financial statementsof the subsidiaries are adjusted in accordance with the accounting policies and the accountingperiod of the Company. For subsidiaries acquired from business combinations involvingenterprises not under common control, the individual financial statements of the subsidiaries areadjusted based on the fair value of the identifiable net assets at the acquisition date.
All significant intra-group balances, transactions and unrealised profits are eliminated in 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 to minorityinterests and total comprehensive income attributed to minority interests and presentedseparately in the consolidated financial statements under shareholders’ equity, net profit andtotal comprehensive income respectively. Where the loss for the current period attributable tothe minority shareholders of the subsidiaries exceeds the share of the minority interests in theopening balance of owners’ equity, the excess is deducted against minority interests. Unrealisedprofits and losses resulting from the sales of assets by the Company to its subsidiaries are fullyeliminated against net profit attributable to shareholders of the parent company. Unrealisedprofits and losses resulting from the sales of assets by a subsidiary to the Company areeliminated and allocated between net profit attributable to shareholders of the parent companyand net profit attributable to minority interests in accordance with the allocation proportion of theparent company in the subsidiary. Unrealised profits and losses resulting from the sales of assetsby one subsidiary to another are eliminated and allocated between net profit attributable toshareholders of the parent company and net profit attributable to minority interests in accordancewith the allocation proportion of the parent company in the subsidiary. If the accounting treatmentof a transaction 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.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(7) Determination criterion for cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits that can be readily drawn ondemand and other cash balances, and short-term and highly liquid investments that are readilyconvertible to known amounts of cash and which are subject to an insignificant risk of changesin value.
(8) Foreign currency translation
(a) Foreign currency transactions
Foreign currency transactions are translated into functional currency using the exchange ratesprevailing at the dates of the transactions.
At the balance sheet date, monetary items denominated in foreign currencies are translated intofunctional currency using the spot exchange rates on the balance sheet date. Exchangedifferences arising from these translations are recognised in profit or loss for the current period,except for those attributable to foreign currency borrowings that have been taken out specificallyfor acquisition or construction of qualifying assets, which are capitalised as part of the cost ofthose assets. Non-monetary items denominated in foreign currencies that are measured athistorical costs are translated at the balance sheet date using the spot exchange rates at thedate of the transactions. The effect of exchange rate changes on cash is presented separatelyin the cash flow statement.
(b) Translation of foreign currency financial statements
The asset and liability items in the balance sheets for overseas operations are translated at thespot exchange rates on the balance sheet date. Among the equity items, the items other thanundistributed profits are translated at the spot exchange rates of the transaction dates. Theincome and expense items in the income statements of overseas operations are translated atthe spot exchange rates of the transaction dates. The differences arising from the abovetranslation are recognised in other comprehensive income. The cash flows of overseasoperations are translated at the spot exchange rates on the dates of the cash flows. The effectof exchange rate changes on cash is presented separately in the cash flow statement.
(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 liability isrecognised when the Group becomes a party to the contractual provisions of the instrument.
(a) Financial assets
(i) Classification and measurement
Based on the Group’s business model for managing the financial assets and the contractualcash flow characteristics of the financial assets, financial assets are classified as: (1) financialassets at amortised cost; (2) financial assets at fair value through other comprehensive income;
(3) financial assets at fair value through profit or loss.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
The financial assets are measured at fair value at initial recognition. Related transaction coststhat 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, the relatedtransaction costs of which are recognised directly in profit or loss for the current period. Accountsreceivable or notes receivable arising from sales of products or rendering of services (excludingor without regard to significant financing components) are initially recognised at the considerationthat 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 a basiclending arrangement, which gives rise on specified dates to the contractual cash flows that aresolely payments of principal and interest on the principal amount outstanding. The interestincome of such financial assets is recognised using the effective interest method. Such financialassets mainly comprise cash at bank and on hand, loans and advances, notes receivable,accounts receivable, other receivables, debt investments, long-term receivables, etc. Debtinvestments and long-term receivables that are due within one year (inclusive) as from thebalance sheet date are included in the current portion of non-current assets; debt investmentswith maturities of no more than one year (inclusive) at the time of acquisition are included inother current assets.
Measured at fair value through other comprehensive income:
The objective of the Group’s business model is to hold the financial assets to both collect thecontractual 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 impairment gains orlosses, foreign exchange gains and losses, and interest income calculated using the effectiveinterest method which are recognised in profit or loss for the current period. Such financial assetsmainly include receivables financing, other debt investments, etc. Other debt investments of theGroup that are due within one year (inclusive) as from the balance sheet date are included inthe current portion of non-current assets; other debt investments with maturities no more thanone year (inclusive) at the time of acquisition are included in other current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 profit or loss:
Debt instruments held by the Group that are not divided into those at amortised cost, or thosemeasured at fair value through other comprehensive income, are measured at fair value throughprofit or loss. At initial recognition, the Group designates a portion of financial assets as at fairvalue through profit or loss to eliminate or significantly reduce an accounting mismatch. Financialassets that are due over one year as from the balance sheet date and are expected to be heldover one year are included in other non-current financial assets. Others are included in financialassets 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 assets heldfor trading; investments in equity instruments expected to be held over one year as from thebalance 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 underinvestments in other equity instruments. The relevant dividend income of such financial assetsis 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 in controllingrisk exposures. Derivative financial instruments are initially recognised at fair value on the daywhen derivatives transaction contract was signed, and subsequently measured at fair value.The derivative financial instruments are recorded as assets when they have a positive fair valueand as liabilities when they have a negative fair value.
The method for recognising changes in fair value of the derivative financial instrument dependson whether the derivative financial instrument is designated as a hedging instrument and meetsthe requirement for it, and if so, the nature of the item being hedged. For derivative financialinstruments that are not designated as hedging instruments and fail to meet requirements onhedging instruments, including those held for the purpose of providing hedging against specificrisks in interest rate and foreign exchange but not conforming with requirements of hedgeaccounting, the changes in fair value are recorded in gains or losses on changes in fair value inthe consolidated income statement.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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)
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 is recognisedin profit or loss for the current period. Where the hedge is a forecast transaction whichsubsequently results in the recognition of a non-financial asset or liability, the amount originallyrecognised in other comprehensive income is transferred and included in the initially recognisedamount of the asset or liability. For cash flow hedge beyond the foregoing scope, the amountoriginally recognised in other comprehensive income is transferred and included in profit or lossfor the current period during the same time in which the profit or loss is influenced by the hedgedexpected cash flow. However, if all or part of net loss recognised directly in other comprehensiveincome will not be recovered in future accounting periods, the amount not expected to berecovered should be transferred to profit or loss for the current period. When the Group revokesthe designation of a hedge, a hedging instrument expires or is sold, terminated or exercised, orthe hedge no longer meets the criteria for hedge accounting, the Group will discontinue thehedge accounting treatments prospectively. Where the Group discontinues the hedgeaccounting treatment for cash flow hedging, for hedged future cash flows that will still happen,the accumulated gains or losses that have been recognised in other comprehensive income areretained and subject to accounting treatment under the subsequent treatment method ofaforesaid cash flow hedging reserve; for hedged future cash flows that the forecast transactionwill never happen, the accumulated gains or losses that have been recognised in othercomprehensive income are transferred immediately and included in profit or loss for the currentperiod.
(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 financial guaranteecontracts 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 SIX MONTHS ENDED 30 JUNE 2022
(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 are measuredrespectively. 12-month ECL provision is recognised for financial instruments in Stage 1 that havenot had a significant increase in credit risk since initial recognition; lifetime ECL provision isrecognised for financial instruments in Stage 2 that have had a significant increase in credit riskyet without credit impairment since initial recognition; and lifetime ECL provision is recognisedfor financial instruments in Stage 3 that have had credit impairment since initial recognition.
For the financial instruments with lower credit risk on the balance sheet date, the Group assumesthere is no significant increase in credit risk since initial recognition and recognises the 12-monthECL provision.
For the financial instruments in Stage 1, Stage 2 and with lower credit risk, the Group calculatesthe interest income by applying the effective interest rate to the book balance (before deductionof the impairment provision). For the financial instruments in Stage 3, the interest income iscalculated by applying the effective interest rate to the amortised cost (after deduction of theimpairment provision from the book balance).
For notes receivable, accounts receivable, receivables financing and contract assets arising fromsales of goods and rendering of services in the ordinary course of operating activities, the Grouprecognises the lifetime ECL provision regardless of whether there exists a significant financingcomponent. Since contract assets are related to work in progress without invoice, essentially,their risk characteristics are the same as the accounts receivable of similar contracts. Therefore,the Group believes that the ECL rate of accounts receivable is an approximation to that ofcontract assets.
In case the ECL of an individually assessed financial asset cannot be evaluated with reasonablecost, the Group divides the receivables and contract assets into certain groupings based oncredit risk characteristics, then pursuant to which, calculates the ECL. Basis and provisionmethod for determining groupings are as follows:
| Grouping of notes receivable 1 | Bank acceptance notes grouping |
| Grouping of notes receivable 2 | Trade acceptance notes grouping |
| Grouping of accounts receivable 1 | Overseas business grouping |
| Grouping of accounts receivable 2 | Domestic business grouping |
| Grouping of contract assets 1 | Overseas business grouping |
| Grouping of contract assets 2 | Domestic business grouping |
| Grouping of other receivables 1 | Security deposit and guarantee receivables grouping |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
| Grouping of other receivables 2 | Receivables from related parties grouping |
| Grouping of other receivables 3 | Other receivables grouping |
| Grouping of long-term receivables | Finance lease payable grouping |
| Grouping of loans and advances | Loans business grouping |
The Group, on the basis of the exposure at default and the lifetime ECL rate, calculates the ECLof notes receivable and receivables financing that are classified into groupings with considerationto historical credit losses experience, current conditions and forecasts of future economicconditions.
With consideration to historical credit loss experience, current conditions and forecasts of futureeconomic conditions, the Group prepares the cross-reference between the number of overduedays of accounts receivable and the lifetime ECL rate, and calculates the ECL of accountsreceivable 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 that areclassified into groupings with consideration to historical credit losses experience, the currentconditions 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, the Groupadjusts other comprehensive income while the impairment loss or gain is recognised in profit orloss for the current period.
(iii) Derecognition of financial assets
A financial asset is derecognised when: (1) the contractual rights to the cash flows from thefinancial asset expire, (2) 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 (3)the financial asset has been transferred and the Group has not retained control of the financialasset, although the Group neither transfers nor retains substantially all the risks and rewards ofownership of the financial asset.
When a financial asset is derecognised, the difference between the carrying amount and thesum of the consideration received and the cumulative changes in fair value that are previouslyrecognised directly in other comprehensive income is recognised in profit or loss for the currentperiod, except for those as investments in other equity instruments, the differenceaforementioned is recognised in retained earnings instead.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(b) Financial liabilities
Financial liabilities are classified as financial liabilities at amortised cost and financial liabilitiesat fair value through profit or loss at initial recognition.
Financial liabilities of the Group mainly comprise financial liabilities at amortised cost, includingnotes payable, accounts payable, other payables, debentures payable, borrowings and short-term financing bonds payable in other current liabilities, customer deposits and deposits frombanks and other financial institutions, borrowings from the Central Bank, long-term payables, etc.Such financial liabilities are initially recognised at fair value, net of transaction costs incurred,and subsequently measured using the effective interest method. Financial liabilities that are duewithin one year (inclusive) are classified as current liabilities; those with maturities over one yearbut are due within one year (inclusive) as from the balance sheet date are classified as currentportion of non-current liabilities. Others are classified as non-current liabilities.
A financial liability is derecognised or partly derecognised when the underlying present obligationis discharged or partly discharged. The difference between the carrying amount of thederecognised part of the financial liability and the consideration paid is recognised in profit orloss for the current period.
(c) Determination of fair value of financial instruments
The fair value of a financial instrument that is traded in an active market is determined at thequoted price in the active market. The fair value of a financial instrument that is not traded in anactive market is determined by using a valuation technique. In valuation, the Group adoptsvaluation techniques applicable in the current situation and supported by adequate availabledata and other information, selects inputs with the same characteristics as those of assets orliabilities considered in relevant transactions of assets or liabilities by market participants, andgives priority to the use of relevant observable inputs. When relevant observable inputs are notavailable or feasible, unobservable inputs are adopted.
(10) Inventories
(a) Classification of inventories
Inventories, including raw materials, consigned processing materials, low value consumables,work in progress, contract performance costs and finished goods, are measured at the lower ofcost and net realisable value.
(b) Costing of inventories
Other than those completed but unsettled, cost is determined using the first-in, first-out methodwhen issued. The cost of finished goods and work in progress comprises raw materials, directlabour and systematically allocated production overhead based on the normal productioncapacity.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(10) Inventories (Cont’d)
(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 ordinary course ofbusiness, less the estimated costs to completion and estimated costs necessary to make thesale and related taxes.
Provision for decline in the value of inventories is determined at the excess amount of the costas calculated based on the classification of inventories over their net realisable value, and arerecognised 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.
(11) 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 joint ventures.
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 of thearrangement based on legal forms, contractual terms and other facts and circumstances. Anassociate is an investee that the Group has significant influence on their financial and operatingpolicies.
Investments in subsidiaries are presented in the Company’s financial statements using the costmethod, and are adjusted to the equity method when preparing the consolidated financialstatements. Investments in joint ventures and associates are accounted for using the equitymethod.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Long-term equity investments (Cont’d)
(a) Determination of investment cost
For long-term equity investments acquired through a business combination: for long-term equityinvestments acquired through a business combination involving enterprises under commoncontrol, the investment cost shall be the absorbing party’s share of the carrying amount of owners’equity of the party being absorbed in the consolidated financial statements of the ultimatecontroller at the combination date; for long-term equity investment acquired through a businesscombination involving enterprises not under common control, the investment cost shall be thecombination cost.
For business combinations achieved by stages involving enterprises not under common control,the initial investment cost accounted for using the cost method is the sum of carrying amount ofpreviously-held equity investment and additional investment cost. For previously-held equityaccounted for using the equity method, the accounting treatment of related other comprehensiveincome from disposal of the equity is carried out on a same basis with the investee’s directdisposal of related assets or liabilities. Owners’ equity, which is recognised due to changes ininvestee’s owners’ equity other than those arising from the net profit or loss, othercomprehensive income and profit distribution, is accordingly transferred into profit or loss for theperiod in which the investment is disposed.
For investment in previously-held equity accounted for using the recognition and measurementstandards of financial instruments, the initial investment cost accounted for using the costmethod is the sum of carrying amount of previously-held equity investment and additionalinvestment cost. The difference between the fair value and carrying amount for investment inpreviously-held equity and the accumulated changes in fair value previously included in othercomprehensive income are transferred to profit or loss for the current period accounted for usingthe cost method.
For long-term equity investments acquired not through a business combination: for long-termequity investments acquired by payment in cash, the initial investment cost shall be the purchaseprice actually paid; for long-term equity investments acquired by issuing equity securities, theinitial investment cost shall be the fair value of the equity securities issued.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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) Long-term equity investments (Cont’d)
(b) Subsequent measurement and recognition methods of gains and losses
For long-term equity investments accounted for using the cost method, they are measured atthe initial investment costs, and cash dividends or profit distribution declared by the investeesare recognised as investment income in profit or loss for the current period.
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 value ofthe investee’s identifiable net assets at the acquisition date, the long-term equity investment ismeasured at the initial investment cost; where the initial investment cost is less than the Group’sshare of the fair value of the investee’s identifiable net assets at the acquisition date, thedifference is included in profit or loss and the cost of the long-term equity investment is adjustedupwards accordingly.
For long-term equity investments accounted for using the equity method, the Group recognisesthe investment income according to its share of net profit or loss of the investee. The Groupdiscontinues recognising its share of the net losses of an investee after the carrying amount ofthe long-term equity investment together with any long-term interests that in substance form partof the investor’s net investment in the investee are reduced to zero. However, if the Group hasobligations for additional losses and the criteria with respect to recognition of provisions underthe accounting standards on contingencies are satisfied, the Group continues recognising theinvestment losses and the provisions. The changes of the Group’s share in investee’s owners’equity other than those arising from the net profit or loss, other comprehensive income and profitdistribution are recognised in capital surplus with a corresponding adjustment to the carryingamount of the long-term equity investment. The carrying amount of the investment is reducedby the Group’s share of the profit distribution or cash dividends declared by the investees. Theunrealised profits or losses arising from the transactions between the Group and its investeesare eliminated in proportion to the Group’s equity interest in the investees, based on which theinvestment gain or losses are recognised. Any losses resulting from transactions between theGroup and 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.
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 decisions ofthe investee, but is not control or joint control over those policies.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Long-term equity investments (Cont’d)
(d) Impairment of long-term equity investments
The carrying amounts of long-term equity investments in subsidiaries, joint ventures andassociates are reduced to the recoverable amounts when the recoverable amounts are belowtheir carrying amounts (Note 2(18)).
(12) Investment properties
Investment properties, including land use rights that have already been leased out, buildings thatare held for the purpose of leasing and buildings that are being constructed or developed forfuture use for leasing, are measured initially at cost. Subsequent expenditures incurred inrelation to an investment property are included in the cost of the investment property when it isprobable that the associated economic benefits will flow to the Group and their costs can bereliably measured; otherwise, the expenditures are recognised in profit or loss for the period inwhich they are incurred.
The Group adopts the cost model for subsequent measurement of investment properties.Buildings and land use rights are depreciated or amortised to their estimated net residual valuesover their estimated useful lives. The estimated useful lives, the estimated net residual valuesthat are expressed as a percentage of cost and the annual depreciation (amortisation) rates ofinvestment 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 | 30 to 50 years | - | 2% to 3.33% |
When an investment property is transferred to owner-occupied properties, it is reclassified asfixed asset or intangible asset at the date of the transfer. When an owner-occupied property istransferred out for earning rentals or for capital appreciation, the fixed asset or intangible assetis reclassified as investment properties at the date of the transfer. At the time of transfer, theproperty is recognised based on the carrying amount before transfer.
The investment properties’ estimated useful lives, the estimated net residual values and thedepreciation (amortisation) methods applied are reviewed and adjusted as appropriate at eachyear-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 its disposal.The net amount of proceeds from sale, transfer, retirement or damage of an investment propertyafter its carrying amount and related taxes and expenses is recognised in profit or loss for thecurrent period.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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)
(13) 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 flow tothe Group and the cost can be reliably measured. The initial cost of purchased fixed assetsinclude purchase price, related taxes and expenditures that are attributable to the assetsincurred before the assets are ready for their intended use. The initial cost of self-constructedfixed assets is determined based on Note 2(14).
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 the relatedcost can be reliably measured. The carrying amount of the replaced part is derecognised. All theother subsequent expenditures are recognised in profit or loss for the period in which they areincurred.
(b) Depreciation method of fixed assets
Fixed assets are depreciated using the straight-line method to allocate the cost of the assets totheir estimated net residual values over their estimated useful lives. For the fixed assets thathave 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 of costand 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% to 10% | 6.7% to 1.8% |
| Machinery and equipment | 2 to 25 years | 0% to 10% | 50% to 3.6% |
| Motor vehicles | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Electronic equipment and others | 2 to 20 years | 0% to 10% | 50% to 4.5% |
| Overseas land | Permanent | Not applicable | Not applicable |
The estimated useful lives and the estimated net residual values of the Group’s fixed assets andthe depreciation methods applied to the assets are reviewed, and adjusted as appropriate ateach year-end.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(13) Fixed assets (Cont’d)
(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(18)).
(d) 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 disposals on sale, transfer, retirement ordamage of a fixed asset net of its carrying amount and related taxes and expenses is recognisedin profit or loss for the current period.
(14) Construction in progress
Construction in progress is measured at actual cost. Actual cost comprises construction costs,installation costs, borrowing costs that are eligible for capitalisation and other costs necessaryto bring the construction in progress ready for their intended use. Construction in progress istransferred to fixed assets when the assets are ready for their intended use, and depreciationbegins from the following month. The carrying amount of construction in progress is reduced tothe recoverable amount when the recoverable amount is below its carrying amount (Note 2(18)).
(15) Borrowing costs
The borrowing costs that are directly attributable to acquisition and construction of a fixed assetthat needs a substantially long period of time for its intended use commence to be capitalisedand recorded as part of the cost of the asset when expenditures for the asset and borrowingcosts have been incurred, and the activities relating to the acquisition and construction that arenecessary to prepare the asset for its intended use have commenced. The capitalisation ofborrowing costs ceases when the asset under acquisition or construction becomes ready for itsintended use and the borrowing costs incurred thereafter are recognised in profit or loss for thecurrent period. Capitalisation of borrowing costs is suspended during periods in which theacquisition or construction of an asset is interrupted abnormally and the interruption lasts formore than 3 months, until the acquisition or construction is resumed.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(15) Borrowing costs (Cont’d)
For the specific borrowings obtained for the acquisition or construction of a fixed asset qualifyingfor capitalisation, the amount of borrowing costs eligible for capitalisation is determined by actualinterest expenses deducting any interest income earned from depositing the unused specificborrowings in the banks or any investment income arising on the temporary investment of thoseborrowings during the capitalisation period.
For the general borrowings obtained for the acquisition or construction of a fixed asset qualifyingfor capitalisation, the amount of general borrowing costs eligible for capitalisation is determinedby applying the weighted average effective interest rate of general borrowings, to the weightedaverage of the excess amount of cumulative expenditures on the asset over the amount ofspecific borrowings. The effective interest rate is the rate at which the future cash flows duringthe period of expected duration of the borrowings or applicable shorter period are discounted tothe initial amount of the borrowings.
(16) Intangible assets
Intangible assets include land use rights, patents and non-patent technologies, trademark rights,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 of 30 to50 years. If the acquisition costs of the land use rights and the buildings located thereon cannotbe reasonably allocated between the land use rights and the buildings, all of the acquisition costsare recognised as fixed assets.
(b) Patents and non-patent technologies
Patents are amortised on a straight-line basis over the statutory period of validity, the period asstipulated by contracts or the beneficial period.
(c) Trademark rights
The trademark rights are measured at cost when acquired and are amortised over the estimateduseful life of 4 to 30 years. The cost of trademark rights obtained in the business combinationsinvolving enterprises not under common control is measured at fair value. As some of thetrademarks are expected to attract net cash inflows injected into the Group, managementconsiders that these trademarks have an indefinite useful life and are presented based upon thecarrying amount after deducting the provision for impairment (Note 4(20)).
(d) Trademark use rights
The trademark use rights are measured at cost when acquired. The cost of trademark use rightsobtained in the business combinations involving enterprises not under common control ismeasured at fair value, and is amortised over the estimated useful life of 40 years.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) 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 amortisation methodis 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 into expenditureon the research phase and expenditure on the development phase based on its nature andwhether there is material uncertainty that the research and development activities can form anintangible asset at the end of the project.
Expenditure on the planned investigation, evaluation and selection for the research of productionprocesses or products is categorised as expenditure on the research phase, and it is recognisedin profit or loss when it is incurred. Expenditure on design and test for the final application of thedevelopment of production processes or products before mass production is categorised asexpenditure on the development phase, which is capitalised only if all of the following conditionsare satisfied:
? The development of production processes or products has been fully justified bytechnical team;? The budget on the development of production processes or products has been approvedby management;? There is market research analysis that demonstrates the product produced by theproduction process or product has the ability of marketing;? There are sufficient technical and financial resources to support the development ofproduction processes or products and subsequent mass production; and? Expenditure attributable to the development of production processes or products can bereliably collected.
Other development expenditures that do not meet the conditions above are recognised in profitor loss in the period in which they are incurred. Development costs previously recognised asexpenses are not recognised as an asset in a subsequent period. Capitalised expenditure onthe development phase is presented as development costs in the balance sheet and transferredto intangible assets at the date that the asset is ready for its intended use.
(g) Impairment of intangible assets
The carrying amount of intangible assets is reduced to the recoverable amount when therecoverable amount is below the carrying amount (Note 2(18)).
(17) 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 expected beneficialperiod and are presented at actual expenditure net of accumulated amortisation.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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)
(18) Impairment of long-term assets
Fixed assets, construction in progress, right-of-use assets, intangible assets with finite usefullives, investment properties measured using the cost model and long-term equity investments insubsidiaries, joint ventures and associates are tested for impairment if there is any indicationthat the assets 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 be impaired.If the result of the impairment test indicates that the recoverable amount of an asset is less thanits carrying amount, a provision for impairment and an asset impairment loss are recognised forthe amount by which the asset’s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset’s fair value less costs to sell and the present valueof the future cash flows expected to be derived from the asset. Provision for asset impairment isdetermined and recognised on the individual asset basis. If it is not possible to estimate therecoverable amount of an individual asset, the recoverable amount of a group of assets to whichthe asset belongs is determined. A group of assets is the smallest group of assets that is able togenerate independent cash inflows.
Goodwill that is separately presented in the financial statements is tested at least annually forimpairment, irrespective of whether there is any indication that it may be impaired. In conductingthe test, the carrying value of goodwill is allocated to the related asset group or groups of assetgroups which are expected to benefit from the synergies of the business combination. If theresult of the test indicates that the recoverable amount of an asset group or a group of assetgroups, including the allocated goodwill, is lower than its carrying amount, the correspondingimpairment loss is recognised. The impairment loss is first deducted from the carrying amountof goodwill that is allocated to the asset group or group of asset groups, and then deducted fromthe carrying amounts of other assets within the asset group or group of asset groups in proportionto 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.
(19) Employee benefits
Employee benefits refer to all forms of consideration or compensation given by the Group inexchange for service rendered by employees or for termination of employment relationship,which include short-term employee benefits, post-employment benefits, termination benefits andother long-term employee benefits.
(a) Short-term employee benefits
Short-term employee benefits include wages or salaries, bonus, allowances and subsidies, staffwelfare, premiums or contributions on medical insurance, work injury insurance, maternityinsurance, housing funds, union running costs and employee education costs, short-term paidabsences, etc. The short-term employee benefits actually occurred are recognised as a liabilityin the accounting period in which the service is rendered by the employees, with a correspondingcharge to the profit or loss for the current period or the cost of relevant assets. Non-monetarybenefits are measured at fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) 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 under whichthe Group pays fixed contributions into a separate fund and will have no obligation to pay furthercontributions; and defined benefit plans are post-employment benefit plans other than definedcontribution plans. During the reporting period, the Group’s defined contribution plans mainlyinclude basic pensions and unemployment insurance, while the defined benefit plans areWandong Medical, 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 by localauthorities of Ministry of Human Resource and Social Security. Monthly payments of premiumson the basic pensions are calculated according to prescribed bases and percentage by therelevant local authorities. When employees retire, the relevant local authorities are obliged topay the basic pensions to them. The amounts based on the above calculations are recognisedas liabilities in the accounting period in which the service has been rendered by the employees,with a corresponding charge to the profit or loss for the current period or the cost of relevantassets.
Supplementary retirement benefits
The liability recognised in the balance sheet in respect of defined benefit pension plans is thepresent value of the defined benefit obligations less the fair value of the plan assets. The definedbenefit obligation is calculated annually by independent actuaries using the projected unit creditmethod at the interest rate of treasury bonds with similar obligation term and currency. Thecharges related to supplementary retirement benefits (including current service costs, historicalservice costs and gains or losses on settlement) and net interest are recognised in profit or lossfor the current period or included in the cost of an asset, and the changes arising fromremeasurement in net liabilities or net assets of defined benefit plans are recognised in othercomprehensive income.
(c) Termination benefits
The Group provides compensation for terminating the employment relationship with employeesbefore the end of the employment contracts or as an offer to encourage employees to acceptvoluntary redundancy before the end of the employment contracts. The Group recognises aliability arising from compensation for termination of the employment relationship with employees,with a corresponding charge to profit or loss for the current period at the earlier of the followingdates: 1) when the Group cannot unilaterally withdraw an employment termination plan or acurtailment proposal; 2) when the Group recognises costs or expenses related to a restructuringthat involves the payment of termination benefits.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) 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 security contributionsto be paid to and for the employees who accept voluntary retirement before the normal retirementdate prescribed by the State, as approved by management. The Group pays early retirementbenefits to those early retired employees from the early retirement date until the normalretirement date. The Group accounts for the early retirement benefits in accordance with thetreatment for termination benefits, in which the salaries and social security contributions to bepaid to and for the early retired employees from the off-duty date to the normal retirement dateare recognised as liabilities with a corresponding charge to the profit or loss for the current period.The differences arising from the changes in the respective actuarial assumptions of the earlyretirement benefits and the adjustments of benefit standards are recognised in profit or loss inthe period in which they occur.
The termination benefits expected to be settled within one year since the balance sheet date areclassified as current liabilities.
(20) 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 ofsubsidiaries engaged in financial business.
(21) Dividend distribution
Cash dividend is recognised as a liability for the period in which the dividend is approved by theshareholders’ meeting.
(22) Provisions
Provisions for product warranties, onerous contracts, etc. are recognised when the Group has apresent obligation, it is probable that an outflow of economic benefits will be required to settlethe obligation, and the amount of the obligation can be measured reliably.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(22) Provisions (Cont’d)
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, uncertaintiesand the time value of money, are taken into account as a whole in reaching the best estimate ofa provision. Where the effect of the time value of money is material, the best estimate isdetermined by discounting the related future cash outflows. The increase in the discountedamount of the provision arising from passage of time is recognised as interest expenses.
The carrying amount of provisions is reviewed at each balance sheet date and adjusted to reflectthe current best estimate.
The provisions expected to be settled within one year since the balance sheet date are classifiedas current liabilities.
(23) Share-based payment
(a) Type of share-based payment
Share-based payment is a transaction in which the entity acquires services from employees asconsideration for equity instruments of the entity or by incurring liabilities for amounts based onthe equity instruments. Equity instruments include equity instruments of the Company, its parentcompany or other accounting entities of the Group. Share-based payments are divided intoequity-settled and cash-settled payments. The Group’s share-based payments are equity-settledpayments.
Equity-settled share-based payment
The Group’s equity-settled share-based payment contains share option incentive plan, restrictedshare plan and employee stock ownership plan. These plans are measured at the fair value ofthe equity instruments at grant date and the equity instruments are exercisable or unlockablewhen services in vesting period are completed or specified performance conditions are met. Inthe vesting period, the services obtained in the current period are included in relevant cost andexpenses at the fair value of the equity instruments at grant date based on the best estimate ofthe number of exercisable or unlockable equity instruments, and capital surplus is increasedaccordingly. If the subsequent information indicates the number of exercisable or unlockableequity instruments differs from the previous estimate, an adjustment is made and, on theexercise or desterilisation date, the estimate is revised to equal to the number of actual vestedequity instruments.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(23) Share-based payment (Cont’d)
(b) Determination of fair value of equity instruments
The Group determines the fair value of share options using option pricing model, which is Black- Scholes option pricing model.
The fair value of other equity instruments is based on the share prices, the price that incentiveobjects pay, and the number of the shares on the grant date, taking into account the effects ofclause of the Group’s relevant plans.
(c) Basis for determining best estimate of unlockable or exercisable equity instruments
As at each balance sheet date in the vesting period, the Group would make best estimate inaccordance with the newly acquired information such as changes in the number of employeesentitled with exercisable or unlockable equity instruments, and amend the estimated number ofexercisable or unlockable equity instruments. On the exercise or desterilisation date, the finalnumber of estimated exercisable or unlockable equity instruments is consistent with the actualnumber of exercisable or unlockable equity instruments.
(24) Treasury stock
The Group’s treasury stock mainly comes from the repurchase of equity instruments and theissuance of restricted shares, etc.
Consideration and transaction costs paid by the Group for repurchasing equity instruments arededucted from equity and not recognised as financial assets. The considerations paid by theGroup for repurchasing equity instruments are presented as treasury stock, and the relatedtransaction costs are recognised in owners’ equity.
On the deregistration day of shares, relevant share capital and treasury stock are reversed withthe difference included in capital surplus (share premium) based on actual deregistration results.
On the grant day of restricted shares, the Group recognises bank deposits when receivingsubscription from the employees and measures the repurchase obligation as liability. On the dayof release of restricted shares, relevant treasury stocks, liabilities and capital surplus recognisedin the vesting period are reversed based on the actual vesting results.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Revenue
Revenue is the gross inflow of economic benefit arising from the ordinary course of the Group’sactivities, which will lead to an increase in shareholders’ equity and are irrelevant to capitalcontributions by shareholders.
Revenue for the Group’s performance of contract obligations in a contract is recognised when acustomer is in control of the underlying goods. Obtaining the control of the underlying goodsmeans being able to direct the use of the goods and obtain almost all economic benefits fromthem.
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 performanceof contract while the Group performs the contract.
(2) Customers can control goods under construction during the Group’s performance ofcontract.
(3) Goods produced during the Group’s performance of contract are irreplaceable. During thewhole contract period, the Group is entitled to collect payments for those which have beenaccumulated up to now.
For a contract obligation within a period of time, the Group shall recognise the revenue basedon the progress of the obligation fulfilment within that period of time, except where the progressof the obligation fulfilment cannot be determined reasonably.
Where the status of completion cannot be reasonably determined, revenue shall be recognisedat the amount of cost incurred if it is predicted that the cost can be compensated till the progressof 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, aswell as air-conditioner (hereinafter referred to as “HVAC”) (mainly comprises residential airconditioner, central air-conditioner, heating and ventilation systems, etc.) and consumerappliances (mainly comprise kitchen appliances, refrigerators, washing machines and varioussmall appliances, etc.), and robotics and automation system.
Revenue from domestic sales of HVAC and consumer appliances is recognised when the Grouphas delivered 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. Upon confirmingthe acceptance, the buyer has the right to sell the products at its discretion and takes the risksof any price fluctuations and obsolescence and loss of the products.
Revenue from overseas sales of HVAC and consumer appliances is recognised when the goodshave been declared to the customs and shipped out of the port in accordance with the salescontract.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Revenue (Cont’d)
(a) Sales of products (Cont’d)
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 credit riskcharacteristics, which is consistent with industry practice, and there is no significant financingcomponent. Generally, the retail customers of the Group are entitled to return the products within7 days after the confirmation of receipt.
The Group provides distributors with sales discount, and the relevant revenue is recognised atcontract consideration net of the discount amount estimated.
The periods and terms of product quality warranty are provided in accordance with the laws andregulations related to the products. The Group has not provided any additional services orproduct 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, intelligent logisticsintegration solution, storage services, delivery services, installation services and transportationservice, which are recognised in a certain period of time based on the stage of completion. Onthe balance sheet date, the Group re-estimates the stage of completion to reflect the actualstatus 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, andthe rest is recognised as contract assets. Meanwhile, loss provision for accounts receivable andcontract assets are recognised on the basis of ECL (Note 2(9)). If the contract price received orreceivable exceeds the amount for the completed service, the excess portion will be recognisedas contract liabilities. Contract assets and contract liabilities under the same contract arepresented on a net basis.
Contract costs include contract performance costs and contract acquisition costs. The costsincurred by the Group for the provision of services are recognised as contract performance costs.The recognised revenue is carried forward to the cost of sales from main operations based onthe stage of completion. Incremental costs incurred by the Group for the acquisition of contractare recognised as the costs to obtain a contract. For the costs to obtain a contract with theamortisation period within one year, the costs are charged to profit or loss when incurred. Forthe costs to obtain a contract with the amortisation period beyond one year, the costs arecharged in the current profit or loss on the same basis as aforesaid revenue of rendering ofservices recognised under the relevant contract. If the carrying amount of the contract costs ishigher than the remaining consideration expected to be obtained by rendering of the service netof the estimated cost to be incurred, the Group makes provision for impairment on the excessportion and recognises it as asset impairment losses. As at the balance sheet date, based onwhether the amortisation period of the costs to fulfil a contract is more than one year when initiallyrecognised, the amount of the Group’s costs to fulfil a contract net of related provision for assetimpairment is presented as inventories or other non-current assets. For costs to obtain a contractwith amortisation period beyond one year at the initial recognition, the amount net of relatedprovision for asset impairment is presented as other non-current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Revenue (Cont’d)
(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 financial assetor liability and the interest income or interest costs based on effective rates. The effective interestrate is the rate at which the estimated future cash flows during the period of expected durationof the financial instruments or applicable shorter period are discounted to the current carryingamount of the financial instruments. When calculating the effective interest rate, the Groupestimates cash flows by considering all contractual terms of the financial instrument (e.g., earlyrepayment options, similar options, etc.), but without considering future credit losses. Thecalculation includes all fees and interest paid or received that are an integral part of the effectiveinterest rate, transaction costs, and all other premiums or discounts.
Interest income from impaired financial assets is calculated at the interest rate that is used fordiscounting estimated future cash flow when measuring the impairment loss.
(d) Dividend income
Dividend income is recognised when the right to receive dividend payment is established.
(e) Rental income
Rental income from investment prosperities is recognised in the income statement on a straight-line basis over the lease period.
(f) Fee and commission income
Fee and commission income is recognised in profit or loss for the current period when the serviceis provided. The Group defers the initial charge income or commitment fee income arising fromthe forming or acquisition of financial assets as the adjustment to effective interest rate. If theloans are not lent when the loan commitment period is expired, related charges are recognisedas fee and commission income.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Government grants
Government grants are transfers of monetary or non-monetary assets from the government tothe Group at nil consideration, including refund of taxes and financial subsidies, etc.
A government grant is recognised when the conditions attached to it can be complied with andthe government grant can be received. For a government grant in the form of transfer ofmonetary assets, the grant is measured at the amount received or receivable. For a governmentgrant in the form of transfer of non-monetary assets, it is measured at fair value; if the fair valueis not reliably determinable, the grant is measured at nominal amount.
Government grants related to assets are grants that are acquired by the Group and used foracquisition, construction or forming long-term assets in other ways. Government grants relatedto income refer to the government grants other than those 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 the relatedcosts are recognised; where the grant is a compensation for related expenses or losses alreadyincurred by the Group, the grant is recognised directly in profit or loss for 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, andthe related loan expenses are calculated based on the principal and the political preferential rate.Finance discounts directly received offset related loans expenses.
(27) 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 tax asset is recognised for the deductible losses that can becarried forward to subsequent years for deduction of the taxable profit in accordance with thetax laws. No deferred tax liability is recognised for a temporary difference arising from the initialrecognition of goodwill. No deferred tax asset or deferred tax liability is recognised for thetemporary differences resulting from the initial recognition of assets or liabilities due to atransaction other than a business combination, which affects neither accounting profit nortaxable profit (or deductible losses). At the balance sheet date, deferred tax assets and deferredtax liabilities are measured at the tax rates that are expected to apply to the period when theasset is realised or the liability is settled.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(27) Deferred tax assets and deferred tax liabilities (Cont’d)
Deferred tax assets are only recognised for deductible temporary differences, deductible lossesand tax credits to the extent that it is probable that taxable profit will be available in the futureagainst which the deductible temporary differences, deductible losses and tax credits can beutilised.
Deferred tax liabilities are recognised for temporary differences arising from investments insubsidiaries, associates and joint ventures, except where the Group is able to control the timingof reversal of the temporary difference, and it is probable that the temporary difference will notreverse in the foreseeable future. When it is probable that the temporary differences arising frominvestments in subsidiaries, associates and joint ventures will be reversed in the foreseeablefuture and that the taxable profit will be available in the future against which the temporarydifferences can be utilised, the corresponding deferred tax assets are recognised.
Deferred tax assets and deferred tax liabilities are offset when:
? the deferred tax assets and deferred tax liabilities are related to the same tax payer withinthe Group and the same taxation authority; and,? that tax payer within the Group has a legally enforceable right to offset current tax assetsagainst current tax liabilities.
(28) Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of anidentified asset for a period of time in exchange for consideration.
The Group as the lessee
At the lease commencement date, the Group recognises the right-of-use asset and measuresthe lease liability at the present value of the lease payments that are not paid at that date. Leasepayments include fixed payments, the exercise price of a purchase option if the lessee isreasonably certain to exercise that option, and payments of penalties for terminating the lease ifthe lessee exercises an option to terminate the lease. Variable lease payments in proportion tosales are excluded from lease payments and recognised in profit or loss as incurred. Leaseliabilities that are due within one year (inclusive) as from the balance sheet date are included inthe current portion of non-current liabilities.
Right-of-use assets of the Group comprise leased buildings, machinery and equipment, motorvehicles, etc. Right-of-use assets are measured initially at cost which comprises the amount ofthe initial measurement of lease liabilities, any lease payments made at or before thecommencement date and any initial direct costs, less any lease incentives received. If there isreasonable certainty that the Group will obtain ownership of the underlying asset by the end ofthe lease term, the asset is depreciated over its remaining useful life; otherwise the asset isdepreciated over the shorter of the lease term and its remaining useful life. The carrying amountof the right-of-use asset is reduced to the recoverable amount when the recoverable amount isbelow the carrying amount.
For short-term leases with a term of 12 months or less and leases of an individual asset (whennew) of low value, the Group chooses to include the lease payments in the cost of the underlyingassets or in the profit or loss for the current period on a straight-line basis over the lease term,instead of recognising right-of-use assets and lease liabilities.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Leases (Cont’d)
The Group accounts for a lease modification as a separate lease if both: (1) the modificationincreases the scope of the lease by adding the right to use one or more underlying assets; (2)the consideration for the lease increases by an amount commensurate with the stand-alone pricefor the increase in scope and any appropriate adjustments to that stand-alone price to reflect thecircumstances of the contract.
For a lease modification that is not accounted for as a separate lease, the Group redeterminesthe lease term at the effective date of the lease modification, and remeasures the lease liabilityby discounting the revised lease payments using a revised discount rate, except that the contractchanges directly resulting from COVID-19 are accounted for by applying the practical expedient.For a lease modification which decreases the scope of the lease or shortens the lease term, theGroup correspondingly decreases the carrying amount of the right-of-use asset, and recognisesin profit or loss any gain or loss relating to the partial or full termination of the lease. For otherlease modifications which lead to the remeasurement of lease liabilities, the Groupcorrespondingly adjusts the carrying amount of the right-of-use asset.
For the rent concessions as a direct result of COVID-19 and for the period ended 30 June 2022only, the Group applies the practical expedient and records the undiscounted concessions inprofit or loss when the agreement is reached to discharge the original payment obligation withcorresponding adjustment of lease liabilities.
The Group as the lessor
A lease is classified as a finance lease if it transfers substantially all the risks and rewardsincidental to ownership of an underlying asset. An operating lease is a lease other than a financelease.
(a) Operating leases
Where the Group leases out self-owned buildings, machinery and equipment, and motor vehiclesunder operating leases, rental income therefrom is recognised on a straight-line basis over thelease term. Variable rental that is linked to a certain percentage of sales is recognised in rentalincome as incurred.
For the rent concessions as a direct result of COVID-19 and for the period ended 30 June 2022only, the Group applies the practical expedient to account for the concessions as variable leasepayments and record the concessions in profit or loss during the waiving period.
Except that the above contract changes directly resulting from COVID-19 are accounted for byapplying the practical expedient, for a lease modification, the Group accounts for it as a newlease from the effective date of the modification, and considers any lease payments received inadvance and receivable relating to the lease before modification as receivables of the new lease.
(b) Finance leases
At the commencement date, the Group recognises the lease payments receivable under afinance lease and derecognises relevant assets. The lease payments receivable under a financelease are presented as long-term receivables; the lease payments receivable under a financelease due within one year (inclusive) as from the balance sheet date are included in the currentportion of non-current assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) Segment information
The Group identifies operating segments based on the internal organisation structure,management requirements and internal reporting system, and discloses segment information ofreportable segments which is determined on the basis of operating segments.
An operating segment is a component of the Group that satisfies all of the following conditions:
(1) the component is able to earn revenue and incur expenses from its ordinary activities; (2)whose operating results are regularly reviewed by the Group’s management to make decisionsabout resources to be allocated to the segment and to assess its performance, and (3) for whichthe information on financial position, operating results and cash flows is available to the Group.Two or more operating segments that have similar economic characteristics and satisfy certainconditions can be aggregated into one single operating segment.
(30) Critical accounting estimates and judgements
The Group continually evaluates the critical accounting estimates and key judgements appliedbased on historical experience and other factors, including expectations of future events that arebelieved to be reasonable.
Critical accounting estimates and key assumptions
The critical accounting estimates and key assumptions that have a significant risk of causing amaterial adjustment to the carrying amounts of assets and liabilities within the next accountingyear 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 group of asset groups that contain the apportioned goodwill isdetermined by the higher value between the use value and the net value that is calculated bythe fair value less the disposal costs. Accounting estimate is required for the calculation of therecoverable amount. The impairment testing is performed by assessing the recoverable amountof the asset groups containing the relevant goodwill, based on the present value of cash flowsforecasts. Key assumptions adopted in the impairment testing of goodwill included estimatedrevenue growth rate, EBITDA margin, perpetual annual growth rate, discount rate, etc. whichinvolved critical accounting estimates and judgement.
If management revises the estimated revenue growth rate and perpetual annual growth rate thatare used in the calculation of the future cash flows of asset groups or groups of asset groups,and the revised rates are lower than the current rates, the Group would need to recognise furtherimpairment against goodwill.
If management revises the EBITDA margin that is used in the calculation of the future cash flowsof asset groups or groups of asset groups, and the revised EBITDA margin is lower than thecurrent one, the Group would need to recognise further impairment against goodwill.
If management revises the pre-tax discount rate applied to the discounted cash flows, and therevised pre-tax discount rate is higher than the one currently applied, the Group would need torecognise further impairment against goodwill.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(30) Critical accounting estimates and judgements (Cont’d)
(i) Provision for impairment of goodwill (Cont’d)
If the actual estimated revenue growth rate, perpetual annual growth rate and EBITDA marginare higher or the actual pre-tax discount rate is lower than management’s estimates, theimpairment loss of goodwill previously provided for is not allowed to be reversed by the Group.
(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 the ordinarycourse of business. Significant judgement is required from the Group in determining the provisionfor income taxes in each of these jurisdictions. Where the final tax outcome of these matters isdifferent from the amounts that were initially recorded, such differences will impact the incometax and deferred tax provisions in the period in which such determination is 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-techenterprise assessment should be submitted again to the relevant government authorities. Basedon the past experience of reassessment for high-tech enterprise upon expiration and the actualcondition of the subsidiaries, the Group considers that the subsidiaries are able to obtain thequalification for high-tech enterprises in future years, and therefore a preferential tax rate of 15%is used to calculate the corresponding deferred income tax. If some subsidiaries cannot obtainthe qualification for high-tech enterprise upon expiration, then the subsidiaries are subject to astatutory tax rate of 25% for the calculation of the income tax, which further influences therecognised deferred tax assets, deferred tax liabilities and income tax expenses.
Deferred tax assets are recognised for the deductible tax losses that can be carried forward tosubsequent years to the extent that it is probable that taxable profit will be available in the futureagainst which the deductible tax losses can be utilised. Taxable profit that will be available in thefuture includes the taxable profit that will be realised through normal operations and the taxableprofit that will be increased upon the reversal of taxable temporary differences incurred in priorperiods. Judgements and estimates are required to determine the time and amounts of taxableprofit in the future. Any difference between the reality and the estimate may result in adjustmentto the carrying amount of deferred tax assets.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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”) | Taxable value-added amount (Tax payable is calculated using the taxable sales amount multiplied by the applicable tax rate less deductible VAT input 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
(a-1) The following subsidiaries of the Company are subject to an enterprise income tax rate of 15% in
2022 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. | GR202144008574 | 20 December 2021 | 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. | GR202144012791 | 31 December 2021 | 3 years | |
| Foshan Shunde Midea Electric Science and Technology Co., Ltd. | GR201944000317 | 2 December 2019 | 3 years | |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | GR202144001270 | 20 December 2021 | 3 years | |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | GR201934001163 | 9 September 2019 | 3 years | |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | GR202134004969 | 18 September 2021 | 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 | |
| Wuxi Filin Electronics Co., Ltd. | GR202132000964 | 3 November 2021 | 3 years | |
| GD Midea Air-Conditioning Equipment Co., Ltd. | GR202044003059 | 1 December 2020 | 3 years | |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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-1) The following subsidiaries of the Company are subject to an enterprise income tax rate of 15% in
2022 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 |
| Handan Midea Air-Conditioning Equipment Co., Ltd. | GR202013000191 | 27 September 2020 | 3 years |
| 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 |
| Guangdong Swisslog Technology Co., Ltd. | GR202144005648 | 20 December 2021 | 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 | 9 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. | GR202134003666 | 18 November 2021 | 3 years |
| Hefei Midea Laundry Appliance Co., Ltd. | GR202134003561 | 18 September 2021 | 3 years |
| Hefei Hualing Co., Ltd. | GR202134000541 | 18 September 2021 | 3 years |
| Foshan Midea Chungho Water Purification Equipment. Co., Ltd. | GR202144010400 | 31 December 2021 | 3 years |
| Toshiba HA Manufacturing (Nanhai) Co., Ltd. | GR202144002672 | 20 December 2021 | 3 years |
| Guangdong Meizhi Precision-Manufacturing Co., Ltd. | GR202144003890 | 20 December 2021 | 3 years |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | GR202134003382 | 18 September 2021 | 3 years |
| Guangdong Midea Intelligent Technologies Co., Ltd. | GR202144008039 | 20 December 2021 | 3 years |
| WINONE ELEVATOR COMPANY LIMITED | GR202144006432 | 20 December 2021 | 3 years |
| Beijing Hiconics Eco-energy Frequency Conversion Technology Co., Ltd. | GR202011003365 | 21 October 2020 | 3 years |
| Changsha Sunye Electric Co., Ltd. | GR202143000846 | 18 September 2021 | 3 years |
| Beijing Huatairunda Energy Saving Co., Ltd. | GR202111004112 | 17 December 2021 | 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 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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-1) The following subsidiaries of the Company are subject to an enterprise income tax rate of 15% in 2022 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 |
| KUKA Robotics Guangdong Co., Ltd. | GR202044003841 | 9 December 2020 | 3 years |
| Reis Robotics (Kunshan) Co., Ltd. | GR202132000238 | 3 November 2021 | 3 years |
| Midea Intelligent Lighting & Controls Technology Co., Ltd. | GR202036000935 | 14 September 2020 | 3 years |
| Beijing Wandong Software Technology Co., Ltd. | GR202011009515 | 2 December 2020 | 3 years |
| Wanliyun Medical Information Technology (Beijing) Co., Ltd. | GR201911005106 | 2 December 2019 | 3 years |
| Guangdong Midea Environmental Technologies Co., Ltd. | GR202144004692 | 20 December 2021 | 3 years |
| MR Semiconductor Ltd. | GR202131000701 | 9 October 2021 | 3 years |
| Anhui Welling Auto Parts Corporation Limited | GR202134002578 | 18 September 2021 | 3 years |
| Guangdong Meicloud Technology Co., Ltd. | GR202144008715 | 20 December 2021 | 3 years |
| Wuhan TTium Motor Technology Co., Ltd. | GR201942001358 | 15 November 2019 | 3 years |
(a-2) According to the Notice of the Ministry of Finance, the State Taxation Administration on
Preferential Enterprise Income Tax Policies for Hainan Free-trade Port, Cai Shui (2020) (No.31),the Company’s subsidiary in Hainan is subject to enterprise income tax at a rate of 15% from 1January 2020 to 31 December 2024.
(a-3) Pursuant to the Notice on Extending the Preferential Enterprise Income Tax Policies for Qianhai
Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen, enterprises thatmeet the notice requirements are subject to a reduced enterprise income tax rate of 15%.Therefore, Midea Commercial Factoring Co., Ltd., a subsidiary of the Company, is subject toenterprise income tax at a rate of 15% from 1 January 2021 to 31 December 2025.
(a-4) According to the Announcement on Continuing the Enterprise Income Tax Policies for the
Development of Western China jointly issued by the Ministry of Finance, the State TaxationAdministration and the National Development and Reform Commission on 23 April 2020,Chongqing Midea Air-Conditioning Equipment Co., Ltd., Chongqing Midea CommercialFactoring Co., Ltd., Chongqing Annto Logistics Technology Co., Ltd. and Guiyang AnntoLogistics Technology Co., Ltd., subsidiaries of the Company are subject to enterprise incometax at a rate of 15% from 1 January 2021 to 31 December 2030.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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-5) 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 the Announcementof the State Taxation Administration on the Income Tax Preference Policies for New Power GridProjects of Power Grid Enterprises (State Taxation Administration Announcement in 2013, No.
26), Phase I Project of the company was subject to the preferential policy of enterprise incometax exemption from 2016 to 2018, and was subject to the preferential policy of enterprise incometax reduction of 50% from 2019 to 2021. On 28 November 2017, the company also obtainedthe Record 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 Enterprise IncomeTax Law of the People’s Republic of China, Order of the President of the People’s Republic ofChina (No. 63), Phase II Project of the company was subject to the preferential policy ofenterprise income tax exemption from 2017 to 2019, and is subject to the preferential policy ofenterprise income tax reduction of 50% from 2020 to 2022.
(a-6) According to the Notice on Implementing the Inclusive Tax Deduction and Exemption Policies
for Micro and Small Enterprises (Cai Shui [2019] No. 13), the Announcement on the MattersConcerning the Implementation of Preferential Income Tax Policies for the Development ofSmall and Micro Enterprises and Individual Industrial and Commercial Households(Announcement [2021], No. 12) and the Announcement on the Matters Concerning theImplementation of Preferential Income Tax Policies for the Development of Small and MicroEnterprises (Announcement [2022], No. 13) jointly issued by the Ministry of Finance and theState Taxation Administration, for Shenzhen Midea Capital Enterprise Management Co., Ltd., asubsidiary of the Company and qualified as a small low-profit enterprise, in 2022, EIT is basedon a 20% rate applied to 12.5% of its taxable income amount for the proportion of taxable incomeup to RMB 1 million, and a 20% rate applied to 25% of its taxable income amount for theproportion of taxable income between RMB 1 million and RMB 3 million.
(a-7) The Company's subsidiaries in Mainland China other than those mentioned in (a-1) to (a-6) are
subject to enterprise income tax at the rate of 25%.
(a-8) 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) by theSingapore Economic Development Board and is subject to the applicable preferential incometax rate of 5.5% for 2022. Midea Singapore Trading Co., Pte Ltd. and Little Swan International(Singapore) Co., Pte Ltd., the Company's subsidiaries, are subject to enterprise income tax atthe rate of 17%.
(a-9) 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 (Hong Kong)Co., Limited, Century Carrier Residential Air-conditioning Equipment Co., Limited, MideaRefrigeration (Hong Kong) Limited, Welling Holding Limited, Welling International Hong KongLtd., Chairing Holding Limited, Main Power Electrical Factory Limited and Midea Investment(Asia) Company Limited.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) 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-11) Springer Carrier Ltda., the Company's subsidiary in Brazil, is subject to Brazil enterprise income
tax at the rate of 34%.
(a-12) 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%.
(a-13) 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-14) KUKA Group, the Company's subsidiary in Germany, is subject to Germany enterprise income
tax at the rate of 32%.
(a-15) Servotronix Motion Control Ltd. (“SMC”), the Company's subsidiary in Israel, is subject to Israel
enterprise income tax at the rate of 23%.
(a-16) 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 tax 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 State TaxationAdministration and the General Administration of Customs and relevant regulations, theapplicable tax rate of revenue arising from sales of goods and rendering of repairing andreplacement services of the Company’s certain subsidiaries is 13% from 1 April 2019, and thatof revenue arising from real estate leasing and transportation services of the Company’s certainsubsidiaries is 9%.
(b-2) Financial services, consulting services and storage services provided by the Company and
certain subsidiaries are subject to VAT at the rate of 6%.
(b-3) Rental revenue of the Company’s certain subsidiaries is subject to easy levy of VAT at the rate
of 5%.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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)
(b) Notes to the VAT tax rate of the principal tax payers with different tax rates (Cont’d)
(b-4) Pursuant to relevant provisions of the Announcement on the VAT Policy Relating to the
Promotion of Relief and Development of Difficulty-ridden Industries in the Service Sector(Announcement [2022] No. 11), Article 7 of the Announcement on Relevant Policies forDeepening the Value-Added Tax Reform (Announcement [2019] No. 39), and additionaldeduction policies of value-added tax for production and consumer service industry specified inthe Announcement on the Additional Deduction Policies of Value-added Tax for ConsumerService Industry (Announcement [2019] No. 87), the applicable period of preferential tax policiesthat have expired shall be extended to 31 December 2022, and certain subsidiaries of theCompany engaged in the production service sector, are eligible for a 10% additional VATdeduction based on deductible input VAT.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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
| Item | Ending balance | Opening balance |
| Cash on hand | 2,447 | 1,609 |
| Cash at bank (a) | 45,849,451 | 46,691,119 |
| Other cash balances (b) | 849,514 | 443,893 |
| Statutory reserve with the Central Bank (c) | 412,248 | 419,718 |
| Surplus reserve with the Central Bank | 154,409 | 272,949 |
| Deposits with banks and other financial institutions (d) | 29,157,065 | 23,351,878 |
| Accrued interest | 276,804 | 694,390 |
| Total | 76,701,938 | 71,875,556 |
| Including: Total amounts deposited with banks overseas (including Hong Kong, China, Macau, China, Singapore, Japan, Italy, Brazil, Germany, etc.) | 15,767,238 | 6,763,152 |
(a) As at 30 June 2022, cash at bank included fixed deposits with the term of over 3 months,
amounting to RMB 12,852,645,000 (31 December 2021: RMB 28,767,516,000).
(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 arecalculated at 5% and 8% for eligible RMB deposits and foreign currency deposits, respectively,and are not available for use in the Group’s daily operations.
(d) As at 30 June 2022, deposits with banks and other financial institutions included fixed deposits
with the term of over 3 months, amounting to RMB 1,000,000,000 (31 December 2021: RMB1,000,000,000).
(2) Financial assets held for trading
| Item | Ending balance | Opening balance |
| Structural deposits (a) | 1,776,905 | 4,285,607 |
| Investments in equity instrument held for trading (b) | 1,099,287 | 1,319,470 |
| Others | 389,449 | 274,125 |
| Total | 3,265,641 | 5,879,202 |
(a) As at 30 June 2022, structural deposits were deposits with financial institutions due within 1
year, which were measured at fair value through profit or loss.
(b) As at 30 June 2022, investments in equity instrument held for trading referred to equity
investments in listed companies, which were measured at fair value through profit or loss.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(3) Notes receivable
| Item | Ending balance | Opening balance |
| Bank acceptance notes | 6,559,383 | 4,689,898 |
| Trade acceptance notes | 129,940 | 126,640 |
| Less: Provision for bad debts (a) | (92,105) | (31,624) |
| Total | 6,597,218 | 4,784,914 |
(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 30 June 2022, theGroup considered that there was no significant credit risk associated with its bank acceptancenotes and did not expect that there would be any significant losses from non-performance bythese banks.
(b) As at 30 June 2022, notes receivable endorsed or discounted but unmatured were as follows:
| Item | Derecognised | Not derecognised |
| Bank acceptance notes | - | 3,320,446 |
(4) Accounts receivable
| Item | Ending balance | Opening balance |
| Accounts receivable | 30,560,260 | 25,495,619 |
| Less: Provision for bad debts | (973,840) | (859,179) |
| Total | 29,586,420 | 24,636,440 |
(a) The ageing of accounts receivable is analysed as follows:
| Ageing | Ending balance | Opening balance |
| Within 1 year | 29,799,662 | 24,566,401 |
| 1 to 2 years | 439,256 | 617,355 |
| 2 to 3 years | 157,043 | 144,300 |
| 3 to 5 years | 127,743 | 134,460 |
| Over 5 years | 36,556 | 33,103 |
| Sub-total | 30,560,260 | 25,495,619 |
As at 30 June 2022, the Group had no significant overdue accounts receivable.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 30 June 2022, accounts receivable for which the related provision for bad debts wasprovided on the individual basis were analysed as follows :
| Category | Ending balance | |||
| Book balance | Lifetime ECL rate | Provision for bad debts | Reason | |
| Domestic customers | 43,880 | 100.00% | (43,880) | The debtor encountered financial distress, etc. |
| Overseas customers | 17,471 | 100.00% | (17,471) | The debtor encountered financial distress, etc. |
| Total | 61,351 | (61,351) | ||
As at 30 June 2022, accounts receivable for which the related provision for bad debts wasprovided on the grouping basis were analysed as follows:
| Category | Ending balance | ||
| Book balance | Provision for bad debts | ||
| Amount | Lifetime ECL rate | Amount | |
| Domestic business grouping | 13,332,913 | 2.98% | (397,430) |
| Overseas business grouping | 17,165,996 | 3.00% | (515,059) |
| Total | 30,498,909 | (912,489) | |
(c) For the six months ended 30 June 2022, the provision for bad debts reversed amounted to
RMB 183,359,000.
For the six months ended 30 June 2022, the accounts receivable written off by the Group werearising from transactions with third parties and no accounts receivable with significant amountswere written off.
(d) As at 30 June 2022, the five largest accounts receivable aggregated by debtor were
summarised and analysed as follows:
| Item | Amount | Provision for bad debts | % of total balance |
| Total amount of the five largest accounts receivable | 1,638,234 | (40,956) | 5.36% |
(5) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 2,217,464 | 3,147,595 |
| Less: Provision for bad debts | (41,801) | (43,530) |
| Total | 2,175,663 | 3,104,065 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(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 :
| Ageing | Ending balance | Opening balance |
| Within 1 year | 1,875,014 | 2,856,634 |
| 1 to 2 years | 238,442 | 149,331 |
| 2 to 3 years | 31,931 | 97,424 |
| 3 to 5 years | 47,258 | 28,029 |
| Over 5 years | 24,819 | 16,177 |
| Sub-total | 2,217,464 | 3,147,595 |
(b) Provision for bad debts and changes in book balance statement
| Item | Stage 1 | Stage 3 | Sub-total | ||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | |||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 1 January 2022 | 2,992,048 | 38,263 | 150,280 | - | 5,267 | 5,267 | 43,530 |
| Transfer to Stage 3 | (18) | (2) | - | - | 18 | 2 | - |
| Net (decrease)/increase in the current year | (793,457) | (8,887) | (136,608) | - | (66) | (57) | (8,944) |
| Including: Write-off in the current period | - | - | - | - | (66) | (66) | (66) |
| Derecognition | - | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | 7,208 | - | 7 | 7,215 | |||
| 30 June 2022 | 2,198,573 | 36,582 | 13,672 | - | 5,219 | 5,219 | 41,801 |
(i) As at 30 June 2022, other receivables for which the related provision for bad debts was provided
on the individual basis were analysed as follows:
| Stage 1 | Book balance | ECL rate in the following 12 months | Provision for bad debts | Reason |
| 13,672 | 0% | - | Relatively low bad debt risks |
| Stage 3 | Book balance | ECL rate in the following 12 months | Provision for bad debts | Reason |
| 5,219 | 100.00% | (5,219) | The debtor encountered financial distress, etc. |
(ii) As at 30 June 2022, other receivables for which the related provision for bad debts was provided
on the grouping basis were all at Stage 1, which were analysed as follows:
| Stage 1 | Ending balance | Opening balance | ||||
| 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 | 2,198,573 | (36,582) | 1.66% | 2,992,048 | (38,263) | 1.28% |
(c) For the six months ended 30 June 2022, the provision for bad debts reversed amounted to
RMB 19,870,000.
For the six months ended 30 June 2022, no other receivables with significant amounts werewritten off.
(d) As at 30 June 2022, the five largest other receivables aggregated by debtor were summarised
and analysed as follows:
| Item | Amount | Provision for bad debts | % of total balance |
| Total amount of the five largest other receivables | 133,079 | (3,788) | 6.00% |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(e) As at 30 June 2022, the Group had no significant government grants recognised at amounts
receivable.
(6) Receivables financing
| Item | Ending balance | Opening balance |
| Receivables financing | 14,072,448 | 10,273,552 |
The Group’s receivables financing were mainly accounts receivable and bank acceptance notestransferred, discounted and endorsed for the purpose of daily treasury management and werequalified for derecognition.
As at 30 June 2022 and 31 December 2021, the Group measured provision for bad debts basedon the lifetime ECL and expected that there was no significant credit risk associated with itsbank acceptance notes and did not expect that there would be any significant losses from non-performance by these banks.
As at 30 June 2022, the Group’s notes receivable endorsed or discounted but not maturedpresented in receivables financing were as follows:
| Item | Derecognised | Not derecognised |
| Receivables financing | 17,767,351 | - |
(7) Advances to suppliers
| Item | Ending balance | Opening balance |
| Prepayments for raw materials and others | 4,385,716 | 4,352,807 |
(a) The ageing of advances to suppliers is analysed below:
| Ageing | Ending balance | Opening balance | ||
| Amount | % of total balance | Amount | % of total balance | |
| Within 1 year | 4,212,859 | 96.06% | 4,241,867 | 97.45% |
| 1 to 2 years | 141,871 | 3.23% | 74,391 | 1.71% |
| 2 to 3 years | 13,611 | 0.31% | 18,798 | 0.43% |
| Over 3 years | 17,375 | 0.40% | 17,751 | 0.41% |
| Total | 4,385,716 | 100.00% | 4,352,807 | 100.00% |
As at 30 June 2022, advances to suppliers with ageing over 1 year with a carrying amount ofRMB 172,857,000 (31 December 2021: RMB 110,940,000) were mainly unsettled prepaymentsfor raw materials.
As at 30 June 2022, the five largest advances to suppliers aggregated by debtor weresummarised and analysed as follows:
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
Item
| Item | Amount | % of total balance |
| Total amount of the five largest advances to suppliers | 1,116,432 | 25.46% |
(8) Contract assets
| Item | Ending balance | Opening balance |
| Contract assets | 4,334,389 | 3,870,243 |
| Less: Provision for impairment of contract assets | (70,025) | (46,767) |
| Total | 4,264,364 | 3,823,476 |
For contract assets, the Group measures the loss provision based on the lifetime ECLregardless of whether there exists a significant financing component.As at 30 June 2022, contract assets for which the related provision for bad debts was providedon the grouping basis were analysed as follows:
| Grouping | Ending balance | ||
| Book balance | Lifetime ECL rate | Provision for bad debts | |
| Domestic business grouping | 1,142,663 | 3.31% | (37,861) |
| Overseas business grouping | 3,191,726 | 1.01% | (32,164) |
| Total | 4,334,389 | (70,025) | |
(9) Loans and advances
(a) By individual and corporation:
| Item | Ending balance | Opening balance |
Loans and advances measured atamortised cost
| Loans and advances to individuals | 2,198,764 | 2,217,220 |
| Loans and advances to corporations | 15,069,283 | 19,744,034 |
| Including: Loans | 10,605,323 | 12,790,285 |
| Discount bills | 4,463,960 | 6,953,749 |
| Sub-total | 17,268,047 | 21,961,254 |
| Less: Provision for loan losses | (492,282) | (452,727) |
| Total | 16,775,765 | 21,508,527 |
As at 30 June 2022, loans and advances over 1 year amounted to RMB 1,190,970,000 (31December 2021: RMB 851,927,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 (Cont’d)
(b) By type of collateral held:
| Item | Ending balance | Opening balance |
| Unsecured loans | 2,194,596 | 2,211,108 |
| Guaranteed loans | 410,209 | 587,936 |
| Pledged loans | 14,663,242 | 19,162,210 |
| Sub-total | 17,268,047 | 21,961,254 |
| Less: Provision for loan losses | (492,282) | (452,727) |
| Total | 16,775,765 | 21,508,527 |
(10) Inventories
(a) Inventories are summarised by category as follows:
| Item | Ending balance | Opening balance | ||||
| Book balance | Provision for decline in value | Carrying amount | Book balance | Provision for decline in value | Carrying amount | |
| Finished goods | 25,857,792 | (533,009) | 25,324,783 | 33,636,462 | (419,166) | 33,217,296 |
| Raw materials | 9,274,477 | (141,590) | 9,132,887 | 9,592,914 | (121,217) | 9,471,697 |
| Work in progress | 1,751,998 | - | 1,751,998 | 2,406,866 | - | 2,406,866 |
| Consigned processing materials and others. | 541,170 | - | 541,170 | 828,580 | - | 828,580 |
| Total | 37,425,437 | (674,599) | 36,750,838 | 46,464,822 | (540,383) | 45,924,439 |
(b) Analysis of provision for decline in the value of inventories is as follows:
| Item | Opening balance | Increase of provision in the current period | Decrease by reversal or write- off in the current period | Differences on translation of foreign currency financial statements | Ending balance |
| Finished goods | 419,166 | 166,758 | (47,347) | (5,568) | 533,009 |
| Raw materials | 121,217 | 38,585 | (13,742) | (4,470) | 141,590 |
| Total | 540,383 | 205,343 | (61,089) | (10,038) | 674,599 |
(c) Provision for decline in the value of inventories is as follows:
| Item | Basis for provision for decline in the value of inventories | Reason for written-off of provision for decline in the value of inventories for current period |
| Finished goods | Stated at the lower of cost and net realisable value | Sales |
| Raw materials | Stated at the lower of cost and net realisable value | Requisition for production |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(11) Current portion of non-current assets
| Item | Ending balance | Opening balance |
| Long-term receivables due within 1 year | 457,716 | 491,205 |
| Other debt investments due within 1 year | 14,232,853 | 19,360,372 |
| Current portion of other non-current assets | 24,027,270 | - |
| Total | 38,717,839 | 19,851,577 |
(12) Other current assets
| Item | Ending balance | Opening balance |
| Fixed income products (a) | 35,591,234 | 23,696,825 |
| Input VAT to be deducted | 4,578,509 | 6,137,776 |
| Prepaid expenses | 970,946 | 828,675 |
| Others | 1,986,733 | 2,492,736 |
| Total | 43,127,422 | 33,156,012 |
(a) As at 30 June 2022, fixed income products were monetary investment products deposited in
financial institutions with maturities of no more than one year at the time of acquisition, whichwere subsequently measured at amortised cost.
(13) Other debt investments
| Item | Ending balance | Opening balance |
| Fair value through other comprehensive income | ||
| - Transferable certificate of deposit | 22,383,547 | 27,254,307 |
| Less: Other debt investments due within 1 year | (14,232,853) | (19,360,372) |
| Total | 8,150,694 | 7,893,935 |
As at 30 June 2022, the cost of the Group’s transferable certificate of deposit approximatedits fair value.
As at 30 June 2022, the Group expected that there has no significant increase in credit risk oftransferable certificate of deposit since initial recognition and made provision for loss basedon 12-month ECL. The Group considered that there was no significant credit risk associatedwith transferable certificate of deposit and did not expect that there would be any significantlosses from non-performance by these banks.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(14) Long-term receivables
| Item | Ending balance | Opening balance |
| Long-term receivables | 1,282,760 | 1,371,022 |
| Less: Provision for bad debts | (16,014) | (8,461) |
| Total | 1,266,746 | 1,362,561 |
| Less: Long-term receivables due within 1 year | (457,716) | (491,205) |
| Total | 809,030 | 871,356 |
The Group’s long-term receivables are presented in net amount of finance lease receivablesafter offsetting the unrealised financing income.
(15) Long-term equity investments
Long-term equity investments are classified as follows:
| Item | Ending balance | Opening balance |
| Investments in associates (a) | 3,769,304 | 3,796,705 |
| Less: Provision for impairment of long-term equity investments | - | - |
| Total | 3,769,304 | 3,796,705 |
(a) Investments in associates mainly refer to the investments in Guangdong Shunde Rural
Commercial Bank Co., Ltd., Carrier Midea North America LLC and Hefei Royalstar Motor Co.,Ltd. and other enterprises by the Group.
(16) Other non-current financial assets
| Item | Ending balance | Opening balance |
| Measured at fair value | ||
| - Equity of unlisted companies, etc. | 7,076,364 | 5,912,873 |
| Less: Provision for impairment of other non-current financial assets | - | - |
| Total | 7,076,364 | 5,912,873 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(17) Fixed assets
| Item | Buildings | Overseas land | Machinery and equipment | Motor vehicles | Electronic equipment and others | Total |
| Cost | ||||||
| Opening balance | 20,108,658 | 1,330,856 | 22,182,072 | 758,743 | 5,497,346 | 49,877,675 |
| Increase in the current period | 528,160 | - | 1,494,799 | 29,774 | 512,787 | 2,565,520 |
| 1) Purchase | 263,493 | - | 1,431,122 | 29,594 | 464,258 | 2,188,467 |
| 2) Transfers from construction in progress | 250,850 | - | 62,295 | 104 | 48,494 | 361,743 |
| 3) Increase by business combinations | - | - | 1,382 | 76 | 35 | 1,493 |
| 4) Others | 13,817 | - | - | - | - | 13,817 |
| Decrease in the current period | (89,640) | (214) | (354,808) | (13,428) | (121,750) | (579,840) |
| 1) Disposal or retirement | (71,378) | - | (354,577) | (13,428) | (121,520) | (560,903) |
| 2) Others | (18,262) | (214) | (231) | - | (230) | (18,937) |
| Differences on translation of foreign currency financial statements | (112,823) | (34,443) | (103,312) | (1,765) | (10,955) | (263,298) |
| Ending balance | 20,434,355 | 1,296,199 | 23,218,751 | 773,324 | 5,877,428 | 51,600,057 |
| Accumulated depreciation | ||||||
| Opening balance | 9,003,358 | - | 13,332,180 | 571,319 | 4,067,650 | 26,974,507 |
| Increase in the current period | 474,963 | - | 731,397 | 12,402 | 369,254 | 1,588,016 |
| 1) Provision | 462,738 | - | 731,397 | 12,402 | 369,254 | 1,575,791 |
| 2) Others | 12,225 | - | - | - | - | 12,225 |
| Decrease in the current period | (55,757) | - | (289,895) | (11,997) | (107,287) | (464,936) |
| 1) Disposal or retirement | (41,829) | - | (289,740) | (11,997) | (107,150) | (450,716) |
| 2) Others | (13,928) | - | (155) | - | (137) | (14,220) |
| Differences on translation of foreign currency financial statements | (6,069) | - | (13,873) | (659) | 545 | (20,056) |
| Ending balance | 9,416,495 | - | 13,759,809 | 571,065 | 4,330,162 | 28,077,531 |
| Provision for impairment | ||||||
| Opening balance | 6,179 | 5,469 | 10,011 | 21,093 | 7,568 | 50,320 |
| Increase in the current period | - | - | - | - | - | - |
| 1) Provision | - | - | - | - | - | - |
| Decrease in the current period | - | - | (61) | (102) | (1) | (164) |
| 1) Disposal or retirement | - | - | (61) | (102) | (1) | (164) |
| Differences on translation of foreign currency financial statements | (172) | (329) | (30) | (13) | (394) | (938) |
| Ending balance | 6,007 | 5,140 | 9,920 | 20,978 | 7,173 | 49,218 |
| Carrying amount at the end of the period | 11,011,853 | 1,291,059 | 9,449,022 | 181,281 | 1,540,093 | 23,473,308 |
| Carrying amount at the beginning of the period | 11,099,121 | 1,325,387 | 8,839,881 | 166,331 | 1,422,128 | 22,852,848 |
(a) For the six months ended 30 June 2022, the depreciation of fixed assets amounted to RMB
1,575,791,000 (for the six months ended 30 June 2021: RMB 1,607,829,000) and was included inthe income statement in full amount.
(b) As at 30 June 2022, the Company was still in the course of obtaining the ownership certificate for
the fixed asset with a carrying amount of RMB 617,721,000 (31 December 2021: RMB 617,721,000).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress
| Project name | Ending balance | Opening balance | ||||
| Book balance | Provision for impairment | Carrying amount | Book balance | Provision for impairment | Carrying amount | |
| Early-stage Project of Shanghai R&D Centre | 874,160 | - | 874,160 | 687,704 | - | 687,704 |
| Midea Headquarters A04 Land Parcel Project | 752,127 | - | 752,127 | 565,884 | - | 565,884 |
| Midea Headquarters 08 Land Parcel Project | 240,058 | - | 240,058 | 234,165 | - | 234,165 |
| Thailand Factories | 256,385 | - | 256,385 | 213,005 | - | 213,005 |
| Indian Science Park | 177,894 | - | 177,894 | 179,813 | - | 179,813 |
| Other projects | 1,321,107 | (31,106) | 1,290,001 | 843,547 | (33,188) | 810,359 |
| Total | 3,621,731 | (31,106) | 3,590,625 | 2,724,118 | (33,188) | 2,690,930 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(18) Construction in progress (Cont’d)
(a) Movements of significant projects of construction in progress
| Project name | Opening balance | Increase in the current period | Transfers to fixed asset | Other decreases | Differences on translation of foreign currency financial statements | Ending balance | Source of funds |
| Early-stage Project of Shanghai R&D Centre | 687,704 | 186,456 | - | - | - | 874,160 | Self-financing |
| Midea Headquarters A04 Land Parcel Project | 565,884 | 186,243 | - | - | - | 752,127 | Self-financing |
| Midea Headquarters 08 Land Parcel Project | 234,165 | 5,893 | - | - | - | 240,058 | Self-financing |
| Thailand Factories | 213,005 | 44,419 | - | - | (1,039) | 256,385 | Self-financing |
| Indian Science Park | 179,813 | 10,735 | - | (11,230) | (1,424) | 177,894 | Self-financing |
| Other projects | 843,547 | 853,606 | (361,743) | (7,056) | (7,247) | 1,321,107 | Self-financing |
| Total | 2,724,118 | 1,287,352 | (361,743) | (18,286) | (9,710) | 3,621,731 |
(i) For the six months ended 30 June 2022, the Group had no borrowing costs eligible for capitalisation.
(ii) As at 30 June 2022, 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 SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(19) Right-of-use assets
| Item | Buildings | Machinery and equipment | Land use rights and others | Total |
| Cost | ||||
| Opening balance | 2,852,417 | 241,510 | 111,501 | 3,205,428 |
| Increase in the current period | 510,106 | 31,682 | 6,111 | 547,899 |
| 1) New lease contracts | 503,180 | 29,467 | 6,073 | 538,720 |
| 2) Lease modifications and others | 6,926 | 2,215 | 38 | 9,179 |
| Decrease in the current period | (179,776) | (21,583) | (1,448) | (202,807) |
| 1) Expiration of lease contracts | (125,741) | (13,531) | (854) | (140,126) |
| 2) Lease modifications and others | (54,035) | (8,052) | (594) | (62,681) |
| Differences on translation of foreign currency financial statements | (657) | (9,854) | (622) | (11,133) |
| Ending balance | 3,182,090 | 241,755 | 115,542 | 3,539,387 |
| Accumulated depreciation | ||||
| Opening balance | 751,536 | 136,409 | 20,129 | 908,074 |
| Increase in the current period | 481,917 | 40,921 | 9,205 | 532,043 |
| 1) Provision | 481,917 | 40,921 | 9,205 | 532,043 |
| Decrease in the current period | (133,681) | (16,230) | (966) | (150,877) |
| 1) Expiration of lease contracts | (125,741) | (13,531) | (854) | (140,126) |
| 2) Lease modifications and others | (7,940) | (2,699) | (112) | (10,751) |
| Differences on translation of foreign currency financial statements | 171 | (7,036) | (404) | (7,269) |
| Ending balance | 1,099,943 | 154,064 | 27,964 | 1,281,971 |
| Carrying amount at the end of the period | 2,082,147 | 87,691 | 87,578 | 2,257,416 |
| Carrying amount at the beginning of the period | 2,100,881 | 105,101 | 91,372 | 2,297,354 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(20) Intangible assets
| Item | Land use rights | Patents and non-patent technologies | Trademark rights | Trademark use rights | Others | Total |
| Cost | ||||||
| Opening balance | 7,158,510 | 3,199,777 | 4,769,814 | 2,295,651 | 5,576,295 | 23,000,047 |
| Increase in the current period | 466,118 | 4,437 | 34 | - | 130,061 | 600,650 |
| 1) Purchase | 459,320 | 3,767 | 34 | - | 116,104 | 579,225 |
| 2) Increase by business combinations | 5,017 | - | - | - | 9,438 | 14,455 |
| 3) Others | 1,781 | 670 | - | - | 4,519 | 6,970 |
| Decrease in the current period | (40,373) | (12) | - | - | (29,792) | (70,177) |
| 1) Disposal | (40,373) | (12) | - | - | (29,792) | (70,177) |
| Differences on translation of foreign currency financial statements | (1,271) | (48,380) | (113,645) | (261,506) | (83,076) | (507,878) |
| Ending balance | 7,582,984 | 3,155,822 | 4,656,203 | 2,034,145 | 5,593,488 | 23,022,642 |
| Accumulated amortisation | ||||||
| Opening balance | 1,138,198 | 921,857 | 160,901 | 342,000 | 3,087,655 | 5,650,611 |
| Increase in the current period | 72,774 | 92,197 | 33,565 | 25,860 | 295,124 | 519,520 |
| 1) Provision | 71,641 | 92,197 | 33,565 | 25,860 | 295,124 | 518,387 |
| 2) Others | 1,133 | - | - | - | - | 1,133 |
| Decrease in the current period | (10,255) | (12) | - | - | (24,605) | (34,872) |
| 1) Disposal | (10,255) | (12) | - | - | (24,605) | (34,872) |
| Differences on translation of foreign currency financial statements | 132 | (26,553) | 602 | (35,325) | (17,072) | (78,216) |
| Ending balance | 1,200,849 | 987,489 | 195,068 | 332,535 | 3,341,102 | 6,057,043 |
| Provision for impairment | ||||||
| Opening balance | - | 108,010 | - | - | 68,354 | 176,364 |
| Increase in the current period | - | - | - | - | 6,400 | 6,400 |
| 1) Provision | - | - | - | - | 6,400 | 6,400 |
| Decrease in the current period | - | - | - | - | - | - |
| 1) Disposal | - | - | - | - | - | - |
| Differences on translation of foreign currency financial statements | - | 4,957 | - | - | 3,480 | 8,437 |
| Ending balance | - | 112,967 | - | - | 78,234 | 191,201 |
| Carrying amount at the end of the period | 6,382,135 | 2,055,366 | 4,461,135 | 1,701,610 | 2,174,152 | 16,774,398 |
| Carrying amount at the beginning of the period | 6,020,312 | 2,169,910 | 4,608,913 | 1,953,651 | 2,420,286 | 17,173,072 |
(a) For the six months ended 30 June 2022, the amortisation of intangible assets amounted to RMB
518,387,000 (for the six months ended 30 June 2021: RMB 579,289,000) and was included in the incomestatement in full amount.
(b) As at 30 June 2022, intangible assets with a carrying amount of RMB 42,937,000 (31 December 2021:
RMB 0) had outstanding certificates of land use rights
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(21) Goodwill
The Group’s goodwill had been allocated to the asset group and asset groups at theacquisition date, and the allocation is as follows:
| Name of investee | Ending balance | Opening balance |
| KUKA Group | 19,943,412 | 20,544,697 |
| TLSC Group | 2,287,889 | 2,580,274 |
| Little Swan | 1,361,306 | 1,361,306 |
| Others | 4,048,806 | 3,893,186 |
| Sub-total | 27,641,413 | 28,379,463 |
| Less: Provision for impairment | (531,286) | (504,711) |
| Total | 27,110,127 | 27,874,752 |
(22) Long-term prepaid expenses
Long-term prepaid expenses mainly include expenses prepaid for software and projectreconstruction.
(23) Deferred tax assets and deferred tax liabilities
(a) Deferred tax assets before offsetting
| Item | Ending balance | Opening balance | ||
| Deductible temporary differences and deductible losses | Deferred tax assets | Deductible temporary differences and deductible losses | Deferred tax assets | |
| Deductible losses | 7,319,923 | 1,617,565 | 6,189,786 | 1,371,028 |
| Provision for asset impairment | 3,105,596 | 647,721 | 2,891,362 | 596,763 |
| Employee benefits payable | 1,046,634 | 254,343 | 1,214,088 | 285,263 |
| Other current liabilities | 33,795,392 | 6,213,666 | 29,984,331 | 5,531,170 |
| Others | 9,027,306 | 2,089,699 | 9,949,311 | 2,192,050 |
| Total | 54,294,851 | 10,822,994 | 50,228,878 | 9,976,274 |
(b) Deferred tax liabilities before offsetting
| Deferred tax liabilities | Ending balance | Opening balance | ||
| Taxable temporary differences | Deferred tax liabilities | Taxable temporary differences | Deferred tax liabilities | |
| Changes in fair value | 1,000,261 | 248,187 | 3,159,648 | 349,208 |
| Business combinations involving enterprises not under common control | 10,446,965 | 2,886,786 | 11,683,474 | 3,145,282 |
| Others | 13,257,302 | 3,067,484 | 14,441,530 | 3,239,720 |
| Total | 24,704,528 | 6,202,457 | 29,284,652 | 6,734,210 |
(c) The net balances of deferred tax assets and deferred tax liabilities after offsetting are as
follows:
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
Item
| Item | Balance after offsetting at the end of the period | Balance after offsetting at the beginning of the period |
| Deferred tax assets | 9,117,529 | 8,192,309 |
| Deferred tax liabilities | 4,496,992 | 4,950,245 |
(24) Other non-current assets
| Item | Ending balance | Opening balance |
| Fixed income products (a) | 54,492,997 | 35,485,395 |
| Less: Fixed income products due within 1 year | (24,027,270) | - |
| Sub-total | 30,465,727 | 35,485,395 |
| Others | 1,222,353 | 888,961 |
| Total | 31,688,080 | 36,374,356 |
(a) As at 30 June 2022, fixed income products were monetary investment products and non-
transferable certificates of deposit deposited in financial institutions with maturities of more thanone year at the time of acquisition, which were subsequently measured at amortised cost.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(25) Asset impairment and provision for loss
| Item | 1 January 2022 | Increase in the current period | Decrease in the current period | Differences on translation of foreign currency financial statements | 30 June 2022 | |
| Reversal | Write-off | |||||
| Provision for bad debts | 1,395,521 | 399,848 | (206,021) | (4,599) | 31,293 | 1,616,042 |
| Including: Provision for bad debts of accounts receivable | 859,179 | 278,516 | (183,359) | (4,533) | 24,037 | 973,840 |
| Provision for losses of loans and advances | 452,727 | 40,511 | (956) | - | - | 492,282 |
| Provision for bad debts of notes receivable | 31,624 | 62,107 | (1,626) | - | - | 92,105 |
| Provision for bad debts of other receivables | 43,530 | 10,992 | (19,870) | (66) | 7,215 | 41,801 |
| Provision for bad debts of long-term receivables | 8,461 | 7,722 | (210) | - | 41 | 16,014 |
| Provision for decline in the value of inventories | 540,383 | 205,343 | (4,683) | (56,406) | (10,038) | 674,599 |
| Provision for impairment of fixed assets | 50,320 | - | - | (164) | (938) | 49,218 |
| Provision for impairment of intangible assets | 176,364 | 6,400 | - | - | 8,437 | 191,201 |
| Provision for impairment of contract assets | 46,767 | 27,908 | (4,289) | - | (361) | 70,025 |
| Provision for impairment of investment properties | 12,576 | - | - | - | - | 12,576 |
| Provision for impairment of construction in progress | 33,188 | - | - | - | (2,082) | 31,106 |
| Provision for impairment of goodwill | 504,711 | - | - | - | 26,575 | 531,286 |
| Total | 2,759,830 | 639,499 | (214,993) | (61,169) | 52,886 | 3,176,053 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(26) Assets with use rights restricted
As at 30 June 2022, assets with use rights restricted were mainly as follows:
| Item | Ending balance | Opening balance |
| Cash at bank and on hand | ||
| Including: Cash at bank (Note 4(1)) | 12,852,645 | 28,767,516 |
| Other cash balances (Note 4(1)) | 849,514 | 443,893 |
| Statutory reserves with the Central Bank (Note 4(1)) | 412,248 | 419,718 |
| Deposits with banks and other financial institutions (Note 4(1)) | 1,000,000 | 1,000,000 |
| Total | 15,114,407 | 30,631,127 |
(27) Short-term borrowings
| Item | Ending balance | Opening balance |
| Unsecured borrowings | 2,436,834 | 1,260,780 |
| Guaranteed borrowings | 7,681,970 | 1,982,534 |
| Pledged borrowings | 539,878 | 2,138,309 |
| Total | 10,658,682 | 5,381,623 |
As at 30 June 2022, the annual interest rate range of short-term borrowings was 0.41% to
14.90% (31 December 2021: 0.41% to 9.75%).
(28) Notes payable
| Item | Ending balance | Opening balance |
| Bank acceptance notes | 29,331,809 | 32,752,007 |
(29) Accounts payable
| Item | Ending balance | Opening balance |
| Materials cost payable | 61,012,948 | 61,527,747 |
| Others | 4,520,785 | 4,455,812 |
| Total | 65,533,733 | 65,983,559 |
As at 30 June 2022, accounts payable with ageing over 1 year with a carrying amount of RMB1,055,032,000 (31 December 2021: RMB 1,271,088,000) were mainly unsettled accountspayable for materials.
(30) Contract liabilities
| Item | Ending balance | Opening balance |
| Advances for construction projects | 2,674,387 | 2,596,795 |
| Advances on sales and services | 21,657,207 | 21,319,800 |
| Total | 24,331,594 | 23,916,595 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(31) Employee benefits payable
| Item | Ending balance | Opening balance |
| Short-term employee benefits payable (a) | 5,318,615 | 7,430,595 |
| Others | 117,376 | 104,573 |
| Total | 5,435,991 | 7,535,168 |
(a) Short-term employee benefits
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Wages and salaries, bonus, allowances and subsidies | 6,949,838 | 13,300,921 | (15,369,473) | 4,881,286 |
| Staff welfare | 299,396 | 927,676 | (967,517) | 259,555 |
| Social security contributions | 67,268 | 938,408 | (944,777) | 60,899 |
| Including: Medical insurance | 65,663 | 902,786 | (908,378) | 60,071 |
| Work injury insurance | 664 | 21,045 | (21,220) | 489 |
| Maternity insurance | 941 | 14,577 | (15,179) | 339 |
| Housing funds | 23,079 | 314,083 | (314,119) | 23,043 |
| Labour union funds and employee education funds | 22,246 | 61,705 | (59,248) | 24,703 |
| Other short-term employee benefits | 68,768 | 356,554 | (356,193) | 69,129 |
| Sub-total | 7,430,595 | 15,899,347 | (18,011,327) | 5,318,615 |
(32) Taxes payable
| Item | Ending balance | Opening balance |
| Enterprise income tax payable | 2,578,726 | 2,972,040 |
| Unpaid VAT | 1,154,924 | 1,032,688 |
| Others | 718,040 | 1,399,539 |
| Total | 4,451,690 | 5,404,267 |
(33) Other payables
| Item | Ending balance | Opening balance |
| Other payables | 4,781,862 | 4,288,104 |
(a) Other payables are mainly restricted share repurchase obligation, deposit and security deposit
payable, reimbursed logistics expense, etc.
(b) As at 30 June 2022, other payables with ageing over 1 year with a carrying amount of RMB
1,457,701,000 (31 December 2021: RMB 1,288,937,000) were mainly those recognised forperforming equity incentive plan and deposit and security deposit payable, which were unsettledsince related projects were uncompleted.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(34) Current portion of non-current liabilities
| Item | Ending balance | Opening balance |
| Current portion of long-term borrowings | 26,695,122 | 28,087,037 |
| Current portion of lease liabilities | 837,332 | 860,503 |
| Total | 27,532,454 | 28,947,540 |
(35) Other current liabilities
| Item | Ending balance | Opening balance |
| Accrued sale rebates | 35,357,854 | 31,307,753 |
| Short-term financing bonds payable (a) | 4,015,610 | - |
| Others | 19,291,393 | 16,920,200 |
| Total | 58,664,857 | 48,227,953 |
(a) As at 30 June 2022, short-term financing bonds payable represented super short-term
financing bonds with a total face value of RMB 4,000,000,000 issued by the Company, with aterm of 180 days, and a coupon rate of 2.23%.
(36) Long-term borrowings
| Item | Ending balance | Opening balance |
| Mortgage borrowings (a) | 25,830,444 | 26,635,207 |
| Guaranteed borrowings (b) | 9,882,746 | 6,903,645 |
| Unsecured borrowings | 17,620,590 | 14,269,908 |
| Pledged borrowings | 7,716 | 12,297 |
| Total | 53,341,496 | 47,821,057 |
| Less: Current portion of mortgage borrowings | (25,830,444) | (26,626,623) |
| Current portion of guaranteed borrowings | (15,023) | (15,025) |
| Current portion of unsecured borrowings | (843,221) | (1,439,224) |
| Current portion of pledged borrowings | (6,434) | (6,165) |
| Total | 26,646,374 | 19,734,020 |
(a) As at 30 June 2022, bank mortgage borrowings were mainly mortgage borrowings with a cost
of EUR 3,684,357,000, equivalent to RMB 25,821,445,000 (31 December 2021: a cost of EUR3,686,857,000, equivalent to RMB 26,617,999,000) and were pledged by 81.04% equity ofKUKA Group, which was acquired by the subsidiary of the Company. Interest is paid on asemi-annual basis, and the borrowings are due in August 2022.
(b) As at 30 June 2022, bank guaranteed borrowings mainly included: (i) guaranteed borrowings
with a cost of EUR 271,000,000, equivalent to RMB 1,899,276,000 (31 December 2021: a costof EUR 271,000,000, equivalent to RMB 1,956,539,000) guaranteed by the Company, withinterest paid every 3 months, which will be due in April 2024; (ii) guaranteed borrowings witha cost of JPY 69,460,000,000, equivalent to RMB 3,412,987,000 (31 December 2021: a costof JPY 69,460,000,000, equivalent to RMB 3,849,126,000) guaranteed by the Company, withinterest paid on a monthly basis, which will be due in May 2024; (iii) guaranteed borrowingswith a cost of EUR 150,000,000, equivalent to RMB 1,051,260,000 (31 December 2021: a costof EUR 150,000,000, equivalent to RMB 1,082,955,000) guaranteed by the Company, withinterest paid on a monthly basis, which will be due in June 2025; and (iv) guaranteedborrowings with a cost of EUR 500,000,000, equivalent to RMB
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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 borrowings (Cont’d)
3,504,200,000 (31 December 2021: Nil) guaranteed by the Company, with interest paid every3 months, which will be due in May 2025.
(c) As at 30 June 2022, the annual interest rate range of long-term borrowings was 0.33% to 5.50%
(31 December 2021: 0.49% to 5.50%).
(37) Debentures payable
| Name of bond | Par value | Value date | Term | Amount issued | Nominal interest rate | Opening balance | Ending balance |
| USD bonds | 2,848,500 | 24 February 2022 | 5 years | 2,848,500 | 2.88% | - | 3,047,541 |
(a) The Group issued a 5-year USD corporate bond on 24 February 2022, with a cost of USD
450,000,000, equivalent to RMB 2,848,500,000. The fixed coupon rate was 2.88% and interestwas paid on a semi-annual basis, which was guaranteed by the Company.
(38) Lease liabilities
| Item | Ending balance | Opening balance |
| Lease liabilities | 2,384,449 | 2,394,055 |
| Less: Current portion of lease liabilities | (837,332) | (860,503) |
| 1,547,117 | 1,533,552 |
(39) Long-term employee benefits payable
| Item | Ending balance | Opening balance |
| Supplementary retirement benefits | 1,322,752 | 1,705,440 |
| Others | 113,171 | 119,576 |
| Total | 1,435,923 | 1,825,016 |
(40) Other non-current liabilities
Other non-current liabilities are mainly equity purchase payables.
(41) Share capital
| Item | Opening balance | Movements for the current period | Ending balance | |||
| Share-based payment incentive plan | Desterilisation | Repurchases and write-offs | Sub-total | |||
| RMB-denominated ordinary shares - | ||||||
| RMB-denominated ordinary shares subject to trading restriction | 156,539 | - | (4,156) | (2,762) | (6,918) | 149,621 |
| RMB-denominated ordinary shares not | 6,830,025 | 13,527 | 4,156 | - | 17,683 | 6,847,708 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
subject to tradingrestriction
| subject to trading restriction | ||||||
| Total | 6,986,564 | 13,527 | - | (2,762) | 10,765 | 6,997,329 |
(a) For the six months ended 30 June 2022, the share-based payment incentive plan increased the
share capital by 13,527,000 shares.
(42) Treasury stock
| Item | Opening balance | Movements for the current period | Ending balance | |
| Increase in the current period | Decrease in the current period | |||
| Treasury stock used for share-based payment incentive plan | 14,044,550 | 1,188,389 | (587,851) | 14,645,088 |
| Total | 14,044,550 | 1,188,389 | (587,851) | 14,645,088 |
For the six months ended 30 June 2022, the Group’s repurchased treasury stock amounted toRMB 1,188,389,000. As at 30 June 2022, treasury stock mainly comprised treasury stock ofRMB 10,851,033,000 used for share-based payment incentive plan and treasury stockrecognised by share-based payment incentive plan amounting to RMB 3,794,055,000 that hasnot met unlock condition, amounting to RMB 14,645,088,000 in total.
(43) Capital surplus
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Share premium (a) | 14,944,914 | 896,560 | (425,501) | 15,415,973 |
| Share-based payment incentive plan (b) | 2,161,354 | 799,795 | (234,790) | 2,726,359 |
| Others | 3,410,662 | 17,863 | (464,222) | 2,964,303 |
| Total | 20,516,930 | 1,714,218 | (1,124,513) | 21,106,635 |
(a) The increase in share premium arose from the exercise of share options with the amount of
approximately RMB 818,573,000, the unlocking of restricted shares with the amount ofapproximately RMB 77,987,000; the decrease in share premium mainly arose from therepurchase of restricted shares.
(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 with theamount of approximately RMB 799,795,000, while the decrease arose from the transfer ofapproximately RMB 234,790,000 to share premium due to exercise of share-based paymentincentive plan.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(44) Other comprehensive income
| Item | Other comprehensive income in the balance sheet | Other comprehensive income in the income statement | |||||||
| Opening balance | Attributable to the parent company after tax | Other comprehensive income transferred to retained earnings | Ending balance | Amount arising before income tax in the current period | Less: Reclassification of previous other comprehensive income to current profit or loss | Less: Income tax expenses | Attributable to the parent company after tax | Attributable to minority shareholders after tax | |
| Other comprehensive income items which will not be reclassified to profit or loss | |||||||||
| Changes arising from remeasurement of defined benefit plan | 12,038 | 183,574 | - | 195,612 | 248,842 | - | (56,244) | 183,574 | 9,024 |
| Changes in fair value of investments in other equity instruments | (1,949) | 1,689 | 1,351 | 1,091 | 1,689 | - | - | 1,689 | - |
| 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 | (89,213) | 47 | - | (89,166) | 47 | - | - | 47 | - |
| Effective portion of gains or losses on hedging instruments in a cash flow hedge | 304,344 | (613,659) | - | (309,315) | (420,701) | (359,992) | 97,340 | (613,659) | (69,694) |
| Differences on translation of foreign currency financial statements | (1,984,168) | 899,069 | - | (1,085,099) | 895,161 | - | - | 899,069 | (3,908) |
| Total | (1,758,948) | 470,720 | 1,351 | (1,286,877) | 725,038 | (359,992) | 41,096 | 470,720 | (64,578) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(45) Surplus reserve
| Item | Opening balance | Increase in the current period | Decrease in the current period | Ending balance |
| Statutory surplus reserve | 9,449,901 | - | - | 9,449,901 |
(46) Undistributed profits
| Item | Current period | Same period of prior year |
| Undistributed profits at the beginning of the period | 102,982,763 | 87,074,453 |
| Add: Net profit attributable to owners of the parent company for the current period | 15,995,496 | 15,009,046 |
| Others | 33,631 | - |
| Less: Ordinary share dividends payable (a) | (11,671,286) | (11,061,680) |
| Undistributed profits at the end of the period | 107,340,604 | 91,021,819 |
(a) Ordinary share dividends distributed in the current year
In accordance with the resolution at the Board of Shareholders’ meeting, dated 20 May 2022,the Company distributed a cash dividend to the shareholders at RMB 1.70 per share, amountingto approximately RMB 11,677,509,000 calculated by 6,865,511,000 issued shares less thoserepurchased; 2,767,000 repurchased incentive shares in the restricted shares incentive planwere written off (Note 4(41)), and cash dividend amounting to RMB 6,223,000 was cancelled.The actual cash dividend distributed in the current year amounted to approximately RMB11,671,286,000.
(47) Revenue and cost of sales
| Item | Current period | Same period of prior year |
| Revenue from main operations | 167,496,125 | 157,035,631 |
| Revenue from other operations | 15,164,884 | 16,773,934 |
| Sub-total | 182,661,009 | 173,809,565 |
| Item | Current period | Same period of prior year |
| Cost of sales from main operations | 127,456,627 | 121,004,423 |
| Cost of sales from other operations | 12,967,541 | 14,723,023 |
| Sub-total | 140,424,168 | 135,727,446 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(47) Revenue and cost of sales (Cont’d)
(a) Revenue and cost of sales from main operations
| Product or business category | Current period | Same period of prior year | ||
| Revenue | Cost of sales | Revenue | Cost of sales | |
| HVAC | 83,236,383 | 65,712,490 | 76,408,470 | 61,335,227 |
| Consumer appliances | 66,334,685 | 46,958,140 | 64,964,319 | 47,164,339 |
| Robotics and automation system | 13,259,483 | 10,447,185 | 12,589,884 | 9,729,927 |
| Others | 4,665,574 | 4,338,812 | 3,072,958 | 2,774,930 |
| Sub-total | 167,496,125 | 127,456,627 | 157,035,631 | 121,004,423 |
For the six months ended 30 June 2022, cost of sales from main operations was mainly materialcosts and labour costs, which accounted for over 80% of total cost of sales from main operations(for the six months ended 30 June 2021: over 80%)。
(b) Revenue and cost of sales from other operations
| Item | Current period | Same period of prior year | ||
| Revenue | Cost of sales | Revenue | Cost of sales | |
| Revenue from sales of materials | 13,451,028 | 12,600,574 | 15,044,049 | 14,407,177 |
| Others | 1,713,856 | 366,967 | 1,729,885 | 315,846 |
| Sub-total | 15,164,884 | 12,967,541 | 16,773,934 | 14,723,023 |
For the six months ended 30 June 2022, cost of sales from other operations was mainly materialcosts, which accounted for over 80% of total cost of sales from other operations (for the sixmonths ended 30 June 2021: over 80%).
(c) For the six months ended 30 June 2022, among the Group’s revenue from main operations, the
amount recognised at a point in time accounted for above 90% and the amount recognisedwithin a certain period of time mainly included revenue from main operations of robotics andautomation system segment. The Group’s revenue from other operations was recognised at apoint in time.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(48) Interest income and interest costs
The Group’s interest income and costs arising from the normal course of financial business arepresented as follows:
| Item | Current period | Same period of prior year |
| Interest income from loans and advances | 910,289 | 857,905 |
| Including: Interest income from loans and advances to corporations and individuals | 873,969 | 809,354 |
| Interest income from note discounting | 36,320 | 48,551 |
| Interest income from deposits with banks, other financial institutions and the Central Bank | 91,671 | 179,269 |
| Interest income | 1,001,960 | 1,037,174 |
| Interest costs | (33,643) | (41,149) |
(49) Taxes and surcharges
| Item | Current period | Same period of prior year |
| City maintenance and construction tax | 288,461 | 336,013 |
| Educational surcharge | 212,661 | 248,069 |
| Others | 297,817 | 249,075 |
| Total | 798,939 | 833,157 |
(50) Selling and distribution expenses
| Item | Current period | Same period of prior year |
| Selling and distribution expenses | 14,698,373 | 13,950,077 |
For the six months ended 30 June 2022, selling and distribution expenses were mainlymaintenance expenses, advertisement and promotion fee, employee benefits, E-commerceservice fee, storage service fee and property management expenses, which accounted for over70% of total selling and distribution expenses (for the six months ended 30 June 2021: over70%).
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(51) General and administrative expenses
| Item | Current period | Same period of prior year |
| General and administrative expenses | 4,951,069 | 4,251,893 |
For the six months ended 30 June 2022, general and administrative expenses were mainlyemployee benefits, depreciation and amortisation expenses, technical maintenance expenses,administrative office expenses, storage service fee and property management expenses whichaccounted for over 70% of total general and administrative expenses (for the six months ended30 June 2021: over 70%).
(52) R&D expenses
| Item | Current period | Same period of prior year |
| R&D expenses | 5,865,033 | 5,314,637 |
For the six months ended 30 June 2022, R&D expenses were mainly employee benefits,depreciation and amortisation expenses, trial products and material inputs expenses, whichaccounted for over 80% of total R&D expenses (for the six months ended 30 June 2021: over80%).
(53) Financial income
The Group’s financial income, other than those arising from financial business (Note 4(48)), ispresented as follows:
| Item | Current period | Same period of prior year |
| Interest expenses | (867,954) | (681,864) |
| Less: Interest income | 2,764,267 | 2,501,014 |
| Add: Exchange gains or losses | (71,019) | 616,849 |
| Add: Others | (89,876) | (114,273) |
| Total | 1,735,418 | 2,321,726 |
(54) Asset impairment losses
| Item | Current period | Same period of prior year |
| Losses on decline in the value of inventories (Note 4(10)) | 200,660 | 179,042 |
| Impairment losses on contract assets (Note 4(8)) | 23,619 | (812) |
| Impairment losses on intangible assets (Note 4(20)) | 6,400 | - |
| Total | 230,679 | 178,230 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(55) Credit impairment losses
| Item | Current period | Same period of prior year |
| Losses on bad debts of accounts receivable (Note 4(4)) | 95,157 | 50,794 |
| Losses on bad debts of other receivables (Note 4(5)) | (8,878) | 20,450 |
| Impairment losses on notes receivable (Note 4(3)) | 60,481 | 6,700 |
| Impairment losses on loans and advances (Note 4(9)) | 38,619 | 67,446 |
| Impairment losses on long-term receivables (Note 4(14)) | 7,512 | 9,070 |
| Total | 192,891 | 154,460 |
(56) Gains/(Losses) on changes in fair value
| Item | Current period | Same period of prior year |
| Derivative financial assets and liabilities | (62,667) | (86,610) |
| Other financial assets and liabilities | (687,075) | (715,334) |
| Total | (749,742) | (801,944) |
(57) Investment income
| Item | Current period | Same period of prior year |
| Investment income from holding of financial assets held for trading | 107,261 | 505,877 |
| Investment income from disposal of financial assets held for trading | - | 137,681 |
| Investment income from disposal of derivative financial assets and liabilities | 257,463 | 222,211 |
| Investment income from associates and joint ventures | 263,014 | 309,013 |
| Others | (19,891) | (93,886) |
| Total | 607,847 | 1,080,896 |
There is no significant restriction on repatriation of investment income of the Group.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(58) Losses on disposal of assets
| Item | Current period | Same period of prior year |
| Gains on disposal of non-current assets | 53,776 | 2,388 |
| Losses on disposal of non-current assets | (34,814) | (20,221) |
| Total | 18,962 | (17,833) |
(59) Other income
| Item | Current period | Same period of prior year | Asset related/ Income related |
| Special subsidy, etc. | 644,525 | 578,265 | Income related |
(60) Income tax expenses
| Item | Current period | Same period of prior year |
| Current income tax calculated based on tax law and related regulations | 4,089,024 | 2,677,644 |
| Deferred income tax expenses | (1,378,473) | (269,705) |
| Total | 2,710,551 | 2,407,939 |
The reconciliation from income tax calculated based on the applicable tax rates and total profitpresented in the consolidated income statement to the income tax expenses is listed below:
| Item | Current period | Same period of prior year |
| Total profit | 18,832,948 | 17,624,384 |
| Income tax calculated at tax rate of 25% | 4,708,237 | 4,406,096 |
| Effect of different tax rates applicable to subsidiaries | (1,493,631) | (1,462,481) |
| Effect of income tax annual filing for prior periods | (166,848) | 40,903 |
| Income not subject to tax | (163,217) | (149,474) |
| Costs, expenses and losses not deductible for tax purposes | 276,483 | 193,728 |
| Utilisation of previous temporary differences or deductible losses for which no deferred tax assets were recognised in prior periods | (43,536) | (57,946) |
| Others | (406,937) | (562,887) |
| Income tax expenses | 2,710,551 | 2,407,939 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(61) 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 to ordinaryshareholders of the Company by the weighted average number of outstanding ordinary shares:
| Item | Unit | Current period | Same period of prior year |
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 15,995,496 | 15,009,046 |
| Less: Dividends payable to restricted shares | RMB’000 | (94,081) | (104,901) |
| Consolidated net profit attributable to ordinary shareholders of the parent company (excluding dividends payable to restricted shares) | RMB’000 | 15,901,415 | 14,904,145 |
| Weighted average number of outstanding ordinary shares | Thousands shares | 6,794,724 | 6,878,509 |
| Basic earnings per share | RMB Yuan/share | 2.34 | 2.17 |
(b) Diluted earnings per share are calculated by dividing consolidated net profit attributable to
ordinary shareholders of the parent company by the diluted weighted average number ofoutstanding ordinary shares:
| Item | Unit | Current period | Same period of prior year |
| Consolidated net profit attributable to ordinary shareholders of the parent company | RMB’000 | 15,995,496 | 15,009,046 |
| Weighted average number of outstanding ordinary shares | Thousands shares | 6,794,724 | 6,878,509 |
| Weighted average number of ordinary shares increased from share options | Thousands shares | 35,505 | 72,495 |
| Weighted average number of diluted outstanding ordinary shares | Thousands shares | 6,830,229 | 6,951,004 |
| Diluted earnings per share | RMB Yuan/share | 2.34 | 2.16 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Notes to the cash flow statement
(a) Cash received relating to other operating activities
| Item | Current period | Same period of prior year |
| Non-operating income | 148,065 | 145,631 |
| Other income | 929,267 | 747,933 |
| Other operating income | 1,637,751 | 1,686,486 |
| Financial interest income | 317,399 | 508,692 |
| Others | 322,410 | 706,646 |
| Total | 3,354,892 | 3,795,388 |
(b) Cash paid relating to other operating activities
| Item | Current period | Same period of prior year |
| General and administrative expenses and R&D expenses (excluding employee benefits and taxes and surcharges) | 4,113,948 | 4,401,999 |
| Selling and distribution expenses (excluding employee benefits and taxes and surcharges) | 10,355,366 | 11,330,954 |
| Others | 521,959 | 255,248 |
| Total | 14,991,273 | 15,988,201 |
(c) Supplementary information to the cash flow statement
Reconciliation of net profit to cash flow from operating activities is as follows:
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(62) Notes to the cash flow statement (Cont’d)
(c) Supplementary information to the cash flow statement (Cont’d)
| Supplementary information | Current period | Same period of prior year |
| 1) Reconciliation of net profit to cash flows from operating activities: | ||
| Net profit | 16,122,397 | 15,216,445 |
| Add: Asset impairment losses | 230,679 | 178,230 |
| Credit impairment losses | 192,891 | 154,460 |
| Depreciation and amortisation | 3,255,456 | 2,954,858 |
| (Gains)/Losses on disposal of assets | (18,962) | 17,833 |
| Losses on changes in fair value | 749,742 | 801,944 |
| Financial expenses | (1,557,613) | (1,046,382) |
| Investment income | (607,847) | (1,080,896) |
| Decrease in deferred tax assets | (892,692) | (289,035) |
| Increase in deferred tax liabilities | (353,888) | (202,799) |
| Decrease in inventories | 8,541,659 | (3,582,020) |
| Decrease in operating receivables | (5,945,656) | (8,694,721) |
| Increase in operating payables | 843,457 | 14,935,305 |
| Share-based payments and others | 835,087 | 813,188 |
| Net cash flows from operating activities | 21,394,710 | 20,176,410 |
| 2) Net increase/(decrease) in cash and cash equivalents | ||
| Cash and cash equivalents at the end of the period | 61,310,727 | 36,068,617 |
| Less: Cash and cash equivalents at the beginning of the period | (40,550,039) | (23,548,508) |
| Net increase in cash and cash equivalents | 20,760,688 | 12,520,109 |
(d) Composition of cash and cash equivalents
| Item | Current period | Same period of prior year |
| Cash on hand | 2,447 | 2,811 |
| Cash at bank that can be readily drawn on demand | 32,996,806 | 18,962,105 |
| Other cash balances that can be readily drawn on demand | - | 355,727 |
| Deposits with the Central Bank that can be readily drawn on demand | 154,409 | 104,174 |
| Deposits with banks and other financial institutions | 28,157,065 | 16,643,800 |
| Cash and cash equivalents at the end of the period | 61,310,727 | 36,068,617 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies
| Item | 30 June 2022 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 1,407,784 | 6.7114 | 9,448,202 |
| JPY | 16,931,813 | 0.0491 | 831,352 |
| HKD | 1,643,162 | 0.8552 | 1,405,232 |
| EUR | 1,017,446 | 7.0084 | 7,130,669 |
| BRL | 43,383 | 1.2813 | 55,587 |
| VND | 670,113,333 | 0.0003 | 201,034 |
| Other currencies | Not applicable | Not applicable | 1,552,754 |
| Sub-total | 20,624,830 | ||
| Accounts receivable | |||
| USD | 1,485,895 | 6.7114 | 9,972,436 |
| JPY | 16,253,544 | 0.0491 | 798,049 |
| HKD | 58,095 | 0.8552 | 49,683 |
| EUR | 540,668 | 7.0084 | 3,789,218 |
| BRL | 766,824 | 1.2813 | 982,532 |
| VND | 1,466,270,000 | 0.0003 | 439,881 |
| Other currencies | Not applicable | Not applicable | 2,612,547 |
| Sub-total | 18,644,346 | ||
| Other receivables | |||
| USD | 45,393 | 6.7114 | 304,651 |
| JPY | 1,339,511 | 0.0491 | 65,770 |
| HKD | 1,853 | 0.8552 | 1,585 |
| EUR | 44,872 | 7.0084 | 314,481 |
| BRL | 39,201 | 1.2813 | 50,228 |
| Other currencies | Not applicable | Not applicable | 376,811 |
| Sub-total | 1,113,526 | ||
| Total | 40,382,702 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 30 June 2022 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 204,944 | 6.7114 | 1,375,461 |
| EUR | 237,923 | 7.0084 | 1,667,460 |
| BRL | 373,126 | 1.2813 | 478,086 |
| Other currencies | Not applicable | Not applicable | 370,794 |
| Sub-total | 3,891,801 | ||
| Accounts payable | |||
| USD | 401,381 | 6.7114 | 2,693,828 |
| JPY | 4,986,273 | 0.0491 | 244,826 |
| HKD | 17,975 | 0.8552 | 15,372 |
| EUR | 231,262 | 7.0084 | 1,620,777 |
| BRL | 248,349 | 1.2813 | 318,210 |
| Other currencies | Not applicable | Not applicable | 1,778,059 |
| Sub-total | 6,671,072 | ||
| Other payables | |||
| USD | 4,847 | 6.7114 | 32,530 |
| JPY | 8,462,383 | 0.0491 | 415,503 |
| HKD | 1,987 | 0.8552 | 1,699 |
| EUR | 1,399 | 7.0084 | 9,805 |
| Other currencies | Not applicable | Not applicable | 156,860 |
| Sub-total | 616,397 | ||
| Current portion of non-current liabilities | |||
| EUR | 3,821,286 | 7.0084 | 26,781,101 |
| Other currencies | Not applicable | Not applicable | 110,103 |
| Sub-total | 26,891,204 | ||
| Long-term borrowings | |||
| USD | 50,209 | 6.7114 | 336,974 |
| EUR | 921,000 | 7.0084 | 6,454,736 |
| JPY | 69,460,000 | 0.0491 | 3,412,987 |
| Other currencies | Not applicable | Not applicable | 4,005 |
| Sub-total | 10,208,702 | ||
| Debentures payable | |||
| USD | 454,084 | 6.7114 | 3,047,541 |
| Sub-total | 3,047,541 | ||
| Lease liabilities | |||
| EUR | 94,957 | 7.0084 | 665,496 |
| JPY | 1,220,489 | 0.0491 | 59,926 |
| Other currencies | Not applicable | Not applicable | 77,631 |
| Sub-total | 803,053 | ||
| Total | 52,129,770 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2021 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Cash at bank and on hand | |||
| USD | 602,212 | 6.3757 | 3,839,525 |
| JPY | 12,142,726 | 0.0554 | 672,707 |
| HKD | 1,630,997 | 0.8176 | 1,333,503 |
| EUR | 148,197 | 7.2197 | 1,069,937 |
| BRL | 289,406 | 1.1425 | 330,646 |
| VND | 448,073,333 | 0.0003 | 134,422 |
| Other currencies | Not applicable | Not applicable | 1,452,778 |
| Sub-total | 8,833,518 | ||
| Accounts receivable | |||
| USD | 1,060,053 | 6.3757 | 6,758,578 |
| JPY | 11,614,937 | 0.0554 | 643,468 |
| HKD | 23,316 | 0.8176 | 19,063 |
| EUR | 394,600 | 7.2197 | 2,848,894 |
| BRL | 635,016 | 1.1425 | 725,506 |
| VND | 1,722,254,244 | 0.0003 | 516,676 |
| Other currencies | Not applicable | Not applicable | 2,475,054 |
| Sub-total | 13,987,239 | ||
| Other receivables | |||
| USD | 175,560 | 6.3757 | 1,119,315 |
| JPY | 1,379,057 | 0.0554 | 76,400 |
| HKD | 1,901 | 0.8176 | 1,555 |
| EUR | 43,768 | 7.2197 | 315,990 |
| BRL | 67,455 | 1.1425 | 77,067 |
| Other currencies | Not applicable | Not applicable | 328,047 |
| Sub-total | 1,918,374 | ||
| Total | 24,739,131 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
4 Notes to the consolidated financial statements (Cont’d)
(63) Monetary items denominated in foreign currencies (Cont’d)
| Item | 31 December 2021 | ||
| Foreign currency balance | Exchange rate | RMB balance | |
| Short-term borrowings | |||
| USD | 200,000 | 6.3757 | 1,275,140 |
| EUR | 149,976 | 7.2197 | 1,082,782 |
| Other currencies | Not applicable | Not applicable | 185,393 |
| Sub-total | 2,543,315 | ||
| Accounts payable | |||
| USD | 330,786 | 6.3757 | 2,108,991 |
| JPY | 5,227,130 | 0.0554 | 289,583 |
| HKD | 12,987 | 0.8176 | 10,618 |
| EUR | 219,900 | 7.2197 | 1,587,612 |
| BRL | 370,864 | 1.1425 | 423,712 |
| Other currencies | Not applicable | Not applicable | 1,845,979 |
| Sub-total | 6,266,495 | ||
| Other payables | |||
| USD | 7,124 | 6.3757 | 45,423 |
| JPY | 7,415,640 | 0.0554 | 410,826 |
| HKD | 10,577 | 0.8176 | 8,648 |
| EUR | 2,410 | 7.2197 | 17,401 |
| Other currencies | Not applicable | Not applicable | 127,366 |
| Sub-total | 609,664 | ||
| Current portion of non-current liabilities | |||
| EUR | 3,824,888 | 7.2197 | 27,614,541 |
| USD | 89,993 | 6.3757 | 573,767 |
| Other currencies | Not applicable | Not applicable | 115,468 |
| Sub-total | 28,303,776 | ||
| Long-term borrowings | |||
| USD | 49,910 | 6.3757 | 318,208 |
| EUR | 421,000 | 7.2197 | 3,039,494 |
| JPY | 69,460,000 | 0.0554 | 3,849,126 |
| Other currencies | Not applicable | Not applicable | 17,292 |
| Sub-total | 7,224,120 | ||
| Lease liabilities | |||
| EUR | 95,154 | 7.2197 | 686,986 |
| JPY | 1,965,358 | 0.0554 | 108,881 |
| Other currencies | Not applicable | Not applicable | 45,337 |
| Sub-total | 841,204 | ||
| Total | 45,788,574 | ||
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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
The Group acquired Midea Venture Capital Management Co., Ltd. and its subsidiaries (includingstructured entities) in January 2022, Wuhan TTium Motor Technology Co., Ltd. and itssubsidiaries in April 2022 and Shaanxi Construction Investment Co., Ltd. in May 2022.
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's wholly-owned subsidiary Anhui Welling Auto Parts Corporation Limitedestablished Anqing Welling Auto Parts Corporation Limited in January 2022, holding 100% of theshares.
Annto Logistics Supply Chain Technology Co., Ltd. and Foshan Annto Logistics Technology Co.,Ltd., the Company's subsidiaries, established Tianjin Antu Supply Chain Management Co., Ltd.in January 2022, holding 99% and 1% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Guangdong Midea Smart Home Retail Co., Ltd. inJanuary 2022, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Guangdong Midea Smart Home Technology Co., Ltd. inJanuary 2022, holding 95% and 5% of the shares respectively.
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Wuhu Yubian Intelligent Technology Co., Ltd. inFebruary 2022, holding 95% and 5% of the shares respectively.
Midea International Corporation Company Limited, a wholly-owned subsidiary of the Company,established MC Innovation Center Co., Ltd. in February 2022, holding 100% of the shares.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart Home TechnologyCo., Ltd., wholly-owned subsidiaries of the Company, established Wuhu Midea Smart Home Co.,Ltd., Haikou Midea Smart Home Appliances Sales Co., Ltd., Hangzhou Midea Smart Home Co.,Ltd., Foshan Midea Smart Home Co., Ltd., Lanzhou Midea Smart Home Appliances Sales Co.,Ltd., Tianjin Midea Smart Home Co., Ltd., Hefei Midea Smart Home Co., Ltd., Changsha MideaSmart Home Co., Ltd., Guangzhou Midea Smart Home Co., Ltd., Wuxi Midea Smart Home Co.,Ltd., Kunming Midea Smart Home Co., Ltd., Ji’nan Midea Smart Home Co., Ltd., Chengdu MideaSmart Home Co., Ltd., Nanyang Midea Smart Home Co., Ltd., Xi’an Midea Smart HomeAppliances Sales Co., Ltd., Beijing Midea Smart Home Co., Ltd., Guizhou Midea Smart HomeCo., Ltd., Linyi Midea Smart Home Appliances Sales Co., Ltd., Nanning Midea Smart HomeAppliances Sales Co., Ltd., Wuhan Midea Smart Home Co., Ltd. and Xuzhou Midea Smart HomeCo., Ltd. in March 2022, holding 95% and 5% of the shares respectively.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
5 Changes of consolidation scope (Cont’d)
(2) Changes of consolidation scope due to other reasons (Cont’d)
(a) Increase of consolidation scope (Cont’d)
The Company and Foshan Midea Air-conditioning Industry Investment Co., Ltd., a wholly-ownedsubsidiary of the Company, established Guizhou Midea Digi-Port Technology Co., Ltd. in April2022, holding 95% and 5% of the shares respectively.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart Home TechnologyCo., Ltd., wholly-owned subsidiaries of the Company, established Shijiazhuang Midea SmartHome Co., Ltd., Nanjing Midea Smart Home Co., Ltd., Fuzhou Midea Smart Home Co., Ltd.,Nanchang Midea Smart Home Co., Ltd., Urumchi Midea Smart Home Co., Ltd., Chongqing MideaSmart Home Co., Ltd. and Ningbo Midea Smart Home Co., Ltd. in April 2022, holding 95% and5% of the shares respectively.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart Home TechnologyCo., Ltd., wholly-owned subsidiaries of the Company, established Shenzhen Midea Smart HomeAppliances Sales Co., Ltd. and Changchun Midea Smart Home Appliances Sales Co., Ltd. in May2022, holding 95% and 5% of the shares respectively.
Midea Electrics Netherlands B.V., a wholly-owned subsidiary of the Company, established MideaElectrics France in June 2022, holding 100% of the shares.
Guangdong Midea Smart Home Retail Co., Ltd. and Guangdong Midea Smart Home TechnologyCo., Ltd., wholly-owned subsidiaries of the Company, established Zhengzhou Midea Smart HomeCo., Ltd. and Taiyuan Midea Smart Home Co., Ltd. in June 2022, holding 95% and 5% of theshares respectively.
Kuka Deutschland GmbH, a subsidiary of the Company, established Kuka TR Robot TeknolojileriSanayi Ticaret Anonim Sirketi in June 2022, holding 100% of the shares.
(b) Decrease of consolidation scope
Decrease of consolidation scope in the current period mainly includes deregistration of subsidiaries.Details are as follows:
| Name of entity | Disposal method of the equity | Disposal time-point of the equity |
| Shanghai Guifu Information Technology Co., Ltd. | Deregistration | January 2022 |
| Shenzhen Midea Financial Leasing Co., Ltd. | Deregistration | May 2022 |
| Wuhan Hiconics Electric Drive Technology Co., Ltd. | Change of equity | March 2022 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 | 93% | 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% | 0% | Establishment |
| Midea Electric Trading (Singapore) Co., Pte. Ltd. | Singapore | Singapore | Export trade | - | 100% | Establishment |
| 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 | 0% | 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% | 0% | Establishment |
| Wuhu Midea Annto Logistics Co., Ltd. | Wuhu, PRC | Wuhu, PRC | Logistics | - | 76% | Establishment |
| Midea Innovation Investment Co., Ltd. | Shenzhen, PRC | Shenzhen, PRC | Investment holding | 85% | 15% | Establishment |
| Midea Group (Shanghai) Co. Ltd. | Shanghai, PRC | Shanghai, PRC | Manufacture and sales of household appliances | 90% | 10% | 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 Investment Co., Ltd. | Hainan, PRC | Hainan, PRC | Investment | 90% | 10% | Establishment |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
6 Interests in other entities (Cont’d)
(2) Interests in associates and joint ventures
The Group’s associates and joint ventures have no significant influence on the Group and aresummarised as follows:
| Item | Current period | Same period of prior year |
| Aggregated carrying amount of investments | 3,769,304 | 3,016,023 |
| Aggregate of the following items in proportion | ||
| Net profit (i) | 263,014 | 309,013 |
| Other comprehensive income (i) | 47 | 24,624 |
| Total comprehensive income | 263,061 | 333,637 |
(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 inassociates and the unification of accounting policies adopted by the associates to thoseadopted by the Company.
(3) Structured entities not included in the consolidation scope
The Group had no significant structured entities not included in the consolidation scope.
7 Segment information
The reportable segments of the Group are the business units that provide different products orservices, 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 segments andto 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 based on negotiation by both parties with referenceto selling prices for third parties.
The assets are allocated based on the operations of the segments and the physical locations ofthe assets. The liabilities are allocated based on the operations of the segments. Expensesindirectly attributable to the segments are allocated based on the proportion of each segment’srevenue.
Operating expenses include cost of sales, interest costs, fee and commission expenses, taxesand surcharges, selling and distribution expenses, general and administrative expenses, R&Dexpenses and financial expenses.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 six months ended 30 June 2022 is as follows:
| Item | Current period | |||||
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated | Offsetting | Total | |
| Revenue from external customers | 93,948,227 | 70,340,259 | 13,426,372 | 5,948,541 | - | 183,663,399 |
| Inter-segment revenue | 1,657,240 | 370,055 | 190,159 | 3,832,595 | (6,050,049) | - |
| Operating expenses | (86,626,933) | (62,098,046) | (13,412,943) | (8,868,417) | 5,969,014 | (165,037,325) |
| Segment profit | 8,978,534 | 8,612,268 | 203,588 | 912,719 | (81,035) | 18,626,074 |
| Other profit or loss | 206,874 | |||||
| Total profit | 18,832,948 | |||||
| Total assets | 179,930,301 | 158,277,514 | 35,267,424 | 210,934,435 | (171,305,529) | 413,104,145 |
| Total liabilities | 127,693,219 | 115,379,530 | 25,961,405 | 203,275,449 | (199,603,928) | 272,705,675 |
| Long-term equity investments in associates and joint ventures | 276,107 | 115,248 | 36,620 | 3,341,329 | - | 3,769,304 |
| Investment income from associates and joint ventures | 92,873 | (2,111) | 665 | 171,587 | - | 263,014 |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 2,338,948 | 1,837,378 | 386,462 | 518,570 | - | 5,081,358 |
| Losses on/(Reversal of) asset impairment | 114,138 | 46,838 | 69,703 | - | - | 230,679 |
| Losses on/(Reversal of) credit impairment | 88,037 | 53,919 | (1,980) | 95,022 | (42,107) | 192,891 |
| Depreciation of right-of-use assets | 51,085 | 63,381 | 118,900 | 298,677 | - | 532,043 |
| Depreciation and amortisation expenses | 1,114,427 | 957,254 | 519,771 | 131,961 | - | 2,723,413 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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 six months ended 30 June 2021 is as follows:
| Item | Same period of prior year | |||||
| Heating & ventilation, as well as air-conditioner | Consumer appliances | Robotics and automation system | Other segments and unallocated amount | Offsetting | Total | |
| Revenue from external customers | 89,094,203 | 68,877,276 | 12,627,376 | 4,248,040 | - | 174,846,895 |
| Inter-segment revenue | 1,585,955 | 338,135 | 91,109 | 3,800,787 | (5,815,986) | - |
| Operating expenses | (82,720,464) | (61,540,893) | (12,476,531) | (6,806,929) | 5,744,784 | (157,800,033) |
| Segment profit | 7,959,694 | 7,674,518 | 241,954 | 1,241,898 | (71,202) | 17,046,862 |
| Other profit or loss | 577,522 | |||||
| Total profit | 17,624,384 | |||||
| Total assets | 164,823,833 | 139,287,931 | 34,823,438 | 191,395,213 | (150,119,213) | 380,211,202 |
| Total liabilities | 117,342,017 | 107,014,609 | 24,510,854 | 182,432,488 | (174,543,552) | 256,756,416 |
| Long-term equity investments in associates and joint ventures | 247,711 | 128,357 | 24,380 | 2,615,575 | - | 3,016,023 |
| Investment income from associates and joint ventures | 110,218 | 5,494 | (288) | 193,589 | - | 309,013 |
| Increase in non-current assets (excluding long-term equity investments, financial assets, goodwill and deferred tax assets) | 1,414,789 | 896,323 | 374,733 | 4,349,352 | - | 7,035,197 |
| Losses on/(Reversal of) asset impairment | 70,592 | 89,860 | 17,778 | - | - | 178,230 |
| Losses on/(Reversal of) credit impairment | (61,249) | (17,671) | 87,584 | 181,396 | (35,600) | 154,460 |
| Depreciation of right-of-use assets | 45,671 | 41,654 | 130,446 | 184,604 | - | 402,375 |
| Depreciation and amortisation expenses | 977,772 | 803,712 | 524,378 | 246,621 | - | 2,552,483 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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 equity investments,financial assets, goodwill and deferred tax assets located domestically and in foreign countriesor geographical areas (including Germany, Japan, Hong Kong, Macau, Singapore, Brazil, etc.)are as follows:
| Revenue from external customers | Current period | Same period of prior year |
| Domestic | 105,824,857 | 100,887,459 |
| In other countries/geographical areas | 77,838,542 | 73,959,436 |
| Total | 183,663,399 | 174,846,895 |
| Total non-current assets | Current period | Same period of prior year |
| Domestic | 32,732,170 | 39,689,984 |
| In other countries/geographical areas | 16,821,780 | 17,838,149 |
| Total | 49,553,950 | 57,528,133 |
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
| Name of the parent company | Registered capital |
| Midea Holding Co., Ltd. | 330,000 |
(c) The percentages of shareholding and voting rights in the Company held by the parent company
| Name of the parent company | At the end of the period | At the beginning of the period | ||||
| Shareholding (%) | Voting rights (%) | Shareholding (%) | Voting rights (%) | |||
| Direct | Indirect | Direct | Indirect | |||
| Midea Holding Co., Ltd. | 31.00% | - | 31.00% | 31.05% | - | 31.05% |
(2) Information of the Company's subsidiaries
Please refer to Note 6(1) for the information of the Company’s main subsidiaries.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
9 Related parties and significant related party transactions (Cont’d)
(3) Information of other related parties
| Name of other related parties | Relationship |
| Guangdong Infore Material-Tech Co., Ltd. | Controlled by direct relatives of the Company’s ultimate controlling shareholder |
| Orinko New Material Co., Ltd. | Controlled by direct relatives of the Company’s ultimate controlling shareholder |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Controlled by the Company’s ultimate controlling shareholder |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Associate of the Company |
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | Associate of the Company |
(4) Information of related party transactions
The following primary related party transactions are conducted in accordance with normalcommercial terms at agreed price by reference to the market price.
(a) Purchase of goods:
| Related parties | Content of related party transactions | Current period | Same period of prior year |
| Orinko New Material Co., Ltd. | Purchase of goods | 697,804 | 671,628 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | Purchase of goods | 161,191 | 180,676 |
| Guangdong Wellkey Electrician Material Co., Ltd. | Purchase of goods | 527,342 | |
| Anhui Wellkey Electrician Material Co., Ltd. | Purchase of goods | 279,685 | |
| Total | 858,995 | 1,659,331 |
As at 30 June 2022, Guangdong Wellkey Electrician Material Co., Ltd. and Anhui WellkeyElectrician Material Co., Ltd. were not related parties of the Company due to changes in equityrelationship.
(b) Sales of goods:
| Related parties | Content of related party transactions | Current period | Same period of prior year |
| Guangdong Ruizhu Intelligent Technology Co., Ltd. | Sales of goods | 74,357 | 93,907 |
(c) Investment income and interest income:
| Related parties | Current period | Same period of prior year |
| Guangdong Shunde Rural Commercial Bank Co., Ltd. | 159,386 | 100,448 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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:
| Item | Related parties | Ending balance | Opening balance |
| Cash at bank and on hand, other debt investments and current portion of current assets, etc. | Guangdong Shunde Rural Commercial Bank Co., Ltd. | 11,185,592 | 6,218,638 |
Payables to related parties:
| Item | Related parties | Ending balance | Opening balance |
| Accounts payable | Orinko New Material Co., Ltd. | 119,838 | 150,002 |
| Foshan Micro Midea Filter Mfg. Co., Ltd. | 62,916 | 80,498 | |
| Guangdong Wellkey Electrician Material Co., Ltd. | - | 186,309 | |
| Anhui Wellkey Electrician Material Co., Ltd. | - | 96,106 | |
| Notes payable | Guangdong Wellkey Electrician Material Co., Ltd. | - | 54,613 |
As at 30 June 2022, Guangdong Wellkey Electrician Material Co., Ltd. and Anhui WellkeyElectrician Material Co., Ltd. were not related parties of the Company due to changes in equityrelationship.
10 Share-based payment
(1) Share option incentive plan
(a) Pursuant to the ninth share option incentive plan (the “Ninth Share Option Incentive Plan”)
approved at the 2021 annual shareholders’ meeting in 2022, the Company granted 107,791,000share options with exercise price of RMB 54.61 to 2,815 employees. Under the circumstancethat the Company meets expected performance, 30%, 30% and 40% of the total share optionsgranted will become effective after 2 years, 3 years and 4 years respectively since 8 June 2022.
Determination method for fair value of share options at the grant date
| Exercise price of options: | RMB 54.61 |
| Effective period of options: | 5 years |
| Current price of underlying shares: | RMB 52.99 |
| Estimated fluctuation rate of share price: | 35.70% |
| Estimated dividend rate: | 2.17% |
| Risk-free interest rate within effective period of options: | 2.00% |
The fair value of the Ninth Share Option Incentive Plan calculated pursuant to the aboveparameters is: RMB 1,334,978,000.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
10 Share-based payment (Cont’d)
(1) Share option incentive plan (Cont’d)
(b) Movements in share options during the six months ended 30 June 2022
| Item | For the six months ended 30 June 2022 (Share in thousands) |
| Share options issued at the beginning of the year | 198,770 |
| Share options granted during the period | 107,791 |
| Share options exercised during the period | (13,527) |
| Share options lapsed during the period | (12,313) |
| Share options issued at the end of the period | 280,721 |
As at 30 June 2022, the residual contractual maturity date of the Fifth Share Option IncentivePlan is on 6 May 2024. The residual contractual maturity date of the Fifth Reserved ShareOption Incentive Plan is on 10 March 2025. The residual contractual maturity date of the SixthShare Option Incentive Plan is on 29 May 2025. The residual contractual maturity date of theSeventh Share Option Incentive Plan is on 4 June 2024. The residual contractual maturity dateof the Eighth Share Option Incentive Plan is on 3 June 2026. The residual contractual maturitydate of the Ninth Share Option Incentive Plan is on 7 June 2027.
(2) Restricted share plan
(a) Pursuant to the restricted shares incentive plan for 2022 approved at the 2021 annual
shareholders’ meeting in 2022 (the "Restricted Shares Incentive Plan for 2022"), the Companygranted 12,152,500 restricted shares with exercise price of RMB 26.47 to 191 employees.Under the circumstance that the Company meets expected performance, 30%, 30% and 40%of the total restricted shares granted will be unlocked after 2 years, 3 years and 4 yearsrespectively since 8 June 2022. The listing date for the granted restricted shares of this plan is13 July 2022.
(b) Movements in restricted shares during the six months ended 30 June 2022
| Item | For the six months ended 30 June 2022 (Share in thousands) |
| Restricted shares issued at the beginning of the year | 62,267 |
| Restricted shares granted during the period | 12,153 |
| Restricted shares unlocked during the period | (3,169) |
| Restricted shares lapsed during the period | (2,762) |
| Restricted shares issued at the end of the period | 68,489 |
(3) For the six months ended 30 June 2022, the total expenses due to the above share-based
payment incentive plan were RMB 835,078,000. As at 30 June 2022, the balance relating to theshare-based payment incentive plan and accrued from capital surplus was RMB 2,726,359,000.
11 Contingencies
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
As at 30 June 2022, the amount in tax disputes involving Brazilian subsidiary with 51% interestsheld by the Company was about BRL 616 million (equivalent to RMB 789 million) (Some caseshave lasted for more than 10 years. The above amount included the principal and interest). Asat 30 June 2022, relevant cases were still at court. Original shareholders of Brazilian subsidiaryhave agreed to compensate the Company according to verdict results of the above tax disputes.The maximum compensation amount is about BRL 157 million (equivalent to RMB 201 million).With reference to judgements of third-party attorneys, management believes that the probabilityof losing lawsuits and making compensation is small, and expects no significant risk of taxviolation.
12 Commitments
The Group had no significant commitments at the balance sheet date.
13 Events after the balance sheet date
Nil.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
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. Pursuantto the risk management objective, the Group has made risk management policies to identifyand analyse the risks it is exposed to and set appropriate risk resistant level and design relevantinternal control procedures to monitor the Group’s risk level. The Group reviews regularly theserisk management policies and relevant internal control systems to adapt to changes in marketcondition or its operating activities.
(1) Market risk
(a) Foreign exchange risk
The Group mainly operates in China, Europe, America, Asia, South America and Africa for themanufacturing, sales, investments and financing activities. Any foreign currency denominatedmonetary assets and liabilities other than in RMB would subject the Group to foreign exchangeexposure.
The Group’s finance department at its headquarters has a professional team to manage foreignexchange risk, with approach of the natural hedge for settling currencies, signing forwardforeign exchange hedging contracts and controlling the scale of foreign currency assets andliabilities, to minimise foreign exchange risk, and to reduce the impact of exchange ratefluctuations 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 the Groupto fair value interest rate risk. The Group determines the relative proportions of its fixed rate andfloating rate contracts depending on the prevailing market conditions. As at 30 June 2022, theGroup’s long-term interest bearing borrowings at floating rates amounted to RMB 336,974,000(31 December 2021: RMB 891,817,000).
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, and thereforecould have a material adverse effect on the Group’s financial performance. Management makesadjustments timely with reference to the latest market conditions and may enter into interestrate swap agreements to mitigate its exposure to interest rate risk.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
14 Financial risk (Cont’d)
(c) Other price risk
The Group's other price risk arises mainly from financial instruments measured at fair value. Asat 30 June 2022, if expected price of the investments held by the Group fluctuated, the Group'sgains or losses on changes in fair value would be affected accordingly.
(2) Credit risk
The Group’s credit risk mainly arises from cash at bank and on hand, deposits with the CentralBank, deposits with banks and other financial institutions, notes receivable, accounts receivable,receivables financing, loans and advances, other receivables, contract assets, other debtinvestments and derivative financial assets at fair value through profit or loss that are notincluded in the impairment assessment scope. As at the balance sheet date, the carryingamount of the Group’s financial assets represented the maximum exposure of the Group andno guarantees that may allow the Group to undertake credit risk were provided.
The Group expects that there is no significant credit risk associated with cash at bank, depositswith the Central Bank and deposits with banks and other financial institutions since they aredeposited at state-owned banks and other medium or large size listed banks. The Group doesnot expect that there will be any significant losses from non-performance by thesecounterparties.
In addition, the Group has policies to limit the credit exposure on notes receivable, accountsreceivable, receivables financing, loans and advances, other receivables, contract assets,monetary investments in other current assets, structural deposits and other debt investments.The Group assesses the credit quality of and sets credit limits on its customers by taking intoaccount their financial position, the availability of guarantee from third parties, their credit historyand other factors such as current market conditions. The credit history of the customers isregularly monitored by the Group. In respect of customers with a poor credit history, the Groupwill use written payment reminders, or shorten or cancel credit periods, to ensure the overallcredit risk of the Group is limited to a controllable extent.
(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 to cashto meet operational needs, while maintaining sufficient headroom on its undrawn committedborrowing facilities from major financial institutions so that the Group does not breachborrowing limits or covenants on any of its borrowing facilities to meet the short-term and long-term liquidity requirements.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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:
30 June 2022
| Item | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 10,744,601 | - | - | - | 10,744,601 |
| Borrowings from the Central Bank (including interest) | 250,000 | - | - | - | 250,000 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 98,895 | - | - | - | 98,895 |
| Notes payable | 29,331,809 | - | - | - | 29,331,809 |
| Accounts payable | 65,519,687 | 14,046 | - | - | 65,533,733 |
| Other payables | 4,781,862 | - | - | - | 4,781,862 |
| Financial liabilities held for trading | 1,706,821 | - | - | - | 1,706,821 |
| Derivative financial liabilities | 238,448 | - | - | - | 238,448 |
| Other current liabilities (including interest) | 23,335,993 | - | - | - | 23,335,993 |
| Current portion of non-current liabilities (including interest) | 27,724,645 | - | - | - | 27,724,645 |
| Long-term borrowings (including interest) | 553,374 | 18,542,481 | 8,715,407 | - | 27,811,262 |
| Debentures payable | 86,980 | 86,980 | 3,234,305 | - | 3,408,265 |
| Lease liabilities (including interest) | - | 607,481 | 750,262 | 336,115 | 1,693,858 |
| Other non-current liabilities | - | - | 687,305 | - | 687,305 |
| Sub-total | 164,373,115 | 19,250,988 | 13,387,279 | 336,115 | 197,347,497 |
31 December 2021
| Ending balance | Within 1 year | 1 to 2 years | 2 to 5 years | Over 5 years | Total |
| Short-term borrowings (including interest) | 5,420,066 | - | - | - | 5,420,066 |
| Borrowings from the Central Bank（including interest) | 180,000 | - | - | - | 180,000 |
| Customer deposits and deposits from banks and other financial institutions (including interest) | 78,235 | - | - | - | 78,235 |
| Notes payable | 32,752,007 | - | - | - | 32,752,007 |
| Accounts payable | 65,983,559 | - | - | - | 65,983,559 |
| Other payables | 4,288,104 | - | - | - | 4,288,104 |
| Derivative financial liabilities | 157,602 | - | - | - | 157,602 |
| Other current liabilities | 16,920,200 | - | - | - | 16,920,200 |
| Current portion of non-current liabilities (including interest) | 28,995,245 | - | - | - | 28,995,245 |
| Long-term borrowings (including interest) | 409,056 | 6,656,015 | 13,726,837 | - | 20,791,908 |
| Lease liabilities (including interest) | - | 667,710 | 879,105 | 143,316 | 1,690,131 |
| Other non-current liabilities | - | - | 687,689 | - | 687,689 |
| Sub-total | 155,184,074 | 7,323,725 | 15,293,631 | 143,316 | 177,944,746 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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 the fair valuehierarchy of the lowest level input that is significant to the entire fair value measurement:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset orliability, 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 30 June 2022, the financial assets and liabilities measured at fair value on a recurring basis bythe above three levels are analysed below:
| Fair value at the end of the period | ||||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial assets measured at fair value - | ||||
| Financial assets held for trading | 1,099,287 | 2,166,354 | - | 3,265,641 |
| Derivative financial assets | - | 586,771 | - | 586,771 |
| Receivables financing | - | 14,072,448 | - | 14,072,448 |
| Other current assets - hedging instruments and transferable certificate of deposit | - | 538,214 | - | 538,214 |
| Other debt investments | - | 22,383,547 | - | 22,383,547 |
| Other equity investments | - | - | 43,377 | 43,377 |
| Other non-current financial assets | - | - | 7,076,364 | 7,076,364 |
| Total assets | 1,099,287 | 39,747,334 | 7,119,741 | 47,966,362 |
| Financial liabilities measured at fair value - | ||||
| Financial liabilities held for trading | - | - | 1,706,821 | 1,706,821 |
| Derivative financial liabilities | - | 238,448 | - | 238,448 |
| Other current liabilities - hedging instruments | - | 521,188 | - | 521,188 |
| Total liabilities | - | 759,636 | 1,706,821 | 2,466,457 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022
(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 2021, the financial assets and liabilities measured at fair value on a recurringbasis by the above three levels are analysed below:
| Item | Fair value at the beginning of the year | |||
| Level 1 | Level 2 | Level 3 | Total | |
| Financial assets measured at fair value - | ||||
| Financial assets held for trading | 1,319,470 | 4,559,732 | - | 5,879,202 |
| Derivative financial assets | - | 545,865 | - | 545,865 |
| Receivables financing | - | 10,273,552 | - | 10,273,552 |
| Other current assets - hedging instruments and transferable certificate of deposit | - | 982,965 | - | 982,965 |
| Other debt investments | - | 27,254,307 | - | 27,254,307 |
| Investments in other equity instruments | - | - | 45,747 | 45,747 |
| Other non-current financial assets | - | - | 5,912,873 | 5,912,873 |
| Total assets | 1,319,470 | 43,616,421 | 5,958,620 | 50,894,511 |
| Financial liabilities measured at fair value - | ||||
| Derivative financial liabilities | - | 157,602 | - | 157,602 |
| Other current liabilities - hedging instruments | - | 9,047 | - | 9,047 |
| Total liabilities | - | 166,649 | - | 166,649 |
The Group takes the date on which events causing the transfers between the levels take place asthe timing specific for recognising the transfers. There was no significant transfer of fair valuemeasurement 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 quoted marketprice; and the fair value of those not traded in an active market is determined by the Group usingvaluation technique. The valuation models used mainly comprise discounted cash flow model andmarket comparable corporate model. Inputs of valuation technique mainly comprise risk-free interestrate, estimated interest rate and estimated annual yield.
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 and liabilities are analysed below:
| Item | Financial assets | Financial liabilities |
| 1 January 2022 | 5,958,620 | - |
| Increase | 1,581,046 | (1,766,953) |
| Decrease | (50,842) | 17,056 |
| Transfer out of Level 3 | (51,500) | - |
| Total gains of current period | ||
| Investment income recognised in the income statement | (379,967) | 43,076 |
| Gains recognised in other comprehensive income | 62,384 | - |
| 30 June 2022 | 7,119,741 | (1,706,821) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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) |
| Item | Financial assets |
| 1 January 2021 | 3,407,500 |
| Increase | 2,492,898 |
| Decrease | (869,794) |
| Transfer into Level 3 | 28,666 |
| Total gains of current period | |
| Investment income recognised in the income statement | 943,969 |
| Losses recognised in other comprehensive income | (44,619) |
| 31 December 2021 | 5,958,620 |
(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 isbased on the materiality of unobservable inputs towards calculation of whole fair value.Significant unobservable inputs mainly include the financial data of targeted companyand risk adjusted discount rates.
Assets and liabilities subject to Level 2 fair value measurement are mainly structuraldeposits, transferable certificate of deposit, receivables financing and forward exchangecontracts and are evaluated by market approach and income approach.
| (2) | Assets and liabilities not measured at fair value but for which the fair value is disclosed |
The Group's financial assets and financial liabilities measured at amortised cost mainly include:
cash at bank and on hand, deposits with the Central Bank, deposits with banks and otherfinancial institutions, notes receivable, accounts receivable, contract assets, loans andadvances, other receivables, other current assets (excluding those mentioned in Note 15(1)),notes payable, accounts payable, contract liabilities, short-term borrowings, long-termborrowings, debentures payable, lease liabilities, current portion of non-current liabilities,customer deposits and deposits from banks and other financial institutions, other payables,other current liabilities, etc.
Carrying amounts of the Group’s financial assets and financial liabilities measured at amortisedcost as at 30 June 2022 and 31 December 2021 approximated to their fair value.
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(All amounts in RMB ’000 Yuan unless otherwise stated)[English translation for reference only]
16 Capital management
The Group’s capital management policies aim to safeguard the Group’s ability to continue as agoing concern in order to provide returns for shareholders and benefits for other stakeholders,and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividendspaid to shareholders, refund capital to shareholders, issue new shares or sell assets to reducedebts.
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 30 June 2022 and 31 December 2021, the Group's gearing ratio was as follows:
| Item | Ending balance | Opening balance |
| Total liabilities | 272,705,675 | 253,121,028 |
| Total assets | 413,104,145 | 387,946,104 |
| Gearing ratio | 66.01% | 65.25% |
17 Notes to the parent company’s financial statements
(1) Other receivables
| Item | Ending balance | Opening balance |
| Other receivables | 26,530,591 | 31,465,557 |
| Less: Provision for bad debts | (18,274) | (17,708) |
| Total | 26,512,317 | 31,447,849 |
(a) Other receivables are analysed by ageing as follows:
| Ageing | Ending Balance | Opening balance |
| Within 1 year | 26,527,119 | 31,461,940 |
| 1 to 2 years | 860 | 1,708 |
| Over 2 years | 2,612 | 1,909 |
| Total | 26,530,591 | 31,465,557 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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)
(b) Provision for bad debts and changes in book balance statements
| Item | Stage 1 | Stage 3 | Sub-total | ||||
| 12-month ECL (Grouping) | 12-month ECL (Individual) | Lifetime ECL (Credit impaired) | |||||
| Book balance | Provision for bad debts | Book balance | Provision for bad debts | Book balance | Provision for bad debts | Provision for bad debts | |
| 1 January 2022 | 31,315,234 | 17,708 | 150,323 | - | - | - | 17,708 |
| Transfer to Stage 3 in the current year | - | - | - | - | - | - | - |
| Net increase in the current period | (4,798,315) | 566 | (136,651) | - | - | - | 566 |
| Including: Write-off in the current period | - | - | - | - | - | - | - |
| Derecognition | - | - | - | - | - | - | - |
| 30 June 2022 | 26,516,919 | 18,274 | 13,672 | - | - | - | 18,274 |
(c) As at 30 June 2022, other receivables of the Company at Stage 1 were analysed as follows:
(i) As at 30 June 2022, other receivables for which the related provision for bad debts was provided
on the individual basis were analysed as follows:
| Category | Ending balance | |||
| Book balance | 12-month ECL rate | Provision for bad debts | Reason | |
| Stage 1 | 13,672 | 0% | - | Relatively low expected loss risk |
(ii) As at 30 June 2022, other receivables for which the related provision for bad debts was provided
on the grouping basis were all at Stage 1, which were analysed as follows:
| Stage 1 | Ending balance | Opening balance | ||||
| 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 | 26,516,919 | (18,274) | 0.07% | 31,315,234 | (17,708) | 0.06% |
(d) As at 30 June 2022, the five largest other receivables aggregated by debtor were analysed as
follows:
| Name of entity | Nature | Book balance | Ageing | % of total balance | Provision for bad debts |
| Company A | Current accounts | 23,551,391 | Within 1 year | 88.77% | (14,131) |
| Company B | Current accounts | 1,128,000 | Within 1 year | 4.25% | (677) |
| Company C | Current accounts | 518,672 | Within 1 year | 1.95% | (311) |
| Company D | Current accounts | 235,000 | Within 1 year | 0.89% | (141) |
| Company E | Current accounts | 193,503 | Within 1 year | 0.73% | (116) |
| Sub-total | 25,626,566 | 96.59% | (15,376) |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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
Long-term equity investments are classified as follows:
| Item | Ending balance | Opening balance |
| Subsidiaries (a) | 67,942,113 | 64,376,850 |
| Associates (b) | 2,424,848 | 2,428,841 |
| Sub-total | 70,366,961 | 66,805,691 |
| Less: Provision for impairment | - | - |
| Total | 70,366,961 | 66,805,691 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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
| Name of investee | Opening Balance | Movements for the current period | Ending balance | Cash dividends attributable to the parent company declared in the current period | ||
| Increase in investment | Decrease in investment | Others | ||||
| Wuxi Little Swan Electric Co., Ltd. | 20,266,584 | - | - | 36,208 | 20,302,792 | - |
| Guangdong Midea Electric Co., Ltd. | 5,000,000 | - | - | - | 5,000,000 | - |
| Midea Group Finance Co., Ltd. | 3,361,856 | - | - | 534 | 3,362,390 | - |
| Foshan Shunde Midea Household Appliances Industry Co., Ltd. | 5,949,000 | - | - | - | 5,949,000 | - |
| Guangdong Midea Microwave Oven Manufacturing Co., Ltd. | 1,880,041 | - | - | - | 1,880,041 | - |
| GD Midea Air-Conditioning Equipment Co., Ltd. | 1,906,520 | - | - | 55,158 | 1,961,678 | - |
| Guangdong Midea Consumer Electric Manufacturing Co., Ltd. | 1,171,449 | - | - | 13,730 | 1,185,179 | - |
| Hefei Midea Heating & Ventilating Equipment Co., Ltd. | 1,080,049 | - | - | 1,952 | 1,082,001 | - |
| Guangdong Midea Intelligent Technologies Co., Ltd. | 1,059,451 | 800,000 | - | 2,963 | 1,862,414 | - |
| Midea Group (Shanghai) Co., Ltd. | 912,585 | - | - | 5,707 | 918,292 | - |
| Hubei Midea Refrigerator Co., Ltd. | 874,840 | - | - | 8,881 | 883,721 | - |
| Anhui Meizhi Precision Manufacturing Co., Ltd. | 831,698 | - | - | 2,174 | 833,872 | - |
| GD Midea Heating & Ventilating Equipment Co., Ltd. | 850,748 | - | - | 33,283 | 884,031 | - |
| Wuhu Maty Air-Conditioning Equipment Co., Ltd. | 772,668 | - | - | 4,040 | 776,708 | - |
| Wuhu Xinhe Technology Co., Ltd. | 742,684 | - | - | - | 742,684 | - |
| Hefei Midea Refrigerator Co., Ltd. | 551,886 | - | - | 9,703 | 561,589 | - |
| Ningbo Midea United Material Supply Co., Ltd. | 501,044 | - | - | 1,447 | 502,491 | - |
| GD Midea Group Wuhu Air-Conditioning Equipment Co., Ltd. | 481,769 | - | - | - | 481,769 | - |
| Hefei Hualing Co., Ltd. | 313,212 | - | - | 22,264 | 335,476 | - |
| Midea International Corporation Company Limited | 176,974 | - | - | - | 176,974 | - |
| Wuhu Midea Kitchen & Bath Appliances Mfg. Co., Ltd. | 193,589 | - | - | 10,508 | 204,097 | - |
| Midea Group Wuhan Refrigeration Equipment Co., Ltd. | 116,227 | - | - | 2,879 | 119,106 | - |
| Chongqing Midea Air-Conditioning Equipment Co., Ltd. | 88,396 | - | - | 2,587 | 90,983 | - |
| Zhejiang Meizhi Compressor Co., Ltd. | 66,553 | - | - | 98 | 66,651 | - |
| Wuhu Midea Life Appliances Mfg Co., Ltd. | 56,544 | - | - | 131 | 56,675 | - |
| Wandong Medical | 2,297,093 | 2,051,910 | - | - | 4,349,003 | 31,958 |
| Midea Innovation Investment Co., Ltd. | 2,135,000 | - | - | - | 2,135,000 | - |
| Hainan Midea Building Technology Co., Ltd. | 921,500 | - | - | - | 921,500 | - |
| Guangdong Midea Electromechanical Technology Co., Ltd. | 500,000 | - | - | - | 500,000 | - |
| Guangdong Midea Commercial Air-Conditioning Equipment Co., Ltd. | 769,430 | - | - | - | 769,430 | - |
| Others | 8,547,460 | 190,831 | (18,600) | 326,875 | 9,046,566 | 20,841 |
| Total | 64,376,850 | 3,042,741 | (18,600) | 541,122 | 67,942,113 | 52,799 |
MIDEA GROUP CO., LTD.
NOTES TO THE FINANCIAL STATEMENTSFOR THE SIX MONTHS ENDED 30 JUNE 2022(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
Investments in associates mainly refer 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 trademark royaltyincome, rental income, management fee income, etc. obtained by the Company from thesubsidiaries.
(4) Investment income
| Item | Current period | Same period of prior year |
| Income from long-term equity investments under cost method | 52,799 | 1,840,053 |
| Investment income from holding of financial assets held for trading | 95,277 | 250,866 |
| Income from long-term equity investments under equity method | 126,297 | 142,640 |
| Others | (1,981) | - |
| Total | 272,392 | 2,233,559 |
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
| Item | Current period | Same period of prior year |
| Gains or losses on disposal of non-current assets, including write-off of provision for asset impairment | 22,156 | (17,085) |
| Except for the effective hedging activities related to the Company’s ordinary activities, gains or losses on changes in fair value arising from financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, other non-current financial assets, and investment income from disposal of financial assets held for trading, derivative financial assets, financial liabilities held for trading, derivative financial liabilities, other non-current financial assets. | (434,341) | (101,719) |
| Others (mainly including government grants, compensation income, penalty income and other non-operating income and expenses) | 772,377 | 544,913 |
| Sub-total | 360,192 | 426,109 |
| Less: Effect of enterprise income tax (decrease in income tax expressed with “-”) | (30,095) | (64,272) |
| Effect of minority interests (after tax) | (26,113) | 10,698 |
| Net non-recurring profit or loss attributable to shareholders of the parent company | 303,984 | 372,535 |
Basis of preparation of details of non-recurring profit or loss:
Under the requirements of the Explanatory Announcement No. 1 on Information Disclosure byCompanies Offering Securities to the Public - Non-recurring Profit or Loss [2008] from CSRC,non-recurring profit or loss refers to that arises from transactions and events that are not directlyrelevant to ordinary activities, or that is relevant to ordinary activities, but is extraordinary andnot expected to recur frequently that would have an influence on users of financial statementsmaking economic decisions on the financial performance and profitability of an enterprise.
2 Return on net assets and earnings per share
The Group's return on net asset and earnings per share calculated pursuant to the CompilationRules for Information Disclosure of Companies Offering Securities to the Public No. 9 -Calculation and Disclosure of Return on Net Asset and Earnings per Share (revised in 2010)issued by CSRC and relevant requirements of accounting standards are as follows:
| Item | Weighted average return on net assets (%) | Earnings per share (in RMB Yuan) | ||||
| Basic earnings per share | Diluted earnings per share | |||||
| Current period | Same period of prior year | Current period | Same period of prior year | Current period | Same period of prior year | |
| Net profit attributable to ordinary shareholders of the Company | 12.18% | 12.63% | 2.34 | 2.17 | 2.34 | 2.16 |
| Net profit attributable to ordinary shareholders of the Company, net of non-recurring profit or loss | 11.95% | 12.31% | 2.30 | 2.11 | 2.30 | 2.10 |
3 Differences in Accounting Data under Domestic and Overseas Accounting Standards
(1) Differences in the net profit and net assets disclosed in the financial reports prepared
under China Accounting Standards (CAS) and International Financial ReportingStandards (IFRS)
□ Applicable √Not applicable
(2) Differences in the net profit and net assets disclosed in the financial reports prepared
under CAS and foreign accounting standards
□ Applicable √Not applicable